PhenixFIN (PFX) 9 May 182018 Q2 Earnings call transcript

Welcome and thank you for joining the Medley Capital Corporation's fiscal second quarter 2018 conference. 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 of the call will be available by using the telephone number 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 question-and-answers, 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 your to company's Taube. in go presentation the Brook I Please Investor now company's the In ahead. is turn the Events/Investor available investor XXXX the conference website. second fiscal Presentations would on to section like host, Mr.

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

discussing This XX will quarter and legacy $X.XX of portfolio, period's I loss the of on to ended June dividend. like today be a the payable Our March Board Directors approved June by per begin share to of for would X. our record unrealized shareholders on the dividend XX. dividend

long-term fund liquidity this continuing portfolio. on to these There the and a generating priority certain assets it's of otherwise available are includes and assets assets legacy to repositioning focus success. for We where reposition is the

first on the legacy deteriorate on this approximately very That's moved the some continued quarter, this expectations portfolio the a During on of the on liquidity The overall $X.XX share assets positions as legacy impact toward of X% a and to declined decline combined impact or the instances we was in on in recovery further. assets, for performance portfolio of certain and led underlying from and our X.X% to NAV X.X%. quarter. that the per the resolution

two we their during decline mark-to-market in and their while also extraction on period, developing from originated underlying performance to sectors, prior respective related negative may had energy adjustments the these news positions the positive and During companies benefit did period. XXXX

our complete the of As we was few quarters, legacy the in in have communicated that year our calendar assets XXXX. repositioning would this be expectation prior

quarter-end the a While par X.X% to internal as to marked five. on did are expectation repositioning positions a our the XX/XX. rated at XX.X%, was and portfolio. of nearing of this this post XX% $XX forma calendar these quarter or am over fair positions for four totaling at the Breaking rated legacy million this remaining down X.X% of on repaid That's repayments I during approximately happy that of approximately one, received quarter-end. both consists end assets if We it's three premature suggest four of will report meaningful two we an or Pro this $XX continues completion, from approximately comprise par. make completed positions currently legacy rating be the value five the of the be or The assets were just down now first approximately our at and market is with sooner. or These are front repayments XX% of XX% to progress year, two by not process that million.

dividend. Turning the to

that was the of NAV During the to period. was by per NII paid partially dividend reduction in share the and $X.XX excess during the in period, this per contributed share

at portfolio per looking earning the by potential Board and forward from continued cash power dividend redeployment it's the this and account We was have disciplined taking assets looked that with of lens of the liquidity into the legacy $X.XX approved share.

be have complete portfolio time. NII over the the into a we the repositioning look potential of XXXX, that targeted As throughout to and XXXX covered has dividend we by

Turning investing. now to

quarter, we of senior the continue to retail which from At extent the the and and time raise channels million, the existing across origination broader to loan resources MCC to company will into joint the support the venture. from benefit we and capital invested institutional of pipeline majority During certain portfolio Medley, over approximately either the and $XX our platform. platform

few at each we in Our and call quarters. like the turn important would at to MCC to Allorto, look review Financial this team every Rick remains financial over asset Officer hard next the our repositioning process work on I now and to results. Chief completing the forward to

you Brook. Thank

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

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

$X.X expenses, general expenses consisted management net and on professional fees, For one-time and expenses. and in million $XX.X were million fees, in waiver total the administrative and base of in million administrator operating $X.X base million management $X.X of financing the and fees, quarter, interest

included of debt March debt $XXX company's outstanding facility, approximately ratio $XX and total million debt-to-equity revolving the outstanding $XXX credit As XX, $XXX times on the in payable XX. March SBA X.XX million. company's equaled notes excluding The was of million SBIC at debentures. This million

portion this unsecured bonds. offering The were $XXX turn now of back over of will of a During used the my proceeds institutional the loan term period, XXXX concludes million our company via review. retail to I our to bonds refinance call That Brook. raised and prepay financial the unsecured investors.

The you questions. are and for the now your hard all to thank remain We Rick work. Thank We team shareholders years open at in the line committed MCC time for ahead. today. of you the can and success substantial remains

Instructions]. [Operator

Our first question of from from the line comes Kyle Joseph Jefferies.

Your line is open.

morning my thanks questions. Good and for guys taking

start given the you the are the some do way going So reducing that guys see need we stabilization? think all Or you to are progress point you made through the on process? assets, we you have think legacy to get at NOI to do where

the questions, for Kyle. Thanks

NII. on we think I are comment to forward going not expected

in and for did portfolio a the we dividend. lens on spend of can lens amount We the we time with sensible not we the done liquidity, time was cetera. looking at that the over decent finish have balance what sheet, capital repositioning deploy generate past. as used That the We expect the et

expectation and and over we that's to is hope the with dividend plan. Our that cover NII in the the able are XXXX time, looking

rotation nonaccrual? impact like, That's just pressure bit couple much legacy there yields you went more it. And on from in how from that little a the were then of under of the, Got was is helpful. Can looks some talk or investments quarters. about

additions Kyle, on nonaccrual. is new is Hi. this with The Rick. the the majority associated

time sorry, on inflows a nonaccruals? then, give us go And and sense helpful. to truly outflows had Q. you I haven't through That's for Okay. to Can the

Sure. Access Group. Dynamic The was and Oxford The And names Pooling nonaccrual Media, were Velocity for Energy, four removed. Mining new Plastics

its restructuring. to Due

a All That's lot questions. right. my helpful. Thanks answering very for

Alexander Thank Compass of our line question Casey next you. Point. from And comes the from

Your line open. is

at in repaid were that investments first second me two end the tell quarter? you can The were morning. marked at those the Good the par, of quarter where

Sure. marked XX second. Casey, of Casey, par. give were, one right I front don't me in They me. to they were at them

of them? Both

Yes.

it. That's you. Thank Okay.

comes Jonathan the Fargo. Bock Our from question line next Wells from

is line Your open.

Would substantial let's Good first were between my the the thank the you decline to and ownership two you been stock you last, just just describe morning say, questions. taking amounts years? have for owned be how over able about you price given share talking and purchasing, management. Brook,

and exact typical filed all were Yes. I Form were think don't a I in X. have the sort of pretty Jonathan, they public numbers,

me Let right numbers. I have published on tally here. them They I up. those get are can to back don't and them

to that ownership mentioned to substantial. share was at gone the funded Medley you stock? special well about MDLY I about used you us by investor a Can of another level purchase works? maybe walk another through us yourselves, that how as investor purpose that that's Clearly, worth it's as it million with there? talk $XX And you sizeable, as you think and Can entity Okay.

Sure.

in a are partnership We that's long-dated.

actually set think think I an ownership. It's XX-year have liked on share a long-term. the probably it. for price the us kind the don't it's our substantially purchase range as increase handle and partnership over up have but of I I higher. control It is way to with this we in stock the where our was exposure a average ownership price, was then. $X exact We a of

We like continue it. to

long company. the that hold the We over expect to in and reflects and our position interest yield term the it in the

in. Got

amounts by that the partner so the owned yourself of other are And amounts stock? and what owned by investment $XX the in million

Yes.

XXX% own company. management we of at So the that

Okay. All right.

collateral at stock's the the the you those the margin potential that shares we liquidation look loan either that forced the extent for would should work? call how or given us and/or the a is, decline does is of decline, through potential How price question given stock that today? And the stock walk given decline just for then So assume of partnership? a the risk,

the is partnership. a financing for last risk I a entire Yes. that That's margin. will tenure duration no It described. of There is

Okay.

balance just the let's also, sheet then walk So today. through

lenders? discussions So constraints been Brook, you at fact sense kind a the how under are debt-to-equity today? I of we your And in believe, are the are the trying and that, you operating with have to now one-to-one So debt-to-equity? looking debt-to-equity get above how they of current

the it SBIC at SBIC quarter-end Jonathan, X.XX slightly one-to-one. debt, exclude is above if debt, the you Including it times. was

Sorry.

with the sudden you more, finding of bit So way, a I call now that all to lenders lenders leverage way, now discussion restrictive continues will borrowing points your result on et your as relative a it, today? your the it this we of by should a part as it, decline, cetera are have economic increase there of bases, you have just that a the to that is asked

restrictions currently not any base. the and We are lenders, within borrowing we constant in with are discussing Jonathan our finding today

Got it.

not is that time cash think portfolio, at no there why agreed you Brook would buy? this if can I of off everyone's coming a good think these restrictions to, and/or is explain a stock mentioned certain if are and prepayments So that to repurchasing the levels, be I level

expired, year. Jonathan. last end repurchase substantial had Yes. of share I Thanks program We think that a was the it

appropriate the of evaluating repurchase in our and share capital always include are would We utilization I that.

to continuing at of this expect are say, at it. renew to the ahead. quarters we look our leverage may Let's do current the not revisit levels while We repositioning, we completion in that

Okay. Thank so you much.

Thanks Jonathan.

National from Thank you. comes from next our Christopher And Securities. question Testa

Your open. line is

my Good questions guys. Thanks Hi. today. for morning taking

curious, couple four on Just you Brook mentioned watchlisted? and of positions. energy and Are losses extraction or these five currently ranked a mark-to-market

Chris, yes, they are.

evaluated gears in looking bit looked of mean, And the just a of continue some continue obviously snowball. many guess the at mean, sour? so and in couple these and to in it. shifting scenes issuance? go opinion, the nonaccruals? might and there Got You seems recurring just the behind failure things why be, sort the nonaccruals components obviously be these certain obviously to I of Okay. But of theme years this what's What across I or four legacy at terms of guys your kind of real this. have to I

You these talked years underwriting up. but continue pop to criteria about ago, names changing

those curious, So of internally? through just what found kind going you

clearly great are challenges and a the we It's Yes. question significant. face

early that and I it the we want the to At that in we time, the we As historically. firm to that part important the larger liquidity, suggested sponsor-backed have and and specifically reiterate done rollout purpose the that origination have going XXXX, suppose, repositioning the to I origination had was we a legacy. of narrowed bit, and beginning little borrowers. of really the we changes had are get we have move made Addressing and that's to issues

So that it was our largely was not a efforts of narrowing. new time. And since become the focus but that's that

and changes to say, personnel restructuring and We would made underwriting I capabilities. also enhancements,

that sort year, through date as sponsor-backed seen of with doing we we through have talking historical XXXX MCC, on this So it's also are MCC XXXX, that before issues the we look we we line it's XXXX. shown through, consistent that with at this to have hard XXXX, in see investments. That's performance. assets originated shown although this necessarily kind as right about and are And has the larger in That's we this now that that at consistent elsewhere. of now that are performance since

and say, the and will of portfolio we that going overall expectations would then non-legacy and changes beyond. from I will portfolio this reflect that is of repositioning year So legacy than our this and we made appear complete the performance in XXXX have to

Okay. million value the are nonaccrual and Got at legacy I the portfolio. your $XX it. million of the looking that you roughly at had $XX.X inclusive those investments legacy are investments And value listed fair fair of think Are of you current nonaccruals? stated

of assets nonaccrual. that in legacy the included Certainly are the majority

it. Got

fair So nonaccrual the on $XX the $XX.X includes value. at million million or so

on additional, an that's So that's there $X.X so not legacy or nonaccrual it, investment? is let's call million

Correct.

it. Got

potentially given been any lot of specifically towards than the this the starkly lowers Okay. the space curious, base mean a who few And has again peers this just Board better had, has the trend have quite inclination years, performance frankly, past yours? lowering fees theirs in have more as negative I as

this Brook, So is Chris.

During fees didn't' the represents legacy. think portion you management have been period, earned a the otherwise as group the see that this a it, certain of portion on did the substantial waive management I waiver and fee we of characterized if

in viewed and manner as So in the we constructive million positive pool legacy to. is management longer. equivalent is bucket intended. will our if today, we you to it this to It waiver hope $XX is one-time fees all that and decision looked this a in was process which specifically that period. this, referring a unilaterally the And definitely of was acknowledge fees the are And the that waive the repositioning at look, is revisit quarters on you amount taking To elected obviously legacy basically ahead.

it. Got

my Okay. Thanks taking questions. for That's all me. for

Thanks Chris.

conference Brook And like back closing for to the turn Taube, Mr. to I host, would your remarks.

for much very today. you Thank time your

I at on work hard in As we asset. mentioned are the earlier each remarks,

intention repositioning. year really this and turn Thanks and the We again. beyond. constructive the appreciate have and continued support of We to do portfolio to complete look forward then the the XXXX

program. and today's gentlemen, Ladies in for This participating conclude does conference. you thank the

You disconnect. have Everybody, great a may day. all