GARRISON CAPITAL INC. Garrison Capital Inc.
Second Quarter 2020 Earnings Presentation
DISCLAIMER
Some of the statements in this presentation constitute forward‐looking statements, which relate to future events or our future performance or financial condition. The forward‐looking statements contained in this presentation involve risks and uncertainties, including statements as to: our future operating results; changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets; our business prospects and the prospects of our current and prospective portfolio companies; the impact of investments that we may make; the impact of increased competition; our contractual arrangements and relationships with third parties; the dependence of our business on the general economy, including general economic trends, and its impact on the industries in which we invest; the ability of our prospective portfolio companies to achieve their objectives; the relative and absolute performance of our investment adviser, including in identifying suitable investments for us; any future financings and investments; the adequacy of our cash resources and working capital; our ability to make distributions to our stockholders; the effects of legislation and regulations and changes thereto; the timing of cash flows, if any, from the operations of our prospective portfolio companies; the impact of future acquisitions and divestitures, the impact of COVID‐19 on the economy and capital markets and on the operations of us and our portfolio companies; the ability of the parties to consummate the proposed mergers and related transactions (the "Mergers") with Portman Ridge Finance Corporation ("PTMN") on the expected timeline, or at all; the ability to realize the anticipated benefits of the proposed Mergers; the effects of disruption on our business from the proposed Mergers; the combined company's plans, expectations, objectives and intentions, as a result of the Mergers; the effect that the announcement or consummation of the Mergers may have on the trading price of our common stock or PTMN's common stock; and any potential termination of the merger agreement or action of our stockholders or PTMN's stockholders with respect to any proposed transaction.
We use words such as "anticipates," "believes," "expects," "intends" and similar expressions to identify forward‐looking statements. Actual results could differ materially from those anticipated in our forward‐looking statements for any reason, and future results could differ materially from historical performance. We have based the forward‐looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward‐looking statements. Although we undertake no obligation to revise or update any forward‐looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the U.S. Securities and Exchange Commission, including annual reports on Form 10‐K, quarterly reports on Form 10‐Q and current reports on Form 8‐K.
2
FINANCIAL RESULTS
EARNINGS TREND
($ in thousands, except per share data) | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | |
Total investment income | $ 7,441 | $ 8,038 | $ 9,073 | $ 9,713 | $ 10,704 | |
Total expenses | 5,667 | 5,638 | 6,587 | 6,290 | 7,230 | |
Net investment income | 1,774 | 2,400 | 2,486 | 3,423 | 3,474 | |
Net realized (loss)/gain on investments | (8,671) | (8,754) | (19,195) | 151 | (2,365) | |
Net change in unrealized (loss)/gain on investments | 5,201 | (21,506) | 10,984 | (20,040) | 284 | |
Loss on extinguishment of debt | (1,014) | (542) | (491) | ‐ | ‐ | |
Net (decrease)/increase in net assets | (2,710) | (28,402) | (6,216) | (16,466) | 1,393 | |
Net investment income per share | 0.11 | 0.15 | 0.16 | 0.21 | 0.22 | |
Net realized/unrealized losses per share | (0.28) | (1.92) | (0.54) | (1.24) | (0.13) | |
Net (losses)/earnings per share | (0.17) | (1.77) | (0.38) | (1.03) | 0.09 | |
Distributions declared per common share | 0.15 | 0.15 | 0.15 | 0.23 | 0.23 | |
Net asset value per share | 6.27 | 6.59 | 8.51 | 9.04 | 10.30 |
Q2 2020 EARNINGS OVERVIEW
- Declared a Q3 2020 cash distribution of $0.05 per share payable on September 25, 2020 to shareholders of record as of September 11, 2020
- The distribution reduction from $0.15 per share to $0.05 per share was driven by the anticipated transaction costs as part of the proposed merger with PTMN
- Q2 2020 net investment income of $0.11 per share, lower than prior quarter of $0.15 per share due to:
- Net interest income primarily driven by investment repayments, debt repayments and a decrease in LIBOR;
- Higher expenses associated with the proposed Merger with PTMN; offset by
- Incurred net realized and unrealized losses on investments of $3.5 million, or $0.22 per share, in Q2 2020 comprised of:
- Credit‐related losses of $2.3 million, or $0.14 per share, across two investments including CircusTrix Holdings LLC and Exela Intermediate LLC along with net market‐related losses of $1.2 million, or $0.08 per share, primarily driven by a few syndicated portfolio investments
- Incurred a $0.06 per share loss on extinguishment of debt due to the prepayment of SBIC borrowings prior to its stated maturity
3
Q2 2020 PORTFOLIO OVERVIEW
PORTFOLIO OVERVIEW
- Investment portfolio consists of 113 investments across 28 industries with an average position size of approximately 1.0% of the total portfolio, at fair value
- As of June 30, 2020, there were four investments on non‐accrual status that represented 1.4% and 1.0% of the total portfolio at cost and fair value, respectively. There was one new investment placed on non‐accrual status during the quarter
- Weighted average portfolio company leverage increased to 4.6x from the prior quarter of 4.1x primarily due to a number of portfolio companies fully drawing down their revolver capacity to ensure adequate liquidity to manage through the COVID‐19 uncertainty.
- The weighted average net leverage ratio of our portfolio companies was 4.1x, consistent with prior quarter
PORTOLIO TRENDS
$ in millions, percentages based on fair value unless otherwise noted* | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 |
Portfolio Summary: | |||||
Total portfolio, at fair value | $ 348.8 | $ 366.1 | $ 418.9 | $ 459.8 | $ 486.7 |
Total number of portfolio companies | 92 | 100 | 105 | 104 | 100 |
Total number of investments | 113 | 119 | 123 | 123 | 119 |
Average size of debt investments | $ 3.7 | $ 3.6 | $ 3.8 | $ 4.2 | $ 4.5 |
Weighted average price of debt investments | 91.1 | 90.1 | 94.8 | 95.1 | 97.1 |
Portfolio Yields:(1) | |||||
Weighted average yield on debt investments at amortized cost(2) | 7.2% | 7.6% | 8.1% | 8.5% | 8.9% |
Weighted average yield on debt investments at fair value(2) | 9.5% | 9.8% | 9.2% | 9.2% | 9.6% |
Weighted average yield on total portfolio at amortized cost | 6.9% | 7.2% | 7.6% | 7.6% | 8.5% |
Weighted average yield on total portfolio at fair value | 8.9% | 9.1% | 8.6% | 8.4% | 9.3% |
Portfolio Credit Quality: | |||||
Performing debt investments | 99.0% | 99.5% | 98.3% | 95.1% | 99.3% |
Non‐accrual debt investments | 1.0% | 0.5% | 1.7% | 4.9% | 0.7% |
Weighted average debt / EBITDA of our portfolio companies(2)(3) | 4.6x | 4.1x | 4.3x | 4.1x | 3.9x |
Weighted average risk rating of our debt investments | 2.6 | 2.5 | 2.4 | 2.4 | 2.3 |
(1) | Weighted average yield is calculated as all‐in interest rate dividend by either the amortized cost or market price as of the balance sheet date. For those investments valued based on an estimated recovery rate, the weighted | |
average yield calculation is based on redeeming the investment at the current expected recovery rate rather than at par. | ||
(2) | Calculation excludes unfunded revolvers, debt investments placed on non‐accrual and equity investments | 4 |
(3) | Excludes first‐lien debt investments which were valued by performing a liquidation analysis of the underlying assets which serve as collateral for those loans |
* Table as of each respective quarter end and excludes investments with a fair value of zero from all figures except for the total number of portfolio companies and total number of investments
COPORATE LEVERAGE & LIQUIDITY TREND
CORPORATE LEVERAGE & LIQUIDITY
- During the quarter, all remaining SBA Debentures had been repaid, resulting in a capital structure comprised of $268.8 million of our non mark‐to‐market CLO notes, at a weighted average cost of L+187, due November 2029
- As a result, our debt to equity ratio was 2.67x as of June 30, 2020 on both a U.S. GAAP and Regulatory basis
- As of June 30, 2020, we were in breach of our asset coverage requirements which restricts our ability to incur any additional leverage until such breach has been cured
- Subsequent to quarter end, two investments were fully paid down resulting in aggregate proceeds of $16.6 million, of which cash of $15.2 million was unencumbered on our Balance Sheet. There is also $23.2 million of restricted cash within our CLO
- Our exposure to unfunded commitments remained low at $1.6 million as of June 30, 2020
LIQUIDITY TREND
($ in millions)
2.4% | 3.9% | 4.1% | 4.4% | 4.5% |
Weighted Average Cost of Funds
- Regulatory debt to equity ratio excludes SBIC leverage and unfunded commitments
5
COMPARATIVE STATEMENT OF FINANCIAL CONDITION
June 30, 2020 | March 31, 2020 | Variance | |||||
Assets ($ in thousands, except per share data) | (unaudited) | (unaudited) | $ | % | |||
Investments, fair value | $ | 348,765 | $ | 366,100 | (17,335) | ‐4.7% | |
Cash and cash equivalents | 8,531 | 2,227 | 6,304 | 283.1% | |||
Cash and cash equivalents, restricted | 7,955 | 29,628 | (21,673) | ‐73.2% | |||
Due from counterparties | 219 | 143 | 76 | 53.1% | |||
Accrued interest receivable | 2,172 | 2,514 | (342) | ‐13.6% | |||
Other assets | 646 | 1,370 | (724) | ‐52.8% | |||
Total assets | 368,288 | 401,982 | (33,694) | ‐8.4% | |||
Liabilities | |||||||
Debt | 266,211 | 292,480 | (26,269) | ‐9.0% | |||
Due to counterparties | ‐ | 84 | (84) | ‐100.0% | |||
Payables to affiliates | 143 | 1,449 | (1,306) | ‐90.1% | |||
Accrued interest payable | 732 | 1,191 | (459) | ‐38.5% | |||
Accrued expenses and other payables | 575 | 1,034 | (459) | ‐44.4% | |||
Total liabilities | 267,661 | 296,238 | (28,577) | ‐9.6% | |||
Total net assets | 100,627 | 105,744 | (5,117) | ‐4.8% | |||
Total liabilities and net assets | 368,288 | 401,982 | (33,694) | ‐8.4% | |||
Net asset value per share | $ | 6.27 | $ | 6.59 | $ | (0.32) | ‐4.8% |
6
COMPARATIVE STATEMENT OF QUARTERLY OPERATING RESULTS
Three Months Ended | ||||||||
Investment income ($ in thousands, except per share data) | June 30, 2020 | March 31, 2020 | Variance | |||||
(unaudited) | (unaudited) | $ | % | |||||
Interest income | $ | 6,225 | $ | 7,665 | (1,440) | ‐18.8% | ||
Payment‐in‐kind | 1,131 | 273 | 858 | N/M | ||||
Other income | 85 | 100 | (15) | ‐15.0% | ||||
Total investment income | 7,441 | 8,038 | (597) | ‐7.4% | ||||
Expenses | ||||||||
Interest expense | 2,197 | 3,004 | (807) | ‐26.9% | ||||
Management fee | 1,143 | 1,300 | (157) | ‐12.1% | ||||
Professional fees | 490 | 149 | 341 | N/M | ||||
Directors' fees | 163 | 83 | 80 | 96.4% | ||||
Administrator expenses | 641 | 744 | (103) | ‐14.0% | ||||
Other expenses | 1,033 | 358 | 675 | N/M | ||||
Total expenses | 5,667 | 5,638 | 29 | 0.5% | ||||
Net investment income | 1,774 | 2,400 | (626) | ‐26.0% | ||||
Realized and unrealized gains/(losses) | ||||||||
Net realized (loss) on investments | (8,671) | (8,754) | 83 | 0.9% | ||||
Net change in unrealized gain/(loss) on investments | 5,201 | (21,506) | 26,707 | N/M | ||||
Loss on refinancing of debt | (1,014) | (542) | (472) | ‐87.1% | ||||
Net realized and unrealized losses | (4,484) | (30,802) | 26,318 | 85.4% | ||||
Net (decrease)/increase in net assets resulting from operations | (2,710) | (28,402) | 25,692 | 90.5% | ||||
Net investment income per common share | $ | 0.11 | $ | 0.15 | $ | (0.04) | ‐26.7% | |
Basic earnings per common share | $ | (0.17) | $ | (1.77) | $ | 1.60 | 90.4% | |
Basic weighted average common shares outstanding | 16,049,352 | 16,049,352 | ‐ | ‐ | ||||
Dividends and distributions declared per common share | $ | 0.15 | $ | 0.15 | $ | ‐ | 0.0% |
N/M represents Not Meaningful
7
ContactCONTACT INFORMATIONInformation
GARRISON CAPITAL INC.
1270 Avenue of the Americas, Suite 804
New York, NY 10020
Tel: 212‐372‐9508
8
Attachments
- Original document
- Permalink
Disclaimer
Garrison Capital Inc. published this content on 10 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2020 21:18:03 UTC
