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Portman Ridge Financial: IIQ 2020 Results – First Look

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PTMN’s IIQ 2020 financial performance was FAIR, based on a review of the earnings press release. (There was no Investor Presentation and we did not have the time to review the 10-Q in any detail). On the more positive side, NAV Per Share managed to climb, albeit ever so slightly: by 0.7%. That’s despite having to contend with CLO equity investments that have dropped 50%  in value since the beginning of the year. Net Investment Income Per Share (“NIIPS”) was even with the quarter before – at a time when most BDCs are reporting lower metrics in this area. NIIPS are in line with the quarterly dividend, also $0.06 a quarter.  The BDC is paying the third quarter dividend in cash, itself an achievement as several BDCs have turned to paying most of the distribution in the form of stock or not at all. On the less positive side, that NIIPS number is achieved only after a substantial fee waiver by the manager, adding 1 cent a share to the bottom line. Furthermore, some of the investment income is Pay-In-Kind, so cash income is likely not “covering” the distribution. Add to that the fact that debt to equity is high at 1.43x and liquidity is POOR, with just $2.5mn in cash and $11.4mn in borrowing capacity; offset by a potential $2.4mn of unilateral commitments to third parties. That leaves PTMN very little room for asset or earnings growth. We didn’t get to learn much about how credit is performing except that no new loans were placed on non accrual. A quick dip into the 10-Q, though, indicates 9 portfolio companies remain on non accrual as of June 2020, suggesting plenty of work-outs ahead for a small BDC with only $208mn in loan assets. Longer term the outlook for the BDC remains POOR, making all the more important the consummation of PTMN’s planned merger with Garrison Capital (GARS), the plans for which proceed apace.

For all the First Look reviews of IIQ 2020 BDC results, check out the BDC Data Table. We are constantly adding new updates as results come in and we undertake an initial survey. Besides these reports, we are also filling in NAV Per Share and investment portfolio size data to compare with prior periods; adding company or BDC Credit Reporter generated data on underperforming companies and assets and affirming or amending our earlier assessments of every BDC’s Liquidity, Credit, Dividend and Long Term Outlook

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