Q2 2020 Portman Ridge Finance Corp Earnings Call
[music].
Good afternoon, ladies and gentleman and welcome to support me to reach Finance Corporation Conference call.
<unk> earnings press release was distributed Thursday morning, all the Sussex, if we did not receive a copy the releases are available on the company's website at www dot warm and reach.
Dot com and the Investor Relations section.
As a reminder, this conference is being recorded today Monday August 10th 2020.
This call is also being hosted on a live webcast, which can be accessed at the company's website at www Dot Portman reagent dot com and the Investor Relations section under events today's call.
Today's conference call and includes forward looking statements and projections and we ask that you referred to Portman religious most recent filings with the S.A.C. for important factors that will cause actual results to differ materially from the projections put me Rich Finance Corporation does not undertake to update is.
Forward looking statements unless required by law I when I like to introduce your host for today's conference Mr., Ted Gold <unk>, Chief Executive Officer assortment reach Finance Corporation. Please go ahead Sir.
Thank you operator, good afternoon, everyone and thank you for joining us for earnings call. We hope every one of their families have remained safe and healthy during the pandemic and continue to do so.
Last Thursday, Portman Ridge announced at second quarter, 2020 results and I'm joined by my CFO, Ted Gilpin, and my Chief Investment Officer, Patrick Shaffer to discuss the results and the portfolio respectively.
Overall, we're very pleased with the quarter's results during especially challenging period of time.
Net investment income per share was six cents, which is consistent with the last quarter and the distribution level that we have set for the past several quarters.
Additionally, net asset value per share is $2.71 an increase of approximately 1% from March 30, Onest 2020.
Ted Gilpin would provide the details in his remarks, but we continue to purchase shares apartment Portman, both as a management team and as part of Portman stock repurchase program.
Our ability to purchase shares during the second quarter was limited by both volume restrictions and available Windows. We continue evaluate options to execute the previously announced stock repurchase program and up and anticipate putting in place a tenbfive program during the third quarter.
From a macro perspective, the second quarter was significantly more challenging a states enacted various levels of lockdowns that persisted for the bulk of the quarter.
Well the economy has begun opening backup we feel we feel like our portfolio companies at a much better grasp on demand and profitability levels as well as the various levers within their business. There's there's still significant uncertainty and we believe evaluations for the quarter reflects this uncertainty in our own conservatism.
As we discussed during last quarters earnings call. Our portfolio has been relatively insulated from those sectors and industries that have been hit the hardest.
Additionally, our portfolio remains very diverse containing 73 unique borrowers across our debt and equity securities.
Our average position size is 1.3% of the debt and equity portfolio and 1% of our total investment preferred aware.
In aggregate, we executed or completing the execution of eight material investments during the quarter across our 73 unique borrowers.
By meaningful we're referring to amendments that fit to the financial covenants or maturity date do the impacts of coated.
And all but one of these situations the portfolio companies have ample liquidity and are continuing to pay cash interest and the remaining into instance, lenders have agreed to defer interest until September thirtyth to provide a temporary liquidity boost and thus.
Thus far the portfolio company has been executing its initial budget has been exceeding its initial budget of the cobot impact.
Additionally, we had one portfolio company file for bankruptcy in early April and expect to receive a significant recovery of principal through the liquidation of assets the majority of which should be realized in third quarter.
On the new investment front.
M&A activity, which is the traditional source of middle market direct loans was exceptionally quiet, however loss activity, making 14 investments 12 of which we're into new borrowers reflects our strong balance sheet position and flexibility heading into the pandemic as well as our breadth of the credit platform sourcing investment opportunities through numerous channels.
Specifically the mix of assets, we added during the quarter is a combination of higher spreading recently issued bonds and lower spreading loans, we acquired at material discounts to par, which should produce future NAV benefits.
Additionally, we monetize the significant.
Good amount of assets during the quarter ever yielding a comparable spread so overall portfolio spread is relatively unchanged for all in return has increased.
Finally last but certainly a lot at least we are excited about the previously announced merger with garrison capital.
As a brief reminder, on June 24th 2020, we announced the proposed merger.
Corbin Ridge and garrison capital, we believe the transaction will be immediately accretive on an eni per share basis simply due to the reduction of overhead expenses at the combined company.
Although we fully expect to generate additional return through leveraging the deal flow generator across our BC credit platform. We are comfortable in the economic benefit to both shareholder base as well that rotation plays out and then ordinary course, the merger will significantly increase the percentage apartment assets that are first lien and significantly reduce our exposure.
Sure to seal equity.
Finally, we believe that the increased market capitalization will provide more liquidity in stock and the combination of large of larger scale and stable income and NAV per share.
Performance could ultimately to higher trading levels.
With that I will turn the call over to Ted Gilpin, our CFO for a brief overview of the financial results for the quarter and then Patrick Shaffer, Our Chief investment Officer prefer a review of our investment activity before concluding the call with some additional remarks.
Thank you Ted and good afternoon, everyone.
As of June Thirtyth, 2020, or any of these stood at $120.7 million or two daughters, and 71 cents per diluted share.
10% from last quarter.
120.4 million or $2.69 per share.
The increase was mainly attributable to unrealized gains, including 2.3 million on our debt securities portfolio and 2.3 million on our investment in the kept freedom three joint venture.
Our COO equity positions showed unrealized losses of approximately 2.9 million in the quarter the ongoing disruption in the markets using cobot 19 pandemic has continued to pressure put pressure on valuation, especially in our legacy COO equity positions that are out of their reinvestment period.
Net investment income for the second quarter of 2020 was 2.6 million.
Six cents per share as compared to 880002 cents per share in the second quarter of last year and compared to six cents per share in the first quarter of 2020 right in line with.
Quarterly distribution.
The company will paid cash it six distribution declared last week on last week on August 20 fees.
With respect to liquidity and unfunded commitments, our aggregate unfunded commitments stood at 29.2 million at June Thirtyth 2020, However, only 2.4 million to this amount is subject to you draw right by the borrower and the remaining commitments are subject to certain restrictions such as borrowing base use of proceeds or leverage that must be sat.
To side before a bar can draw down on the commitment.
On the liability side of the balance sheet, we believe that we're in a relatively strong position have meaningful investment and liquidity flexibility was relatively limited funding commitments.
As of June Thirtyth 2020, we had 76 million six.
6.12, 0.1% to 5% notes outstanding and 98.3 million in borrowings under our credit facility for a total of 175 million of debt net of cash and trades pending settlement as of June Thirtyth 2020, or debt or equity ratio was 1.3 times for regulatory perspective.
A coverage ratio as of June Thirtyth 2020 was 167% so above this gesture requirement bdcs of 150%.
The stock repurchase program announced in March of 2020, we continued repurchasing shares this quarter and repurchased 253896 shares of stock at an average price per door and 12 cents per share. We expect to continue to evaluate opportunities that buyback shares as a means to dry.
Hi value for shareholders, including in entering into a Tenbfive program. In addition to take advantage of ongoing dislocation or publicly traded bonds. The C.P.L., we repurchased and retired approximately 109000 at par value of those bonds.
Open market purchases.
At a cost of approximately or averaged 95000.
To go through mentioned the merger with gears in Campos remarks under the terms of pose agreement gears and stockholders will receive a combination of.
19.1 million cash.
You should put me in rich shares valued at 100% if its NPV per share and an additional cash payment of 5 million from sea aircrafts. We expect this transaction to close in the fourth quarter of 2020.
With that I would like to turn the call over to Patrick Shaffer, Our Chief investment Officer.
Thanks Ted.
Turning to page five of the slide presentation during the quarter, we made investments into 14 borrowers two of which we're going to exist.
I think portfolio companies and 12 of which four brand new borrowers.
While these investments into new borrowers.
For what complete alongside other BC partners entities and aggregate these fourq investments totaled $41.9 million face value.
84% of which four person securities.
13% of which or unsecured bonds that were almost all still prior to the ended the quarter and the remaining 2% being net add on to the great Lakes joint venture.
In two small equity investments.
The weighted average spread on new investments, excluding the great Lakes joint venture that currently remain on our balance sheet was 568 basis points, but the total return will ultimately be higher as a number of these investments were purchased at a significantly higher.
Ben typical given the market environment.
Additionally, over the course of the quarter, we fully exited eight positions three of which legacy kick out or Ohio positions in aggregate our fully exited positions represented carrying value of $21.0 million and resulted in a gain of $948000.
All positions were sold either at or above their carrying value relative to March 30, onest or cost if it was acquired during the quarter.
Additionally, we partially monetized for position that represent an aggregate carrying value of $9.7 million unrealized gain of $28000.
Three of these four positions or sold at or above their carrying value, but there are many remaining position so for approximately 2% less than its carrying value.
After adjusting for movements between unrealized and realized we recognized approximately $384000 of unrealized losses on our investments our debt and equity securities accounted for approximately 200000 dollar unrealized gain well see a low at these positions accounted for a $2.9 million unrealized loss.
Offset partially by $2.3 million realized gain from our two joint ventures.
With respect to our debt and equity securities.
You see partners originated assets increased by approximately 1.3% quarter over quarter legacy and legacy, Ohio assets increased by approximately 3.0% offset partially it by legacy Kickup assets declined by approximately 2.6% quarter over quarter.
On an equivalent basis, excluding the non accruing asset of OCI, which was acquired with the.
Oh, hi portfolio.
As of June Thirtyth form rich has 233.4 million of debt securities.
<unk>, 88.5% of par and yielding a statement spread to life war of 681 basis points on a current debt securities.
This compares to 226.4 million of debt securities market, 87.7% of par and yielding stated spread to LIBOR.
685 basis points on a current debt securities as of March 30, Onest 2020.
And 165.7 billion.
Our securities portfolio.
Portfolio marked at a blended price of 91.9% apart and stated spreads a lot more of 658 basis points NBC partners took over management the partner edge on April Onest 2019.
Turning to slide six we had no new non accruals during the period.
Non accruals as of June 30, 2020 represented 6.8% of cost and 4.3% a fair value on the investment portfolio.
Finally, moving to slide seven you can see the progress we've made in rotating the portfolio subsequent to the consolidation and Ohio merger.
We have reduced alessi OHAI portfolio by 52% and KCAP legacy noncore assets now represent only approximately 30% our current investment portfolio.
With that I'll turn the call back over to Petco Park.
Thank you Patrick.
Let me say again, there were pleased with our performance during the quarter, our investment portfolio sets from a credit quality and expected earnings accretive accretion through the garrison merger on the corporate activity front. Our main focus over the next few months will be to complete the merger with garrison a seamlessly as possible.
So we will continue to pursue further called consolidation opportunities as they come come up.
With that I'd like to thank all of our shareholders for their continued support and I will now turn over the call to the operator for your questions.
As a reminder band the question. Please press star one of your telephone keypad.
Just one moment wallet compiled acuity roster.
Okay and you.
First question comes on line of Ryan Lynch from KBW.
Good afternoon, guys. Thanks for taking my questions.
The first one has to do where the garrison transaction.
Garrison balance sheet, obviously have a significant amount of leverage compared to portman ridges balance sheet.
As you prepare for that over about a dozen they're coming months I guess the expectation that data that you guys will be deemed leveraging the portman rage portfolio in order to take on that portfolio, which with higher leverage that the expectation.
Yeah, that's a great question.
So through through our merger agreement number one is garrison is relatively limited and then on new investments.
So we expect to potentially some organic deleveraging from that side and from our side you know a number one the investment environment right. Now you know activity levels are down quite dramatically, but we're being very very very discerning about new investment activity and the hope would be.
We can we can de lever through a combination of of our balance sheet as well as their balance sheet. So it's something we're very focused on it's something you know post close where we're going to want to get leverage way down from from one of the port pro forma entity is and we think we have a bunch of different paths to do that in a pretty expedite a period of time. So we feel we feel good about it but I, but to your question.
We've really set the bar high for new investment activity to basically prepare for the merger.
Okay.
Oh, I know, there's not a ton of of market activity going on as far as the direct lending markets today I'm drinking one important topics.
It is staying relevant to your private equity clients and borrowing partners on if you guys are.
Limiting the deals are you guys are really looking you youre setting not buying back that that that bar higher could you maybe talk to slide 11, a little bit that really shows the broader BC partners platform.
Typically the yield strategy could you guys have 3.3 billion. Your day, you add and how while Portman rich or maybe stepping back a little bit from the market, which again the market is pretty muted right now, but then maybe stepping back from the market a little bit.
Good to focus a little bit on de lever gene.
You talked about with BC partners platform ability, you just got down and scale of support those existing borrowers.
Yeah, I mean, our borrowers are really key to our life blood and to your question like I don't think theres any intention to cut off our borrowers from from liquidity and also our our best relationships. So number one we have within Portman branch, we've got ample room in our bank lines, and and ER and everything else to for new activity, but exactly your question.
There, we do have other pockets of capital as a firm that we can use to support our best our best borrowers so even though.
Even though we've raised the bar it doesn't mean, we cannot choice Porter class.
Okay, and then kind of on that point I think you said.
You had.
Correct me, if I'm wrong in the way I heard this but for new bar or excuse me 12, new new borrowers went into the Portman rich portfolio.
And all those except for score.
We're borrowers to cross the existing BC partners platform I'm not sure if I got that correct. So please correct me if I'm wrong in that but can you talk about how.
Deal sourcing it made across the platform as well as allocation policy to two different funds across the BC partners platform and now Portman Ridge, you can benefit from from broader deal sourcing across the platform.
Hey, Ryan I'll take the first part than I can I think that's up to 10 for the second part, but the what we're trying to get out was that we may 14, new investments during the quarter 12, which were to new borrowers and too much more to existing borrowers within within Portman range. So I think wed add ons or oil.
Follow ons or things like that.
For those two and then the raining 12 were just new borrowers kind of new Department.
And and and and all of that and all but four of those 12 work done with other BC entities investing alongside a point. So eight of the 12, new investments worked on alongside a word that alongside of corn and there is there kind of various reasons for for getting.
Sure.
Which would have had begun to examples out but that was we're trying to get out was eight of the every 12 are done.
In connection with other Bcf to keep investing at the same time.
Okay got it ended the second part your question Yeah, I mean look that I think part of the reason why we've been able to be successful then and you.
And getting people to join our joined former ridge in terms of merger candidates is couple of fold one is.
You know, we can speak the bigger deals and bigger size. So its hard it's hard if your subscale credit manager to be relevant to clients without more capital. So so the way our allocation policy works is very standard I mean, we had exemptive relief every transaction has shown to Portland Ridge and you know, we not only evaluate things on UNEV basis, but also look available.
Quickly.
So it all at all flows through all that and eat up originate access to all of our deal flow not only on the other deals that are relevant for portion rich.
Okay makes sense, that's all for me I appreciate the time this afternoon Brett thanks.
Your next question comes on line of Christopher Nolan from Landenburg Thalmann.
Hey, guys I'm reading the press release Am I correct. If there was not a common dividend declared in the second quarter or <unk> or did I Miss read it.
We we did declare a dividend in second quarter, okay. So.
So again it was six cents a per share payable on August 28, I think for shareholders relative as of the 17th of August.
Okay, and only reason that.
Yeah, our different pulse is unchanged.
Yes.
Okay. The only reason I asked that is August I was reading is the third quarter.
I didn't see anything for the second quarter.
Yeah we've.
We have Oh, we currently have any differently.
Yes, we did in March. So you you might have missed it was we did a little bit early because.
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The uncertainty in the markets with Covidien and people know that they're doing them a safe so.
And so we following a four payments in the year methodology got it okay was or any sort of nonrecurring deal expenses related to GARS in the quarter.
I don't think there was a if there was I don't think there was a loss I mean I think there's.
Probably some as it relates to our professional fees, but everything I think that most for the most part.
It's not in there.
Well I think it's simple I think it's important to address it's a great question. I think is important dress been one thing that we're very focused on.
Obviously LIBOR has been a big headwind for all of the Bdcs and one thing we've done and we always do this but we're really trying to drive costs out of our business. So we've obviously done through M&A, but we're also looking at every dollar that we spend on you know legal fees in every other part of our business and we really are trying to drive down administrative expenses Miss It you just wafer.
Just a lot to deliver benefits to our shareholders and it's something that we're incredibly focused on.
Okay, and turn them could you I think you Mike touched on this on the comments, but how exactly are you guys planning to take a leverage ratio down.
In the third quarter, because I'm getting at 1.43 times debt to equity and.
Just curious as to if theres strategy to get that lower.
Yeah, I think what we're focused on is between you know we we're obviously looking forward.
To the pro forma entity and really what we're focused on is the is the combined leverage number and we want to keep that at a relatively conservative number.
For a whole bunch of reasons. So yeah, we can do it through obviously selling assets. We can also do it by restriction originations, but it's something there obviously, a very very focused on and if you look our track record you know Ryan asked in the previous question, but just to reiterate yeah. When we did the Oak Hill transaction, we monetized a big chunk of the portfolio very soon after the transaction close.
And so I think we've demonstrated track record to be able to develop a relatively quickly.
You know and some of these somebody's analogous merger situations.
Okay final question.
But you had more to act just quickly if you looked at our balance sheet, we actually as of June Thirtyth, we had a decent amount of cash would call. It restricted cash, but it's really just cash sitting in our credit facility and a certain number of trade that were executed but hadn't yet settled so when you look at it on a net basis or debt equity ratio.
So is it still below is below that 4.3, it's more like it's 4.43 0.4 0.3 times this quarter's worth.
Okay, and then I guess my final question on the and.
The $10 million worth of incentive fees that you plan to ingest important rude shares at one times now.
Would that be.
With that the new shares that you would buy one times now or buying get me I presume yeah.
That's correct so mechanically what will the the way it works to be technical is.
Form and will pay the manager or the the cash incentive fee and then the manager take that cash and then buys newly issued shares import men at now.
All right. So this would be the because where the show the trading now you get.
You know.
Sort of a joost effect in terms of capitalizing the balance sheet no equity.
Yeah equity I mean, the equity count goes up and obviously you know the incentive fees. We earned you know on a mark to market basis are obviously substantiate below.
What the actual like earned amount is a bit but we feel good about our NAV and we think it's a great message for our shareholders.
Okay, Great. That's it for me Thank you guys.
[noise] at this time there no further questions.
Well, thanks again for for all of your support. Thank you for all your great questions and on a go forward basis. Please feel free to ratio to anyone of members of management, we'd be happy to tell you more about part of a rich. Thank you very much and have a great evening.
This concludes today's conference you may now disconnect.
Oh.
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[music].
[music].
Earnings Press release was distributed Thursday morning, all the Sussex, if we did not receive a copy the releases are available on the company's website.
At Www dot warm and rich.
Dot com and the Investor Relations section.
He reminded this conference is being recorded today Monday August 10th 2020. This call is also being hosted on a live webcast, which can be accessed at the company's website at www Dot Portman reagent dot com and the Investor Relations section under events today's call.
Today's conference call. It includes forward looking statements and projections.
Asset you refer to Portman religious most recent filings with the S. E. C. Four important factors that will cause actual results to differ materially from their projections.
Hi, Rich Finance Corporation does not undertake to update its forward looking statements unless required by law I would now like to introduce your host for todays call first Mr., Ted Gold <unk>, Chief Executive Officer assortment Rich Finance Corporation. Please go ahead sorry.
Thank you operator, good afternoon, everyone and thank you for joining us for earnings call. We'd hope every one of their families have remained safe and healthy during the pandemic and continue to do so.
Last Thursday, Portman Ridge announced at second quarter 2020 results I'm joined by my CFO, Ted Gilpin at my Chief Investment Officer, Patrick Shaffer to discuss the results and the portfolio respectively.
Overall, we're very pleased with the quarter's results darn, especially challenging period of time.
Net investment income per share a six cents, which is consistent with the last quarter and the distribution level that we have set for the past several quarters.
Finally, net asset value per share is $2.71 an increase of approximately 1% from March 30, Onest 2020.
Ted Gilpin will provide the details in his remarks, but we continue to purchase shares apartment Portman, both as a management team and as part of Portman stock repurchase program.
The ability to purchase shares during the second quarter was limited by both volume restrictions and available Windows. We continue evaluate options to execute the previously announced stock repurchase program and anticipate putting in place a tenbfive program during the third quarter.
From a macro perspective, the second quarter was significantly more challenging states enacted various levels of walk down the stuff persisted for the bulk of the quarter.
Well the economy has begun opening backup we feel we feel like our portfolio companies at a much better grasp on demand and profitability levels as well as the various levers within their business. There's there's still significant uncertainty and we believe are valuations for the quarter reflects this uncertainty in our own conservatism.
As we discussed during last quarters earnings call. Our portfolio has been relatively insulated from those sectors and industries that have been hit the hardest.
Additionally, our portfolio remains very diverse contending 73 unique borrowers across our debt and equity securities. Our average position size is 1.3% of the debt and equity portfolio and 1% of our total investment portfolio.
In aggregate, we executed or are completing the execution of eight material investments during the quarter across our 73 unique borrowers.
By meaningful we're referring to amendments that fit to the financial covenants or maturity date do the impacts of coated.
And all but one of these situations the portfolio companies have ample liquidity and are continuing to pay cash interest and the remaining its instance, lenders have agreed to defer interest until September thirtyth to provide a temporary liquidity boost and that's.
Thus far the portfolio companies been executing its initial budget has been exceeding its initial budget up the cobot impact.
Additionally, we had one portfolio company file for bankruptcy in early April and expect to receive a significant recovery of principal through the liquidation of assets the majority of which should be realized in third quarter.
On the new investment front.
M&A activity, which is the traditional source of middle market direct loans was exceptionally quiet I love her lot activity, making 14 investments 12 of which we're into new bars reflects our strong balance sheet position and flexibility heading into the pandemic as well as our breadth of the credit platform sourcing investment opportunities through numerous channels.
Specifically the mix of assets, we added during the quarter is a combination of higher spreading recently issued bonds and lower spreading loans, we acquired at material discounts to par, which should produce future not benefits I.
Additionally, we monetize a significant.
A good amount of assets during the quarter ever yielding a comparable spread so overall portfolio spread is relatively unchanged for all in return has increased.
Finally last but certainly a lot least we're excited about the previously announced merger at garrison capital.
As a brief reminder, on June 24th 2020, we announced the proposed merger.
Corbin Ridge and garrison capital, we believe the transaction will be immediately accretive on an eni per share basis simply due to the reduction of overhead expenses at the combined company.
Although we fully expect to generate additional returns through leveraging the deal flow generator across our BC credit platform, we're comfortable in the economic benefit to both shareholder base as well that rotation plays out and then ordinary course, the merger will significantly increase the percentage apartment assets that are first lien and significantly reduce our exposure.
Sure to seal equity.
Finally, we believe that the increased market capitalization will provide more liquidity in stock and the combination of larger and larger scale and stable income and NAV per share.
Performance could ultimately to higher trading levels.
With that I will turn the call over to Ted Gilpin, our CFO for a brief overview of the financial results for the quarter and then Patrick Shaffer, Our Chief investment Officer for a review of our investment activity before concluding the call with some additional remarks.
Thank you Ted good afternoon, everyone.
As of June Thirtyth 2020, our navy stood at $120.7 million or $2.71 per diluted share.
1% from last quarter.
120.4 million or $2.69 per share.
The increase was mainly attributable to unrealized gains, including 2.3 million on our debt securities portfolio and 2.3 million on our investment in the kept freedom three joint venture.
Our COO equity positions showed unrealized losses of approximately 2.9 million in the quarter the ongoing disruption in the markets using koeppen 19 pandemic has continued to pressure put pressure on valuation, especially in our legacy COO equity positions that are out of their reinvestment period.
Net investment income for the second quarter of 2020 was 2.6 million.
Or six cents per share as compared to 880002 cents per share in the second quarter of last year and compared to six cents per share in the first quarter of 2020 right in line with our current quarterly distribution.
The company will paid cash it six at distribution declared last week on last week on August 20 days.
With respect to liquidity and unfunded commitments, our aggregate unfunded commitments stood at 29.2 million at June Thirtyth 2020, However, only 2.4 million to this amount is subject to you draw right.
The borrower and the remaining commitments are subject to certain restrictions such as borrowing base use of proceeds or leverage that must be satisfied before a bar can draw down on the commitment.
On the liability side of the balance sheet. We believe that we are in a relatively strong position and have meaningful investment and liquidity flexibility was relatively limited funding commitments as of June Thirtyth 2020, we had 76 million in six.
6.11% to 5% notes outstanding and 90.3 million in borrowings under our credit facility for a total of 175 million of debt net of cash and trades pending settlement as of June Thirtyth 2020, or debt equity ratio was 1.3 times for regulatory perspective.
Coverage ratio as of June Thirtyth 2020 was 167%.
Just above the statutory requirement bdcs of 150%.
The stock repurchase program announced in March of 2020, we continued repurchasing shares this quarter and repurchased 253896 shares of stock at an average price image or 12 cents per.
Per share we expect to continue to evaluate opportunities to buy back shares as a means to drive value for shareholders, including in entry into a Tenbfive program.
Addition to take advantage of ongoing dislocation or publicly traded bombs Casey.
Well, we repurchased and retired approximately 109000 at par value of those bonds.
Open market purchases.
At a cost of approximately EUR averaged 95000.
Ted Gulfport mentioned the merger with garrison capitals remarks under the terms of pose agreement scares and stockholders will receive a combination of.
19.1 million cash.
Newly issued Portman rich shares valued at 100% of its NPV per share and an additional cash payment of 5 million from sea aircrafts. We expect this transaction to close in the fourth quarter of 2020.
With that I would like to turn the call over to Patrick Shaffer, Our Chief investment Officer.
Thanks Ted.
Turning to page five of the slide presentation during the quarter, we've made investments into 14 borrowers two of which worrying to exist.
Portfolio companies, and 12 of which were brand new borrowers.
These investments into new borrowers.
For well complete alongside other PC partners entities in aggregate.
Working investments totaled $41.9 million a face value.
84% of which four person securities.
13% of which or unsecured bonds that were almost all still prior to the ended the quarter.
Meaning 2% being net add on to the great Lakes joint venture.
Two small equity investments.
The weighted average spread on new investments, excluding the great Lakes joint venture. The currently remain on our balance sheet was 568 basis points, but the total return will ultimately be higher at the number of these investments or purchased at a significantly higher.
Than typical given the market environment.
Additionally, over the course of the quarter, we fully exited eight positions three of which legacy kick out or Ohio positions.
Aggregate are fully exited positions represented carrying value of $21.0 million and resulted in a gain of $948000.
Positions or sold either at or above their carrying value relative to march 31st or cost. If it was acquired during the quarter.
Additionally, we partially monetized four positions that represents an aggregate carrying value of $9.7 billion unrealized gain of $28000.
Three of these four positions or sold at or above their carrying value, but there are many remaining position salt approximately 2% less than the carrying value.
After adjusting for movements between unrealized and realized we recognized approximately $384000 unrealized losses on our investments our debt and equity securities accounted for approximately 200000 dollar unrealized gain.
I'll still be physicians accounted for a $2.9 million unrealized loss offset partially by 2.3 million dollar realized gains for our two joint ventures.
With respect to our debt and equity securities.
Hi, guys originated assets increased by approximately 1.3% quarter over quarter legacy and legacy assets increased by approximately 3.0% offset partially by legacy kick up assets declined by approximately 2.6% quarter over quarter.
On an equivalent basis, excluding the non accruing asset of OCI, which was acquired with the.
Oh, hi portfolio.
As of June Thirtyth borrowing rates has 233.4 mine debt securities market, 88.5% to par and yielding David spreads a lot more of 681 basis points on accruing debt securities.
This compares to 226.4 million of debt securities market, 87.7%, apart and yielding stated spreads a lot more.
685 basis points on occurring debt securities as of March 30, Onest 20.
And 165.7 billion of debt securities portfolio marked at a blended price 91 point.
9% apart and its stated spreads a lot more.
658 basis points MDC partners took over management partner edge on April Onest 2019.
Turning to slide six.
No new non accruals during the period.
Non accruals as of June Thirtyth, 2020 represented 6.8% of cost and 4.3% a fair value on the investment portfolio.
Finally.
Slide seven you can see the progress we've made in rotating the portfolio subsequent to that foundation and Ohio merger.
We have reduced the Lacey, Ohio portfolio by 52%.
Take up legacy noncore assets now represent only approximately 30% our current investment portfolio.
With that I'll turn the call back over to Petco Park.
Thank you Patrick.
Let me say again, there were pleased with our performance during the quarter, our investment portfolio sets from a credit quality and the expected earnings accretive accretion through the garrison merger.
Corporate activity from our main focus over the next few months will be to complete the merger with garrison seamlessly as possible.
We will continue to pursue further called consolidation opportunities as they come come up.
With that I would like to thank all of our shareholders for their continued support and I will now turn over the call. The operator for your questions.
As a reminder, if you have a question. Please press star one of your telephone keypad.
Just one moment wallet compiled acuity roster.
Okay and your first question comes from the line of Ryan Lynch from KBW.
Good afternoon, guys. Thanks for taking my questions.
First one has to do with.
The garrison transaction.
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Garrison balance sheet, obviously have a significant amount of leverage compared to portman ridges balance sheet.
As you prepare for that over about the they're coming months I guess.
The expectation that data that you guys will be de leveraging the portman rage portfolio in order to take on that portfolio with with higher leverage at the expectation.
Yes, that's a great question.
Through through our merger agreement.
Number one as garrison is relatively limited on new investments.
So we expect to potentially some organic deleveraging from that side and from our side.
Number one the investment environment right now you know activity levels are down quite dramatically, but we're being very very very discerning about new investment activity and the hope would be.
We can we can de lever through a combination of our balance sheet as wells that are balance sheet. So it's something we're very focused on it's something you know post close we're going to want to get leverage way down from from one of the port pro forma entity is and we think we have a bunch of different path to do that in a pretty expedite a period of time. So we feel we feel good about it but but to your question.
We've really set the bar high for new investment activity to basically prepare for the merger.
Okay.
I know, there's not a ton of market activity going on as far as the direct lending market today.
I think one important topics.
It's staying relevant to your private equity clients in borrowing partners.
If you guys are.
Limiting.
Good deals are you guys are really looking to your second not buy back that that that bar higher could you maybe talk to slide a rather than a little bit that really shows the broader BC partners platform.
Specifically the yield strategy could you guys have 3.3 billion value add and how while Portman rich.
Maybe stepping back a little bit from the market, which again the market as.
You did right now, but maybe stepping back from the market a little bit.
Good to focus a little bit on de leveraging.
Are you talking probably be seen partners platform ability to step in and spill out support those existing borrowers.
Yeah, I mean, our borrowers are really key to our life blood and to your question like I don't think theres any intention that to cut off our borrowers from from liquidity and also our our best relationships. So number one we have within Portland rates, we've got ample room in our bank lines and and everything else to for new activity, but exactly your question.
We do have other pockets of capital as a firm that we can use to support our best our best borrowers so even though.
Even though we've raised the bar it doesn't mean, we kept us first quarter class.
Okay, and then kind of on that point I think you said.
You had.
Correct me, if I'm wrong in the way I heard this but.
For new borrowers excuse me 12, new new borrowers wanting to the.
Portman rich portfolio.
And all those except for score.
We're borrowers across the existing BC partners platform I'm not sure if I got that correct. So please correct me if I if I'm wrong in that.
But can you talk about how.
Deal sourcing it made across the platform as well as allocation policy.
Different funds across the BC partners platform and now Portman rich.
Can benefit from from broader.
Sourcing across the platform.
Hey, Ryan I'll take that require than I can pass up the test in the second part, but the more we're trying to get out was that we may 14, new investments during the quarter 12, which were to new borrowers and too much more to existing borrowers within within Portman range. So I think when does add on the or or.
Follow ons or things like that.
For those two and then the raining 12, well just new borrowers kind of new Department.
And and and and all of that all but four of those 12 work done with other BC entities investing alongside it so.
So eight of the 12, new investments worked on alongside a longtime Harbin and those kind of various reasons for the four.
What.
You are going to examples out but that was we're trying to get out was eight of the 11 12 are done.
In connection with other Vcs investing at the same time.
Okay entered the second part of your question.
Yes, I mean listen I think part of the reason why we've been able to be successful and.
Getting people to join our.
Joined polymer rich in terms of merger candidates is couple of fold one is.
You know, we can speak to bigger deals and bigger size. So its hard it's hard if youre subscale credit manager to be relevant to clients without more capital. So so the way our allocation policy works is very standard I mean, we have exemptive relief every transaction get Sean to Portman Ridge and you know, we not only evaluate things on enough basis, but also look.
Failed liquidity.
So it all at all flows through all that and purchase access to all of our deal flow not only on the deals that are relevant for patent rich.
Okay. Thanks.
That's all from me I appreciate the time this afternoon.
Thanks.
Your next question comes on line of Christopher Nolan from Ladenburg Thalmann.
Hey, guys.
Reading the press release Am I correct. If there was not a common dividend declared in the second quarter or or did I Miss Reid.
We we did declare a dividend in second quarter.
Okay.
So again it was six cents per.
For share payable on August 28 shareholders record of as of the 17th of August.
Okay. That's one reason that.
Yeah, our dividend policy is unchanged.
Yes.
Okay. The only reason I asked that is August I was reading as the third quarter.
And I Didnt see anything for the second quarter.
Yeah Weve.
We have a critical.
Yes, we did in March so you might have missed it through as we did a little bit early because.
The uncertainty the markets with Covance when people know that they're giving them a safe so.
Yes, so we're following a four payments in the year methodology that okay.
Was there any sort of nonrecurring deal expenses related to GARS in the quarter.
I don't think there was a if there was I don't think there was a loss I mean I think there's.
Probably some is it relates to our.
Professional fees, but everything I think that most for the most part.
Thats not in there.
I think it's simple I think it's important to address it's a great question. I think is important address been one thing that we're very focused on.
Obviously LIBOR has been a big headwind for all of the businesses and one thing we've done and we always do this but we're really trying to drive cost out of our business. So we've obviously done through M&A, but we're also looking at every dollar that we spend on you know legal fees that every other part of our business and we really are trying to drive down on administrative expenses I missed the easiest way.
For us to do a lot or deliver benefits to our shareholders and it's something that we're incredibly focused on.
Okay and turn them.
I think you Mike touched on this on the comments, but how exactly are you guys planning to take a leverage ratio down.
The third quarter, because I'm getting at 1.43 times debt to equity and.
I'm, just curious as to that Theres strategy to get that lower.
Yes, I think what we're focused on is between you know we we're obviously looking forward.
To the pro forma entity and really what we're focused on as the is the combined leverage number and we want to keep that at a relatively conservative number.
For a whole bunch of reasons.
So we can do it through obviously selling assets. We can also do it by restriction originations, but it's something that we're obviously very very focused on and if you look our track record.
Ryan asked in the previous question, but just to reiterate yes. When we did the Oak Hill transaction, we monetized a big chunk of the portfolio very soon after the transaction close and so I think we've demonstrated track record to be able to develop a relatively quickly.
You know and some of this some of it's analogous murder situations.
Okay final question.
Okay, well market actually just quickly if you look at our balance sheet, we actually as of June Thirtyth.
We had a decent amount of cash we call it restricted cash, but it's really just cash sitting on our credit facility.
And a certain number of trade that were executed but hadn't yet settled so when you have looked at on a net basis or debt equity ratio is is still below it below that 4.3, it's more like.
4.43, or 4.3 times, just what it's worth.
Okay.
And then I guess my final question on the in.
The $10 million worth of incentive fees that you plan to invest in Portland Rude shares at one times NAV.
Would that be.
Would that be new shares that you would buy one times novel or buying get me I presume.
That's correct so mechanically what will the the way it works to be technical is.
Form and will pay the manager or the cash incentive fee and then the manager take that cash and then buys newly issued shares in Portman at now.
All right. So this would be because where the shares are trading now you get.
Yes.
Sort of a joost effect in terms of capitalizing the balance sheet no equity.
Yeah equity I mean, the equity count goes up and obviously the incentive fees we earned.
On a mark to market basis are obviously substantially below.
What the actual like earned a bonus but that we feel good about our NAV and we think it's a great message for our shareholders.
Okay, Great. That's it for me Thank you guys.
At this time there no further questions.
Well, thanks again for for all of your support. Thank you for all your great questions and on a go forward basis. Please feel free to ratio to anyone of members of management, we'd be happy to tell you more about Porter ranch. Thank you very much and have a great event.
This concludes today's conference you may now disconnect.