Logan Ridge Finance Corporation Price & Performance (LRFC)

Thank you for standing by. Good morning and welcome to Logan Ridge Finance Corporation's Fourth Quarter and Full Year Ended December thirty one, twenty twenty four Earnings conference call. An earnings press release was distributed yesterday, 03/30/2025. After the close of the market. A copy of the release along with a supplemental earnings presentation is available on company's website at www.loganridgefinance.com in the Investors and should be reviewed in conjunction with the company's Form 10 ks filed 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 future performance or results and involve a number of risks 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 SEC. Speaking on today's call will be Ted Goldpork, Chief Executive Officer, President and Director of Logan Ridge Finance Corporation. Brandon Satherin, Chief Financial Officer and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldform, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.

Good morning, and welcome to our fourth quarter and full year 2024 earnings call. As mentioned, I am joined today by our Chief Financial Officer, Brandon Satorin and our Chief Investment Officer, Patrick Schafer. Following my opening remarks, Patrick will provide additional details on our investment activity to date. And Brandon will walk through the financials. 2024 was a profoundly transformative year for Logan Ridge. We continue to build upon the record results seen in 2023 and made significant strides in the rotation out of our legacy equity portfolio. This is the strongest year of financial performance for Logan Ridge since Mount Logan Management took over as the company's investment advisor in July of twenty twenty one. Twenty twenty four's results were highlighted by the highest total investment income and net investment income in our history, at $20,900,000 $4,200,000 or $1.56 per share respectively. The hallmark of 2024 however was our successful sale of our largest equity position [indiscernible] for $17,500,000 in cash which was a significant catalyst for the accretive combination with Portman Ridge announced in January. This exit was a major achievement in our long term strategy to rotate out of our legacy equity portfolio which has been a central focus to the Sure Round strategy for Logan Ridge.

Further building on our success, I'm very pleased to announce that in February of twenty twenty five, we exited our second largest non yielding equity investment in GA Communications, We also ended the year with no new non accruals during the fourth quarter twenty twenty four. Additionally, during 2024, we further strengthened our balance sheet by successfully amending and extending our revolving credit facility with KeyBanc. The amendment further termed out our debt capital structure and reduced our cost of financing while also increasing our financial flexibility. The culmination of these collective achievements paved the way for a combination with Portman Ridge Finance Corporation which the Board approved in January. Successful combination of the two companies will be a significant milestone for BC Credit BC Partners Credit Platform we believe will be accretive for both sets of shareholders. We believe this combination has the potential to provide greater scale improved operating efficiencies increased trading volume in the stock all of which should create incremental value for shareholders. The next step towards the completion of the merger is a special meeting of shareholders investors will be asked to vote to approve the merger after the N-fourteen is declared effective by the SEC.

We invite our shareholders to vote for the merger they receive their proxy card. Both Portman and Logan's Board of Directors have unanimously recommended that shareholders vote for the merger. Due to the strong financial and operational performance seen in 2024, Board of Directors approved a dividend of $0.36 per share for the fourth quarter twenty twenty four, which remains flat to the prior quarter. Fluctuating on the year, we are incredibly proud of what we were able to accomplish. Looking ahead, we expect to remain active in the market with a healthy deployment pipeline, our disciplined and prudent investment strategy, our experienced management team we believe we are well positioned to continue to deliver delivering meaningful returns to our stakeholders. With that, I'll turn the call over to Patrick to discuss our portfolio and investment activities. Thanks, Ted, and hello, everyone. Of 12/31/2024, the fair value of Logan's portfolio was approximately $172,300,000 with exposure to 59 portfolio companies. This compares to 59 portfolio companies with a fair value of approximately $75,600,000 as of the prior [indiscernible] and 60 portfolio companies with a fair value of $189,700,000 as of 12/31/2023. During the year ended December 3124, we continue to be selective in our investment strategy.

Deployed approximately $38,300,000 in new and existing investments had approximately $55,000,000 in repayments and sales resulting in net repayments and sales of approximately $16,700,000 for the year. Of note, net deployments reflect the 17,500,000.0 of proceeds from Entegree received in late Q3 $5,300,000 of repayment from Critical Nurse was received on the last day of the year. Now on to portfolio composition. As of 12/31/2024, 66.7% of the company's investment portfolio at fair value was invested in assets originated by the BC Partners Credit Platform. Up from 65.4% at the end of last year. Also as of 12/31/2024, our investment our debt investment portfolio represented eighty 3.3% at a fair value with a weighted average annualized yield of approximately 10.7%. Excluding income from non accruals and collateralized loan obligations. And 87.9% of our debt investment portfolio at fair value was bearing interest at a floating rate. Additionally, as of 12/31/2024, first lien debt represented 64.464.7% of our total portfolio on a cost and fair value basis respectively. And the equity portfolio represented 13.413.8% of the portfolio on a cost and fair value basis perspective. As of 12/31/2024. Moving on to non accrual status, As of 12/31/2024, the company had four debt investments across three portfolio companies on non accrual status, with an aggregate amortized cost and fair value of $17,200,000 and $7,900,000 respectively, or 94.6% of the investment portfolio at cost and fair value respectively.

This remained relatively stable since the third quarter of twenty twenty four with four debt investments in three portfolio companies a cost and fair value of 17.2%, $70,200,000 and $8,200,000 respectively. Or 8.84.6% of the investment companies investment portfolios cost and fair value respectively. I'll now turn the call over to Brandon. Thanks Patrick. Turning our financial results for the quarter ended 12/31/2024. For the quarter ended 12/31/2024, Logan Ridge generated $5,400,000 of investment income, $1,000,000 reported for the quarter ended 09/30/2024. The increase in investment income compared to the prior quarter was primarily due to the receipt of $300,000 of non recurring other income as well as an increase of $100,000 in distributions received from our Great Lakes joint venture.

For the quarter ended December thirty one, twenty twenty four, Logan Ridge had $3,900,000 of total expenses, which decreased by $300,000 from $4,200,000 of total in the prior quarter. The decrease is primarily due to lower average outstanding debt as well as a full quarter's benefit of seven basis point spread reduction on the KeyBanc credit facility as part of the August 2024 amendment. Accordingly, net investment income for the fourth quarter was $1,500,000 or $0.56 per share. An increase of $500,000 or $0.19 per share from the third quarter of twenty twenty four. Our net asset value as of 12/31/2024 was $85,100,000 representing a $1,200,000 decrease. Or 1.4% compared to the prior quarter net asset value of $86,300,000 as of 09/30/2024. On a per share basis, net asset value was $32.04 per share as of 12/31/2024, representing a $0.27 decrease. Per share or 0.6% as compared to $32.31 per share as of 09/30/2024. The difference between the decrease of 1.40.6% is the accretive effect of our buyback program. Finally, as of 12/31/2024, the company had $15,000,000 in cash and cash equivalents. As well as $26,200,000 of unused borrowing capacity. With that, I will turn the call back over to Ted.

Thank you, Brandon. To our shareholders, thank you so much for your continued support. This concludes our prepared remarks and we'll now turn the call over to the operator for any questions.

Thank you. We will now begin the question and answer session. Our first question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead. Hey, guys. Congratulations on a good quarter and I guess looking and a lot of the questions, I think were answered in the last call, but looking forward, do you anticipate the Logan portfolio just to be subsumed into Portman Ridge or is it going to be anything else where you might be lowering the equity exposure more? How do you see the combined portfolio going forward? I guess is the succinct way to ask.

Hi, Chuck. Hey, Chris, I'll go first. I mean, I think it's going to be just a straight merger. Obviously, Patrick had mentioned in his remarks, we were able to exit another equity position this quarter.

So I think from our perspective, it's still a big focus of ours, but I don't think there's a big we're not going to leave behind a StubCo or a CVR or anything like that. Think the intention is just to kind of blend the portfolios together.

Yes, that's right. I mean, as I said between M3, which was during last year and then GHG Communications, which we noted is Q1. Equity percentage just of Logan is going to go down that much more in a pro form a company, it's going to be that much smaller. So I think we're still going to focus on a go forward basis of reducing those equity exposures and reinvesting the proceeds. But I don't think think we're going to take a different tact with the equity positions or general investment thesis on a pro form a basis. I think we would prefer to reduce those as much as possible. And as you've seen more so in Portman than Logan, just because there was an existing equity book, We've have a number of positions within Portman where we have kind of a mix of a first lien debt and like a structure preferred equity. And that's sort of how we kind of use our equity bucket there is something that is not common, but it's either warrants that we're getting for free or something that's more structured that we think is ultimately kind of high very, very high double digit very, very high teens or low 20% return over time through structuring as opposed to to through enterprise value creation and dividend.

So I think our Portman business has a bit of different strategy on how we use a equity bucket to try and focus on yield generating equity positions as opposed to to NAV generating necessarily. I don't think I got will change and we'll continue to be as active as we can on reducing those equity positions. Post closing.

Okay. And then for the Board of Directors going forward, I mean, do both companies sort of have significant overlap [indiscernible] is it going to be sort of a combination of two different groups?

No. So the Logan Board members are 100% overlap with Portman. There are additional board members on Portman in how we set up the special committees. But all of the Logan board members are existing Board members. So that will effectively kind of go away as doing double director duty.

Okay. And any consideration of given the merger and all the strategic discussions how about putting the Board member compensation purely in stock? I mean, after all, it's a dividend paying stock and it's sort of really aligned interest. Any discussion on that?

We haven't talked about that. I mean historically, the same issue for management because we're getting obviously management fees to manage the vehicle. We're not there's a 40 Act rule where we're actually not allowed to pay executives in stock. I actually would assume that applies to the Board as well, but I don't know. I mean, historically, we've looked into paying our executives in stock and you're not allowed to under the 40 Act. Don't know if that's the case for the Board, but I would assume it's the same thing. I don't know. I would have to check that. Okay. Thanks. Bye. Good idea.

As there are no further questions at this time, I would now like to turn the call over to Ted Goldpork for closing remarks.

Great. Well, thank you very much. Everybody have a great weekend. And again, we also wish thank our shareholders one last time. Thank you very much.

Please wait. The conference will begin shortly. [indiscernible]