Portman Ridge Q2 2025 slides: NAV declines amid strategic transformation

Introduction & Market Context

Portman Ridge Finance Corporation (NASDAQ:PTMN) released its second-quarter 2025 earnings presentation on August 8, revealing continued financial challenges alongside significant strategic developments. The business development company (BDC) reported a net asset value (NAV) of $17.89 per share, continuing a downward trend from $19.41 at the end of 2024.

The company’s stock closed at $12.25 on August 8, representing a 0.82% increase for the day, but still trading at a significant discount to NAV. This follows a challenging first quarter where the company missed earnings expectations, reporting a -$0.01 EPS against a $0.62 forecast.

Quarterly Performance Highlights

Portman Ridge reported total investment income of $12.6 million for Q2 2025, with $10.9 million attributable to interest income. Net investment income (NII) came in at $4.6 million, or $0.50 per share, sufficient to cover the company’s regular quarterly distribution of $0.47 per share plus a $0.02 supplemental distribution.

As shown in the following financial highlights table, the company’s performance has fluctuated over recent quarters:

The company’s investment portfolio stood at $395.1 million at fair value, comprised of 96 different portfolio companies. Debt investments on non-accrual status increased to six positions, representing 2.1% and 4.8% of the company’s investment portfolio at fair value and amortized cost, respectively.

Portman Ridge’s net asset value continued its downward trend, as illustrated in this NAV rollforward:

The company maintained a leverage ratio of 1.4x net debt to equity, with outstanding borrowings of $255.4 million and an asset coverage ratio of 165%. This represents a slight increase in leverage compared to previous quarters.

Strategic Initiatives

The most significant development announced in the presentation was the completion of the merger with Logan Ridge Finance Corporation on July 15, 2025. This strategic combination creates a larger BDC with total assets exceeding $600 million, potentially providing economies of scale and enhanced market positioning.

As part of this transformation, Portman Ridge will rebrand as BCP Investment Corporation and will trade on Nasdaq under the symbol "BCIC." The company also announced plans to transition to monthly distribution payments beginning in 2026, a move that could appeal to income-focused investors.

The following slide highlights these recent milestones:

Additionally, the Board of Directors has authorized a stock repurchase program of up to $10 million from March 12, 2025, to March 31, 2026. This initiative could help address the significant discount to NAV at which the shares currently trade.

Portfolio Composition and Credit Quality

Portman Ridge maintains a diversified portfolio with a focus on first-lien debt, which constitutes 83.9% of the portfolio. The company emphasizes non-cyclical industries with high free cash flow generation, potentially providing some insulation from economic volatility.

The portfolio diversification is illustrated in the following chart:

The company’s credit quality metrics show that 93.8% of the portfolio is performing, with 6.2% classified as underperforming. The six investments on non-accrual status represent a modest portion of the portfolio at fair value (2.1%) but a more significant 4.8% at amortized cost, indicating substantial write-downs on these troubled positions.

Interest rate stabilization has been a positive factor, with the Secured Overnight Financing Rate (SOFR) settling around 4.3%. As shown in the following chart, this represents a moderation from previous volatility:

The company has also demonstrated success in realizing value from previous acquisitions, as illustrated in this M&A value realization chart:

Forward-Looking Statements

Looking ahead, Portman Ridge faces both challenges and opportunities. The merger with Logan Ridge and subsequent rebranding represent a significant strategic pivot that could help the company achieve greater scale and operational efficiencies. However, the continued decline in NAV and the presence of non-accrual investments suggest ongoing portfolio challenges.

The company’s focus on first-lien debt and non-cyclical industries appears to be a defensive positioning in anticipation of potential economic headwinds. This approach, combined with the stock repurchase program and the shift to monthly distributions, suggests management is prioritizing shareholder returns and capital preservation.

During the previous quarter’s earnings call, CEO Ted Goulthorpe had emphasized a cautious approach, stating, "We’re planning for the worst and maybe something better happens." This conservative stance appears to continue into Q2, with limited new deployments ($10.9 million) compared to repayments and sales ($17.0 million).

As Portman Ridge completes its transformation into BCP Investment Corporation, investors will be watching closely to see if the strategic initiatives can reverse the NAV decline and generate sustainable returns in an increasingly challenging market environment.

Full presentation:

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