PennantPark Investment Corp. Files 10-Q for Period Ending December 31, 2023

TL;DR

<b>PennantPark Investment Corp. reported its Q1 2024 results, highlighting a significant portfolio of secured debt investments and equity interests.</b>

AI Summary

PENNANTPARK INVESTMENT CORP (PNNT) filed a Quarterly Report (10-Q) with the SEC on February 7, 2024. Investments in Non-Controlled, Non-Affiliated Portfolio Companies represented 165.4% of net assets, with First Lien Secured Debt at 93.2% as of September 30, 2023. Spendmend Holdings LLC, a First Lien Secured Debt investment, has a maturity date of 03/01/2028 and a current coupon of 11.20% (1M SOFR+565 bps). The Plimpton & Hills Corporation, a First Lien Secured Debt investment, matures 11/08/2029 with a current coupon of 11.20% (3M SOFR+600 bps). FedHC InvestCo LP, an investment in Aerospace and Defense, had common equity/partnership interests/warrants at 23.0% as of September 30, 2023. Signature Systems Holding Company, a Related Party PSLF First Lien Secured Debt investment, matures 5/3/2024 with a current coupon of 12.04% (SOFR+650 bps).

Why It Matters

For investors and stakeholders tracking PENNANTPARK INVESTMENT CORP, this filing contains several important signals. The filing details specific debt investments with varying maturity dates and interest rates, indicating the company's focus on income generation through secured lending. The inclusion of related party investments and common equity interests suggests a diversified investment strategy, potentially offering upside beyond fixed income.

Risk Assessment

Risk Level: medium — PENNANTPARK INVESTMENT CORP shows moderate risk based on this filing. The company's investment portfolio is heavily concentrated in secured debt, which can be sensitive to interest rate fluctuations and borrower default risk, as evidenced by the specific coupon rates and maturity dates listed.

Analyst Insight

Investors should monitor the performance of key debt holdings like Spendmend Holdings LLC and The Plimpton & Hills Corporation, given their significant allocations and maturity profiles.

Key Numbers

• 165.4% — Investments in Non-Controlled, Non-Affiliated Portfolio Companies (as of 2023-09-30)
• 93.2% — First Lien Secured Debt (as of 2023-09-30)
• 11.20% — Current Coupon (Spendmend Holdings LLC)
• 11.20% — Current Coupon (The Plimpton & Hills Corporation)
• 23.0% — Common Equity/Partnership Interests/Warrants (FedHC InvestCo LP as of 2023-10-01)
• 11.02% — Current Coupon (ITI Holdings, Inc.)
• 12.04% — Current Coupon (Signature Systems Holding Company)
• 11.79% — Coupon (HV Watterson Holdings, LLC)

Key Players & Entities

• PENNANTPARK INVESTMENT CORP (company) — FILER
• Spendmend Holdings LLC (company) — Portfolio Company
• The Plimpton & Hills Corporation (company) — Portfolio Company
• FedHC InvestCo LP (company) — Portfolio Company
• Signature Systems Holding Company (company) — Portfolio Company
• STV Group Incorporated (company) — Portfolio Company
• PennantPark Senior Loan Fund, LLC (company) — Portfolio Company
• Walker Edison Furniture (company) — Portfolio Company

Forward-Looking Statements

• PNNT will continue to prioritize first lien secured debt investments due to their higher position in the capital structure and consistent income generation. (PENNANTPARK INVESTMENT CORP) — high confidence, target: 2024-09-30
• The upcoming maturity of Signature Systems Holding Company's debt on May 3, 2024, will likely result in either repayment or refinancing, impacting PNNT's short-term cash flow or investment allocation. (Signature Systems Holding Company) — medium confidence, target: 2024-05-03

FAQ

Risk Factors

• Credit Risk [high — financial]: The company's investments are subject to credit risk, as the inability of borrowers to make payments could negatively impact its financial condition and results of operations.
• Interest Rate Risk [medium — financial]: Changes in interest rates can affect the fair value of the company's debt investments and its net investment income.
• Market Volatility [medium — market]: The value of the company's investments can be affected by general market conditions and economic downturns.

Key Financial Figures

• $0.001 — ch Registered Common Stock, par value $0.001 per share PNNT The New York Stock E

Filing Documents

• pnnt-20231231.htm (10-Q) — 12337KB
• pnnt-ex31_1.htm (EX-31.1) — 13KB
• pnnt-ex31_2.htm (EX-31.2) — 13KB
• pnnt-ex32_1.htm (EX-32.1) — 6KB
• pnnt-ex32_2.htm (EX-32.2) — 6KB
• 0000950170-24-012191.txt (&nbsp;) — 46251KB
• pnnt-20231231.xsd (EX-101.SCH) — 1949KB
• pnnt-20231231_htm.xml (XML) — 10990KB

CONSOLIDATED FINANCIAL INFORMATION

PART I. CONSOLIDATED FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Consolidated Statements of Assets and Liabilities as of December 31, 2023 (unaudited) and September 30, 2023 4 Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022 (unaudited) 5 Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2023 and 2022 (unaudited) 6 Consolidated Statements of Cash Flows for the three months ended December 31, 2023 and 2022 (unaudited) 7 Consolidated Schedules of Investments as of December 31, 2023 (unaudited) and September 30, 2023 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 21 Report of Independent Registered Public Accounting Firm (PCAOB ID 49) 38

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 40

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 53

Controls and Procedures

Item 4. Controls and Procedures 53

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 54

Risk Factors

Item 1A. Risk Factors 54

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 55

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 55

Other Information

Item 5. Other Information 55

Exhibits

Item 6. Exhibits 56

—CONSOLIDATED F INANCIAL INFORMATION

PART I—CONSOLIDATED F INANCIAL INFORMATION We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where context suggest otherwise, the terms "Company," "we," "our" or "us" refers to PennantPark Investment Corporation and its consolidated subsidiaries; "PennantPark Investment" refers to only PennantPark Investment Corporation; "our SBIC Fund" refers collectively to our consolidated subsidiaries, PennantPark SBIC II LP, or SBIC II, and its general partner, PennantPark SBIC GP II, LLC; "Funding I" refers to PennantPark Investment Funding I, LLC, a wholly-owned subsidiary prior to deconsolidation on July 31, 2020; "Taxable Subsidiary" refers to PNNT Investment Holdings, LLC; "PSLF" refers to PennantPark Senior Loan Fund, LLC, an unconsolidated joint venture; "PTSF II" refers to PennantPark-TSO Senior Loan Fund II, LP, an unconsolidated limited partnership; "PennantPark Investment Advisers" or "Investment Adviser" refers to PennantPark Investment Advisers, LLC; "PennantPark Investment Administration" or "Administrator" refers to PennantPark Investment Administration, LLC; "SBA" refers to the Small Business Administration; "SBIC" refers to a small business investment company under the Small Business Investment Act of 1958, as amended; "BNP Credit Facility" refers to our revolving credit facility with BNP Paribas prior to deconsolidation of Funding I; "Truist Credit Facility" refers to our multi-currency, senior secured revolving credit facility with Truist Bank, as amended and restated; "2026 Notes" refers to our 4.50% Notes due May 2026; "2026 Notes-2" refers to our 4.00% Notes due November 2026; "BDC" refers to a business development company under the Investment Company Act of 1940, as amended, or the "1940 Act"; "SBCAA" refers to the Small Business Credit Avail

Consolidated Financial Statements

Item 1. Consolidated Financial Statements PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS O F ASSETS AND LIABILITIES (In thousands, except share and per share data) December 31, 2023 September 30, 2023 (unaudited) Assets Investments at fair value Non-controlled, non-affiliated investments (amortized cost—$ 877,517 and $ 816,754 , respectively) $ 879,245 $ 830,808 Non-controlled, affiliated investments (amortized cost—$ 54,736 and $ 55,787 , respectively) 40,829 54,771 Controlled, affiliated investments (amortized cost—$ 299,787 and $ 245,386 , respectively) 290,684 216,068 Total investments (amortized cost—$ 1,232,040 and $ 1,117,927 , respectively) 1,210,758 1,101,647 Cash and cash equivalents (cost—$ 36,850 and $ 38,784 , respectively) 36,893 38,775 Interest receivable 9,884 6,820 Distribution receivable 5,381 5,079 Due from affiliates 181 — Prepaid expenses and other assets 4,141 4,656 Total assets 1,267,238 1,156,977 Liabilities Truist Credit Facility payable, at fair value (cost—$ 388,456 and $ 212,420 , respectively) 385,016 206,940 2026 Notes payable, net (par— $ 150,000 ) 147,894 147,669 2026 Notes-2 payable, net (par— $ 165,000 ) 162,440 162,226 Payable for investment purchased 51,850 99,949 Distributions payable 4,566 13,697 Accounts payable and accrued expenses 4,323 6,754 Base management fee payable 4,004 3,915 Incentive fee payable 3,321 3,310 Interest payable on debt 3,125 6,231 Due to affiliates 1,557 4,099 Total liabilities 768,096 654,790 Commitments and contingencies (See Note 11) Net assets Common stock, 65,224,500 shares issued and outstanding Par value $ 0.001 per share and 100,000,000 shares authorized 65 65 Paid-in capital in excess of par value 746,466 746,466 Accumulated deficit ( 247,389 ) ( 244,344 ) Total net assets $ 499,142 $ 50

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View this 10-Q filing on SEC EDGAR