Alcentra Capital Corporation Announces Fourth Quarter Earnings of $0.45 per share and Full Year 2016 Financial Results of $1.66 per share. Regular Dividend of $0.34 Per Share and Special Cash Dividend of $0.03 Per Share declared for First Quarter 2017

NEW YORK, March 9, 2017 /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 fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Highlights

Total investment income of $10.9 million
Net investment income of $6.1 million, or $0.45 per share
Invested $22.8 million in debt and equity securities, including investments in 3 new portfolio companies
Received proceeds from repayments of $29.6 million
Paid regular quarterly dividend of $0.34 per share on January 5, 2017
Net asset value (NAV) of $184.5 million, or $13.72 per share, which is up from $13.69 in the third quarter;
Weighted Average Portfolio Leverage – 3.93x, which is up from the prior quarter of 3.69x
Weighted Average Portfolio Yield – 11.7%

Full Year 2016 Financial Highlights

Total investment income of $40.6 million
Net Investment income of $22.4 million, or $1.66 per share
Net increase in net assets resulting from operations of $8.8 million, or $0.65 per share
Invested $153.2 million in debt and equity securities, including investments in 12 new portfolio companies
Received proceeds from repayments and amortizations of $164.5 million
Paid regular quarterly dividends totaling $1.36 per share

Management Commentary

"We exceeded expectations for net investment income earning $0.45 cents per share for the fourth quarter. We invested in 3 new portfolio companies, our fourth quarter results benefitted from the early pre-payment of our debt investment in Limbach, which had $1.5 million of pre-payment interest and warrant gains.

For the full 2016 fiscal year, we earned $1.66 per share, which is up 16.1% from last year's results of $1.43 cents per share.

As we stated in our third quarter earnings release, we made a strategic decision to reduce our equity portfolio via a secondary sale of select portfolio equity investments which we accomplished during the third quarter. We had a small remaining equity investment in Wholesome Sweeteners, which we sold back to the investor group in January 2017, thus completing the strategic realignment of the portfolio.

The secondary sale of portfolio company equity investments, in combination with the early pre-payment of the Limbach debt, accounted for the reduction of assets at year end from the third quarter. Absent the early repayment of the Limbach debt, the portfolio would have been relatively flat on a year-over-year basis.

The capital markets have improved significantly over the past few months, and we expect the M&A market to improve alongside continued strength in the stock market. We would expect the velocity of our portfolio to continue be dynamic in this environment.

We believe that recent public announcements made by certain Fortune 500 companies with regard to large investments in their US operations, particularly in the semiconductor, oil and gas, and automotive sector, will benefit some of our existing portfolio companies."

Fourth Quarter 2016 Financial Results

For the three months ended December 31, 2016, total investment income was $10.9 million. This is an increase from the same period in the prior year mainly due to an increase in prepayment interest and fees. Interest and PIK income comprised $10.0 million and other income comprised $0.8 million.

For the three months ended December 31, 2016, total expenses were $4.8 million. Interest and financing expenses for the quarter were $1.9 million and the base management fee was $1.3 million. The income based incentive fee for the three months ended December 31, 2016 was $0.9 million and there was no capital gains incentive fee accrual. Professional fees and other general and administrative expenses totaled $0.6 million for the three months ended December 31, 2016.

Net investment income for the three months ended December 31, 2016 was $6.1 million ($0.45 per share).

During the three months ended December 31, 2016, we recorded a net realized loss on investments of $5.9 million (largely due to secondary sale of portfolio company equity securities and the RT1 investment) and a net change in unrealized appreciation on investments of $7.1 million.

The net increase in net assets resulting from operations during the three months ended December 31, 2016, was $4.9 million, or $0.36 per share.

Per share results for the second quarter ended December 31, 2016 are based on average shares outstanding of 13.49 million.

Portfolio and Investment Activities

As of December 31, 2016, Alcentra had debt and equity investments in 32 portfolio companies with a total fair market value of $276.3 million. The average portfolio investment on a cost basis was $8.8 million and equity constituted 7.8% of the portfolio, down from 29% at the time of the IPO. During the fourth quarter ending December 31, 2016, Alcentra made investments of $22.8 million, including investments in 3 new portfolio companies and 2 add on financings, and received proceeds from repayments and amortizations of investments of $29.6 million. As of December 31, 2016, the weighted average yield on debt investments was 11.7%, which is a slight decrease from the weighted average yield from the September 30, 2016 reporting period of 11.8%.

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

Lugano Diamonds ("Lugano") is a leading luxury brand of jewelry to ultra-high net worth individuals. The Company designs and creates unique, luxury, artistic jewelry. Alcentra invested $5.4 million in Senior Secured Notes and $0.6 million in equity on October 24, 2016.
Security Alarm Financing Enterprises, L.P. ("SAFE") is a full service nationwide alarm company that services and monitors security alarm contracts. Alcentra invested $10.0 million in Senior Subordinated Notes on October 27, 2016.
Palmetto Moon, LLC ("Palmetto") is a specialty retailer of outdoor active lifestyle apparel and accessories, college lifestyle apparel and state and local themed apparel. Alcentra invested $5.5 million in Senior Secured Notes and $0.4 million of common equity on December 30, 2016.

Alcentra has one investment on non-accrual – a out of home media and advertising company based in Las Vegas – which has been on our Watch List intermittently and represents less than 1.5% of our portfolio.

Liquidity and Capital Resources

At December 31, 2016, Alcentra had $3.9 million in cash and cash equivalents. Alcentra had $39.1 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.

Subsequent Events

On January 3, 2017, Alcentra sold its equity interest in Wholesome Sweetners in a secondary sale for $3.7 million.
On January 5, 2017, Alcentra invested an additional $2.7 million in LRI Energy Solutions
On January 31, 2017, Alcentra invested $10.2 million in Pharmalogics Recruiting (10.25% 1st Lien Debt and common equity)
On February 1, 2017, Alcentra invested an additional $0.402 million in Black Diamond Rentals and a further $0.064 million on February 28, 2017
On February 21, 2017, Duke Finance, LLC repaid their investment in the amount of $7.5 million
On February 27, 2017, Alpine Waste repaid their investment in the amount of $11.0 million
On February 28, 2017, Alcentra invested an additional $2.1 million in Pharmalogic Holdings Corporation
On March 9, 2017, David Scopelliti was named Executive Vice President

First Quarter 2017 Regular Dividend of $0.34 Per Share and a Special Cash Dividend of $0.03 Per Share Declared

On March 9, 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the First Quarter of 2017 and a special cash dividend of $0.03 per share, both payable on April 6, 2017 to stockholders of record as of March 31, 2017.

The special dividend is due to the estimated spillover income of approximately $5.99 million, or approximately $0.44 per share, for the year ended December 31, 2016. This special dividend will be paid out of Alcentra Capital's undistributed taxable income ("spillover income", or taxable income in excess of dividends paid). After giving effect to the special cash dividend, the Company will have $5.59 million of estimated spillover income or $0.41 per share.

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.

Fourth 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, March 10, 2017. 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 # 83441678.

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 March 9, 2018.

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 $250.0 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
	December 31,		December 31,
	2016		2015
Assets
Portfolio investments, at fair value
Non-controlled, non-affiliated investments, at fair value (cost of $248,479,039 and $219,715,263, respectively)	$	239,722,117	$	221,349,073
Non-controlled, affiliated investments, at fair value (cost of $29,734,859 and $56,426,475, respectively)		22,094,203		59,243,999
Controlled, affiliated investments, at fair value (cost of $15,122,171 and $27,289,995, respectively)		14,456,630		15,748,539
Total of portfolio investments, at fair value (cost of $293,336,069 and $303,431,733, respectively)		276,272,950		296,341,611
Cash		3,891,606		4,866,972
Dividends and interest receivable		3,240,640		2,607,205
Receivable for investments sold		2,139,463		—
Deferred financing costs		1,287,807		2,183,881
Deferred tax asset		1,264,811		1,382,408
Prepaid expenses and other assets		100,770		113,730
Total Assets	$	288,198,047	$	307,495,807

Liabilities
Credit facility payable	$	39,133,273	$	63,504,738
Notes payable (net of deferred note offering costs of $1,495,062 and $1,156,622, respectively)		53,504,938		38,843,378
Other accrued expenses and liabilities		282,165		271,801
Directors' fees payable		95,000		37,025
Professional fees payable		331,867		481,333
Interest and credit facility expense payable		1,008,127		813,222
Management fee payable		1,301,591		1,302,213
Income-based incentive fees payable		2,071,661		1,081,797
Distributions payable		4,586,816		4,595,700
Unearned structuring fee revenue		1,175,319		689,577
Income tax liability		182,699		842,812
Total Liabilities		103,673,456		112,463,596

Commitments and Contingencies (Note 12)

Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,451,633 and 13,516,766 shares issued and outstanding, respectively)		13,452		13,517
Additional paid-in capital		196,290,348		197,652,086
Accumulated net realized gain (loss)		(776,548)		2,791,590
Undistributed net investment income		4,890,065		1,130,327
Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $1,170,393 and $534,813 as of December 31, 2016 and December 31, 2015, respectively		(15,892,726)		(6,555,309)
Total Net Assets		184,524,591		195,032,211
Total Liabilities and Net Assets	$	288,198,047	$	307,495,807

Net Asset Value Per Share	$	13.72	$	14.43

Alcentra Capital Corporation and Subsidiary
Consolidated Statement of Operations

	Three Months Ended December 31,		Alcentra Capital Corporation and Subsidiary	Alcentra Capital Corporation and Subsidiary
Investment Income:	2016	2015	For the year ended December 31, 2016	For the year ended December 31, 2015
From non-controlled, non-affiliated investments:
Interest income from portfolio investments	$ 8,435,370	$ 5,647,278	$ 25,178,890	$ 19,225,065
Paid in-kind income from portfolio investments	413,432	786,729	3,182,683	3,128,501
Other income from portfolio investments	746,478	412,213	2,475,976	1,819,533
Dividend income from portfolio investments	30,756	-	82,777	302,874
From non-controlled, affiliated investments:
Interest income from portfolio investments	219,187	1,021,703	2,742,054	4,231,004
Paid in-kind income from portfolio investments	418,048	734,531	2,365,373	2,632,281
Other income from portfolio investments	65,150	-	2,352,766	72,320
Dividend income from portfolio investments	-	-	-	-
From controlled, affiliated investments:
Interest income from portfolio investments	403,353	533,270	1,566,173	2,280,106
Paid in-kind income from portfolio investments	167,997	(458,810)	655,907	159,722
Other income from portfolio investments	-	-	-	64,843
Dividend income from portfolio investments	-	-	-	-
Total investment income	10,899,771	8,676,914	40,602,599	33,916,249
Expenses:
Management fees	1,301,591	1,302,213	5,209,684	4,943,886
Income-based incentive fees	930,543	521,295	3,255,167	2,270,450
Capital gains incentive fees	-	-	-	1,001,467
Professional fees	227,475	439,380	1,227,977	966,671
Valuation services	37,135	106,527	236,904	419,264
Interest and credit facility expense	1,536,789	1,271,454	5,657,154	4,142,013
Amortization of deferred financing costs	305,976	258,813	1,154,343	867,786
Directors' fees	64,201	71,900	296,809	243,726
Insurance Expense	65,913	67,341	264,209	272,331
Amortization of deferred note offering costs	101,505		193,357
Other expenses	209,488	108,389	697,809	491,953
Total expenses	4,780,616	4,147,312	18,193,413	15,619,547
Waiver of management and incentive fees by the Investment Advisor	-	-	-	-
Waiver of capital gains incentive fees			-	(1,001,467)
Net expenses	4,780,616	4,147,312	18,193,413	14,618,080
Net investment income	6,119,155	4,529,602	22,409,186	19,298,169

Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments
Net realized gain (loss) on:
Non-controlled, non-affiliated investments	(5,557,600)	2,625,441	(4,018,220)	2,722,992
Non-controlled, affiliated investments	(337,257)	-	11,019,205	-
Controlled, affiliated investments	(18,961)	-	(11,282,968)	-
Net realized gain (loss) from portfolio investments	(5,913,818)	2,625,441	(4,281,983)	2,722,992
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments	7,784,736	1,510,631	(10,390,732)	230,245
Non-controlled, affiliated investments	(1,123,826)	(674,396)	(10,458,180)	3,128,631
Controlled, affiliated investments	474,006	(11,743,547)	10,875,915	(15,000,080)
Net change in unrealized appreciation (depreciation) from portfolio investments	7,134,916	(10,907,312)	(9,972,997)	(11,641,204)
Benefit/(Provision) for taxes on unrealized gain on investments		1,704,047	635,580	2,231,817
Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio
investments	(1,195,769)	(6,577,824)	(13,619,400)	(6,686,395)
Net Increase in Net Assets from Operations	$ 4,923,386	$ (458,939)	$ 8,789,786	$ 12,611,774

Per common share data:
Net Investment income per share	0.45	0.34	1.66	1.43
Net increase/(decrease) in net assets resulting from operation per share	0.36	(0.15)	0.65	0.93
Dividends Declared per common share	0.34	0.34	1.36	1.36

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SOURCE Alcentra Capital Corporation

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