Portman Ridge Finance Corporation Announces Third Quarter 2024 Financial Results

Reports Net Investment Income of $0.63 Per Share and Net Asset Value of $20.36 Per Share

Recurring PIK Income as a Percentage of Total Investment Income Declines by Over 200 Basis Points

Continued Share Repurchase Program: Total of 33,429 Shares for an Aggregate Cost of Approximately $0.6 Million Repurchased During the Third Quarter; Accretive to NAV by $0.01 Per Share

Announces Fourth Quarter 2024 Quarterly Distribution of $0.69 Per Share

NEW YORK, Nov. 07, 2024 (GLOBE NEWSWIRE) -- Portman Ridge Finance Corporation (Nasdaq: PTMN) (the “Company” or “Portman Ridge”) announced today its financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Highlights

• Total investment income for the third quarter of 2024 was $15.2 million, as compared to $16.3 million for the second quarter of 2024, and $18.6 million for the third quarter of 2023.
• Core investment income¹, excluding the impact of purchase price accounting, for the third quarter of 2024 was $15.2 million, as compared to $16.2 million for the second quarter of 2024, and $18.3 million for the third quarter of 2023.
• Net investment income (“NII”) for the third quarter of 2024 was $5.8 million ($0.63 per share) as compared to $6.5 million ($0.70 per share) in the second quarter of 2024, and $7.2 million ($0.75 per share) for the third quarter of 2023.
• Net asset value (“NAV”), as of September 30, 2024, was $188.0 million ($20.36 per share), as compared to NAV of $196.4 million ($21.21 per share) as of June 30, 2024.
• Total shares repurchased in open market transactions under the Renewed Stock Repurchase Program during the quarter ended September 30, 2024, were 33,429 shares at an aggregate cost of approximately $0.6 million, which was accretive to NAV by $0.01 per share.
• In July, the Company amended the terms of the senior secured revolving credit facility (“JPM Credit Facility”) with JPMorgan Chase Bank, National Association (“JPM”) by increasing the aggregate principal amount by $85.0 million, for a total of $200.0 million, and reduced the applicable margin from 2.80% per annum to 2.50% per annum. Additionally, the reinvestment period was extended from April 29, 2025 to August 29, 2026, and the maturity date was extended from April 29, 2026 to August 29, 2027. Finally, using the amended JPM Credit Facility, the Company refinanced the remaining $85.0 million of the Senior Secured Notes, due November 20, 2029 and issued by Portman Ridge Funding 2018-2 LLC (the “2018-2 Secured Notes”), on August 20, 2024.

Subsequent Events

• On November 7, 2024, the Company declared a cash distribution of $0.69 per share of common stock. The distribution is payable on November 29, 2024 to stockholders of record at the close of business on November 19, 2024.
  

Management Commentary

Ted Goldthorpe, Chief Executive Officer of Portman Ridge, stated, “Following the strong earnings we saw in the first half of 2024, the Company’s third quarter earnings were temporarily impacted by prudent cash and portfolio management initiatives prior to successfully refinancing the 2018-2 Secured Notes. However, I am very pleased with the work we did on the right-side of the balance sheet and the substantial improvements we made to the Company’s debt capital structure. Specifically, the Company upsized and termed out the JPM Credit Facility, while also reducing the spread by a full 30 basis points. Further, using the upsized and lower cost JPM Credit Facility, the Company refinanced the remaining $85.0 million of 2018-2 Secured Notes at the end of August, which resulted in further net spread savings of approximately 28 basis points. These savings are significant, and the Company’s new lower cost of financing positions the Company well for the future.

With that in mind, we continue to believe our stock remains undervalued and thus we continued repurchasing shares during the third quarter of 2024 under our Rule 10b-5 stock repurchase program. Specifically, during the quarter ended September 30, 2024, the Company repurchased 33,429 shares in the open market for an aggregate cost of approximately $0.6 million, which was accretive to NAV by $0.01 per share and reinforces our commitment to increasing shareholder value.

Looking ahead to the final quarter of 2024 and the beginning of 2025, with the Company’s balance sheet fortified by the amended lower cost JPM Credit Facility, we expect to be active in the market and net deployers of the Company’s capital which we believe will restore net investment income back in line with more normalized levels. Above all, despite the current economic uncertainty and a dynamic interest rate environment, we remain confident in our prudent investment strategy, strong pipeline, and experienced management team, and believe the Company remains well positioned with strong spillover earnings to continue to deliver positive returns to our shareholders.”

Selected Financial Highlights

• Total investment income for the quarter ended September 30, 2024, was $15.2 million, of which $12.7 million was attributable to interest income, inclusive of payment-in-kind income, from the Debt Securities Portfolio. This compares to total investment income of $18.6 million for the quarter ended September 30, 2023, of which $15.8 million was attributable to interest income, inclusive of payment-in-kind income, from the Debt Securities Portfolio.
• Core investment income for the third quarter of 2024, excluding the impact of purchase discount accretion, was $15.2 million, a decrease of $3.1 million as compared to core investment income of $18.3 million for the third quarter of 2023.
• Net investment income (“NII”) for the third quarter of 2024 was $5.8 million ($0.63 per share) as compared to $7.2 million ($0.75 per share) for the third quarter of 2023.
• Non-accruals on debt investments, as of September 30, 2024, were nine debt investments representing 1.6% and 4.5% of the Company’s investment portfolio at fair value and amortized cost, respectively. This compares to nine debt investments representing 0.5% and 4.5% of the Company’s investment portfolio at fair value and amortized cost, respectively, as of June 30, 2024.
• Total investments at fair value as of September 30, 2024, were $429.0 million and consisted of investments in 95 portfolio companies. The debt investment portfolio at fair value as of September 30, 2024 was $347.0 million, which excludes CLO Funds and Joint Ventures, and was comprised of 72 different portfolio companies across 28 different industries with an average par balance per entity of approximately $2.7 million. This compares to total investments of $444.4 million at fair value as of June 30, 2024 and consisted of investments in 92 portfolio companies. The debt investment portfolio at fair value as of June 30, 2024 was $358.9 million, which excludes CLO Funds and Joint Ventures, and was comprised of 75 different portfolio companies across 28 different industries with an average par balance per entity of approximately $2.6 million.
• Weighted average contractual interest rate on our interest earning Debt Securities Portfolio as of September 30, 2024 was approximately 11.9%.
• Par value of outstanding borrowings, as of September 30, 2024, was $267.5 million compared to $285.1 million as of June 30, 2024, with an asset coverage ratio of total assets to total borrowings of 170% and 169%, respectively. On a net basis, leverage as of September 30, 2024 was 1.3x² compared to net leverage of 1.3x² as of June 30, 2024.
  

Results of Operations

Operating results for the three months ended September 30, 2024, and September 30, 2023, were as follows:

Investment Income

The composition of our investment income for the three and nine months ended September 30, 2024, and September 30, 2023, was as follows:

Fair Value of Investments

The composition of our investment portfolio as of September 30, 2024, and December 31, 2023, at cost and fair value was as follows:

^{(1) Represents the equity investment in the Asset Manager Affiliates.}

Liquidity and Capital Resources

As of September 30, 2024, the Company had $267.5 million (par value) of borrowings outstanding at a current weighted average interest rate of 6.7%, of which $108.0 million par value had a fixed rate and $159.5 million par value had a floating rate. This balance was comprised of $159.5 million of outstanding borrowings under the JPM Credit Facility, and $108.0 million of 4.875% Notes due 2026. On August 20, 2024, an optional redemption of the CLO occurred, and all rated notes were repaid in full. As of September 30, 2024, no 2018-2 Secured Notes were outstanding.

As of September 30, 2024, and December 31, 2023, the fair value of investments and cash were as follows:

As of September 30, 2024, the Company had unrestricted cash of $13.7 million and restricted cash of $13.0 million. This compares to unrestricted cash of $9.8 million and restricted cash of $26.8 million as of June 30, 2024. As of September 30, 2024, the Company had $40.5 million of available borrowing capacity under the JPM Credit Facility.

Interest Rate Risk

The Company’s investment income is affected by fluctuations in various interest rates, including SOFR and prime rates.

As of September 30, 2024, approximately 91.2% of our Debt Securities Portfolio at par value were either floating rate with a spread to an interest rate index such as SOFR or the PRIME rate. 88.5% of these floating rate loans contain floors ranging between 0.50% and 5.25%. We generally expect that future portfolio investments will predominately be floating rate investments.

In periods of rising or lowering interest rates, the cost of the portion of debt associated with the 4.875% Notes Due 2026 would remain the same, given that this debt is at a fixed rate, while the interest rate on borrowings under the JPM Credit Facility would fluctuate with changes in interest rates.

Generally, the Company would expect that an increase in the base rate index for floating rate investment assets would increase gross investment income and a decrease in the base rate index for such assets would decrease gross investment income (in either case, such increase/decrease may be limited by interest rate floors/minimums for certain investment assets).

Conference Call and Webcast

We will hold a conference call on Tuesday, November 12, 2024, at 10:00 am Eastern Time to discuss our third quarter 2024 financial results. To access the call, stockholders, prospective stockholders and analysts should dial (646) 307-1963 approximately 10 minutes prior to the start of the conference call and use the conference ID 6715408.

A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on the 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: https://edge.media-server.com/mmc/p/ma5zjqpa. 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 L.P.

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 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. For more information, please visit https://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 merger transactions effectuated by the Company; (3) the ability of the Company and/or its adviser to implement its business strategy; (4) evolving legal, regulatory and tax regimes; (5) changes in general economic and/or industry specific conditions, including but not limited to the impact of inflation; (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’s ability to fund any unfunded commitments; (12) any future distributions by the Company; (13) changes in regional or national economic conditions and their impact on the industries in which we invest; and (14) other changes in the conditions of the industries in which we invest and other factors enumerated in our filings with the SEC. 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.

Contacts:
Portman Ridge Finance Corporation
650 Madison Avenue, 3rd floor
New York, NY 10022
info@portmanridge.com

Brandon Satoren
Chief Financial Officer
Brandon.Satoren@bcpartners.com
(212) 891-2880

The Equity Group Inc.
Lena Cati
lcati@equityny.com
(212) 836-9611

Val Ferraro
vferraro@equityny.com
(212) 836-9633

^{(1) During the three months ended September 30, 2024 and 2023, the Company received $— and $0.1 million, respectively, of non-recurring fee income that was paid in-kind and included in this financial statement line item. During the nine months ended September 30, 2024 and 2023, the Company received $0.1 million and $0.6 million, respectively, of non-recurring fee income that was paid in-kind and included in this financial statement line item.}

______________________________
^{¹ Core investment income represents reported total investment income as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, less the impact of purchase discount accretion in connection with the Garrison Capital Inc. (“GARS”) and Harvest Capital Credit Corporation (“HCAP”) mergers. Portman Ridge believes presenting core investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, core investment income is a non-U.S. GAAP measure and should not be considered as a replacement for total investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, core investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
² Net leverage is calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and cash equivalents, and restricted cash and (B) NAV. Portman Ridge believes presenting a net leverage ratio is useful and appropriate supplemental disclosure because it reflects the Company’s financial condition net of $26.8 million and $36.6 million of cash and cash equivalents and restricted cash as of September 30, 2024 and June 30, 2024, respectively. However, the net leverage ratio is a non-U.S. GAAP measure and should not be considered as a replacement for the regulatory asset coverage ratio and other similar information presented in accordance with U.S. GAAP. Instead, the net leverage ratio should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial condition.}