Logan Ridge Finance Corporation (“Logan Ridge”, “LRFC”, “Company”,
“we”, “us” or “our”) (Nasdaq: LRFC) announced today its financial
results for the second quarter ended June 30, 2023.
Second Quarter 2023
Highlights
- Reported Net Investment Income
(“NII”) of $1.0 million, or $0.38 per share, which marks the
Company’s fourth consecutive quarter of positive NII.
- Net Asset Value (“NAV”) increased
by $1.05 per share, or 3.0%, to $35.68 per share as of June 30,
2023 from $34.63 per share as of March 31, 2023.
- As of June 30, 2023, our portfolio
consisted of investments in 62 portfolio companies with a fair
value of approximately $206.6 million. During the quarter, the
Company made approximately $4.8 million of investments and had
approximately $4.4 million in repayments and sales of investments,
resulting in net deployment of approximately $0.4 million.
- There were no new portfolio
companies added to non-accrual status during the three months ended
June 30, 2023.
- During the six months ended June
30, 2023, the Company repurchased 14,112 of its outstanding shares,
at an aggregate cost of approximately $0.3 million, under the $5.0
million share repurchase program authorized by the Board of
Directors on March 6, 2023, which resulted in an increase to NAV
per share of $0.08.
Subsequent Events
- On August 8, 2023, the Company’s
Board of Directors approved a third quarter distribution of $0.26
per share payable on August 31, 2023 to stockholders of record as
of August 22, 2023.
- Total distributions declared in
2023 (including the third quarter distribution) were $0.66 per
share.
Management CommentaryTed
Goldthorpe, Chief Executive Officer and President of LRFC, said, “I
am pleased to report another strong quarter for Logan Ridge. As the
Company’s exposure to the legacy equity portfolio has continued to
decline and its exposure to credits originated by the BC Partners’
Credit platform has increased, the benefit to shareholders has been
clear and the Company’s financials are now telling the story for
us. Notably, we reported our fourth straight quarter of positive
NII, but more importantly the Company reported a 3.0% increase in
NAV compared to the prior quarter. Further, our prudent investment
strategy and strong financial performance allowed our Board of
Directors to approve an 18% increase in the quarterly distribution
to $0.26 per share compared to $0.22 per share last quarter. This
is our second consecutive increase in the Company’s dividend since
it was reintroduced at the beginning of the year. Finally, I’d like
to highlight that we continue to be active in the market
repurchasing shares under our share repurchase program, which
generated $0.08 of NAV accretion for shareholders through quarter
end.
Looking ahead to the back half of the year, we
continue to see attractive opportunities throughout the market. Our
pipeline remains strong, and the platform remains well equipped to
take advantage of current market conditions.”
Selected Financial
Information
- Total investment
income for the second quarter of 2023 increased by $2.0
million, to $5.3 million, compared to $3.3 million in the second
quarter of 2022.
- Total operating
expenses for the second quarter of 2023 increased by $0.1
million, to $4.3 million, compared to $4.2 million for the second
quarter of 2022.
- Net investment
income for the second quarter of 2023 was $1.0 million, as
compared to a net investment loss of $0.9 million for the second
quarter of 2022. The Company reported net investment income of $1.1
million for the first quarter of 2023.
- Net asset value as
of June 30, 2023 was $96.2 million, or $35.68 per share, as
compared to $93.8 million, or $34.63 per share, as of March 31,
2023.
- Cash and
cash equivalents as of June 30, 2023 were $6.3 million, as
compared to $9.3 million as of March 31, 2023.
- The investment
portfolio as of June 30, 2023 consisted of investments in
62 portfolio companies with a fair value of approximately $206.6
million. This compares to 59 portfolio companies with a fair value
of approximately $203.3 million as of March 31, 2023.
- Deployment
remained strong. During the second quarter of 2023, we made
approximately $4.8 million of investments and had approximately
$4.4 million in repayments and sales of investments, resulting in
net deployment of approximately $0.4 million for the period.
- The debt investment
portfolio as of June 30, 2023 represented 82.2% of the
fair value of our total portfolio, with a weighted average
annualized yield of approximately 10.8% (excluding income from
non-accruals and collateralized loan obligations), compared to a
debt investment portfolio of approximately 83.1% with a weighted
average annualized yield of approximately 10.7% (excluding income
from non-accruals and collateralized loan obligations) as of March
31, 2023. As of June 30, 2023, 16.8% of the fair value of our debt
investment portfolio was bearing a fixed rate of interest, compared
to 16.6% of the fair value of our debt investment portfolio as of
March 31, 2023.
- Non-Accruals: As
of June 30, 2023, we had debt investments in two portfolio
companies on non-accrual status with an amortized cost and fair
value of $17.1 million and $11.1 million, respectively,
representing 7.8% and 5.3% of the investment portfolio’s amortized
cost and fair value, respectively. As of March 31, 2023, we
had debt investments in two portfolio companies on non-accrual
status with an aggregate amortized cost and fair value of $14.2
million and $10.0 million, respectively, representing 6.4% and 4.9%
of the investment portfolio’s amortized cost and fair value,
respectively.
- Our asset coverage
ratio as of June 30, 2023 was 178%.
Results of OperationsOperating
results for the three and six months ended June 30, 2023 and June
30, 2022 were as follows (dollars in thousands):
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Total investment income |
$ |
5,344 |
|
|
$ |
3,303 |
|
|
$ |
10,600 |
|
|
$ |
6,641 |
|
Total expenses |
|
4,305 |
|
|
|
4,232 |
|
|
|
8,488 |
|
|
|
8,620 |
|
Net investment income (loss) |
|
1,039 |
|
|
|
(929 |
) |
|
|
2,112 |
|
|
|
(1,979 |
) |
Net realized (loss) gain on
investments |
|
(2,362 |
) |
|
|
15,503 |
|
|
|
(3,868 |
) |
|
|
15,466 |
|
Net change in unrealized
appreciation (depreciation) on investments |
|
4,563 |
|
|
|
(19,608 |
) |
|
|
4,346 |
|
|
|
(19,379 |
) |
Net increase (decrease) in net
assets resulting from operations |
$ |
3,240 |
|
|
$ |
(5,034 |
) |
|
$ |
2,590 |
|
|
$ |
(5,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
The composition of our investment income for the
three and six months ended June 30, 2023, and June 30, 2022 was as
follows (dollars in thousands):
|
|
|
|
|
For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Interest income |
$ |
4,907 |
|
$ |
2,996 |
|
$ |
9,675 |
|
$ |
6,193 |
Payment-in-kind interest |
|
319 |
|
|
307 |
|
|
783 |
|
|
440 |
Dividend income |
|
19 |
|
|
— |
|
|
33 |
|
|
— |
Other income |
|
99 |
|
|
— |
|
|
109 |
|
|
8 |
Total investment income |
$ |
5,344 |
|
$ |
3,303 |
|
$ |
10,600 |
|
$ |
6,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of InvestmentsThe
composition of our investments as of June 30, 2023 and December 31,
2022 at amortized cost and the fair value of investments was as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
As of June 30,
2023 |
Investments atAmortized Cost |
|
Amortized CostPercentage
ofTotal Portfolio |
|
|
Investments atFair Value |
|
Fair ValuePercentage
ofTotal Portfolio |
|
First Lien Debt |
$ |
144,849 |
|
66.1 |
% |
|
$ |
138,045 |
|
66.8 |
% |
Second Lien Debt |
|
8,614 |
|
4.0 |
% |
|
|
7,102 |
|
3.4 |
% |
Subordinated Debt |
|
26,573 |
|
12.1 |
% |
|
|
24,709 |
|
12.0 |
% |
Collateralized Loan
Obligations |
|
2,440 |
|
1.1 |
% |
|
|
2,440 |
|
1.2 |
% |
Joint Venture |
|
475 |
|
0.2 |
% |
|
|
460 |
|
0.2 |
% |
Equity |
|
36,216 |
|
16.5 |
% |
|
|
33,833 |
|
16.4 |
% |
Total |
$ |
219,167 |
|
100.0 |
% |
|
$ |
206,589 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2022 |
Investments atAmortized Cost |
|
Amortized CostPercentage
ofTotal Portfolio |
|
|
Investments atFair Value |
|
Fair ValuePercentage
ofTotal Portfolio |
|
First Lien Debt |
$ |
143,047 |
|
64.9 |
% |
|
$ |
136,896 |
|
67.3 |
% |
Second Lien Debt |
|
8,283 |
|
3.8 |
% |
|
|
6,464 |
|
3.2 |
% |
Subordinated Debt |
|
26,571 |
|
12.0 |
% |
|
|
25,851 |
|
12.7 |
% |
Collateralized Loan
Obligations |
|
6,185 |
|
2.8 |
% |
|
|
4,972 |
|
2.4 |
% |
Joint Venture |
|
414 |
|
0.2 |
% |
|
|
403 |
|
0.2 |
% |
Equity |
|
36,016 |
|
16.3 |
% |
|
|
29,006 |
|
14.2 |
% |
Total |
$ |
220,516 |
|
100.0 |
% |
|
$ |
203,592 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Risk
Based on our June 30, 2023 consolidated
statements 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
(dollars in thousands):
|
|
|
|
|
|
|
|
|
Basis Point Change |
Increase(decrease) ininterest
income |
|
|
(Increase)decrease
ininterest expense |
|
|
Increase(decrease) in net
income |
|
Up 300 basis points |
$ |
4,410 |
|
|
$ |
(1,717 |
) |
|
$ |
2,693 |
|
Up 200 basis points |
|
2,940 |
|
|
|
(1,144 |
) |
|
|
1,796 |
|
Up 100 basis points |
|
1,470 |
|
|
|
(572 |
) |
|
|
898 |
|
Down 100 basis points |
|
(1,470 |
) |
|
|
572 |
|
|
|
(898 |
) |
Down 200 basis points |
|
(2,940 |
) |
|
|
1,144 |
|
|
|
(1,796 |
) |
Down 300 basis points |
$ |
(4,332 |
) |
|
$ |
1,717 |
|
|
$ |
(2,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call and Webcast
We will hold a conference call on Thursday,
August 10, 2023, at 10:00 a.m. Eastern Time to discuss second
quarter 2023 financial results. Stockholders, prospective
stockholders, and analysts are welcome to listen to the call or
attend the webcast.
To access the conference call, please dial (646)
307-1963 approximately 10 minutes prior to the start of the call
and use the conference ID 2979808. A replay of the conference call
will be available from approximately 12:00 p.m. Eastern Time on
August 10th through August 17th.
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.loganridgefinance.com in the Investor
Resources section under Events and Presentations. The webcast can
also be accessed by clicking the following link:
https://edge.media-server.com/mmc/p/fpdu6q7v. 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 www.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. 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 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, 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
Lena Cati The Equity Group
Inc.lcati@equityny.com (212) 836-9611
Val FerraroThe Equity Group
Inc.vferraro@equityny.com (212) 836-9633
Logan Ridge Finance
CorporationConsolidated Statements of Assets and
Liabilities (in thousands, except share and per
share data)
|
|
|
|
|
|
|
As ofJune 30,2023 |
|
|
As ofDecember 31,2022 |
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
Investments at fair
value: |
|
|
|
|
|
Non-control/non-affiliate investments (amortized cost of $192,331
and $191,435, respectively) |
$ |
177,424 |
|
|
$ |
177,268 |
|
Affiliate investments (amortized cost of $26,836 and $29,081,
respectively) |
|
29,165 |
|
|
|
26,324 |
|
Total investments at fair value (amortized cost of $219,167 and
$220,516, respectively) |
|
206,589 |
|
|
|
203,592 |
|
Cash and cash equivalents |
|
6,287 |
|
|
|
6,793 |
|
Interest and dividend
receivable |
|
2,013 |
|
|
|
1,578 |
|
Prepaid expenses |
|
2,285 |
|
|
|
2,682 |
|
Other assets |
|
6 |
|
|
|
65 |
|
Total assets |
$ |
217,180 |
|
|
$ |
214,710 |
|
LIABILITIES |
|
|
|
|
|
2026 Notes (net of deferred
financing costs and original issue discount of $1,237 and $1,421,
respectively) |
|
48,763 |
|
|
|
48,579 |
|
2032 Convertible Notes (net of
deferred financing costs and original issue discount of $1,058 and
$1,117, respectively) |
|
13,942 |
|
|
|
13,883 |
|
KeyBank Credit Facility (net
of deferred financing costs of $1,153 and $1,322,
respectively) |
|
55,282 |
|
|
|
54,615 |
|
Management and incentive fees
payable |
|
946 |
|
|
|
933 |
|
Interest and financing fees
payable |
|
1,031 |
|
|
|
973 |
|
Accounts payable and accrued
expenses |
|
990 |
|
|
|
722 |
|
Total liabilities |
$ |
120,954 |
|
|
$ |
119,705 |
|
Commitments and
contingencies |
|
|
|
|
|
NET ASSETS |
|
|
|
|
|
Common stock, par value $0.01,
100,000,000 common shares authorized, 2,697,143 and 2,711,068
common shares issued and outstanding, respectively |
$ |
27 |
|
|
$ |
27 |
|
Additional paid in
capital |
|
190,752 |
|
|
|
191,038 |
|
Total distributable loss |
|
(94,553 |
) |
|
|
(96,060 |
) |
Total net assets |
$ |
96,226 |
|
|
$ |
95,005 |
|
Total liabilities and net
assets |
$ |
217,180 |
|
|
$ |
214,710 |
|
Net asset value per share |
$ |
35.68 |
|
|
$ |
35.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logan Ridge Finance
CorporationConsolidated Statements of
Operations (in thousands, except share and per
share data)
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
$ |
4,773 |
|
|
$ |
2,713 |
|
|
$ |
9,377 |
|
|
$ |
5,655 |
|
Affiliate investments |
|
134 |
|
|
|
185 |
|
|
|
298 |
|
|
|
345 |
|
Control investments |
|
— |
|
|
|
98 |
|
|
|
— |
|
|
|
193 |
|
Total interest income |
|
4,907 |
|
|
|
2,996 |
|
|
|
9,675 |
|
|
|
6,193 |
|
Payment-in-kind interest and
dividend income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
271 |
|
|
|
261 |
|
|
|
687 |
|
(1) |
|
347 |
|
Affiliate investments |
|
48 |
|
|
|
46 |
|
|
|
96 |
|
|
|
93 |
|
Total payment-in-kind interest and dividend income |
|
319 |
|
|
|
307 |
|
|
|
783 |
|
|
|
440 |
|
Dividend income: |
|
|
|
|
|
|
|
|
|
|
|
Affiliate investments |
|
19 |
|
|
|
— |
|
|
|
33 |
|
|
|
— |
|
Total dividend income |
|
19 |
|
|
|
— |
|
|
|
33 |
|
|
|
— |
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
99 |
|
|
|
— |
|
|
|
109 |
|
|
|
8 |
|
Total other income |
|
99 |
|
|
|
— |
|
|
|
109 |
|
|
|
8 |
|
Total investment income |
|
5,344 |
|
|
|
3,303 |
|
|
|
10,600 |
|
|
|
6,641 |
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
Interest and financing
expenses |
|
2,236 |
|
|
|
2,131 |
|
|
|
4,305 |
|
|
|
4,319 |
|
Base management fee |
|
946 |
|
|
|
973 |
|
|
|
1,876 |
|
|
|
2,001 |
|
Directors' expense |
|
135 |
|
|
|
120 |
|
|
|
270 |
|
|
|
223 |
|
Administrative service
fees |
|
224 |
|
|
|
131 |
|
|
|
481 |
|
|
|
251 |
|
General and administrative
expenses |
|
764 |
|
|
|
877 |
|
|
|
1,556 |
|
|
|
1,826 |
|
Total expenses |
|
4,305 |
|
|
|
4,232 |
|
|
|
8,488 |
|
|
|
8,620 |
|
NET INVESTMENT INCOME (LOSS) |
|
1,039 |
|
|
|
(929 |
) |
|
|
2,112 |
|
|
|
(1,979 |
) |
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
Net realized (loss) gain on
investments: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
(2,362 |
) |
|
|
15,503 |
|
|
|
(3,868 |
) |
|
|
15,466 |
|
Net realized (loss) gain on investments |
|
(2,362 |
) |
|
|
15,503 |
|
|
|
(3,868 |
) |
|
|
15,466 |
|
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
|
|
|
|
|
|
|
|
Non-control/non-affiliate investments |
|
510 |
|
|
|
(16,495 |
) |
|
|
(740 |
) |
|
|
(17,645 |
) |
Affiliate investments |
|
4,053 |
|
|
|
174 |
|
|
|
5,086 |
|
|
|
1,477 |
|
Control investments |
|
— |
|
|
|
(3,287 |
) |
|
|
— |
|
|
|
(3,211 |
) |
Net change in unrealized appreciation (depreciation) on
investments |
|
4,563 |
|
|
|
(19,608 |
) |
|
|
4,346 |
|
|
|
(19,379 |
) |
Total net realized and change in unrealized gain (loss) on
investments |
|
2,201 |
|
|
|
(4,105 |
) |
|
|
478 |
|
|
|
(3,913 |
) |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
3,240 |
|
|
$ |
(5,034 |
) |
|
$ |
2,590 |
|
|
$ |
(5,892 |
) |
NET INCREASE (DECREASE) IN NET
ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC |
$ |
1.20 |
|
|
$ |
(1.86 |
) |
|
$ |
0.96 |
|
|
$ |
(2.17 |
) |
WEIGHTED AVERAGE COMMON STOCK
OUTSTANDING – BASIC |
|
2,703,871 |
|
|
|
2,711,068 |
|
|
|
2,707,399 |
|
|
|
2,711,068 |
|
NET INCREASE (DECREASE) IN NET
ASSETS PER SHARE RESULTING FROM OPERATIONS – DILUTED |
$ |
1.07 |
|
|
$ |
(1.86 |
) |
|
$ |
0.94 |
|
|
$ |
(2.17 |
) |
WEIGHTED AVERAGE COMMON STOCK
OUTSTANDING – DILUTED |
|
3,243,374 |
|
|
|
2,711,068 |
|
|
|
3,246,902 |
|
|
|
2,711,068 |
|
DISTRIBUTIONS PAID PER
SHARE |
$ |
0.22 |
|
|
$ |
— |
|
|
$ |
0.40 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________(1) During
the six months ended June 30, 2023, the Company received $0.2
million of non-recurring fee income that was paid in-kind and
included in this financial statement line item.
Logan Ridge Finance (NASDAQ:LRFC)
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