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PFLT PennantPark Floating Rate Capital

Participants
Art Penn Chairman & Chief Executive Officer
Aviv Efrat Chief Financial Officer
Call transcript
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Operator

Good morning, and welcome to the PennantPark Floating Rate Capital First Fiscal Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, all participants are placed in a 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. Chief of and Capital. Floating Chairman Penn, Executive PennantPark Officer Rate Art Mr. you conference. begin Penn, your may

Art Penn

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

Aviv Efrat

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

Art Penn

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

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

PSSL names, an diversified $XXX As average million yield X.X%. owned with a of XX XX, of pool December of

This last and we the a the our has The this dividend. years, platform are net well to position as are net of investment pleased active adding regional $X.XX that significantly combined grown in Net as level rate and Due to evidence investment accrued was our one-time Over and The income not debt deal credit by $X.XX covers was growth professionals have several incentive we current PSSL, mid-level costs, additional seeing per substantially us have capital Core investment investment selective. our share. share. is per and the payable income fee amendment excluding income, run raised platform. offices facility we flow. additional enhanced puts of enhanced people offices equity be York. both with New in senior growth in our and activity we

Our a ratio, in on tailwind stream still earnings while increase based a debt should nice gradual have profile. prudent our maintaining debt-to-equity

to X.X the XXX% coverage Act, coverage $X.XX share. law, to targeting approved With April a to September ratio times Small from was effective per our Credit was Business that time, XXX% times. Over are that As included asset modified a regard XX, of X, the asset XXXX. the of spillover reducing X.X board debt-to-equity Availability we our reminder in

We this will overnight. not target reach

track be has new can to record represent investing an assets senior risk will returns lien for to We profile X excellent assets. generated first target. an The secured last to believe such rate us that that We provide our the investors. carefully leveraged lower prudently quarters appropriate attractive floating in continue and invest several over may years the take company it reach risk

PSSL Our at targeted of which operating successful operation evidence is strategy. the equity today of this same ratio debt is to

our $XXX amendments to we facility ratio. million to upsized During reach the targeted the necessary completed from million $XXX and to the credit enable quarter, debt-to-equity us

have We support record. that expanded excellent the of we are also lender that our all and confidence track receive relationships. existing pleased the lenders we highlights support The our they in

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

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

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

and sponsor’s consistent call are management middle-market We for credible intermediaries capital. want first who teams financial

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

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

our of sponsors. the our on million is of the the generally important of $XX EBITDA, $XX risk. with borrowers and market Additionally debt-to-EBITDA to at million cost, capital was indication to another portfolio overall companies X.Xx In prudent ratio of core

covenants help seeing risk and are our which reward still attractive are we receiving We protect capital.

companies only since has On excellent. credit which experienced we've X on since we've Our we $X.XX have the dollar far. so five XXX non-accruals, non-accruals. nearly inception invested in quality years ago Out inception, five of those been recovered

was no underlying recession. had portfolio From U.S. we our the point global strong at our record a an business to credit had standpoint, lenders, XX, underwriting December non-accruals a to regard one that strong direct cycle and economy in who prior With middle-market economy are of and crisis, the of experience this books. during track and indicates we no sign of on financial As the time. few

was to not back subordinated investments again ultimately in as the $XXX financial September was, primarily Although then, subordinated PennantPark we in primarily PFLT aggregated XXXX, onset existence crisis focused mezzanine in initiated an which of million, debt. Prior organization global of investing on debt. in was and and the

the of the American This declined underlying During Index High the recession, of Bloomberg EBITDA those of by down at of compares the average EBITDA Yield decline North to weighted companies, the trough portfolio X.X% the average XX%. recession.

prior result, to financial investments those IRR the a crisis were they underlying As though recession. even X%, the on was and done

We track case are this primarily of record subordinated on proud debt. downside

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

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

real eCommission to is market. glass million Glass. Let's common Services and purchased advanced The walk $XXX,XXX own, $XX.X products. through that of of the We purchased fabricator term $XX.X lien and first sponsor. develop We and distributor online is of of some finance Lightyear Capital loan, specializes American common the lien $XXX,XXX formed of value-added agents estate purchased million sponsor. the of first payment the equity. sponsor. of an PGP first a is the Peninsula highlights. of newly Virginia loan, the in term platform loan the company term Entertainment. regulated company Financial lien with is gaming Capital $XX.X AV opportunities is the The Insulated the of is in the newly operate million Investors commissions. equity providing We Pacific and of

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

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

Aviv Efrat

you, Art. Thank

ended excluding December of one-time fees. our accrued share per investment XXXX, net $X.XX incentive For XX, per income incentive of reversal net was per $X.XX $X.XX investment financing not costs, net per $X.XX the excluding and investment income share share, share. quarter in fee, Core payable was of of

the interest facility expense and expense excluding management General $X categories, accrued totaled $X fees. fees $X.X $X about payable financing about of million, not about excluding some million, incentive million totaled totaled costs. million the credit at and $X.X Looking million, administrative expenses one-time amendment

from went or During $X.XX net Net per investment ended quarter $X.XX per investment about depreciation covered XX or per on share $X was realized Consequently, and dividends. share. per million income share. notes Net million million was to $XX $XX.XX Net per about facility our share. credit $X our unrealized gain on the appreciation NAV $X.XX was or share. unrealized December $XX.XX

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

XX% lien diversified highly PSSL. secured is including different in including and debt in XX in debt industries. PSSL, in XX% portfolio invested in is X% X% Our lien XX second equity senior first with companies X% across

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

Now, Art. let me turn to the call back

Art Penn

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

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

Art Penn

Yeah. I with like looks This and be the Q&A Penn the we having this it may difficulties think technical on is morning. some system Art

difficulties. We Thank CFO, you should for following the quarter. at me any free you next or and very apologies Feel are you we'll Aviv My technical call. Efrat, call company. talk our this on much up to around have to questions, the

Operator

all again conference. once We participation. does that your conclude thank today's And you for

disconnect. now may You