Stellus Private Credit BDC Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2023

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Mar 11, 2024, 17:08 ET

HOUSTON, March 11, 2024 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its fourth fiscal quarter and year ended December 31, 2023.

Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated "We are pleased to report strong results in the fourth quarter in which we generated $0.56 per share of net investment income and increased net asset value. During the quarter we made three new investments and received four full repayments, bringing the total portfolio to $209 million at fair value. On January 13, 2024, we declared our 2024 first 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		Three Months Ended		Year Ended		Year Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
	Amount	Per Share	Amount	Per Share	Amount	Per Share	Amount	Per Share
Net investment income	$3.92	$0.56	$1.88	$0.35	$12.33	$1.96	$4.20	$1.08
Net realized gain on investments	0.70	0.11	—	—	0.70	0.11	—	—
Net unrealized (loss) gain included in earnings	(0.22)	(0.03)	0.30	0.05	2.59	0.41	(0.52)	(0.13)
Provision for taxes on net unrealized appreciation on investments	(0.11)	(0.02)	—	—	(0.17)	(0.03)	—	—
Net increase in net assets resulting from operations	$4.29	$0.62	$2.18	$0.41	15.45	2.46	3.68	0.95
Distributions	(3.55)	(0.51)	(3.51)	(0.66)	(11.77)	(1.88)	(4.28)	(1.11)
Other weighted average share adjustments⁽¹⁾	—	—	—	—	—	—	—	0.03
Net asset value	108.0	$15.21	80.3	$14.64	108.0	$15.21	80.3	$14.64
Weighted average shares outstanding		6,953,190		5,344,720		6,273,882		3,869,643

(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
	December 31, 2023	December 31, 2022
Investments at fair value	$208.6	$157.5
Total assets	$211.2	$174.4
Net assets	$108.0	$80.3
Shares outstanding	7,102,136	5,483,433
Net asset value per share	$15.21	$14.64

	Three Months Ended	Year Ended
	December 31, 2023	December 31, 2023
New investments	$20.9	$89.4
Repayments of investments	(24.9)	(42.3)
Net activity	($4.0)	$47.1

	As of	As of
	December 31, 2023	December 31, 2022
Number of portfolio company investments	39	25
Number of debt investments	37	24

Weight average yield of debt and other income producing investments ⁽²⁾
Cash	11.8 %	11.0 %
Payment-in-kind ("PIK")	0.3 %	—
Fee amortization	0.4 %	0.4 %
Total	12.5 %	11.4 %

Weighted average yield on total investments ⁽³⁾
Cash	11.2 %	10.7 %
Payment-in-kind ("PIK")	0.3 %	—
Fee amortization	0.4 %	0.4 %
Total	11.9 %	11.1 %

(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 and year ended December 31, 2023 totaled $7.1 million and $23.4 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months and year ended December 31, 2023 totaled $3.2 million and $11.0 million, respectively, net of $1.1 million and $4.1 million in expenses reimbursed and fees waived by the Company's investment advisor, Stellus Private BDC Advisor, LLC (the "Advisor"), respectively. For the same periods, base management fees totaled $0.8 million and $2.8 million (all of which were waived by the Advisor), income incentive fees totaled $0.4 million and $1.4 million (net of $0.2 million and $0.7 million which were waived as our shares were not listed on a national exchange), capital gains incentive fees of less than $0.1 million and $0.3 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.4 million and $8.2 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.4 million, other expenses totaled $0.3 million and $1.3 million, and expense support and conditional reimbursements from the Advisor of ($0.1) and ($0.5), respectively.

For the three months and year ended December 31, 2023, net investment income was $3.9 million and $12.3 million, or $0.56 and $1.96 per common share based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.

The Company's investment portfolio had a net change in unrealized (depreciation) appreciation of ($0.2) million and $2.6 million for the three months and year ended December 31, 2023, respectively.

For the three months and year ended December 31, 2023, net increase in net assets resulting from operations totaled $4.3 million and $15.5 million, or $0.62 and $2.46 per common share, based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.

Liquidity and Capital Resources

On February 1, 2022, the Company entered into a revolving credit and security agreement with Signature Bank as subsequently amended (the "Commitment Facility"). On March 10, 2023, Signature Bank was placed into receivership by the FDIC and on March 12, 2023, the FDIC created Signature Bridge Bank, N.A. ("Signature Bridge") to take over the operations of Signature Bank. Signature Bridge serviced the Commitment Facility until October 23, 2023. On October 23, 2023, Goldman Sachs Bank USA ("Goldman Sachs") became the servicer under the Commitment Facility. The Company's amended and restated senior secured revolving credit agreement with Goldman Sachs (as amended from time to time) matured on December 31, 2023 and was fully repaid, including all accrued interest, on December 22, 2023.

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 December 31, 2023 and December 31, 2022, the Company had $98.0 million and $0.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity

The Company invested in the following portfolio companies for the three months ended December 31, 2023:

Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
Add-On Investment	October 11, 2023	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	243,675	Senior Secured – First Lien
				$	7,582	Equity
Add-On Investment	October 16, 2023	Equine Network, LLC*	Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry	$	431,401	Senior Secured – First Lien
Add-On Investment	October 31, 2023	2X LLC*	Provider of outsourced digital B2B marketing-as-a-service	$	659,771	Senior Secured – First Lien
Add-On Investment	November 15, 2023	Monitorus Holding, LLC*	Provider of media monitoring and evaluation services	$	16,225	Unsecured Convertible Bond
Add-On Investment	November 30, 2023	Axis Portable Air, LLC*	Air conditioning, heating, and air quality equipment rental company	$	2,500,000	Delayed Draw Term Loan Commitment
Add-On Investment	December 5, 2023	Amika OpCo LLC*	Branded haircare platform	$	1,152,465	Senior Secured – First Lien
New Investment	December 7, 2023	evolv Consulting, LLC	Digital transformation consulting firm	$	5,156,250	Senior Secured – First Lien
				$	1,250,000	Revolver Commitment
				$	266,927	Equity
New Investment	December 12, 2023	AdCellerant LLC	Provider of outsourced digital marketing software and services	$	5,719,319	Senior Secured – First Lien
				$	802,995	Revolver Commitment
				$	437,006	Equity
New Investment	December 21, 2023	Michelli, LLC	Provider of test and measurement services and equipment	$	1,342,685	Senior Secured – First Lien
				$	2,983,923	Delayed Draw Term Loan Commitment
				$	994,641	Revolver Commitment
				$	266,062	Equity

* Existing portfolio company

The Company realized investments in the following portfolio companies for the three months ended December 31, 2023:


Activity Type	Date	Company Name	Company Description	Proceeds Received		Realized Gain		Instrument Type
Full Repayment	November 30, 2023	Axis Portable Air, LLC*	Air conditioning, heating, and air quality equipment rental company	$	1,509,146	$	—	Senior Secured – First Lien
Full Repayment	November 30, 2023	Archer Systems, LLC*	Provider of mass tort settlement administrative solutions	$	7,834,418	$	—	Senior Secured – First Lien
Full Realization	December 21, 2023	International Designs Holdings LLC*	Distributor of design-oriented surfaces, appliances and architectural specialty products	$	1,296,416	$	841,075	Equity
Full Repayment	December 22, 2023	BLP Buyer, Inc.*	Distributor of lifting solutions	$	4,816,367	$	—	Senior Secured – First Lien
				$	2,750,450	$	—	Senior Secured – First Lien
				$	1,265,924	$	—	Senior Secured – First Lien
				$	779,098	$	—	Senior Secured – First Lien

* Existing portfolio company

Events Subsequent to December 31, 2023

The Company's management has evaluated subsequent events through March 11, 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 December 31, 2023:


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	February 28, 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

* Existing portfolio company

The Company realized investments in the following portfolio companies subsequent to December 31, 2023:


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

Credit Facility

The outstanding balance under the Credit Facility as of March 11, 2024 was $103.7 million.

Distributions Declared

On January 13, 2024, our Board of Directors declared a regular monthly distribution for each of January, February, and March 2024, as follows:


Stellus Private Credit BDC	Record	Payment	Amount per
Declared	Date	Date	Share
1/13/2024	1/15/2024	1/31/2024	$	0.1666
1/13/2024	2/1/2024	2/29/2024	$	0.1666
1/13/2024	3/1/2024	3/29/2024	$	0.1666

Sale of Unregistered Securities

Since December 31, 2023, the Company sold 191,580 common shares of beneficial interest at a price of $15.21 per share for aggregate proceeds of $2.9 million, which included less than $0.1 million of Organizational Expense Allocation pursuant to Subscription Agreements entered into between the Company and investors.

Since December 31, 2023, the Company also issued 23,235 common shares of beneficial interest for aggregate proceeds of $0.4 million under the DRIP.

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


	December 31, 2023		December 31, 2022
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $206,513,758 and $158,022,677, respectively)	$	208,574,078	$	157,504,755
Cash and cash equivalents		593,685		15,469,823
Interest receivable		1,495,581		1,030,274
Expense reimbursement receivable from the Advisor (Note 2)		126,539		165,638
Deferred offering costs		72,875		54,394
Related party receivable		162,455		9,620
Prepaid expenses		127,019		133,004
Receivable for sales and repayments of investments		71,105		26,996
Total Assets	$	211,223,337	$	174,394,504
LIABILITIES
Credit Facilities payable	$	97,031,517	$	79,448,134
Short-term loan payable		—		11,250,000
Dividends payable		3,551,068		1,809,533
Unearned revenue		897,538		539,634
Income incentive fee payable		439,854		328,196
Capital gains incentive fee payable		261,684		—
Interest payable		367,093		563,241
Administrative services payable		124,958		66,064
Income tax payable		182,489		7,471
Deferred tax liability		167,865		—
Other accrued expenses and liabilities		177,249		119,274
Total Liabilities	$	103,201,315	$	94,131,547
Commitments and contingencies (Note 7)
Net Assets	$	108,022,022	$	80,262,957
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 7,102,136 and 5,483,433 issued and outstanding, respectively)	$	71,021	$	54,834
Paid-in capital		104,810,048		80,950,845
Total distributable earnings (loss)		3,140,953		(742,722)
Net Assets	$	108,022,022	$	80,262,957
Total Liabilities and Net Assets	$	211,223,337	$	174,394,504
Net Asset Value Per Share	$	15.21	$	14.64

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
INVESTMENT INCOME
Interest income	$	22,760,669	$	7,804,783	$	—
Other income		601,776		152,173		—
Total Investment Income	$	23,362,445	$	7,956,956	$	—
OPERATING EXPENSES
Management fees	$	2,833,601	$	1,335,054	$	—
Income incentive fees		2,097,153		686,398		—
Capital gains incentive fee		261,684		—		—
Professional fees		670,800		447,045		70,800
Organization costs		1,000		90,184		416,553
Amortization of deferred offering costs		165,937		240,152		—
Administrative services expenses		417,573		226,489		—
Trustees' fees		160,000		158,000		42,000
Insurance expense		81,438		82,045		—
Valuation fees		40,324		5,519		—
Interest expense and other fees		8,225,528		2,312,701		—
Income tax expense		44,925		7,471		—
Other general and administrative expenses		142,294		120,343		3,492
Total Operating Expenses	$	15,142,257	$	5,711,401	$	532,845
Expenses reimbursed/fees waived by Investment Advisor (Note 2)	$	(4,101,044)	$	(1,952,196)	$	—
Net Operating Expenses	$	11,041,213	$	3,759,205	$	532,845
Net Investment Income	$	12,321,232	$	4,197,751	$	(532,845)
Net realized gain on non-controlled, non-affiliated investments	$	841,075	$	—	$	—
Net realized gain on foreign currency translation		24,343		1,950		—
Provision for taxes on realized gain on investments		(142,988)		—		—
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments		2,566,523		(538,883)		—
Net change in unrealized appreciation on foreign currency translations		11,719		20,961		—
Provision for taxes on net unrealized gain on investments		(167,865)		—		—
Net Increase (Decrease) in Net Assets Resulting from Operations	$	15,454,039	$	3,681,779	$	(532,845)
Net Investment Income Per Share – basic and diluted	$	1.96	$	1.08	$	N/A
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted	$	2.46	$	0.95	$	N/A
Weighted Average Common Shares of Beneficial Interest Outstanding – basic and diluted		6,273,882		3,869,643		N/A
Distributions Per Share – basic and diluted	$	1.88	$	1.11	$	N/A

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS


	Common Shares of
	Beneficial Interest					Total
	Number of	Par		Paid-in		distributable
	shares	value		capital		(loss) gain		Net Assets
Balances at December 31, 2020	—	$	—	$	—	$	—	$	—
Net investment loss	—		—		—		(532,845)		(532,845)
Balances at December 31, 2021	—	$	—	$	—	$	(532,845)	$	(532,845)
Net investment income	—		—		—		4,197,751		4,197,751
Net realized gain on foreign currency translation	—		—		—		1,950		1,950
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(538,883)		(538,883)
Net change in unrealized appreciation on foreign currency translations	—		—		—		20,961		20,961
Return of capital and other tax related adjustments	—		—		(388,214)		388,214		—
Distributions from net investment income	—		—		—		(4,279,870)		(4,279,870)
Issuance of common shares of beneficial interest	5,483,433		54,834		81,339,059		—		81,393,893
Balances at December 31, 2022	5,483,433	$	54,834	$	80,950,845	$	(742,722)	$	80,262,957
Net investment income	—		—		—		12,321,232		12,321,232
Net realized gain on non-controlled, non-affiliated investments	—		—		—		841,075		841,075
Net realized gain on foreign currency translation	—		—		—		24,343		24,343
Provision for taxes on realized gain on investments	—		—		—		(142,988)		(142,988)
Net change in unrealized appreciation on non-controlled, non-affiliated investments	—		—		—		2,566,523		2,566,523
Net change in unrealized appreciation on foreign currency translations	—		—		—		11,719		11,719
Provision for taxes on net unrealized gain on investments	—		—		—		(167,865)		(167,865)
Return of capital and other tax related adjustments	—		—		(197,724)		197,724		—
Distributions from net investment income	—		—		—		(11,768,088)		(11,768,088)
Issuance of common shares of beneficial interest	1,618,703		16,187		24,056,927		—		24,073,114
Balances at December 31, 2023	7,102,136	$	71,021	$	104,810,048	$	3,140,953	$	108,022,022

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF CASH FLOWS


					For the period
	For the				from Inception
	year ended				through
	December 31, 2023		December 31, 2022		December 31, 2022
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	15,454,039	$	3,681,779	$	(532,845)
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(89,322,601)		(168,326,016)		—
Proceeds from sales and repayments of investments		42,260,585		10,474,408		—
Net change in unrealized (appreciation) depreciation on investments		(2,566,523)		538,883		—
Net change in unrealized appreciation foreign currency translations		(11,719)		(20,961)		—
Increase in investments due to PIK		(129,990)		—		—
Amortization of premium and accretion of discount, net		(502,109)		(198,065)		—
Deferred tax provision		167,865		—		—
Amortization of loan structure fees		586,127		478,626		—
Amortization of deferred offering costs		165,937		240,152		—
Net realized gain on investments		(841,075)		—		—
Changes in other assets and liabilities
Increase in interest receivable		(465,307)		(1,030,274)		—
Increase in deferred offering costs		—		—		(139,570)
Increase in related party receivable		(152,835)		(9,620)		—
Decrease (increase) in expense reimbursements receivable from the Advisor		39,099		(165,638)		—
Decrease (increase) in prepaid expenses		5,985		(39,356)		(93,648)
(Decrease) increase in due to affiliate		—		(460,085)		460,085
Increase in professional fees payable		—		—		263,978
(Decrease) increase in trustees' fees payable		—		(42,000)		42,000
Increase in administrative services payable		58,894		66,064		—
(Decrease) increase in interest payable		(196,148)		563,241		—
Increase in income incentive fees payable		111,658		328,196		—
Increase in capital gains incentive fees payable		261,684		—		—
Increase in unearned revenue		357,904		539,634		—
Increase in income tax payable		175,018		7,471		—
Increase (decrease) in other accrued expenses and liabilities		57,975		(144,704)		—
Net Cash Used in Operating Activities	$	(34,485,537)	$	(153,518,265)	$	—
Cash Flows from Financing Activities
Proceeds from issuance of common shares of beneficial interest	$	24,073,114	$	81,393,893	$	—
Offering costs paid for common shares of beneficial interest issued		(184,418)		(154,976)		—
Stockholder distributions paid		(10,026,553)		(2,470,337)		—
Borrowings under Credit Facilities		169,750,000		124,762,500		—
Repayments of Credit Facilities		(152,365,000)		(44,147,500)		—
Financing costs paid on Credit Facilities		(387,744)		(1,645,492)		—
Short-term loan borrowings		4,500,000		11,250,000
Short-term loan repayments		(15,750,000)		—		—
Net Cash Provided by Financing Activities	$	19,609,399	$	168,988,088	$	—
Net (Decrease) Increase in Cash and Cash Equivalents	$	(14,876,138)	$	15,469,823	$	—
Cash and Cash Equivalents Balance at Beginning of Period		15,469,823		—		—
Cash and Cash Equivalents Balance at End of Period	$	593,685	$	15,469,823	$	—
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	7,835,549	$	1,270,834	$	—
Income and excise tax paid		12,895		—		—
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan		623,113		43,894		—
Increase in dividends payable		5,360,601		1,809,533		—