Portman Ridge Finance Corporation

Thank you. Good morning, ladies and gentlemen, and welcome to the Portman Ridge Finance Corporation conference call. An earnings press release was distributed Monday evening, November 9th. If you do not receive a copy, the release is available on the company's website at www.portmanridge.com in the investor relations section. As a reminder, this conference call is being recorded today, Tuesday, November 10th, 2020. This call is also being hosted on a live webcast which can be accessed at our company's website at www.portmanridge.com in the Investor Relations section under Events. 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, then 1 on your telephone keypad. Today's conference call includes forward-looking statements and projections, and we ask that you refer to Portman Ridge's most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. Portman Ridge Finance Corporation does not undertake to update its forward-looking statements unless required by law. I would now like to introduce your host for today's conference, Mr. Ted Goldthorpe, Chief Executive Officer of Portman Ridge Finance Corporation. Mr. Goldthorpe, you may begin.

Thank you, Operator, and welcome, everyone. Thank you for joining us. Yesterday afternoon, we reported our third quarter 2020 financial results. I am joined today by my CFO, Ted Gilpin, and my Chief Investment Officer, Patrick Schaefer. Ted Gilpin will provide additional detail on our financial results, and Patrick will do the same on the investment portfolio. I will begin by discussing Portman Ridge's performance for the third quarter and speak more on the merger with Garrison Capital, which we closed on October 28th. Overall, I am pleased to report that Portman Ridge had a solid quarter marked by significant improvement in net realized and unrealized gains of $5.6 million across our entire portfolio. While we're clearly not out of the woods with respect to COVID, we experienced improved market sentiment during the quarter as portfolio companies began to gain a better sense of near-term financial visibility on their prospects. M&A and refinancing activity began to pick up after having been quiet in the prior quarter. Net investment income per share was six cents, consistent with the past four quarters and the distribution level we have set for the past several quarters. Net asset for per share was $2.85, an increase of 5% from the net asset value per share of $2.71 as of June 30, 2020. Driving this increase in net asset value per share was a broad-based strengthening of our portfolio due to market spreads tightening throughout the quarter. M&A activity, which is a traditional source of middle market direct loans, picked up substantially towards the end of the quarter. While still at depressed levels as compared to the last several years, We experienced buyers, sellers, and lenders all returning to the market in an orderly fashion, and activity levels continue to pick up pace through the end of the quarter up to present day. Turning now to our merger with Garrison Capital, which we first announced on June 24th and subsequently closed on October 28th, we believe this merger is a truly transformational event for Portman Ridge as it represents the continued execution of our vision of the consolidation in the public BDC space. It is the third strategic transaction successfully closed by our team in less than two years. We are very excited about the benefits this merger brings to the combined company. First, the merger results in significant added scale and size, essentially doubling the size of the company. At closing, the combined company held total assets of approximately $638 million compared to Portmere Ridge at total assets of $300 million as of September 30th. As a larger company, we expect to we expect immediate savings related to overhead and public company expenses on a per-share basis, and in the longer term, increased trading liquidity of our common stock and the capability and flexibility to speak for larger deals. Based on our previously discussed target leverage range of 1.25 to 1.4 times, where we sit today, the pro forma portman would need to generate an approximately 9.5 to 10% return on its investment portfolio to cover our historical $0.06 per quarter distribution. Over the last five quarters, Portman has averaged 10.8% annual return on its investment portfolio, despite the headwinds from LIBOR declining and reduced earnings from our CLO equity portfolio. Although these estimates are subject to change in the future, Our historical ability to achieve returns on our investment portfolio in excess of what is required to sustain our distribution level should provide shareholders insight into earnings prospects going forward. Furthermore, we expect that leveraging the considerable resources, namely the access, sourcing capabilities, and industry expertise afforded by BC partners across the entire platform will be of significant benefits to all stakeholders of our combined company. Integration and repositioning efforts are already underway. As of this call, we have already sold approximately 87 million of assets originated by Garrison at a slight premium to the fair value at the time of the merger. Performed for the Garrison merger and these asset sales, Portman's leverage on a net cash basis, i.e., after the use of cash on hand to pay down debt once the debt becomes callable, is approximately 1.4 times our regulatory asset coverage of approximately 169%. We will continue to opportunistically sell assets as part of our repositioning strategy, but believe that we have significantly reduced market risk to our portfolio in a very short period of time. Over time, our goal is to maintain a portfolio of directly originated senior secured debt investments with a focus on first-lane investments, and we look forward to updating you on our progress in future quarters. With that, I will turn the call over to Ted Gilpin, our Chief Financial Officer, for a brief overview of the financial results, and then to Patrick Schaefer, our Chief Investment Officer, for review of our investment activity before concluding the call with some additional remarks. Ted?

Thank you, Ted. Good morning, everyone. As of September 30th, 2020, our NAV stood at $126 million or $2.85 per diluted share, up 5% from last quarter of $120.7 million or $2.71 per share. The increase is mainly attributable to unrealized gains across our investment portfolio including $4.6 million on our debt securities portfolio, $1.9 million in our legacy CLO equity positions, and $1.1 million on our investments in the KCAP Freedom 3 and BCP Great Lakes joint ventures. As Ted mentioned, we are beginning to observe improved market conditions, which resulted in the significant improvements in valuation. Net investment income for the third quarter of 2020 was $2.7 million, or $0.06 per share, as compared to $2.2 million and $0.06 per share in the third quarter of last year. We've generated net investment income of $0.06 per share for the past five quarters right in line with our current quarterly distribution. We announced our quarterly distribution of $0.06 per share on October 16th for shareholders of record on October 26th and to be paid on November 27th. Following this distribution, we will resume our normal declaration and payment schedule. With respect to liquidity and unfunded commitments, Our aggregate unfunded commitments stood at $26.5 million at September 30, 2020. However, only $2.4 million of this amount is subject to a unilateral draw right by the borrower, and the remaining commitments are subject to certain restrictions, such as borrowing base, use of proceeds, or leverage that must be satisfied before a borrower can draw down on the commitment. On the liability side of the balance sheet, we believe that we are in a relatively strong position and have meaningful investment and liquidity flexibility with relatively limited funding commitments. As of September 30, 2020, we had $77 million in 6.125% notes outstanding and $94 million in borrowings under our credit facility for a total of $171 million of debt. As of September 30, 2020, our debt-to-equity ratio was 1.36 times. From a regulatory perspective, our asset coverage ratio as of September 30, 2020, was 172%. which is above the statutory requirement for BDCs of 150%. Under the stock repurchase program announced in March of 2020, we continued repurchasing shares this quarter and repurchased 358,959 shares of stock at an average price of $1.27 per share. We expect to continue to evaluate opportunities to buy back shares. To further facilitate these opportunities, we entered into a 10b-5 repurchase plan on August 31st of this year. As Ted Goldthorpe mentioned, we are very pleased to complete the merger with Garrison Capital this quarter. At closing on October 28th, Garrison stockholders received a combination of $19.1 million in cash from Portman Ridge and newly issued Portman Ridge shares valued at 100% of NAV. Garrison stockholders also received an additional cash payment of $5 million from our investment advisor, Sierra Crest. As a result, Garrison stockholders received per share of Garrison stock, $1.50 in cash, and 1.917 shares of Portman Ridge stock per share. Following closing, Portman Ridge shareholders owned approximately 59% of former, and former Garrison stockholders owned 41% of the combined company. We're fully in process of integration and look forward to providing combined results next quarter. With that, I'd like to turn the call over to Patrick Schaefer, our Chief Investment Officer.