Phenixfin Corporation · NASDAQ:PFX
Phenixfin — Medley Capital — Q1 FY2015 Earnings Presentation
29 slides from Phenixfin's earnings presentation, February 2015
Slide 1: Medley Capital Corporation Investor Presentation
Medley Capital Corporation (NYSE: MCC) Investor Presentation Quarter Ended December 31, 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. Majority Floating Rate Senior Secured Assets 6. Revised Quarterly Dividend Remains Attractive And Is Covered By NII Per Share Page 3
Slide 4: Strong Relative Dividend On Current Share Price
Strong Relative Dividend On Current Share Price • MCC’s revised dividend provides an attractive current yield for investors compared to our BDC peers Current Annualized Dividend Yield On Current Share Price1 and Quarterly Dividend Coverage From NII Per Share2 128% 130% 14.0% 13.2% 117% 120% 112% 120
Slide 5: Strong Relative Dividend On NAV Per Share
Strong Relative Dividend On NAV Per Share • MCC’s revised dividend provides an attractive current yield on NAV for investors compared to our BDC peer median Current Annualized Dividend Yield On NAV Per Share1 and Quarterly Dividend Coverage From NII Per Share2 12.0% 128% 10.7% 120% 125% 10.2% 10.2%
Slide 6: 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 14.0% 13.2% 1.20 1.00 12.0% 1.00 0.93 0.85 10.0% 9.7% 0.85 0.80 0.80 0.73 7.9% 8.0% 0.60 6.0% 0.40 4.0% 2.8% 2.0% 2.0% 2.0% 0.20 2.0% 0.0% 0.00 1 2 3 4 5 4 3 1 2 MCC B
Slide 7: MCC Delivers Attractive Risk Adjusted Return on Equity
MCC Delivers Attractive Risk Adjusted Return on Equity • The BDC industry, as well as MCC individually has historically minimized net realized losses relative to other credit-related assets while offering higher return on equity Return on Equity Historical Cumulative Loss Rates BDCs offer an attract
Slide 8: 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 0.78x 13.2% 0.71x 11.5% BDCs 4 0.89x 9.7% 0.77x 9.7% REITs 5 2.87x 2.8% 0.98x 8.1% MLPs 6 3.18x 7.9% 1.44x 11.0% Bank
Slide 9: Company Overview
COMPANY OVERVIEW
Slide 10: 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 11: 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 10% 9% 20% 31% 3% 23.8% 17% 19% 90% Direct Syndicated International: 1% 1. Based on fair value of inv
Slide 12: Investment Process – Disciplined
Investment Process – Disciplined Selective Filter – LTM 12/31/2014 Portfolio Construction Senior Secured Deals Originated • UCC (lien) filings / Cash control / Covenants 1,400 Broadly diversified • Sector / Collateral / Position size / Geography Thorough diligence Early Read Memo • Deep underwriting
Slide 13: Highly Diversified Senior Secured Floating Rate Portfolio
Highly Diversified Senior Secured Floating Rate Portfolio • MCC has a diversified portfolio of 76 companies with a 12.5% weighted average yield1 Industry Geography Business Services Buildings and Real Estate 2% 2%0% 2% Automobile 1% 9% 2% 14% 2% Healthcare, Education and Childcare 2% Oil and Gas 20%
Slide 14: Oil & Gas Exposure
Oil & Gas Exposure • MCC oil and gas exposure is in line with its BDC peers Percentage of Portfolio in Energy Energy Portfolio Assets by Security 16% GBDC 100% 14% 14% FSC 100% 12% TCRD 98% 2% 12% NMFC 97% 3% 10% 10% MCC 96% 4% 9% TSLX 93% 7% 8% 7% 7% 7% PSEC 75% 5% 7% 12% 6% ARCC 73% 27% 5% 4% PNNT
Slide 15: Well Positioned for a Rising Rate Environment
Well Positioned for a Rising Rate Environment • Positioned for a rising interest rate Basis Interest Interest Point Income Expense NII % NII environment Change Change Change Change Change • 75% of the portfolio is floating rate 100 $2,400 $4,900 $(2,500) -3.2% • 34% of interest bearing liabilities a
Slide 16: Expense Margins across Comparable Asset Classes
Expense Margins across Comparable Asset Classes • MCC’s cost structure is consistent with most of its BDC peers • BDCs offer low expenses compared to other assets classes, providing investors with outsized returns Expense Margins as a % of Total Revenue 1 80% 69% 70% 60% 57% 50% 47% 40% 37% 32% 32%
Slide 17: One of the Highest Number of Professionals to Asset Ratios
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 3.5 2.9 3.0 2.5 2.1 2.0 1.8 1.4 1.5 1.4 1.0 1.0 0.7 0.5 0.5 0.0 TCPC MCC TCRD TS
Slide 18: Attractive Industry Dynamics
Attractive Industry Dynamics
Slide 19: 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 20: 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 20
Slide 21: 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% Bank Participation in Levered Loan Market (%)² 70% 10,000 60% 9,000 50% 8,000 40% 30% 7,000 20% 6,000 10% 5,00
Slide 22: 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 23: MCC Financial Results
MCC Financial Results
Slide 24: Performance Overview
Performance Overview • Quarterly dividend of $0.30 per share for quarter ending 12/31/14 • Diversified portfolio with weighted average loan-to-value of 58.9% through MCC’s debt • 12.5% portfolio yield as of 12/31/141 • FY Q4 2014 gross investment originations of $93.9 million • Total debt/credit fac
Slide 25: Financial & Portfolio Highlights
Financial & Portfolio Highlights Financial Highlights 12/31/14 9/30/14 6/30/14 3/31/14 12/31/13 Net investment income per share $ 0.35 $ 0.37 $ 0.41 $ 0.38 $ 0.42 Net realized gains (losses) $ - $ (0.01) $ 0.02 $ - $ - Net unrealized gains (losses) $ (0.66) $ (0.18) $ (0.10) $ (0.09) $ (0.07) Provis
Slide 26: Select Financial & Portfolio Information
Select Financial & Portfolio Information As of and for the Three Months Ended (dollars in millions, except per share data) 12/31/14 9/30/14 6/30/14 3/31/14 12/31/13 Net investment income per share - basic & diluted $ 0.35 $ 0.37 $ 0.41 $ 0.38 $ 0.42 Net realized and unrealized gains per share - basi
Slide 27: Balance Sheet
Balance Sheet As of (dollars in thousands, except per share data) 12/31/14 9/30/14 6/30/14 3/31/14 12/31/13 ASSETS (Unaudited) (Audited) (Unaudited) (Unaudited) (Unaudited) Investments at fair value Non-control/non-affiliate investments $ 1,162,864 $ 1,185,859 $ 1,033,052 $ 949,197 $ 809,125 Control
Slide 28: Transaction Summary
Transaction Summary Closed Deals in Q1 FY20151 Totaling $94M By Investment Type By Industry 1% 1% 5% 1% 5% 25% 6% 6% 42% 11% 74% 23% Senior Secured First Lien Loans Healthcare, Education and Childcare Senior Secured Second Lien Loans Mining, Steel, Iron and Nonprecious Metals Equity Finance Retail D
Slide 29: 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