Stellus Private Credit BDC Reports Results for its First Fiscal Quarter Ended March 31, 2024

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May 10, 2024, 16:54 ET

HOUSTON, May 10, 2024 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its first fiscal quarter ended March 31, 2024.

Robert T. Ladd, Chief Executive Officer of Stellus PBDC, stated "We are pleased to report strong results in the first quarter in which we generated $0.49 per share of net investment income and increased net asset value. During the quarter, we funded $17 million of investments and received $9 million of repayments, bringing the total portfolio to $216 million at fair value. Following the end of the quarter, on April 3, 2024, we declared our 2024 second quarter monthly dividend of $0.50 per share in the aggregate which represents an annualized dividend yield of approximately 13%."

FINANCIAL HIGHLIGHTS
($ in millions, except data relating to per share amounts and shares outstanding)

	Three Months Ended
	March 31, 2024		March 31, 2023
	Amount	Per Share	Amount	Per Share
Net investment income	$3.55	$0.49	$2.64	$0.48
Net unrealized gain (loss) included in earnings	0.33	0.04	(0.06)	(0.01)
Benefit for taxes on net unrealized depreciation on investments	0.05	0.01	—	—
Net increase in net assets resulting from operations	$3.93	$0.54	$2.58	$0.47
Distributions	(3.61)	(0.50)	(2.31)	(0.42)
Other weighted average share adjustments⁽¹⁾	—	0.01	—	(0.01)
Net asset value	112.2	$15.26	108.0	$14.68
Weighted average shares outstanding		7,227,206		5,501,765

__________________________
(1)	Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end.

PORTFOLIO ACTIVITY
($ in millions)

	As of	As of
	March 31, 2024	December 31, 2023
Investments at fair value	$216.3	$208.6
Total assets	$219.0	$211.2
Net assets	$112.2	$108.0
Shares outstanding	7,358,038	7,102,136
Net asset value per share	$15.26	$15.21

	Three Months Ended
	March 31, 2024	March 31, 2023
New investments	$16.6	$17.1
Repayments of investments	(9.4)	(9.9)
Net activity	$7.2	$7.2

	As of	As of
	March 31, 2024	December 31, 2023
Number of portfolio company investments	41	39
Number of debt investments	39	37

Weight average yield of debt and other income producing investments ⁽²⁾
Cash	11.7 %	11.8 %
Payment-in-kind ("PIK")	0.3 %	0.3 %
Fee amortization	0.4 %	0.4 %
Total	12.4 %	12.5 %

Weighted average yield on total investments ⁽³⁾
Cash	11.1 %	11.2 %
Payment-in-kind ("PIK")	0.4 %	0.3 %
Fee amortization	0.4 %	0.4 %
Total	11.9 %	11.9 %

_____________________________
(2)	The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expense or any sales load that may be paid by investors.
(3)	The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company's total investments, including non-income producing loans and equity.

Results of Operations

Investment income for the three months ended March 31, 2024 and 2023 totaled $6.4 million and $4.9 million, respectively, most of which was interest income from portfolio investments.

Gross operating expenses for the three months ended March 31, 2024 and 2023 totaled $4.1 million and $3.3 million, respectively. For the same periods, base management fees totaled $0.8 million and $0.6 million, income incentive fees totaled $0.6 million and $0.5 million, capital gains incentive fees of less than $0.1 million and $0.0 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.1 million and $1.7 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.1 million, other expenses totaled $0.4 million and $0.4 million. For the three months ended March 31, 2024 and 2023, the Company's investment advisor, Stellus Private BDC Advisor, LLC (the "Advisor"), waived $0.8 million and $0.6 million of management fees (voluntarily waived until October 1, 2024), $0.2 million and $0.2 million of income incentive fees (waived as our shares were not listed on a national exchange), and $0.2 million and $0.2 million of expenses pursuant to expense support and conditional reimbursements from the Advisor for net operating expenses of $2.9 million and $2.3 million, respectively.

For the three months ended March 31, 2024 and 2023, net investment income was $3.6 million and $2.6 million, or $0.49 and $0.48 per common share based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

The Company's investment portfolio had a net change in unrealized appreciation (depreciation) of $0.3 million and ($0.1) million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, net increase in net assets resulting from operations totaled $3.9 million and $2.6 million, or $0.54 and $0.47 per common share, based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

Liquidity and Capital Resources

On September 30, 2022, the Company entered into a senior secured revolving credit agreement with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the "Credit Facility"). The Credit Facility, as amended, provides for borrowings up to a maximum of $150.0 million on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $200.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions. As of March 31, 2024 and December 31, 2023, the Company had $105.3 million and $98.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity

The Company invested in the following portfolio companies for the three months ended March 31, 2024:

Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
Add-On Investment	January 9, 2024	Morgan Electrical Group Intermediate Holdings, Inc.*	Provider of commercial electrical services	$	12,854	Senior Secured – First Lien
Add-On Investment	January 12, 2024	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	28,813	Equity
Add-On Investment	January 31, 2024	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	12,637	Equity
Add-On Investment	March 1, 2024	Monitorus Holding, LLC*	Provider of media monitoring and evaluation services	$	38,984	Unsecured Convertible Bond
New Investment	March 11, 2024	Exec Connect Intermediate LLC	Facilitator of executive-level in-person events and remote peer-to-peer industry insights	$	1,746,286	Senior Secured – First Lien
				$	254,005	Delayed Draw Term Loan Commitment
				$	158,753	Revolver Commitment
				$	77,109	Equity
New Investment	March 11, 2024	Titan Meter Bidco Corp.	Provider of liquid metering products and integrated solutions to the energy infrastructure sector	$	7,696,671	Senior Secured – First Lien
				$	810,176	Revolver Commitment
				$	395,667	Equity
New Investment	March 26, 2024	Med Learning Group, LLC	Provider of continuing medical education services	$	3,636,170	Senior Secured – First Lien
				$	990,355	Delayed Draw Term Loan Commitment
____________________________
* Existing portfolio company

The Company realized investments in the following portfolio companies for the three months ended March 31, 2024:


Activity Type	Date	Company Name	Company Description	Proceeds Received		Instrument Type
Full Repayment	January 8, 2024	Peltram Plumbing Holdings, LLC*	Provider of plumbing solutions.	$	6,818,700	Senior Secured – First Lien
____________________________
* Existing portfolio company

Events Subsequent to March 31, 2024

The Company's management has evaluated subsequent events through May 10, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.

Investment Portfolio

The Company invested in the following portfolio companies subsequent to March 31, 2024:


Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
New Investment	April 1, 2024	FairWave Holdings, LLC	Specialty coffee platform	$	3,084,350	Senior Secured – First Lien
				$	1,079,522	Delayed Draw Term Loan Commitment
				$	462,652	Revolver Commitment
				$	115,663	Equity
New Investment	April 11, 2024	WER Holdings, LLC	Regional provider of commercial landscaping services	$	1,099,727	Senior Secured – First Lien
				$	544,419	Delayed Draw Term Loan Commitment
				$	163,326	Revolver Commitment
				$	73,300	Equity
Add-On Investment	April 16, 2024	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	5,055	Equity
New Investment	May 10, 2024	Luxium Solutions, LLC	Manufacturer and distributor of high- performance advanced materials and assemblies	$	3,372,885	Senior Secured – First Lien
				$	488,117	Delayed Draw Term Loan Commitment
____________________________
* Existing portfolio company

Credit Facility

The outstanding balance under the Credit Facility as of May 10, 2024 was $108.3 million.

Distributions Declared

On April 3, 2024, our Board of Directors declared a regular monthly distribution for each of April 2024, May 2024, and June 2024, as follows:


	Record	Payment	Amount per
Declared	Date	Date	Share
4/3/2024	4/5/2024	4/30/2024	$	0.1666
4/3/2024	5/1/2024	5/31/2024	$	0.1666
4/3/2024	6/1/2024	6/28/2024	$	0.1666

Sale of Unregistered Securities

Since March 31, 2024, the Company sold 414,531 common shares of beneficial interest at a price of $15.26 per share for aggregate proceeds of $6,325,743, which included $24,257 of organizational expense allocation pursuant to subscription agreements entered into between the Company and investors.

Since March 31, 2024, the Company also issued 11,915 common shares of beneficial interest for aggregate proceeds of $181,535 under the DRIP.

On May 7, 2024, Stellus Private Credit BDC (the "Company") delivered a capital drawdown notice to its investors relating to the sale of 1,310,616 common shares of beneficial interest (the "Shares") of the Company for an aggregate offering price of $20,000,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of the Shares. The sale of the Shares is expected to close on or about May 21, 2024.

About Stellus Private Credit BDC

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans and second lien loans, with corresponding equity co-investments. The Company's investment activities are managed by its investment adviser, Stellus Private BDC Advisor, LLC.

Forward-Looking Statements

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Contacts

Stellus Private Credit BDC
W. Todd Huskinson, Chief Financial Officer
(713) 292-5414
[email protected]

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	March 31, 2024
	(unaudited)		December 31, 2023
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $213,929,910 and $206,513,758, respectively)	$	216,314,810	$	208,574,078
Cash and cash equivalents		297,635		593,685
Interest receivable		1,856,236		1,495,581
Expense reimbursement receivable from the Advisor (Note 2)		197,775		126,539
Deferred offering costs		72,876		72,875
Related party receivable		36,625		162,455
Prepaid expenses		132,405		127,019
Receivable for sales and repayments of investments		121,176		71,105
Total Assets	$	219,029,538	$	211,223,337
LIABILITIES
Credit Facilities payable	$	104,425,625	$	97,031,517
Dividends payable		—		3,551,068
Unearned revenue		784,484		897,538
Income incentive fee payable		407,007		439,854
Capital gains incentive fee payable		299,574		261,684
Interest payable		348,640		367,093
Administrative services payable		118,005		124,958
Income tax payable		149,085		182,489
Deferred tax liability		121,980		167,865
Other accrued expenses and liabilities		127,817		177,249
Total Liabilities	$	106,782,217	$	103,201,315
Commitments and contingencies (Note 7)
Net Assets	$	112,247,321	$	108,022,022
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 7,358,038 and 7,102,136 issued and outstanding, respectively)	$	73,580	$	71,021
Paid-in capital		108,711,728		104,810,048
Total distributable earnings		3,462,013		3,140,953
Net Assets	$	112,247,321	$	108,022,022
Total Liabilities and Net Assets	$	219,029,538	$	211,223,337
Net Asset Value Per Share	$	15.26	$	15.21

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	Three Months Ended
	March 31, 2024		March 31, 2023
INVESTMENT INCOME
Interest income	$	6,309,381	$	4,731,952
Other income		109,596		176,069
Total Investment Income	$	6,418,977	$	4,908,021
OPERATING EXPENSES
Management fees	$	800,654	$	601,839
Income incentive fees		598,401		439,666
Capital gains incentive fee		37,891		—
Professional fees		196,911		211,808
Organization costs		—		1,000
Amortization of deferred offering costs		46,728		57,623
Administrative services expenses		121,777		93,760
Trustees' fees		40,000		40,000
Insurance expense		20,196		20,084
Valuation fees		27,159		17,659
Interest expense and other fees		2,110,119		1,703,503
Income tax expense		21,589		7,835
Other general and administrative expenses		42,933		43,520
Total Operating Expenses	$	4,064,358	$	3,238,297
Expenses reimbursed/fees waived by Investment Advisor (Note 2)	$	(1,197,896)	$	(968,275)
Net Operating Expenses	$	2,866,462	$	2,270,022
Net Investment Income	$	3,552,515	$	2,637,999
Net realized gain on foreign currency translation	$	8,442	$	3,475
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments		333,461		(72,026)
Net change in unrealized (depreciation) appreciation on foreign currency translations		(8,881)		6,220
Benefit for taxes on net unrealized loss on investments		45,885		—
Net Increase in Net Assets Resulting from Operations	$	3,931,422	$	2,575,668
Net Investment Income Per Share – basic and diluted	$	0.49	$	0.48
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted	$	0.54	$	0.47
Weighted Average Common Shares of Beneficial Interest Outstanding – basic and diluted		7,227,206		5,501,765
Distributions Per Share – basic and diluted	$	0.50	$	0.42

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

	Common Shares of
	Beneficial Interest					Total
	Number of	Par		Paid-in		distributable
	shares	value		capital		(loss) gain		Net Assets
Balances at December 31, 2022	5,483,433	$	54,834	$	80,950,845	$	(742,722)	$	80,262,957
Net investment income	—		—		—		2,637,999		2,637,999
Net realized gain on foreign currency translation	—		—		—		3,475		3,475
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(72,026)		(72,026)
Net change in unrealized appreciation on foreign currency translations	—		—		—		6,220		6,220
Distributions from net investment income	—		—		—		(2,306,409)		(2,306,409)
Issuance of common shares of beneficial interest	349,546		3,496		5,115,958		—		5,119,454
Balances at March 31, 2023	5,832,979	$	58,330	$	86,066,803	$	(473,463)	$	85,651,670

Balances at December 31, 2023	7,102,136	$	71,021	$	104,810,048	$	3,140,953	$	108,022,022
Net investment income	—		—		—		3,552,515		3,552,515
Net realized gain on foreign currency translation	—		—		—		8,442		8,442
Net change in unrealized appreciation on non-controlled, non-affiliated investments	—		—		—		333,461		333,461
Net change in unrealized depreciation on foreign currency translations	—		—		—		(8,881)		(8,881)
Benefit for taxes on net unrealized loss on investments	—		—		—		45,885		45,885
Distributions from net investment income	—		—		—		(3,610,362)		(3,610,362)
Issuance of common shares of beneficial interest	255,902		2,559		3,901,680		—		3,904,239
Balances at March 31, 2024	7,358,038	$	73,580	$	108,711,728	$	3,462,013	$	112,247,321

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Three Months Ended
	March 31, 2024		March 31, 2023
Cash Flows from Operating Activities
Net increase in net assets resulting from operations	$	3,931,422	$	2,575,668
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(16,534,629)		(17,104,559)
Proceeds from sales and repayments of investments		9,368,480		9,823,196
Net change in unrealized (appreciation) depreciation on investments		(333,461)		72,026
Net change in unrealized depreciation (appreciation) foreign currency translations		8,881		(6,220)
Increase in investments due to PIK		(159,943)		—
Amortization of premium and accretion of discount, net		(140,131)		(106,212)
Deferred tax benefit		(45,885)		—
Amortization of loan structure fees		94,108		156,894
Amortization of deferred offering costs		46,728		57,623
Changes in other assets and liabilities
Increase in interest receivable		(360,655)		(230,621)
Increase in other receivable		—		(16,200)
Decrease (increase) in related party receivable		125,830		(49,651)
Increase in expense reimbursements receivable from the Advisor		(71,236)		(198,636)
(Increase) decrease in prepaid expenses		(5,386)		36,509
Increase in related party payable		—		5,000,000
(Decrease) increase in administrative services payable		(6,953)		74,458
(Decrease) increase in interest payable		(18,453)		105,780
(Decrease) increase in income incentive fees payable		(32,847)		293,110
Increase in capital gains incentive fees payable		37,890		—
Decrease in unearned revenue		(113,054)		(4,408)
(Decrease) increase in income tax payable		(33,404)		7,835
(Decrease) increase in other accrued expenses and liabilities		(49,432)		67,928
Net Cash (Used) Provided in Operating Activities	$	(4,292,130)	$	554,520
Cash Flows from Financing Activities
Proceeds from issuance of common shares of beneficial interest	$	3,904,239	$	5,119,454
Offering costs paid for common shares of beneficial interest issued		(46,729)		(96,872)
Stockholder distributions paid		(7,161,430)		(1,809,533)
Borrowings under Credit Facilities		20,400,000		49,500,000
Repayments of Credit Facilities		(13,100,000)		(54,115,000)
Financing costs paid on Credit Facilities		—		(182,195)
Short-term loan repayments		—		(6,750,000)
Net Cash Provided (Used) by Financing Activities	$	3,996,080	$	(8,334,146)
Net Decrease in Cash and Cash Equivalents	$	(296,050)	$	(7,779,626)
Cash and Cash Equivalents Balance at Beginning of Period		593,685		15,469,823
Cash and Cash Equivalents Balance at End of Period	$	297,635	$	7,690,197
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	2,034,464	$	1,440,829
Income and excise tax paid		54,993		—
Increase in deferred offering costs		—		39,249
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan		354,239		119,453
(Decrease) increase in dividends payable		(3,551,068)		496,876