Q4 2024 Logan Ridge Finance Corp Earnings Call
Speaker Change: Thank you for standing by. Good morning and welcome to Logan Ridge Finance Corporation's fourth quarter in full year and the December 31st, 2020 for Ernie's conference call.
Speaker Change: An earning press release was distributed yesterday, March 13, 2035, after the close of the market.
Speaker Change: A copy of the release along with a supplemental earnings presentation is available on the company's website at www.loganridgefinance.com in the investor resources section and should be reviewed in conjunction with the company's form 10K file with the SEC.
Speaker Change: Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results that involve a number of risks and uncertainties.
Speaker Change: Actual results may differ materially from those in the forward-looking statement as a result of a number of factors, including those described in the company's file list with the SEC.
Speaker Change: Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President and Director of Logan Ridge Finance Corporation
Speaker Change: Chief Financial Officer, and Patrick Schafer, Chief Investment Officer. With that, I would not like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.
Speaker Change: Good morning and welcome to our fourth quarter and full year 2024 earnings call. As mentioned, I am joined today by our Chief Financial Officer Brandon Satoren and our Chief Investment Officer Patrick Schafer.
Ted Goldthorpe: Following my opinion remarks, Patrick will provide additional details on our investment activity today, and Brandon will walk through the financials.
Ted Goldthorpe: 2024 was a profoundly transformed year for Logan Ridge as we continue to build upon the record results seen in 2023 and made significant strides the rotation out of our legacy equity portfolio.
Ted Goldthorpe: This is the strongest year of financial performance for Logan Ridge since Mount Logan Management took over as the company's investment advisor in July of 2021.
Ted Goldthorpe: 2024's results were highlighted by the highest total investment income and net investment income in our history at $20.9 million and $4.2 million or $1.56 per share respectively.
Ted Goldthorpe: The hallmark of 2024, however, was our successful sale of our largest equity position, N-degree, for 17.5 million in cash, which was a significant catalyst for the creative combination with Portland Ridge, announced in January .
Ted Goldthorpe: This exit was a major achievement in our long-term strategy to rotate out of our legacy equity portfolio, which has been a central focus to the Schafer Round strategy for Logan Ridge.
Ted Goldthorpe: Burn the building on our success, I'm very pleased to announce that in February of 2025, we exited our second largest non-yielding equity investment in GA communications.
Ted Goldthorpe: and also into the air with no new non-accruals during the fourth quarter, 2024.
Ted Goldthorpe: Additionally, during 2024, we further strengthen our balance sheet by successfully amending and extending our revolving credit facility with Keybank. The amendment further turned out our debt capital structure and reduced our cost of financing will also increase in our financial flexibility.
Ted Goldthorpe: The culmination of these collective achievements paved the way for a combination with Portland Ridge Finance Corporation, which is the Board approved in January .
Ted Goldthorpe: Successful combination of the two companies will be a significant milestone for BC Credit.
Ted Goldthorpe: B.C. Partners Credit Platform, we believe will be a creative for both sets of shareholders. We believe this combination has the potential to provide greater scale, improved operating efficiencies, and increased trading volume in the stock, all of which should create incremental value for shareholders.
Ted Goldthorpe: The next step towards the completion of the merger is the special meeting of shareholders, where investors will be asked to vote to approve the merger after the N-14 is declared effective by the SEC.
Ted Goldthorpe: We invite our shareholders to vote for the merger when they receive their proxy card. Both Portman and Logan's board of directors have unanimously recommended that shareholders vote for the merger.
Ted Goldthorpe: Here's the strong financial and operational performance seen in 2024. Board directors approved a dividend of 36 cents per share for the fourth quarter 2024. The remains flat to the prior quarter.
Ted Goldthorpe: Flecting on the year, we're incredibly proud of what we were able to accomplish.
Looking ahead, we expect to remain active in the market.
Ted Goldthorpe: with a healthy deployment pipeline, our disciplined and prudent investment strategy and our experience management team.
Ted Goldthorpe: We believe we are well positioned to continue delivering meaningful returns to our stakeholders. With that, I will turn the call over to Patrick to discuss our portfolio and investment
Thanks Ted and hello everyone.
As of December 31st, 2024.
The Ferra value of Logan's portfolio was approximately $172.3 million dollars.
Ted Goldthorpe: with the exposure to 59 portfolio companies. This compares to 59 portfolio companies with the fair value of approximately 75.6 million as of the prior quarter, and 64 fellow companies with the fair value of $189.7 million as of December 31, 2023.
during the year-end of December 31, 2024.
Ted Goldthorpe: We continue to be selective in our investment strategy. We deployed approximately $38.3 million in new and existing investments and had approximately $55 million in repayments and sales, resulting in net repayments and sales of approximately $16.7 million for the year.
Ted Goldthorpe: of note, net deployments reflect the $17.5 million of proceeds from Nth degree received in late Q3 and $5.3 million of repayment from critical nurse, which was received on the last day of the year.
Ted Goldthorpe: Now on to portfolio composition. As of December 31, 2024, 66.7% of the company's investment portfolio and fair value was invested in assets originated by the BC Partners Credit Platform, up from 65.4% at the end of last year.
Ted Goldthorpe: Also as of December 31st, 2024, our debt investment portfolio represented 83.3% of the total portfolio at a fair value at fair value with a weighted average annual ideal of approximately 10.7%.
Ted Goldthorpe: excluding income from non-accurals and collateralized loan applications. An 87.9% or debt investment portfolio at fair value was bearing interest at a floating rate.
Ted Goldthorpe: Additionally, as of December 31, 2024, First League debt represented 64.4% and 64.7% of our total portfolio on a cost and fair value basis respectively.
Ted Goldthorpe: and the equity portfolio represented 13.4% and 30.8% of the portfolio on a cost and fair value basis respectively, at December 31, 2024.
Ted Goldthorpe: Moving on to not a cruel status as of December 31, 2024, the company had four debt investments across three portfolio companies on not a cruel status with an aggregate, amortized cost and fair value of 17.2 million and 7.9 million respectively, or 9.0% in 4.6% of the investment portfolio at cost and fair value respectively.
Ted Goldthorpe: This has remained relatively stable since the third quarter of 2024 with 4 debt investments in 3 portfolio companies with a cost and fair value of 17.2 percent, 7.2 million and 8.2 million
Ted Goldthorpe: for 8.8% and 4.6% of the investment companies, investment portfolios cost and for value respectively.
and also the call over to Brandon.
Brandon Satoren: Thanks, Patrick. Turning to our financial results for the quarter-ended December 31, 2024.
Brandon Satoren: For the quarter-ended December 31, 2024, Logan Ridge generated $5.4 million of investment income. A 0.3 million increase as compared to $5.1 million reported for the quarter-ended September 30, 2024.
Brandon Satoren: The increase in investment income compared to the prior quarter was primarily due to the receipt of 0.3 million of non-recurring other income, as well as an increase of 0.1 million and distributions received from our great Lakes Joint Venture.
Brandon Satoren: For the quarter ended December 31, 2024, Logan Ridge had 3.9 million of total expenses, which decreased by 0.3 million from 4.2 million of total expenses reported in the prior quarter.
Brandon Satoren: The decrease is primarily due to a lower average outstanding debt as well as a full quarter's benefit of the database's point spread reduction on the key bank credit facility as part of the August 2024 amendment.
from the 3rd quarter of 2024.
Brandon Satoren: Our net asset value as of December 31st, 2024 was $85.1 million, representing a $1.2 million decrease or 1.4% compared to the prior quarter net asset value of $86.3 million as of September 30th, 2024.
Brandon Satoren: On a per share basis, Net asset value was $32.04 per share as of December 31, 2024, representing a 27th and decrease.
Brandon Satoren: per share, or 0.6% as compared to $32.31 per share as of September 30 of 2024.
Brandon Satoren: The difference between the decrease of 1.4% and 0.6% is the accretive effect of our
Brandon Satoren: Finally, as of December 31, 2024, the company had 15 million in cash and cash equivalents, as well as 26.2 million of unused borrowing capacity available for deployment in new investments.
Ted Goldthorpe: with that, I will turn the call back over to Ted. Thank you, Brandon.
Ted Goldthorpe: to our shareholders. Thank you so much for your continued support. This concludes our prepare remarks and will now turn the call over to the operator for any questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you are dialed in and would like to ask a question please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, seem to press star one again. If you are called upon to ask a question and are listening the allowed speaker on your device, please speak up your handset and ensure that your phone is not on mute when asking the question.
Ted Goldthorpe: Once again, that is to press star one if you have any questions.
Speaker Change: Our first question comes from the line of Christopher Nolan with Leiden Bergthalman. Please go ahead.
Hey, guys, congratulations on a good quarter and um
Speaker Change: I guess looking at a lot of the questions, I think we're answered in the last call, but looking forward, do you anticipate the Logan portfolio just to be subsumed due to?
Speaker Change: Or is it going to be anything else where you might be lowering the equity exposure more? How do you see the combined portfolio going forward? I guess it's an assistant to it, ask.
Hey Chris, I'll go first.
Speaker Change: Yeah, I mean, I think it's going to be just a straight merger. Obviously, Patrick mentioned in history remarks, we were able to exit another.
Equity Position of the Squadron [inaudible]
Speaker Change: So I think from our perspective, it's still a big focus of ours, but I don't think there's a big, we're not going to leave behind a Stubco or a CVR or anything like that. I think the intention is just to kind of blend the portfolios together.
Speaker Change: Yes, right. I mean, as I said, between M3, which was during last year, and then GA Communications, which we noted is Q1, that actually percentage, just of Logan is going to go down that much more and in a pro-form company, it's going to be that much smaller. So I think...
Speaker Change: We're still going to focus on a go-for basis of reducing those equity exposures and re-investing the proceeds, but I don't think we're going to take a different tact with
Speaker Change: The equity positions are a general investment thesis on a pro-form basis. I think...
Speaker Change: More so in Portman than Logan because there was an existing equity book.
Speaker Change: You know, yield generating equity positions as opposed to nav-generating necessarily. So I don't think any of that will change and will continue to be as active as we can on not reducing those equity positions both closing.
Speaker Change: Okay, and then for the board of directors going forward, I mean, do both companies sort of have significant overlaps in board members or is it going to be sort of a combination of two different groups?
Now that the Logan board members are 100% overlap with Portman
Speaker Change: There are additional board members on Portman in how we set up the special committees, but all of the Logan board members are just important board members, so that will effectively kind of go away as doing double director duty.
Speaker Change: Okay, in any consideration of given the merger and all the strategic discussions,
How about putting the board member compensation purely in stock?
Speaker Change: I mean, after all, the dividend bank stock and that's sort of really the line it's interesting discussion on that.
Speaker Change: We haven't talked about that. I mean, historically, you know, it's the same issue for management because we're getting, you know, obviously management fees to manage the vehicle, you know, we're not, there's a 40-Eck rule, we're actually not allowed to pay.
Speaker Change: I actually would assume that applies to the board as well, but I don't know. I mean, historically we've looked into pain our executives in stock and you're not allowed to in the 40 act. I don't know if that's the case for the board, but I would assume it's the same thing. But I don't know, I would have to check that. Okay, thanks.
Good idea.
Speaker Change: As there are no further questions at this time, I would now like to turn the call over to Ted Goldthorpe for closing remarks.
Speaker Change: Great, well thank you very much and everybody have a great weekend and again we also we just want to thank our shareholders one last time. Thank you very much.
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