Fifth Street Senior Floating Rate Corp. Releases Its April 2014 Newsletter: Positioned for Growth
April 23 2014 - 7:30AM
Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR")
released its April 2014 newsletter today.
On Target After Active March Quarter
A robust investment pipeline in the March quarter enabled us to
reach and maintain leverage within our target range of 0.8x-0.9x
debt-to-equity. Our active investment pipeline allowed us to
realize gains in the portfolio by selling positions that
appreciated in value and redeploying the proceeds into new loans at
attractive pricing levels and yields. For the March quarter, we
closed $96 million of gross originations and exited $47 million of
investments. As a result, our portfolio of 100% senior secured
floating rate loans was spread across a diverse group of
investments in 34 portfolio companies at quarter end. As a
reminder, in February our Board of Directors declared a 17%
quarter-over-quarter increase in the June quarterly dividend to
$0.27 per share, which should be fully supported by March quarterly
results.
The breadth of Fifth Street's platform provides direct
relationships with sponsors and middle market investment banks
enabling us to source attractively structured and priced
investments. So far in the June quarter, we are seeing
opportunities for new investments as spreads stabilize, while
continuing to optimize the portfolio by exiting positions which
have appreciated in value. Based on our expectations for continued
growth in net investment income, our Board of Directors may have
the opportunity to declare a higher dividend level in the
future.
Pending Partnership to Drive Growth
We are making further progress since signing a Letter of Intent
in mid-March to form a strategic partnership between FSFR and GF
Funding 2014, an entity controlled by the Glick family, to
co-invest primarily in senior secured loans of middle market
companies. During the course of our investment adviser's over
10-year relationship with the Glick family, they invested in two
private funds, including the predecessor to Fifth Street Finance
Corp. (NASDAQ:FSC), and were initial investors in FSFR's IPO in
July 2013.
Through this partnership, FSFR can enhance the returns on its
invested equity, broaden its investment opportunity set and improve
its longer-term growth potential. Once fully ramped, we
believe the partnership could generate an estimated 13% to 16%
return on FSFR's invested equity. FSFR will need additional
capital to fully ramp the strategic partnership, which we consider
important to our long-term growth and success. These higher
potential returns should be accretive to earnings and provide our
Board of Directors with additional opportunities to declare a
higher dividend level in the future.
Our ability to attract experienced investors (and shareholders),
such as the Glick family, is a further vote of confidence in the
Fifth Street platform's origination, underwriting and portfolio
management expertise. The new venture should be similar to
other senior loan funds in the BDC sector, and is expected to be
structured as a limited liability company owned by FSFR and GF
Funding 2014 with each party appointing two members to the
company's board. The joint venture may also utilize leverage
provided by a third party enabling it to invest in a broader range
of investments and enhance the already attractive risk-adjusted
returns to FSFR shareholders.
We look forward to discussing our March quarterly results in
more detail on our next earnings conference call scheduled at 11:00
a.m. (Eastern Time) on Thursday, May 15, 2014.
Sincerely,
The Fifth Street Team
About Fifth Street Senior Floating Rate Corp.
Fifth Street Senior Floating Rate Corp. is a specialty finance
company that provides financing solutions in the form of floating
rate senior secured loans to small and mid-sized companies,
primarily in connection with investments by private equity
sponsors. The company's investment objective is to maximize
its portfolio's total return by generating current income from its
debt investments while seeking to preserve its capital. The
company has elected to be regulated as a business development
company and is externally managed by Fifth Street Management LLC.
Named 2013 "Lender Firm of the Year" by The M&A Advisor, Fifth
Street Management is an SEC-registered investment adviser and
leading alternative asset manager with over $4 billion in assets
under management. With a track record of more than 15 years
and offices across the country, Fifth Street's nationally
recognized platform has the ability to hold loans up to $150
million, commit up to $250 million and structure and syndicate
transactions up to $500 million. FSFR's website can be found
at fsfr.fifthstreetfinance.com.
Forward-Looking Statements
This press release may contain certain forward-looking
statements, including statements with regard to the future
performance of the company. Words such as "believes,"
"expects," "estimates," "projects," "anticipates," and "future" or
similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to
the inherent uncertainties in predicting future results and
conditions. Certain factors could cause actual results to
differ materially from those projected in these forward-looking
statements, and these factors are identified from time to time in
the company's filings with the Securities and Exchange
Commission. The company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
CONTACT: Investor Contact:
Dean Choksi, Executive Director of Finance
& Head of Investor Relations
(914) 286-6855
dchoksi@fifthstreetfinance.com
Media Contact:
Nick Rust
Prosek Partners
(212) 279-3115 ext. 252
pro-fifthstreet@prosek.com
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