Alcentra Capital Corporation Announces Second Quarter 2016 Financial Results and Announces Quarterly Dividend of $0.34 Per Share

NEW YORK, Aug. 4, 2016 /PRNewswire/ -- Alcentra Capital Corporation ABDC ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market companies based in the United States, today announced its financial results for the second quarter ended June 30, 2016.

Second Quarter 2016 Financial Highlights

Total investment income of $10.6 million
Net investment income of $5.9 million, or $0.44 per share
Net increase in net assets resulting from operations of $1.4 million, or $0.10 per share
Invested $39.3 million in debt and equity securities, including investments in 4 new portfolio companies
Received proceeds from repayments and amortizations of $26.5 million
Paid regular quarterly dividend of $0.34 per share on July 7, 2016
Net asset value (NAV) of $191.1 million, or $14.16 per share, as of June 30, 2016
Weighted Average Portfolio Leverage – 3.88x, which is a slight increase from the prior quarter of 3.72x
Weighted Average Portfolio Yield – 11.7%, down from 12.0% in the prior quarter

Management Commentary

"We had another good quarter with net investment income exceeding 40 cents per share for two consecutive quarters.

Originations in the second quarter improved from the first quarter consistent with an improved M&A climate for lower middle market companies. We closed four new deals in the quarter representing $34.75 million of invested capital, thus representing a moderate increase in assets under management for the quarter. We continue to see attractive opportunities to deploy capital in growth companies across a variety of industry sectors.

Two significant events occurred within the last four weeks that will help us achieve our strategic objectives, which have been to reduce the level of PIK interest and equity in the portfolio.

The sale of City Carting to Tunnel Hill Partners has allowed us to consolidate City Carting into a much larger waste management platform with a deeper management team and broader geographic focus. The transaction also reduces the level of PIK income in the portfolio.

On August 1, 2016, our notes and warrants in DBI Holdings were repaid including the Holding Company PIK Note. We realized a gain on our warrant of $9.7 million.

The sale of City Carting and repayment of our loan to DBI has eliminated the two largest components of PIK income in the portfolio. It also reduces the equity exposure in our portfolio, and positions us favorably to redeploy that capital into new debt investments. We would expect this portfolio dynamic to continue for the next several quarters, allowing continued growth in net investment income.

Lastly, we continued to repurchase common stock over the last few weeks and will continue to do so selectively under our existing program as market conditions dictate."

Second Quarter 2016 Financial Results

For the three months ended June 30, 2016, total investment income was $10.6 million. This is an increase from the same period in the prior year mainly due to an increase of investments in the portfolio as well as fees associated with repayments. Interest and PIK income comprised $8.1 million and other income comprised $2.5 million, including $2.1 million of prepayment fees and $0.3 million of amendment fee income.

For the three months ended June 30, 2016, total expenses were $4.7 million. Interest and financing expenses for the three months ended June 30, 2016 was $1.6 million and the base management fee was $1.3 million. The income based incentive fee for the three months ended June 30, 2016 was $0.93 million and there was no capital gains incentive fee accrual. Professional fees and other general and administrative expenses totaled $0.91 million for the three months ended June 30, 2016.

Net investment income for the three months ended June 30, 2016 was $5.9 million ($0.44 per share).

During the three months ended June 30, 2016, we recorded a net realized gain on investments of $1.7 million and a net change in unrealized depreciation on investments of $5.9 million.

The net increase in net assets resulting from operations during the three months June 30, 2016, was $1.4 million, or $0.10 per share.

Per share results for the second quarter ended June 30, 2016 are based on average shares outstanding of 13.50 million.

Portfolio and Investment Activities

As of June 30, 2016, Alcentra had debt and equity investments in 33 portfolio companies with a total fair market value of $293.6 million. The average portfolio investment on a cost basis was $9.0 million and equity constituted 16.9% of the portfolio, down from 29% at the time of the IPO. During the second quarter ended June 30, 2016, Alcentra made investments of $39.3 million, including investments in 4 new portfolio companies and add on financing, and received proceeds from repayments and amortizations of investments of $26.5 million. As of June 30, 2016, the weighted average yield on debt investments was 11.7%, which was a slight decrease in the weighted average yield from the March 31, 2016 reporting period of 12.0%.

Second quarter 2016 investment activity included the following new portfolio company investments:

Healthcare Associates of Texas, LLC ("HCAT") is a full-service physician practice group providing primary care and multi-specialty care via three locations in the Dallas-Fort Worth metro area. Alcentra invested $8.50 million in Second Lien Notes and $1.30 million in a delayed draw on April 30, 2016.

Metal Powder Products ("MPP") is a leading manufacturer of ferrous and aluminum powder metal components for use in the automotive, lawn and garden, and light industrial sectors. Alcentra invested $8.25 million in subordinated notes and $0.50 million of equity on May 5, 2016.

QRC Technologies designs, develops and services a host of proprietary Radio Frequency products and provides comprehensive integrated solutions primarily for government, military and law enforcement agencies. Alcentra invested $10 million in subordinated notes on May 20, 2016.

Vectra (Duke Finance, LLC) is a technology-driven industrial company which operates through Magnetic Technology, Battery Technologies and Specialty Chemicals. Alcentra invested $7.5 million in Second Lien Notes on May 18, 2016.

Alcentra had no investments on non-accrual status as of June 30, 2016.

Liquidity and Capital Resources

At June 30, 2016, Alcentra had $5.0 million in cash and cash equivalents. Alcentra had $51.7 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $51.5 million outstanding of Alcentra Capital InterNotes as of June 30, 2016.

Subsequent Events

On July 20, 2016, Alcentra funded a $13,000,000 13.0% cash/3.0% PIK subordinated debt investment in Limbach Facility Services,LLC.

On August 1, 2016, DBI Holdings, LLC repaid our senior subordinated notes ($9.6 million), senior PIK notes ($9.2 million), and warrants ($9.7 million) for total proceeds of $28.5 million

Third Quarter 2016 Dividend of $0.34 Per Share Declared

On August 4, 2016, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the third quarter of 2016 payable on October 6, 2016 to stockholders of record as of September 30, 2016.

Alcentra has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

Second Quarter 2016 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 10:00 am ET on Friday, August 5, 2016. 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 # 59795061.

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 August 5, 2017.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $100.0 million. Alcentra' 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, as amended. In addition, for tax purposes, Alcentra has elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

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' 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
	June 30, 2016		December 31,
	(Unaudited)		2015
Assets
Portfolio investments, at fair value
Non-controlled, non-affiliated investments, at fair value (cost of $236,246,942 and $219,715,263, respectively)	$	228,320,326	$	221,349,073
Non-controlled, affiliated investments, at fair value (cost of $47,758,791 and $56,426,475, respectively)		50,927,904		59,243,999
Controlled, affiliated investments, at fair value (cost of $14,788,295 and $27,289,995, respectively)		14,390,754		15,748,539
Total of portfolio investments, at fair value (cost of $298,794,028 and $303,431,733, respectively)		293,638,984		296,341,611
Cash		5,038,752		4,866,972
Dividends and interest receivable		1,517,925		2,607,205
Receivable for investments sold		1,364,550		—
Deferred financing costs		1,801,484		2,183,881
Deferred tax asset		927,632		1,382,408
Prepaid expenses and other assets		249,005		113,730
Total Assets	$	304,538,332	$	307,495,807

Liabilities
Credit facility payable	$	51,685,846	$	63,504,738
Notes payable (net of deferred note offering costs of $1,413,937 and $1,156,622, respectively)		50,130,063		38,843,378
Other accrued expenses and liabilities		278,021		271,801
Directors' fees payable		72,500		37,025
Professional fees payable		235,067		481,333
Interest and credit facility expense payable		974,292		813,222
Management fee payable		1,283,763		1,302,213
Income-based incentive fees payable		2,023,682		1,081,797
Distributions payable		4,586,816		4,595,700
Unearned structuring fee revenue		1,354,846		689,577
Income tax liability		825,900		842,812
Total Liabilities		113,450,796		112,463,596

Commitments and Contingencies (Note 12)

Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,490,636 and 13,516,766 shares issued and outstanding, respectively)		13,491		13,517
Additional paid-in capital		197,181,027		197,652,086
Accumulated net realized gain (loss)		(4,440,768)		2,791,590
Undistributed net investment income		3,451,048		1,130,327

Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $37,782 and $534,813 as of June 30, 2016 and December 31, 2015, respectively		(5,117,262)		(6,555,309)
Total Net Assets		191,087,536		195,032,211
Total Liabilities and Net Assets	$	304,538,332	$	307,495,807

Net Asset Value Per Share	$	14.16	$	14.43

Alcentra Capital Corporation and Subsidiary
Consolidated Statement of Operations
Investment Income:	For the three months ended June 30, 2016 (Unaudited)	For the three months ended June 30, 2015 (Unaudited)	For the six months ended June 30, 2016 (Unaudited)	For the six months ended June 30, 2015 (Unaudited)
From non-controlled, non-affiliated investments:
Interest income from portfolio investments	$5,169,619	$4,286,969	$10,437,162	$8,444,528
Paid in-kind income from portfolio investments	1,008,525	1,166,440	2,359,613	1,902,164
Other income from portfolio investments	652,786	295,386	1,571,450	955,282
Dividend income from portfolio investments	-	302,874	-	302,874
From non-controlled, affiliated investments:
Interest income from portfolio investments	785,044	988,949	1,695,367	2,208,005
Paid in-kind income from portfolio investments	634,025	631,046	1,485,164	1,242,545
Other income from portfolio investments	1,845,055	20,527	1,950,937	48,885
From controlled, affiliated investments:
Interest income from portfolio investments	382,888	582,229	764,635	1,158,209
Paid in-kind income from portfolio investments	162,027	206,077	322,032	404,858
Other income from portfolio investments	-	27,043	-	64,843
Total investment income	10,639,969	8,507,540	20,586,360	16,732,193
Expenses:
Management fees	1,283,763	1,219,963	2,572,799	2,367,968
Income-based incentive fees	926,158	397,028	1,716,885	1,203,128
Capital gains incentive fees	-	434,217	-	1,435,684
Professional fees	372,535	170,549	726,537	359,935
Valuation services	71,061	100,010	142,047	222,915
Interest and credit facility expense	1,334,510	1,067,118	2,643,454	1,673,006
Amortization of deferred financing costs	283,805	195,770	548,435	379,257
Directors' fees	84,372	76,191	149,295	114,191
Insurance Expense	65,771	68,006	132,381	137,541
Other expenses	319,648	129,339	451,289	213,512
Total expenses	4,741,623	3,858,191	9,083,122	8,107,137
Waiver of capital gains incentive fees	-	-	-	(1,001,467)
Net expenses	4,741,623	3,858,191	9,083,122	7,105,670
Net investment income	5,898,346	4,649,349	11,503,238	9,626,523

Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments
Net realized gain (loss) on:
Non-controlled, non-affiliated investments	23,802	(146,703)	1,900,440	(146,449)
Non-controlled, affiliated investments	1,626,964	-	2,021,697	-
Controlled, affiliated investments	-	-	(11,154,495)	-
Net realized gain (loss) from portfolio investments	1,650,766	(146,703)	(7,232,358)	(146,449)
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments	(3,575,425)	587,925	(9,560,426)	(535,989)
Non-controlled, affiliated investments	(2,228,352)	2,016,324	351,589	3,412,598
Controlled, affiliated investments	(62,999)	(286,458)	11,143,915	(382,031)
Net change in unrealized appreciation (depreciation) from portfolio investments	(5,866,776)	2,317,791	1,935,078	2,494,578
Benefit/(Provision) for taxes on unrealized gain on investments	(287,167)	(406,781)	(497,031)	(569,105)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio investments	(4,503,177)	1,764,307	(5,794,311)	1,779,024
Net Increase in Net Assets from Operations	$1,395,169	$6,413,656	$5,708,927	$11,405,547

Basic and diluted:
Net Investment income per share	$0.44	$0.34	$0.85	$0.71
Net increase in net assets resulting from operation per share	$0.10	$0.47	$0.42	$0.84
Weighted Average Shares of Common Stock Outstanding	13,500,429	13,516,766	13,507,973	13,516,766
Dividends Declared per common share	$0.34	$0.34	$0.68	$0.68

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SOURCE Alcentra Capital Corporation

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