PennantPark Investment (PNNT) - 2025 Q1 - Quarterly Report

Portfolio Overview - As of December 31, 2024, the portfolio totaled $1,298.1 million, with 44$1,328.1 million, with 50% in first lien secured debt and a weighted average yield on interest-bearing debt investments of 12.3%[232] - As of December 31, 2024, PennantPark Senior Loan Fund's portfolio totaled $1,275.1 million, consisting of 112 companies with a weighted average yield of 10.7$13.6 million as of December 31, 2024[231] - The company’s portfolio primarily consists of illiquid securities, with most investments classified as Level 3 in the fair value hierarchy[246] Investment Activity - For the three months ended December 31, 2024, the company invested $295.7 million in 12 new and 61 existing portfolio companies, with sales and repayments totaling$353.7 million[233] - For the three months ended December 31, 2023, the company invested $231.1 million in 12 new and 32 existing portfolio companies, with sales and repayments totaling$71.0 million[234] - For the three months ended December 31, 2024, PennantPark Senior Loan Fund invested $353.8 million in 15 new and 43 existing portfolio companies at a weighted average yield of 10.5$34.2 million, a slight decrease from $34.3 million in the same period of 2023, primarily due to changes in the portfolio and investment yields[266] - Net investment income for the three months ended December 31, 2024, was$13.0 million, or $0.20 per share, compared to$15.7 million, or $0.24 per share in 2023, reflecting an increase in interest expense[268] - Total expenses for the three months ended December 31, 2024, were$21.2 million, up from $18.7 million in 2023, mainly due to an increase in debt-related interest and expenses[267] - Total investment income for the three months ended December 31, 2024, was$33.476 million, an increase of 22.4% from $27.247 million in the same period of 2023[307] - Net investment income for the three months ended December 31, 2024, was$9.316 million, compared to $7.998 million for the same period in 2023, reflecting a growth of 16.4$0.7 million for the three months ended December 31, 2024, compared to $0.4 million for the same period in 2023[258] - The company has adopted ASC 825-10 for the Truist Credit Facility, allowing it to report selected financial assets and liabilities at fair value, which mitigates volatility in earnings[249] - The board of directors utilizes a multi-step valuation process for illiquid securities, involving independent valuation firms and an audit committee review[243] - The company has not elected to designate the Investment Adviser as the valuation designee under Rule 2a-5, but has revised its valuation policies to comply with the rule[247] Debt and Liquidity - The Truist Credit Facility had outstanding borrowings of$464.5 million as of December 31, 2024, with a weighted average interest rate of 6.8%[277] - Cash and cash equivalents as of December 31, 2024, were $55.9 million, an increase from$49.9 million in the previous quarter, indicating improved liquidity[287] - Operating activities provided cash of $18.7 million for the three months ended December 31, 2024, contrasting with cash used of$155.1 million in the same period of 2023[288] - Cash and cash equivalents increased to $112.691 million as of December 31, 2024, from$36.595 million as of September 30, 2024, showing a significant increase of 208.5%[305] Distributions and Equity - The company declared distributions of $0.24 per share for a total of$15.7 million during the three months ended December 31, 2024, compared to $0.21 per share totaling$13.7 million in the same period of 2023, marking a 14.6% increase[310] - Members' equity increased to $133.234 million as of December 31, 2024, compared to$112.271 million as of September 30, 2024, indicating a growth of 18.7%[305] - The company maintains an "opt out" dividend reinvestment plan for common stockholders, allowing automatic reinvestment of cash distributions unless stockholders opt out[312] Market Conditions and Risks - The company does not accrue PIK interest if the portfolio company valuation indicates that such interest is not collectible[251] - The company’s net investment income is dependent on the difference between borrowing rates and investment rates, with no assurance that significant changes in market interest rates will not adversely affect net investment income[322] - A hypothetical 1% increase in interest rates would result in a $3,033 thousand increase in net interest income, while a 1$3,033 thousand decrease[321] - The company has not engaged in interest rate hedging activities or foreign currency derivatives hedging activities during the periods covered by the report[323] Sector Focus - The company holds a significant position in the healthcare sector, with multiple investments such as Emergency Care Partners, LLC and Bioderm, Inc., both yielding above 10%[300] - The total cost of investments in the healthcare, education, and childcare sector exceeds $100 million, showcasing a strategic focus on this growing market[300] - The company has a significant investment in the aerospace and defense sector, with multiple entries showing coupon rates above 10%[302] - Overall, PSLF's investment strategy appears to focus on high-yield opportunities across various industries, with a notable emphasis on healthcare and media sectors[302]