Q1 2021 Portman Ridge Finance Corp Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the appointment reach financial first quarter 2021 financial results Conference call.
At this time all participants are on a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypads. Please.
Please be advised that today's conference is being recorded if you require any assistance. Please press star zero for the operator thank.
Thank you. It is now my pleasure to turn the call over to Mr. He learned from the floor is yours.
Thank you good morning, and welcome to Portman Ridge Finance Corporation first quarter 2021 earning conference call on earnings Press release was distributed yesterday after market closed a copy of the release along with the earnings presentation is available on the company's website at Www Dot Portland Ridge Dotcom.
In the Investor Relations section and should be reviewed in conjunction with the company's form 10-Q filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes.
Please note that today's conference call may contain forward looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described in the company's filings with the SEC hormone wage Finance Corporation assumes no.
Asian to update any such forward looking statements unless required by law.
With that I would now like to turn the call over to tank Goldfarb, Chief Executive Officer of Portman Ridge.
Ted.
Great.
Good morning, and thanks, everyone for joining our first quarter earnings call I'm sorry, it's so early.
Got for other guys in our space reporting.
This volume as well.
I'm joined today by our Chief Financial Officer, Jason Reuss on our Chief Investment Officer, Patrick Schafer.
Yesterday afternoon, Portman Ridge announced its first quarter 2021 fiscal year financial results.
I will begin with an update on the significant progress we've made towards our strategic goals and provide a high level overview of our first quarter results.
I'll finish with a discussion of our near term priorities heading into 2021, including an update on our M&A pipeline activity as it relates to the harvest transaction.
Following that Patrick will give an update on our portfolio activity and status and Jason will provide additional details on our financial results.
In the first quarter of 2021, we continue to execute on our strategic plan of repositioning Department Rich portfolio. Following the merger with garrison and October of 2020.
An immediate priority of ours was to reduce the combined leverage level. After the merger, which was one eight times on the on net basis at close.
Accordingly, we've proactively monetized an aggregate of $92 $4 million in the fourth quarter of 2020 at or above fair value and utilized the net proceeds to repay approximately $88 million of the roughly $252 million in secured notes, which were assumed as part of the garrison merger.
This $88 million principal repayment was completed in the first quarter and as a result at quarter end gross leverage was one point for on a gross basis and one one times on a net basis compared to one seven times gross leverage and 1.4 times on a net basis at year end.
Having having having previously stated that our long term leverage range is 1.25 to 1.4, we were pleased to achieve this range in a relatively short order without compromising price valuation or earnings.
We continue to engage in the sales of assets originate by garrison on the first quarter with an additional 33 million sold above fair value.
Looking ahead, while we continue to assess opportunistic asset sales on our portfolio. We do not plan to continue the proactive pace at which we sold legacy garretson assets in the fourth quarter of 2020, and the first quarter of 2021 as we are pleased with the state of the overall portfolio at this time.
We've also continued to drive the shift in the composition of our portfolio.
And really just focused on secured loans with an emphasis on first lien investments.
Firstly on investments now comprise 83% of the debt securities portfolio compared to 80% at year end and 60% at September 30th.
Pro forma for the harvest transaction.
We expect our portfolio will be similarly weighted to the first lien securities I believe as we've previously discussed we expect over time to continue rotating our existing legacy assets, including those originated by garrison and harvest into higher yielding directly originated loans per our lending strategy a P C partners.
Turning to financial performance for the quarter.
We generated net investment income per share of 11 cents in earnings per share of 11 cents.
Nonrecurring and onetime expenses impacted our earnings per share this quarter, including a $1.8 million realized loss on extinguishment of debt, which resulted in a negative two cent impact.
We also experienced professional fee expenses that were higher than typical due to increased legal expenses from our M&A activities and higher tax and audit fees during the quarter that equated to nearly one cents per share impact.
Looking ahead in the second quarter and beyond we remain cost focused on multiple levels and we expect the actions, we're taking now will generate cost savings.
Well little football or fully emerge with the passage of time.
On April 30th we closed a private placement debt offering of $80 million and four and seven eighths senior secured notes.
On your unsecured notes.
We were pleased to have completed this transaction during an opportune time in the credit markets and will benefit substantially from interest expense savings going forward.
We expect these interest rate savings and other cost efficiencies related to M&A will continue to rise as we manage a significantly broader asset base over which to spread our fixed costs that will flow to the benefit of shareholders.
And other corporate news, we previously announced the renewal of a $10 million stock repurchase program that was approved on March 11, 2021 by the board of directors. We continue to believe that buying back our stock makes sense for shareholders, but we are constrained by blackout periods and other restrictions around our M&A activities.
Furthermore, we continue to take into account feedback from our shareholders and on that note and in our most recent proxy filed on April 23rd we raise as a voting matter on June 7th annual meeting our intention to enact a reverse stock split within the range of one to five to one to 15 shares within one year of stockholder approval we.
Belief, having our shares undergo a reverse stock split.
Provide greater flexibility for shareholders, particularly for institutional investors, who often operate with under restrictions with respect to per share prices among other parameters.
Finally in December of 2020, we announced our plan to merge with harvest capital Credit Corporation as discussed on previous calls the harvest transaction makes sense for apartment ridge from any of the same reasons that we noted for our previous mergers, including adding of size and diversification to the existing port platform, increasing the leverage.
<unk> of public company expenses immediately while improving trading liquidity visibility and the capability and flexibility to speak for larger deals and the longer term.
The harvest portfolio will also continue to shift our portfolio composition to first lien assets. We've also noted that we expect harvest transaction to be deleveraging to the tune of 0.1 turns on both a gross and net basis.
We are on track for an expected closing to occur in early to mid June of this year.
We were off to a strong start in 2021, our portfolio is performing well non accruals are continue to trend downwards as a percentage of the total fair value of the debt portfolio and we expect this trend may continue based on current conditions.
Having achieved a leverage ratio at the low end of our target range. We are now on a good position to increase investment activity in the near term through the BC partners platform as we continue to rebuild and shift the portfolio composition to BC partners originated assets.
We will benefit from even greater flexibility once they expected harvest transaction closes, which we anticipate will be a further deleveraging event at.
Internally, we remain very focused on generating cost savings in all areas of the company in order to maximize value for our shareholders.
And with that I will turn the call over to Patrick Schafer, Our Chief investment Officer for a review of our investment activity.
Thanks Ted.
Turning first to current market conditions as many of you on this call on though our primary market has been very strong starting at the end of last year and really continuing into the first quarter of this year.
Given the backdrop of low interest rates vaccine distribution led reopening and ongoing fiscal stimulus.
The overall credit market has remained extremely active.
If you look at liquid loans benchmarks spreads during the first quarter were actually lower on average than on average in the fourth quarter of 2019.
The middle market benchmarks are still wider than in Q4 2019.
But those also continued to grind tighter in tandem with the broadly syndicated markets.
Transaction volume was strong in the quarter, including both new investment opportunities through M&A activity as well as refinancing activity.
Repayments, which were higher than typical in the past couple of quarters appear to be slowing down in the second quarter, particularly for the middle market, where we operate.
As before we know that spreads remain higher wider in the direct loan origination market relative to the liquid credit market and our ability to use the breath of our platform to lead and structure transactions should generate consistent attractive risk adjusted returns in excess of the broader market.
Looking ahead to the full year 2021.
Focus will be on leveraging a robust pipeline to remain well invested during this period of increased asset repayments.
We highlight later, our new debt originations continued to generate yields in excess of our in place debt portfolio as a whole. So long term. We believe the increased repayment activity will lead to increasing returns for shareholders.
Further rotate out of legacy K Catholic garrison assets and these assets originated by BC partners.
Turning to slide nine of the Investor presentation. The first quarter was fairly active considering that our primary short term goal. After the garrison merger was to Delever.
During the quarter, we made investments into 14 borrowers eight of which were existing borrowers, including the BCP, great Lakes joint venture and six of which were brand new borrowers.
In total all but three of the 14 transactions were completed alongside other BC partners entities.
In aggregate. These 14 investments totaled approximately $50 million on fair value of 67% of which well first on securities.
18% of which were second lien securities.
12% of which was net add on to the Great Lakes joint venture and the final 3% were short term investments that were sold prior to the end of the quarter.
The weighted average spread on the new investment excluding the great Lakes joint venture was 828 basis points.
On the repayments and disposition side. The quarter was also active in total we exited or were repaid on 19 positions seven of which were repayments in aggregate. These exits representing a carrying value of approximately $68 million and resulted in the gain of approximately 830000.
Balance.
Specifically related to the proactive asset sales. These 12 positions represented approximate.
The aggregate carrying value on approximately $30 million and resulted in a gain of approximately $165000.
During the quarter, our debt and equity securities accounted for an approximately $6 $2 million net gain while CLO equity positions accounted for a $2 $2 million net gain.
Two joint ventures accounted for the remaining $1 $2 million net gain.
On an equivalent basis as of March 31.
Portman Ridge has a $412 $3 million on debt securities marked at 93, 9% of par and yielding a stated spread to LIBOR of 658 basis points on accruing debt securities.
This compares to $437 7 million of debt Securities marked at 92, 4% of par and yielding a stated spread to LIBOR of 680 basis points on accruing debt securities.
December 31 2020.
And $165 7 million of debt securities portfolio, Mark on a blended price of 91, 9% of par and stated spread to LIBOR of 658 basis points. When see aircrafts took over management of Portman Ridge on April one 2019.
Turning to slide 10, non accruals as of March 31, 2021 represented two 3% of cost and <unk>, 7% of fair value on the investment portfolio as compared to two 4% and 8% respectively as of December 31.
Seven investments were on non accrual status as of March 31, 2021.
I'll now turn the call over to Jason to further discuss our financial results for the quarter.
Thanks, Patrick as.
As a quick note given the transformational nature of the garrison merger that closed in October 2020 I.
I will present, all prior period comparison to the first quarter of 2021 against the adjusted fourth quarter 2020 results unless otherwise noted.
GAAP net investment income for Q1 was $8 2 million or 11 cents per share, which compares to adjusted net investment income from Q4 of eight cents per share after adjusting for the impact of tariffs on purchase accounting.
Total investment income was $18 3 million down $1 6 million or 8% due primarily to the timing between closing of the garrison merger, which occurred in October and the eventual sales of $92 4 million in assets originated by Gary and as part of our goal to deleverage the combined portfolio.
The bulk of these asset sales, which occurred after close and closer to year end generated investment income during this period.
Total expenses for Q1 decreased to $10 1 million from $11 million in the fourth quarter of 2020. The decrease was driven primarily by lower performance based incentive.
Sympathies offset in part by higher management fees and professional fees.
Management fees increased due to the full quarter impact on the garrison merger and professional fees increased due to higher legal expenses related to merger activity and incremental tax fees incurred in the first quarter.
Going forward, we do not anticipate.
Professional fees to stay at this elevated level and would expect for them to normalize closer to the fourth quarter of 2020 levels. We also know that through the end of this quarter all incentive fees earned are reinvested in new shares issued.
Interest expense and amortization of debt issuance costs increased slightly quarter to quarter from $3 3 million to $3 4 million in the first quarter due primarily to the full quarter impact of the garrison merger offset by lower debt balances as the company repaid $88 million of secured notes due 2029 during the quarter.
We expect substantial interest expense savings in future periods, driven by our issuance of the four and seven eight.
Senior unsecured notes on April 30th and the pending redemption of this based on in his notes due 2022, which we expect will be completed on or before may 31st.
At quarter end, we had total investments excluding derivatives of $474 million and net assets of $220 million or $2 92 per share compared to investments, excluding derivatives of $488 million and net assets of $216 million or $2 88 per share in the fourth quarter of 2020.
This marks the fourth straight quarter that we've increased NAV per share.
The increase in NAV per share for the quarter was mainly attributable to net investment income of $8 2 million and net appreciation in the value of our investment of approximately $1 6 million offset by a onetime loss on extinguishment of capitalized debt cost and the amount of $1 8 million.
Valuations continue to benefit from an overall yield tightening environment and general economic improvement.
Net of the dividend paid during the quarter. This resulted in growth of three 6 million in stockholders' equity, resulting in an NAV per share of $2 92.
As of March 31st 2021, our debt to equity ratio was one four times on a gross.
From a regulatory perspective, our asset coverage ratio at quarter end was 170%.
The reduction in leverage was driven primarily by the repayment of $88 million of the secured notes during the quarter on.
Our objective has been and will continue to be focused on maintaining overall leverage to a range of 125 from 1.4 times.
Total debt at quarter end was comprised of $69 million in borrowings under our credit facility of $164 million in secured notes due 2029 and $77 million and the stakes on the need to know you.
2022.
A total of $310 million in debt as discussed subsequent to quarter end, we issued $80 million and 470.
On your unsecured notes due 2026, and a private placement offering and subsequently notified the trustee.
Of the one of the six and eight notes our election to redeem them in full.
With respect to liquidity and unfunded commitments, our aggregate unfunded commitments that are 25 million at March 31, 2021, and we reported $38 million in unrestricted cash on cash equivalents with an additional $46 million of available borrowing capacity under the credit facility.
As announced yesterday and consistent with prior quarter levels, a quarterly distribution of <unk> <unk> per share. It was approved by the board and declared payable on June one 2021 to stockholders of record at the close of business on May 19 2021.
With that I will turn the call back over to Ted Goldberg.
Thank you Jason.
We are pleased with another quarter of progress assortment ridge.
Solid financial shape, and we certainly believe believes that we've taken the necessary steps to position Portman ridge to generate stable consistent.
For the long term.
We believe that we've begun to see some of the fruition of our work to date, we're confident that theres more to come on.
I'd like to close our prepared remarks by encouraging shareholders of record.
Our annual meeting on June seven.
Participating on those.
Thank you again to all our shareholders for your ongoing support.
This concludes our prepared remarks, and I'll now turn it over to the operator for any questions. Thank.
Thank you, ladies and gentlemen in order to ask a question. Please press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypads, well pause for just a moment to compile the Q&A roster.
Again, if anyone would like to ask a question. Please press star one on your telephone keypad.
Okay.
Your first question comes from the line of Christopher Nolan from Lindenberg Thalmann.
Hey, guys.
Was I saw on the press releases 138 million share sale to an affiliate of.
On the management can you explain that a little bit please.
Yes, Jason.
Yes.
Yeah sure.
Okay Jason.
Yeah sure so we issued.
Equity too.
An affiliate of <unk>.
Portman.
And.
Yeah.
To the tune of like that at 1.38 million.
Equity equity issuance.
Private placement.
It's Chris Chris that this is the incentive fees being paid in stock.
Okay, Yeah, I thought I saw.
It's at one times.
Net and that was a first quarter event or a second quarter event.
It'll be second quarter events. So it's it was it was done as part of the the financials yesterday and will be issued in the upcoming days.
Great and then at Christmas.
For people, who don't recall, because we all think about this as normal but when we did the when.
When we did it on some of these original mergers we agreed a or we offered shareholders. The opposite side that we would take our incentive fees in stock versus at NASS vs in cash.
And we just thought it was a great message to send to shareholders.
Align ourselves with our shareholders.
And.
That gave rise to this so this is just us taking on incentive fees in.
In stock on that yeah, no I totally agree.
And on the capital structure front are you starting to see.
Economic inflation in your portfolio of companies and have the <unk>.
Aspect of inflation affecting how you guys are thinking about your capital structure going forward.
Yeah.
Yes, So I think I think what we've seen in the last 12 months is a portfolio of companies have done an amazing job on the cost side.
Despite this the worries about supply chain and.
Inflation on a trailing basis, we've not seen a lot of.
On a trailing basis, we just havent seen a lot of.
Inflation that being said on.
Sure going up all over the place right now and it is something that we're focused on so revenue.
Last year. It was all about expense controls and anemic revenue growth now you've got strong revenue growth on the Big question is whats your expense is going to do so I think it is something that we're it's a good question actually from that we're definitely focused on.
And you know on our new underwriting for sure. We definitely are focused on it we haven't seen it but we haven't seen it roll through our portfolio of companies broadly speaking yes.
Yes, I was just gonna add it is far more of a focus on new investment activity trying to ascertain how much of the of the earnings are inflated we obviously have.
On a much better handle on our portfolio of companies because we saw them each quarter through the pandemic and feel pretty good about it but it's something we are laser focused on her new investment activity gotcha.
Gotcha.
Hum.
And then I guess H Cup are you planning once they have $6 million to $8 million excuse me $63 million from debt any plans to.
Shut that debt or do you think your.
Leverage ratios can just.
Absorb it and keep on going.
Yeah.
I think Ed.
The current stage, we're only anticipating.
On the their existing senior unsecured bonds, which I believe is about 28 $29 billion to carryover to the pro forma company.
And at that point, we'll we'll decide on how to address those relative to the new unsecured bonds that we just issued.
But from a from a harvest perspective, the only the only debt that we anticipate being carried over to Portman will be those unsecured notes.
Yeah, So I would say simplistically.
The ability to take it on.
Average ratios with the ability to take on the debt I. Just think if you look at our recent execution of our bond deal. We think there's opportunities for us to save money for our shareholders.
Your next question comes from the line of Angelo Guarino.
Good morning.
Congratulations on them.
Good performance.
With regards to the Reed Smith of <unk>.
The management fees.
There's been a bunch of moving parts there all the way back from the original.
Okay cap.
Transition that had the.
Function like that.
With what Youre doing currently what is the what's the lifespan of that and when was that initiated I'm I'm, assuming the original cap.
Yeah promise to reinvest.
It's already.
And this is a new one that we.
Just if you could just bring me up to speed on which we're on.
What were under now on what you're operating under limited expires.
Yes, Andrew this is patrik. Thanks for the question. So this is actually part of the original transaction. So we agreed as part of the original externalization of kick out that for the first two years, we would take up to $10 million of incentive fees in the form of stock at now and so this quarter.
Here then ended at $3 31, 2021 will be the two year anniversary of that.
Of that agreement. So this will be this will be the last or this was the last quarter, where we are under the day affirmative obligations to take our stock in the form of take incentive fees in the form on stock.
Okay were there any other are there any other overlapping.
No.
Similar okay. No there were not we didn't we didn't have the similar a similar construct on any of the other M&A activity, we had a a separate.
But unrelated on the stock buyback program as part of the Oak Hill acquisition that has come and gone and so the new stock buyback program that was initiated earlier. This year that is a proactive art choice our decision to having an ongoing buyback program.
Okay.
And okay, great. Thanks.
Question is regarding the reverse stock split from from.
In favor of of the concept, but my my concern is is.
You know float size, obviously and number of shares available.
How do you think about that.
Yeah.
That's a great question.
I think we were worried about it free.
<unk>.
But now that we've done garrison and now that we've done.
We're about to do harvest I think I think it's probably less of a concern for us.
The reality is a lot of our institutions.
And margin stock.
For stocks trading at this kind of share price level.
And a lot of our a lot of our investors of assets.
So.
I think it's just the balance it just you know we're not going to do it's a balance between how much of a reverse split.
Vis vis <unk>.
Vis vis making sure your conscious of your flow.
So I know this is kind of engine, there's no right answer to this question, but what.
But it is something that we're aware of.
In general I guess youre trying to shoot for us a stable above 10 or is that a way of thinking about it.
Yeah, I mean, I think I think the most likely range. If you look at the range we provided.
I'll be surprised if we come in somewhere in the middle of that right.
So like a 10 to one.
Yeah.
Okay.
That's all I have again congratulations Angela.
Angela.
Once again I would like to remind everyone. If you would like to ask a question. Please press star one on your telephone keypad again that is star one to ask a question.
Your next question comes from the line of Steve Martin from Slater.
Hi, guys.
And I applaud the reverse split and Ah I agree you know you don't want to go too far you just Wanna.
Get it to a level that satisfies a whole lot of requirements, but doesn't reduce the flow too much.
But in terms of timing you left yourself a lot of timing on that.
Any particular reason.
No I mean, there's no real science behind it I mean, I think the reality is.
With all of the corporate activity.
The refinancings that we were doing when we put the proxy out.
And our merger and everything else I think.
I think it's we put it on there just for flexibility, but there's no again, there's no real science I mean, it's our intention to do it relatively soon after we get the devotedly, if we get devoted Daniel I think our intention relative.
Sure.
You'll wait until the H cap deal closes so you sort of have a salt on a solid number of shares.
Yeah, I mean, if you look at our annual meeting it lines up well with somewhat close on harvest. So they're both kind of happened on the same time. So I think it probably makes sense for us to do post harvest closed just because they're.
They're all happened at the same time, but.
Our annual meeting and harvest are expected to happen in June or July.
Got it Yeah, and then I guess, if you could do it before June the end of June and you don't have that would make your second quarter numbers.
<unk> done once and for all the share counts on everything we're all done.
Alright, the buy back.
What is your intention to put some sort of plan in place.
After the mergers so that you Don with some form of trigger a formula So that you can buy since you're always in quiet periods.
Yes, I mean, I mean, if you look at what we did.
Garrison.
You had a <unk> five in place.
Our voices this blackout issue.
On the issue that we have is even if you had that you can't buy back stock during a when you have a proxy outstanding.
So we saw obviously, we've got a shareholder vote going on right now from harvest and so.
I think I think don't be surprised if we can do that again, just because we want to buy back stock with told shareholders from a buyback stock.
And.
Uh huh.
We think we can do to do that.
Okay.
Buyback as opposed to like asking restricted all the time.
Thanks, a lot of sense.
I agree with that.
Can you talk about.
Two subjects in a little more detail the non accruals, where they stand what the price prognosis is and you've done a great job reducing them.
And are the status of the CLO book and the income you're you're recording.
Yeah, Steve So first on the on the non accruals were down one non accrual from last quarter to this quarter.
Candidly, we have a couple of names on that list two of which are kind of just in a liquidation and so they're relatively small amounts, but at some point hopefully in the next quarter or two of those get cleaned up and then there's a third that is supposed to.
Opposed to be purchased by US back again this is all public public information.
This purchase is supposed to be closing sometime in this quarter.
So that would come off the list there too. So we think we have some relative near term visibility to that that number decreasing but it's kind of up in the air on on the exact timing of that because you know you kind of have to go through.
Some trustees on localization side, and then you just kind of waiting on on a stack mode.
For another one so we generally think the trend is downward. The question is just kind of timing wise when that rolls through.
So if it's if some of them are getting sort of low.
One is that sort of go off because the thing one bank as the company went bankrupt. This one thing.
If one of them is getting bought by US back do you expect to recover some of the funds.
Some of the fair value of fair market value, Yes, no.
Absolutely, we can get the number a little bit wrong, but we havent mark somewhere in the very high Fifty's.
Which is where we expect to receive which is the value. We expect to receive from from this package. It's all been without an egregious. So assuming it closes then the quantum or the recovery is not in doubt.
So that's kind of baked into our on fair value as of quarter on.
So I'm trying to say.
And similar to the ones that are liquidating, we do expect to receive value from them and have been receiving value as they've been liquidating.
It's just you know at some point they'll actually slip at all of our non accrual list because they'll no longer being assets.
Okay, and the CLO book.
Yes, CLO book, we we exited one position during the quarter as we've kind of continued to mention and in several in on a number of these calls we look to proactively take advantage of resets and repricing and things like that another one of our positions got called during.
<unk> during Q1, they are still in the process of making a making payments out again.
Again, the early indications are we will probably get a little bit more than the mark.
But kind of you know, it's it's right around where we haven't marked them and then again I think theres. Another position that was turned off from a cash flow perspective from most of last year. It's now back on to making half payments and you know hopefully that that flips, but I would say you could you could think of the CLO.
Income is probably relatively stable here in the short term.
Great.
As far as I think most of us are concerned.
Getting paid at.
Carrying value or book is a victory when you're trading at a discount.
Okay great.
It's just a little bit it's a little bit tricky from the timing wise, because you kind of have to make sure. It.
It's only really applicable and you're able to kind of get those values. When there is kind of on an actual.
Events going on with Cielo to kind of get people to the table. So that's kind of it's been a little bit slower than we expected candidly, but every single time one of the CLO Hasnt event, we were proactive and we monetize.
Okay and you May have said this I got cut off at one point.
Harvest, where I assume they have been running their portfolio down.
Prior to the actual deal closing so you know what's the status of their portfolio and our intention after the closing.
Yeah.
I would say trending in.
In line or better than we expected.
So.
From what we presented to shareholders at the very end of last year I think I think it's.
There's been no real nice prizes and again the other bucket.
They have had some refinancings so.
Again.
Post close we expect that transaction alone in line or better than what we told people originally.
And then fled to play with that portfolio has yet to do exactly what was done on the other portfolios, it's a little harder because they harvest portfolio is probably less liquid.
And smaller companies.
That would be the kind of wind down that portfolio in a prudent way and replace it with BC originated deals that's kind of the.
So that's kind of the plan with that portfolio.
Alright, and then recognizing that you guys don't have a whole lot of equity like.
Securities.
Given all the refinancings are spacs et cetera have you Hum.
Have you been able to achieve any games on any or have they on any of the airport sometimes in those smaller companies.
There were some equity securities.
I haven't look yes, we went from where it was carefully.
Yeah on that day.
On harvest had a big realization in Q1 that they noted as a subsequent event in their Q4 earnings on that.
It is a relatively big pop we've seen a couple of deals from the garrison portfolio that had relatively large money multiple realizations, but theyre very small equity positions.
It doesn't necessarily move the needle a ton, but yes, we're absolutely seeing that activity, but your points are our equity portfolio was a little bit smaller so it's a little bit less obvious.
As it works through the financials, but absolutely we're seeing some of that activity.
Okay, and one last one on going back to the Oak Hill.
That was now a year and a half ago is that portfolio pretty much done and or are you left with anything that you were just holding because they're good assets or you haven't been able to get rid of.
Yeah, I mean, we still have about roughly a third of the assets on its maybe a touch over that but I think where we sit right now we're kind of what kind of very comfortable from a credit perspective.
And it makes a lot more sense just to kind of keep our and the income where we kind of feel good about the credits as opposed to breadth of monetizing them.
Okay.
Thanks, a lot guys and look forward to a quarter that is definitely have so many moving pieces.
Thank you.
And I show no further questions at this time I will now turn the call back to Mr. Goldberg for any closing remarks.
Thank you.
Thank you very much for all of your support again, we're very sorry to have a call. So early in the morning, I know a lot of EBITDA reached out to US I think a number I think eight bdcs are reported.
24 hours, so we try to open the call to be convenient.
But thank you for all your support and thank you for all of your.
Questions. If you guys have any questions at all please reach out to any member of management. Thank.
Thank you very much and hope you have a good weekend.
Ladies and gentlemen, this does conclude today's conference. Thank you again for your participation you may now all disconnect.
[music].
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Portman Ridge Finance first quarter 2021 financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypads. Please be advised that today's conference is being recorded.
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Thank you. It is now my pleasure to turn the call over to Mr. He learned first before as yours.
Thank you good morning, and welcome to Portman Ridge Finance Corporation first quarter 2021 earning conference call on earnings Press release was distributed yesterday may six after market closed a copy of the release along with the earnings presentation is available on the company's website at Www Dot Portland Ridge Dotcom.
The Investor Relations section and should be reviewed in conjunction with the company's form 10-Q filed yesterday with the SEC.
As a reminder, this conference call is being recorded for replay purposes.
Please note that today's conference call may contain forward looking statements, which are not guarantees of future performance or results.
A number of risks and uncertainties actual results may differ materially from those on the forward looking statements as a result of a number of factors, including those described in the company's filings with the SEC Portman Ridge Finance Corporation assumes no obligation to update any such forward looking statements unless required by law.
With that I would now like to turn the call over to tank Goldfarb, Chief Executive officer of corporate average.
Right.
Great.
Good morning, and thanks, everyone for joining our first quarter earnings call I'm, sorry, it's so early but we've got four other guys in our space reporting and doing calls this morning as well.
I'm joined today by our Chief Financial Officer, Jason and Bruce and our Chief Investment Officer, Patrick Schafer.
Yesterday afternoon, Portman Ridge announced its first quarter 2021 fiscal year financial results.
I will begin with an update on the significant progress we've made towards our strategic goals and provide a high level overview of our first quarter results on.
I'll finish with a discussion of our near term priorities heading into 2021, including an update on our M&A pipeline activity as it relates to the harvest transaction.
Following that Patrick will give an update on our portfolio activity and status and Jason will provide additional details on our financial results.
In the first quarter of 2021, we continue to execute on our strategic plan of repositioning Department Rich portfolio. Following the merger with garrison in October of 2020.
An immediate priority of ours was to reduce the combined leverage level. After the merger, which was one eight times on the on net basis at close.
Accordingly, we've proactively monetized an aggregate of $92 $4 million in the fourth quarter of 2020.
At or above fair value and utilized the net proceeds to repay approximately $88 million of the roughly 252 million in secured notes, which were assumed as part of the garrison merger.
This $88 million principal repayment was completed in the first quarter and as a result at quarter end gross leverage was one four on a gross basis and one one times on a net basis compared to one seven times gross leverage and 1.4 times on a net basis at year end.
Haven't had any having previously stated that our long term leverage range is 1.25 to 1.4, we were pleased to achieve this range in a relatively short order without compromising price valuation or earnings.
We continue to engage in the sales of assets originate by garrison on the first quarter with an additional $30 3 million sold above fair value.
Looking ahead, while we continue to assess opportunistic asset sales on our portfolio. We do not plan to continue the proactive pace at which we sold like legacy garrison assets in the fourth quarter of 2020, and the first quarter of 2021 as we are pleased with the state of the overall portfolio at this time.
We've also continued to drive the shift in the composition of our portfolio.
And really just focused on secured loans with an emphasis on first lien investments.
Firstly on investments now comprise 83% of the debt securities portfolio compared to 80% at year end and 60% at September 30th.
Pro forma for the harvest transaction.
We expect our portfolio will be similarly weighted to the first lien securities I believe as we've previously discussed we expect over time to continue rotating our existing legacy assets, including those originated by garrison on harvest into higher yielding directly originated loans per London strategy of BC partners.
Turning to financial performance for the quarter.
We generated net investment income per share of 11 cents in earnings per share of 11 cents.
Nonrecurring and onetime expenses impacted our earnings per share this quarter, including a $1.8 million realized loss on extinguishment of debt, which resulted in a negative two cent impact.
We also experienced professional fee expenses that were higher than typical due to increased legal expenses from our M&A activities and higher tax and audit fees during the quarter that equated to nearly one cents per share impact.
Looking ahead in the second quarter and beyond we remain cost focused on multiple levels and we expect the actions, we're taking now will generate cost savings.
Well the full wellbore fully emerge with the passage of time.
On April 30th we closed a private placement debt offering of $80 million and four and seven eighths senior secured notes senior unsecured notes.
We were pleased to have completed this transaction during opportune time on the credit markets and will benefit substantially from interest expense savings going forward.
We expect these interest rate savings and other cost efficiencies related to M&A will continue to rise as we manage a significantly broader asset base over which to spread our fixed costs that will flow to the benefit of shareholders.
And other corporate news, we previously announced the renewal of the $10 million stock repurchase program that was approved on March 11, 2021 by the board of directors. We continue to believe that buying back our stock makes sense for shareholders, but we are constrained by blackout periods and other restrictions around our M&A activities.
Furthermore, we continue to take into account feedback from our shareholders and on that note and in our most recent proxy filed on April 23rd we raise as a voting matter on June 7th annual meeting our intention to enact a reverse stock split within the range of one to five to one to 15 shares within one year of stockholder approval we.
Believe having our shares undergo a reverse stock split may provide greater flexibility for shareholders, particularly for institutional investors, who often operate with under restrictions with respect to per share prices among other parameters.
Finally in December of 2020, we announced our plan to merge with harvest capital Credit Corporation as discussed on previous calls the harvest transaction makes sense for Portman Ridge from any of the same reasons that we noted for our previous mergers, including adding of size and diversification to the existing platform increasing the leverage.
<unk> of of public company expenses immediately while improving trading liquidity visibility and the capability and flexibility to speak for larger deals and the longer term.
The harvest portfolio will also continue to shift our portfolio composition to first lien assets. We've also noted that we expect harvest transaction to be deleveraging to the tune of 0.1 turns on both a gross and net basis.
We are on track for an expected closing to occur in early to mid June of this year.
We're off to a strong start in 2021.
Portfolios performing well non accruals are continue to trend downwards as a percentage of the total fair value of the debt portfolio and we expect this trend may continue based on current conditions.
Having achieved a leverage ratio at the low end of our target range. We are now on a good position to increase investment activity in the near term through the BC partners platform as we continue to rebuild and shift the portfolio composition to BC partners originated assets.
We will benefit from even greater flexibility once they expected harvest transaction closes, which we anticipate will be a further deleveraging event and.
Internally, we remain very focused on generating cost savings in all areas of the company in order to maximize value for our shareholders.
And with that I will turn the call over to Patrick Schafer, Our Chief investment Officer for a review of our investment activity.
Thanks Ted.
Turning first to current market conditions as many of you on this call on though our primary market has been very strong starting at the end of last year and really continuing into the first quarter of this year.
Given the backdrop of low interest rates vaccine distribution led reopening and ongoing fiscal stimulus.
The overall credit market has remained extremely active.
If you look at liquid loans benchmarks spreads during the first quarter were actually lower on average than on average in the fourth quarter of 2019.
The middle market benchmarks are still wider than in Q4 2019.
But those also continued to grind tighter in tandem with the broadly syndicated markets.
Transaction volume was strong in the quarter, including both new investment opportunities through M&A activity as well as refinancing activity.
Repayments, which were higher than typical in the past couple of quarters appear to be slowing down in the second quarter, particularly for the middle market, where we operate.
As before we know that spreads remain higher wider in the direct loan origination market relative to the liquid credit market and our ability to use the breath of our platform to lead and structure transactions should generate consistent attractive risk adjusted returns in excess of the broader market.
Looking ahead to the full year 2021, our focus will be on leveraging a robust pipeline to remain well invested during this period of increased asset repayments as we highlight later, our new debt originations continued to generate yields in excess of our in place debt portfolio as a whole so long term we.
I believe the increased repayment activity will lead to increasing returns for shareholders. As we further rotate out of legacy K Catholic gears and assets and these assets originated by BC partners.
Turning to slide nine of the Investor presentation. The first quarter was fairly active considering that our primary short term goal. After the <unk> merger was to Delever.
During the quarter, we made investments into 14 borrowers eight of which were existing borrowers, including the BCP, great Lakes joint venture and fees.
Six of which were brand new borrowers.
In total all the three of the 14 transactions were completed alongside other BC partners entities.
In aggregate. These 14 investment totaled approximately $50 million of fair value, 67% of which well first on securities, 18% of which were second lien securities.
12% of which was net add on to the Great Lakes joint venture and the final 3% were short term investments that were sold prior to the end of the quarter.
The weighted average spread on the new investments, excluding the great Lakes joint venture was 828 basis points.
On the repayments and disposition side. The quarter was also active in total we exited or were repaid on 19 positions seven of which were repayments in aggregate. These exits represented a carrying value of approximately $68 million and resulted in a gain of approximately $830.
The balance.
Specifically related to the proactive asset sales. These 12 positions represented approximately an aggregate carrying value on approximately $30 million and resulted in a gain of approximately $165000.
During the quarter, our debt and equity securities accounted for an approximately $6 $2 million net gain while CLO equity positions accounted for a $2 $2 million net gain in our.
Two joint ventures accounted for the remaining $1 2 million dollar net gain.
On an equivalent basis as of March 31st.
Portman Ridge has a $412 $3 million on debt securities marked at 93, 9% on par and yielding a stated price at LIBOR, plus 658 basis points on accruing debt securities.
This compares to $437 7 million on debt Securities market 92, 4% of par and yielding a stated spread to LIBOR of 680 basis points on accruing debt securities.
December 31 2020.
And $155 7 million of debt securities portfolio marked at a blended price of 91, 9% of par and a stated spread to LIBOR of 658 basis points. When see aircrafts took over management of Portman Ridge on April one 2019.
Turning to slide 10, non accruals as of March 31, 2021 represented two 3% of cost and <unk>, 7% of fair value on the investment portfolio as compared to two 4% and 8% respectively as of December 31.
Seven investments were on non accrual status as of March 31, 2021.
I'll now turn the call over to Jason to further discuss our financial results for the quarter.
Thanks, Patrick as a quick note given the transformational nature of the garrison merger that closed in October 20th 20 I.
I will present, all prior period comparisons to the first quarter of 2021 again, the adjusted fourth quarter 2020 results unless otherwise noted.
GAAP net investment income for Q1 was $8 2 million or <unk> 11 per share, which compares to adjusted net investment income for Q4 of eight cents per share after adjusting for the impact of tariffs on purchase accounting.
Total investment income was $18 3 million down $1.6 million or 8% due primarily to the timing between the closing of the garrison merger, which occurred in October and the eventual sales of $92 4 million in assets originated by Gary and that's part of our goal to deleverage the combined portfolio.
The broker these asset sales, which occurred after close and closer to year end generated investment income during this period.
Total expenses for Q1 decreased to $10 1 billion from $11 million in the fourth quarter of 2020. The decrease was driven primarily by lower performance based on that.
Offset in part by higher management fees and professional.
Management fees increased due to the full quarter impact of the garrison merger and professional fees increased due to higher legal expenses related to the merger activities and incremental taxes incurred in the first quarter.
Going forward, we do not anticipate.
Professional fees stay at this elevated level and would expect for them to normalize closer to the fourth quarter of 2020 levels. We also know that through the end of this quarter all incentive fees earned on reinvested in new shares issued.
Interest expense and amortization of debt issuance costs increased slightly quarter over quarter from $3 3 million to $3 4 million in the first quarter due primarily to the full quarter impact of the garrison merger offset by lower debt balances as the company repaid $88 million of secured notes due 2029 during the quarter.
We expect substantial interest expense savings in future periods, driven by issuance of the four and seven eight.
Senior unsecured notes on April 30th and the pending redemption of this they've spent a net notes due 2022, which we expect will be completed on or before may 31.
At quarter end, we had total investments excluding derivatives of $474 million and net assets of $220 million or $2 92 per share compared to investment excluding derivatives of $488 million and net assets of $216 million or $2 88 per share in the fourth quarter of 2020.
This marks the fourth straight quarter that we've increased NAV per share.
The increase in NAV per share for the quarter was mainly attributable to net investment income of $8 2 million and net appreciation in the value of our investment of approximately $1 6 million offset by a one time loss on extinguishment of capitalized debt cost and the amount of $1 8 million.
Valuations continue to benefit from an overall yield tightening environment and general economic improvement.
Net of the dividend paid during the quarter. This resulted in growth of 3.6 million in stockholders' equity, resulting in an NAV per share of $2 92.
As of March 31, 2021, our debt to equity ratio was one four times on a gross.
From a regulatory perspective, our asset coverage ratio at quarter end was 170%.
The reduction in leverage was driven primarily by the repayment of $88 million on the secured notes during the quarter. Our objective has been and will continue to be focused on maintaining overall leverage to a range of one point to 1.4 times.
Total debt at quarter end was comprised of $69 million in borrowings under our credit facility and $164 million unsecured notes, the 2029, and 77 million and the fixed on the NATO.
In 2022.
Total of $310 million of debt.
As discussed subsequent to quarter end, we issued $80 million and four and seven eight senior.
Your unsecured notes due 2022.
But placement offering and subsequently notified the trustee.
The one in five of the six on an eighth notes our election to redeem them at all.
With respect to liquidity and unfunded commitments, our aggregate unfunded commitments that are 25 million at March 31, 2021, and we reported 38 million in unrestricted cash on cash equivalents with an additional 46 billion of available borrowing capacity under the credit facility.
As announced yesterday and consistent with prior quarter levels quarterly distribution of <unk> <unk> per share. It was approved by the board and declared and payable on June one 2021 to stockholders of record at the close of business on May 19 2021.
With that I will turn the call back over to Ted Goldberg.
Thank you Jason.
We were pleased with another quarter of progress assortment ridge in solid financial shape, and we certain believes belief that we've taken the necessary steps to position Portman ridge to generate stable consistent earnings for the long term and we believe that we've begun to see some of the fruition of our work to date, we're confident that there's more to come.
I'd like to close our prepared remarks by encouraging shareholders of record.
Note our annual meeting on June seven.
To participate and vote.
Thank you again to all our shareholders for your ongoing support.
This concludes our prepared remarks, and I'll now turn it over to the operator for any questions.
Thank you, ladies and gentlemen in order to ask a question. Please press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypads, well pause for just a moment to compile the Q&A roster.
Again, if anyone would like to ask a question. Please press star one on your telephone keypad.
Yeah.
Your first question comes from the line of Christopher Nolan from Lindenberg Thalmann.
Hey, guys.
Was I saw on the press releases 1.38 million share sale to an affiliate of.
On the management can you explain that a little bit please.
Yes, Jason.
Yes.
Yeah sure.
Oh God, yes.
Yeah sure so we issued.
Equity too.
An affiliate of appointment.
And.
Yeah.
To the tune up like that at 1.38 million with a.
Equity equity issuance.
Private placement.
It's Chris Chris that this is the incentive fees being paid in stock.
Okay, Yeah, and I thought I saw that one times.
Net and that was a first quarter event or a second quarter event.
It'll be second quarter events. So it's it was it was done as part of the the financials yesterday and will be issued in the upcoming day.
Dave.
Great and then to Chris' question on just I mean for people, who don't recall because as you know we all think about this as normal but when we did the when we did it on some of these original mergers we agreed a or we offered shareholders. The opposite side that we would take our incentive fees in stock versus at NASS vs and cash and we did.
Thought it was a great message to send to shareholders too.
Align ourselves with our shareholders and that's kind of gave rise to this so this is just us taking on incentive fees and stock on that yeah, no totally agree hum.
On the capital structure front are you starting to see.
Economic inflation in your portfolio companies and have the price.
Prospect of inflation affecting how you guys are thinking about your capital structure going forward.
Yes.
Yeah. So I think I think what we've seen the last 12 months is a portfolio of companies have done an amazing job on the cost side.
So despite this worried about supply chain and inflation on.
On a trailing basis, we've not seen a lot of.
On a trailing basis, we just havent seen a lot of inflation.
Inflation that being said you know Oscar going up all over the place right now and it is something that we're focused on them. So revenue last year was all about expense controls and anemic revenue growth now you've got strong revenue growth on the Big question is whats your expense is going to do but I think it is something that we're it's a good question actually from that we're definitely focused on.
And you know on our new underwriting for sure and we definitely are focused on it we haven't seen it but we haven't seen it roll through our portfolio of companies broadly speaking yes.
I was just gonna add it is far more of a focus on new investment activity trying to ascertain how much of the of the earnings are inflated. We obviously have a much better handle on our portfolio companies because we saw them each quarter through the pandemic and feel pretty good about it.
Something we are laser focused on her new investment activity.
Gotcha.
And then I guess H Cup are you planning once they have $6 million to $8 million excuse me $63 million from debt any plans to.
Shut that debt or do you think your.
Leverage ratios can just.
Absorb it and keep on going.
Yeah.
I think at the current stage, we're only anticipating them.
The their existing senior unsecured bonds, which I believe is about 28 $29 billion to carryover to the pro forma company.
And at that point, we'll we'll decide how to how to address those relative to the new unsecured bonds that were issued.
From a from a harvest perspective, the only the only debt that we anticipate being carried over to the appointment will be those unsecured notes.
Yeah, So I would say simplistically, we have the ability to take it on and we've had on our leverage ratios with the ability to take on the debt I. Just think if you look at our recent execution of our bond deal. We think there's opportunities for us to save money for our share.
Holders.
Your next question comes from the line of Angelo Guarino.
Good morning.
Congratulations on.
Performance.
With regards to the reinvestment of the management fees.
There's been a bunch of moving parts there all the way back from the original.
Okay cap.
Transition that had the funky.
Function like that.
What would.
What youre doing currently what is the.
What's the lifespan of that and when was that initiated this I'm I'm, assuming the original cap.
Yeah promise to reinvest.
It's already.
Expired and this is a new one that we just.
If you could just bring me up to speed on which we're what we're under now on what you're operating under Windows expires.
Yeah. Andrew this is patrik. Thanks for the question. So this is actually part of the original transaction and so we agreed as part of the original externalization of kick up that for the first two years, we would take up to $10 million of incentive fees in the form on stock at now and so this quarter.
Here, then ended 331, 2021 will be the two year anniversary of that.
Of that agreement. So this will be this will be the last or this was the last quarter, where we are under the day affirmative obligations to take our stock in the form I'll take incentive fees in the form on stock.
Okay were there any other are there any other overlapping.
No.
Okay. No there were not we didn't we didn't have this similar a similar construct on any of the other M&A activity, we had a a separate but on.
Unrelated on the stock buyback program as part of the Oak Hill acquisition that has come and gone and so the new stock buyback program that was initiated earlier. This year that is a proactive our choice our decision to have in an ongoing buyback program.
Okay.
And okay, great. Thanks.
Question is regarding the reverse stock split.
In favor of of the concept, but my concern is as you know float size obviously.
The number of shares available.
How do you think about that.
Yeah.
That's a great question, it's a balance I think we were worried about it.
Free garrison.
But now that we've done garrison and now that we've done.
We're about to do harvest I think I think it's probably less of a concern for us.
I mean, the reality is a lot of our institutions.
And margin stock.
Our stock's trading at this kind of share price level.
And a lot of our a lot of our investors vessels.
So I.
I think it's just the balance it just you know we're not going to do it's a balance between how much of a reverse split you do.
Vis vis <unk>.
Vis vis maybe making sure your conscious of is low.
So I know that's kind of engine there's no. There's no right answer to this question, but it is something that we're aware of.
In general I guess youre trying to shoot for a stable above 10 is that on a way of thinking about it.
Yeah, I mean, I think I think the most likely range. If you look at the range we provided.
I'll be surprised if we come in somewhere in the middle of that right.
So like a 10 to one split fish.
Yes.
Again congratulations.
Angela.
Once again I would like to remind everyone. If you would like to ask a question. Please press star one on your telephone keypad again that is star one to ask a question.
Your next question comes from the line of Steve Martin from Slater.
Hi, guys.
And I applaud.
Reverse split.
And I agree you know you don't want to go too far or you just want to get it to a level that satisfies a whole lot of requirements, but doesn't reduce the flow too much.
But in terms of timing you left yourself a lot of timing on that.
Any particular reason.
No I mean, there's no real science behind it I mean, I think the reality is.
With all of the corporate activity.
In the refinancings that we were doing when we put the proxy out and our merger and everything else I think.
I think it's just we put it on there just for flexibility, but there's no again, there's no real science, but it's our intention to do it relatively soon after we get the devote a day if we get devoted to hang on I think our intention relatively soon after.
You'll wait till the H cap deal closes so you sort of have a salt on a solid number of shares.
Yeah, I mean, if you look at our annual meeting it lines up well with them on closing harvest. So they're both kind of happened on the same time. So I think it probably makes sense for us to do post harvest close just because they're all happened at the same time, but.
You know our annual meeting and harvests are expected to happen in June or July.
Got it yeah, and then if you.
Yes, if you could do it before June the end of June then you don't have that would make your second quarter numbers sort of done one once and for all the share counts on everything we're all done.
Alright, the buy back.
What is your intention to put some sort of plan in place after the mergers. So that you don't with some form of trigger a formula. So that you can buy since youre always in quiet periods.
Yes, I mean, I mean, if you look at what we did with <unk>.
The garrison.
You had a <unk> five in place.
Our voices this blackout issue.
The issue that we have is even if you had that you can't buy back stock during a when you have a proxy outstanding.
So we saw obviously, we've got a shareholder vote going on right now for harvest.
So I think you know I think don't be surprised if we can do that again, just because we want to buy back stock with til shareholders from a buyback stock.
And.
Uh huh.
We think we can do to do that.
Blind buyback as opposed to like asking restricted all the time.
Makes a lot of sense.
I I agree with that.
Can you talk about.
On two subjects in a little more detail the non accruals, where they stand and what the product a prognosis is and you've done a great job reducing them.
And are the status of the CLO book and the income Youre recording.
Yeah, Steve So first on the on the non accruals were down one non accrual from last quarter to this quarter.
Candidly, we have a couple of names on that list two of which are kind of just in a liquidation and so they're relatively small amounts, but at some point hopefully in the next quarter or two of those get cleaned up and then there's a third that is supposed to.
Post to be purchased by US back again this is all public public information.
The stock purchase is supposed to be closing sometime in this quarter.
So that would come off the list there too. So we think we have some relative near term visibility to that that number decreasing but it's kind of up in the air on on the exact timing of that because you know we kind of have to go through.
Trustees on localization side, and then you're just not waiting on on.
On a stack mode.
For another one so we generally think the trend is downward on the question is just kind of timing wise when that rolls through.
So if it's if some of them are getting sort of the <unk>.
One is that sort of go off because the thing went Bang is a company went bankrupt just one thing.
If one of them is getting bought by US back do you expect to recover some of the funds.
The fair value of fair market value, yes, no absolutely.
Absolutely, we and I'm using the number a little bit wrong, but we havent mark somewhere in the very high Fifty's.
Which is where we expect to receive which is the value. We expect to receive from from this package. It's all been without an egregious. So assuming that closes then the quantum or the recovery is not in doubt.
So that's kind of baked into our on fair value.
As of quarter.
Just trying to be quick.
And similar to the ones that are liquidating, we do expect to receive value from them and have been receiving value as they've been liquidating.
It's just you know at some point they'll actually slipped on our non accrual list because they'll no longer be in assets.
Okay, and the CLO book.
Yes, CLO book, we we exited one position during the quarter as we've kind of continued to mention and in several in on a number of these calls.
We look to proactively take advantage of resets and repricing and things like that.
Another one of our position got call.
During the during Q1, they are still in the process of making a making payments out.
Again, the early indications are will probably get a little bit more than the mark.
But kind of right around where we have it marked.
And then.
Again, I think theres another position that was turned off from a cash flow perspective from most of last year. It's now back on to making half payments and you know hopefully that that flips, but I would say you could you could think of the CLO income is probably relatively stable here.
The short term.
Great.
As far as I think most of us are concerned.
Getting paid at Terry.
Carrying value or book is a victory when you're trading at a discount.
Yeah.
Okay great.
It's just a little bit it's a little bit tricky from the timing wise, because you kind of have to make sure.
It's only really applicable and you're able to kind of get those values. When there is kind of on an actual.
Events going on with the cielo to kind of get people to the table. So that's kind of it's been a little bit slower than we expected candidly.
Every single time, one of the CLO has an event we were proactive and we monetize.
Okay and you May have said this I I got.
Cut off at one point harvest.
Ah I assume they have been running their portfolio down.
Prior to the actual deal closing so what's the status of their portfolio and the intention after the closing.
Yeah.
Okay.
I would say trending.
In line or better than we expected.
So.
It looks like you know from what we presented to shareholders at the very end of last year I think I think it's.
There's been no real net losses and again the other buckets.
They have had some refinancings so.
Again post post close we expect that transaction to look in line or better than what we told people originally.
And then fly the plane with that portfolio has yet to do exactly what some of the other portfolios. It's a little harder because they harvest portfolio is probably less liquid.
And smaller companies.
<unk> would be to kind of wind down that portfolio in a prudent way and replace it with BC originated deals that's kind of the.
So that's kind of the plan with that portfolio.
Alright, and then recognizing that you guys don't have a whole lot of equity like.
Securities.
Given all the refinancings Spacs et cetera have you Hum.
Have you been able to achieve any gains on any or have they on any of the airport sometimes in those smaller companies.
There are some equity securities.
I haven't looked forward it was carefully.
Yeah, I mean, they harvest.
Harvest had a big realization in Q1 that they noted as a subsequent event in their Q4 earnings.
That was a relatively big pop we've seen.
A couple of deals from the garrison portfolio that had relatively large money multiple realizations, but they're there.
Small equity position.
So it doesn't necessarily move the needle a ton, but yes, we're absolutely seeing that activity, but your points are our equity portfolio is a little bit smaller so it's a little bit less obvious as it works through the financials, but absolutely we're seeing some of that activity.
Okay, and one last one on going back to the Oak Hill.
Rising that was now a year and a half ago.
Is that portfolio pretty much done and or are you left with anything that you are just holding because they're good assets or you haven't been able to get rid of.
Yes, I mean, we still have about roughly a third of the assets.
Maybe a touch over that.
But I think where we sit right now we're kind of what kind of very comfortable from a credit perspective.
And it makes a lot more sense just to kind of keep earning the income where we kind of feel good about the credits as opposed to proactively monetizing them.
Okay.
Thanks, a lot guys and look forward to a quarter that is doesn't have so many moving pieces.
Thanks.
Yeah.
And I show no further questions at this time I will now turn the call back to Mr. Goldberg for any closing remarks.
Thank you.
Thank you very much for all of your support again, we're very sorry to have a call. So early in the morning.
<unk> reached out to us I think a number I think eight bdcs are reported over the last 24 hours. So we tried to put free calls to be convenient.
But thank you for all your support and thank you for all of your <unk>.
<unk> if you guys have any questions at all please reach out to any member of management.
Thank you very much and hope you hope you have a good weekend.
Ladies and gentlemen, this does conclude today's conference. Thank you again for your participation you may now all disconnect.