Phenixfin Corporation · NASDAQ:PFX
Phenixfin — Medley Capital — Q3 2015 Earnings Presentation
28 slides from Phenixfin's earnings presentation, August 2015
Slide 1: Medley Capital Corporation Investor Presentation
Medley Capital Corporation (NYSE: MCC) Investor Presentation Quarter Ended June 30, 2015
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. Focused on Floating Rate and Senior Secured Assets 6. Attractive Dividend Yield 7. Senior Loan Strategy Joint Venture Adds Investment Capacity Page 3
Slide 4: Strong Relative Dividend On NAV Per Share
Strong Relative Dividend On NAV Per Share • MCC’s dividend provides an attractive return on NAV for investors Current Annualized Dividend Yield On NAV Per Share 1 12.0% 11.2% 10.4% 10.2% 10.0% 9.8% 9.8% 9.7% 10.0% 9.5% 9.0% 9.0% 8.1% 7.9% 8.0% 6.0% 4.0% 2.0% 0.0% PNNT MCC TCRD AINV TSLX NMFC PSEC TC
Slide 5: Comparable Operating ROE & Expense Margins across Asset Classes
Comparable Operating ROE & Expense Margins across Asset Classes • BDCs offer high operating ROE with lower expense ratios compared to other asset classes Operating ROE and Expense Margins as a % of Total Revenue 1 100.0% 10.9% 10.4% 10.3% 9.9% 90.0% 10.0% 8.5% 80.0% 76.8% 70.0% 57.9% 60.0% 5.0% 50.0
Slide 6: BDCs Provide Attractive Risk-Adjusted Yields
BDCs Provide Attractive Risk-Adjusted Yields Dividend Yield Beta 16.0% 1.20 14.0% 14.0% 1.00 1.00 0.92 12.0% 0.81 0.77 0.80 0.79 10.0% 9.7% 8.5% 0.64 8.0% 0.60 6.0% 0.40 4.0% 3.6% 2.2% 2.1% 2.0% 0.20 2.0% 0.0% 0.00 4 MCC BDCs 1 MLPs 2 REITs 3 US 10-yr Banks 5 S&P 500 S&P 500 4 REITs 3 BDCs 1 MCC MLP
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, has historically offered higher ROE with lower cumulative losses Return on Equity Historical Cumulative Loss Rates BDCs offer an attractive return on equity with historically low loss rates 12.0% 35% 10.9% 31.
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 Operating Price / NAV Dividend Yield 1 Leverage 2 ROE 3 MCC 0.74x 14.0% 0.69x 10.9% BDCs 4 0.94x 9.7% 0.65x 10.3% REITs 5 2.39x 3.6% 1.11x 9.9% MLPs 6 2.54x 8.5% 1.63x
Slide 9: Highly Diversified Senior Secured Floating Rate Portfolio
Highly Diversified Senior Secured Floating Rate Portfolio • MCC has a diversified portfolio of 71 companies with a 12.4% weighted average yield1 Industry Geography 2 1%1%0% Services: Business 2%2% 2% Construction & Building 3% 13% Automotive 6% Healthcare & Pharmaceuticals 3% Banking, Finance, Insur
Slide 10: 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 18% GBDC 100% 16% 16% FSC 100% 14% 14% TCRD 98% 2% 13% TSLX 96% 4% 12% NMFC 95% 5% 10% MCC 94% 6% 8% PSEC 82% 6% 7% 5% 8% 6% ARCC 71% 29% 6% 6% 6% TCPC 60
Slide 11: Well Positioned for a Rising Rate Environment
Well Positioned for a Rising Rate Environment • MCC is well positioned for a rising interest Assets rate environment 12/31/2011 6/30/2015 • 77% of the portfolio is floating rate • 40% of liabilities are fixed rate Floating Fixed • Favorable asset & liability mix 34% 23% The weighted average maturi
Slide 12: Comparable Headcount to AUM
Comparable Headcount to AUM • Medley has made a significant investment to build out the team to support origination and asset management Number of Investment Professionals Per $100M in AUM 1 3.0 2.6 2.5 2.1 2.1 2.0 1.5 1.2 1.1 1.2 1.0 0.7 0.5 0.5 0.0 TCPC TCRD MCC FSC TSLX ARCC PSEC Investment Profe
Slide 13: Medley Overview
MEDLEY OVERVIEW
Slide 14: 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 15: 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 8% 10% 17% 33% 6% 92% 23.8% 14% 20% Direct Club 1. Based on fair value of investment portfolio at 6/3
Slide 16: Selective Investment Process by Vintage
Selective Investment Process by Vintage Selective Filter – 1H 2015 Portfolio Construction Senior Secured • UCC (lien) filings / Cash control / Covenants Deals Originated 700 Broadly diversified • Sector / Collateral / Position size / Geography Thorough diligence • Deep underwriting by internal team
Slide 17: Attractive Industry Dynamics
Attractive Industry Dynamics
Slide 18: The Opportunity – Middle-Market is Substantial
The Opportunity – Middle-Market is Substantial 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 Marke
Slide 19: 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 19
Slide 20: 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 21: Alternatives Represent a Growing Segment within Investments
Alternatives Represent a Growing Segment within Investments • By 2020: – $102 trillion global AUM – $13 trillion invested in alternatives (over 100% growth from 2012 levels) • Retail Growing as a % of Alternative Investments: – By 2020, $4 trillion (31%) of $13 trillion of alternatives from retail –
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 $300 $681 $250 $200 $150 BDC Opportunity as Banks Continue to Exit Level 3 Assets $280 $100 $50 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3/31/2015 Illustrative 20
Slide 23: MCC Financial Results
MCC Financial Results
Slide 24: Performance Overview
Performance Overview • Quarterly dividend of $0.30 per share for quarter ending 6/30/2015 • Net investment income of $0.30 per share for quarter ending 6/30/2015 • 12.4% portfolio yield as of 6/30/20151 • Gross investment originations of $47.5 million for quarter ending 6/30/2015 • Amended and exten
Slide 25: Financial & Portfolio Highlights
Financial & Portfolio Highlights Financial Highlights 6/30/15 3/31/15 12/31/14 9/30/14 Net investment income per share $ 0.30 $ 0.30 $ 0.35 $ 0.37 Net realized gains (losses) $ (0.16) $ (0.16) $ - $ (0.01) Net unrealized gains (losses) $ 0.01 $ 0.07 $ (0.66) $ (0.18) Provision for taxes on unrealize
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) 6/30/15 3/31/15 12/31/14 9/30/14 Net investment income per share - basic & diluted $ 0.30 $ 0.30 $ 0.35 $ 0.37 Net realized and unrealized gains per share - basic & diluted1 (0.
Slide 27: Balance Sheet
Balance Sheet As of (dollars in thousands, except per share data) 6/30/15 3/31/15 12/31/14 9/30/14 ASSETS (Unaudited) (Unaudited) (Unaudited) (Audited) Investments at fair value Non-control/non-affiliate investments $1,156,184 $ 1,164,170 $ 1,162,864 $ 1,185,859 Control investments 38,000 37,513 38,
Slide 28: Corporate Information
Corporate Information Board of Directors Corporate Officers Research Coverage Corporate Headquarters BROOK TAUBE BROOK TAUBE CREDIT SUISSE 375 Park Avenue, 33rd Floor Chairman & Chief Executive Officer Chairman & Chief Executive Officer Douglas Harter – (212)-538-5983 New York, NY 10152 (212)-759-07