PennantPark Investment Corporation (NASDAQ:PNNT) Q2 2019 Earnings Conference Call - Final Transcript

May 10, 2019 • 12:00 am ET

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PennantPark Investment Corporation (NASDAQ:PNNT) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Art Penn

and no signs of recession. We remain focused on long term value and making investments that will perform well over an extended period of time and can withstand different business cycles.

We are first called for middle market financial sponsors management teams and intermediaries who want consistent and credible capital. As an independent provider, free of conflicts or affiliations, we are trusted financial partner for our clients. In general, our overall portfolio is performing well with cash interest coverage ratio of 2.7 times and a debt to EBITDA ratio of 5.2 times at cost on our cash flow loans.

With regard to our energy related portfolio, we are pleased that we've made progress monetizing some of those investments at reasonable values over the last year. We are also pleased to see higher energy prices over the last few months, which resulted in increases in the fair market value of our energy investments in this past quarter. RAM is focusing on its Austin Chalk position in Eastern Texas. The Company commenced a limited drilling program. The early results have been strong on an absolute basis and relative to other operators in the area. We are encouraged by their early performance. RAM plans to solely focus on the development of the Austin Chalk assets and monetize all other assets over time. The positive fair market value increases of our energy portfolio this past quarter was more than offset by valuation declines and other assets as we move towards exit of investments that are largely equity positions.

As a result, our overall NAV was down for the quarter. As of March 31, Park Holdings was our largest debt investment. We are pleased that the recapitalization and exit of that investment closed yesterday. It was a complex situation and we are thankful of the efforts of everyone to make the deal happen including the existing ownership, new investors, government agencies, and regulators who all worked tirelessly to make it happen.

We received our interest and principal at about 98% of original cost. This resulted in a realized IRR of 13.8% and a multiple on invested capital of about 1.6 times. We are thrilled with the realized returns of this investment and are looking forward to using these proceeds to further our strategic direction of a more diversified portfolio with more modest bite sizes which are higher in the capital stack.

In terms of new investments, we've known these particular companies for a while, have studied the industries or have a strong relationship with the sponsor. Let's walk through some of the highlights. We purchased $1.2 million of revolver and $17.6 million of a first lien term loan of HW Holdco, Hanley-Wood. The company is a business-to-business data, marketing and media company, primarily serving the residential construction market. MidOcean Partners is the sponsor. We purchased $15.4 million of the first lien term loan and funded $900,000 of the revolver at Lombart Brothers. The company is a manufacturer and distributor of ophthalmic equipment. Atlantic Street is