Logan Ridge Finance Corporation

Ladies and gentlemen, this conference is scheduled to begin shortly. Please continue to standby. Again, ladies and gentlemen, this conference is scheduled to begin shortly. Please continue to standby. Thank you for your patience. Thank you. Thank you. Thank you. Good day and thank you for standing by. Welcome to the Logan Ridge 3rd Quarter 2021 Financial Results Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Jihei Lindford. You may begin.

Thank you. Good morning and welcome to Logan Ridge Finance Corporation's third quarter 2021 earnings conference call. An earnings press release was distributed yesterday afternoon, November 10th after market closed. A copy of the press release along with an earnings presentation is available on the company's website at loganridgefinance.com in the investor relations section and should be reviewed in conjunction with the company's form 10Q filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Logan Ridge Finance Corporation assumes no obligation to update any such forward-looking statements unless required by law. With that, I would now like to turn the call over to Ted Goldthorpe Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.

Good morning, and welcome to our third quarter 2021 earnings call. I'm joined today by our Chief Financial Officer, Jason Ruse, and our Chief Investment Officer, Patrick Schaefer. This marks our first completed quarter as the new advisor to Logan Ridge Finance. And today, I'd like to start off by summarizing the progress that we've made and what lies ahead. Following that, Patrick will provide additional detail on our investment activity to date, and Jason will walk you through the financials. We previously discussed our two immediate objectives as the new advisor. First and foremost, our goal is to reposition the book by rotating out of non-income-producing equity exposure and redeploying those proceeds into high-quality, senior-secured, income-generating investments originated by VC partners. And secondly, a key priority was to leverage and optimize the company's debt capitalization. I'm pleased to report that during the third quarter, the company made material progress on the repositioning front, exiting five portfolio companies which generated proceeds of $59.7 million, of which approximately $11.2 million was received for the successful exits from three non-income producing equity investments. These positions were valued at $58.7 million as of June 30th, 2021. Additionally, during the quarter ended September 30th, 2021, we made $48.9 million of new investment commitments to six new portfolio companies, of which approximately $33.3 million was funded as of quarter end. As a result, first lien debt as a percentage of the portfolio at fair value has increased to 58% from 50% in the prior quarter, Second lien debt has decreased to 11% from 17% in the prior quarter, and our equity portfolio decreased to 31% from 32% in the prior quarter. We're very pleased with the progress we've made in repositioning the portfolio. With that in mind, I would like to spend a few minutes addressing our investment income during the third quarter. Our investment income declined this quarter compared to prior quarter, but this is primarily driven by large exits occurring early in the quarter, and the bulk of our deployment activity occurring at the end of the quarter. As prudent underwriters and good stewards of shareholder capital, we've always taken a disciplined approach to deploying capital, and the reinvestment of Logan Ridge is no exception. In addition to the new funded loans made during the quarter, largely weighted towards the end of the quarter, we had $37.4 million of cash on the balance sheet that is earmarked for previous commitments that we expect to fund in new investments we intend to make. We fully expect this dynamic to be transitory, but generally it is the result of successful proactive rotation of the portfolio. Our platform has a robust pipeline, and we expect to play the capital in a reasonably short period of time, which should drive incremental investment income that flows through 100% to NII. With respect to the company's debt structure, we made tangible debt progress in risk reduction by additional deleveraging during the third quarter. Following the full repayment of the $71 million in SBA debentures during the second quarter, we then repaid $25 million outstanding on the key bank credit facility during the quarter. Accordingly, our debt-to-equity ratio has decreased from 1.3 times at the end of the second quarter, 2021, to 1.1 times as of the end of the third quarter, 2021. Furthermore, subsequent to quarter end, we announced that we successfully refinanced a portion of our long-term debt On October 29th, 2021, the company issued 50 million of five and a quarter senior unsecured notes due 2026, which received an investment grade rating of triple B minus from Egan Jones. The proceeds of this offering will be used to repay 50 million in aggregate principal of the 6% notes due 2022, which will be completed early next month. Longer term, we've also discussed our plans to leverage the BC Partners platform an entire AUM base to drive operating efficiencies. So far, we've reduced and stabilized operating expenses, and we expect we will be able to continue this trend of spreading a stable level of expenses across a larger asset base as we seek to grow the investment portfolio. As I mentioned earlier, our overall key objective is to reinstate a stable, sustainable dividend as soon as practically possible. We've made solid progress thus far. We look forward to continuing this momentum and providing additional updates in the coming quarters. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer.