Logan Ridge Finance Corporation Announces Third Quarter 2024 Financial Results
Reports Solid Results with Net Investment Income of $0.37 Per Share, and Net Asset Value of $32.31 Per Share
Recurring PIK Income as a Percentage of Total Investment Income Declines by Over 200 Basis Points
Exits Largest Equity Investment, Nth Degree Investment Group, LLC ("Nth Degree")
Declared a Distribution of $0.36 Per Share for the Fourth Quarter of 2024, Which Represents a 9% Increase Compared to the Third Quarter of 2024
NEW YORK, Nov. 07, 2024 (GLOBE NEWSWIRE) -- Logan Ridge Finance Corporation ("Logan Ridge", "LRFC", the "Company", "we", "us" or "our") (NASDAQ:LRFC) announced today its financial results for the third quarter ended September 30, 2024.
Third Quarter 2024 Highlights
Total Investment Income was $5.1 million for the quarter ended September 30, 2024, as compared to $5.4 million reported for the quarter ended June 30, 2024.
Net Investment Income ("NII") increased to $1.0 million, or $0.37 per share, for the quarter ended September 30, 2024, as compared to $0.8 million or $0.28 per share, for the quarter ended June 30, 2024.
Net asset value was $32.31 per share as of September 30, 2024, as compared to $33.13 per share as of June 30, 2024.
During the quarter ended September 30, 2024, repurchased 3,697 of its outstanding shares of common stock in open market transactions under the renewed stock repurchase program, at an aggregate cost of approximately $0.1 million.
Made approximately $0.9 million of investments and had approximately $19.0 million in repayments and sales of investments, resulting in net repayments and sales of approximately $18.1 million. The high level of repayments and sales was mainly due to the Company's exit from its largest equity investment, Nth Degree, for $17.5 million in cash, which was approximately $2.0 million above the investment's previously reported fair value as of June 30, 2024, in exchange for all of the Company's equity interest in the investment. The exit was completed on September 10, 2024.
On August 21, 2024, the Company amended and extended its existing senior secured revolving credit facility with KeyBank National Association. Under the terms of the amendment, the applicable margin during the reinvestment period was reduced from 2.90% per annum to 2.80% per annum, and the applicable margin during the amortization period was reduced from 3.25% per annum to 3.20% per annum. The reinvestment period was also extended from May 2025 to August 2027, and the maturity date was extended from May 2027 to August 2029. Of note, the credit facility continues to provide for borrowings of up to $75.0 million, and an uncommitted accordion feature that allows the Company to borrow up to an additional $125.0 million. Furthermore, under the terms of the amendment, the eligibility requirements, advance rates and concentration limits were revised, creating meaningful additional borrowing capacity for the Company.
Subsequent Events
On November 6, 2024, the Company's Board of Directors approved a fourth quarter distribution of $0.36 per share, payable on November 29, 2024, to stockholders of record as of November 19, 2024.
Management CommentaryTed Goldthorpe, Chief Executive Officer and President of Logan Ridge, said, "We are pleased to announce another solid quarter of financial performance for Logan Ridge, highlighted by the sale of our largest equity position, Nth Degree, above our prior quarter fair value. This successful exit is a transformational milestone for the Company, as the rotation out of the legacy equity portfolio has been a key component of the turnaround strategy for Logan Ridge since Mount Logan management took over as the Company's investment adviser in July of 2021. We plan to redeploy the cash proceeds from this transaction into interest earning assets originated by the BC Partners Credit Platform, which we believe will significantly improve the long-term earning power of our portfolio.
Further, the Company's successful exit of its non-yielding equity interest Nth Degree, solid financial position and the outlook for the long-term earnings power of the portfolio has allowed the Board of Directors to approve a dividend of $0.36 per share for the fourth quarter of 2024, which represents a 9% increase compared to the $0.33 per share distributed in the third quarter of 2024.
Finally, during the third quarter of 2024, we amended and extended our revolving credit facility with KeyBank National Association. The new attractive terms, which reduced the applicable margins and extended the maturity date of both the reinvestment period and maturity date, have reduced our overall cost of capital while creating meaningful additional borrowing capacity to provide us with further financial flexibility.
As we navigate through economic uncertainty and a dynamic interest rate environment, we remain confident in our prudent investment strategy, strong pipeline, and experienced management team. We believe we remain well positioned to continue to deliver positive returns to our shareholders."
Selected Financial Information
Total investment income for the quarter ended September 30, 2024, decreased by $0.1 million, to $5.1 million, compared to $5.2 million for the third quarter of 2023.
Total operating expenses for the quarter ended September 30, 2024, increased by $0.2 million, to $4.2 million, compared to $4.0 million for the third quarter of 2023.
Net investment income for the quarter ended September 30, 2024, was $1.0 million, or $0.37 per share, compared to $1.2 million, or $0.43 per share, for the third quarter of 2023.
Net asset value as of September 30, 2024, was $86.3 million, or $32.31 per share, compared to $88.7 million, or $33.13 per share, as of June 30, 2024.
Cash and cash equivalents as of September 30, 2024, were $5.0 million compared to $4.3 million as of June 30, 2024.
The investment portfolio as of September 30, 2024, consisted of investments in 59 portfolio companies with an aggregate fair value of approximately $175.6 million. This compares to 61 portfolio companies with an aggregate fair value of approximately $195.6 million as of June 30, 2024.
Deployment, in our view, was judicious and prudent during the quarter ended September 30, 2024. During the quarter, the Company made approximately $0.9 million in investments and had $19.0 million in repayments and sales of investments, resulting in net repayments and sales of approximately $18.1 million for the quarter. The high level of repayments and sales during the quarter was largely due to the sale of the Company's largest equity position, Nth Degree, for $17.5 million.
The debt investment portfolio as of September 30, 2024 represented 86.8% of the fair value of the total portfolio, with a weighted average annualized yield of approximately 12.3% (excluding income from non-accruals and collateralized loan obligations), compared to a debt investment portfolio of approximately 80.0% with a weighted average annualized yield of approximately 11.4% (excluding income from non-accruals and collateralized loan obligations) as of June 30, 2024. As of September 30, 2024, 10.6% of the fair value of the debt investment portfolio was bearing a fixed rate of interest, compared to 11.9% of the fair value of the debt investment portfolio as of June 30, 2024.
Non-Accruals: As of September 30, 2024, the Company had debt investments in three portfolio companies on non-accrual status with an amortized cost and fair value of $17.2 million and $8.2 million, respectively, representing 8.8% and 4.6% of the investment portfolio's amortized cost and fair value, respectively. This compares to debt investments in the same three portfolio companies on non-accrual status with an aggregate amortized cost and fair value of $17.2 million and $10.1 million, respectively, representing 8.5% and 5.2% of the investment portfolio's amortized cost and fair value, respectively, at June 30, 2024.
Asset coverage ratio as of September 30, 2024 was 186%.
Results of OperationsOur operating results for the three and nine months ended September 30, 2024 and September 30, 2023 were as follows (dollars in thousands):
For the Three MonthsEnded September 30,
For the Nine MonthsEnded September 30,
2024
2023
2024
2023
Total investment income
$
5,148
$
5,162
$
15,521
$
15,762
Total expenses
4,153
4,008
12,829
12,496
Net investment income
995
1,154
2,692
3,266
Net realized gain (loss) on investments
11,068
(95
)
11,155
(3,963
)
Net change in unrealized appreciation (depreciation) on investments
(13,263
)
(3,010
)
(13,680
)
1,336
Net realized gain (loss) on extinguishment of debt
(147
)
—
(321
)
—
Net increase (decrease) in net assets resulting from operations
$
(1,347
)
$
(1,951
)
$
(154
)
$
639
Investment income The composition of our investment income for the three and nine months ended September 30, 2024 and September 30, 2023 was as follows (dollars in thousands):
For the Three MonthsEnded September 30,
For the Nine MonthsEnded September 30,
2024
2023
2024
2023
Interest income
$
4,867
$
4,765
$
14,135
$
14,440
Payment-in-kind interest
226
374
1,097
1,157
Dividend income
17
14
51
47
Other income
38
9
238
118
Total investment income
$
5,148
$
5,162
$
15,521
$
15,762
Fair Value of InvestmentsThe composition of our investments as of September 30, 2024 and December 31, 2023, at amortized cost and fair value of investments was as follows (dollars in thousands):
September 30, 2024
Investments atAmortized Cost
Amortized CostPercentage ofTotal Portfolio
Investments atFair Value
Fair ValuePercentage ofTotal Portfolio
First Lien Debt
$
132,601
67.6
%
$
121,654
69.3
%
Second Lien Debt
9,554
4.9
%
8,181
4.7
%
Subordinated Debt
26,895
13.7
%
22,487
12.8
%
Collateralized Loan Obligations
1,823
0.9
%
1,570
0.9
%
Joint Venture
383
0.2
%
393
0.2
%
Equity
24,864
12.7
%
