Portman Ridge Finance Q4 Earnings Call Highlights

BCP Investment Corporation executives highlighted a year of significant corporate activity and capital structure changes during the company’s fourth-quarter and full-year 2025 earnings call, while also addressing portfolio credit trends, net asset value (NAV) pressure, and their approach to new investment deployment in a competitive lending environment.

2025 described as a “transformational year”

Chief Executive Officer Ted Goldthorpe said 2025 marked a “transformational year” for the company, pointing to a merger and rebranding completed in the second half of the year. In July, the company completed its merger with Logan Ridge, and in August it executed a rebranding and name change intended to reflect its affiliation with the broader BC Partners credit platform and its long-term growth vision.

Goldthorpe also emphasized capital management actions undertaken in 2025. In December, the company completed a tender offer, purchasing roughly 558,000 shares at an aggregate cost of about $7.6 million. Management said the tender offer was accretive to NAV by $0.18 per share.

In addition, the company extended and laddered unsecured debt maturities, issuing $75 million of 7.75% notes due October 2030 and $35 million of 7.5% notes due October 2028, while redeeming its 4.875% notes due 2026. Goldthorpe said the steps diversified the funding base and provided enhanced financial flexibility.

Dividend actions and share repurchase authorization

Management said the board approved a quarterly base distribution of $0.32 per share for the quarter ended March 31, 2026. The company will also transition its base dividend schedule from quarterly to monthly beginning in April 2026, while retaining the potential for quarterly supplemental distributions. The board approved a regular monthly base distribution of $0.09 per share for each of April, May, and June 2026.

Separately, Goldthorpe noted the board authorized a renewed stock purchase program of up to $10 million for roughly a one-year period, approved on March 4, 2026.

Quarterly results: NII declined; NAV fell on realized and unrealized losses

For the quarter ended Dec. 31, 2025, the company generated net investment income (NII) of $7.4 million, or $0.57 per share, down from $8.8 million, or $0.71 per share, in the prior quarter, according to management’s prepared remarks. For full-year 2025, NII totaled $25.1 million, or $2.28 per share, compared with $24.0 million, or $2.59 per share, in 2024.

Chief Financial Officer Brandon Satoren said total investment income was $17.5 million for the fourth quarter, down $1.4 million sequentially, primarily due to a distribution from the Great Lakes joint venture that was $1.3 million lower than the prior quarter and historical levels because of a non-recurring item. Satoren also cited the impact of two additional investments moving to non-accrual and decreases in base rates. Full-year total investment income was $61.2 million versus $62.4 million in 2024.

Total expenses were $10.1 million for the quarter, down $0.2 million from the prior quarter, as lower incentive fees and general and administrative expenses were partially offset by higher financing costs tied to “30 days of duplicative interest expense” associated with calling the company’s April 2026 notes, which Satoren quantified at $0.5 million. For the year, total expenses were $36.2 million, down $2.2 million from 2024, primarily due to lower incentive fees.

Satoren reported that core net investment income for the quarter was $4.1 million, or $0.32 per share, compared with $5.2 million, or $0.42 per share, in the third quarter.

NAV declined during the quarter. As of Dec. 31, 2025, NAV totaled $209.2 million, down $22.1 million, or 9.6%, from the prior quarter. NAV per share was $16.68, down $0.87, or 5%, from $17.55. Satoren said the difference between the percentage declines reflected the accretive impact of the tender offer and buyback activity.

He attributed the quarter’s NAV decline primarily to $14.5 million of net realized and change in unrealized losses on the portfolio, as well as core net NII not covering the dividend paid during the quarter by approximately $2 million.

Portfolio activity, yields, and non-accruals

Chief Investment Officer Patrick Schafer said the company was “intentionally prudent” on new investment deployment during the fourth quarter while executing the debt refinancing and tender offer. Schafer described competition as elevated across sponsor-backed direct lending—particularly for higher-quality assets—with lenders competing on spreads, terms, and certainty of execution.

Originations totaled $9.6 million in the fourth quarter, while repayments and sales were $40.4 million, resulting in net repayments and sales of about $30.8 million. Schafer said the overall yield on par value of new debt investments during the quarter was 11.8%. He compared that with a 12.9% weighted average annualized yield (excluding income from non-accruals and CLOs) as of Dec. 31, 2025.

At year-end, the debt investment portfolio (excluding CLO funds, equities, and joint ventures) was spread across 74 portfolio companies and 34 industries, with an average par balance of $3.5 million per investment, according to Schafer.

Non-accruals increased. Schafer said that as of Dec. 31, 2025, the company had 13 investments on non-accrual status attributable to 10 portfolio companies, representing 4.0% of the portfolio at fair value and 7.1% at cost. At Sept. 30, 2025, the company had 10 investments on non-accrual status attributable to eight portfolio companies, representing 3.8% at fair value and 6.3% at cost.

Schafer also discussed portfolio pricing and potential NAV uplift as assets rotate, stating that excluding non-accruals, the aggregate debt portfolio was $391.7 million at fair value, representing a blended price of 92.7% of par value and 81.5% comprised of first lien loans at par value. He said that assuming par recovery, Dec. 31, 2025 fair values reflected a potential $30.9 million of incremental net value, or a 14.8% increase to NAV. Under an illustrative scenario applying a 10% default rate and 70% recovery rate, Schafer said the debt portfolio would generate an incremental $1.46 per share of NAV, or an 8.7% increase, as it rotates.

Balance sheet, refinancing, and management commentary on credit markets

On leverage, Satoren said the company ended the year with gross and net leverage ratios of 1.5x and 1.4x, respectively, compared with 1.4x and 1.3x in the prior quarter. As of Dec. 31, 2025, borrowings outstanding were $312.3 million with a weighted average contractual interest rate of 6.9%, compared with $324.6 million at 6.1% in the prior quarter. The company had $124.7 million of available borrowing capacity under its senior secured revolving credit facilities, subject to borrowing base restrictions.

Satoren said the company refinanced $108 million of unsecured notes maturing in April 2026 by issuing the $75 million 7.75% notes due October 2030 and the $35 million 7.5% notes due October 2028, describing the move as reducing near-term refinancing risk and improving maturity staggering.

Goldthorpe also addressed recent credit market developments affecting software valuations. He said the company had observed a “notable risk off move in public software valuations” in recent weeks, driven by uncertainty around AI adoption and competitive dynamics rather than broad-based sector fundamentals. He noted software represented approximately 12.5% of the portfolio’s fair market value and said an internal review assessed the “overwhelming majority” of software exposure as low to medium AI impact, with only a small portion viewed as high impact.

During the Q&A, Goldthorpe said he did not see the company pursuing organic growth and suggested buybacks remained attractive given where the stock trades, noting that repayments and sales exceeded originations and that management viewed liquidations followed by buybacks as more accretive. He also said the company’s M&A pipeline was “bigger than it’s ever been,” including both public and unlisted entities, and described continued consolidation as a key part of the strategy.

Executives also provided specific drivers behind certain portfolio marks. Management said the largest realized loss driver was a portfolio company called CP Flex, which Schafer attributed to a late-stage sale process impacted by junior lenders creating “hold-up value.” For unrealized depreciation, Schafer cited HDC Hostway, describing a process involving the sale of two business units and using a lower “re-traded” valuation for marks after a buyer came back at a discount on the remaining unit.

Some shareholders and an analyst pressed management on longer-term NAV declines and whether mergers have benefited shareholders. Goldthorpe said management could provide additional disclosure, including revisiting presentation detail showing purchase prices versus monetizations, and offered to continue the discussion with shareholders offline.

About Portman Ridge Finance (NASDAQ:PTMN)

Portman Ridge Finance (NASDAQ: PTMN) is a publicly traded, closed-end management investment company that has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940. Since its formation in 2015, the firm has focused on providing customized financing solutions to U.S. middle-market companies, including senior secured loans, unitranche instruments, mezzanine debt and select equity co?investments. Its flexible approach allows Portman Ridge to structure transactions that address a range of sponsor-backed and privately negotiated financing needs.

The company’s portfolio spans a variety of industry sectors such as healthcare, business services, consumer goods and industrials.