Logan Ridge Finance Corporation (“LRFC”, “Logan Ridge” or the
“Company”) (Nasdaq: LRFC) today announced its financial results for
the second quarter ended June 30, 2022.
Management CommentaryTed Goldthorpe, Chief
Executive Officer and President of LRFC, said, “The second quarter
of 2022 was transformational for Logan Ridge and marks the
first-year anniversary of our stewardship. Although we continue to
operate in an uncertain economic environment affected by high
inflation and rising interest rates, our portfolio is stable and
non-accruals remain low as a percentage of our total portfolio at
fair value. Moreover, as a result of the successful execution on
our business plan, we have materially lowered our cost of capital
by refinancing the entire legacy debt structure at lower rates,
eliminated all near-term liability maturities and increased our
borrowing capacity. Additionally, we significantly reduced the
Company’s exposure to the legacy non-interest earning equity
investments, including the successful exit of its largest legacy
equity interest in Eastport Holding, LLC on June 29, 2022, which
will allow us to reinvest the proceeds into interest earning
investments originated by Mount Logan Management, which is part of
the BC Partners Credit Platform. With the successful completion of
these substantial milestones, the current strength of our portfolio
and our commitment to execute on our growth initiatives, we believe
we have positioned Logan Ridge well to take advantage of
opportunities arising from the current credit environment, which we
believe will be an attractive vintage. We are now laser focused on
returning the Company to profitability. We expect to see the full
benefits of these initiatives starting in the second half of
2022.”
One Year Anniversary Highlights
- As of June 30, 2022, 42% of the Company’s investment portfolio
at fair value was invested in assets originated by Mount Logan
Management, part of the BC Partners Credit Platform, with an
additional $29.5 million of cash and $34.4 million of unused
borrowing capacity available for deployment in investments
originated by the BC Partners Credit Platform.
- Successfully monetized and/or realized $145.4 million of the
legacy portfolio we inherited from the former investment adviser
through June 30, 2022. This represents approximately 64% of the
fair value of the portfolio we inherited.
- Credit has stabilized and there have been no new non-accruals
since Mount Logan Management became the Company’s investment
adviser. Further, we successfully exited a non-accrual investment
for proceeds of $0.6 million. This position was valued at zero as
of June 30, 2021.
- Received an investment grade credit rating.
- Refinanced the entire legacy debt structure, materially
lowering the cost of capital as previously announced. As a result,
the Company has no near-term maturities.
- Strategically exited the Company’s largest legacy non-interest
earning equity interest, Eastport Holdings, LLC. This refinancing
and recapitalization transaction significantly reduced the
Company’s legacy non-interest earning equity exposure. As a result
of this transaction, the Company received $16.5 million in cash and
$19.25 million in principal of a new debt security, in exchange for
all of its previous debt and equity securities.
- As of June 30, 2022, the Company’s non-yielding equity
portfolio represented 21.7% and 21.4% of the portfolio on a cost
and fair value basis, respectively, as compared to 22.9% and 32.3%
of the portfolio on a cost and fair value basis, respectively as of
June 30, 2021.
- For the last-twelve-month (“LTM”) period ended June 30, 2022,
administration fees reimbursed to the administrator, BC Partners
Management LLC, totaled $0.6 million. This compares to $1.4 million
reimbursed to the former administrator, Capitala Advisors Corp, for
the LTM period ended June 30, 2021.
Selected Second Quarter 2022 Financial
Highlights
- As of June 30, 2022, net asset
value was $101.1 million, or $37.31 per share, as compared to
$106.2 million, or $39.16 per share, as of March 31, 2022 and
$107.1 million, or $39.48 per share, as of December 31, 2021.
- Net investment loss for the second
quarter was $0.9 million as compared to net investment loss of $1.1
million reported in the first quarter of 2022. Net investment loss
for the second quarter also includes certain non-recurring
incremental financing costs and professional fees totaling $0.3
million. Excluding the impact of these non-recurring items,
adjusted net investment loss for the second quarter would have been
$0.6 million.
- As of June 30, 2022, our portfolio
consisted of investments in 44 portfolio companies with a fair
value of approximately $175.9 million.
- The Company continued to
judiciously redeploy capital generated from exiting the legacy
portfolio. During the second quarter, the Company made
approximately $30.7 million of investments and had approximately
$58.3 million in repayment and exits, resulting in net repayment
and sales of approximately $27.6 million for the period. This
compares to $16.4 million of investments and approximately $8.4
million in repayments and sales on the first quarter of 2022.
- Cash and cash equivalents as of
June 30, 2022 increased to $29.5 million as compared to $15.8
million as of March 31, 2022, primarily as a result of the Eastport
Holdings, LLC refinancing and recapitalization transaction that
closed on June 29, 2022.
- As of June 30, 2022, our debt
investment portfolio, which represented 75.0% of our total
portfolio at fair value, had a weighted average annualized yield of
approximately 8.7% (excluding non-accruals and collateralized loan
obligations). This compares to a debt investment portfolio, which
represented 68.1% of our total portfolio at fair value, with a
weighted average annualized yield of approximately 8.3% (excluding
non-accruals and collateralized loan obligations) as of March 31,
2022.
- As of June 30, 2022, we had debt
investments in two portfolio companies on non-accrual status with
an aggregate cost of $12.1 million and fair value of $6.4 million,
which represented 6.5 % and 3.6% of the investment portfolio,
respectively. This compares to debt investments in two portfolio
companies on non-accrual status with an aggregate cost of $12.7
million and fair value of $7.0 million, which represented 6.4 % and
3.4% of the investment portfolio, respectively as of March 31,
2022.
- As of June 30, 2022, our debt-to-equity ratio was 1.0x as
compared to 1.2x as of March 31, 2022.
- Total investment income was $3.3
million for the second quarter of 2022, compared to $5.0 million
for the second quarter of 2021. The decline was due primarily to
lower average outstanding debt investments.
- Total expenses for the second
quarter of 2022 declined to $4.2 million, compared to $5.0 million
for the second quarter of 2021. The decrease in expenses was driven
primarily by lower interest and financing fees (decreased by $0.6
million), management fees (decreased by $0.3 million), and other
general and administrative costs (decreased by $0.2 million) as
compared to the second quarter of 2021.
- Net investment loss for the second
quarter of 2022 was $0.9 million compared to net investment income
of less than $0.1 million during the second quarter of 2021.
- Net realized gain on investments
was $15.5 million for the quarter of 2022, compared to $6.9 million
during the second quarter of 2021.
- The Company had a decrease in net
assets resulting from operations of $5.0 million, or $(1.86) per
share, during the second quarter of 2022. This compares to a net
decrease in net asset from operations of $7.6 million, or $(2.79)
per share, for the second quarter of 2021.
The following table summarizes the amortized
cost and the fair value of investments as of June 30, 2022:
($ in thousands) |
Investments at Amortized
Cost |
|
|
Amortized Cost Percentage
of Total Portfolio |
|
|
Investments at Fair
Value |
|
|
Fair Value Percentage
of Total Portfolio |
|
First Lien Debt |
$ |
104,341 |
|
|
|
55.7 |
% |
|
$ |
97,460 |
|
|
|
55.4 |
% |
Second Lien Debt |
|
8,888 |
|
|
|
4.7 |
% |
|
|
8,249 |
|
|
|
4.7 |
% |
Subordinated Debt |
|
26,433 |
|
|
|
14.1 |
% |
|
|
26,250 |
|
|
|
14.9 |
% |
Collateralized Loan
Obligations |
|
7,160 |
|
|
|
3.8 |
% |
|
|
6,296 |
|
|
|
3.6 |
% |
Equity and Warrants |
|
40,703 |
|
|
|
21.7 |
% |
|
|
37,598 |
|
|
|
21.4 |
% |
Total |
$ |
187,525 |
|
|
|
100.0 |
% |
|
$ |
175,853 |
|
|
|
100.0 |
% |
The following table summarizes the amortized
cost and the fair value of investments as of December 31, 2021:
($ in thousands) |
Investments at Amortized
Cost |
|
|
Amortized Cost Percentage
of Total Portfolio |
|
|
Investments at Fair
Value |
|
|
Fair Value Percentage
of Total Portfolio |
|
First Lien Debt |
$ |
103,667 |
|
|
|
54.4 |
% |
|
$ |
98,251 |
|
|
|
49.6 |
% |
Second Lien Debt |
|
30,048 |
|
|
|
15.8 |
% |
|
|
30,190 |
|
|
|
15.2 |
% |
Subordinated Debt |
|
5,050 |
|
|
|
2.6 |
% |
|
|
5,050 |
|
|
|
2.6 |
% |
Equity and Warrants |
|
51,717 |
|
|
|
27.2 |
% |
|
|
64,698 |
|
|
|
32.6 |
% |
Total |
$ |
190,482 |
|
|
|
100.0 |
% |
|
$ |
198,189 |
|
|
|
100.0 |
% |
Interest Rate RiskBased on our
June 30, 2022 consolidated statement of assets and liabilities, the
following table shows the annual impact on net income (excluding
the potential related incentive fee impact) of base rate changes in
interest rates (considering interest rate floors for variable rate
securities) assuming no changes in our investment and borrowing
structure:
Basis Point Change($ in thousands) |
Increase (decrease) in interest
income |
|
(Increase) decrease
in interest expense |
|
Increase (decrease)
in net income |
|
Up 300 basis points |
$ |
2,834 |
|
$ |
(1,235 |
) |
$ |
1,599 |
|
Up 200 basis points |
|
1,881 |
|
|
(823 |
) |
|
1,058 |
|
Up 100 basis points |
|
928 |
|
|
(412 |
) |
|
516 |
|
Down 100 basis points |
|
(727 |
) |
|
529 |
|
|
(198 |
) |
Down 200 basis points |
|
(1,054 |
) |
|
529 |
|
|
(525 |
) |
Down 300 basis points |
|
(1,056 |
) |
|
529 |
|
|
(527 |
) |
Conference Call and WebcastLRFC
will discuss these results in a conference call on Wednesday,
August 10, 2022 at 10:00 am ET.
To access the call, please dial (646) 307-1963
approximately 10 minutes prior to the start of the conference call
and use the conference ID 9702305.
A live audio webcast of the conference call can
be accessed via the Internet, on a listen-only basis on the
Company’s website, loganridgefinance.com, in the Investor Relations
section, under Events and Presentations. The webcast can also be
accessed by clicking the following link: Logan Ridge Second Quarter
2022 Conference Call. The online archive of the webcast will be
available on the Company’s website shortly after the call.
About Logan Ridge Finance
CorporationLogan Ridge Finance Corporation (Nasdaq: LRFC)
is a business development company that invests primarily in first
lien loans and, to a lesser extent, second lien loans and equity
securities issued by lower middle market companies. The Company
invests in performing, well-established middle market businesses
that operate across a wide range of industries. It employs
fundamental credit analysis, targeting investments in businesses
with relatively low levels of cyclicality and operating risk. For
more information, visit loganridgefinance.com.
About Mount Logan Capital Inc.
Mount Logan Capital Inc. is an alternative asset management company
that is focused on public and private debt securities in the North
American market. The Company seeks to source and actively manage
loans and other debt-like securities with credit-oriented
characteristics. The Company actively sources, evaluates,
underwrites, manages, monitors and primarily invests in loans, debt
securities, and other credit-oriented instruments that present
attractive risk-adjusted returns and present low risk of principal
impairment through the credit cycle.
About BC Partners Advisors L.P. and BC
Partners CreditBC 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.
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 communication contains
“forward-looking” statements. Forward-looking statements concern
future circumstances and results and other statements that are not
historical facts and are sometimes identified by the words “may,”
“will,” “should,” “potential,” “intend,” “expect,” “endeavor,”
“seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,”
“believe,” “could,” “project,” “predict,” “continue,” “target” or
other similar words or expressions. 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. The inclusion of such statements should
not be regarded as a representation that such plans, estimates or
expectations will be achieved. Important factors that could cause
actual results to differ materially from such plans, estimates or
expectations include those risk factors detailed in the Company’s
reports filed with the Securities and Exchange Commission (“SEC”),
including the Company’s annual report on Form 10-K, periodic
quarterly reports on Form 10-Q, current reports on Form 8-K and
other documents filed with the SEC.
Any forward-looking statements speak only as of
the date of this communication. The Company does not undertake any
obligation to update any forward-looking statements, whether as a
result of new information or developments, future events or
otherwise, except as required by law. Readers are cautioned not to
place undue reliance on any of these forward-looking
statements.
For additional information, contact:
Logan Ridge Finance Corporation650 Madison Avenue, 23rd FloorNew
York, NY 10022
Jason Roos Chief Financial Officer Jason.Roos@bcpartners.com
(212) 891-5046
The Equity Group Inc.Lena Catilcati@equityny.com(212)
836-9611
Logan Ridge Finance
CorporationConsolidated Statements of Assets and
Liabilities (in thousands, except share and per
share data)
|
As of June 30, |
|
|
As of December 31, |
|
|
2022 |
|
|
2021 |
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
Investments at fair
value: |
|
|
|
|
|
Non-control/non-affiliate investments (amortized cost of $148,331
and $151,543, respectively) |
$ |
141,954 |
|
|
$ |
129,991 |
|
Affiliate investments (amortized cost of $30,344 and $30,089,
respectively) |
|
30,271 |
|
|
|
61,359 |
|
Control investments (amortized cost of $8,850 and $8,850,
respectively) |
|
3,628 |
|
|
|
6,839 |
|
Total investments at fair value (amortized cost of $187,525 and
$190,482, respectively) |
|
175,853 |
|
|
|
198,189 |
|
Cash and cash equivalents |
|
29,489 |
|
|
|
39,056 |
|
Interest and dividend
receivable |
|
1,024 |
|
|
|
929 |
|
Prepaid expenses |
|
2,822 |
|
|
|
3,358 |
|
Receivable for unsettled
trades |
|
— |
|
|
|
685 |
|
Other assets |
|
2,951 |
|
|
|
— |
|
Total assets |
$ |
212,139 |
|
|
$ |
242,217 |
|
LIABILITIES |
|
|
|
|
|
2022 Notes (net of deferred
financing costs of zero and $46, respectively) |
$ |
— |
|
|
$ |
22,787 |
|
2022 Convertible Notes (net of
deferred financing costs of zero and $167, respectively) |
|
— |
|
|
|
51,921 |
|
2026 Notes (net of deferred
financing costs and original issue discount of $1,597 and $1,552,
respectively) |
|
48,403 |
|
|
|
48,448 |
|
2032 Convertible Notes (net of
deferred financing costs and original issue discount of $1,175 and
zero, respectively) |
|
13,825 |
|
|
|
— |
|
KeyBank Credit Facility (net
of deferred financing costs of $1,468 and $353, respectively) |
|
39,128 |
|
|
|
(353 |
) |
Management and incentive fees
payable |
|
973 |
|
|
|
1,065 |
|
Interest and financing fees
payable |
|
707 |
|
|
|
911 |
|
Payable for unsettled
trades |
|
7,493 |
|
|
|
9,265 |
|
Accounts payable and accrued
expenses |
|
473 |
|
|
|
1,144 |
|
Total liabilities |
$ |
111,002 |
|
|
$ |
135,188 |
|
Commitments and
contingencies |
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
Common stock, par value $0.01,
100,000,000 common shares authorized, 2,711,068 and 2,711,068
common shares issued and outstanding, respectively |
$ |
27 |
|
|
$ |
27 |
|
Additional paid in
capital |
|
188,846 |
|
|
|
188,846 |
|
Total distributable loss |
|
(87,736 |
) |
|
|
(81,844 |
) |
Total net assets |
$ |
101,137 |
|
|
$ |
107,029 |
|
Total liabilities and net
assets |
$ |
212,139 |
|
|
$ |
242,217 |
|
Net asset value per share |
$ |
37.31 |
|
|
$ |
39.48 |
|
Logan Ridge Finance
CorporationConsolidated Statements of
Operations (in thousands, except share and per
share data) (unaudited)
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
$ |
2,713 |
|
|
$ |
2,901 |
|
|
$ |
5,655 |
|
|
$ |
6,098 |
|
Affiliate investments |
|
185 |
|
|
|
1,130 |
|
|
|
345 |
|
|
|
2,427 |
|
Control investments |
|
98 |
|
|
|
98 |
|
|
|
193 |
|
|
|
196 |
|
Total interest and fee income |
|
2,996 |
|
|
|
4,129 |
|
|
|
6,193 |
|
|
|
8,721 |
|
Payment-in-kind interest and
dividend income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
261 |
|
|
|
24 |
|
|
|
347 |
|
|
|
95 |
|
Affiliate investments |
|
46 |
|
|
|
99 |
|
|
|
93 |
|
|
|
198 |
|
Total payment-in-kind interest and dividend income |
|
307 |
|
|
|
123 |
|
|
|
440 |
|
|
|
293 |
|
Dividend income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
— |
|
|
|
560 |
|
|
|
— |
|
|
|
560 |
|
Affiliate investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
155 |
|
Total dividend income |
|
— |
|
|
|
560 |
|
|
|
— |
|
|
|
715 |
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
— |
|
|
|
174 |
|
|
|
8 |
|
|
|
174 |
|
Affiliate investments |
|
— |
|
|
|
58 |
|
|
|
— |
|
|
|
67 |
|
Total other income |
|
— |
|
|
|
232 |
|
|
|
8 |
|
|
|
241 |
|
Total investment income |
|
3,303 |
|
|
|
5,044 |
|
|
|
6,641 |
|
|
|
9,970 |
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
Interest and financing
expenses |
|
2,131 |
|
|
|
2,728 |
|
|
|
4,319 |
|
|
|
5,765 |
|
Base management fee |
|
973 |
|
|
|
1,272 |
|
|
|
2,001 |
|
|
|
2,670 |
|
Directors expense |
|
120 |
|
|
|
103 |
|
|
|
223 |
|
|
|
206 |
|
Administrative service
fees |
|
131 |
|
|
|
350 |
|
|
|
251 |
|
|
|
700 |
|
General and administrative
expenses |
|
877 |
|
|
|
557 |
|
|
|
1,826 |
|
|
|
1,378 |
|
Total expenses |
|
4,232 |
|
|
|
5,010 |
|
|
|
8,620 |
|
|
|
10,719 |
|
NET INVESTMENT (LOSS) INCOME |
|
(929 |
) |
|
|
34 |
|
|
|
(1,979 |
) |
|
|
(749 |
) |
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investments: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
15,503 |
|
|
|
4,732 |
|
|
|
15,466 |
|
|
|
(9,291 |
) |
Affiliate investments |
|
— |
|
|
|
2,215 |
|
|
|
— |
|
|
|
2,215 |
|
Net realized gain (loss) on investments |
|
15,503 |
|
|
|
6,947 |
|
|
|
15,466 |
|
|
|
(7,076 |
) |
Net change in unrealized
(depreciation) appreciation on investments: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
(16,495 |
) |
|
|
(12,774 |
) |
|
|
(17,645 |
) |
|
|
10,438 |
|
Affiliate investments |
|
174 |
|
|
|
60 |
|
|
|
1,477 |
|
|
|
4,032 |
|
Control investments |
|
(3,287 |
) |
|
|
(1,006 |
) |
|
|
(3,211 |
) |
|
|
(1,030 |
) |
Net change in unrealized (depreciation) appreciation on
investments |
|
(19,608 |
) |
|
|
(13,720 |
) |
|
|
(19,379 |
) |
|
|
13,440 |
|
Total net realized and change in unrealized (loss) gain on
investments |
|
(4,105 |
) |
|
|
(6,773 |
) |
|
|
(3,913 |
) |
|
|
6,364 |
|
Net realized loss on
extinguishment of debt |
|
— |
|
|
|
(815 |
) |
|
|
— |
|
|
|
(815 |
) |
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
(5,034 |
) |
|
$ |
(7,554 |
) |
|
$ |
(5,892 |
) |
|
$ |
4,800 |
|
NET (DECREASE) INCREASE IN NET
ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC &
DILUTED |
$ |
(1.86 |
) |
|
$ |
(2.79 |
) |
|
$ |
(2.17 |
) |
|
$ |
1.77 |
|
WEIGHTED AVERAGE COMMON STOCK
OUTSTANDING– BASIC & DILUTED |
|
2,711,068 |
|
|
|
2,711,068 |
|
|
|
2,711,068 |
|
|
|
2,711,068 |
|
DISTRIBUTIONS PAID PER
SHARE |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Grafico Azioni Logan Ridge Finance (NASDAQ:LRFC)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Logan Ridge Finance (NASDAQ:LRFC)
Storico
Da Giu 2023 a Giu 2024