Market Overview

OFS Capital Corporation Announces Third Quarter 2019 Financial Results

Share:

Net Investment Income of $0.36 per common share

Declares 28th Consecutive $0.34 per common share Distribution

OFS Capital Corporation (NASDAQ:OFS) ("OFS Capital," the "Company," "we," "us," or "our") today announced its financial results for the quarter ended September 30, 2019.

FINANCIAL HIGHLIGHTS

  • Net investment income of $4.85 million, or $0.36 per share, an increase of 3% year-over-year and above the $0.34 quarterly distribution.
  • Closed investments in the third quarter of 2019 totaled approximately $41.3 million, including $22.7 million of senior loans financed by the BNP credit facility.
  • Net asset value ("NAV") per share decreased to $12.74 at September 30, 2019 from $12.95 at June 30, 2019. No new non-accruals.
  • At September 30, 2019, 90% and 78% of our loan portfolio and total portfolio, respectively, consisted of senior secured loans, based on fair value.
  • On November 6, 2019, OFS Capital's Board of Directors declared a distribution of $0.34 per share for the fourth quarter of 2019, payable on December 31, 2019 to stockholders of record as of December 24, 2019.

"Our net investment income again exceeded our distribution," said Bilal Rashid, OFS Capital's Chairman and Chief Executive Officer. "We are pleased to declare our 28th consecutive quarterly distribution of $0.34 per share since our IPO in late 2012. Over the last five years, our total net investment income has exceeded our total regular distribution.

We also remain focused on capital preservation. Our $2.2 billion platform has been in existence since 1994 and navigated multiple credit cycles. As a result, we believe we are well positioned for the future."

HIGHLIGHTS

($ in millions, except for per share data)

 

Portfolio Overview

 

At September 30, 2019

Total assets

 

$

 

518.3

 

Investment portfolio, at fair value

 

$

 

502.2

 

Net assets

 

$

 

170.4

 

Net asset value per share

 

$

 

12.74

 

Weighted average yield on performing debt investments (1)

 

 

10.78

%

Weighted average yield on total debt investments (2)

 

 

10.51

%

Weighted average yield on total investments (3)

 

 

9.96

%

(1)

The weighted average yield on our performing debt and structured finance note investments is computed as (a) the sum of (i) the annual stated accruing interest on our debt investments plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees at the balance sheet date, plus the annual effective yield on our structured finance notes at the balance sheet date divided by (b) amortized cost of our debt and structured finance note investments, excluding assets on non-accrual basis as of the balance sheet date.

(2)

The weighted average yield on our total debt and structured finance note investments is computed as (a) the sum of (i) the annual stated accruing interest plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees on our debt investments at the balance sheet date, plus the annual effective yield on our structured finance notes at the balance sheet date divided by (b) amortized cost of our debt and structured finance note investments, including assets on non-accrual basis as of the balance sheet date.

(3)

The weighted average yield on total investments is computed as (a) the annual stated accruing interest plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees on our debt investments at the balance sheet date, plus the annual effective yield on our structured finance notes at the balance sheet date, plus the effective cash yield on our performing preferred equity investments divided by (b) amortized cost of our total investment portfolio, including assets on non-accrual basis as of the balance sheet date. The weighted average yield of investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our fees and expenses.

 

Quarter Ended September 30,

Operating Results

2019

2018

Total investment income

$

13.9

$

11.0

Net investment income

$

4.9

$

4.7

Net investment income per common share, basic and diluted

$

0.36

$

0.35

Net increase in net assets resulting from operations

$

1.8

$

5.2

 

Quarter Ended September 30,

Portfolio Activity

2019

2018

Number of new portfolio companies

 

4

 

6

Investments in new portfolio companies

$

25.5

$

38.2

Investments in existing portfolio companies

$

13.4

$

9.1

Investments in structured finance notes

$

2.4

$

Number of portfolio companies at end of period

 

73

 

47

PORTFOLIO AND INVESTMENT ACTIVITIES

During the third quarter of 2019, OFS Capital closed $25.5 million of senior secured debt investments in four new portfolio companies. In addition, we made $13.4 million of new senior secured debt investments in existing portfolio companies and a $2.4 million investment in a new structured finance note.

The total fair value of OFS Capital's investment portfolio was $502.2 million at September 30, 2019, which was equal to approximately 96% of amortized cost. As of September 30, 2019, the fair value of OFS Capital's debt investment portfolio totaled $437.9 million in 67 portfolio companies, of which 90% and 10% were senior secured loans and subordinated loans, respectively. As of September 30, 2019, we also held approximately $42.0 million in equity investments, at fair value, in 14 portfolio companies in which we also held debt investments, as well as six portfolio companies in which we solely held an equity investment. As of September 30, 2019, our investment portfolio also included four investments in structured finance notes with a fair value of $22.2 million. We had unfunded commitments of $4.7 million to four portfolio companies at September 30, 2019. As of September 30, 2019, floating rate loans as a percentage of fair value comprised 90% of OFS Capital's debt investment portfolio, with the remaining 10% in fixed rate loans.

RESULTS OF OPERATIONS

Income

Investment Income

Interest income increased by $2.8 million for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, primarily due to a $3.2 million increase caused by an approximately $104 million increase in the average outstanding performing loan balance offset, in part, by a $0.4 million decrease resulting from a 33 basis point decrease in the recurring earned yield on our portfolio. We recognized fee income of $0.3 million for the three months ended September 30, 2019, primarily due to $0.2 million of prepayment fees and $0.1 million of syndication fees resulting from the $17.0 million in loan originations during the period in which OFS Capital Management, LLC sourced, structured, and arranged the lending group, and for which we were additionally compensated.

Expenses

Int

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