Capitala Finance Corp. (NASDAQ:CPTA) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 08:30 am ET

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Capitala Finance Corp. (NASDAQ:CPTA) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

At this time, I would like to welcome everyone to the Capitala Finance Corp.'s conference call for the quarter ended June 30, 2020. [Operator Instructions] Today's call is being recorded, and a replay will be available approximately 3 hours after the conclusion of the call on the company's website at www.capitalagroup.com under the Investor Relations section.

The host for today's call are Capitala Finance Corp.'s Chairman and Chief Executive Officer, Joe Alala; and Chief Financial Officer and Chief Operating Officer, Steve Arnall.

Capitala Finance Corp. issued a press release on August 4, 2020, with details of the company's quarterly financial and operating results. A copy of the press release is available on the company's website.

Please note that this call contains forward-looking statements that provide information other than historical information, including statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in the forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the section titled Risk Factors and Forward-looking Statements in the company's quarterly report on Form 10-Q. Capitala undertakes no obligation to update or revise any forward-looking statements.

At this time, I would like to turn the meeting over to Joe Alala.

Executive
Joe Alala

Thank you, operator. Good morning, and thank all of you for joining us today. During the second quarter, we monetized over $10 million of assets to cash, improving NAV and materially reducing portfolio exposure to COVID-sensitive companies. We currently have approximately $95 million cash focused on leveraging the balance sheet. Net asset value at June 30, 2020, was $6.46 per share, up from $6.27 per share at March 31, 2020. The increase was the result of appreciation in our investment portfolio.

At June 30, we had $95.2 million of cash. During the second quarter, we received $51.1 million of repayments, resulting from the wind down of Capitala Senior Loan Fund II and a number of repayments, including the repayment of investments held in COVID-sensitive and consumer-facing businesses. As a result, the company is in a great position to reduce leverage through the repayment of SBA debt maturities and the prepayment and/or buyback of other debts outstanding.

At quarter-end, we had 5 debt investments on nonaccrual status, down from 8 at the prior quarter-end. Our portfolio management team will continue to work with all of our portfolio of companies, management teams and sponsors, where appropriate, in an effort to reduce the level of nonperforming investments. Distributions remain suspended for third quarter of 2020. We understand the need to rebuild net investment income in support of future distributions and are focused on that end. Continued progress on reducing nonaccrual loans and the closing of new investments during the second half of 2020 will help in this regard.

Looking ahead, we are in a good position from a liquidity standpoint both at Capital Finance Corp. and across our entire