THL Credit, Inc. (NASDAQ:TCRD) Q1 2019 Earnings Conference Call Transcript

May 10, 2019 • 10:30 am ET

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THL Credit, Inc. (NASDAQ:TCRD) Q1 2019 Earnings Conference Call Transcript

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Presentation
Executive
Christopher J. Flynn

me summarize our financial results for the quarter and provide an update on our progress since our March call. First, our investment income of $0.21 per share, or $0.22 excluding the one-time items for the quarter was in line with our Q1 dividend of $0.21. Secondly, NAV for the quarter declined by 2% to $8.96 per share due to an additional markdown taken on our position in LAI. We marked our original investment in LAI down in Q4 and indicated that the Company was in the sale process on our March call. And in Q1, we stepped in to support the business with an additional $10 million investment to address liquidity needs ahead of the sale, which we expect to close next week. The markdown this quarter on our original investment reflects our expected sale proceeds. We expect to exit the new dollars contributed in Q1 at par.

Overall, apart from this markdown in LAI, we are pleased with the performance of the remainder of the portfolio, which was either flat or up for the quarter. I will go into more detail on the portfolio in a minute. I'd like to highlight some additional progress since our earnings call in March. First, we continue to improve the overall diversification of the portfolio by adding smaller positions and proactively exiting more concentrated positions. The average size of four new investments made year-to-date in 2019 is $4 million, which is less than 1% of the portfolio and well below our target max hold of 2.5%.

And since the start of 2018, the average size of our 13 new investments made is $6 million or 1.2%. Our co-investment capabilities across our private funds, including our middle-market CLOs, have allowed us to take smaller hold sizes within the BDC and achieve our diversification goals, while still executing on our strategy as being a leading investor and originator in middle market private credit. We continue to benefit from a robust high-quality deal flow from our broader direct lending platform. The platform has invested over $500 million across 34 investments since Q1 2018. The growth of our private capital vehicles has allowed us to be lead in -- on the majority of these deals, while maintaining the diversity requirements inside of our BDC.

We've continued to make progress exiting our more concentrated investments. Hart InterCivic, our third largest division at 5% of the portfolio, was repaid at par at the quarter end. Over the last 12 months, we've proactively exited or reduced the size of four other concentrated positions, A10, Alex Brands, MeriCal and Hart. There are currently 10 remaining positions with the hold size in excess of 2.5%. While we are proactively monitoring all the remaining concentrated positions, we continue to be especially focused from a risk and diversification perspective on three positions, which I highlighted on last quarter's call. They are Charming Charlie, Holland and OEM.

First, let me address Charming Charlie. With the completion of the refinancing of its ABL facility in March,