Logan Ridge Finance (LRFC) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2025, Logan Ridge generated $4.6 million in investment income, a decrease of$800,000 or $0.29 per share compared to$5.4 million in Q4 2024 [10] - Net investment income for Q1 2025 was $900,000 or$0.35 per share, down from $1.5 million or$0.50 per share in Q4 2024, representing a decrease of $600,000 or$0.21 per share [11] - The net asset value (NAV) as of March 31, 2025, was $78.8 million, a decrease of$6.3 million or 7.4% from $85.1 million in the previous quarter [12] Business Line Data and Key Metrics Changes - The fair value of Logan's portfolio was approximately$169.6 million, down from $172.3 million in the prior quarter, with exposure to 59 portfolio companies [6] - The company deployed approximately$15.1 million into new and existing investments, with repayments and sales totaling approximately $12.5 million, resulting in a net deployment of approximately$2.7 million for the quarter [7] - The equity portfolio was reduced to 12% from 10.8% of the portfolio on a cost and fair value basis, reflecting the exit of the second largest non-yielding equity position in GA Communications [9] Market Data and Key Metrics Changes - As of March 31, 2025, 70.1% of the investment portfolio at fair value was invested in assets originated by the BC Partners Credit platform, up from 66.7% at the end of the last quarter [7] - The debt investment portfolio represented 86.6% of the total portfolio at fair value, with a weighted average annualized yield of approximately 10.7% [8] Company Strategy and Development Direction - The company is focused on rotating out of its legacy equity portfolio, which has been reduced to 10.8% of the portfolio at fair value, down from 13.8% in the prior quarter [4] - The merger with Fort McMurray is expected to provide increased scale, improved liquidity, and enhanced operational efficiencies, strengthening the company's ability to deliver greater value to shareholders [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning to grow earnings and increase long-term shareholder value despite market volatility and geopolitical uncertainties [4] - The management team does not expect significant recovery from the non-accrual assets, particularly the legacy investment in Sequoia, which has been on non-accrual since 2021 [23] Other Important Information - As of March 31, 2025, the company had $5.1 million in cash and cash equivalents, along with$31.5 million of unused borrowing capacity available for new investments [12] Q&A Session Summary Question: Will the pending merger with Portman entail a full valuation review of Logan's investments? - Yes, a new NAV for both Portman and Logan will be established within 48 hours of share issuance [16] Question: How will the valuation be conducted? - The valuation will be done consistent with regular practices, including third-party marks and internal models [17] Question: What is the prospect for recovering non-accruals? - There is not much expectation for meaningful recovery from non-accrual assets, particularly from Sequoia [23] Question: Are any BC loans in non-accrual status? - Yes, there are three loans in non-accrual status, including one BC name [26] Question: What is the discount to par for the BC sourced book? - Specific numbers will be provided later, but generally, most of the BC sourced book is performing well [28]