PennantPark Investment Corporation (NASDAQ:PNNT) announced today
financial results for the second fiscal quarter ended March 31,
2017.
HIGHLIGHTS |
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|
Quarter ended March 31,
2017 |
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|
|
($ in millions, except
per share amounts) |
|
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|
|
|
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Assets and
Liabilities: |
|
|
|
|
|
Investment portfolio |
|
|
$ |
1,194.5 |
|
Net
assets |
|
|
$ |
646.2 |
|
Net asset
value per share |
|
|
$ |
9.09 |
|
|
|
|
|
|
|
Credit
Facility |
|
|
$ |
88.5 |
|
2019
Notes |
|
|
$ |
255.1 |
|
SBA
debentures |
|
|
$ |
193.6 |
|
2025
Notes |
|
|
$ |
72.2 |
|
|
|
|
|
|
|
Yield on debt
investments at quarter-end |
|
|
|
11.9 |
% |
|
|
|
|
|
|
Operating Results: |
|
|
|
Net
investment income |
|
|
$ |
16.2 |
|
Net
investment income per share |
|
|
$ |
0.23 |
|
Distributions declared per share |
|
|
$ |
0.18 |
|
|
|
|
|
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|
Portfolio
Activity: |
|
|
|
|
|
Purchases
of investments |
|
|
$ |
60.5 |
|
Sales and
repayments of investments |
|
|
$ |
202.0 |
|
|
|
|
|
|
|
Number of
new portfolio companies invested |
|
|
|
3 |
|
Number of
existing portfolio companies invested |
|
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7 |
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Number of
portfolio companies at quarter-end |
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56 |
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CONFERENCE CALL AT 10:00 A.M. ET ON MAY 9,
2017
PennantPark Investment Corporation (“we,” “our,”
“us” or “Company”) will host a conference call at 10:00 a.m.
(Eastern Time) on Tuesday, May 9, 2017 to discuss its financial
results. All interested parties are welcome to participate. You can
access the conference call by dialing (877) 874-1571 approximately
5-10 minutes prior to the call. International callers should dial
(719) 325-4849. All callers should reference PennantPark Investment
Corporation. An archived replay of the call will be available
through May 23, 2017 by calling (888) 203-1112. International
callers please dial (719) 457-0820. For all phone replays, please
reference conference ID #3262779.
PORTFOLIO AND INVESTMENT ACTIVITY
As of March 31, 2017, our portfolio totaled
$1,194.5 million and consisted of $499.9 million of senior secured
debt, $387.5 million of second lien secured debt, $167.5 million of
subordinated debt and $139.6 million of preferred and common
equity. Our debt portfolio consisted of 83% variable-rate
investments (including 81% with a floor) and 17% fixed-rate
investments. As of March 31, 2017, we had one company on
non-accrual, representing 0.3% and 0.3% of our overall portfolio on
a cost and fair value basis, respectively. Overall, the portfolio
had net unrealized depreciation of $54.8 million as of March 31,
2017. Our overall portfolio consisted of 56 companies with an
average investment size of $21.3 million, had a weighted average
yield on interest bearing debt investments of 11.9% and was
invested 42% in senior secured debt, 32% in second lien secured
debt, 14% in subordinated debt and 12% in preferred and common
equity.
As of September 30, 2016, our portfolio
totaled $1,153.7 million and consisted of $397.1 million of senior
secured debt, $425.4 million of second lien secured debt, $177.6
million of subordinated debt and $153.6 million of preferred and
common equity. Our debt portfolio consisted of 78% variable-rate
investments (including 72% with a floor) and 22% fixed-rate
investments. As of September 30, 2016, we had four companies on
non-accrual, representing 5.3% and 2.8% of our overall portfolio on
a cost and fair value basis, respectively. Overall, the portfolio
had net unrealized depreciation of $100.3 million as of September
30, 2016. Our overall portfolio consisted of 56 companies with an
average investment size of $20.6 million, had a weighted average
yield on interest bearing debt investments of 11.9% and was
invested 35% in senior secured debt, 37% in second lien secured
debt, 15% in subordinated debt and 13% in preferred and common
equity.
For the three months ended March 31, 2017, we
invested $60.5 million in three new and seven existing portfolio
companies with a weighted average yield on debt investments of
9.5%. Sales and repayments of investments for the three months
ended March 31, 2017 totaled $202.0 million. For the six months
ended March 31, 2017, we invested $289.7 million in 12 new and 14
existing portfolio companies with a weighted average yield on debt
investments of 10.8%. Sales and repayments of investments for the
six months ended March 31, 2017 totaled $266.2 million.
For the three months ended March 31, 2016, we
invested $86.5 million in two new and four existing portfolio
companies with a weighted average yield on debt investments of
10.8%. Sales and repayments of investments for the three months
ended March 31, 2016 totaled $92.9 million. For the six months
ended March 31, 2016, we invested $216.8 million in six new and 10
existing portfolio companies with a weighted average yield on debt
investments of 11.7%. Sales and repayments of investments for the
six months ended March 31, 2016 totaled $201.0 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations
for the three and six months ended March 31, 2017 and 2016.
Investment Income
Investment income for the three and six months
ended March 31, 2017 was $33.7 million and $65.6 million,
respectively, and was attributable to $15.2 million and $28.3
million from senior secured loans, $13.0 million and $25.6 million
from second lien secured debt, $5.5 million and $11.7 million from
subordinated debt, preferred and common equity, respectively. This
compares to investment income for the three and six months ended
March 31, 2016, which was $39.1 million and $74.4 million,
respectively, and was attributable to $19.6 million and $32.5
million from senior secured loans, $13.8 million and $31.2 million
from second lien secured debt and $5.7 million and $10.7 million
from subordinated debt, preferred and common equity, respectively.
The decrease in investment income compared with the same periods in
the prior year was primarily due to a lower yielding portfolio.
Expenses
Net expenses for the three and six months ended
March 31, 2017 totaled $17.5 million and $34.4 million,
respectively. Base management fee for the same periods totaled $5.3
million (after a base management fee waiver of $1.0 million) and
$10.6 million (after a base management fee waiver of $2.0 million),
incentive fee totaled $3.1 million (after an incentive fee waiver
of $0.6 million) and $5.9 million (after an incentive fee waiver of
$1.1 million), debt related interest and expenses totaled $7.2
million and $13.9 million, general and administrative expenses
totaled $1.5 million and $3.1 million and provision for taxes
totaled $0.4 million and $0.9 million, respectively. This compares
to expenses for the three and six months ended March 31, 2016,
which totaled $18.3 million and $36.7 million, respectively. Base
management fee for the same periods totaled $5.1 million (after a
base management fee waiver of $1.0 million) and $10.6 million
(after a base management fee waiver of $2.0 million), incentive fee
totaled $4.0 million (after an incentive fee waiver of $0.7
million) and $7.2 million (after an incentive fee waiver of $1.4
million), debt related interest and expenses totaled $6.9 million
and $13.7 million, general and administrative expenses totaled $1.9
million and $3.5 million and provision for taxes totaled $0.4
million and $1.7 million, respectively. The decrease in expenses
compared with the same periods in the prior year was primarily due
to lower incentive fees and general and administrative
expenses.
Net Investment Income
Net investment income totaled $16.2 million and
$31.2 million, or $0.23 and $0.44 per share, for the three and six
months ended March 31, 2017, respectively. Net investment income
totaled $20.8 million and $37.7 million, or $0.29 and $0.52 per
share, for the three and six months ended March 31, 2016,
respectively. The decrease in net investment income per share
compared to the same periods in the prior year was primarily due to
the repayments of higher yielding investments.
Net Realized Gains or
Losses
Sales and repayments of investments for the
three and six months ended March 31, 2017 totaled $202.0 million
and $266.2 million, respectively, and realized losses totaled $18.7
million and $40.9 million, respectively. Sales and repayments of
investments for the three and six months ended March 31, 2016
totaled $92.9 million and $201.0 million, respectively, and
realized losses totaled $11.2 million and $36.6 million,
respectively. The increase in realized losses was primarily due to
changes in the market conditions of our investments and the values
at which they were realized.
Unrealized Appreciation or Depreciation
on Investments, Credit Facility, 2019 Notes and 2025
Notes
For the three and six months ended March 31,
2017, we reported a net change in unrealized appreciation on
investments of $20.2 million and $45.5 million, respectively. For
the three and six months ended March 31, 2016, we reported a net
change in unrealized depreciation on investments of $16.0 million
and $55.9 million, respectively. As of March 31, 2017 and September
30, 2016, our net unrealized depreciation on investments totaled
$54.8 million and $100.3 million, respectively. The net change in
unrealized appreciation (depreciation) on our investments was
driven primarily by changes in the capital market conditions, the
financial performance of certain portfolio companies and the
reversal of unrealized depreciation (appreciation) of investments
that were realized.
For the three and six months ended March 31,
2017, we reported a net change in unrealized appreciation on our
multi-currency, senior secured revolving credit facility, as
amended and restated, or the Credit Facility, our 4.50% notes due
2019, or 2019 Notes, and our 6.25% notes due 2025, or 2025 Notes,
of $6.1 million and $0.3 million, respectively. For the three and
six months ended March 31, 2016, we reported a net change in
unrealized depreciation on our Credit Facility, 2019 Notes and 2025
Notes of $10.3 million and $18.0 million, respectively. The change
compared with the same periods in the prior year was primarily due
to changes in the capital markets.
Net Change in Net Assets Resulting from
Operations
Net change in net assets resulting from
operations totaled $11.5 million and $35.5 million, or $0.16 and
$0.50 per share, for the three and six months ended March 31, 2017,
respectively. This compares to a net change in net assets resulting
from operations of $3.9 million and $(36.8) million, or $0.06 and
$(0.51) per share, for the three and six months ended March 31,
2016, respectively. The increase in the net change in net assets
from operations compared with the same periods in the prior year
reflects the change in portfolio investment values during the
reporting periods.
LIQUIDITY AND CAPITAL
RESOURCES
Our liquidity and capital resources are derived
primarily from proceeds of securities offerings, debt capital and
cash flows from operations, including investment sales and
repayments, and income earned. Our primary use of funds from
operations includes investments in portfolio companies and payments
of fees and other operating expenses we incur. We have used, and
expect to continue to use, our debt capital and proceeds from the
rotation of our portfolio and proceeds from public and private
offerings of securities to finance our investment objectives.
Our annualized weighted average cost of debt for
the six months ended March 31, 2017 and 2016, inclusive of the fee
on the undrawn commitment on the Credit Facility, amortized upfront
fees on SBA debentures and debt issuance costs, was 4.38% and
4.42%, respectively.
As of March 31, 2017 and September 30, 2016,
there was $99.6 million and $50.3 million, respectively, in
outstanding borrowings under the Credit Facility. The Credit
Facility had a weighted average interest rate of 2.62% and 2.76%,
as of March 31, 2017 and September 30, 2016, respectively,
excluding the undrawn commitment fees of 0.375%. The Credit
Facility is a five-year revolving facility with a stated maturity
date of June 25, 2019, a one-year term-out period following its
fourth year and pricing is set at 225 basis points over LIBOR. As
of March 31, 2017 and September 30, 2016, we had $445.4 million and
$494.7 million of unused borrowing capacity under our Credit
Facility, respectively, subject to the regulatory restrictions.
As of March 31, 2017 and September 30, 2016, we
had $250.0 million in aggregate principal amount of 2019 Notes
outstanding, with a fixed interest rate of 4.50% per year. As of
March 31, 2017 and September 30, 2016, we had $71.3 million in
aggregate principal amount of 2025 Notes outstanding, with a fixed
interest rate of 6.25% per year. As of March 31, 2017 and September
30, 2016, our SBIC Funds had $225.0 million in debt commitments, of
which $197.5 million was drawn, respectively.
At March 31, 2017 and September 30, 2016, we had
cash and cash equivalents of $66.6 million and $75.6 million,
respectively, available for investing and general corporate
purposes. We believe our liquidity and capital resources are
sufficient to take advantage of market opportunities.
Our operating activities used cash of $18.8
million for the six months ended March 31, 2017, and our financing
activities provided cash of $9.5 million for the same period. Our
operating activities used cash primarily for our investment
activities and our financing activities provided cash primarily for
net borrowings under our Credit Facility.
Our operating activities provided cash of $9.9
million for the six months ended March 31, 2016, and our financing
activities used cash of $26.3 million for the same period. Our
operating activities provided cash from sales and repayments on our
investments and our financing activities used cash primarily for
our stock repurchase plan.
DISTRIBUTIONS
During the three and six months ended March 31,
2017, we declared distributions of $0.18 and $0.46 per share,
respectively, for total distributions of $12.8 million and $32.7
million, respectively. For the same periods in the prior year, we
declared distributions of $0.28 and $0.56 per share, respectively,
for total distributions of $19.9 million and $40.0 million,
respectively. We monitor available net investment income to
determine if a return of capital for taxation purposes may occur
for the fiscal year. To the extent our taxable earnings fall below
the total amount of our distributions for any given fiscal year,
common stockholders will be notified of the portion of those
distributions deemed to be a return of capital. Tax characteristics
of all distributions will be reported to stockholders subject to
information reporting on Form 1099-DIV after the end of the
calendar year and in our periodic reports filed with the Securities
and Exchange Commission, or the SEC.
AVAILABLE INFORMATION
The Company makes available on its website its
report on Form 10-Q filed with the SEC and stockholders may find
the report on our website at www.pennantpark.com.
PENNANTPARK INVESTMENT CORPORATION AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES |
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|
|
March 31, 2017(unaudited) |
|
|
September 30, 2016 |
|
Assets |
|
|
|
|
|
|
|
Investments at fair
value |
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments (cost—$806,381,197 and
$805,189,545, respectively) |
|
$ |
827,414,297 |
|
$ |
813,467,491 |
|
Non-controlled, affiliated investments (cost—$247,342,695 and
$262,476,906, respectively) |
|
|
242,689,039 |
|
|
215,192,547 |
|
Controlled, affiliated investments (cost—$195,523,633 and
$186,290,695, respectively) |
|
|
124,376,311 |
|
|
125,019,637 |
|
Total of
investments (cost—$1,249,247,525 and $1,253,957,146,
respectively) |
|
|
1,194,479,647 |
|
|
1,153,679,675 |
|
Cash and cash
equivalents (cost—$66,560,479 and $75,617,133, respectively) |
|
|
66,565,207 |
|
|
75,608,113 |
|
Interest
receivable |
|
|
10,167,252 |
|
|
7,032,858 |
|
Receivable for
investments sold |
|
|
12,086,044 |
|
|
— |
|
Prepaid expenses and
other assets |
|
|
2,275,115 |
|
|
2,615,232 |
|
Total assets |
|
|
1,285,573,265 |
|
|
1,238,935,878 |
|
Liabilities |
|
|
|
|
|
|
|
Distributions
payable |
|
|
12,790,950 |
|
|
19,897,034 |
|
Credit Facility payable
(cost—$99,586,300 and $50,339,700, respectively) |
|
|
88,491,651 |
|
|
39,551,187 |
|
2019 Notes payable
(par—$250,000,000) |
|
|
255,137,500 |
|
|
254,175,000 |
|
SBA debentures payable,
net (par—$197,500,000) |
|
|
193,579,200 |
|
|
193,244,534 |
|
2025 Notes payable
(par—$71,250,000) |
|
|
72,247,500 |
|
|
72,618,000 |
|
Base management fee
payable, net |
|
|
5,319,305 |
|
|
5,074,830 |
|
Performance-based
incentive fee payable, net |
|
|
3,060,280 |
|
|
2,865,444 |
|
Interest payable on
debt |
|
|
7,649,300 |
|
|
7,520,113 |
|
Accrued other
expenses |
|
|
1,109,912 |
|
|
622,880 |
|
Total liabilities |
|
|
639,385,598 |
|
|
595,569,022 |
|
Commitments and
contingencies |
|
|
— |
|
|
— |
|
Net
assets |
|
|
|
|
|
|
|
Common stock,
71,060,836 shares issued and outstanding, respectively |
|
|
|
|
|
|
|
Par value
$0.001 per share and 100,000,000 shares authorized |
|
|
71,061 |
|
|
71,061 |
|
Paid-in capital in
excess of par value |
|
|
819,983,676 |
|
|
819,983,676 |
|
Undistributed net
investment income |
|
|
1,640,939 |
|
|
3,119,380 |
|
Accumulated net
realized loss on investments |
|
|
(125,709,891 |
) |
|
(84,771,820 |
) |
Net unrealized
depreciation on investments |
|
|
(54,757,767 |
) |
|
(100,280,954 |
) |
Net unrealized
depreciation on debt |
|
|
4,959,649 |
|
|
5,245,513 |
|
Total net assets |
|
$ |
646,187,667 |
|
$ |
643,366,856 |
|
Total liabilities and net assets |
|
$ |
1,285,573,265 |
|
$ |
1,238,935,878 |
|
Net asset value
per share |
|
$ |
9.09 |
|
$ |
9.05 |
|
|
|
|
|
|
|
|
|
PENNANTPARK INVESTMENT CORPORATION AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Investment
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From non-controlled,
non-affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
24,090,316 |
|
|
$ |
26,649,790 |
|
|
$ |
45,962,445 |
|
|
$ |
54,867,820 |
|
Other
income |
|
|
1,565,617 |
|
|
|
5,860,016 |
|
|
|
3,668,153 |
|
|
|
7,527,669 |
|
From non-controlled,
affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
4,440,386 |
|
|
|
3,337,000 |
|
|
|
8,666,067 |
|
|
|
5,517,576 |
|
Other
income |
|
|
— |
|
|
|
— |
|
|
|
22,500 |
|
|
|
— |
|
From controlled,
affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
3,618,674 |
|
|
|
3,261,619 |
|
|
|
7,264,738 |
|
|
|
6,458,652 |
|
Total
investment income |
|
|
33,714,993 |
|
|
|
39,108,425 |
|
|
|
65,583,903 |
|
|
|
74,371,717 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
management fee |
|
|
6,332,507 |
|
|
|
6,115,075 |
|
|
|
12,607,289 |
|
|
|
12,620,855 |
|
Performance-based incentive fee |
|
|
3,643,189 |
|
|
|
4,772,473 |
|
|
|
7,017,399 |
|
|
|
8,568,255 |
|
Interest
and expenses on debt |
|
|
7,179,057 |
|
|
|
6,942,925 |
|
|
|
13,914,631 |
|
|
|
13,669,250 |
|
Administrative services expenses |
|
|
894,000 |
|
|
|
900,500 |
|
|
|
1,788,000 |
|
|
|
1,768,000 |
|
Other
general and administrative expenses |
|
|
668,483 |
|
|
|
937,563 |
|
|
|
1,336,990 |
|
|
|
1,822,192 |
|
Expenses before Management Fees waiver and provision for
taxes |
|
|
18,717,236 |
|
|
|
19,668,536 |
|
|
|
36,664,309 |
|
|
|
38,448,552 |
|
Management Fees waiver |
|
|
(1,596,111 |
) |
|
|
(1,742,008 |
) |
|
|
(3,139,950 |
) |
|
|
(3,390,262 |
) |
Provision
for taxes |
|
|
425,000 |
|
|
|
350,000 |
|
|
|
850,000 |
|
|
|
1,650,000 |
|
Net expenses |
|
|
17,546,125 |
|
|
|
18,276,528 |
|
|
|
34,374,359 |
|
|
|
36,708,290 |
|
Net investment income |
|
|
16,168,868 |
|
|
|
20,831,897 |
|
|
|
31,209,544 |
|
|
|
37,663,427 |
|
Realized and
unrealized (loss) gain on investments and debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized loss on
investments |
|
|
(18,742,737 |
) |
|
|
(11,210,018 |
) |
|
|
(40,938,071 |
) |
|
|
(36,584,981 |
) |
Net change in
unrealized (depreciation) appreciation on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
|
(6,279,870 |
) |
|
|
(6,211,252 |
) |
|
|
13,356,331 |
|
|
|
(22,954,067 |
) |
Non-controlled and controlled, affiliated investments |
|
|
26,429,957 |
|
|
|
(9,775,018 |
) |
|
|
32,166,856 |
|
|
|
(32,904,728 |
) |
Debt
(appreciation) depreciation |
|
|
(6,116,548 |
) |
|
|
10,314,028 |
|
|
|
(285,864 |
) |
|
|
17,974,803 |
|
Net change in unrealized appreciation (depreciation) on
investments and debt |
|
|
14,033,539 |
|
|
|
(5,672,242 |
) |
|
|
45,237,323 |
|
|
|
(37,883,992 |
) |
Net realized
and unrealized (loss) gain from investments and debt |
|
|
(4,709,198 |
) |
|
|
(16,882,260 |
) |
|
|
4,299,252 |
|
|
|
(74,468,973 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
$ |
11,459,670 |
|
|
$ |
3,949,637 |
|
|
$ |
35,508,796 |
|
|
$ |
(36,805,546 |
) |
Net increase (decrease)
in net assets resulting from operations per common share |
|
$ |
0.16 |
|
|
$ |
0.06 |
|
|
$ |
0.50 |
|
|
$ |
(0.51 |
) |
Net investment income
per common share |
|
$ |
0.23 |
|
|
$ |
0.29 |
|
|
$ |
0.44 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business
development company which primarily invests in U.S. middle-market
companies in the form of senior secured debt, mezzanine debt and,
to a lesser extent, equity investments. PennantPark Investment
Corporation is managed by PennantPark Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. You should understand that under Section
27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section
21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995 do not apply to
forward-looking statements made in periodic reports we file under
the Exchange Act. All statements other than statements of
historical facts included in this press release are forward-looking
statements and are not guarantees of future performance or results
and involve a number of risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements as a
result of a number of factors, including those described from time
to time in filings with the SEC. The Company undertakes no duty to
update any forward-looking statement made herein. You should not
place undue influence on such forward-looking statements as such
statements speak only as of the date on which they are made.
We may use words such as “anticipates,”
“believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and
similar expressions to identify forward-looking statements. Such
statements are based on currently available operating, financial
and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations.
CONTACT:
Aviv Efrat
PennantPark Investment Corporation
Reception: (212) 905-1000
www.pennantpark.com
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