Logan Ridge Finance Corporation

Thank you for standing by and welcome to Logan Ridge Finance Corporation's third quarter ended September 30, 2023 earnings conference call. An earnings press release was distributed yesterday after the close of the market. A copy of the release along with a supplemental earnings presentation is available on the company's website at www.loganridgefinance.com in the investor resources section and should be reviewed in conjunction with the company's form 10Q filed 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. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President and Director of Logan Ridge Finance Corporation, Jason Ruse, Chief Financial Officer, and Patrick Schaefer, Chief Investment Officer. 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. Good afternoon. Welcome to our third quarter 2023 earnings call. As mentioned, I'm joined today by our Chief Financial Officer, Jason Ruse, and our Chief Investment Officer, Patrick Schaefer. Following my opening remarks, Patrick will provide additional detail on our investment activity to date, and Jason will walk through the financials. I'd like to start by highlighting that Logan Ridge once again reported another strong quarter, generating the highest net investment income since we began managing the company a little over two years ago. This success is largely a continuation of the performance trajectory Logan has been on since we reported our first quarter, a positive net investment income just over one year ago for the quarter ending September 30th, 2022. As the company's exposure to the legacy equity portfolio has continued to decline and its exposure to credits originated by the BC Credit, BC Partners credit platform has increased, the benefit to shareholders has been clear and has been reflected through Logan Ridge's financial results. With that in mind, I will keep my prepared remarks brief today. and limited to a few key highlights, which Patrick and Jason can provide more detail on shortly. First and foremost, as a result of the company's strong financial performance, the Board of Directors approved a 15% increase in the quarterly distribution, bringing it to 30 cents per share compared to 26 cents per share last quarter. Since we've turned the quarterly dividend back on in early 2023, we've steadily increased it each quarter. Including this distribution, total distributions declared in 2023 is 96 cents per share. We reported our fifth consecutive quarter of positive debt investment income, which amounted to $1.2 million or 43 cents per share for this quarter. Compared to the prior quarter, our net investment income is up $200,000 from $1 million or 38 cents per share. Compared to the same quarter in the prior year, our net investment income is up $1 million from $200,000, or 7 cents per share, in the third quarter of 2022. This trend illustrates the enhanced earnings power of our portfolio, driven by the reworked capital structure we refinanced in 2022 and the success we've had in monetizing the non-yielding legacy portfolio and redeploying that capital into income-generating names originated by the BC Partners credit platform. I'm incredibly proud of this achievement. Deployment for the quarter remains strong. with the company funding $6.1 million in new and follow-on investments. However, repayments and sales were elevated at $23.2 million, leaving us with net repayment and sales of $17.1 million for the quarter. As of quarter end, the portfolio consisted of investments in 58 companies. Finally, during the quarter, we continued repurchasing shares until our share repurchase program that was established in late March. Since the inception of the program and through September 30th, 2023, the company has repurchased over 31,000 shares for an aggregate cost of approximately $700,000, which is accretive to NAV by approximately 8 cents per share for the quarter and 16 cents per share since the introduction of the program. As we enter the final quarter of the year, M&A activity is rebounding, and our pipeline is strong, and thus we are expecting a solid fourth quarter for deployment. We continue to believe that 2023 will prove to be a very attractive private credit vintage, and I am very optimistic on the company's future. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer. Thanks, Ted.

As of September 30, 2023, the fair value of Logan's portfolio was approximately $187.1 million, and exposure to 58 portfolio companies. This compares to 62 portfolio companies with a fair value of approximately $206.6 million as of the prior quarter and 54 portfolio companies with a fair value of $193.1 million as of the third quarter of 2022. During the third quarter, we continued to judiciously deploy capital. Specifically, the company made approximately $6.1 million in new and follow-on investments and had approximately $2,300 in repayments and sales, resulting in net repayments and sales of approximately $17.1 million for the quarter. Included in our repayments and sales for the quarter was a successful exit of the company's legacy portfolio company, Jurassic Quest. Specifically, Logan Ridge received $8.2 million in proceeds to pay off its term loan and preferred equity interest in Jurassic Quest, which generated a realized gain of approximately $200,000. Moreover, while we had some large repayments and sales during the second half of the quarter, As Ted mentioned, our pipeline is strong, and we are optimistic that, barring any unexpected large repayments, Logan Ridge will be able to redeploy this capital such that the company is fully invested and back to its target leverage ratio by the end of the fourth quarter, which historically has been a strong quarter for deployment across our platform. Now on to portfolio composition. As of September 30, 2023, 55% of the company's investment portfolio at fair value was invested in assets originated by the BC Partners platform. At quarter end, Our debt investment portfolio represented 82% of the total portfolio at fair value with a weighted average annualized yield of approximately 11%, excluding income from non-accruals and collateralized loan obligations. This compares to a debt investment portfolio which represents 82.2% of our total portfolio at fair value with a weighted average annualized yield of approximately 10.8%, excluding income from non-accruals and collateralized loan obligations as of the prior quarter. First lien debt represented 63.6% and 64.8% of our total portfolio on a cost and fair value basis, respectively. This compares to first lien debt representing 66.1% and 66.8% of our total portfolio on a cost and fair value basis, respectively, as of June 30, 2023, and 61.9% of our total portfolio on a cost and fair value basis, respectively, as of September 30, 2022. The non-yielding equity portfolio represented 17.6% and 16.6% of the portfolio on a cost and fair value basis, respectively, as of December 30, 2023. This compares to 16.5% and 16.4% of the portfolio on a cost and fair value basis as of June 30, 2023. The increase in our equity portfolio relative to the prior quarter was largely driven by net repayments and sales in the debt portfolio. As of September 30, 2023, 82.3% of our debt portfolio at fair value was bearing interest at a floating rate, compared to 83.2% as of June 30, 2023. Moving on to non-accrual status, credit quality remained stable during the three months ended September 30, 2023, as there were no new portfolio companies added to non-accrual status. As of September 30, 2023, we had two portfolio companies on non-accrual with an aggregate amortized cost and fair value of $16.8 million and $10.6 million respectively, or 8.3% and 5.7% of the investment portfolio at cost and fair value respectively. This represents a slight decrease as compared to two portfolio companies on non-accrual status as of the prior quarter, with a cost and fair value of $17.1 million and $11.1 million respectively, representing 7.8% and 5.3% of the investment portfolio cost, and fair value, respectively. I'll now turn the call over to Jason.