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PFLT PennantPark Floating Rate Capital

Participants
Arthur Penn Chairman & CEO
Aviv Efrat CFO
Call transcript
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Operator

Good morning, and welcome to the PennantPark Floating Rate Capital's Fourth Fiscal Quarter 2017 Earnings Conference Call. At this time, all participants have been placed on listen-only mode. The call will be open for a question-and-answer session following the speakers' remarks. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital. Mr. begin. may you Penn,

Arthur Penn

our good information Floating I'd quarter Rate I'm forward-looking some Aviv conference and start Aviv, you by statements. include off XXXX to the to call. disclosing Efrat, by today PennantPark Capital's conference joined Financial morning, you, Officer. like please call everyone. general welcome earnings Chief and Thank fourth about fiscal discussion

Aviv Efrat

unless to a will call filings, Art Officer, XXX-XXX-XXXX. statements, At call the property Art. time, call like strictly and PennantPark your on of broadcast please by this www.pennantpark.com call turn our provided materially this website. do to customary on copies required call Chairman conference update is numbers could call ask statements most and our our today's to SEC forward-looking SEC, disclosure include being of I'd may back projections. the at us earnings law. like these to attention filings Chief using Safe that also forward-looking visit to latest we Harbor with that unauthorized recorded. refer you results Penn. differ Audio well available actual you, at prohibited. our and in obtain To important recent factors Capital, or Thank call that in Rate to our like cause information. for everyone not to website as the projections, that I'd PIN our forward-looking undertake is from of We and Floating also I'd our Executive Today's to the any is call telephone and press be press note, by Please remind replay any our that release regarding form this of release as

Arthur Penn

going Q&A. portfolio, it of spend financials, highlights, Aviv. by activity, discussing Thanks, financial investment open up minutes a the for followed few to the I'm discussion and

primarily continue or million PennantPark secured at about ended Fund we assets of quarter grow. XX, September in For an PSSL first average to invested $XXX Loan the X.X%. Secured yield lien Senior

XX, of $X.XX poll former income litigation of PSSL diversified share Capital. million per this to settlement includes X.X%. of MCG XX September with $XXX average related As net portfolio of names owned yield Net share, investment per was an a $X.XX of company a

have significant We we that while use protect ramp dividend can spillover the portfolio. income cushion as we our to

September was per of share. XX, As our spillover $X.XX

quarter November shares sheet. upsized XX In our being after X end addition On facility. with investing October to on of amended, been On equity. we extended, active million X issued balance the active credit and front, we've we our

notes long-term we unsecured facility. are priced an Israel. We senior our priced $XXX who On gratified million institutional the about XXX of in supported lenders long-term November our XX attractively from of support we received offering L-plus in

lock-in able We are rate fixed X.XX%. long-term of an unsecured pleased be to notes coupon at to attractive

business middle market has primary financing of remained Our robust. financial sponsors

can on well receive over we investments cycles. we about and have what We years ultimately in about We withstand invest our of XXX about to extremely Chicago, and with be making sponsor's business our primarily selective from done We've the remain will sponsors we manage perform that funnel London. of vehicles, that different we the across can Los financial due with relative white Houston Angeles, elsewhere focused in. country value deal offices New size several XXX long-term that the and to-date to flow business York, relationships and

and more structures that companies low continues strong and focus are to defensive, be covenants leverage, have high returns. Our on

itself. upside preserve goals takes capital, of As usually credit of investors, capital. one care we of our preservation is the primary If

goals one long-term is business, building our a As of primary trust.

shareholders. credit trust on long-term providers sponsors, management our teams, intermediaries, portfolio Our companies, financial course, with our is building and, our focus of

financial middle-market and consistent, for intermediaries call capital. who sponsors, first credible are want management teams We

As a an clients. trusted become partner financing conflicts for affiliations, our provider, independent free or we've of

this relevant Being relevant substantially be flow. ability in we've be be and This more about we to giving flow with has means get can pleased as enhanced terms. We deal that even approaching investments increasingly that transactions more important we our deal to selective are more significantly meant drive drive us investing clients. borrower leader can been the order which as that make, who market we self-originated to capital more well looks an can enhanced in and resources

benefit addition MCG order We two offerings, have recent this PSSL across senior build that deal larger in that terms. the offering. write together venture launching Similar Kemper PFLT, bond years, a PSSL our merger, PFLT enhanced sponsored geographies, Universal relevant the can and first subsidiary in lien and companies PSSL PSSL more driving clients increased are more the is and of Corporation. mid-level taken additional several have professionals with the our better equity Company, have of over and and of Insurance cheques loans has Capital the and to to steps them different joint few including invest flow defensive, primarily strong secured covenance. PSSL leverage, Trinity our be for relevance for last to low follow-on

in overtime. should investment investments the and increase which income on expect to accretive We to ROE PFLT low be our be PSSL mid-teens the to net the overall in

asset, PFLT's still currently as a Although is non-qualifying. plenty basket XX% maximum we is the since PSSL XX% non-qualifying in considered of only investment of have cushion

second actively senior are joint loan We venture. a considering

-- be and income. stable to a which by expense, healthy X.X on cash in structure, continue to high-quality provides economic our withstand cash As cushion interest assets of significant diversification, this volatility focus floating-rate capital times; a or flow the exceeds support amount EBITDA is and the continuing our companies, result market ratio, to seniority portfolio constructed investment

EBITDA prudent times, cost, X.X of Additionally, the indication on at to ratio portfolio the debt overall another of risk. was

$X.XX have on have a a and so dollar only September non-accruals. representing far. quality the X.X excellent. recovered five Out on ago had experienced portfolio we on one non-accrual On inception which five XX, cost companies the of invested, since On basis credit market-value books our in those X.X% Our years been basis. we on has non-accruals, X.X% we've of XXX we

investments, terms an another returns. new active had attractive In risk-adjusted quarter of we investing

Our virtually driven we've by or industries of a relationship all these deals, a activity re-financings, sponsor. strong a the M&A mixture and studied these particular financings investments have the growth and known was for while, companies have with

of the for $X decorating McAfee of for software enthusiasts, Let's million solutions loan cyber countries Pack cake sponsor. legal loans; loan million lien supplier million services the purchased first term law and million software, the a is sponsor. $X.X of invested the term and lien provides Snow [ph] Country common of some is walk the software the to in of TK an fruit, million is security we Australian $XX Fresh lien second we to and base firms. second term invested of cloud-based equity, debt primarily through With lien is first the the Fresh. decorating we've leading in lien enterprises, provider first TPG bakeries is Phipps $X.X consumers of million sponsor. Capital fresh X provider in Capital and Country CANUS cake XX and marketer highlights; of

seeing sourcing to and we active to both financings. the and active to XXXX, we'll are deal outlook, be that's due remainder network our continue growth client driven Due Turning the relationships, we strong flow. M&A of believe to

call CFO, Aviv, financial over take turn now to me Let our us the to results. the through

Aviv Efrat

Art. you, Thank

per For the September quarter $X.XX $X.XX of net litigation XXXX, income proceeds. investment per ended XX, was share, share including settlement

$X.X of and accrued million, including expense $XXX,XXX of categories, totaled fees totaled management some but administrative the expense incentive million, payable $X.X at about Looking totaled and million. fees. about $X.X General expenses not interest

million of facility $XXX,XXX the about about share per $XXX,XXX Net And credit Net on was about share. unrealized went or or income quarter gains was on was XX, $XX.XX excess unrealized NAV net During investments $X.XX per September in per ended Consequently, per $X.XX or realized from $X.XX appreciation share. $XX.XX share. our $XXX,XXX was $X.XX share. dividend per appreciation to per $X.X share. or

price Directors broker/dealer are the firms XXX by Our quotations independent using inactive, credit markets our firms valuation mark-to-market provided entire use portfolio to cases we where valuation of independent XXX. are investments. our when Board independent quarter ASC or under available and the In value facility each are quotes exit and by active broker/dealer

Our highly XX is is secured with lien first second in X% companies invested relatively is and XX% low lien debt diversified risk, senior in in it in industries. subordinated across portfolio equity. X% XX debt, different debt, X%

XX% whose are investment lien of the underlying loans Our in PFLT investments and about portfolio. represents debt in subordinated equity PSSL, senior secured first investments

average of X%. portfolio of is overall portfolio yield a Our floating debt the has rate. weighted XX%

back to Art. me turn call let Now, the

Arthur Penn

our Aviv. To we to Thanks, reiterate mission. conclude, want

is the team that for find closing, cash commitment cash contractual would today In dedication. primarily middle-market that aligned have cash lien secured pay protected and try dividend is debt floating high capital. goal Our We steady, conversion. Everything that free and do stream, preservation first less with of a capture We senior out in we goal. we rate flow to coupled time for to and up instruments, companies At risky in I in this extremely shareholders. your those and of free flow stable our thank dividends confidence questions. I'd for to investment call professionals like remarks. all the That form our your open of our to like flows to Thank the and talented their us. concludes you time, with

Arthur Penn

today. you for Thank the call on everybody. Okay, being

the to will if extent early any much. here you we be anybody be has very February. and to will talking Thank We in you questions

Operator

and conference. program. participation your thank you your concludes for Ladies This gentlemen, today's in

now great may a disconnect. day. You Everyone have