NEW YORK, Nov. 5, 2018 /PRNewswire/ -- Alcentra Capital Corporation 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 third quarter of 2018.
Third Quarter 2018 Highlights
- Total investment income of $6.6 million
- Net investment income of $3.0 million, or $0.22 per share
- Invested $6.1 million of capital into one new portfolio company and one add on investment
- Received proceeds from repayments, loan dispositions, and amortizations on investments of $4.6 million
- Paid regular quarterly dividend for the second quarter of 2018 of $0.18 per share on October 4, 2018
- The Company's Board of Directors declared a dividend of $0.18 per share for the fourth quarter of 2018, which is payable on January 3, 2019 to stockholders of record as of December 31, 2018
- On November 5, 2018, the Company's Board of Directors approved a stock repurchase program. Pursuant to the program, the Company is authorized to repurchase up to $10 million in the aggregate of its outstanding common stock in the open market. The timing, manner, price and amount of any share repurchases will be determined by the Company's management, in its discretion, based upon the evaluation of economic and market conditions, stock price, applicable legal and regulatory requirements and other factors. The program will be in effect until the approved dollar amount has been used to repurchase shares. The program does not require the Company to repurchase any specific number of shares and the Company cannot assure you that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued at any time.
- Net asset value of $149.8 million, or $11.08 per share
- Weighted average debt portfolio yield – 10.9%
- The Board of Directors elected to increase the size of the Board from three to five members by adding two independent directors, William H. Wright II and Frederick Van Zijl, effective September 16, 2018
- Senior secured revolving credit facility amendments included reduction in interest expense, increase in financial flexibility and maturity extension, among other amendments
Vijay Rajguru, CEO of Alcentra, commented on the quarter: "We have continued to execute on our plan to shift our portfolio toward a more traditional private-equity focused, middle market, senior secured strategy. Our goal remains to establish and maintain a more stable asset base and NAV, with appropriate risk/return characteristics that provide attractive dividends and returns to our shareholders. Our NAV per share has stabilized, increasing 0.6% since Q2 2018, and we expect our strategy to yield further stability as we continue our rotation into middle market senior secured loans. This rotation is particularly important in market conditions which, while remaining healthy, require caution this late in the economic cycle."
Third Quarter 2018 Financial Results
For the three months ended September 30, 2018, total investment income was $6.6 million, a decrease of $1.0 million over the $7.6 million of total investment income for the three months ended September 30, 2017. This decrease was due to the continued transition of the portfolio to senior secured loans. For the three months ended September 30, 2018, interest and PIK income comprised $6.5 million and other non-recurring income was $0.1 million.
For the three months ended September 30, 2018, net expenses (total expenses less a management fee waiver) were $3.6 million, an increase of $0.8 million over the $2.8 million of net expenses for the three months ended September 30, 2017. While net expenses increased, total expenses decreased by $0.2 million due to lower management fees and the reversal of previously accrued incentive fees, partially offset by an increase in interest and credit facility expense.
Net investment income for the three months ended September 30, 2018 was $3.0 million or $0.22 per share as compared to $4.8 million or $0.34 per share for the three months ended September 30, 2017.
For the three months ended September 30, 2018, we recorded a net realized loss from portfolio investments of $0.04 million and a net increase in unrealized appreciation from portfolio investments of $0.1 million after the provision for taxes as compared to a net realized loss from portfolio investments of $10.4 million and a net change in unrealized depreciation from portfolio investments of $6.5 million after the provision for taxes for the three months ended September 30, 2017. As a result, our net increase in net assets resulting from operations was $3.1 million after the provision for taxes for the three months ended September 30, 2018 as compared to our net decrease in net assets resulting from operations of $1.6 million after the benefit for taxes for the three months ended September 30, 2017.
Portfolio and Investment Activities
As of September 30, 2018, the fair value of our investment portfolio totaled $248.6 million and consisted of 34 investments in 28 companies, 5 broadly syndicated loans, and 1 rated debt security in a CLO. The average portfolio investment size on a cost basis was $6.9 million and equity investments constituted 10.8% of the portfolio. We received proceeds from repayments, loan dispositions, and amortizations on investments of $4.6 million during the three months ended September 30, 2018. This included the sale of Blue Mountain CLO and OZLM Funding IV Ltd CLO and various amortization payments from portfolio investments.
New and add-on investments totaling $6.1 million during the quarter ended September 30, 2018 included the following:
- Value-Based Care Solutions Group (since re-named Virence Health Technologies) - $6.0 million in L+8.125% 2nd lien secured debt
- Envocore - $0.06 million of preferred equity
As of September 30, 2018, Alcentra had four debt investments, Black Diamond Rentals, Show Media, Inc., Southern Technical Institute, Inc. and Xpress Global Systems, LLC 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 September 30, 2018 filed with the SEC.
Liquidity and Capital Resources
At September 30, 2018, Alcentra had $7.8 million in cash and cash equivalents, $54.5 million of borrowings outstanding on its $115 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.
Subsequent Events
- On October 4, 2018, Alcentra paid a dividend of $0.18 per share to shareholders of record as of September 28, 2018.
- On October 15, 2018, Alcentra sold Weight Watchers International for $1.9 million (Senior Secured L + 4.75%).
- On October 16, 2018, Alcentra sold Lumileds and Asurion, LLC for $1.96 million and $3.1 million, respectively. Lumileds and Asurion were both senior secured loans at L + 5.00% and L +6.00%, respectively.
- On October 17, 2018, Alcentra invested $12.9 million in Impact Group (L + 6.25% 1st Lien).
- On October 19, 2018, Acuity Technologies (fka QRC) repaid their debt (subordinated notes) in full in the amount of $10.0 million.
- On October 22, 2018, Alcentra sold West Corporation and Mayfield Agency ("Feeco") for $1.76 million and $1.98 million, respectively. Both loans were senior secured at L +3.50% and L + 8.50%, respectively.
- On November 2, 2018, Alcentra invested $4.5 million in Sandvine Corporation (2nd Lien at L + 8.00%).
- On November 2, 2018, Security Alarm Financing Enterprises, L.P. ("SAFE") repaid their debt (subordinated notes) for total proceeds of $10.4 million.
- On November 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 January 3, 2019.
Third 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 November 6, 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 1168456.
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 November 6, 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 $224,244,959 and $265,675,598, | $ | 217,130,492 | $ | 252,325,403 | ||||
Non-controlled, affiliated investments, at fair value (cost of $40,659,071 and $51,734,635, respectively) | 16,499,213 | 19,972,905 | ||||||
Controlled, affiliated investments, at fair value (cost $15,336,406 and $15,806,301, respectively) | 15,007,246 | 15,256,237 | ||||||
Cash | 7,791,745 | 13,882,956 | ||||||
Dividends and interest receivable | 1,400,706 | 1,942,300 | ||||||
Receivable for investments sold | 644,733 | 669,733 | ||||||
Deferred financing costs | 1,521,603 | 514,241 | ||||||
Deferred tax asset | 5,365,469 | 4,934,962 | ||||||
Income tax asset | 614,781 | 748,408 | ||||||
Prepaid expenses and other assets | 143,986 | 79,005 | ||||||
Total Assets | $ | 266,119,974 | $ | 310,326,150 | ||||
Liabilities | ||||||||
Credit facility payable | $ | 54,457,145 | $ | 89,703,273 | ||||
Notes payable (net of deferred note offering costs of $950,726 and $1,252,165, respectively) | 54,049,274 | 53,747,835 | ||||||
Other accrued expenses and liabilities | 371,444 | 447,589 | ||||||
Directors' fees payable | 78,500 | 68,917 | ||||||
Professional fees payable | 318,505 | 548,455 | ||||||
Interest and credit facility expense payable | 1,342,528 | 1,248,791 | ||||||
Management fee payable | 1,712,974 | 1,265,172 | ||||||
Income-based incentive fees payable | 1,251,180 | 1,294,985 | ||||||
Distributions payable | 2,449,591 | 3,561,305 | ||||||
Unearned structuring fee revenue | 275,020 | 725,653 | ||||||
Total Liabilities | 116,306,161 | 152,611,975 | ||||||
Commitments and Contingencies (Note 12) | ||||||||
Net Assets | ||||||||
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,517,234 and 14,222,945 shares | 13,517 | 14,223 | ||||||
Additional paid-in capital | 201,748,407 | 206,570,701 | ||||||
Accumulated net realized loss | (31,765,697) | (11,436,155) | ||||||
Undistributed net investment income | 7,215,213 | 4,449,122 | ||||||
Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $4,205,858 and | (27,397,627) | (41,883,716) | ||||||
Total Net Assets | 149,813,813 | 157,714,175 | ||||||
Total Liabilities and Net Assets | $ | 266,119,974 | $ | 310,326,150 | ||||
Net Asset Value Per Share | $ | 11.08 | $ | 11.09 | ||||
Alcentra Capital Corporation and Subsidiary | |||||||||||||
Consolidated Statements of Operations | |||||||||||||
For the three | For the three | For the nine | For the nine | ||||||||||
Investment Income: | |||||||||||||
From non-controlled, non-affiliated investments: | |||||||||||||
Interest income from portfolio investments | $ | 5,676,759 | $ | 5,374,814 | $ | 17,284,856 | $ | 18,567,193 | |||||
Paid-in-kind interest income from portfolio investments | 107,164 | 226,519 | 352,295 | 876,901 | |||||||||
Other income from portfolio investments | 94,668 | 377,071 | 2,213,784 | 1,574,818 | |||||||||
Dividend income from portfolio investments | 30,756 | 30,661 | 92,268 | 87,230 | |||||||||
From non-controlled, affiliated investments: | |||||||||||||
Interest income from portfolio investments | 58,881 | 405,892 | 265,414 | 937,704 | |||||||||
Paid in-kind income from portfolio investments | 96,816 | 609,854 | 309,946 | 1,375,173 | |||||||||
Other income from portfolio investments | — | — | — | — | |||||||||
From controlled, affiliated investments: | |||||||||||||
Interest income from portfolio investments | 488,036 | 411,262 | 1,470,032 | 1,219,767 | |||||||||
Paid in-kind income from portfolio investments | — | 174,448 | — | 511,292 | |||||||||
Other income from portfolio investments | — | — | — | — | |||||||||
Total investment income | 6,553,080 | 7,610,521 | 21,988,595 | 25,150,078 | |||||||||
Expenses: | |||||||||||||
Management fees | 943,360 | 1,230,961 | 3,214,345 | 3,710,178 | |||||||||
Income-based incentive fees | (43,805) | — | (43,805) | 638,244 | |||||||||
Professional fees | 362,625 | 368,909 | 1,095,777 | 862,097 | |||||||||
Valuation services | 78,346 | 41,346 | 132,279 | 211,087 | |||||||||
Interest and credit facility expense | 1,705,992 | 1,549,462 | 5,146,364 | 4,589,436 | |||||||||
Amortization of deferred financing costs | 117,587 | 232,807 | 325,138 | 806,418 | |||||||||
Directors' fees | 87,076 | 112,281 | 300,104 | 254,761 | |||||||||
Insurance expense | 57,076 | 57,232 | 169,583 | 181,815 | |||||||||
Amortization of deferred note offering costs | 97,478 | 111,726 | 343,439 | 315,554 | |||||||||
Consulting fees | 54,152 | — | 535,892 | — | |||||||||
Other expenses | 284,764 | 223,318 | 810,583 | 631,542 | |||||||||
Total expenses | 3,744,651 | 3,928,042 | 12,029,699 | 12,201,132 | |||||||||
Waiver of management fees | (157,227) | (1,160,896) | (266,508) | (1,330,420) | |||||||||
Net expenses | 3,587,424 | 2,767,146 | 11,763,191 | 10,870,712 | |||||||||
Net investment income | 2,965,656 | 4,843,375 | 10,225,404 | 14,279,366 | |||||||||
Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments | |||||||||||||
Net realized gain (loss) on: | |||||||||||||
Non-controlled, non-affiliated investments | (38,921) | (10,477,819) | (10,162,013) | (11,497,056) | |||||||||
Non-controlled, affiliated investments | (12) | 72,164 | (10,167,529) | 72,164 | |||||||||
Controlled, affiliated investments | — | — | — | — | |||||||||
Net realized gain (loss) from portfolio investments | (38,933) | (10,405,655) | (20,329,542) | (11,424,892) | |||||||||
Net change in unrealized appreciation (depreciation) on: | |||||||||||||
Non-controlled, non-affiliated investments | 2,355,583 | 6,824,145 | 6,235,728 | (2,376,265) | |||||||||
Non-controlled, affiliated investments | (1,610,661) | (8,156,756) | 7,601,872 | (11,143,489) | |||||||||
Controlled, affiliated investments | — | 473 | 220,904 | 475,999 | |||||||||
Net change in unrealized appreciation (depreciation) from | 744,922 | (1,332,138) | 14,058,504 | (13,043,755) | |||||||||
Benefit (Provision) for income taxes on unrealized gain (loss) on | (589,643) | 5,282,934 | 427,585 | 4,455,809 | |||||||||
Net realized gain (loss) and net change in unrealized appreciation | 116,346 | (6,454,859) | (5,843,453) | (20,012,838) | |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 3,082,002 | $ | (1,611,484) | $ | 4,381,951 | $ | (5,733,472) | |||||
Basic and diluted: | |||||||||||||
Net investment income per share | $ | 0.22 | $ | 0.34 | $ | 0.74 | $ | 1.03 | |||||
Earnings (loss) per share | $ | 0.23 | $ | (0.11) | $ | 0.32 | $ | (0.41) | |||||
Weighted Average Shares of Common Stock Outstanding | 13,530,129 | 14,245,220 | 13,815,619 | 13,825,432 | |||||||||
Dividends declared per common share | $ | 0.180 | $ | 0.340 | $ | 0.540 | $ | 1.050 | |||||
SOURCE Alcentra Capital Corporation
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