Phenixfin Corporation · NASDAQ:PFX
Phenixfin — Medley Capital — Q3 2015 Earnings Presentation
29 slides from Phenixfin's earnings presentation, Sep 30, 2015
Slide 1: Medley Capital Corporation Investor Presentation
Medley Capital Corporation (NYSE: MCC) Investor Presentation Quarter Ended September 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: 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 Sierra Income Separately Corporation Corporation Private Funds (NYSE: MCC) (Public non-traded BDC) Managed Accounts Middle Medley Senior Senior Senior
Slide 4: Key Initiatives to Drive Shareholder Value at MCC
Key Initiatives to Drive Shareholder Value at MCC 1. Upsized our share repurchase program to $50 million and will execute pursuant to a 10b5-1 program with authorization to repurchase shares up to the most recently published NAV per share 2. Reduced fees and implemented netting with a three year loo
Slide 5: Reduced Fees and Netting With a Three Year Look-Back
Reduced Fees and Netting With a Three Year Look-Back • Management recommended and, in consultation with the Board, agreed to reduce fees under the investment management agreement • Beginning January 1, 2016, the base management fee will be reduced to 1.50% on gross assets above $1 billion • In addit
Slide 6: Historical NII and Dividend Coverage per Share
Historical NII and Dividend Coverage per Share • MCC remains focused on covering the dividend with net investment income • Announced $0.30 dividend per share on November 5th Historical Net Investment Income and Dividend Coverage per Share $0.60 117% 120% 114% 111% 111% 108% 110% $0.50 103% 100% 103%
Slide 7: Strong Relative Dividend On Current Share Price
Strong Relative Dividend On Current Share Price • MCC’s dividend provides an attractive current yield for investors compared to our BDC peers Current Annualized Dividend Yield On Current Share Price 1 18.0% 16.0% 16.0% 15.4% 14.0% 13.3% 12.6% 12.0% 11.6% 11.1% 10.0% 9.6% 9.6% 9.4% 9.1% 8.9% 8.0% 7.4
Slide 8: 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% 11.4% 10.9% 10.4% 10.2% 10.0% 9.9% 9.8% 10.0% 9.5% 9.2% 9.1% 8.1% 8.0% 8.0% 6.0% 4.0% 2.0% 0.0% PNNT MCC TCRD AINV TSLX NMFC PSEC T
Slide 9: 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 0.68x 16.0% 0.64x 11.1% BDCs 4 0.94x 9.6% 0.70x 10.3% REITs 5 2.55x 3.3% 1.11x 10.6% MLPs 6 1.95x 10.8% 1.7
Slide 10: Highly Diversified Senior Secured Floating Rate Portfolio
Highly Diversified Senior Secured Floating Rate Portfolio • MCC has a diversified portfolio of 72 companies with a 12.3% weighted average yield1 Industry Geography 2 1% 1%1%1% 1% Services: Business 1% 2% 13% Construction & Building Banking, Finance, Insurance & Real Estate 6% 2% Automotive Midwest 3
Slide 11: Portfolio by Issuer
Portfolio by Issuer Top 20 Investments: 47% Harrison Gypsum LLC 5% 3% DHISCO Electronic Distribution, Inc. 3% Nation Safe Drivers Holdings, Inc. 3% United Road Towing Inc 3% Accupac, Inc. Merchant Cash and Capital LLC 3% Response Team Holdings LLC 3% RCS Management Corporation 2% Seotowncenter, Inc.
Slide 12: 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% 16% GBDC 100% 16% FSC 100% 14% TCRD 100% 12% TSLX 100% 0% 12% 10% MCC 93% 7% 10% NMFC 93% 7% 8% PSEC 76% 24% 8% MAIN 61% 3% 36% 6% 6% 5% 5% TCPC 60% 4
Slide 13: Selective Investment Process
Selective Investment Process Pipeline – FY 2015 Portfolio Construction Senior Secured • UCC (lien) filings / Cash control / Covenants Deals Originated 1400 Broadly diversified • Sector / Collateral / Position size / Geography Thorough diligence • Deep underwriting by internal team Early Read Memo •
Slide 14: 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 9/30/2015 • 79% of the portfolio is floating rate • 41% of liabilities are fixed rate Floating Fixed • Favorable asset & liability mix 34% 21% The weighted average maturi
Slide 15: Debt Maturity Profile
Debt Maturity Profile • On 7/28/2015 MCC amended and extended its ING credit facility, extending the maturity on the (i) revolver from June 2017 to July 2019, followed by a one-year amortization period until final maturity in July 2020 and (ii) term loan from June 2019 to July 2020 $400.0 $350.0 ING
Slide 16: 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 11.1% 100.0% 10.6% 10.3% 9.7% 90.0% 10.0% 74.7% 8.6% 80.0% 70.0% 60.0% 5.0% 58.3% 50.0
Slide 17: 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 2.4 2.5 2.1 2.0 2.0 1.5 1.1 1.0 1.1 1.0 0.7 0.5 0.4 0.0 TCPC MCC TCRD TSLX FSC ARCC PSEC Investment Profe
Slide 18: Attractive Industry Dynamics
Attractive Industry Dynamics
Slide 19: The Opportunity – Middle-Market is Substantial
The Opportunity – Middle-Market is Substantial Top GDPs 1 $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 Mark
Slide 20: The Opportunity – Large Number of Borrowers
The Opportunity – Large Number of Borrowers Number of Businesses by Market 1 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 U.S. FDIC Insured Commerical Banks¹ 11,000 Bank Participation in Levered Loan Market (%)² 80% 70% 10,000 60% 9,000 50% 8,000 40% 30% 7,000 20% 6,000 10% 5,00
Slide 22: 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, retail expected to account for 31% ($4 trillion) of alternative
Slide 23: 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 $251 $100 $50 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6/30/2015 Illustrative 20
Slide 24: MCC Financial Results
MCC Financial Results
Slide 25: Performance Overview
Performance Overview • Quarterly dividend of $0.30 per share for quarter ending 9/30/2015 • Net investment income of $0.31 per share for quarter ending 9/30/2015 • 12.3% portfolio yield as of 9/30/20151 • Amended and extended term loan and revolving credit facility • Closed $100.0 million credit fac
Slide 26: Financial & Portfolio Highlights
Financial & Portfolio Highlights Financial Highlights 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14 Net investment income per share $ 0.31 $ 0.30 $ 0.30 $ 0.35 $ 0.37 Net realized gains (losses) $ (0.74) $ (0.16) $ (0.16) $ - $ (0.01) Net unrealized gains (losses) $ 0.13 $ 0.01 $ 0.07 $ (0.66) $ (0.18) P
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) 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14 Net investment income per share - basic & diluted $ 0.31 $ 0.30 $ 0.30 $ 0.35 $ 0.37 Net realized and unrealized gains per share - basic
Slide 28: Balance Sheet
Balance Sheet As of (dollars in thousands, except per share data) 9/30/15 6/30/15 3/31/15 12/31/14 9/30/14 ASSETS (Audited) (Unaudited) (Unaudited) (Unaudited) (Audited) Investments at fair value Non-control/non-affiliate investments $1,131,894 $1,156,184 $ 1,164,170 $ 1,162,864 $ 1,185,859 Control
Slide 29: 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