NEW YORK, May 6, 2019 /PRNewswire/ -- Alcentra Capital Corporation ABDC (the "Company"), a provider of debt financing solutions to middle-market companies based primarily in the United States, today announced its financial results for the first quarter of 2019.
First Quarter Highlights
- Total investment income of $6.4 million
- Net investment income of $2.9 million, or $0.22 per share
- Invested approximately $26.0 million of capital into 5 new portfolio investments
- Received proceeds from repayments, loan dispositions and amortizations on investments of approximately $50.0 million
- Net asset value of $143.9 million, or $11.17 per share
- Weighted average debt portfolio yield of approximately 11.2%
- Repurchased 229,729 shares during the quarter as part of the share repurchase program authorized on November 5, 2018; repurchased approximately 9.5% of shares outstanding since January 1, 2018
Vijay Rajguru, Chairman of the Company, stated, "The Board is pleased with the progress management continues to make in rotating our legacy assets and stabilizing book value per share. At the same time, as management continues to focus on increasing value for stockholders, the Board believes it is also important to explore additional options that may be available to further enhance the value of the Company. As a result, and as we previously announced, the Board decided to enter into a formal process to evaluate potential strategic alternatives and the process is currently ongoing."
Suhail A. Shaikh, Chief Executive Officer of the Company, stated, "We are pleased with our performance in the first quarter of 2019, including successfully exiting several of our legacy investments, reducing the size of our concentrated positions and adding new investments consistent with our revised strategy – all with the backdrop of a relatively light volume quarter in the direct lending market."
First Quarter 2019 Financial Results
For the three months ended March 31, 2019, total investment income was $6.4 million, a decrease of $1.8 million from the $8.2 million of total investment income for the three months ended March 31, 2018. This decrease was due primarily to two prepayment penalties ($1.4 million) received in the first quarter of 2018 along with the continued transition of the portfolio to lower-yielding senior secured loans. For the three months ended March 31, 2019, interest and PIK income comprised $6.2 million and other non-recurring income was $0.2 million. Net investment income for the three months ended March 31, 2019 was $2.9 million, or $0.22 per share, as compared to $3.8 million, or $0.27 per share, for the three months ended March 31, 2018.
For the three months ended March 31, 2019, total net expenses were $3.5 million, a decrease of $0.9 million from the $4.4 million of total net expenses for the three months ended March 31, 2018. Net expenses decreased primarily due to the permanent management fee reduction and temporary management fee waiver that commenced in May 2018. The base net management fee was $0.7 million and there was a reversal of previously accrued incentive fees of $0.5 million. For the three months ended March 31, 2019, higher professional fees and other general and administrative expenses totaled $1.6 million, an increase of $0.3 million from March 31, 2018. The increase was due primarily to an increase in professional, director and other of fees $0.5 million which was offset by a decrease in consulting fees of $0.2 million. The Company expects director fees, insurance fees, consulting fees and other professional expenses to increase on a go-forward basis in light of recent stockholder activist activities and the Board's formal review process to evaluate strategic alternatives for the Company.
For the three months ended March 31, 2019, the Company recorded a net realized loss and net change in unrealized depreciation from portfolio investments of $0.9 million after the provision for taxes. As a result, the Company's net increase in net assets resulting from operations was $2.0 million for the three months ended March 31, 2019.
Portfolio and Investment Activities
As of March 31, 2019, the fair value of the Company's investment portfolio totaled $213.7 million and consisted of 29 investments including 28 companies and 1 rated debt security in a CLO. The average portfolio investment size on a cost and fair market basis was $7.7 million and $7.5 million, respectively. The Company received proceeds from repayments, loan dispositions, and amortizations on investments of approximately $50.0 million during the three months ended March 31, 2019.
New and add-on investments totaling approximately $26.0 million during the quarter ended March 31, 2019 included the following:
- Aegis Sciences Corporation – A first lien term loan ($7.3 million) at LIBOR + 5.50%. Aegis operates a forensic toxicology and healthcare sciences laboratory that provides science-driven drug testing and consulting services in the United States.
- Cambium Learning Group – A second lien term loan ($4.7 million) at LIBOR + 8.50%. Cambium Learning Group is a leading provider of digital resources and instructional products for Pre-k through 12 schools, districts, teachers and students.
- Clanwilliam Group Ltd. – Add-on first lien investment ($0.3 million) at EURIBOR + 7.00%. Clanwillian is an existing portfolio company.
- Institutional Shareholder Services – A first lien term loan ($3.0 million) at LIBOR + 4.50% and a second lien term loan ($1.9 million) at LIBOR + 8.50%. ISS provides proxy advisory, corporate governance and ESG analytic solutions to financial market participants.
- GGC Aperio Holdings – A first lien term loan ($8.5 million) at LIBOR + 5.0%. Aperio manages domestic and international equity portfolios for ultra-high net worth individuals via large financial intermediaries, including registered investment advisors, broker-dealers and family offices.
As of March 31, 2019, the Company had one debt investment (Southern Technical Institute, Inc.) on non-accrual status.
A risk rating of the portfolio companies is available on the Company's website presentation (https://investors.alcentracapital.com/events-presentations) and in the MD&A section of the Form 10-Q for the quarter ended March 31, 2019 filed with the SEC.
Liquidity and Capital Resources
At March 31, 2019, the Company had $4.4 million in cash, $28.6 million of borrowings outstanding on its $115.0 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.
Review of Strategic Alternatives
The Company's Board, led by its Committee of Independent Directors, continues to explore a variety of strategic alternatives to enhance long-term stockholder value, including a sale of part or all of the Company, a business combination and other strategic transactions. To assist the Company in this process, the Committee of Independent Directors has retained Houlihan Lokey as its financial advisor. There is no assurance that the review will lead to a transaction. No specific timetable has been set and the Company does not expect to comment further on the review of strategic alternatives or periodically provide updates to the market with additional information unless and until the Board has approved a specific transaction or otherwise deems disclosure to be appropriate or required by law.
Subsequent Events
- On April 1 and 2, 2019, the Company received total funds of $7.0 million in connection with a debt and equity repayment from Champion ONE, (consisting of $1.1 million in equity value and the principal amount of $5.9 million, respectively).
- On April 3, 2019, Superior Controls, Inc. repaid its debt and equity for $8.5 million (consisting of the principal amount of $7.1 million and $1.4 million in equity value).
- On April 4, 2019, the Company paid a dividend to stockholders of record as of March 29, 2019 of $0.18 per share.
- On April 4, 2019, the Board announced that it had entered into a formal review process to evaluate strategic alternatives for the Company, including a sale of the Company, a business combination and other strategic transactions. The Board authorized its Committee of Independent Directors to lead the process.
- On April 10, 2019, the Company sold $5.0 million of the first lien loan of Impact Group at 99.5% of par value.
- On May 3, 2019, the Board approved the 2019 second quarter dividend of $0.18 per share for stockholders of record as of June 28, 2019, payable July 3, 2019. The Board also approved a special spillover dividend of $0.15 per share for the stockholders of record as of June 28, 2019, payable July 3, 2019. The special dividend was declared by the Board as a result of overearning the quarterly dividend in 2018.
- On May 3, 2019, the Adviser agreed to a continued temporary waiver of 25 basis points across all of the base management fee breakpoints under the Investment Advisory Agreement, effective from May 1, 2019 to April 30, 2020.
First Quarter 2019 Financial Results Conference Call
Management will host a conference call to discuss the Company's operating and financial results at 9:30 am ET on May 7, 2019. 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 3891513#.
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 May 7, 2020.
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. The Company's investment objective is to provide attractive risk-adjusted returns by generating current income from its debt investments. The Company 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 Capital Corporation 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, the Company has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute "forward-looking statements," which relate to future events, including in connection with the exploration of strategic alternatives, or the Company's future performance or financial condition. These statements speak only as of the date of this press release, are based on the Company's current plans, expectations, estimates, projections, beliefs and assumptions and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements, including those relating to the impact of activist stockholder activities and the strategic alternatives review process on, among other things, the Company's professional and consulting fees and expenses and on management distractions, the nature and timing of any possible transaction or other strategic alternative, or of any potential or anticipated benefits from any such transaction or other alternative, as well as those risks and uncertainties described in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 12, 2019 and in the Company's other filings made with the SEC from time to time. As a result, any forward-looking statements are not guarantees and there can be no assurance that the strategic alternatives review process will result in a transaction or change in the Company's announced strategy. In addition, there is no assurance that the Company will purchase additional shares at any specific discount levels or in any specific amounts under its repurchase program. There is no assurance that the market price of the Company's shares, either absolutely or relative to net asset value, will increase as a result of any share repurchases, or that any repurchase program will enhance stockholder value over the long term. You should not place undue reliance on any forward-looking statements. Except as required by applicable law or regulation, the Company does not undertake any obligation to update its forward-looking statements to reflect future events or circumstances.
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 $206,648,256 and | $ | 199,599,456 | $ | 205,411,779 | ||||
Non-controlled, affiliated investments, at fair value (cost of $26,482,025 and | 14,149,845 | 12,980,016 | ||||||
Controlled, affiliated investments, at fair value (cost $0 and $15,212,562, | — | 16,406,021 | ||||||
Cash | 4,362,418 | 11,049,499 | ||||||
Dividends and interest receivable | 1,241,095 | 454,883 | ||||||
Receivable for investments sold | 7,797,809 | 644,733 | ||||||
Deferred financing costs | 1,160,277 | 1,366,393 | ||||||
Deferred tax asset | 5,132,895 | 5,385,694 | ||||||
Prepaid expenses and other assets | 46,075 | 79,410 | ||||||
Total Assets | $ | 233,489,870 | $ | 253,778,428 | ||||
Liabilities | ||||||||
Credit facility payable | $ | 28,568,305 | $ | 28,536,441 | ||||
Notes payable (net of deferred note offering costs of $752,071 and $855,433, | 54,247,929 | 54,144,567 | ||||||
Payable for investments purchased | — | 18,550,000 | ||||||
Other accrued expenses and liabilities | 466,521 | 535,096 | ||||||
Directors' fees payable | 130,000 | 36,125 | ||||||
Professional fees payable | 661,207 | 554,173 | ||||||
Interest and credit facility expense payable | 1,529,992 | 1,069,139 | ||||||
Management fee payable | 721,348 | 765,659 | ||||||
Income-based incentive fees payable | 403,672 | 890,796 | ||||||
Distributions payable | 2,433,102 | 2,433,102 | ||||||
Unearned structuring fee revenue | 59,540 | 81,643 | ||||||
Income tax liability | 412,944 | 379,155 | ||||||
Total Liabilities | 89,634,560 | 107,975,896 | ||||||
Commitments and Contingencies (Note 12) | ||||||||
Net Assets | ||||||||
Common stock, par value $0.001 per share (100,000,000 shares authorized, 12,875,566 | 12,876 | 13,105 | ||||||
Additional paid-in capital | 197,118,476 | 198,594,662 | ||||||
Distributable earnings (accumulated loss) | (53,276,042) | (52,805,235) | ||||||
Total Net Assets | 143,855,310 | 145,802,532 | ||||||
Total Liabilities and Net Assets | $ | 233,489,870 | $ | 253,778,428 | ||||
Net Asset Value Per Share | $ | 11.17 | $ | 11.13 | ||||
Alcentra Capital Corporation and Subsidiary | |||||||||||||
Consolidated Statements of Operations | |||||||||||||
For the three months | For the three months | ||||||||||||
Investment Income: | |||||||||||||
From non-controlled, non-affiliated investments: | |||||||||||||
Interest income from portfolio investments | $ | 5,806,309 | $ | 5,742,386 | |||||||||
Paid-in-kind interest income from portfolio investments | 84,504 | 199,650 | |||||||||||
Other income from portfolio investments | 107,757 | 1,507,304 | |||||||||||
Dividend income from portfolio investments | — | 30,756 | |||||||||||
From non-controlled, affiliated investments: | |||||||||||||
Interest income from portfolio investments | 36,479 | 77,453 | |||||||||||
Paid in-kind income from portfolio investments | 96,413 | 123,126 | |||||||||||
Other income from portfolio investments | — | — | |||||||||||
From controlled, affiliated investments: | |||||||||||||
Interest income from portfolio investments | 208,538 | 500,890 | |||||||||||
Paid in-kind income from portfolio investments | — | — | |||||||||||
Other income from portfolio investments | 87,116 | — | |||||||||||
Total investment income | 6,427,116 | 8,181,565 | |||||||||||
Expenses: | |||||||||||||
Management fees | 865,618 | 1,234,863 | |||||||||||
Income-based incentive fees | (487,124) | — | |||||||||||
Professional fees | 625,229 | 354,070 | |||||||||||
Valuation services | 71,250 | 63,971 | |||||||||||
Interest and credit facility expense | 1,417,450 | 1,694,887 | |||||||||||
Amortization of deferred financing costs | 206,116 | 103,981 | |||||||||||
Directors' fees | 159,676 | 96,202 | |||||||||||
Insurance expense | 55,835 | 55,988 | |||||||||||
Amortization of deferred note offering costs | 133,363 | 126,694 | |||||||||||
Consulting fees | 111,601 | 305,038 | |||||||||||
Excise tax | 468,432 | 329,575 | |||||||||||
Other expenses | 62,448 | 40,136 | |||||||||||
Total expenses | 3,689,894 | 4,405,405 | |||||||||||
Waiver of management fees | (144,270) | — | |||||||||||
Net expenses | 3,545,624 | 4,405,405 | |||||||||||
Net investment income and foreign currency transactions | 2,881,492 | 3,776,160 | |||||||||||
Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments | |||||||||||||
Net realized gain (loss) on: | |||||||||||||
Non-controlled, non-affiliated investments | (1,715,758) | (14,815) | |||||||||||
Non-controlled, affiliated investments | — | — | |||||||||||
Controlled, affiliated investments | 1,193,458 | — | |||||||||||
Foreign currency transactions | 40,416 | — | |||||||||||
Net realized gain (loss) from portfolio investments and foreign | (481,884) | (14,815) | |||||||||||
Net change in unrealized appreciation (depreciation) on: | |||||||||||||
Non-controlled, non-affiliated investments | (180,407) | (333,426) | |||||||||||
Non-controlled, affiliated investments | 1,073,416 | (107,374) | |||||||||||
Controlled, affiliated investments | (1,193,459) | 220,904 | |||||||||||
Foreign currency translation | 115,935 | — | |||||||||||
Net change in unrealized appreciation (depreciation) from | (184,515) | (219,896) | |||||||||||
Benefit (Provision) for income taxes on unrealized gain (loss) on | (252,798) | (2,489) | |||||||||||
Net realized gain (loss) and net change in unrealized appreciation | (919,197) | (237,200) | |||||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,962,295 | $ | 3,538,960 | |||||||||
Basic and diluted: | |||||||||||||
Net investment income per share | $ | 0.22 | $ | 0.27 | |||||||||
Earnings (loss) per share | $ | 0.15 | $ | 0.25 | |||||||||
Weighted Average Shares of Common Stock Outstanding | 12,906,379 | 14,198,651 | |||||||||||
Dividends declared per common share | $ | 0.180 | $ | 0.180 | |||||||||
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SOURCE Alcentra Capital Corporation
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