Portman Ridge Finance Corporation

A copy of the release along with an earnings presentation is available on the company's website at www.portmanridge.com in the investor relations section and should be reviewed in conjunction with the company's Form 10-K 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 tweets 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. Portman Ridge Finance Corporation assumes the obligation to update any such forward-looking statements unless required by law. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of Portman Ridge Finance Corporation, Brandon Satoran, Chief Financial Officer, and Patrick Schaefer, Chief Investment Officer. With that, I would like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Portman Ridge.

Good morning and welcome to our fourth quarter and full year 2024 earnings call. I'm joined today by our Chief Financial Officer, Brandon Satorin, and our Chief Investment Officer, Patrick Schaefer. Following my opening remarks on the company's performance and activities during the fourth quarter, Patrick will provide commentary on our investment portfolio and our markets, and Brandon will discuss our operating results and financial condition in greater detail. While 2024 had several positive developments for Portman, including the potential for an accretive combination with Logan Ridge, announced just after year-end, the company's financial results were impacted by certain idiosyncratic challenges within our investment portfolio. who will continue to focus on our underperforming credits and remain confident in our ability to derive the best outcome for shareholders, and most importantly, in the credit quality of the portfolio overall. As far as the combination with Logan Ridge is concerned, the next critical step towards completion is the special meeting of shareholders, where investors will be asked to approve the transaction, which will be scheduled once the N14 is declared effective by the SEC. This transformative transaction marks a significant milestone in our long-term growth strategy and underscores our commitment to finding creative ways to continue to grow the company's balance sheet and generate shareholder value. We believe the combination of these two BDCs create a stronger, more competitive combined company with increased scale, significant operational efficiencies, and enhanced trading liquidity. We invite our shareholders to vote for the merger when they receive their proxy card. Both Portman and Logan Board of Directors have unanimously recommended that shareholders vote for the merger. The proposed merger with Logan Ridge is a testament to the strategic actions we have taken to position Portman Ridge for long-term success. In support of this transaction, our external advisor, Sierra Crest, has agreed to waive up to $1.5 million of incentive fees over the next eight quarters following the merger's closing, further aligning interests with our shareholders. During the year, we executed our disciplined capital management strategy for prudent capital and portfolio management initiatives. I'm very pleased with the work we did on the right side of the balance sheet and substantial improvements we made to the company's debt capital structure. This is highlighted by the refinancing of the 2018-2 secured notes and the amendment and extension of our JPMorgan Chase bank credit facility, which we upsized and termed out, which resulted in net spread savings of that we truly benefited fully in fourth quarter of 2024. Complementary to these efforts, we continue to strengthen our portfolio by reducing non-accrual investments from nine as of September 30th, 2024 to six as of December 31st, 2024, improving the overall asset quality. In light of both the benchmark rate environment as well as the general market spread compression, Board of Directors has approved the modification of Portman's dividend policy to introduce regularly quarterly-based distribution and a quarterly supplemental distribution. which will approximate 50% of net investment income in excess of our quarterly base distribution. For the first quarter of 2025, the Board of Directors approved a base distribution of 47 cents per share and a supplemental cash distribution of 7 cents a share. Additionally, during the year, we continue to believe our stock remained undervalued and thus, the company repurchased 202,357 shares of its common stock in the open market under its renewed stock repurchase program for an aggregate cost of approximately $3.8 million, which was accreted to NAV by 7 cents per share, reinforcing our commitment to increasing shareholder value. Looking ahead, we are excited about the opportunities the proposed merger will create. Entering 2025, we anticipate being active in the market and net deployers of capital we anticipate will restore net investment income to more normalized levels. A healthy pipeline, fortified balance sheet, prudent investment strategy, and experienced management team remain confident in our ability to generate strong risk-adjusted returns and drive long-term value for our shareholders. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer, for a review of our investment activity. Thanks, Ted.

Turning now to slide five of our presentation and the sensitivity of our earnings to interest rates, as of December 31st, 2024, approximately 90.1% of our debt securities portfolio was floating rate with a spread peg to an interest rate index such as SOFR or prime rate, with substantially all of these being linked to SOFR. As you can see from the chart, SOFR rates have declined in the past two quarters, impacting the current quarter's net investment income. Skipping down to slide 10, Originations for the quarter were higher than last quarter, but were below the current quarter repayment and sales levels, resulting in net repayments and sales of approximately $19.2 million. Of note, approximately $12 million of this was due to the repayment of Critical Nurse on the last day of the year. So it's going to year end. We have successfully deployed the Critical Nurse proceeds through add-on to multiple existing portfolio companies and investment in a new borrower that is expected to close in the near term. Overall, yield on par value of new investments during the quarter was 11.4%, slightly above the yield of the overall portfolio at 11.3% on par value. Our investment portfolio at year-end remained highly diversified. We ended the fourth quarter with a debt investment portfolio, when excluding our investments in COO funds, equities, and joint ventures, spread across 26 different industries, with an average par balance of $2.5 million. Turning to slide 11, in aggregate, we had six investments on non-accrual status at the end of the fourth quarter of 2024, representing 1.7% and 3.4% of the company's investment portfolio at fair value and cost, respectively. This compares to nine investments on non-accrual status as of September 30, 2024, representing 1.6% and 4.5% of the company's investment portfolio at fair value and cost, respectively. In slide 12, excluding our non-accrual investments, we have an aggregate debt investment portfolio of $320.7 million at failed value, which represents a blended price of 90.7% of par value and is 90.2% comprised of first lien loans at par value. Assuming a par recovery, our December 31, 2024 fair values reflect a potential of $16.4 million of incremental NAB value, or a 16.4% increase to NAB. When applying an illustrative 10% default rate and 70% recovery rate, our debt portfolio would generate an incremental $2.36 per share of NAV, or an 11.1% increase as it rotates. Finally, turning to slide 13, to aggregate the three portfolios acquired over the last three years, we have purchased a combined $435 million of investments and have realized approximately 85% of these investments at a combined realized and unrealized mark of 101% of fair value at the time of closing of those respective mergers. As of Q4 2024, we have fully exited the acquired Oak Hill portfolio and are down to a combined $27 million of the acquired HCAP and initial KCAP portfolios. I'll now turn the call over to Brandon to further discuss our financial results for the period.