PennantPark Investment Corporation (NASDAQ:PNNT) Q1 2019 Earnings Conference Call Transcript
Feb 08, 2019 • 10:00 am ET
And first we will hear from Casey Alexander with Compass Point Research Trading.
Hi, good morning. I have two questions. One that's a little more specific and then one that is a little more market general. First of all on the specific side, could you take us through the actual puts and takes on the investment gains and losses in the quarter? There, it looks like there are some tides going in both directions, and I think it would be helpful both on individual names that had significant moves, as well as how much or to what degree there were marks taken that were directly related to the volatility of the credit markets and commodity markets in the fourth quarter?
Thanks. Thanks Casey. Was that your first question?
That's the first question. Yes.
Okay. So look, overall, about 15% of the portfolio is broker-dealer quoted. Clearly the broker dealer quotes were a little soft as of December 30. December 31 wasn't a lot of training as far as we could tell. I don't have a quick quantification of how much that was, but it's about 15% of the portfolio.
In terms of substantial unrealized winners and unrealized losers, at least on a mark-to-market basis, I'll just give you some of the names. The winners included RAM Energy, AKW and BlackHawk Industrial, and some of the markdowns included Superior Digital and ETX. I mean, those were kind of a handful of five biggest movers up and down over the course of the quarter.
Okay, great. That's helpful. Thank you.
Secondly, and this is more -- well it's certainly general and specific. Obviously, everybody knows that there was a lot of volatility in credit markets during the fourth quarter. Love to hear how it impacted your originations and how you feel it impacts the originations that you're doing? How it may have impacted or changed your pipeline and your thoughts around that because it clearly was a volatile market, but you guys had a very successful origination quarter.
Yes. So I'll give you a -- hopefully I do have(ph)much of a long-winded answer, but we think it's important for you and others to understand, maybe the differences between the various types of markets. There is the broadly syndicated loan market, which takes its cue from the volatility and ETFs and CLOs, and that was where you saw some mark-to-market -- real movement in December over two, three week time period. That's where deals get financed for companies who generally have over $50 million of EBITDA, to where they generally come to get financed. Investors basically make their investment decisions based on a one-hour bank meeting. There is generally no covenants. These are covenant light deals. Generally, there's more --
leverage they are higher leveraged than the deals we do, and we generally shy away from that end of the market.
We focus today mostly on the self-originated middle market, which generally doesn't really move. It's a much more placid environment. And