UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
x |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2022
|
¨ |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission |
|
Exact name of registrant as specified in its charter, |
|
I.R.S. Employer |
814-01022 |
|
Logan Ridge Finance Corporation 650 Madison Avenue, 23rd Floor New York, New York 10022 State of Incorporation: Maryland Telephone: (212) 891-2880 |
|
90-0945675 |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
|
Trading symbol(s) |
|
Name of Each Exchange on Which |
Common Stock, par value $0.01 per share |
|
LRFC |
|
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 x |
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 x |
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 the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
¨ |
Accelerated filer |
¨ |
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Non-accelerated filer |
x |
Smaller reporting company |
¨ |
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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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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|
Yes ¨ |
No x |
The number of shares of Logan Ridge Finance Corporation’s common stock, $0.01 par value, outstanding as of November 8, 2022 was 2,711,068.
TABLE OF CONTENTS
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Item 1. |
3 |
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4 |
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5 |
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6 |
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Consolidated Schedules of Investments as of September 30, 2022 (unaudited) and December 31, 2021 |
7 |
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13 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
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41 |
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42 |
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42 |
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43 |
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44 |
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PART I. FINANCIAL INFORMATION
Logan Ridge Finance Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
|
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As of September 30, |
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As of December 31, |
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2022 |
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|
2021 |
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||
|
|
(unaudited) |
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ASSETS |
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Investments at fair value: |
|
|
|
|
|
|
||
Non-control/non-affiliate investments (amortized cost of $172,131 and $131,829, respectively) |
|
$ |
166,404 |
|
|
$ |
129,991 |
|
Affiliate investments (amortized cost of $30,612 and $49,803, respectively) |
|
|
26,716 |
|
|
|
61,359 |
|
Control investments (amortized cost of $0 and $8,850, respectively) |
|
|
— |
|
|
|
6,839 |
|
Total investments at fair value (amortized cost of $202,743 and $190,482, respectively) |
|
|
193,120 |
|
|
|
198,189 |
|
Cash and cash equivalents |
|
|
11,263 |
|
|
|
39,056 |
|
Interest and dividend receivable |
|
|
1,162 |
|
|
|
929 |
|
Prepaid expenses |
|
|
2,908 |
|
|
|
3,358 |
|
Receivable for unsettled trades |
|
|
— |
|
|
|
685 |
|
Other assets |
|
|
30 |
|
|
|
— |
|
Total assets |
|
$ |
208,483 |
|
|
$ |
242,217 |
|
LIABILITIES |
|
|
|
|
|
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||
2022 Notes (net of deferred financing costs of zero and $46, respectively) |
|
$ |
— |
|
|
$ |
22,787 |
|
2022 Convertible Notes (net of deferred financing costs of zero and $167, respectively) |
|
|
— |
|
|
|
51,921 |
|
2026 Notes (net of deferred financing costs and original issue discount of $1,509 and $1,552, respectively) |
|
|
48,491 |
|
|
|
48,448 |
|
2032 Convertible Notes (net of deferred financing costs and original issue discount of $1,146 and zero, respectively) |
|
|
13,854 |
|
|
|
— |
|
KeyBank Credit Facility (net of deferred financing costs of $1,391 and $353, respectively) |
|
|
44,385 |
|
|
|
(353 |
) |
Management and incentive fees payable |
|
|
927 |
|
|
|
1,065 |
|
Interest and financing fees payable |
|
|
1,289 |
|
|
|
911 |
|
Payable for unsettled trades |
|
|
381 |
|
|
|
9,265 |
|
Accounts payable and accrued expenses |
|
|
980 |
|
|
|
1,144 |
|
Total liabilities |
|
$ |
110,307 |
|
|
$ |
135,188 |
|
Commitments and contingencies (Note 2) |
|
|
|
|
|
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NET ASSETS |
|
|
|
|
|
|
||
Common stock, par value $0.01, 100,000,000 common shares authorized, 2,711,068 and 2,711,068 common shares issued and outstanding, respectively |
|
$ |
27 |
|
|
$ |
27 |
|
Additional paid in capital |
|
|
188,846 |
|
|
|
188,846 |
|
Total distributable loss |
|
|
(90,697 |
) |
|
|
(81,844 |
) |
Total net assets |
|
$ |
98,176 |
|
|
$ |
107,029 |
|
Total liabilities and net assets |
|
$ |
208,483 |
|
|
$ |
242,217 |
|
Net asset value per share |
|
$ |
36.21 |
|
|
$ |
39.48 |
|
See accompanying notes to consolidated financial statements
3
Logan Ridge Finance Corporation
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
|
|
For the Three Months Ended September 30, |
|
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For the Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
|
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INVESTMENT INCOME |
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Interest income: |
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|
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|
|
|
|
|
|
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||||
Non-control/non-affiliate investments |
|
$ |
3,162 |
|
|
$ |
2,079 |
|
|
$ |
8,817 |
|
|
$ |
8,177 |
|
Affiliate investments |
|
|
176 |
|
|
|
1,072 |
|
|
|
521 |
|
|
|
3,499 |
|
Control investments |
|
|
35 |
|
|
|
97 |
|
|
|
228 |
|
|
|
293 |
|
Total interest and fee income |
|
|
3,373 |
|
|
|
3,248 |
|
|
|
9,566 |
|
|
|
11,969 |
|
Payment-in-kind interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-control/non-affiliate investments |
|
|
250 |
|
|
|
— |
|
|
|
597 |
|
|
|
95 |
|
Affiliate investments |
|
|
47 |
|
|
|
100 |
|
|
|
140 |
|
|
|
298 |
|
Total payment-in-kind interest and dividend income |
|
|
297 |
|
|
|
100 |
|
|
|
737 |
|
|
|
393 |
|
Dividend income: |
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|
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||||
Non-control/non-affiliate investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
560 |
|
Affiliate investments |
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
|
179 |
|
Total dividend income |
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
|
739 |
|
Other income: |
|
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|
|
|
|
|
|
|
|
|
|
||||
Non-control/non-affiliate investments |
|
|
78 |
|
|
|
— |
|
|
|
86 |
|
|
|
174 |
|
Affiliate investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67 |
|
Total other income |
|
|
78 |
|
|
|
— |
|
|
|
86 |
|
|
|
241 |
|
Total investment income |
|
|
3,748 |
|
|
|
3,372 |
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|
10,389 |
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|
13,342 |
|
EXPENSES |
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||||
Interest and financing expenses |
|
|
1,558 |
|
|
|
2,296 |
|
|
|
5,877 |
|
|
|
8,061 |
|
Base management fee |
|
|
927 |
|
|
|
1,111 |
|
|
|
2,928 |
|
|
|
3,781 |
|
Directors expense |
|
|
135 |
|
|
|
103 |
|
|
|
358 |
|
|
|
309 |
|
Administrative service fees |
|
|
175 |
|
|
|
200 |
|
|
|
426 |
|
|
|
900 |
|
General and administrative expenses |
|
|
771 |
|
|
|
1,172 |
|
|
|
2,597 |
|
|
|
2,550 |
|
Total expenses |
|
|
3,566 |
|
|
|
4,882 |
|
|
|
12,186 |
|
|
|
15,601 |
|
NET INVESTMENT INCOME (LOSS) |
|
|
182 |
|
|
|
(1,510 |
) |
|
|
(1,797 |
) |
|
|
(2,259 |
) |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
|
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|
|
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|
||||
Net realized (loss) gain on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-control/non-affiliate investments |
|
|
23 |
|
|
|
7,425 |
|
|
|
15,489 |
|
|
|
(1,866 |
) |
Affiliate investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,215 |
|
Control investments |
|
|
(5,215 |
) |
|
|
— |
|
|
|
(5,215 |
) |
|
|
— |
|
Net realized (loss) gain on investments |
|
|
(5,192 |
) |
|
|
7,425 |
|
|
|
10,274 |
|
|
|
349 |
|
Net change in unrealized appreciation (depreciation) on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-control/non-affiliate investments |
|
|
652 |
|
|
|
(6,169 |
) |
|
|
(16,993 |
) |
|
|
4,269 |
|
Affiliate investments |
|
|
(3,825 |
) |
|
|
(2,842 |
) |
|
|
(2,348 |
) |
|
|
1,190 |
|
Control investments |
|
|
5,222 |
|
|
|
(390 |
) |
|
|
2,011 |
|
|
|
(1,420 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
|
2,049 |
|
|
|
(9,401 |
) |
|
|
(17,330 |
) |
|
|
4,039 |
|
Total net realized and change in unrealized (loss) gain on investments |
|
|
(3,143 |
) |
|
|
(1,976 |
) |
|
|
(7,056 |
) |
|
|
4,388 |
|
Net realized loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(815 |
) |
NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
(2,961 |
) |
|
$ |
(3,486 |
) |
|
$ |
(8,853 |
) |
|
$ |
1,314 |
|
NET (DECREASE) INCREASE IN NET ASSETS PER SHARE RESULTING |
|
$ |
(1.09 |
) |
|
$ |
(1.29 |
) |
|
$ |
(3.27 |
) |
|
$ |
0.48 |
|
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING |
|
|
2,711,068 |
|
|
|
2,711,068 |
|
|
|
2,711,068 |
|
|
|
2,711,068 |
|
DISTRIBUTIONS PAID PER SHARE |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
See accompanying notes to consolidated financial statements.
4
Logan Ridge Finance Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except share data)
(unaudited)
|
Common Stock |
|
|
Additional |
|
|
Total |
|
|
|
|
||||||||
|
Number of |
|
|
|
|
|
Paid in |
|
|
Distributable |
|
|
|
|
|||||
For the Three Months Ended September 30, 2022 and 2021 |
Shares |
|
|
Par Value |
|
|
Capital (1) |
|
|
Loss |
|
|
Total |
|
|||||
BALANCE, June 30, 2022 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
188,846 |
|
|
$ |
(87,736 |
) |
|
$ |
101,137 |
|
Net investment income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
182 |
|
|
|
182 |
|
Net realized loss on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,192 |
) |
|
|
(5,192 |
) |
Net change in unrealized appreciation on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,049 |
|
|
|
2,049 |
|
BALANCE, September 30, 2022 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
188,846 |
|
|
$ |
(90,697 |
) |
|
$ |
98,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
BALANCE, June 30, 2021 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
229,481 |
|
|
$ |
(115,761 |
) |
|
$ |
113,747 |
|
Net investment loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,510 |
) |
|
|
(1,510 |
) |
Net realized gain on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,425 |
|
|
|
7,425 |
|
Net change in unrealized depreciation on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,401 |
) |
|
|
(9,401 |
) |
BALANCE, September 30, 2021 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
229,481 |
|
|
$ |
(119,247 |
) |
|
$ |
110,261 |
|
|
Common Stock |
|
|
Additional |
|
|
Total |
|
|
|
|
||||||||
|
Number of |
|
|
|
|
|
Paid in |
|
|
Distributable |
|
|
|
|
|||||
For the Nine Months Ended September 30, 2022 and 2021 |
Shares |
|
|
Par Value |
|
|
Capital (1) |
|
|
Loss |
|
|
Total |
|
|||||
BALANCE, December 31, 2021 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
188,846 |
|
|
$ |
(81,844 |
) |
|
$ |
107,029 |
|
Net investment loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,797 |
) |
|
|
(1,797 |
) |
Net realized gain on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,274 |
|
|
|
10,274 |
|
Net change in unrealized depreciation on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,330 |
) |
|
|
(17,330 |
) |
BALANCE, September 30, 2022 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
188,846 |
|
|
$ |
(90,697 |
) |
|
$ |
98,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
BALANCE, December 31, 2020 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
229,481 |
|
|
$ |
(120,561 |
) |
|
$ |
108,947 |
|
Net investment loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,259 |
) |
|
|
(2,259 |
) |
Net realized gain on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
349 |
|
|
|
349 |
|
Net change in unrealized appreciation on investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,039 |
|
|
|
4,039 |
|
Net realized loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(815 |
) |
|
|
(815 |
) |
BALANCE, September 30, 2021 |
|
2,711,068 |
|
|
$ |
27 |
|
|
$ |
229,481 |
|
|
$ |
(119,247 |
) |
|
$ |
110,261 |
|
See accompanying notes to consolidated financial statements.
5
Logan Ridge Finance Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net (decrease) increase in net assets resulting from operations |
|
$ |
(8,853 |
) |
|
$ |
1,314 |
|
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Purchase of investments |
|
|
(83,795 |
) |
|
|
(43,275 |
) |
Repayments and sales of investments |
|
|
83,800 |
|
|
|
127,519 |
|
Net realized gain on investments |
|
|
(10,274 |
) |
|
|
(349 |
) |
Net change in unrealized depreciation (appreciation) on investments |
|
|
17,330 |
|
|
|
(4,039 |
) |
Net realized loss on extinguishment of debt |
|
|
— |
|
|
|
815 |
|
Payment-in-kind interest and dividends |
|
|
(737 |
) |
|
|
(393 |
) |
Accretion of original issue discount on investments |
|
|
(1,255 |
) |
|
|
(156 |
) |
Amortization of deferred financing fees and original issue discount |
|
|
729 |
|
|
|
1,059 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Interest and dividend receivable |
|
|
(233 |
) |
|
|
1,278 |
|
Prepaid expenses |
|
|
450 |
|
|
|
(2,511 |
) |
Receivable for unsettled trades |
|
|
685 |
|
|
|
(3,101 |
) |
Other assets |
|
|
(30 |
) |
|
|
(106 |
) |
Management and incentive fees payable |
|
|
(138 |
) |
|
|
(2,661 |
) |
Interest and financing fees payable |
|
|
378 |
|
|
|
(920 |
) |
Payable for unsettled trades |
|
|
(8,884 |
) |
|
|
— |
|
Accounts payable and accrued expenses |
|
|
(164 |
) |
|
|
4,489 |
|
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES |
|
|
(10,991 |
) |
|
|
78,963 |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Repayment of SBA-guaranteed debentures |
|
|
— |
|
|
|
(91,000 |
) |
Prepayment penalty on SBA-guaranteed debentures |
|
|
— |
|
|
|
(519 |
) |
Proceeds from issuance of 2032 Convertible Notes |
|
|
13,950 |
|
|
|
— |
|
Repayment of 2022 Notes |
|
|
(22,833 |
) |
|
|
— |
|
Repayment of 2022 Convertible Notes |
|
|
(52,088 |
) |
|
|
— |
|
Borrowings under KeyBank Credit Facility |
|
|
71,776 |
|
|
|
25,000 |
|
Repayments under KeyBank Credit Facility |
|
|
(26,000 |
) |
|
|
(25,000 |
) |
Deferred financing fees paid |
|
|
(1,607 |
) |
|
|
— |
|
NET CASH USED IN FINANCING ACTIVITIES |
|
|
(16,802 |
) |
|
|
(91,519 |
) |
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(27,793 |
) |
|
|
(12,556 |
) |
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
39,056 |
|
|
|
49,942 |
|
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
11,263 |
|
|
$ |
37,386 |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
4,401 |
|
|
$ |
7,621 |
|
See accompanying notes to consolidated financial statements.
6
Logan Ridge Finance Corporation
Consolidated Schedule of Investments
(in thousands, except for units/shares)
September 30, 2022
(unaudited)
Investment (1), (2), (3), (4), (5) |
|
Industry |
|
Interest Rate (+) |
|
Reference Rate |
|
Floor (+) |
|
Maturity |
|
Par/Shares (++) |
|
|
Cost |
|
|
Fair Value |
|
|
Footnotes |
|||
Investments in Non-Control, Non-Affiliate Portfolio Companies - 169.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
First Lien/Senior Secured Debt - 115.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accordion Partners LLC |
|
Industrials |
|
9.80% |
|
SOFR + 6.25% |
|
0.75% |
|
08/29/2029 |
|
|||||||||||||