Portman Ridge Finance Corporation Announces Fourth Quarter and Full Year 2020 Financial Results
03/11/2021 - 04:23 PM
NEW YORK, March 11, 2021 (GLOBE NEWSWIRE) -- Portman Ridge Finance Corporation (Nasdaq: PTMN) (the “Company” or “Portman Ridge”) announced today its financial results for the fourth quarter and full year ended December 31, 2020.
Recent Developments
As previously announced, the Company successfully closed on the merger of Garrison Capital Inc. (“GARS” or “Garrison”) on October 28, 2020. On December 23, 2020, the Company entered into an Agreement and Plan of Merger (the “HCAP Merger Agreement”) with Harvest Capital Credit Corporation, a publicly traded business development company (“HCAP”). On February 12, 2021, the Board of Directors of the Company approved a cash distribution of $0.06 per share of common stock to shareholders of record as of February 22, 2021. The distribution was paid on March 2, 2021. On February 22, 2021, the Company repaid $88.0 million of 2018-2 Secured Notes due 2029. On March 8, 2021, the Company received a corporate investment grade rating of BBB- with a stable outlook from Egan-Jones. On March 11, 2021, the Board approved a $10 million stock repurchase program with substantially the same terms as the prior program, which expired on March 5, 2021. Fourth Quarter and Full Year 2020 Highlights
Net investment income for the fourth quarter of 2020 was $8.9 million , or $0.14 per weighted average share. Excluding the impact of purchase accounting in connection with the Garrison merger, net investment income for the fourth quarter of 2020 was $5.2 million , or $0.08 per share(1) , compared to $2.7 million , or $0.06 per share in the third quarter of 2020 and $2.1 million , or $0.06 per share in the fourth quarter of 2019. Net investment income for the year ended December 31, 2020 was $17.0 million , or $0.34 per share, compared with net investment income of $3.1 million , or $0.08 per share in the year ended December 31, 2019. As noted above, excluding purchase accounting associated with the Garrison merger, net investment income for the full year was $13.3 million (1) , or $0.27 per share(1) . At December 31, 2020, the fair value of the Company's investments totaled $487 million , of which the Company’s debt securities portfolio totaled $405 million and was comprised of investments in 109 portfolio companies. At September 30, 2020, the fair value of the Company’s investments totaled $279 million , of which the Company’s debt securities portfolio totaled $205 million and was comprised of investments in 65 portfolio companies. Net asset value per share at December 31, 2020 was $2.88 , compared to net asset value per share of $2.85 at September 30, 2020. Excluding approximately $1.6 million in transaction expenses associated with the Garrison merger, this represents a 2.5% increase relative to the prior quarter.(2) Quarterly distribution paid during the fourth quarter was $0.06 per share, consistent with the first three quarters of the year. Accordingly, distributions for the full year 2020 totaled $0.24 per share. As of December 31, 2020, there were eight investments on non-accrual status. Investments on non-accrual status were 0.8% and 2.4% of the Company’s investment portfolio at fair value and amortized cost, respectively, compared to 1.3% and 3.2% as of September 30, 2020, and there was no change in the number of non-accrual debt securities during the quarter. During the fourth quarter (excluding the impacts of the Garrison merger), the Company acquired $21.2 million par value of debt securities. Also, during the quarter, the Company received $135.1 million in sale and repayment proceeds, which includes a $1.1 million increase relative to the carrying value of those assets sold. Of this activity, $92.4 million was the result of proactive sales of legacy Garrison assets (inclusive of a $0.6 million increase relative to carrying value). Management Commentary
Ted Goldthorpe, Chief Executive Officer of Portman Ridge, stated, “We are very pleased with the progress we made at Portman Ridge this year in terms of managing the business while growing in size and scale. On October 28, we completed the merger with Garrison Capital and quickly began strategic repositioning of the acquired assets through opportunistic sales and debt repayment to reduce leverage of the portfolio. Shortly before year-end, we announced our plans to acquire Harvest Capital Credit Corporation, and we are working toward an expected closing of this transaction in the second quarter of 2021. Overall, our investment portfolio benefited from the economy’s strong rebound and recovery that began mid-2020 and accelerated through the year. We are also pleased to have delivered consistent quarterly dividends each quarter this year. We look forward to making continued progress in 2021 as we continue to focus on all aspects of our business to deliver both sustainable earnings and earnings growth for Portman Ridge shareholders.”
Fourth Quarter 2020 – Selected Financial Highlights
Three Months Three Months (in $ millions, except per share data) December 31, 2020 September 30, 2020 Investment Income: Interest from investments in debt securities $ 16.4 $ 4.9 Investment income on CLO Fund Securities 0.9 0.6 Investment income - Joint Ventures 2.2 2.2 Capital structuring service fees 0.6 - Total investment income 19.9 7.8 Net Investment Income $ 8.9 $ 2.7 Impact from GARS purchase accounting 3.7 - Net investment income less GARS purchase accounting impact (1) $ 5.2 $ 2.7 Net realized and unrealized gains $ 40.0 $ 5.6 Net increase in net assets resulting from operations $ 49.0 $ 8.3 Net increase in net assets resulting from operations per share (basic and diluted) $ 0.74 $ 0.19 Net investment income per share (basic and diluted) $ 0.14 $ 0.06 Impact from GARS purchase accounting $ 0.06 $ - Net investment income less GARS purchase accounting impact (1) $ 0.08 $ 0.06 Weighted average shares outstanding (in millions) 66.0 44.4 Distribution per share $ 0.06 $ 0.06
Total investment income for the three months ended December 31, 2020 and September 30, 2020, was $19.9 million and $7.8 million , respectively. The increase in investment income was primarily driven by the impact of the Garrison merger and the debt investments acquired by the Company as a result. Investment income from debt securities in the quarter was $16.4 million , compared with $4.9 million in the third quarter. The quarter-to-quarter increase in investment income from debt securities included $2.5 million of income from purchase discount accretion, and $1.9 million in income from paydowns on assets acquired in the Garrison merger that occurred during the fourth quarter. Investment income on CLO fund securities in the quarter was $0.8 million compared with $0.6 million in the third quarter of 2020. Investment income from Joint Ventures in the fourth quarter of 2020 was $2.2 million , which was relatively unchanged from the third quarter.
Total expenses for the three months ended December 31, 2020 and September 30, 2020, were $11.0 million and $5.1 million , respectively. The components of the quarter-to-quarter increase were higher Management fees and Performance-based income incentive fees, which in aggregate increased by $3.6 million due primarily to higher than typical prepayment activity during the quarter. Additionally, interest expense and amortization of debt issuance costs for the fourth quarter of 2020 were $3.3 million , compared to $2.2 million in the third quarter of 2020, driven primarily by the impact of the Garrison merger. Professional fees were also higher quarter-to-quarter at $1.0 million in fourth quarter of 2020 compared to $0.4 million in the third quarter of 2020, partially as a result of activities related to the Garrison merger.$8.9 million , or $0.14 per basic share, and $2.7 million or $0.06 per basic share, respectively. Excluding the impact of purchase accounting in connection with the Garrison merger, net investment income for the fourth quarter of 2020 was $5.2 million , or $0.08 per basic share.( 1)
Net realized and unrealized appreciation on investments for the three months ended December 31, 2020 was $40.1 million , as compared to net realized and unrealized appreciation of $5.6 million in the prior quarter. The substantial difference in net realized and unrealized appreciation was due to the impact of a $40.4 million purchase discount recorded in connection with the Garrison merger. This day-one purchase accounting-related discount was a one-time gain and a noncash event.
Portfolio and Investment Activity
The fair value of our portfolio was $487 million as of December 31, 2020. The composition of our investment portfolio at December 31, 2020 and 2019 at cost and fair value was as follows:
December 31, 2020 December 31, 2019 Security Type Cost/Amortized Cost Fair Value %¹ Cost/Amortized Cost Fair Value %¹ Short-term investments $ — $ — — $ 4,207,107 $ 4,207,107 2 Senior Secured Loan 304,539,184 328,845,612 68 91,245,574 88,788,639 32 Junior Secured Loan 87,977,057 75,807,477 16 100,655,341 95,188,373 34 Senior Unsecured Bond 416,170 207,766 0 620,145 403,615 — Subordinated Note — — — 2,165,304 2,422,281 1 CLO Fund Securities 45,727,813 19,582,555 4 46,618,717 31,968,202 12 Equity Securities 24,593,639 13,944,876 3 22,160,993 9,864,419 4 Asset Manager Affiliates2 17,791,230 — — 17,791,230 — — Joint Ventures 54,932,458 49,349,163 10 48,594,539 45,087,967 16 Derivatives 30,609 (1,108,618 ) — 30,609 (33,437 ) — Total $ 536,008,160 $ 486,628,831 100 % $ 334,089,559 $ 277,897,166 100 %
¹ Represents percentage of total portfolio at fair value.
Liquidity and Capital Resources
As of December 31, 2020, we had $378 million (par value) of borrowings outstanding ($373 million net of capitalized costs) with a combined weighted average interest rate of 3.0% . This balance was comprised of $49.3 million of outstanding borrowings under the Senior Secured Revolving Credit Facility, $76.7 million of 6.125% unsecured Notes due 2022, and $252 million of 2018-2 Secured Notes due 2029. On February 22, 2021, the Company repaid $88.0 million of the 2018-2 Secured Notes due 2029.
At December 31, 2020, the Company had unrestricted cash of $7.0 million , restricted cash of $75.9 million , $65.7 million of available borrowing capacity under the Senior Secured Revolving Credit Facility, and $25 million of borrowing capacity under the 2018-2 Revolving Credit Facility. Total assets and stockholders’ equity at year-end 2020 were $600 million and $216 million , respectively. Aggregate unfunded commitments stood at $32.9 million at December 31, 2020.
The Company’s asset coverage ratio stood 156% as of December 31, 2020, above the 150% asset coverage statutory limit.
Stock Repurchase Program
On March 5, 2020, the Board approved a $10 million stock repurchase program. During the year ended December 31, 2020, the Company repurchased 734,403 shares, under the Stock Repurchase Program in open market transactions at an aggregate cost of $863 thousand . On March 5, 2021, the Stock Repurchase Program expired pursuant to its terms. On March 11, 2021, the Board approved a $10 million stock repurchase program with substantially the same terms as the prior program.
Conference Call and Webcast
We will hold a conference call on Friday March 12, 2021 at 9:00 am Eastern Time to discuss our fourth quarter and full year 2020 financial results. Stockholders, prospective stockholders and analysts are welcome to listen to the call or attend the webcast.
To access the call please dial (866) 757-5630 approximately 10 minutes prior to the start of the conference call. A replay of the conference call will be available from March 12, 2021 until March 19, 2021. The dial in number for the replay is (855) 859-2056 and the conference ID is 1237528.
A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company’s website www.portmanridge.com in the Investor Relations section under Events and Presentations. The webcast can also be accessed by clicking the following link: Portman Ridge Fourth Quarter and Full Year 2020 Conference Call . The online archive of the webcast will be available on the Company’s website shortly after the call.
About Portman Ridge Finance Corporation
Portman Ridge Finance Corporation (Nasdaq: PTMN) is a publicly traded, externally managed investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Portman Ridge’s middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. Portman Ridge’s investment activities are managed by its investment adviser, Sierra Crest Investment Management LLC, an affiliate of BC Partners Advisors, LP.
Portman Ridge’s filings with the Securities and Exchange Commission (the “SEC”), earnings releases, press releases and other financial, operational and governance information are available on the Company's website at www.portmanridge.com.
About BC Partners Advisors L.P. and BC Partners Credit
BC Partners is a leading international investment firm with over $40 billion of assets under management in private equity, private credit and real estate strategies. Established in 1986, BC Partners has played an active role in developing the European buyout market for three decades. Today, BC Partners executives operate across markets as an integrated team through the firm's offices in North America and Europe. Since inception, BC Partners has completed 117 private equity investments in companies with a total enterprise value of €149 billion and is currently investing its eleventh private equity fund. For more information, please visit www.bcpartners.com .
BC Partners Credit was launched in February 2017 and has pursued a strategy focused on identifying attractive credit opportunities in any market environment and across sectors, leveraging the deal sourcing and infrastructure made available from BC Partners.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements. The matters discussed in this press release, as well as in future oral and written statements by management of Portman Ridge Finance Corporation, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements.
Forward-looking statements relate to future events or our future financial performance and include, but are not limited to, projected financial performance, expected development of the business, plans and expectations about future investments and the future liquidity of the Company. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “outlook”, “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements.
Important assumptions include our ability to originate new investments, and achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation that such plans, estimates, expectations or objectives will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) uncertainty of the expected financial performance of the Company; (2) expected synergies and savings associated with the transaction in which Garrison Capital Inc. merged with and into the Company; (3) the ability of the Company and/or BC Partners to implement its business strategy; (4) evolving legal, regulatory and tax regimes; (5) changes in general economic and/or industry specific conditions; (6) the impact of increased competition; (7) business prospects and the prospects of the Company’s portfolio companies; (8) contractual arrangements with third parties; (9) any future financings by the Company; (10) the ability of Sierra Crest Investment Management LLC to attract and retain highly talented professionals; (11) the Company ability to fund any unfunded commitments; (12) any future distributions by the Company; (13) changes in regional or national economic conditions, including but not limited to the impact of the COVID-19 pandemic, and their impact on the industries in which we invest; (14) other changes in the conditions of the industries in which we invest and other factors enumerated in our filings with the SEC; (15) the successful completion of the Company’s acquisition of HCAP and receipt of stockholder approval from HCAP’s stockholders; and (16) expectations concerning the proposed HCAP transaction, including the financial results of the combined company. The forward-looking statements should be read in conjunction with the risks and uncertainties discussed in the Company’s filings with the SEC, including the Company’s most recent Form 10-K and other SEC filings. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the SEC.
(1) Net investment income excluding the impact of purchase accounting in connection with the GARS merger is net investment income as determined in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), excluding the impact of purchase accounting in connection with the GARS merger. We believe presenting net investment income excluding the impact of the GARS merger-related purchase accounting and the related per share amount is useful and appropriate supplemental disclosure for analyzing our financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, this measure is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, this measure should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to net investment income excluding the impact of purchase accounting is detailed in the financial tables included with this press release.
(2) Net asset value excluding the transaction expense associated with the Garrison merger is net asset as determined in accordance with U.S. GAAP, excluding the impact of the transaction expense associated with the Garrison merger. We believe presenting information relating to this adjusted net asset value figure on a per share basis is useful and appropriate supplemental disclosure for analyzing our financial performance due to the non-ordinary nature of the expense. However, this measure is a non-U.S. GAAP measure and should not be considered as a replacement for net asset value presented in accordance with U.S. GAAP. Instead, this measure should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance. In order to reconcile these two financial measures, you should add the $1.6 million , or $0.04 per share, of transaction expense relating to the Garrison merger to net asset value determined in accordance with U.S. GAAP.
Contacts:
Jason Roos
Jeehae Linford
PORTMAN RIDGE FINANCE CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, 2020 December 31, 2019 ASSETS Investments at fair value: Debt securities (amortized cost: 2020 - $392,932,411 ; 2019 - $194,686,364) $ 404,860,855 $ 186,802,908 CLO Fund Securities managed by affiliates (amortized cost: 2020 - $0 ; 2019 - $45,099,076) — 29,984,047 CLO Fund Securities managed by non-affiliates (amortized cost: 2020 - $45,727,813 ; 2019 - $1,519,641) 19,582,555 1,984,155 Equity securities (cost: 2020 - $24,593,639 ; 2019 - $22,160,993) 13,944,876 9,864,419 Asset Manager Affiliates (cost: 2020 - $17,791,230 ; 2019 - $17,791,230) — — Joint Ventures (cost: 2020 - $54,932,458 ; 2019 - $48,594,539) 49,349,163 45,087,967 Short-term investments (cost: 2020 - $00 ; 2019 - $4,207,107) — 4,207,107 Total Investments at Fair Value, excluding derivatives (cost: 2020 - $535,977,551 ; 2019 - $334,058,950) 487,737,449 277,930,603 Cash and cash equivalents 6,990,008 136,864 Restricted cash 75,913,411 4,967,491 Interest receivable 2,972,546 1,367,447 Receivable for unsettled trades 25,107,598 24,420,045 Due from affiliates 357,168 473,100 Other assets 1,100,241 1,112,150 Total Assets $ 600,178,421 $ 310,407,700 LIABILITIES 6.125% Notes Due 2022 (net of offering costs of: 2020-$1,058,351 ; 2019 - $1,651,946) $ 75,667,624 $ 75,755,253 2018-2 Secured Notes (net of discount of: 2020-$2,444,512 ; 2019 - $0) 249,418,186 — Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net of offering costs of: 2020-$1,097,815 ; 2019 - $1,462,364) 48,223,083 78,108,535 Derivative liabilities, net (cost: 2020 - $30,609 ; 2019 - $30,609) 1,108,618 33,437 Accounts payable and accrued expenses 1,788,908 1,386,981 Accrued interest payable 1,089,531 136,486 Due to affiliates 1,374,739 1,711,793 Management and incentive fees payable 5,243,869 1,076,645 Total Liabilities 383,914,558 158,209,130 COMMITMENTS AND CONTINGENCIES (NOTE 9) STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 76,093,492 issued, and 75,164,230 outstanding at December 31, 2020, and 45,024,535 issued, and 44,829,676 outstanding at December 31, 2019 751,642 448,297 Capital in excess of par value 638,459,548 451,353,379 Total distributable (loss) earnings (422,947,327 ) (299,603,106 ) Total Stockholders' Equity 216,263,863 152,198,570 Total Liabilities and Stockholders' Equity $ 600,178,421 $ 310,407,700 NET ASSET VALUE PER COMMON SHARE $ 2.88 $ 3.40
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2020 2019 2018 Investment Income: Interest from investments in debt securities $ 28,210,725 $ 14,377,460 $ 14,939,309 Payment-in-kind investment income 3,217,614 606,234 1,066,354 Interest from short-term investments 15,279 79,065 76,055 Investment income on CLO Fund Securities managed by affiliates 3,221,838 4,427,387 6,024,935 Investment income on CLO Fund Securities managed by non-affiliates 319,458 2,008,148 388,237 Dividends from Asset Manager Affiliates — — 1,246,510 Investment income - Joint Ventures 6,911,418 4,859,780 3,100,000 Capital structuring service fees 867,853 137,061 245,393 Total investment income 42,764,185 26,495,135 27,086,793 Expenses: Management fees 4,579,082 3,129,079 — Performance-based incentive fees 4,857,563 — — Interest and amortization of debt issuance costs 10,283,996 8,261,445 7,403,436 Compensation — 3,688,578 4,012,743 Professional fees 2,835,947 3,466,877 3,470,269 Insurance 670,688 704,592 321,268 Administrative services expense 1,941,398 1,243,587 — Other general and administrative expenses 1,152,045 1,496,258 1,874,600 Lease termination costs — 1,431,030 — Total expenses 26,320,719 23,421,446 17,082,316 Management and performance-based incentive fees waived (556,880 ) — — Net Expenses 25,763,839 23,421,446 17,082,316 Net Investment Income 17,000,346 3,073,689 10,004,477 Realized And Unrealized Gains (Losses) On Investments: Net realized gains (losses) from investment transactions 7,604,698 (15,619,046 ) (16,474,939 ) Net change in unrealized appreciation (depreciation) on: Debt securities 19,811,899 6,519,282 (7,420,747 ) Equity securities 1,647,812 (4,856,831 ) (1,283,420 ) CLO Fund Securities managed by affiliates (11,079,828 ) (6,875,007 ) 17,790,480 CLO Fund Securities managed by non-affiliates (414,915 ) 3,380,119 (8,285,747 ) Asset Manager Affiliates investments — — (579,000 ) Joint Venture Investments (2,076,723 ) 3,017,847 (3,125,560 ) Derivatives (1,075,182 ) (64,046 ) — Total net change in unrealized appreciation (depreciation) 6,813,063 1,121,364 (2,903,994 ) Net realized and unrealized appreciation (depreciation) on investments 14,417,761 (14,497,682 ) (19,378,933 ) Realized gains on extinguishments of Debt 154,571 (1,075,968 ) (197,090 ) Net Increase (Decrease) In Stockholders’ Equity Resulting From Operations $ 31,572,678 $ (12,499,961 ) $ (9,571,546 ) Net Increase (Decrease) In Stockholders' Equity Resulting from Operations per Common Share: Basic: $ 0.63 $ (0.33 ) $ (0.26 ) Diluted: $ 0.63 $ (0.33 ) $ (0.26 ) Net Investment Income Per Common Share: Basic: $ 0.34 $ 0.08 $ 0.27 Diluted: $ 0.34 $ 0.08 $ 0.27 Weighted Average Shares of Common Stock Outstanding—Basic 49,987,586 37,641,650 37,356,241 Weighted Average Shares of Common Stock Outstanding—Diluted 49,987,586 37,641,650 37,356,241
