UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February
9, 2016
Fifth Street Senior Floating Rate
Corp.
(Exact name of registrant as specified in
its charter)
Delaware |
001-35999 |
61-1713295 |
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
777 West Putnam Avenue, 3rd Floor, Greenwich, CT |
06830 |
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including
area code: (203) 681-3600
Not Applicable
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On February 9, 2016, Fifth Street Senior Floating Rate Corp.
(“FSFR”) issued a press release announcing its financial results for the fiscal quarter ended December 31, 2015. A
copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The information disclosed under this Item 2.02, including Exhibit
99.1 hereto, is being “furnished” and is not deemed “filed” by FSFR for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor
is it deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 99.1 | Press release dated February 9, 2016 |
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
|
FIFTH STREET SENIOR FLOATING RATE CORP.
|
Date: February 9, 2016 |
|
By: |
/s/ Kerry Acocella |
|
|
|
Name: Kerry Acocella
Title: Chief Compliance Officer |
Exhibit 99.1
Fifth Street Senior Floating Rate Corp.
Announces Quarter Ended December 31, 2015 Financial Results
GREENWICH, CT, February 9, 2016 - 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
Fifth Str SR Floating Rate Corp (NASDAQ:FSFR)
Historical Stock Chart
From May 2024 to Jun 2024
Fifth Str SR Floating Rate Corp (NASDAQ:FSFR)
Historical Stock Chart
From Jun 2023 to Jun 2024