Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or
"we") announces its financial results for the second fiscal quarter
ended March 31, 2014.
Second Fiscal Quarter 2014 Financial
Highlights
- Net investment income for the quarter ended March 31, 2014
increased to $1.8 million or $0.27 per share, as compared to $1.5
million or $0.23 per share for the quarter ended December 31,
2013;
- Net asset value increased to $15.13 per share as of March 31,
2014, as compared to $15.10 per share as of December 31, 2013;
- We grew our investment portfolio by 32.8% to $179.8 million at
fair value as of March 31, 2014, as compared to $135.4 million as
of December 31, 2013. We closed $96.4 million of new investments,
100% of which were senior secured floating rate loans, and we
exited $47.0 million of investments, realizing a net gain of $0.2
million; and
- We ended the March 31, 2014 quarter with leverage at 0.80x
debt-to-equity, within our target range of 0.8x to 0.9x.
Dividend Declaration
On May 12, 2014, our Board of Directors declared a quarterly
dividend of $0.30 per share for the quarter ending September 30,
2014, reflecting an annualized dividend run rate of $1.20 per
share. This dividend represents our fourth consecutive
quarterly increase and an 11% increase from the prior quarter.
Portfolio and Investment Activity
Our Board of Directors determined the fair value of our
portfolio at March 31, 2014 to be $179.8 million, as compared
to $135.4 million at December 31, 2013 and $48.7 million at
September 30, 2013. Total assets increased to $192.5
million at March 31, 2014, as compared to $141.0 million at
December 31, 2013 and $101.5 million at September 30,
2013.
During the quarter ended March 31, 2014, we closed $96.4
million of investments in 26 new and four existing portfolio
companies, and funded $94.8 million across new and existing
portfolio companies. We also received $47.0 million in
connection with payoffs and open market sales of 15 of our debt
investments, all of which were exited at or above par.
At March 31, 2014, our portfolio consisted of investments
in 34 companies, and 100% of our portfolio consisted of senior
secured debt investments that bore interest at floating
rates. The portfolio remained highly diversified, and our
average portfolio company debt investment size at fair value was
$5.3 million at March 31, 2014, versus $6.1 million at
September 30, 2013. The average portfolio company EBITDA
was $56.6 million as of March 31, 2014.
"We are proud of FSFR's accomplishments since last year's IPO,
including delivering continued growth in net investment income per
share and our fourth consecutive dividend increase," stated our
President and Chief Investment Officer, Ivelin M. Dimitrov, adding
"We are benefiting from Fifth Street's established origination
platform, and were fully deployed within our target leverage range
across 34 portfolio companies at quarter end. We are also
excited about our potential joint venture to co-invest with an
entity controlled by the Glick family, which we expect will drive
accelerated portfolio growth and earnings accretion once
funded."
Our weighted average cash yield on debt investments was 6.74% at
March 31, 2014, which increased from 6.62% at
December 31, 2013.
Results of Operations
Total investment income for the quarter ended March 31,
2014 was $3.4 million, which consisted of $2.6 million of interest
income and $0.8 million of fee income on our portfolio
investments.
Expenses for the quarter ended March 31, 2014 were $1.6
million and primarily consisted of the base management fee,
incentive fee, interest expense and professional fees. The
base management fee was calculated at an annual rate of 1% of the
average of our gross assets (excluding cash and cash equivalents)
during the quarter.
Liquidity and Capital Resources
As of March 31, 2014, we had $3.7 million of cash and cash
equivalents, $1.6 million of restricted cash, portfolio investments
(at fair value) of $179.8 million, $0.9 million of interest and
fees receivable, dividend payable of $1.5 million, $80.9 million of
borrowings outstanding under our $100.0 million Natixis credit
facility and unfunded commitments of $12.4 million.
As of September 30, 2013, we had $52.3 million of cash and cash
equivalents, portfolio investments (at fair value) of $48.7
million, $0.4 million of interest and fees receivable and unfunded
commitments of $5.8 million.
Fiscal Year 2014 Dividends
Thus far during fiscal year 2014, our Board of Directors has
declared the following quarterly dividends:
- $0.30 per share for the quarter ending September 30, 2014,
payable on October 15, 2014 to stockholders of record on September
15, 2014;
- $0.27 per share for the quarter ending June 30, 2014, payable
on July 15, 2014 to stockholders of record on June 30, 2014;
- $0.23 per share for the quarter ended March 31, 2014, which was
paid on April 15, 2014 to stockholders of record on March 31,
2014;
- $0.20 per share for the quarter ended December 31, 2013, which
was paid on January 31, 2014 to stockholders of record on December
16, 2013; and
- $0.01 per share for the quarter ended September 30, 2013, which
was paid on October 31, 2013 to stockholders of record on October
21, 2013.
Dividends are paid primarily from distributable (taxable)
income. Our Board of Directors determines dividends based on
estimates of distributable (taxable) income, which differ from book
income due to temporary and permanent differences in income and
expense recognition and changes in unrealized appreciation and
depreciation on investments.
Our amended dividend reinvestment plan ("DRIP") provides for
reinvestment of dividends, unless a stockholder elects to receive
cash. As a result, if our Board of Directors declares a cash
dividend, our stockholders whose shares are registered in their
name and who have not "opted out" of our DRIP will have their cash
dividends automatically reinvested in additional shares of our
common stock, rather than receiving cash dividends. We provide
up to a 5% discount on newly-issued shares purchased through the
DRIP (provided that shares will not be issued at less than net
asset value per share). If you are a stockholder and your
shares of our common stock are held through a brokerage firm or
other financial intermediary and you wish to participate in the
DRIP, please contact your broker or other financial
intermediary.
Portfolio Asset Quality
We utilize the following investment ranking system for our
investment portfolio:
- Investment Ranking 1 is used for investments that are
performing above expectations and/or capital gains are
expected.
- Investment Ranking 2 is used for investments that are
performing substantially within our expectations, and whose risks
remain materially consistent with the potential risks at the time
of the original or restructured investment. All new
investments are initially ranked 2.
- Investment Ranking 3 is used for investments that are
performing below our expectations and for which risk has materially
increased since the original or restructured investment. The
portfolio company may be out of compliance with debt covenants and
may require closer monitoring. To the extent that the
underlying agreement has a PIK interest provision, investments with
a ranking of 3 are generally those on which we are not accruing PIK
interest.
- Investment Ranking 4 is used for investments that are
performing substantially below our expectations and for which risk
has increased substantially since the original or restructured
investment. Investments with a ranking of 4 are those for
which some loss of principal is expected and are generally those on
which we are not accruing cash interest.
At March 31, 2014 and September 30, 2013, the
distribution of our investments on the 1 to 4 investment ranking
scale at fair value was as follows:
|
March 31,
2014 |
September 30,
2013 |
|
Fair Value |
% of Portfolio |
Leverage Ratio |
Fair Value |
% of Portfolio |
Leverage Ratio |
1 |
— |
— |
— |
— |
— |
— |
2 |
$ 179,752,625 |
100.00% |
4.26 |
$ 48,653,617 |
100.00% |
4.32 |
3 |
— |
— |
— |
— |
— |
— |
4 |
— |
— |
— |
— |
— |
— |
Total |
$
179,752,625 |
100.00% |
4.26 |
$
48,653,617 |
100.00% |
4.32 |
Recent Developments
On May 12, 2014, our Board of Directors declared a dividend of
$0.30 per share, payable on October 15, 2014 to stockholders of
record as of September 15, 2014.
Fifth Street Senior
Floating Rate Corp. |
|
Consolidated Statements
of Assets and Liabilities |
(in thousands, except
per share amounts) |
(unaudited) |
|
|
March 31,
2014 |
September 30,
2013 |
ASSETS |
|
Investments at fair
value: |
|
|
Non-control/Non-affiliate investments
(cost March 31, 2014: $180,366,004; cost September 30, 2013:
$48,653,617) |
$ 179,752,625 |
$ 48,653,617 |
Total investments at fair value (cost
March 31, 2014: $180,366,004; cost September 30, 2013:
$48,653,617) |
179,752,625 |
48,653,617 |
Cash and cash equivalents |
3,683,986 |
52,346,831 |
Restricted cash |
1,642,927 |
— |
Interest and fees receivable |
888,821 |
394,023 |
Due from portfolio company |
651,300 |
8,333 |
Receivables from unsettled transactions |
4,023,028 |
— |
Deferred financing costs |
1,740,703 |
— |
Other assets |
77,197 |
47,240 |
Total assets |
$
192,460,587 |
$
101,450,044 |
LIABILITIES AND NET
ASSETS |
|
Liabilities: |
|
|
Accounts payable, accrued expenses and
other liabilities |
$ 1,091,096 |
$ 484,066 |
Base management fee payable |
407,087 |
61,379 |
Incentive fee payable |
280,597 |
— |
Due to FSC CT, Inc. |
280,372 |
61,721 |
Interest payable |
494,717 |
— |
Dividend payable |
1,533,357 |
— |
Payables from unsettled transactions |
6,655,042 |
— |
Credit facility payable |
80,873,200 |
— |
Total liabilities |
91,615,468 |
607,166 |
Commitments and
contingencies |
|
|
Net assets: |
|
|
Common stock, $0.01 par value,
150,000,000 shares authorized, 6,666,768 shares issued and
outstanding at March 31, 2014 and September 30, 2013 |
66,668 |
66,668 |
Additional paid-in-capital |
99,934,852 |
99,934,852 |
Net unrealized depreciation on
investments |
(613,379) |
— |
Net realized gain on investments |
254,813 |
— |
Accumulated undistributed net investment
income |
1,202,165 |
841,358 |
Total net assets (equivalent to
$15.13 per common share at March 31, 2014 and September 30,
2013) |
100,845,119 |
100,842,878 |
Total liabilities and net
assets |
$
192,460,587 |
$
101,450,044 |
|
|
Fifth Street Senior
Floating Rate Corp. |
|
Consolidated Statements
of Operations |
(in thousands, except
per share amounts) |
(unaudited) |
|
|
Three months ended March 31,
2014 |
Six months ended March 31,
2014 |
Interest income: |
|
|
Non-control/Non-affiliate
investments |
$ 2,567,868 |
$ 3,870,947 |
Interest on cash and cash
equivalents |
197 |
2,217 |
Total interest
income |
2,568,065 |
3,873,164 |
Fee income: |
|
|
Non-control/Non-affiliate
investments |
837,855 |
1,839,099 |
Total fee income |
837,855 |
1,839,099 |
Total investment income |
3,405,920 |
5,712,263 |
Expenses: |
|
|
Base management fee |
407,087 |
641,636 |
Incentive fee |
280,597 |
280,597 |
Professional fees |
204,167 |
325,699 |
Board of Directors fees |
43,250 |
97,500 |
Interest expense |
434,960 |
575,993 |
Administrator expense |
111,364 |
218,624 |
General and administrative expenses |
133,781 |
278,029 |
Total expenses |
1,615,206 |
2,418,078 |
Net investment income |
1,790,714 |
3,294,185 |
Unrealized depreciation on
investments: |
|
|
Non-control/Non-affiliate
investments |
(318,940) |
(613,379) |
Net unrealized depreciation on
investments |
(318,940) |
(613,379) |
Realized gain on
investments: |
|
|
Non-control/Non-affiliate
investments |
232,188 |
254,813 |
Net realized gain on
investments |
232,188 |
254,813 |
Net increase in net assets resulting
from operations |
$1,703,962 |
$2,935,619 |
Net investment income per common
share — basic and diluted |
$ 0.27 |
$ 0.49 |
Earnings per common share —
basic and diluted |
$ 0.26 |
$ 0.44 |
Weighted average common
shares outstanding — basic and diluted |
6,666,768 |
6,666,768 |
Distributions per common
share |
$ 0.23 |
$ 0.44 |
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 both 2013 "Lender Firm of the Year" by The M&A
Advisor and "Lender of the Year" by Mergers & Acquisitions,
Fifth Street Management LLC 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, 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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