PhenixFIN (PFX) 6 Feb 182018 Q1 Earnings call transcript

Welcome and thank you for joining the Medley Capital Corporation's Fiscal First Quarter 2018 Conference Call. The company would like to remind everyone that today's call is being recorded. Please note that this call is the property of Medley Capital Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay for the call will be available by using the telephone numbers and PIN provided in the company's earnings press release. At this time, all participants are in a listen-only mode, but will be prompted for a question-and-answer session, following the prepared remarks. Markets. from CFO; Corporation Investing; Dean Anderson, of call CEO; Brook and the Head Allorto, Rick Crowe, Capital on Medley are Capital Taube, Sam Participating Head of

to results of risks www.medleycapitalcorp.com. not visit as Before statements by which call statements Safe we company's any those other company's and fact disclosure undertake company's Today's press projections forward-looking forward-looking the statements and are to constitute could SEC. statements by a recent forward-looking release in such the those company and release, than in also please conference begin, the would call reason most Harbor update To your the to company's may the uncertainties. any differ the may of materially the required Any obtain copies disclosed attention filings latest at unless historical statement. the from customary regarding does information. to note Please statements law. press filings subject company company's like include expressed SEC forward-looking actual the forward-looking with for The website that

Section Relations quarter in addition, the to over company's in presentation the Taube. I Investor now company's the In is turn the Events/Investor available investor XXXX the call website. first fiscal Presentations would on to Section like Mr. Brook

ended for $X.XX per quarter Corporation's call. of This earnings asset the value Medley XXst. morning investment quarterly operator our $X.XX. you, share Capital everyone announced financial welcome net Thank results to and Reported and we of income December net

to of existing today to XXst, ended I'd XXst. on share approved record for Our payable on portfolio. $X.XX begin quarter shareholders of February XXrd be will Directors per the Board of March which discussing December a dividend like the

transitioning resolving quarter where which year and on legacy remaining on This as we December we As positions. was focused I've legacy challenging repositioning and portfolio. on XXXX resolving past where up focused the this finished assets previous year appropriate a possible the calls, mentioned challenging

to Medley a to borrowers XXXX, generally included our subordinate as made larger sponsor-backed to pursues certain in focus XX companies, We smaller the non-sponsored legacy assets Today, legacy also MCC loans the strategy. that borrowers we broader shifted early a on primarily which think characterized have portfolio and that the we remaining at In benefit I reminder, that strategy platform consists of from two positions. continues in strategy portfolio. buckets. remaining

to a And three. a are four the positions either legacy our a end, ahead will borrowers marked two, end, consistent respectively, the were of five are bucket pre-XXXX while of total carried or and legacy of XXXX. vintage, these The mark XX five and of part currently with of positions first in assets. at one, X.X% The average par of bucket positions internal above expect five performing represent, quarter below credit At the at five. now, second assets in assets is to these of we trend borrowers, remaining this continue well XX% that these XX. an ratings now be end, these for and quarter of, substantially underwriting two and that or performing slightly quarter these are five of five XX% plans, three total below positions bucket includes of with, had These these and approximately that or credit ratings represents internal case number applied

the bucket legacy and this million our During of names marked position of bulk second for in were accounted portfolio. in approximately markdown these three the December quarter, $XX lower the

the on during and hard work do a resolve expect to legacy continue portfolio XXXX. majority positions of to We these

SBIC. lien of this senior were And to origination, million our deployed invested million, first $XX investing, which majority Turning of was during $XX sponsor-backed in now we to loans the secured quarter, the borrowers.

over institutional of like benefit to the to consistent that the no MCC just origination Following term from loan. I unsecured million retail our from capital to our comment, were the that quarter refinance and of continue would raised we to resources buyers. made platform. to retail post-XXXX continues The At broader raise we $XXX that make we across offering of bonds, end, used proceeds I'm pleased this institutional is and and which have non-accruals performance. Medley, to and i.e. platform, have and produced channels originations report continue one generate

would borrowers As I we the our we're of Medley over follow quarters, to the for Officer, our results Financial to turn quarter. legacy our to call portfolio the Corporation. for off now the and the complete through roll sponsor-backed migration the financial future Capital the coming cautiously with Rick, Chief continued like larger over about review optimistic to

you, Thank Brook.

months $X.XX the to of December three XXst, loss and the share. XXth. or income that's December per a reported company share net XXst $X.XX ended or at million $X.XX asset was at value share For of $X.XX per compared net million per $X.X investment net September $XX The and

quarter, total and was of investment $X.X $X.X of income, of dividend income, $XX.X fee was the For million comprised $XX.X million and income of interest million million income.

operating were of $X.X For in the million and expenses, million management and and quarter, $X.X financing interest million in base total million in consisted $XX.X expenses. operating fees, other expenses $X.X

depreciation million. quarter, unrealized the company the For of reported $XX net

As XXst. my payable, call loss three at debt loan now [Technical over turn outstanding SBA notes Brook. to total I'll That Difficulty] term the X.XX and company's net the $XXX of SBIC facility, million million borrowers approximately XXst, debt-to-equity review mentioned, of million, the in The the of was of back on $XXX the primarily million in debentures. credit outstanding result company's $XX $XXX including revolving our million financial times December equaled excluding ratio, concludes legacy Brook was payable, As $XXX December debt,

for and Rick your today. Thanks, time thank you all

have seen strategy by As encouraged originated we've all in I few performance past began XXXX. been challenging, shift assets we after years but mentioned, the the on are our which

legacy XXXX. remaining resolve which we assets, in complete to left the work We intend to have

our However, legacy we related believe the are us. behind issues the assets bulk to of

and we -- you of know, of shareholders well, MCC. some most are substantial As

open Our Operator, ahead. we work the in to can the for hard and at years team is the now success questions. remains call MCC committed of

Yes Instructions] question Fargo of [Operator And Wells Securities. from sir. first comes Jonathan the from Bock line our

may begin. You

Your be on may line mute.

apologize taking I'd you as experiencing, my and question. for thank just we're I remaining Good relates implications to for keeping SBIC in to your the solitary fairly Brook, that. license? any NAV a start like environment it morning in that given are or there decline credit

None that I'm of. aware

any Are of pledged to experienced the facility? have the that the Question. difficulties loans SBIC

not do some significant it's a portion. We portion, have but

Okay.

that the to next question of a that's into. plan to performance advise of then cetera, we book of light of in to assets, trust just peers? explain relative those be this part et And your to the in the you Just performance why want run fund light should looking relates can institutional the ability at a overall in always question deterioration,

that's not Jonathan? I'm a Is really question. sure Yes, it

what client then, so, perhaps, does to light that make could you in So returns in have them? consider of believe considered if difficulties is been have do flip maybe experienced, we alternative? generating strategic back. the you Do And that it a sense

of and me let altitude. step sort back go Well, little bit a to of

returns ago. over In $X the Difficulty] as it I well years have prepared positions performance in with which consistent, clients legacy have about in function a our in way of constrained, there. largely of been made for continued I assets a I We growth is of the the were, there. fact, billion our the you're performance smaller become Mistakes case think challenge the been and borrowers made shareholders. on as we the institutional well we've MCC, in for subordinate mentioned And assets. clearly [Technical mentioned, dealing substantial aware, rewind clock the remarks, has that portfolio were us to as and can't

expect say over I than we're So, would fact say not that pointed senior be And and lien in doing of it's sponsor-backed to -- continue XX% I now the assets probably are are XX% the has not case. is, over performer, strategy assets we but think of a that our that that I bulk actually, the to first past, that be what pointed the should borrowers. did work to been consistent will considering the MCC's other

future. committed So, to we're the

We confident it corner. or we're position that at near the have where We we're now. stock the and significant is, turning like

helpful. So, that's hopefully,

That the I'd actually. Then in question Is MCC. through of way ask shareholders It's you're that honest margin? last and that done appreciated. mentioned is, is, so any you

No.

Okay. All right, my guys, thank you for taking questions.

care. Take Jonathan. Thanks

And our next from comes Thank Kyle you. the Jefferies. of line Joseph question from

You may begin.

taking morning guys. Thanks good questions. my Hey, for

sort tax growth, credit company portfolio any terms on of you you've in well for demand Just changes, can of performance? any to changes seen as outline first impact as credit, one,

want you a how about topic point, it's to direct a comments impact, would see few know, little this a discussed. It bit Dean, At early we're I be we've if don't that it's Sure. helpful. make thinking that. on to but

of say seeing in in that new -- behavior any the change We're seeing that in change XX% I'll referring I maxed of not the to you're terms behavior any in really borrowers, deduction not EBITDA sponsor-backed their they with we're out. regard. assume this

obviously, of way. throw thinking cash that about to our starting terms it In model, how we're into free flow we and it model

a rates And give kind in if post just you've XX/XX? a terms have you can us any up relief yield, And versus it. ticked sense yields Got as on give of seen then repayment? originations sense of for

Sure.

the for yield the was quarter, the just about was of yield XX. terms repayment and then In originations, the the X.XX on all-in about

So, weighted our overall a decline average yield the portfolio. slight in for

a outlook started it's but give And really us XXXX? in your rates still only this for sense I back to it. Got have just, sort for of can early year, you up know go

to what on So, Kyle, just clarify, the outlook topic?

yields, Just portfolio on yields.

portfolio specifically sorry. Just yields,

have what We've date, yields flat. tightening. to seeing we're respect generally to With seen been

the this of aside days, markets short is impact, a to feed-through. -- balance. the we of that there. of lot leave in but the continues, it's there's point, on If the would too expectation capital period liquid likely At obviously, our last a environment haven't out Let's few see seen time risk

bit opportunities. interesting lower kind seeing is that's yields. a higher But combination a spread a a And probably are granular, LIBOR flat we're be to all-in of generally more the little been little and grinding margin. on grinding little We quarter-over-quarter, just of seeing

That's my questions. helpful. Thanks for answering

Thanks Kyle.

next [Operator line Thank Instructions] And question Securities. our from you. National from the Christopher of comes Testa

begin. You may

down obviously, of more been with there peers with revisiting Has those declines. line issue the potentially and in asset towards fees the of kind the bringing quality struggle and Board in NAV any sector? …continued by

have part that the not have, make two did years we know, incentive it one fees. look and on dialogue. change back back going you fee past, our we a the revisited as at We we in to looked Chris, related

has So, that was been implemented. on discussions no that further There topic.

where seeing it's where market. keep be implementing guys stock inclination capital. just the trading you spreads And roughly pretty as of would challenging significant more It buyback best environment, a seeing program, towards just XX% moving allocation sure NAV? are, obviously, your that I'm seems the challenging of Okay. up especially, What's is in today a that,

guys thinking So, just how about you that. curious are

of We evaluating at that are does firm appropriate it's the obviously repurchase not utilization At levels, always repurchase that. is capital leverage and our to feel current appropriate in included it the share shares.

the may revisit we However, in quarters ahead. that

investments non-accrual Okay. five the five And you or legacy buckets, that four already on in of of how are the status? many are said those

All are five non-accrual. on them, Chris, of

Got Thank taking you it. from all That's questions. me. my for

Chris. Thanks

Thank from Instructions] from comes of next And question Investment. David [Operator Confluence the you. our line Miyazaki

that. about Sorry

Our next Jordan line Jordan the of from David question from comes Capital.

for the seems call may I'd some having our It today. ending difficulties. to session And now over Brook for You that concludes to like remarks. Mr. begin. pass any we're

Thank you, operator.

the in And we the support. Difficulty] all we forward believe We confirm I issues to of of do the a [Technical continued remarks, future complete. to our thank your transition related look in said bulk near that you when for time the is you As prepared

Ladies conference. and day. participating disconnect. you great for This Everyone, all conclude gentlemen, program have the thank in does may and a today's you