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1. Company Snapshot

1.a. Company Description

Logan Ridge Finance Corporation, formerly known as, Capitala Finance Corp.is a Business Development Company specializing in senior subordinated debt and unitranche debt, unitranche loan, first-lien and second-lien loans, lower middle market and middle market, equity co-investment in sponsored companies.The fund targets companies in the Aerospace, defense, business services, education, food and beverage, Industrial & Environmental Services, logistics, distribution, media, telecommunication, manufacturing, consumer goods and health-care industries.


It typically considers investments in the United States.The fund invests $5 million and $50 million per transaction in companies with EBITDA between $5 million to $50 million and enterprise value less than $250 million.The fund makes minority equity co-investments, alongside management or financial sponsors.

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1.b. Last Insights on LRFC

The recent 3-month performance of Logan Ridge Finance Corporation has been negatively impacted by several factors. The proposed sale of the company to Portman Ridge Finance Corporation has raised concerns among investors, with multiple law firms investigating the adequacy of the price and process. The transaction, which involves exchanging 1.50 newly issued shares of Portman for each share of Logan Ridge, has been met with skepticism, with some questioning whether it is fair to shareholders. Additionally, the company's disappointing financial performance, including declines in top and bottom lines and net asset value, has justified a significant discount to its net asset value.

1.c. Company Highlights

2. Logan Ridge Finance Corporation Q1 2025 Earnings: Navigating Challenges with Strategic Merger

Logan Ridge Finance Corporation reported mixed results for Q1 2025, highlighting both challenges and strategic initiatives to drive future growth. The company's net investment income per share (EPS) came in at $0.35, slightly below the consensus estimate of $0.37, reflecting a 30% sequential decline from Q4 2024. This was primarily attributed to lower non-recurring fees, reduced base rates, and timing of deployments. Despite these headwinds, the company maintained its dividend yield at 7.84%, providing a steady return for shareholders. As noted by Patrick Schafer, the pending merger with Portman Ridge is expected to enhance scale and operational efficiency, aligning with the strategic direction set since BC Partners Credit took over as external manager in 2021.

Publication Date: May -10

📋 Highlights
  • Portfolio Strengthening: Reduced legacy equity portfolio to 10.8% of total portfolio fair value after exiting GA Communications, focusing on long-term earnings growth.
  • Portfolio Composition: $169.6 million portfolio across 59 companies, with 71.8% in BC Partners-originated assets and 86.6% in debt investments yielding 10.7% annually.
  • Financial Performance: Q1 2025 investment income was $4.6 million, down $0.8 million from Q4, with net investment income of $0.9 million or $0.35 per share.
  • Non-Accruals: Four debt investments in non-accrual, totaling $17.2 million in cost and $3.7 million in fair value, primarily due to Sequoia Healthcare.
  • Merger Impact: Pending merger with Portman Ridge expected to increase scale, liquidity, and operational efficiencies, with a new NAV determination post-merger using third-party marks and internal models.

Portfolio Performance and Strategic Initiatives

Logan Ridge's portfolio fair value stood at $169.6 million across 59 companies as of March 31, 2025, with a focus on debt investments yielding 10.7% annually. The company reduced its legacy equity portfolio to 10.8% of total portfolio fair value after exiting GA Communications. CEO Ted Goldthorpe emphasized the focus on monetizing the legacy equity portfolio to position for long-term earnings growth and shareholder value. The pending merger with Portman Ridge is a key strategic milestone, expected to bring increased scale, liquidity, and operational efficiencies.

Valuation and Financial Health

Despite the challenges, Logan Ridge's valuation metrics suggest potential upside. The stock trades at a price-to-book (P/B) ratio of 0.55, indicating a substantial discount to book value. Additionally, the company's free cash flow yield of 29.81% highlights strong cash generation capabilities. The net debt-to-EBITDA ratio of -0.61 underscores a conservative balance sheet, while the return on invested capital (ROIC) of 1176.51% reflects efficient capital deployment. These metrics collectively suggest that the market may be underestimating the company's intrinsic value, especially considering the potential benefits of the Portman Ridge merger.

Outlook and Strategic Positioning

Looking ahead, Logan Ridge is focused on integrating the Portman Ridge merger and further reducing its legacy equity portfolio. The company's portfolio remains heavily weighted towards first-lien debt, providing a level of security. However, the significant write-down on the Sequoia Healthcare legacy term loan and the $17.2 million in non-accruals across three companies highlight ongoing credit risks. Management remains confident in the strategy, positioning the company for long-term growth and value creation for shareholders.

3. NewsRoom

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Logan Ridge Finance Corporation Announces Adviser Funded Cash Payment to Shareholders in Connection with its Merger with Portman Ridge Finance Corporation

Jun -17

Source: globenewswire.com

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BDC Weekly Review: Questions About BDC Income And Price Trends

Jun -14

Source: seekingalpha.com

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Logan Ridge Announces Change of Date to the Special Meeting of Stockholders to Allow Additional Time for Stockholders to Vote “FOR” the Merger Proposal

Jun -05

Source: globenewswire.com

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Logan Ridge Finance: Poor Credit Quality Makes This 8% Yielding BDC One To Avoid

May -15

Source: seekingalpha.com

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Logan Ridge Finance Corporation (LRFC) Q1 2025 Earnings Call Transcript

May -09

Source: seekingalpha.com

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Logan Ridge Finance Corporation Announces First Quarter 2025 Financial Results

May -08

Source: globenewswire.com

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Two BDCs For 60 Cents On The Dollar: 1 To Buy And 1 To Avoid

Apr -17

Source: seekingalpha.com

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Logan Ridge Finance Corporation Schedules First Quarter 2025 Earnings Release and Conference Call

Apr -03

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.50%)

6. Segments

Investment and Related Activities

Expected Growth: 8.5%

Logan Ridge Finance Corporation's investment and related activities are poised for growth driven by increasing demand for debt and equity securities, rising loan demand, and effective risk management through hedging activities.

7. Detailed Products

Commercial Loans

Logan Ridge Finance Corporation offers commercial loans to businesses of all sizes, providing financing solutions for various business needs such as expansion, equipment purchases, and working capital.

Equipment Financing

Logan Ridge Finance Corporation offers equipment financing solutions to help businesses acquire new or used equipment, vehicles, or software, with flexible repayment terms and competitive rates.

Invoice Financing

Logan Ridge Finance Corporation offers invoice financing solutions to help businesses improve their cash flow by advancing funds against outstanding invoices.

Asset-Based Lending

Logan Ridge Finance Corporation offers asset-based lending solutions, using a company's assets as collateral to secure a loan, providing access to capital for various business needs.

Factoring

Logan Ridge Finance Corporation offers factoring solutions, providing immediate access to cash by purchasing outstanding invoices at a discount.

Mergers and Acquisitions Financing

Logan Ridge Finance Corporation offers financing solutions for mergers and acquisitions, providing capital for strategic business growth and expansion.

8. Logan Ridge Finance Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Logan Ridge Finance Corporation is moderate due to the presence of alternative financial institutions and online lending platforms.

Bargaining Power Of Customers

The bargaining power of customers is high due to the availability of multiple financial institutions and online platforms, giving customers the power to negotiate better rates and terms.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's strong financial position and ability to negotiate favorable terms with suppliers.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of regulatory barriers and the need for significant capital investment to enter the market.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of multiple established financial institutions and online lending platforms, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 56.43%
Debt Cost 3.95%
Equity Weight 43.57%
Equity Cost 10.47%
WACC 6.79%
Leverage 129.54%

11. Quality Control: Logan Ridge Finance Corporation passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Monroe Capital

A-Score: 6.8/10

Value: 6.1

Growth: 5.7

Quality: 7.1

Yield: 10.0

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

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SuRo Capital

A-Score: 6.3/10

Value: 7.5

Growth: 1.0

Quality: 9.3

Yield: 7.0

Momentum: 9.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
OFS Credit

A-Score: 6.2/10

Value: 4.8

Growth: 5.8

Quality: 7.2

Yield: 10.0

Momentum: 1.5

Volatility: 7.7

1-Year Total Return ->

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BNY Mellon Strategic Municipals

A-Score: 6.1/10

Value: 5.4

Growth: 4.1

Quality: 5.5

Yield: 7.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Logan Ridge Finance

A-Score: 5.3/10

Value: 6.5

Growth: 5.8

Quality: 2.4

Yield: 6.0

Momentum: 1.5

Volatility: 9.7

1-Year Total Return ->

View Full Report
Stock-Card
BrightSphere

A-Score: 4.6/10

Value: 2.7

Growth: 6.3

Quality: 7.1

Yield: 0.0

Momentum: 5.0

Volatility: 6.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

19.08$

Current Price

19.08$

Potential

-0.00%

Expected Cash-Flows