SEC Filing | Portman Ridge Finance Corporation

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 814-00735

Portman Ridge Finance Corporation

(Exact name of Registrant as specified in its charter)

    Delaware

    20-5951150

    (State or other jurisdiction of
Incorporation or organization)

    (I.R.S. Employer
Identification Number)

650 Madison Avenue, 3rd Floor

New York, New York 10022

(Address of principal executive offices)

(212) 891-2880

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PTMN	The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

The number of outstanding shares of common stock of the registrant as of August 2, 2024 was 9,244,024.

TABLE OF CONTENTS


		Page

	Part I. Financial Information

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	4

	Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited)	5

	Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2024 and 2023 (unaudited)	6

	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	7

	Consolidated Schedules of Investments as of June 30, 2024 (unaudited) and December 31, 2023	8

	Consolidated Financial Highlights for the six months ended June 30, 2024 and 2023 (unaudited)	18

	Notes to Consolidated Financial Statements as of and for the period ended June 30, 2024 (unaudited)	19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

Item 4.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61

Item 5.	Controls and Procedures	61

	Part II. Other Information

Item 1.	Legal Proceedings	62

Item 1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 3.	Defaults Upon Senior Securities	63

Item 4.	Mine Safety Disclosures	63

Item 5.	Other Information	63

Item 6.	Exhibits	63

Signatures		64

NOTE ABOUT REFERENCES TO PORTMAN RIDGE FINANCE CORPORATION

In this Quarterly Report on Form 10-Q, the “Company”, “Portman Ridge”, “we”, “us” and “our” refer to Portman Ridge Finance Corporation and its wholly-owned subsidiaries, unless the context otherwise requires.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

The information contained in this item should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report and in conjunction with the financial statements and notes thereto in the Company’s Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”). In addition, some of the statements in this report constitute forward-looking statements. The matters discussed in this Quarterly Report, as well as in future oral and written statements by management of Portman Ridge Finance Corporation, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “outlook, ”believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans or objectives will be achieved. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

•

our future operating results;

•

our business prospects and the prospects of our existing and prospective portfolio companies;

•

the return or impact of current and future investments;

•

our contractual arrangements and other relationships with third parties;

•

the dependence of our future success on the general economy and its impact on the industries in which we invest;

•

the financial condition and ability of our existing and prospective portfolio companies to achieve their objectives;

•

our expected financings and investments;

•

our ability to operate as a business development company (“BDC”) under the Investment Company Act of 1940 and a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, including the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;

•

the adequacy of our available liquidity, cash resources and working capital;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of Sierra Crest Investment Management LLC (the “Adviser”) to locate suitable investments for us to monitor and administer our investments;

•

the ability of the Adviser to attract and retain highly talented professionals;

•

actual and potential conflicts of interest with the Adviser and its affiliates;

•

the effect of legal, tax, and regulatory changes on us and our portfolio companies;

•

the impact of a protracted decline in the liquidity of credit markets on our business;

•

the impact of fluctuations in interest rates on our business;

•

the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

•

our ability to recover unrealized losses;

•

market conditions and our ability to access additional capital;

•

an economic downturn could have a material adverse effect on our portfolio companies’ results of operations and financial condition, which could lead to a loss on some or all of our investments in such portfolio companies and have a material adverse effect on our results of operations and financial condition; and

•

the timing, form and amount of any dividend distributions.

For a more detailed discussion of factors that could cause our actual results to differ from forward-looking statements contained in this Quarterly Report, please see the discussion in Part II, “Item 1A. Risk Factors” of this Quarterly Report, and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date this Quarterly Report is filed with the SEC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	June 30, 2024			December 31, 2023
	(Unaudited)
ASSETS
Investments at fair value:
Non-controlled/non-affiliated investments (amortized cost: 2024 - $409,486; 2023 - $426,630)	$	370,359		$	398,325
Non-controlled affiliated investments (amortized cost: 2024 - $62,769; 2023 - $55,611)		60,464			55,222
Controlled affiliated investments (cost: 2024 - $50,428; 2023 - $58,041)		13,547			14,318
Total Investments at Fair Value (cost: 2024 - $522,683; 2023 - $540,282)	$	444,370		$	467,865
Cash and cash equivalents		9,813			26,912
Restricted cash		26,826			44,652
Interest receivable		4,659			5,162
Receivable for unsettled trades		—			573
Due from affiliates		1,544			1,534
Other assets		1,599			2,541
Total Assets	$	488,811		$	549,239
LIABILITIES
2018-2 Secured Notes (net of discount of: 2024 - $414; 2023 - $712)	$	84,656		$	124,971
4.875% Notes Due 2026 (net of discount of: 2024 - $974; 2023 - $1,225; net of deferred financing costs of: 2024 - $430; 2023 - $561)		106,596			106,214
Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net of deferred financing costs of: 2024 - $609; 2023 - $775)		91,391			91,225
Payable for unsettled trades		37			520
Accounts payable, accrued expenses and other liabilities		2,700			4,252
Accrued interest payable		3,537			3,928
Due to affiliates		411			458
Management and incentive fees payable		3,054			4,153
Total Liabilities	$	292,382		$	335,721
COMMITMENTS AND CONTINGENCIES (NOTE 8)
NET ASSETS
Common stock, par value $0.01 per share, 20,000,000 common shares authorized; 9,951,485 issued, and 9,260,495 outstanding at June 30, 2024, and 9,943,385 issued, and 9,383,132 outstanding at December 31, 2023	$	93		$	94
Capital in excess of par value		715,488			717,835
Total distributable (loss) earnings		(519,152	)		(504,411	)
Total Net Assets	$	196,429		$	213,518
Total Liabilities and Net Assets	$	488,811		$	549,239
Net Asset Value Per Common Share	$	21.21		$	22.76

See accompanying notes to unaudited consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
INVESTMENT INCOME
Interest income:
Non-controlled/non-affiliated investments	$	11,913	$	14,786	$	24,534	$	29,632
Non-controlled affiliated investments		312		626		407		1,475
Total interest income	$	12,225	$	15,412	$	24,941	$	31,107
Payment-in-kind income:
Non-controlled/non-affiliated investments(1)	$	2,018	$	859	$	3,912	$	2,386
Non-controlled affiliated investments		183		107		295		180
Total payment-in-kind income	$	2,201	$	966	$	4,207	$	2,566
Dividend income:
Non-controlled affiliated investments	$	1,800	$	1,864	$	3,453	$	3,248
Controlled affiliated investments		—		465		—		1,540
Total dividend income	$	1,800	$	2,329