Phenixfin Corporation · NASDAQ:PFX
Phenixfin — Medley Capital — Q4 FY2014 Earnings Presentation
31 slides from Phenixfin's earnings presentation, December 2014
Slide 1: Medley Capital Corporation Investor Presentation, Quarter Ended September 30, 2014
Medley Capital Corporation (NYSE: MCC) Investor Presentation Quarter Ended September 30, 2014
Slide 2: Important Notice
Important Notice This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation du
Slide 3: Key Investment Highlights
Key Investment Highlights 1. Attractive Market Dynamics 2. Seasoned Management Team 3. Direct Origination Model 4. Disciplined Investment Process 5. History of Covering Our Dividend with Net Investment Income 6. Majority Floating Rate Senior Secured Assets Page 3
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Medley's Platform
Medley's Platform • Medley is a CREDIT-FOCUSED direct lender to the middle market MEDLEY (NYSE: MDLY) Public Vehicles Private Vehicles Medley Capital Separately Sierra Income Institutional Corporation Managed Corporation Funds (NYSE: MCC) Accounts CLIENTS INCLUDE: › Pension Funds › Endowments › Publ
Slide 6: Investment Strategy – Overview
Investment Strategy – Overview Focus Results 1. Direct Origination • Middle-market borrowers 1. Higher returns • Lead / sole lender 2. Careful Underwriting and 2. Lower risk Structuring • Senior • Secured 3. Strong risk-adjusted returns • Floating rate • Diversified portfolio 4. MCC annualized total
Slide 7: Investment Process – National Origination Platform
Investment Process – National Origination Platform • Seasoned 80+ person team • Institutionalized direct origination and underwriting process MCC Deal Flow by Source 1 MCC Investments by Geography 2 11% 8.9% 22.3% 29.2% 2.6% 23.8% 19.7% 16.4% 89% Direct Syndicated International: 0.9% 1. Based on fai
Slide 8: Investment Process – Disciplined
Investment Process – Disciplined Selective Filter – LTM 9/30/2014 Portfolio Construction Senior Secured Deals Originated • UCC (lien) filings / Cash control / Covenants 1,350 Broadly diversified • Sector / Collateral / Position size / Geography Thorough diligence Early Read Memo • Deep underwriting
Slide 9: Highly Diversified Senior Secured Floating Rate Portfolio
Highly Diversified Senior Secured Floating Rate Portfolio Industry Geography Business Services Buildings and Real Estate 2%1% Automobile 1% 2%2% 11% 9% 2% Oil and Gas 3% Aerospace & Defense 3% Home Furnishings and Durable Consumer Products 22% Northeast 3% Healthcare, Education and Childcare 10% Per
Slide 10: Industry Leading Return on Equity
Industry Leading Return on Equity 15.00% 12.00% MCC 1 12.0% BDCs 1 10.4% 9.00% Banks 2 8.6% REITs 3 7.7% 6.00% 3.00% 0.00% 1. MCC and BDC ROE calculation based off of LTM NII/Average Shareholder Equity. BDCs include: AINV, ARCC, FSC, FSIC, GBDC, NMFC, PNNT, PSEC, TCPC, TCRD and TSLX. 2. Bank ROE cal
Slide 11: Well Positioned for a Rising Rate Environment
Well Positioned for a Rising Rate Environment • Positioned for a rising interest rate environment Basis Interest Interest Point Income Expense NII % NII • 74% of the portfolio is floating rate Change Change Change Change Change 100 $2,300 $4,200 $(1,900) -2.5% • 40% of interest bearing liabilities a
Slide 12: Asset Growth, Net Investment Income and Dividends per Share
Asset Growth, Net Investment Income (“NII”) and Dividends per Share • While assets under management have grown since our inception, our focus remains on protecting our Net Asset Value (“NAV”) and covering the dividend with NII $0.42 $0.41 $0.41 $0.39 $0.38 $0.37 $0.37 $0.36 $0.36 $0.36 $0.37 $0.37 $
Slide 13: Strong Relative Dividend
Strong Relative Dividend Current Annualized Dividend Yield and Dividend Per Share 1 20.0% 18.0% $1.00 16.1% 16.0% $1.48 14.4% $1.10 14.0% 13.3% $1.12 $1.36 12.0% $0.80 11.0% 10.8% $1.52 $1.36 $1.56 10.1% $0.89 $1.44 10.0% 9.5% 9.2% 9.0% 8.9% 8.7% $1.28 8.0% 7.3% 6.0% 4.0% 2.0% 0.0% MCC PSEC FSC PNNT
Slide 14: One of the Highest Number of Professionals to Asset Ratios in the Industry
One of the Highest Number of Professionals to Asset Ratios in the Industry • Medley has made a significant investment to build out the team ahead of portfolio growth Number of Investment Professionals Per $100M in AUM 1 3.0 2.6 2.5 2.2 2.0 1.8 1.4 1.5 1.2 1.3 1.0 0.8 0.5 0.5 0.0 MCC TCPC TCRD TSLX F
Slide 15: Attractive Industry Dynamics
Attractive Industry Dynamics
Slide 16: The Opportunity – Middle-Market is Substantial
The Opportunity – Middle-Market is Substantial 2013 Top GDPs1 $16.8 Middle-Market • Accounts for 40% of GDP2 2 • Standalone would be the world’s 3rd largest economy • Companies tend to be private with less access to traditional credit $9.2 $6.7 $4.9 $3.6 $2.7 $2.5 $2.2 United States China US Middle
Slide 17: The Opportunity – Large Number of Borrowers
The Opportunity – Large Number of Borrowers Number of Businesses by Market1 39,000 Revenue: 2,000 $500M - $1B Revenue: $50M - $500M Target Market: 37,000 2,600 Revenue: $1B+ Large Market Middle Market 1. U.S. Census Bureau, 2007 Economic Census. Page 17
Slide 18: Powerful Secular Trends
Powerful Secular Trends • Banks continue to shift toward large borrowers • Regulatory environment is a headwind for banks in the middle-market 11,000 U.S. FDIC Insured Commerical Banks¹ 80% 2 Bank Participation in Levered Loan Market (%) 70% 10,000 60% 9,000 50% 8,000 40% 30% 7,000 20% 6,000 10% 5,0
Slide 19: Regulatory Pressure Continues for Banks
Regulatory Pressure Continues for Banks Level 3 Assets for Financial Firms 1 Total Assets of Publicly Traded BDCs 2 $350 $681 $300 $250 $200 BDC Opportunity as Banks Continue to Exit Level 3 Assets $297 $150 $100 $58 $51 $50 $42 $31 $27 $22 $26 $18 $21 $6 $11 $1 $0 2007 9/30/2014 Total Assets of BDC
Slide 20: BDC Industry Overview
BDC INDUSTRY OVERVIEW
Slide 21: BDCs Have Delivered Above Average Yields
BDCs Have Delivered Above Average Yields • BDCs provide investors with an attractive risk-adjusted current yield Dividend Yield Beta 1.20 16.0% 14.4% 1.00 14.0% 0.96 1.00 0.91 12.0% 0.86 0.79 0.80 10.0% 9.5% 0.63 8.0% 0.60 6.7% 6.0% 0.40 4.0% 2.9% 2.3% 0.20 1.9% 1.9% 2.0% 0.0% 0.00 MCC BDCs 1 MLPs 2
Slide 22: MCC Presents an Attractive Investment Opportunity
MCC Presents an Attractive Investment Opportunity • Attractive ROE with lower leverage levels vs. other yield oriented asset classes Price / NAV Dividend Yield 1 Leverage 2 ROE 3 MCC 0.8x 14.4% 0.6x 12.0% BDCs 4 1.0x 9.5% 0.6x 10.4% REITs 5 2.7x 2.9% 1.0x 7.7% MLPs 6 3.1x 6.7% 1.3x 10.5% Banks 7 1.4
Slide 23: MCC Has Outperformed vs Industry
MCC Has Outperformed vs Industry • Industry leading total return since IPO • Higher percentage of senior secured loans vs. the industry MCC Portfolio Mix at 9/30/2014 4% 3% Senior Secured % Of Cum. Net Annualized Realized Gain/Loss Total Return Subordinated Debt to Average Assets Since MCC Since MCC
Slide 24: MCC Financial Results
MCC Financial Results
Slide 25: Performance Overview
Performance Overview • Consistent quarterly dividend ($0.37 per share for quarter ending 9/30/14) • Diversified portfolio with weighted average loan-to-value of 57.4% through MCC’s debt • 12.6% portfolio yield as of 9/30/141 • FY Q4 2014 gross investment originations of $299.4 million • Completed 5.
Slide 26: Financial & Portfolio Highlights
Financial & Portfolio Highlights Financial Highlights 9/30/14 6/30/14 3/31/14 12/31/13 9/30/13 Net investment income per share $ 0.37 $ 0.41 $ 0.38 $ 0.42 $ 0.41 Net realized gains (losses) $ (0.01) $ 0.02 $ - $ - $ - Net unrealized gains (losses) $ (0.18) $ (0.10) $ (0.09) $ (0.07) $ 0.02 Provision
Slide 27: Select Financial & Portfolio Information
Select Financial & Portfolio Information As of and for the Three Months Ended (dollars in millions, except per share data) 9/30/14 6/30/14 3/31/14 12/31/13 9/30/13 Net investment income per share - basic & diluted $ 0.37 $ 0.41 $ 0.38 $ 0.42 $ 0.41 Net realized and unrealized gains per share - basic
Slide 28: Balance Sheet
Balance Sheet As of (dollars in thousands, except per share data) 9/30/14 6/30/14 3/31/14 12/31/13 9/30/13 ASSETS (Audited) (Unaudited) (Unaudited) (Unaudited) (Audited) Investments at fair value Non-control/non-affiliate investments $ 1,185,859 $ 1,033,052 $ 949,197 $ 809,125 $ 740,097 Control inve
Slide 29: Transaction & Backlog Summary
Transaction & Backlog Summary Closed Deals in Q4 FY20141 Totaling $299M By Investment Type By Industry 1.4% 5.0% 3.7% 2.3% 12.7% 5.7% 8.3% 14.1% 20.2% 52.8% 0.9% 2.4% 32.5% 6.9% 11.3% 8.3% 1.4% 9.9% 0.2% Senior Secured First Lien Loans Aerospace & Defense Automobile Senior Secured Second Lien Loans
Slide 30: Transaction & Backlog Summary
Transaction & Backlog Summary Backlog as of December 8, 2014 Totaling $236M By Asset Type By Industry 6.3% 11.0% 11.0% 18.8% 14.8% 6.4% 8.9% 89.0% 16.9% 16.9% Automobile Senior Secured First Lien Loans Buildings and Real Estate Senior Secured Second Lien Loans Business Services Chemicals, Plastics &
Slide 31: Corporate Information
Corporate Information Board of Directors Corporate Officers Research Coverage Corporate Counsel BROOK TAUBE BROOK TAUBE BARCLAYS CAPITAL INC. SUTHERLAND ASBIL & BRENNAN LLP Chairman & Chief Executive Officer Chairman & Chief Executive Officer Mark C. DeVries – (212)-526-9484 Washington, DC SETH TAUB