Alcentra Capital Corporation Announces Second Quarter 2018 Financial Results
NEW YORK, Aug. 6, 2018 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of debt financing solutions to middle-market companies based in the United States, today announced its financial results for the second quarter of 2018.
Second Quarter 2018 Financial Highlights
- Total investment income of $7.3 million
- Net investment income of $3.5 million, or $0.25 per share
- Invested $19.6 million of capital into one new portfolio company, two add on investments and one loan refinancing
- Received proceeds from repayments, amortizations on investments and a loan refinancing of $30.9 million
- Paid regular quarterly dividend for the second quarter of 2018 of $0.18 per share on July 5, 2018
- The Company's Board of Directors declared a dividend of $0.18 per share for the third quarter of 2018, which is payable on October 4, 2018 to stockholders of record as of September 28, 2018
- Net asset value of $149.6 million, or $11.01 per share
- On May 4, 2018, the Adviser agreed to a permanent 25 basis point reduction, effective as of May 1, 2018, across all of the base management fee breakpoints under the Company's investment advisory agreement. The Adviser has also agreed to an additional temporary 25 basis point reduction, from May 1, 2018 to April 30, 2019, across all of these base management fee breakpoints.
- Weighted average debt portfolio yield – 10.9%
Second Quarter 2018 Financial Results
For the three months ended June 30, 2018, total investment income was $7.3 million, a decrease of $1.0 million over the $8.3 million of total investment income for the three months ended June 30, 2017. This decrease was due to the continued yield compression in the markets and the continued transition of the portfolio. For the three months ended June 30, 2018, interest and PIK income comprised $6.7 million and other non-recurring income was $0.6 million as compared to $7.7 million of interest and PIK income and $0.6 of other non-recurring income as of June 30, 2017. Net investment income for the three months ended June 30, 2018 was $3.5 million or $0.25 per share as compared to $4.8 million or $0.36 per share for the three months ended June 30, 2017.
For the three months ended June 30, 2018, total expenses were $3.8 million. Interest and financing expenses for the quarter were $2.0 million, the base management fee, after the management fee waiver, was $0.9 million and there were no incentive fees earned. For the three months ended June 30, 2018, professional fees and other general and administrative expenses totaled $0.9 million of which $0.2 million was comprised of consulting fee expenses incurred in connection with our exploration of measures to lower our cost of capital and other shareholder-related matters.
For the three months ended June 30, 2018, we recorded a net realized loss and net change in unrealized depreciation from portfolio investments of $5.7 million after the provision for taxes. As a result, our net decrease in net assets resulting from operations was $2.2 million after the provision for taxes.
During the quarter five investments were written down: Black Diamond ($1.6mm), My Alarm Capital ($3.1mm), SAFE ($0.2mm), Tunnel Hill ($1.7mm) and XGS ($0.8mm) for approximately a $7.4 million decrease.
Portfolio and Investment Activities
As of June 30, 2018, the fair value of our investment portfolio totaled $246.2 million and consisted of 35 investments including 27 companies, 5 broadly syndicated loans, and 3 rated debt securities in CLOs. The average portfolio investment size on a cost basis was $7.1 million and equity investments constituted 10.0% of the portfolio. We received proceeds from repayments, amortizations on investments and a loan refinancing of $30.9 million during the three months ended June 30, 2018. This included the sale of Red Ventures, Inc., the repayment of debt from Lugano Diamonds, Superior Controls and Cirrus Medical Staffing, the assignment of 25% of Healthcare Associates of Texas and the refinancing of Pharmalogic Holding.
New and add-on investments including one loan re-financing totaled $19.6 million during the quarter ended June 30, 2018 included the following:
- Manna Pro Products, Inc. - $1.3 million in L+6.00% 1st lien secured debt
- Healthcare Associates of Texas (HCAT) - $1.0 million of the delayed draw commitment
- NTI - $1.2 million of the delayed draw commitment
- Pharmalogic Holdings - refinance $16.1 million subordinated fixed debt (12%) to floating 2nd lien debt (L + 8.0%)
As of June 30, 2018, Alcentra had three debt investments, Show Media, Inc., Southern Technical Institute, Inc., and Black Diamond Rentals on non-accrual status.
A risk rating of the portfolio companies is available in our website presentation (https://investors.alcentracapital.com/events-presentations) and in the MD&A section of the Form 10-Q for the quarter ended June 30, 2018 filed with the SEC.
Liquidity and Capital Resources
At June 30, 2018, Alcentra had $12.7 million in cash and cash equivalents, $58.6 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.
Subsequent Events
- On July 5, 2018, Alcentra paid a dividend to shareholders of record as of June 29, 2018 of $0.18 per share
- On July 10, 2018, a $6.0 million 2nd Lien investment was made into Value Based Care Solutions ("VBC") at L + 8.125%
- On August 6, 2018 the Company's Board of Directors declared a dividend of $0.18 per share for the third quarter of 2018, which is payable on October 4, 2018 to stockholders of record as of September 28, 2018
- As of August 6, 2018, $0.3 million of common stock had been repurchased by the Company through its $5.0 million share repurchase program.
Second Quarter 2018 Financial Results Conference Call
Management will host a conference call to discuss the operating and financial results at 9:30 am ET on August 7, 2018. To participate in the conference call, please dial (844) 832-0218 approximately 10 minutes prior to the call. International callers should dial (484) 756-4314. Please reference conference ID 8777017.
A live webcast of the conference call will be available at http://investors.alcentracapital.com/events-presentations. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.
An archived webcast replay will be available on the Company's website until August 7, 2019.
ABOUT ALCENTRA CAPITAL CORPORATION
Alcentra Capital Corporation provides customized debt and equity financing solutions to middle-market companies, which the Company generally defines as U.S. based companies having between $15.0 million and $75.0 million of EBITDA. Alcentra's investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Alcentra seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.
Alcentra is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. In addition, for tax purposes, Alcentra has elected to be treated as a regulated investment company, under Subchapter M of the Internal Revenue Code of 1986.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Alcentra's filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
| Alcentra Capital Corporation and Subsidiary |
||||||
| Consolidated Statements of Assets and Liabilities |
||||||
| As of |
As of |
|||||
| Assets |
||||||
| Portfolio investments, at fair value |
||||||
| Non-controlled, non-affiliated investments, at fair value (cost of $222,388,011 and $265,675,598, respectively) |
$ |
212,917,961 |
$ |
252,325,403 |
||
| Non-controlled, affiliated investments, at fair value (cost of $40,536,590 and $51,734,635, respectively) |
17,987,393 |
19,972,905 |
||||
| Controlled, affiliated investments, at fair value (cost $15,583,666 and $15,806,301, respectively) |
15,254,506 |
15,256,237 |
||||
| Cash |
12,704,301 |
13,882,956 |
||||
| Dividends and interest receivable |
2,715,171 |
1,942,300 |
||||
| Receivable for investments sold |
669,733 |
669,733 |
||||
| Deferred financing costs |
419,191 |
514,241 |
||||
| Deferred tax asset |
5,955,112 |
4,934,962 |
||||
| Income tax asset |
644,319 |
748,408 |
||||
| Prepaid expenses and other assets |
208,562 |
79,005 |
||||
| Total Assets |
$ |
269,476,249 |
$ |
310,326,150 |
||
| Liabilities |
||||||
| Credit facility payable |
$ |
58,553,273 |
$ |
89,703,273 |
||
| Notes payable (net of deferred note offering costs of $1,036,205 and $1,252,165, respectively) |
53,963,795 |
53,747,835 |
||||
| Other accrued expenses and liabilities |
523,720 |
447,589 |
||||
| Directors' fees payable |
36,125 |
68,917 |
||||
| Professional fees payable |
643,322 |
548,455 |
||||
| Interest and credit facility expense payable |
1,158,173 |
1,248,791 |
||||
| Management fee payable |
926,841 |
1,265,172 |
||||
| Income-based incentive fees payable |
1,294,985 |
1,294,985 |
||||
| Distributions payable |
2,449,591 |
3,561,305 |
||||
| Unearned structuring fee revenue |
331,680 |
725,653 |
||||
| Total Liabilities |
$ |
119,881,505 |
$ |
152,611,975 |
||
| Commitments and Contingencies (Note 12) |
||||||
| Net Assets |
||||||
| Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,582,751 and 14,222,945 shares outstanding, respectively) |
13,583 |
14,223 |
||||
| Additional paid-in capital |
202,161,682 |
206,570,701 |
||||
| Accumulated net realized loss |
(31,726,764) |
(11,436,155) |
||||
| Undistributed net investment income |
6,699,149 |
4,449,122 |
||||
| Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $4,795,501 and $3,778,273 as of June 30, 2018 and December 31, 2017, respectively |
(27,552,906) |
(41,883,716) |
||||
| Total Net Assets |
149,594,744 |
157,714,175 |
||||
| Total Liabilities and Net Assets |
$ |
269,476,249 |
$ |
310,326,150 |
||
| Net Asset Value Per Share |
$ |
11.01 |
$ |
11.09 |
||
| Alcentra Capital Corporation and Subsidiary |
||||||||||||||||||
| Consolidated Statements of Operations |
||||||||||||||||||
| For the three months ended June 30, 2018 |
For the three months ended June 30, 2017 |
For the six months ended June 30, 2018 |
For the six months ended June 30, 2017 |
|||||||||||||||
| Investment Income: |
||||||||||||||||||
| From non-controlled, non-affiliated investments: |
||||||||||||||||||
| Interest income from portfolio investments |
$ |
5,865,711 |
$ |
6,187,702 |
$ |
11,608,097 |
$ |
13,192,379 |
||||||||||
| Paid-in-kind interest income from portfolio investments |
45,481 |
302,190 |
245,131 |
650,382 |
||||||||||||||
| Other income from portfolio investments |
611,812 |
587,782 |
2,119,116 |
1,197,747 |
||||||||||||||
| Dividend income from portfolio investments |
30,756 |
29,049 |
61,512 |
56,569 |
||||||||||||||
| From non-controlled, affiliated investments: |
||||||||||||||||||
| Interest income from portfolio investments |
129,080 |
594,972 |
206,533 |
846,750 |
||||||||||||||
| Paid in-kind income from portfolio investments |
90,004 |
63,345 |
213,130 |
450,381 |
||||||||||||||
| From controlled, affiliated investments: |
||||||||||||||||||
| Interest income from portfolio investments |
481,106 |
573,069 |
981,996 |
978,904 |
||||||||||||||
| Paid in-kind income from portfolio investments |
— |
— |
— |
166,445 |
||||||||||||||
| Total investment income |
7,253,950 |
8,338,109 |
15,435,515 |
17,539,557 |
||||||||||||||
| Expenses: |
||||||||||||||||||
| Management fees |
1,036,122 |
1,229,648 |
2,270,985 |
2,479,217 |
||||||||||||||
| Income-based incentive fees |
— |
— |
— |
653,911 |
||||||||||||||
| Professional fees |
379,082 |
226,849 |
733,152 |
493,188 |
||||||||||||||
| Valuation services |
(10,038) |
68,345 |
53,933 |
169,741 |
||||||||||||||
| Interest and credit facility expense |
1,745,485 |
1,513,067 |
3,440,372 |
3,039,974 |
||||||||||||||
| Amortization of deferred financing costs |
103,570 |
288,048 |
207,551 |
573,611 |
||||||||||||||
| Directors' fees |
116,826 |
74,344 |
213,028 |
142,480 |
||||||||||||||
| Insurance expense |
56,519 |
60,102 |
112,507 |
124,583 |
||||||||||||||
| Amortization of deferred note offering costs |
119,267 |
105,418 |
245,961 |
203,828 |
||||||||||||||
| Consulting fees |
176,702 |
— |
481,740 |
— |
||||||||||||||
| Other expenses |
156,108 |
98,437 |
525,819 |
392,557 |
||||||||||||||
| Total expenses |
3,879,643 |
3,664,258 |
8,285,048 |
8,273,090 |
||||||||||||||
| Waiver of management fees |
(109,281) |
(169,524) |
(109,281) |
(169,524) |
||||||||||||||
| Net expenses |
3,770,362 |
3,494,734 |
8,175,767 |
8,103,566 |
||||||||||||||
| Net investment income |
3,483,588 |
4,843,375 |
7,259,748 |
9,435,991 |
||||||||||||||
| Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments |
||||||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||||
| Non-controlled, non-affiliated investments |
(10,108,277) |
30,002 |
(10,123,092) |
(1,019,237) |
||||||||||||||
| Non-controlled, affiliated investments |
(10,167,517) |
— |
(10,167,517) |
— |
||||||||||||||
| Controlled, affiliated investments |
— |
— |
— |
— |
||||||||||||||
| Net realized gain (loss) from portfolio investments |
(20,275,794) |
30,002 |
(20,290,609) |
(1,019,237) |
||||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||
| Non-controlled, non-affiliated investments |
4,213,571 |
(8,084,209) |
3,880,145 |
(9,200,410) |
||||||||||||||
| Non-controlled, affiliated investments |
9,319,907 |
(2,168,452) |
9,212,533 |
(2,986,733) |
||||||||||||||
| Controlled, affiliated investments |
— |
328,527 |
220,904 |
475,526 |
||||||||||||||
| Net change in unrealized appreciation (depreciation) from portfolio investments |
13,533,478 |
(9,924,134) |
13,313,582 |
(11,711,617) |
||||||||||||||
| Benefit (Provision) for income taxes on unrealized gain (loss) on investments |
1,019,717 |
(102,309) |
1,017,228 |
(827,125) |
||||||||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio investments |
(5,722,599) |
(9,996,441) |
(5,959,799) |
(13,557,979) |
||||||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations |
$ |
(2,239,011) |
$ |
(5,153,066) |
$ |
1,299,949 |
$ |
(4,121,988) |
||||||||||
| Basic and diluted: |
||||||||||||||||||
| Net investment income per share |
$ |
0.25 |
$ |
0.36 |
$ |
0.52 |
$ |
0.68 |
||||||||||
| Earnings (loss) per share |
$ |
(0.16) |
$ |
(0.38) |
$ |
0.09 |
$ |
(0.30) |
||||||||||
| Weighted Average Shares of Common Stock Outstanding |
13,725,423 |
13,612,059 |
13,960,729 |
13,783,414 |
||||||||||||||
| Dividends declared per common share |
$ |
0.180 |
$ |
0.340 |
$ |
0.360 |
$ |
0.710 |
||||||||||
SOURCE Alcentra Capital Corporation
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