• Logan Ridge Finance Corporation Announces Fourth Quarter and Full Year 2021 Financial Results

    ソース: Nasdaq GlobeNewswire / 14 3 2022 16:24:11   America/Chicago

    During 2021 Logan Ridge further de-levered and strengthen its portfolio, redeployed equity investments into interest earnings investments and lowered overall cost of debt; well positioned to generate higher returns on investments in 2022

    NEW YORK, March 14, 2022 (GLOBE NEWSWIRE) -- Logan Ridge Finance Corporation (“Logan Ridge”, “LRFC” or the “Company”) (Nasdaq: LRFC) announced today its financial results for the fourth quarter and full year ended December 31, 2021.

    Fourth Quarter and Full Year 2021 Highlights

    • During the year ended December 31, 2021, we have successfully de-levered the Company from 1.98x as of December 31, 2020 to 1.17x as of December 31, 2021. As of September 30, 2021 our debt-to-equity ratio was 1.13x.
    • As of December 31, 2021, 34% of the Company’s investment portfolio at fair value was invested in assets originated by Mount Logan Management, part of the BC Partners Credit Platform, with an additional $39.1 million of cash available for deployment in investments originated by the BC Partners Credit Platform.
    • During the fourth quarter, we successfully monetized a further $36.3 million of the legacy portfolio we inherited from the former investment advisor on July 1, 2021, which represents approximately 16% of the portfolio at fair value as of July 1, 2021. Since Mount Logan Management became the Company’s investment advisor, we have successfully monetized $99.5 million of the legacy portfolio we inherited from former investment advisor through December 31, 2021, which represents approximately 44% of the portfolio at fair value as of July 1, 2021.
    • During the fourth quarter, we successfully exited a non-accrual investment for proceeds of $0.6 million. This position was valued at zero as of September 30, 2021.
    • As of December 31, 2021, the Company’s investment portfolio consisted of investments in 40 portfolio companies with an aggregate fair value of approximately $198.2 million. The debt investment portfolio, which represented 67.4% of the fair value of the total portfolio as of December 31, 2021, had a weighted average annualized yield of approximately 9.3%.
    • During the fourth quarter, the Company made approximately $46.2 million of investments and had approximately $42.1 million in repayments and sales of investments, resulting in net deployment of approximately $4.1 million. Since Mount Logan Management assumed the role as the Company’s investment advisor on July 1, 2021, we have deployed $79.5 million in interest earning investments December 31, 2021, and had sales and repayments of $106.2 million.
    • During the fourth quarter, the Company exited equity investments in three portfolio companies generating $2.0 million in proceeds that can be redeployed into interest earning investments. Since Mount Logan Management assumed the role of the Company’s investment advisor on July 1, 2021, we have successfully exited equity investments in six portfolio companies, generating $13.4 million of proceeds through December 31, 2021, which can be redeployed into interest earning investments.
    • As previously announced, following the receipt of an investment grade credit rating of “BBB-’’, Logan Ridge completed:
      • the issuance of $50 million in aggregate principal amount of 5.25% Senior Unsecured Notes due 2026 in a private placement transaction on October 29, 2021.
      • the redemption of $50 million 6.0% fixed-rate notes due 2022 on December 6, 2021. Following this redemption, $22.8 million aggregate principal amount of the 6.0% fixed-rate notes due 2022 remains outstanding.

    Management Commentary

    Ted Goldthorpe, Chief Executive Officer and President of LRFC, said, “We are pleased to announce our first fiscal year end results since Mount Logan Management became the Company’s investment advisor on July 1, 2021. During this period, we made substantial progress and repositioning the investment portfolio, having successfully exited $100 million of the legacy portfolio Mount Logan Management inherited through the end of 2021. Originations and repayments were very active during this period, and we will continue to redeploy the Company’s capital into new investment commitments originated by the BC Partners Credit platform in 2022. Additionally, during the year we substantially de-levered the fund from 1.98x to 1.17x and refinanced a portion of our long-term notes. We will continue work on the Company’s capital structure in 2022, aiming to further lower our overall cost of debt. Despite the current market volatility, we believe that we are well positioned to strengthen our portfolio and generate higher returns on investments.”

    Selected Financial Highlights

    • Total investment income for the quarter ended December 31, 2021 was $3.4 million, which represents an increase of less than $0.1 million, or approximately 1.2%, compared to total investment income for the prior quarter ended September 30, 2021 of $3.4 million.
    • Total investment income for the year ended December 31, 2021 decreased by $9.7 million, or 36.6%, compared to the prior year, mainly due to lower average outstanding debt investments resulting in a decrease in interest income to $14.8 million during the year ended December 31, 2021, from $23.7 million during the prior year.
    • Total operating expenses for the quarter ended December 31, 2021 decreased to $4.7 million, compared to $4.9 million for the prior quarter ended September 30, 2021. Interest and financing expenses increased by $0.2 million to $2.5 million for the quarter ended December 31, 2021 primarily due to a $0.3 million one-time expense associated with refinancing the 6.00% fixed rate notes. The increase in interest and financing expenses was offset by declines in administrative service fees and general and administrative expenses.
    • Total operating expenses for the year ended December 31, 2021 decreased to $20.3 million, compared to $26.4 million a year ago. Interest and financing expenses declined by $4.6 million to $10.6 million for the year ended December 31, 2021 primarily due to lower average debt outstanding. Base management fee declined 25% to $4.8 million for the year ended December 31, 2021 due to lower average assets under management.
    • During the quarter ended December 31, 2021, the Company recognized $8.3 million of net realized losses on its portfolio investments, as compared to net realized gains of $7.4 million during the quarter ended September 30, 2021, primarily driven by the exit of a non-accrual investment during the fourth quarter of 2021 that was previously valued at zero as of September 30, 2021. Additionally, during the quarter ended December 31, 2021, the Company recognized $0.2 million of extinguishment losses on the retirement of the 6.00% fixed rate notes.
    • During the years ended December 31, 2021 and 2020, the Company recognized $8.0 million and $24.0 million of net realized losses on its portfolio investments, respectively. The change in realized losses was primarily due to changes in the market conditions of our investments and the values at which they were realized, caused by fluctuations in the market and in the economy.
    • Total borrowings outstanding as of December 31, 2021 were $124.9 million. This balance was comprised of $50.0 million of 5.25% fixed-rate notes due 2026, $22.8 million of 6.0% fixed-rate notes due 2022 and $52.1 million of 5.75% fixed-rate convertible notes due 2022. In addition, as of December 31, 2021, we did not have any outstanding borrowings under the KeyBank Credit Facility. The KeyBank Credit Facility provides for borrowings of up to $25.0 million on a revolving basis and may be increased up to $100.0 million.
    • As of December 31, 2021, we had debt investments in two portfolio companies that remain on non-accrual status with an aggregate amortized cost of $12.7 million and an aggregate fair value of $7.6 million, which represented 6.7% and 3.8% of the investment portfolio, respectively. As of September 30, 2021, the Company had debt investments in three portfolio companies on non-accrual status with an aggregate amortized cost of $21.3 million and an aggregate fair value of $9.2 million, which represented 11.0% and 4.7% of the Company’s investment portfolio, respectively.

    The composition of our investments as of December 31, 2021 and December 31, 2020 at amortized cost and the fair value of investments was as follows (dollars in thousands):

    As of December 31, 2021Investments at
    Amortized Cost    		  Amortized
    Cost
    Percentage of
    Total Portfolio    		  Investments at
    Fair Value    		  Fair Value
    Percentage of
    Total Portfolio    		 
    First Lien Debt$103,667  54.4% $98,251  49.6%
    Second Lien Debt 30,048  15.8%  30,190  15.2%
    Subordinated Debt 5,050  2.6%  5,050  2.6%
    Equity and Warrants 51,717  27.2%  64,698  32.6%
    Total$190,482  100.0% $198,189  100.0%


    As of December 31, 2020Investments at
    Amortized Cost    		  Amortized Cost
    Percentage of
    Total Portfolio    		  Investments at
    Fair Value    		  Fair Value
    Percentage of
    Total Portfolio    		 
    First Lien Debt$185,107  66.7% $167,418  60.9%
    Second Lien Debt 39,026  14.1%  39,209  14.3%
    Equity and Warrants 53,519  19.3%  68,065  24.8%
    Total$277,652  100.0% $274,692  100.0%

    Interest Rate Risk

    Based on our December 31, 2021 consolidated statement of assets and liabilities, the following table shows the annual impact on net income (excluding the potential related incentive fee impact) of base rate changes in interest rates (considering interest rate floors for variable rate securities) assuming no changes in our investment and borrowing structure (dollars in thousands):

    Basis Point ChangeIncrease 
    (decrease) in
    interest
    income    		 (Increase)
    decrease in 
    interest
    expense    		 Increase 
    (decrease) in 
    net income    		 
    Up 300 basis points$1,755 $— $1,755 
    Up 200 basis points 909  —  909 
    Up 100 basis points 269  —  269 
    Down 100 basis points —  —  — 
    Down 200 basis points —  —  — 
    Down 300 basis points$— $— $— 

    Conference Call and Webcast

    We will hold a conference call on Wednesday, March 16, 2022 at 9:00 am Eastern Time to discuss fourth quarter and full year 2021 financial results. Stockholders, prospective stockholders, and analysts are welcome to listen to the call or attend the webcast.

    To access the conference call, please dial (844) 616-4517 approximately 10 minutes prior to the start of the call. A replay of the conference call will be available from March 16, 2022 until March 23, 2022. The dial-in number for the replay is (855) 859-2056 and the conference ID is 5439717.

    A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company’s website www.loganridge.com in the Investor Resources section under Events and Presentations. The webcast can also be accessed by clicking the following link: Logan Ridge Fourth Quarter and Full Year 2021 Conference Call. The online archive of the webcast will be available on the Company’s website shortly after the call.

    About Logan Ridge Finance Corporation

    Logan Ridge Finance Corporation (Nasdaq: LRFC) is a business development company that invests primarily in first lien loans and, to a lesser extent, second lien loans and equity securities issued by lower middle market companies. The Company invests in performing, well-established middle market businesses that operate across a wide range of industries. It employs fundamental credit analysis, targeting investments in businesses with relatively low levels of cyclicality and operating risk. For more information, visit loganridgefinance.com.

    About Mount Logan Capital Inc.

    Mount Logan Capital Inc. is an alternative asset management company that is focused on public and private debt securities in the North American market. The Company seeks to source and actively manage loans and other debt-like securities with credit-oriented characteristics. The Company actively sources, evaluates, underwrites, manages, monitors, and primarily invests in loans, debt securities, and other credit-oriented instruments that present attractive risk-adjusted returns and present low risk of principal impairment through the credit cycle.

    About BC Partners Advisors L.P. and BC Partners Credit

    BC Partners is a leading international investment firm with over $40 billion of assets under management in private equity, private credit and real estate strategies. Established in 1986, BC Partners has played an active role in developing the European buyout market for three decades. Today, BC Partners executives operate across markets as an integrated team through the firm's offices in North America and Europe. Since inception, BC Partners has completed 117 private equity investments in companies with a total enterprise value of €149 billion and is currently investing its eleventh private equity fund. For more information, please visit www.bcpartners.com.

    BC Partners Credit was launched in February 2017 and has pursued a strategy focused on identifying attractive credit opportunities in any market environment and across sectors, leveraging the deal sourcing and infrastructure made available from BC Partners.

    Cautionary Statement Regarding Forward-Looking Statements

    This communication contains “forward-looking” statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include those risk factors detailed in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), including the Company’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC. Any forward-looking statements speak only as of the date of this communication. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

    For additional information, contact:

    Logan Ridge Finance Corporation
    650 Madison Avenue, 23rd Floor
    New York, NY 10022

    Jason Roos
    Chief Financial Officer
    Jason.Roos@bcpartners.com
    (212) 891-5046

    Lena Cati
    The Equity Group Inc.
    lcati@equityny.com
    (212) 836-9611

    Serena Liegey
    The Equity Group Inc.
    sliegey@equityny.com
    (212) 836-9630

    Logan Ridge Finance Corporation
    Consolidated Statements of Assets and Liabilities
    (in thousands, except share and per share data)

     As of December 31, 
     2021  2020 
    ASSETS     
    Investments at fair value:     
    Non-control/non-affiliate investments (amortized cost of $131,829 and $187,744, respectively)$129,991  $172,848 
    Affiliate investments (amortized cost of $49,803 and $80,961, respectively) 61,359   93,425 
    Control investments (amortized cost of $8,850 and $8,947, respectively) 6,839   8,419 
    Total investments at fair value (amortized cost of $190,482 and $277,652, respectively) 198,189   274,692 
    Cash and cash equivalents 39,056   49,942 
    Interest and dividend receivable 929   2,286 
    Prepaid expenses 3,358   1,077 
    Receivable for unsettled trades 685   — 
    Total assets$242,217  $327,997 
    LIABILITIES     
    SBA-guaranteed debentures (net of deferred financing costs of zero and $485, respectively)$—  $90,515 
    2022 Notes (net of deferred financing costs of $46 and $846, respectively) 22,787   71,987 
    2022 Convertible Notes (net of deferred financing costs of $167 and $552, respectively) 51,921   51,536 
    2026 Notes (net of deferred financing costs and original issue discount of $1,552 and $0, respectively) 48,448   — 
    KeyBank Credit Facility (net of deferred financing costs of $353 and $546, respectively) (353)  (546)
    Management and incentive fees payable 1,065   3,842 
    Interest and financing fees payable 911   1,688 
    Trade settlement payable 9,265   — 
    Accounts payable and accrued expenses 1,144   28 
    Total liabilities$135,188  $219,050 
    Commitments and contingencies     
    NET ASSETS     
    Common stock, par value $0.01, 100,000,000 common shares authorized, 2,711,068 and 2,711,068 common shares issued and outstanding, respectively$27  $27 
    Additional paid in capital 188,846   229,481 
    Total distributable loss (81,844)  (120,561)
    Total net assets$107,029  $108,947 
    Total liabilities and net assets$242,217  $327,997 
    Net asset value per share$39.48  $40.19 

    Logan Ridge Finance Corp.
    Consolidated Statements of Operations
    (in thousands, except share and per share data)

     For the Years Ended December 31, 
     2021  2020  2019 
             
    INVESTMENT INCOME        
    Interest income:        
    Non-control/non-affiliate investments$10,064  $16,678  $26,550 
    Affiliate investments 4,368   6,580   8,068 
    Control investments 389   410   1,488 
    Total interest and fee income 14,821   23,668   36,106 
    Payment-in-kind interest and dividend income:        
    Non-control/non-affiliate investments 95   1,105   1,721 
    Affiliate investments 361   818   869 
    Control investments —   —   372 
    Total payment-in-kind interest and dividend income 456   1,923   2,962 
    Dividend income:        
    Non-control/non-affiliate investments 727   —   1,345 
    Affiliate investments 179   25   50 
    Control investments —   —   1,904 
    Total dividend income 906   25   3,299 
    Other income:        
    Non-control/non-affiliate investments 479   709   1,109 
    Affiliate investments 88   70   283 
    Control investments —   —   78 
    Total other income 567   779   1,470 
    Interest income from cash and cash equivalents 4   51   198 
    Total investment income 16,754   26,446   44,035 
    EXPENSES        
    Interest and financing expenses 10,569   15,144   17,121 
    Base management fee 4,846   6,428   7,967 
    Incentive fees —   —   1,497 
    Directors expense 410   325   380 
    Administrative service fees 1,039   1,400   1,400 
    General and administrative expenses 3,483   3,091   2,915 
    Expenses before incentive fee waiver 20,347   26,388   31,280 
    Incentive fee waiver —   —   (288)
    Total expenses 20,347   26,388   30,992 
    NET INVESTMENT (LOSS) INCOME (3,593)  58   13,043 
    REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS        
    Net realized loss on investments:        
    Non-control/non-affiliate investments (10,442)  (25,016)  16,529 
    Affiliate investments 2,475   1,451   2,288 
    Control investments —   (484)  (38,573)
    Net realized loss on investments (7,967)  (24,049)  (19,756)
    Net change in unrealized appreciation (depreciation) on investments:        
    Non-control/non-affiliate investments 13,058   (5,509)  (16,116)
    Affiliate investments (908)  (5,543)  (2,632)
    Control investments (1,483)  (559)  (1,558)
    Net change in unrealized appreciation (depreciation) on investments 10,667   (11,611)  (20,306)
    Total net realized and unrealized gain (loss) on investments 2,700   (35,660)  (40,062)
    Tax provision —   —   (628)
    Total net realized and unrealized gain (loss) on investments, net of taxes 2,700   (35,660)  (40,690)
    Net realized (loss) gain on extinguishment of debt (1,025)  155   — 
    NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS$(1,918) $(35,447) $(27,647)
    NET DECREASE IN NET ASSETS PER SHARE RESULTING FROM$(0.71) $(13.08) $(10.29)
    OPERATIONS – BASIC AND DILUTED        
    WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – 2,711,068   2,709,169   2,686,287 
    BASIC AND DILUTED        
    DISTRIBUTIONS PAID PER SHARE$—  $1.50  $6.00 

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