Q3 2019 Earnings Call
Welcome to today's scarce in capital Inc. third quarter ended September Thirtyth 2019 earnings call.
For the third quarter ended September Thirtyth 2019 earnings presentation that we intend to refer to in the earnings call. Please visit the Investor Relations link on the home page or website Www Dot garrison capital BBC Dot com and click on the third quarter ended September Thirtyth 2019 earnings presentation under upcoming events.
As more fully described in that presentation words, such as anticipates believes expects intends and similar expressions identify forward looking statements.
Actual results could differ materially from those inside or expressed in forward looking statement for any reason and future results could differ materially from historical performance.
You should not rely solely on the matters discussed in today's call as the basis of in the best sitting here some capital.
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Questions will be taken via the phone during the Q when they session at the end.
It is now my pleasure to turn the webcast <unk> Mr. Joseph Tansy CEO you may begin.
Good morning, everybody and thank you for joining the call I'm joined by Brian Chase, Our Chief operating Officer, Mr. Drucker, our Chief investment Officer, and Dan Han Archie pencil National Officer, I Tuesday afternoon, we filed our Form 10-Q with the FCC along with our earnings presentation to include the financial results for the third quarter ended September Thirtyth 2019.
We have also posted the Q3 earnings presentation to our web site will be referring to it throughout todays call I'll begin today's call with an update and current market conditions at a high level overview of the third quarter results. Following my broader comments Mitch will highlight the investment activity during the quarter discuss the current portfolio in greater detail, Brian will then summary.
The courts financial performance and provide some additional color on the direction of the company before opening up the lines for Q1 that the overall credit market. During 2019 has been quite challenging some factors contributing to these market conditions included significant volatility in Q4 2018 that resulted in soft M&A volume during the year as well as lower yields driven by.
The decrease in LIBOR spreads remain largely flat.
In addition financing solutions to borrowers it would have historically been syndicated to wider group of club or syndication partners are now being executed as large one stop either troche.
Financings by platform significant scale finally in the B. I felt market, we saw a flight to quality that resulted in wider dispersion credit performance advertising.
The pricing on larger deals with high credit ratings have remained largely stable or higher yielding investments with lower ratings have experienced significant spread widening and underperformance due to the risk a further downgrades, resulting in forced sellers in CLL market, turning now to our performance for the quarter. We've reported third quarter net investment income of 21 cents per share which were slightly.
Lower than our third quarter dividend of 23 cents per share. Unfortunately, our and I was offset again by losses of $1.24 cents per share during the quarter, resulting in a drop in net asset value to $9.04 per share.
Finer NAV was driven by credit losses, as well as negative fair value adjustments driven by spread widening uncertain syndicated investments.
Based on the current save the company, we're considering our potential options going forward to deliver the best possible outcome for our shareholders, which Brian will discuss in greater detail.
In the meantime, they'll continue to work diligently on managing our existing investments in client relationships and we'll seek to deploy capital into lower risk assets, which are less volatile and have significant downside protection.
With that I'll turn it over to match who'll provide additional color on the loan market and our activity during the quarter. Thanks, Joe as noted on page four of their presentation you par additions during the quarter totaled 28.3 million across 10, new portfolio companies at a weighted average yield of 8.2%.
New business mix included one club deal for 6.9 million and nine purchase credits totaling 18.5 million all of which would backed by sponsors.
The remaining 3 million a portfolio additions for the quarter were add on investments to existing clients.
Our investment portfolio is now up to 104 distinct portfolio companies diversified across approximately 30 industries.
I portfolio additions for the quarter, well were offset by aggregate repayments and sales of 34.7 million.
Weighted average yield of 8.2%.
She full repayment from for borrowers and sold two investments the balance for the repayments came from ordinary course amortization partial repayments from excess cash flow and refinancings.
As a result of the repayments outpacing additions and the net losses, our total portfolio at fair value decreased quarter over quarter to 460 million from 487 million.
The average yield to the debt portfolio at the cost decreased slightly quarter over quarter to 8.5% from 8.9%.
The decrease was due to a combination of a decrease in like war and the placement of higher yielding credits on non accrual during the quarter.
As Joe mentioned, we incurred net realized and unrealized losses of approximately 20 million or dollar 24 cents a share for the quarter.
He's losses were driven by 15.1 million of negative credit losses across three investments and 3.8 million of negative markdowns, primarily on for syndicated investments.
The majority of the credit losses resulted from writing our investment in confluence outdoors down to zero.
The other two meaningful credit write downs well on our investments in gold coast bakeries and age are holding corp., both of which were placed on non accrual during the quarter. We also placed or investment infusion connect on non accrual.
Bringing our total non accruals to 6.5% and 4.9% of the debt portfolio based on amortized cost in fair value respectively.
As of September Thirtyth 2019, all four nonaccrual investments.
Currently being restructured either through bankruptcy or sale process now I'd like to pass the discussion tear COO Brian Chase.
Thanks, Mitch our net investment income remained relatively stable at $3.4 million or 21 cents per share for the third quarter ending September thirtyth 2019, as compared to $3.5 million or 22 cents per share in the prior quarter.
Third quarter Eni of 21 cents per share was just shy of our Q3 dividend of 23 cents per share driven by reduction in life or a new nonaccrual assets.
As I mentioned on last quarter's call, we'd like to be reassessing, our different we're likely to be reassessing, our dividend based on the expectation of lower level of rates given the decreases we've seen since then and the increase in non accruals management in the board have decided that a reduction in our dividend is warranted. We have declared a fourth quarter dividend a 15 cents per share.
Yeah, that's payable on December twentyth to shareholders of record as of December 16th.
[noise] as Joe mentioned, we've spent a considerable amount of time discussing the company's future with our board of directors are fully aware that based on the current sides of the company and its performance. The current operating model is unsustainable. The company's board of directors has decided to retain KBW as its financial advisor and investment banker to explore.
Variety of strategic options in order to maximize shareholder value, while we're actively working with KBW to explore all options and are committed to taking actions that will maximize shareholder value. We cannot make any assurances that the company will be able to execute on any of them.
In addition, there's no specific timetable our formal process as of yet and we will not comment further or provide periodic updates to the market unless and until the company's fourth directors approved a specific transaction or otherwise deemed such a disclosure would be appropriate for necessary.
In the meantime, we will continue to work diligently to maximize shareholder value through the realization of our existing club and originated investments and the new investments and target companies with a lower risk profile less volatility and significant downside protection. We've set our dividend with these priorities in mind that concludes your prepared remarks for today's call.
And with that I'd open up for questions.
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[noise], thanks, everybody for dialing in and out this concludes the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.