Portman Ridge Finance Corporation Announces Full Year 2021

NEW YORK, March 10, 2022 (GLOBE NEWSWIRE) — Portman Ridge Finance Corporation (Nasdaq: PTMN) (the “Company” or “Portman Ridge”) announced today its financial results for the full year ended December 31, 2021.

The Company also declared a quarterly stockholder distribution of $0.63 per share for the first quarter of 2022, payable on March 30, 2022 to stockholders of record at the close of business on March 21, 2022. This is an increase of $0.01 per share from $0.62 per share distributed in the fourth quarter of 2021 and $0.60 per share distributed in preceding quarters.

Full Year 2021 Highlights1

  • Net asset value (“NAV”) for full year 2021 increased to $280.1 million ($28.88 per share) from $216.3 million ($28.77 per share) year-over-year, reflecting broad-based improvements in the debt portfolio investments and joint ventures.
  • Total investment income for full year 2021 increased to $80.1 million, of which $63.8 million was attributable to interest income from the debt securities portfolio. This compares to total investment income of $42.8 million in 2020, of which $31.4 million was attributable to interest income from the debt securities portfolio.
  • Excluding the impact of purchase price accounting, core investment income2 for the full year 2021 was $63.4 million, an increase of $24.3 million as compared to core investment income of $39.1 million in 2020
  • Net investment income (“NII”) for full year 2021 increased to $42.0 million ($4.92 per share) as compared to $17.0 million ($3.40 per share) a year ago.
  • Core NII3 for full year 2021 increased to $25.4 million ($2.97 per share) as compared to $13.3 million ($2.67 per share)1 a year ago.
  • Total investments at fair value (excluding derivatives) at December 31, 2021 was $550.0 million; when excluding CLO funds and Joint Ventures, these investments are spread across 30 different industries and 113 different entities, with an average par balance per investment of approximately $3.3 million. This compares to $487.7 million as of December 31, 2020, comprised of investments in 121 entities.
  • As of December 31, 2021, par value of outstanding borrowings was $352.4 million with an asset coverage ratio of total assets to total borrowings of 178%. On a net basis, leverage as of December 31, 2021 was 1.01x.4
  • During the year, the Company redeemed in full the aggregate $77.4 million in principal outstanding of the 6.125% Notes due 2022 on May 30, 2021; the aggregate principal amount outstanding of $28.75 million of HCAP’s 6.125% Notes due 2022 were redeemed in full on July 23, 2021.
  • In the fourth quarter of 2021, the Company’s previously announced purchase of $18.1 million of portfolio of CLO assets in exchange for $1.4 million in cash and 556,852 shares of common stock issued at NAV closed in the fourth quarter of 2021.
  • During the year, the Company repurchased 75,377 shares, under its $10 million Stock Repurchase Program in open market transactions at an aggregate cost of approximately $1.8 million.
  • A 1-for-10 reverse stock split of the Company’s common stock was completed effective August 26, 2021.

Management Commentary

Ted Goldthorpe, Chief Executive Officer of Portman Ridge, stated, “We are pleased with our year end results and believe we are well-positioned as we look ahead to the new year. The year-over-year increase in net assets per share is a reflection of the strength of our portfolio. Our solid performance has allowed us to increase our quarterly distribution for a second quarter in a row to $0.63 per share. Overall, we have had a successful year and our goal is to continue to improve our portfolio performance, lower our cost of capital, and reduce expenses relative to our asset base. Furthermore, the expected speed and extent in the rise of interest rates should improve our gross investment income in the coming quarters, as the majority of our portfolio has a floating rate. We also expect future portfolio investments to predominately be floating rate investments.”

Select Financial Highlights

    For the Year Ended December 31,   For the Year Ended December 31,
($ in thousands)     2021       2020  
Total investment income     80,086       42,764  
Net Expenses     38,082       25,764  
Net Investment Income     42,004       17,000  
           
Net realized and unrealized (loss) gain on investments     (12,701 )     14,418  
Tax (provision) benefit on realized and unrealized (gains) losses on investments     (1,442 )      
Realized (losses) gains on extinguishments of Debt     (1,835 )     155  
Net Increase (Decrease) In Net Assets Resulting From Operations   $ 26,026     $ 31,573  
Net Increase (Decrease) In Stockholders’ Equity Resulting from Operations per Common Share—Basic and Diluted(1)   $ 3.05     $ 6.32  
Net Investment Income Per Common Share—Basic and Diluted(1)   $ 4.92     $ 3.40  
Weighted Average Shares of Common Stock Outstanding—Basic and Diluted(1)     8,536,079       4,998,759  
Distribution per share(1)   $ 0.63     $ 0.60  
           

(1)   The Company completed a Reverse Stock Split of 10 to 1 effective August 26, 2021. As a result, common shares and net asset value per common share information has been adjusted retroactively to reflect the split for periods prior to August 26, 2021.

       
    For the Year Ended
December 31, 2021
 
($ in thousands)    
Interest from investments in debt excluding accretion   $ 42,787    
Purchase discount accounting     16,644    
PIK Investment Income     4,345    
CLO Income     4,754    
JV Income     9,178    
Service Fees     2,378    
Total Investment Income     80,086    
Less: Purchase discount accounting     (16,644 )  
Core Investment Income     63,442    

Investment income for the years ended December 31, 2021 increased to $80.1 million, as compared to $42.8 million in 2020.

Interest income from investments in debt securities for the year ended December 31, 2021 increased to $63.8 million as compared to $31.4 million in the prior year. The increase in interest income was primarily driven by additions to the Debt Securities Portfolio through merger transactions, as well as an increase in the contractual interest rates on loans.

At December 31, 2021 and December 31, 2020, the weighted average contractual interest rate on our interest earning debt securities was approximately 8.1% and 7.7%, respectively.

Investment Portfolio Activity

The composition of our investment portfolio at December 31, 2021 and December 31, 2020 at cost and fair value was as follows:

($ in thousands)   December 31, 2021   December 31, 2020
Security Type   Cost/Amortized
Cost
  Fair Value   %(¹)   Cost/Amortized
Cost
  Fair Value   %(¹)
Senior Secured Loan   $361,556   $364,701     66     $304,539   $328,846     68  
Junior Secured Loan     82,996     70,549     13       87,977     75,807     16  
Senior Unsecured Bond     416     43     0       416     208     0  
CLO Fund Securities     51,561     31,632     6       45,728     19,583     4  
Equity Securities     26,680     22,586     4       24,594     13,945     3  
Asset Manager Affiliates(2)   17,791               17,791          
Joint Ventures     64,365     60,474     11       54,932     49,349     10  
Derivatives     31     (2,412 )         31     (1,109 )    
Total   $605,396   $547,573     100 %   $536,008   $486,629     100 %

¹        Represents percentage of total portfolio at fair value.
²        Represents the equity investment in the Asset Manager Affiliates.

As of December 31, 2021, seven of the Company’s debt investments were on non-accrual status. As of September 30, 2021, six of the Company’s investments were on non-accrual status. Investments on non-accrual status were 0.5% and 2.8% of the Company’s investment portfolio at fair value and amortized cost as of December 31, 2021, respectively, compared to 0.9% and 2.5% as of September 30, 2021.

Liquidity and Capital Resources

As of December 31, 2021, we had $352.4 million (par value) of borrowings outstanding ($347.2 million net of capitalized costs) with a weighted average interest rate of 3.2%. This balance was comprised of $79.8 million of outstanding borrowings under the Senior Secured Revolving Credit Facility, $162.5 million of 2018-2 Secured Notes due 2029, and $104.9 million of 4.875% Notes due 2026.

As of December 31, 2021, the Company had unrestricted cash of $28.9 million, restricted cash of $39.4 million, $34.4 million of available borrowing capacity under the Senior Secured Revolving Credit Facility, and $25.0 million of borrowing capacity under the 2018-2 Revolving Credit Facility. Total assets and stockholders’ equity at December 31, 2021 were $648.3 million and $280.1 million, respectively. Aggregate unfunded commitments stood at $47.9 million as of December 31, 2021.

As of December 31, 2021 and December 31, 2020 the fair value of investments and cash were as follows:

Security Type   December 31, 2021   December 31, 2020
Cash and cash equivalents   $ 28,919     $ 6,990  
Restricted Cash     39,421       75,913  
Senior Secured Loan     364,701       328,846  
Junior Secured Loan     70,549       75,807  
Senior Unsecured Bond     43       208  
CLO Fund Securities     31,632       19,583  
Equity Securities     22,586       13,945  
Joint Ventures     60,474       49,349  
Derivatives     (2,412 )     (1,109 )
Total   $ 615,914     $ 569,532  

Interest Rate Volatility

The Company’s investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates.

As of December 31, 2021, approximately 84% of the Company’s Debt Securities Portfolio were either floating rate with a spread to an interest rate index such as LIBOR or the prime rate. 75% of these floating rate loans contain LIBOR floors ranging between 0.50% and 2.00%.

As of December 31, 2021, Portman Ridge had approximately $352.4 million (par value) of borrowings outstanding, of which approximately 31% had a fixed rate and 69% had a floating rate. Portman Ridge expects future portfolio investments to predominately be floating rate investments.

In periods of rising or lowering interest rates, the cost of the portion of debt associated with the 4.875% Notes Due 2026 would remain the same5, given that this debt is at a fixed rate, while the interest rate on borrowings under the Revolving Credit Facility would fluctuate with changes in interest rates.

Generally, an increase in the base rate index for floating rate investment assets would increase gross investment income and a decrease in the base rate index for such assets would decrease gross investment income (in either case, such increase/decrease may be limited by interest rate floors/minimums for certain investment assets).

    Impact on net investment income from
a change in interest rates at:
 
    ($ in thousands)  
    1%       2%       3%    
Increase in interest rate     $ (1,153 )       $ 217         $ 1,671    
Decrease in interest rate     $ 256         $ 256         $ 256    

Conference Call and Webcast

We will hold a conference call on Friday March 11, 2022 at 9:00 am Eastern Time to discuss our fourth quarter and full year 2021 financial results. To access the call, stockholders, prospective stockholders and analysts should dial (866) 757-5630 approximately 10 minutes prior to the start of the conference call and use the conference ID 1949597.

A replay of this conference call will be available from approximately 12:00 p.m. Eastern Time on March 11 through March 18. The dial in number for the replay is (855) 859-2056 and the conference ID is 1949597.

A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on the Company’s website www.portmanridge.com in the Investor Relations section under Events and Presentations. The webcast can also be accessed by clicking the following link: Portman Ridge Fourth Quarter and Full Year 2021 Conference Call. The online archive of the webcast will be available on the Company’s website shortly after the call.

About Portman Ridge Finance Corporation

Portman Ridge Finance Corporation (Nasdaq: PTMN) is a publicly traded, externally managed investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Portman Ridge’s middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. Portman Ridge’s investment activities are managed by its investment adviser, Sierra Crest Investment Management LLC, an affiliate of BC Partners Advisors, LP.

Portman Ridge’s filings with the Securities and Exchange Commission (the “SEC”), earnings releases, press releases and other financial, operational and governance information are available on the Company’s website at www.portmanridge.com.

About BC Partners Advisors L.P. and BC Partners Credit

BC 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 press release contains forward-looking statements. The matters discussed in this press release, as well as in future oral and written statements by management of Portman Ridge Finance Corporation, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements.

Forward-looking statements relate to future events or our future financial performance and include, but are not limited to, projected financial performance, expected development of the business, plans and expectations about future investments and the future liquidity of the Company. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “outlook”, “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. 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.

Important assumptions include our ability to originate new investments, and achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation that such plans, estimates, expectations or objectives will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) uncertainty of the expected financial performance of the Company; (2) expected synergies and savings associated with . merger transaction effectuated by  the Company; (3) the ability of the Company and/or its adviser to implement its business strategy; (4) evolving legal, regulatory and tax regimes; (5) changes in general economic and/or industry specific conditions; (6) the impact of increased competition; (7) business prospects and the prospects of the Company’s portfolio companies; (8) contractual arrangements with third parties; (9) any future financings by the Company; (10) the ability of Sierra Crest Investment Management LLC to attract and retain highly talented professionals; (11) the Company ability to fund any unfunded commitments; (12) any future distributions by the Company; (13) changes in regional or national economic conditions, including but not limited to the impact of the COVID-19 pandemic, and their impact on the industries in which we invest; and (14) other changes in the conditions of the industries in which we invest and other factors enumerated in our filings with the SEC. The forward-looking statements should be read in conjunction with the risks and uncertainties discussed in the Company’s filings with the SEC, including the Company’s most recent Form 10-K and other SEC filings. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the SEC.

Contacts:
Portman Ridge Finance Corporation
650 Madison Avenue, 23rd floor
New York, NY 10022
[email protected]

Jason Roos
[email protected]
(212) 891-2880

Lena Cati
The Equity Group Inc.
[email protected]
(212) 836-9611

Serena Liegey
The Equity Group Inc.
[email protected]
(212) 836-9630

PORTMAN RIDGE FINANCE CORPORATION
CONSOLIDATED BALANCE SHEETS

    December 31,
2021
    December 31,
2020
 
($ in thousands, except share and per share amounts)            
ASSETS            
Investments at fair value:            
Non-controlled/non-affiliated investments (amortized cost: 2021 – $479,153; 2020 – $445,901)   $ 452,482     $ 427,277  
Non-controlled affiliated investments (amortized cost: 2021 – $74,082; 2020 – $40,726)     74,142       40,503  
Controlled affiliated investments (cost: 2021 – $52,130; 2020 – $49,350)     23,361       19,957  
Total Investments at Fair Value, excluding derivatives (cost: 2021 – $605,365; 2020 – $535,978)     549,985       487,737  
Cash and cash equivalents     28,919       6,990  
Restricted cash     39,421       75,913  
Interest receivable     5,514       2,973  
Receivable for unsettled trades     20,193       25,108  
Due from affiliates     507       357  
Other assets     3,762       1,100  
Total Assets   $ 648,301     $ 600,178  
LIABILITIES            
2018-2 Secured Notes (net of discount of: 2021 – $1,403; 2020 – $2,445)   $ 162,460     $ 249,418  
4.875% Notes Due 2026 (net of discount of: 2021 – $2,157; net of deferred financing costs of: 2021 – $951)     104,892        
Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net of deferred financing costs of: 2021 – $732; 2020 – $1,098)     79,839       48,223  
6.125% Notes Due 2022 (net of deferred financing costs of: 2020 – $1,058)           75,668  
Derivative liabilities (cost: 2021 – $31; 2020 – $31)     2,412       1,109  
Payable for unsettled trades     5,397        
Accounts payable, accrued expenses and other liabilities     4,819       1,789  
Accrued interest payable     2,020       1,089  
Due to affiliates     1,799       1,375  
Management and incentive fees payable     4,541       5,244  
Total Liabilities     368,179       383,915  
COMMITMENTS AND CONTINGENCIES            
NET ASSETS            
Common stock, par value $0.01 per share, 20,000,000 common shares authorized; 9,867,998 issued, and 9,699,695 outstanding at December 31, 2021, and 7,609,349 issued, and 7,516,423 outstanding at December 31, 2020     97       75  
Capital in excess of par value     733,095       639,136  
Total distributable (loss) earnings     (453,069 )     (422,947 )
Total Net Assets     280,122       216,264  
Total Liabilities and Stockholders’ Equity   $ 648,301     $ 600,178  
NET ASSET VALUE PER COMMON SHARE (1)   $ 28.88     $ 28.77  

(1)   The Company completed a Reverse Stock Split of 10 to 1 effective August 26, 2021, the common shares and net asset value per common share have been adjusted retroactively to reflect the split for all periods presented.

PORTMAN RIDGE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

    For the Year Ended December 31,
($ in thousands, except share and per share amounts)      2021       2020       2019  
Investment income:            
Income from non-controlled/non-affiliated investments   $                3,591     $ 27,553     $ 12,205  
Income from non-controlled affiliated investments     8,947       10,065       10,324  
Income from controlled affiliated investments     5,170       4,263       3,750  
Interest from cash and time deposits           15       79  
Fees and other income     2,378       868       137  
Total investment income     80,086       42,764       26,495  
Expenses:            
Management fees     7,916       4,579       3,129  
Performance-based incentive fees     7,075       4,858        
Interest and amortization of debt issuance costs     13,644       10,284       8,261  
Compensation                 3,689  
Professional fees     3,660       2,836       3,467  
Administrative services expense     3,219       1,941       1,244  
Other general and administrative expenses     2,568       1,823       2,201  
Lease termination costs                 1,431  
Total expenses     38,082       26,321       23,421  
Management and performance-based incentive fees waived           (557 )      
Net Expenses     38,082       25,764       23,421  
Net Investment Income     42,004       17,000       3,074  
Realized And Unrealized Gains (Losses) On Investments:            
Net realized gains (losses) from investment transactions            
Non-controlled/non-affiliated investments     (4,397 )     7,120       (10,972 )
Non-Controlled affiliated investments     139       485       (12 )
Controlled affiliated investments                 (4,635 )
Net realized gain (loss) on investments     (4,258 )     7,605       (15,619 )
Net change in unrealized appreciation (depreciation) on:            
Non-controlled/non-affiliated investments     (8,047 )     21,366       9,756  
Non-Controlled affiliated investments     282       (11,723 )     (6,208 )
Controlled affiliated investments     625       (1,755 )     (2,363 )
Derivatives     (1,303 )     (1,075 )     (64 )
Net unrealized gain (loss) on investments     (8,443 )     6,813       1,121  
Tax (provision) benefit on realized and unrealized (gains) losses on investments     (1,442 )            
Net realized and unrealized appreciation (depreciation) on investments, net of taxes     (14,143 )     14,418       (14,498 )
Realized gains (losses) on extinguishments of Debt     (1,835 )     155       (1,076 )
Net Increase (Decrease) In Net Assets Resulting From Operations   $ 26,026     $ 31,573     $ (12,500 )
Net Increase (Decrease) In Stockholders’ Equity Resulting from Operations per Common Share (1):            
Basic:   $                   3.05     $ 6.32     $ (3.32 )
Diluted:   $ 3.05     $ 6.32     $ (3.32 )
Net Investment Income Per Common Share (1):            
Basic:   $ 4.92     $ 3.40     $ 0.82  
Diluted:   $ 4.92     $ 3.40     $ 0.82  
Weighted Average Shares of Common Stock Outstanding—Basic and Diluted (1)     8,536,079       4,998,759       3,764,165  

(1)   The Company completed a Reverse Stock Split of 10 to 1 effective August 26, 2021, the common shares and net asset value per common share have been adjusted retroactively to reflect the split for all periods presented.

_______________________________________

1 The Company completed a Reverse Stock Split of 10 to 1 effective August 26, 2021. As a result, the share and per share amounts have been adjusted retroactively to reflect the split for all periods prior to August 26, 2021.
2 Core investment income represents reported total investment income as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, less the impact of purchase price discount accounting in connection with the Garrison Capital Inc. (“GARS”) and Harvest Capital Credit Corporation (“HCAP”) mergers. Portman Ridge believes presenting core investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, core investment income is a non-U.S. GAAP measure and should not be considered as a replacement for total investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, core investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
3 Core NII, or core net investment income, represents reported net investment income in accordance with U.S. GAAP, less the impact of purchase price discount accounting in connection with the GARS and HCAP mergers.  Portman Ridge believes presenting Core NII and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, Core NII is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP.  Instead, Core NII should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
4 Net leverage is calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and cash equivalents, and restricted cash and (B) NAV. Portman Ridge believes presenting a net leverage ratio is useful and appropriate supplemental disclosure because it reflects the Company’s financial condition net of $68.3 million of cash and cash equivalents. However, the net leverage ratio is a non-U.S. GAAP measure and should not be considered as a replacement for the regulatory asset coverage ratio and other similar information presented in accordance with U.S. GAAP. Instead, the net leverage ratio should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial condition.
5 See comment above about describing the terms and amount of the 4.875% Notes issuance.

Minnie Arwood

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