Q1 2020 Earnings Call
Welcome to today's Garrison Capital Inc. First quarter ended March 31st, 2020 earnings call for the first quarter ended March 31st, 2020 earnings presentation that we intend to refer to wage earnings call. Please visit the investor relations link on the homepage of our website www.apple.com and click on the first quarter ended March 30th, 2020 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 implied or expressed in our forward-looking statements 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 an investment in Garrison Capitol. Please review our public publicly available this club
documents for further information
And on the risk of an investment in our company questions will be taken via the phone during the Q&A session at the end. It is now my pleasure to turn the webcast over to mister Joseph Kenzie CEO May begin, sir. Good morning everybody and thank you for joining our call. I'm joined by Brian chase our chief operating officer and Dan Hahn our Chief Financial Officer on Monday afternoon. We filed our form 10-q along with our press release with the SEC that included the financial results for the first quarter ended March 31st, 2020. We have also posted our earnings presentation. In fact cute to our company website. I'll begin today's call with some broad commentary on the market environment and significant macro events that occurred during the quarter all then highlight the investment activities during the quarter followed by a few thoughts around the Investment Portfolio position in light of the current market conditions, Brian will then summarize the first quarter's results and discuss some of the actions we took off.
In the company's financial position given the impending economic downturn before opening up the lines for Q&A before getting to this quarter's activity. I want to thank all of the front-line workers who are putting their own safety at risk. So the rest of us are able to manage through these challenging circumstances our thoughts and best wishes go out to all of those families that have been impacted by covid-19 pandemic and I hope everyone listening is safe and in good health. In addition. I would like to recognize our employees who remain focused on ensuring a seamless transition in our business operations as we navigated to a phone not working environment in mid-march. We are fortunate that our employees are safe and healthy and they remain committed to serving our clients and stakeholders to the duration of this Health crisis. Finally before digging. In fact, I want to remind everyone that cars has retained k p w as in the midst of the Strategic review process. We are while we continue to actively work with KBW to explore all options and Arkham wage.
To take actions that will maximize shareholder value. We cannot make any assurance that the company will be able to execute on any of them as we have said previously. We do not expect to comment further wage or provide any periodic updates to the market until the company's board of directors has approved a specific transaction or otherwise deemed disclosure appropriate or necessary and I will not be commenting further answering questions today regarding the Strategic review process turning out to the overall Market the first quarter experienced unprecedented volatility as a result of the outbreak of covid-19 pandemic combined with the collapse of oil prices these events resulted in sharp decline sharp price declines across both equity and debt markets including hi-ee the high-yield and liquid credit markets the uncertainty around the magnitude and duration of the pandemic resulted in virtually no volume of new issuances of Leverage loans and and m&a transactions dead.
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Been impacted by The Economic Consequences of the covid-19 pandemic, although the government government extraordinary monetary and fiscal policy responses have led to a rebound and asset prices subsequent to the quarter a month. Most Market participants are anticipating following into a recession. The first quarter Market activity certainly had impacted our our quarter our first quarter results. We reported investment income and fifteen cents per share, which was in line with our first quarter dividend of fifteen cents per share. However, Arnav fell $1.92 per share or approximately $0.22 to $6.59 primarily due to net losses as a result of fraud Market dislocation of the loss is approximately 38% or driven by Investments is existing credit issues prior to the pan that money that were unable to recover approximately fifty percent of the lawsuit were were due to the decline in prices in the liquid credit Market, but the rest of the losses coming from broad Market spread widening across I direct lending Club.
In light of the first quarter results. I wanted to spend a few minutes adding some context around the portfolio position to leave it under gone over the last couple of years as we have said on previous calls our portfolio strategy around since around 2016 has been to reduce the risk by increasing industry diversification reducing our investment sizes and increasing the size of the companies. We invest in in order to do that that often times found better relative value in purchasing syndicated assets in the secondary Market as a result our portfolio can our current portfolio consists of over 97% first-lien seen a secured floating-rate Investments across 29-inch treats with an average position size of less than 1% of our total Investment Portfolio fair value. We believe that this Diversified liquid portfolio took us with greater flexibility in managing the risks of our portfolio on the flipside the drawback of such a portfolio is the increased marked to Market volatility as evidenced in the first quarter.
Finally well received the vast majority of our one Q interest payments. We did place to additional Investments on non-accrual status bring the total non-accrual loads up to four Investments representing 2.7% of our total portfolio is cost new car additions the first quarter total 1.3 million, which was comprised almost entirely of existing borrower drawing down there unfunded revolver month.
As of March 31st 2020 you had a total of 1.1 million dollars of remaining exposure to unfunded revolvers and safety commitments. This was offset by total sales of 24.4 million dollars across 500 folio companies resulting in a net decrease of 23.1 million dollars. We have used a portion of these proceeds to repack additional s p i c debentures which probably will discuss further detail with that. I'll pass the discussion to our CEO Brian Chase.
Thanks, Joe our net investment income remained relatively stable a 2.4 million dollars or fifteen cents per share for the first quarter ending March 31st, 2020 as compared to two and half million dollars or $0.16 per share in the prior quarter. We declared a second quarter dividend of $0.15 per share that is payable and on June 26th to shareholders of record as of June 6th.
As the company's debt is currently comprised of notes issued pursuant to RC which were privately placed. The company is not prohibited from paying a cash dividend to stockholders despite the fact that we had breached the 150% coverage ratio quarter-end the company however cannot incur more debt until such time as it regains compliance with the S8 correct requirements, the company has adequate liquidity without the occurence of more debt to make the current dividend payment and dividend payments for the foreseeable future future dividend payments are of course subject to declarations by our board and no decisions regarding future dividends have been made at this time.
Fortunately heading into this crisis the right side of our balance sheet was intentionally structured to insulate the company from Market volatility as we have noted on previous calling Cielo financing is not subject to margin calls and is structured to self amortize if certain triggers are exceeded. In other words shareholders can feel very secure that market volatility won't cross any for selling of assets or punitive Capital races as a result of covenants or triggers relating to our financing the structure naturally delivers and right sizes its liabilities overtime, utilizing its net interest margin to pay down notes as required.
Additionally, we have further simplified our capital structure by repaying the remaining SBA debentures subsequent to quarter-end and are in the process of winding up that subsidiary more important as a result of the wind up. We are able to generate approximately 11 and 1/2 million dollars of unrestricted and unencumbered cash that sits at the company level outside of the restricted clo subsidiary page additionally over the coming quarters. We are expecting repayments outside of the Cielo subsidiary which could generate another five to ten million dollars of unrestricted and unencumbered cash in April. We expect cash outside of the Seal of subsidiary to eventually be around twenty million dollars, which is equal to about a dollar twenty-five per share. We don't have any immediate or planned wage for that cash and expect to retain that liquidity for the foreseeable future.
That concludes our prepared remarks for today's call. And with that. I'd like to open up the line for questions at this time. I would like to remind everyone that if you would like to ask a question about the star one on your telephone keypad now again, that's star one for any questions over the phone line will pause for just a moment.
And again, ladies and gentlemen, that's star one for any questions.
And at this time I'm showing no responses. Okay, great. Well, thanks for joining the call everyone and we'll speak to you next time.
Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.
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