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Kayne Anderson Energy Development Company Announces Results for the Quarter Ended August 31, 2012

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HOUSTON--(BUSINESS WIRE)--

(NYSE: KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter ended August 31, 2012.

HIGHLIGHTS

  • Net asset value: $23.90 per share; up $1.22 per share for the quarter (5.4% increase)
  • The Company increased its distribution to $0.43 per share (4.9% increase over prior quarter)
  • Net investment loss: $0.4 million
  • Net realized gains: $1.3 million
  • Net unrealized gains: $16.0 million

RESULTS OF OPERATIONS – QUARTER ENDED AUGUST 31, 2012

Investment income totaled $1.8 million for the quarter and consisted primarily of net dividends and distributions and interest income. The Company received $5.1 million of cash dividends and distributions, of which $4.9 million was treated as a return of capital during the period. Return of capital was increased by $1.5 million during the quarter due to 2011 tax reporting information that was received in fiscal 2012. Of this amount, $1.0 million related to the Company's private investments, and $0.5 million related to its public investments. During the quarter, the Company received $1.6 million of interest income, of which $0.4 million was paid-in-kind interest from ProPetro Services, Inc. (“ProPetro”). The Company also received $0.6 million of paid-in-kind distributions, of which $0.3 million was from VantaCore Partners LP (“VantaCore”). These paid-in-kind distributions are not included in investment income, but are reflected as an unrealized gain.

Operating expenses totaled $2.4 million, including $1.5 million of investment management fees; $0.6 million of interest expense and $0.3 million of other operating expenses. Interest expense included $0.1 million of amortization of debt issuance costs. Investment management fees were equal to an annual rate of 1.75% of average total assets.

The Company's net investment loss totaled $0.4 million and included a deferred income tax benefit of $0.3 million and current income tax expense of $0.02 million.

The Company had net realized gains from investments of $1.3 million, after taking into account a deferred income tax benefit of $0.1 million and a current income tax expense of $0.7 million.

The Company had a net change in unrealized gains of $16.0 million. The net change consisted of $25.2 million of unrealized gains and a deferred income tax expense of $9.2 million.

The Company had an increase in net assets resulting from operations of $16.9 million. This increase was comprised of net investment loss of $0.4 million; net realized gains of $1.3 million; and net unrealized gains of $16.0 million, as noted above.

NET ASSET VALUE

As of August 31, 2012, the Company's net asset value was $248.4 million or $23.90 per share. This represents an increase of $1.22 per share or 5.4% for the quarter.

PORTFOLIO

As of August 31, 2012, the Company had long-term investments of $343.1 million, of which approximately 55% were public MLPs and other public equity securities, 28% were private MLPs and other private equity securities and 17% were debt securities. The Company's long-term investments consisted of 46 portfolio companies.

UPDATES ON PRIVATE PORTFOLIO COMPANIES

The Company will provide updates on its private portfolio companies on its website at www.kaynefunds.com/ked/portfolio-companies/ in lieu of a quarterly earnings conference call.

LIQUIDITY AND CAPITAL RESOURCES

As of August 31, 2012, the Company had $77.0 million of borrowings under its credit facility (at an interest rate of 2.24%), which represented 59.6% of its borrowing base of $129.2 million (66.1% of its borrowing base attributable to quoted securities). At the same date, the Company's asset coverage ratio under the Investment Company Act of 1940 was 423%. The maximum amount that the Company can borrow under its credit facility is limited to the lesser of the commitment amount of $85.0 million or its borrowing base. As of October 25, 2012, the Company had $75.0 million borrowed under its credit facility and had $7.9 million in cash. Outstanding borrowings represented 54.3% of the borrowing base of $138.2 million (60.1% of its borrowing base attributable to quoted securities).

DISTRIBUTION

On September 28, 2012, the Company declared a distribution of $0.43 per share for the quarter ended August 31, 2012, which was paid on October 26, 2012 to stockholders. This distribution represents an increase of 4.9% from the prior quarter distribution ($0.41 per share) and an increase of 13.2% from the distribution for the quarter ended August 31, 2011.

GUIDANCE

The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $7.1 million in the next quarter. This estimate includes cash distributions of $1.2 million per quarter for Direct Fuels, which is pro forma for the October 23, 2012 redemption of the Preferred D units. The Company has assumed that the proceeds from this redemption will be reinvested at an average yield of 8.5%. The estimate also includes distributions of $0.9 million per quarter from VantaCore, which is based on only the cash distributions the Company expects to receive, on average, over the next four quarters of $0.343 per common and preferred A unit and $0.383 per preferred B unit. The Company's guidance does not include payment-in-kind distributions that the Company expects to receive on VantaCore's common and preferred A units. The Company's guidance does not reflect any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since August 31, 2012.

                   
Portfolio Category

 

Amount

Invested

($ in millions)

 

Average Annual

Yield(1)(2)

 
Private MLPs(3)(4)

$

  85

 

10.9

%
Public MLPs and Other Public Equity  

  190

 

  6.7

 
Debt Investments(5)(6)  

  59

  10.5  

(1) Average yields include return of capital distributions. Return of capital distributions are reported as a reduction to gross dividends and distributions to arrive at net investment income reported under generally accepted accounting principles.

(2) Average yields for Public MLPs and Other Public Equity are based on the most recently declared distributions as of August 31, 2012. Amounts invested for Private MLPs are based on August 31, 2012 valuations.

(3) The amount invested excludes the Company's equity investment in ProPetro (valued at $8.9 million as of August 31, 2012), which does not pay a dividend.

(4) Reflects the redemption of the Direct Fuels' Preferred D units at the liquidation preference ($6.5 million) plus accrued dividends. Assumes the $6.5 million is reinvested at an average yield of 8.5%.

(5) The average yield includes straight-line amortization of the purchase price discounts/premiums through the expected maturity.

(6) The amount invested includes the Company's $13.2 million debt investment in ProPetro. This investment pays paid-in-kind interest at an annual rate of 13.0%.

Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.53 million per quarter. Other operating expenses are estimated to be approximately $0.40 million per quarter.

Interest Expense – Interest expense is estimated to be approximately $0.46 million per quarter based on $81.4 million borrowed under the Company's credit facility, assuming a 30-day LIBOR rate of 0.23% and a spread of 2.00%.

Based on the foregoing assumptions, the Company is expected to generate net distributable income (“NDI”) per share of $0.445 to $0.455 in the fourth quarter of fiscal 2012.

AVAILABLE INFORMATION

The Company's filings with the Securities and Exchange Commission, press releases and other financial information are available on the Company's website at www.kaynefunds.com.

 

KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY

STATEMENT OF ASSETS AND LIABILITIES

AUGUST 31, 2012

(amounts in 000's, except share and per share amounts)

(UNAUDITED)

 
ASSETS          
Investments, at fair value:
Non-affiliated (Cost — $169,433)

$

 

201,952

Affiliated (Cost — $139,206)       141,189  
Total investments (Cost — $308,639) 343,141
Cash 2,220
Receivable for securities sold 27
Interest, dividends and distributions receivable 752
Other receivable 4,900
Debt issuance costs, prepaid expenses and other assets       899  
Total Assets       351,939  
LIABILITIES
Credit facility 77,000
Current income tax liability 232
Deferred income tax liability 24,206
Investment management fee payable 1,494
Accrued directors' fees and expenses 74
Accrued expenses and other liabilities       565  
Total Liabilities       103,571  
NET ASSETS   $   248,368  
NET ASSETS CONSIST OF

Common stock, $0.001 par value (200,000,000 shares authorized; 10,391,595 shares issued

and outstanding)

$ 10
Paid-in capital 200,552
Accumulated net investment loss, net of income taxes, less dividends (33,500 )
Accumulated net realized gains on investments, net of income taxes 59,770
Net unrealized gains on investments, net of income taxes       21,536  
NET ASSETS   $   248,368  
NET ASSET VALUE PER SHARE   $   23.90  
 
 

KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED AUGUST 31, 2012

(amounts in 000's)

(UNAUDITED)

 
INVESTMENT INCOME              
Income
Dividends and distributions:
Non-affiliated investments $   2,463
Affiliated investments       2,666  
Total dividends and distributions       5,129  
Return of capital       (4,882 )
Net dividends and distributions 247
Interest and other income — non-affiliated investments 1,097
Interest — affiliated investments       457  
Total investment income       1,801  
Expenses
Investment management fees 1,493
Professional fees 130
Directors' fees and expenses 77
Insurance 27
Administration fees 21
Other expenses       123  
Total expenses — before interest expense 1,871
Interest expense       577  
Total expenses       2,448  
Net Investment Income (Loss) — Before Income Taxes (647 )
Current income tax expense (23 )
Deferred income tax benefit (expense)       268  
Net Investment Income (Loss)       (402 )
REALIZED AND UNREALIZED GAINS
Net Realized Gains
Investments — non-affiliated 855
Investments — affiliated 1,089
Current income tax expense (726 )
Deferred income tax benefit       99  
Net Realized Gains       1,317  
Net Change in Unrealized Gains
Investments — non-affiliated 14,814
Investments — affiliated 10,394
Deferred income tax expense       (9,177 )
Net Change in Unrealized Gains       16,031  
Net Realized and Unrealized Gains       17,348  
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   $   16,946  
 

The Company is a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to generate both current income and capital appreciation primarily through equity and debt investments. The Company will seek to achieve this objective by investing at least 80% of its net assets together with the proceeds of any borrowings (its "total assets") in securities of companies that derive the majority of their revenue from activities in the energy industry, including: (a) Midstream Energy Companies, which are businesses that operate assets used to gather, transport, process, treat, terminal and store natural gas, natural gas liquids, propane, crude oil or refined petroleum products; (b) Upstream Energy Companies, which are businesses engaged in the exploration, extraction and production of natural resources, including natural gas, natural gas liquids and crude oil, from onshore and offshore geological reservoirs; and (c) Other Energy Companies, which are businesses engaged in owning, leasing, managing, producing, processing and sale of coal and coal reserves; the marine transportation of crude oil, refined petroleum products, liquefied natural gas, as well as other energy-related natural resources using tank vessels and bulk carriers; and refining, marketing and distributing refined energy products, such as motor gasoline and propane to retail customers and industrial end-users.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements" as defined under the U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Company's historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; energy industry risk; commodity pricing risk; leverage risk; valuation risk; non-diversification risk; interest rate risk; tax risk; and other risks discussed in the Company's filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Company's investment objectives will be attained.

KA Fund Advisors, LLC
Monique Vo, 877-657-3863
http://www.kaynefunds.com/

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