Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or
"we") announces its financial results for the first fiscal quarter
ended December 31, 2015.
First Fiscal Quarter 2016 and Post-Quarter
Highlights
- Net investment income for the quarter ended December 31,
2015 was $7.0 million, or $0.24 per share;
- Net asset value per share was $11.36 at December 31,
2015;
- We closed $128.5 million of investments during the quarter
ended December 31, 2015; and
- We entered into a $25.0 million revolving credit facility with
East West Bank.
Portfolio and Investment Activity
Our Board of Directors determined the fair value of our
investment portfolio at December 31, 2015 to be $604.0
million, as compared to $623.6 million at September 30, 2015.
Total assets were $644.5 million at December 31, 2015, as
compared to $697.7 million at September 30, 2015.
During the quarter ended December 31, 2015, we closed
$128.5 million of investments in 23 new and two existing portfolio
companies, and funded $132.4 million across new and existing
portfolio companies. This compares to closing $103.7 million in 25
new and one existing portfolio companies, and funding $108.7
million during the quarter ended September 30, 2015. During
the quarter ended December 31, 2015, we received $47.5 million
in connection with full repayments of four of our debt investments,
all of which were exited at par, and an additional $76.9 million in
connection with syndications and sales of debt investments.
At December 31, 2015, our portfolio consisted of
investments in 68 companies. 90.7% of our portfolio at fair value
consisted of senior secured floating rate debt investments, and
9.1% of the portfolio consisted of investments in the subordinated
notes and LLC equity interests of FSFR Glick JV LLC ("FSFR Glick
JV"). The portfolio remained spread across a number of industries
and our average portfolio company debt investment size at fair
value was $8.8 million at December 31, 2015. The average
portfolio company EBITDA was $63.4 million at December 31,
2015, and investments in the energy sector represented only 0.7% of
our portfolio at fair value.
At December 31, 2015, FSFR Glick JV had $199.4 million in
assets, including senior secured loans to 29 portfolio companies.
The joint venture generated income of $1.6 million for FSFR during
the first fiscal quarter, which represented a 10.5% weighted
average annualized return on investment.
Our weighted average yield on debt investments at
December 31, 2015, including the return on FSFR Glick JV, was
8.0%, and included a cash component of 7.8%. We effectively
utilized our attractively priced leverage and operated within our
target range of 0.8x to 0.9x debt-to-equity during the quarter
ended December 31, 2015.
"We are pleased to announce that for the second straight quarter
FSFR operated within its target leverage range and covered its
quarterly run rate dividend, which has enhanced our operating
flexibility,” stated Chief Executive Officer, Ivelin M. Dimitrov,
adding, “Despite broader market volatility that persisted during
the December quarter, we are excited about the opportunity to
continue to optimize our portfolio through investments in senior
secured floating rate assets with strong risk-adjusted
returns."
Results of Operations
Total investment income for the quarters ended December 31, 2015
and December 31, 2014 was $13.9 million and $11.9 million,
respectively. For the quarter ended December 31, 2015, the
amount primarily consisted of $12.2 million of interest income from
portfolio investments. For the quarter ended December 31,
2014, this amount primarily consisted of $8.3 million of interest
income from portfolio investments. For the quarter ended December
31, 2015, PIK interest net of PIK collected in cash represented
only 0.1% of total investment income.
Total expenses for the quarters ended December 31, 2015 and
December 31, 2014 were $6.9 million and $4.4 million,
respectively. Total expenses increased for the quarter ended
December 31, 2015 as compared to the quarter ended
December 31, 2014, due primarily to a $1.4 million increase in
interest expense, a $0.4 million increase in base management fees
and a $0.4 million increase in professional fees.
Net realized and unrealized losses on our investment portfolio
for the quarters ended December 31, 2015 and December 31, 2014 were
$20.3 million and $1.0 million, respectively. For the quarter ended
December 31, 2015, over 50% of our portfolio losses were due
to broader market fluctuations, including spread widening, with the
remainder due to credit deterioration in a small number of
investments.
Liquidity and Capital Resources
At December 31, 2015, we had $20.5 million of cash and cash
equivalents (including restricted cash), portfolio investments (at
fair value) of $604.0 million, receivables from unsettled
transactions of $11.4 million, payables from unsettled transactions
of $11.4 million, $109.2 million of borrowings outstanding under
our revolving credit facility, $182.3 million of borrowings
outstanding under our debt securitization and $72.7 million of
unfunded commitments.
At September 30, 2015, we had $52.7 million of cash and
cash equivalents (including restricted cash), portfolio investments
(at fair value) of $623.6 million, receivables from unsettled
transactions of $13.5 million, payables from unsettled transactions
of $11.8 million, $136.7 million of borrowings outstanding under
our revolving credit facility, $186.4 million of borrowings
outstanding under our debt securitization and $76.8 million of
unfunded commitments.
On January 12, 2016, we announced the closing of a $25.0 million
senior secured revolving credit facility with East West Bank. The
facility has a final maturity of January 2021 and will accrue
interest at LIBOR plus a variable margin according to the agreed
upon schedule.
Dividend Declaration
In addition to our previously declared dividend of $0.075 per
share, which is payable on February 16, 2016 to stockholders of
record on February 5, 2016, our Board of Directors met on February
8, 2016 and declared the following distributions:
- $0.075 per share, payable on March 31, 2016 to stockholders of
record on March 15, 2016;
- $0.075 per share, payable on April 29, 2016 to stockholders of
record on April 15, 2016; and
- $0.075 per share, payable on May 31, 2016 to stockholders of
record on May 13, 2016.
Dividends are paid primarily from distributable (taxable)
income. To the extent our taxable earnings for a fiscal taxable
year fall below the total amount of our dividend distributions for
that fiscal year, a portion of those distributions may be deemed a
return of capital to our stockholders. 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.
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 December 31, 2015 and September 30, 2015, the
distribution of our investments on the 1 to 4 investment ranking
scale at fair value was as follows:
Investment Ranking |
|
December 31, 2015 |
|
September 30, 2015 |
|
Fair Value |
|
% of Portfolio |
|
Leverage Ratio |
|
Fair Value |
|
% of Portfolio |
|
Leverage Ratio |
1 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
2 |
|
$ |
580,100,227 |
|
|
96.05 |
% |
|
4.63 |
|
|
$ |
596,955,786 |
|
|
95.72 |
% |
|
4.71 |
|
3 |
|
4,145,805 |
|
|
0.69 |
|
|
10.33 |
|
|
26,691,688 |
|
|
4.28 |
|
|
5.87 |
|
4 |
|
19,709,803 |
|
|
3.26 |
|
|
NM |
|
(1 |
) |
— |
|
|
— |
|
|
— |
|
Total |
|
$ |
603,955,835 |
|
|
100.00 |
% |
|
4.52 |
|
|
$ |
623,647,474 |
|
|
100.00 |
% |
|
4.76 |
|
_____________(1) Due to operating
performance this ratio is not measurable and, as a result, is
excluded from the total portfolio calculation.
We may from time to time modify the payment terms of our
investments, either in response to current economic conditions and
their impact on certain of our portfolio companies or in accordance
with tier pricing provisions in certain loan agreements. As of
December 31, 2015, we had modified the payment terms of our
investments in three portfolio companies. Such modified terms may
include increased PIK interest rates and reduced cash interest
rates. These modifications, and any future modifications to our
loan agreements, may limit the amount of interest income that we
recognize from the modified investments, which may, in turn, limit
our ability to make distributions to our stockholders.
As of December 31, 2015, there were two investments on
which we had stopped accruing cash and/or PIK interest or OID
income that represented 2.6% of our debt portfolio at fair value in
the aggregate.
Fifth Street Senior Floating Rate
Corp.
Consolidated Statements of Assets and
Liabilities
(unaudited)
|
|
December 31, 2015 |
|
September 30, 2015 |
ASSETS |
|
|
Investments at
fair value: |
|
|
|
|
Control investments (cost December
31, 2015: $60,815,474; cost September 30, 2015: $58,977,973) |
|
$ |
55,243,930 |
|
|
$ |
57,156,921 |
|
Non-control/Non-affiliate
investments (cost December 31, 2015: $573,264,001; cost September
30, 2015: $574,538,984) |
|
548,711,905 |
|
|
566,490,553 |
|
Total investments
at fair value (cost December 31, 2015:
$634,079,475; cost September 30, 2015:
$633,516,957) |
|
603,955,835 |
|
|
623,647,474 |
|
Cash and cash
equivalents |
|
13,145,865 |
|
|
41,433,301 |
|
Restricted cash |
|
7,346,098 |
|
|
11,258,796 |
|
Interest, dividends and
fees receivable |
|
3,535,034 |
|
|
2,783,379 |
|
Due from portfolio
companies |
|
209,312 |
|
|
11,587 |
|
Receivables from unsettled
transactions |
|
11,427,161 |
|
|
13,541,056 |
|
Deferred financing
costs |
|
4,799,894 |
|
|
5,001,675 |
|
Other assets |
|
62,567 |
|
|
33,216 |
|
Total
assets |
|
$ |
644,481,766 |
|
|
$ |
697,710,484 |
|
LIABILITIES AND NET ASSETS |
|
|
Liabilities: |
|
|
|
|
Accounts payable, accrued expenses
and other liabilities |
|
$ |
1,882,712 |
|
|
$ |
1,964,249 |
|
Base management fee and incentive
fee payable |
|
859,209 |
|
|
2,055,179 |
|
Due to FSC CT |
|
379,846 |
|
|
379,641 |
|
Interest payable |
|
1,538,385 |
|
|
1,669,012 |
|
Distributions payable |
|
2,210,008 |
|
|
— |
|
Payables from unsettled
transactions |
|
11,393,092 |
|
|
11,809,500 |
|
Credit facilities payable |
|
109,226,800 |
|
|
136,659,800 |
|
Notes payable |
|
182,331,000 |
|
|
186,366,000 |
|
Total
liabilities |
|
309,821,052 |
|
|
340,903,381 |
|
Commitments and
contingencies |
|
|
|
|
Net
assets: |
|
|
|
|
Common stock, $0.01 par value,
150,000,000 shares authorized; 29,466,768 shares issued and
outstanding at December 31, 2015 and September 30, 2015 |
|
294,668 |
|
|
294,668 |
|
Additional paid-in-capital |
|
373,995,934 |
|
|
373,995,934 |
|
Net unrealized depreciation on
investments |
|
(30,123,640 |
) |
|
(9,869,483 |
) |
Net realized gain on
investments |
|
1,745,950 |
|
|
1,800,070 |
|
Accumulated overdistributed net
investment income |
|
(11,252,198 |
) |
|
(9,414,086 |
) |
Total net assets
(equivalent to $11.36 and $12.11 per common share at December 31,
2015 and September 30, 2015, respectively) |
|
334,660,714 |
|
|
356,807,103 |
|
Total liabilities
and net assets |
|
$ |
644,481,766 |
|
|
$ |
697,710,484 |
|
|
|
|
|
|
|
|
|
|
Fifth Street Senior Floating Rate
Corp.
Consolidated Statements of
Operations
(unaudited)
|
|
Three months ended December 31,
2015 |
|
Three months ended December 31,
2014 |
Interest
income: |
|
|
|
|
Control investments |
|
$ |
1,120,491 |
|
|
$ |
— |
|
Non-control/Non-affiliate
investments |
|
11,005,597 |
|
|
8,261,529 |
|
Interest on cash and cash
equivalents |
|
20,399 |
|
|
3,935 |
|
Total interest
income |
|
12,146,487 |
|
|
8,265,464 |
|
PIK interest
income: |
|
|
|
|
Non-control/Non-affiliate
investments |
|
17,161 |
|
|
— |
|
Total PIK interest
income |
|
17,161 |
|
|
— |
|
Fee
income: |
|
|
|
|
Non-control/Non-affiliate
investments |
|
1,312,607 |
|
|
3,657,679 |
|
Total fee
income |
|
1,312,607 |
|
|
3,657,679 |
|
Dividend and other
income: |
|
|
|
|
Control investments |
|
437,500 |
|
|
— |
|
Total dividend and other
income |
|
437,500 |
|
|
— |
|
Total investment
income |
|
13,913,755 |
|
|
11,923,143 |
|
Expenses: |
|
|
|
|
Base management fee |
|
1,586,192 |
|
|
1,156,911 |
|
Part I incentive fee |
|
1,748,812 |
|
|
1,787,394 |
|
Part II incentive fee |
|
— |
|
|
(257,141 |
) |
Professional fees |
|
722,803 |
|
|
309,786 |
|
Board of Directors fees |
|
168,650 |
|
|
98,250 |
|
Interest expense |
|
2,273,433 |
|
|
886,155 |
|
Administrator expense |
|
185,000 |
|
|
246,135 |
|
General and administrative
expenses |
|
226,947 |
|
|
200,151 |
|
Total
expenses |
|
6,911,837 |
|
|
4,427,641 |
|
Net investment
income |
|
7,001,918 |
|
|
7,495,502 |
|
Unrealized
appreciation (depreciation) on investments: |
|
|
|
|
Control investments |
|
(3,750,492 |
) |
|
— |
|
Non-control/Non-affiliate
investments |
|
(16,503,665 |
) |
|
(1,439,578 |
) |
Net unrealized
depreciation on investments |
|
(20,254,157 |
) |
|
(1,439,578 |
) |
Realized gain
(loss) on investments: |
|
|
|
|
Non-control/Non-affiliate
investments |
|
(54,120 |
) |
|
428,002 |
|
Net realized gain
(loss) on investments |
|
(54,120 |
) |
|
428,002 |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
(13,306,359 |
) |
|
$ |
6,483,926 |
|
Net investment
income per common share — basic and diluted |
|
$ |
0.24 |
|
|
$ |
0.25 |
|
Earnings (loss)
per common share — basic and diluted |
|
$ |
(0.45 |
) |
|
$ |
0.22 |
|
Weighted average common
shares outstanding — basic and diluted |
|
29,466,768 |
|
|
29,466,768 |
|
Distributions per
common share |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
Conference Call Information
We will hold a conference call at 10:00 a.m. (Eastern Time) on
Wednesday, February 10, 2016, to discuss our quarterly financial
results. All interested parties are welcome to participate.
Domestic callers can access the conference call by dialing (877)
369-6549. International callers can access the conference call by
dialing +1 (330) 863-3349. All callers will need to enter the
Conference ID Number 17770477 and reference "Fifth Street Senior
Floating Rate Corp." after being connected with the operator. All
callers are asked to dial in 10-15 minutes prior to the call so
that name and company information can be collected. An archived
replay of the call will be available approximately four hours after
the end of the conference call and will be available through
February 17, 2016 to domestic callers by dialing (855) 859-2056 and
to international callers by dialing +1 (404) 537-3406. For all
replays, please reference Conference ID Number 17770477. An
archived replay will also be available online on the "Investor
Relations" section of FSFR's website under the "News & Events -
Calendar of Events" section.
About Fifth Street Senior Floating Rate Corp.
Fifth Street Senior Floating Rate Corp. ("FSFR") is a
specialty finance company that provides financing solutions in the
form of floating rate senior secured loans to mid-sized companies,
primarily in connection with investments by private equity
sponsors. FSFR'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 a subsidiary of Fifth Street Asset
Management Inc. (NASDAQ:FSAM), a nationally recognized
credit-focused asset manager with over $5 billion in
assets under management across multiple public and private
vehicles. With a track record of over 17 years, Fifth Street's
platform has the ability to hold loans up to $250
million and structure and syndicate transactions up
to $500 million. Fifth Street received the 2015 ACG New York
Champion's Award for "Lender Firm of the Year," and other
previously received accolades include the ACG New York Champion's
Award for "Senior Lender Firm of the Year," "Lender Firm of the
Year" by The M&A Advisor and "Lender of the Year"
by Mergers & Acquisitions. FSFR's website can be found at
fsfr.fifthstreetfinance.com.
Forward-Looking Statements
Some of the statements in this press release constitute
forward-looking statements, because they relate to future events or
our future performance or financial condition. Forward-looking
statements may include statements as to the future operating
results, dividends and business prospects of FSFR. Words such as
"believes," "expects," "seeks," "plans," "should," "estimates,"
"project," and "intend" indicate forward-looking statements,
although not all forward-looking statements include these words.
These forward-looking statements involve risks and uncertainties.
Actual results could differ materially from those implied or
expressed in these forward-looking statements for any reason. Such
factors are identified from time to time in FSFR's filings with the
Securities and Exchange Commission and include changes in the
economy and the financial markets and future changes in laws or
regulations and conditions in FSFR's operating areas. FSFR
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
CONTACT:
Investor Contact:
Robyn Friedman, Senior Vice President, Head of Investor Relations
(203) 681-3720
ir@fifthstreetfinance.com
Media Contact:
Michael Freitag / James Golden / Alyssa Cass
Joele Frank Wilkinson Brimmer Katcher
(212) 355-4449
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