Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or
"we") today announced its financial results for the third fiscal
quarter ended June 30, 2016.
Third Fiscal Quarter 2016 Highlights
- Net investment income of $6.2 million, or $0.21 per share;
- Net asset value per share of $10.99;
- Closed $112.2 million of new investments; and
- Reported only one investment on non-accrual status at
June 30, 2016, representing 0.2% of the portfolio at fair
value.
“During the June quarter, we benefited from a rebound in
origination volumes, although we also continued to be impacted by
unusually high professional expenses. We expect these
expenses to return to normal levels beginning in the September
quarter,” stated Ivelin M. Dimitrov, FSFR's Chief Executive
Officer. “With respect to our investment strategy, FSFR
continues to focus on delivering consistent returns to stockholders
by investing in senior secured assets with strong risk adjusted
returns. We are pleased to report that despite some softness
in the broader economy and credit deterioration in a few
concentrated investments, our overall portfolio remains solid, with
only one investment on non-accrual status, representing just 0.2%
of the total portfolio at fair value.”
Portfolio and Investment Activity
FSFR's Board of Directors determined the fair value of our
investment portfolio at June 30, 2016 to be $598.3 million, as
compared to $623.6 million at September 30, 2015. Total
assets were $639.8 million at June 30, 2016, as compared to
$697.7 million at September 30, 2015.
During the quarter ended June 30, 2016, we closed $112.2
million of investments in nine new and three existing portfolio
companies and funded $107.1 million across new and existing
portfolio companies. This compares to closing $336.5 million
in 26 new and eight existing portfolio companies and funding $282.9
million during the quarter ended June 30, 2015. During the
quarter ended June 30, 2016, we received $34.1 million in
connection with full repayments of two of our debt investments,
both of which were exited at par, and an additional $45.2 million
in connection with paydowns, syndications and sales of debt
investments.
At June 30, 2016, our portfolio consisted of investments in
64 companies. At fair value, 88.0% of our portfolio consisted
of senior secured floating rate debt investments, and 10.6% 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
$9.1 million at June 30, 2016. The average portfolio
company EBITDA was $58.9 million at June 30, 2016, with only
0.5% of the portfolio's fair value invested in the energy sector
and no exposure to CLO equity.
At June 30, 2016, FSFR Glick JV had $220.3 million in
assets, including senior secured loans to 36 portfolio
companies. The joint venture generated income of $2.1 million
for FSFR during the third fiscal quarter, which represented an
11.7% weighted average annualized return on investment.
Our weighted average yield on debt investments at June 30,
2016, including the return on FSFR Glick JV, was 8.6%, and included
a cash component of 8.4%. We effectively utilized our
attractively priced leverage and operated within our target
leverage range of 0.8x to 0.9x debt-to-equity for much of the
quarter, ending the quarter at 0.91x leverage.
Results of Operations
Total investment income for the quarters ended June 30, 2016 and
June 30, 2015 was $13.1 million and $14.1 million, respectively.
For the quarter ended June 30, 2016, the amount primarily
consisted of $11.5 million of cash interest income from portfolio
investments. For the quarter ended June 30, 2015, this amount
primarily consisted of $11.2 million of cash interest income from
portfolio investments. For the quarter ended June 30,
2016, we collected payment-in-kind ("PIK") interest in excess of
PIK accrued.
Total expenses for the quarters ended June 30, 2016 and
June 30, 2015 were $7.0 million and $7.1 million,
respectively. Total expenses decreased for the quarter ended
June 30, 2016 as compared to the quarter ended June 30,
2015, due primarily to a $1.3 million charge, net of a decrease in
the incentive fee, in the quarter ended June 30, 2015 related to a
debt securitization in which we repaid and terminated our credit
facility with Natixis, New York Branch by issuing $180.0 million of
low-cost, senior secured notes with ten-year maturities. The
decrease due to this charge was partially offset by a $0.6 million
increase in professional fees incurred during the quarter ended
June 30, 2016.
Net realized and unrealized losses on our investment portfolio
for the quarters ended June 30, 2016 and June 30, 2015 were $5.2
million and $4.6 million, respectively.
Liquidity and Capital Resources
At June 30, 2016, we had $23.0 million of cash and cash
equivalents (including restricted cash), portfolio investments (at
fair value) of $598.3 million, $4.2 million of interest, dividends
and fees receivable, $4.5 million of net payables from unsettled
transactions, $115.8 million of borrowings outstanding under our
revolving credit facilities, $180.0 million of borrowings
outstanding under our debt securitization and $57.8 million of
unfunded commitments. Our regulatory leverage ratio was 0.91x
debt-to-equity.
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, $2.8 million of interest,
dividends and fees receivable, $1.7 million of net receivables from
unsettled transactions, $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. Our regulatory leverage ratio was 0.91x
debt-to-equity.
Dividend Declaration
In addition to our previously declared dividend of $0.075 per
share, which is payable on August 31, 2016 to stockholders of
record on August 15, 2016, our Board of Directors met on August 4,
2016 and declared the following distributions:
- $0.075 per share, payable on September 30, 2016 to stockholders
of record on September 15, 2016;
- $0.075 per share, payable on October 31, 2016 to stockholders
of record on October 14, 2016; and
- $0.075 per share, payable on November 30, 2016 to stockholders
of record on November 15, 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 June 30, 2016 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 |
|
June 30, 2016 |
|
September 30, 2015 |
|
Fair Value |
|
% of Portfolio |
|
Leverage Ratio |
|
Fair Value |
|
% of Portfolio |
|
Leverage Ratio |
1 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
2 |
|
$ |
589,971,359 |
|
|
98.61 |
% |
|
4.36 |
|
|
$ |
596,955,786 |
|
|
95.72 |
% |
|
4.71 |
|
3 |
|
7,121,550 |
|
|
1.19 |
|
|
5.35 |
|
|
26,691,688 |
|
|
4.28 |
|
|
5.87 |
|
4 |
|
1,200,000 |
|
|
0.20 |
|
|
NM |
(1 |
) |
— |
|
|
— |
|
|
— |
|
Total |
|
$ |
598,292,909 |
|
|
100.00 |
% |
|
4.37 |
|
|
$ |
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 June 30, 2016, we had modified the payment terms of our
investments in four 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 June 30, 2016, there was one investment on which we
had stopped accruing original issue discount income, which
represented 0.2% of our debt portfolio at fair value in the
aggregate.
|
Fifth Street Senior Floating Rate Corp. |
Consolidated Statements of Assets and
Liabilities |
(unaudited) |
|
|
|
June 30, 2016 |
|
September 30, 2015 |
ASSETS |
|
|
Investments at
fair value: |
|
|
|
|
Control investments (cost June 30,
2016: $71,030,006; cost September 30, 2015: $58,977,973) |
|
$ |
63,443,232 |
|
|
$ |
57,156,921 |
|
Affiliate investments (cost June
30, 2016: $15,902,053; cost September 30, 2015: $0) |
|
13,521,320 |
|
|
— |
|
Non-control/Non-affiliate
investments (cost June 30, 2016: $539,870,867; cost September 30,
2015: $574,538,984) |
|
521,328,357 |
|
|
566,490,553 |
|
Total investments
at fair value (cost June 30, 2016: $626,802,926;
cost September 30, 2015: $633,516,957) |
|
598,292,909 |
|
|
623,647,474 |
|
Cash and cash
equivalents |
|
15,067,740 |
|
|
41,433,301 |
|
Restricted cash |
|
7,980,698 |
|
|
11,258,796 |
|
Interest, dividends and
fees receivable |
|
4,213,089 |
|
|
2,783,379 |
|
Due from portfolio
companies |
|
269,734 |
|
|
11,587 |
|
Receivables from unsettled
transactions |
|
8,898,941 |
|
|
13,541,056 |
|
Deferred financing
costs |
|
4,801,668 |
|
|
5,001,675 |
|
Other assets |
|
314,309 |
|
|
33,216 |
|
Total
assets |
|
$ |
639,839,088 |
|
|
$ |
697,710,484 |
|
LIABILITIES AND NET ASSETS |
|
|
Liabilities: |
|
|
|
|
Accounts payable, accrued expenses
and other liabilities |
|
$ |
1,893,044 |
|
|
$ |
1,964,249 |
|
Base management fee and incentive
fee payable |
|
2,731,300 |
|
|
2,055,179 |
|
Due to FSC CT LLC |
|
379,244 |
|
|
379,641 |
|
Interest payable |
|
1,717,231 |
|
|
1,669,012 |
|
Payables from unsettled
transactions |
|
13,425,000 |
|
|
11,809,500 |
|
Credit facilities payable |
|
115,826,800 |
|
|
136,659,800 |
|
Notes payable |
|
180,000,000 |
|
|
186,366,000 |
|
Total
liabilities |
|
315,972,619 |
|
|
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 June 30, 2016 and September 30, 2015 |
|
294,668 |
|
|
294,668 |
|
Additional paid-in-capital |
|
373,995,934 |
|
|
373,995,934 |
|
Net unrealized depreciation on
investments |
|
(28,510,017 |
) |
|
(9,869,483 |
) |
Net realized gain (loss) on
investments |
|
(11,560,596 |
) |
|
1,800,070 |
|
Accumulated overdistributed net
investment income |
|
(10,353,520 |
) |
|
(9,414,086 |
) |
Total net assets
(equivalent to $10.99 and $12.11 per common share at June 30, 2016
and September 30, 2015, respectively) |
|
323,866,469 |
|
|
356,807,103 |
|
Total liabilities
and net assets |
|
$ |
639,839,088 |
|
|
$ |
697,710,484 |
|
|
Fifth Street Senior Floating Rate Corp. |
Consolidated Statements of Operations |
(unaudited) |
|
|
|
Three months ended June 30, 2016 |
|
Three months ended June 30, 2015 |
|
Nine months ended June 30, 2016 |
|
Nine months ended June 30, 2015 |
Interest
income: |
|
|
|
|
|
|
|
|
Control investments |
|
$ |
1,351,423 |
|
|
$ |
754,216 |
|
|
$ |
3,681,941 |
|
|
$ |
754,216 |
|
Affiliate investments |
|
85,003 |
|
|
— |
|
|
85,003 |
|
|
— |
|
Non-control/Non-affiliate
investments |
|
10,078,942 |
|
|
10,450,360 |
|
|
31,416,467 |
|
|
28,595,641 |
|
Interest on cash and cash
equivalents |
|
20,141 |
|
|
7,042 |
|
|
53,311 |
|
|
16,227 |
|
Total interest
income |
|
11,535,509 |
|
|
11,211,618 |
|
|
35,236,722 |
|
|
29,366,084 |
|
PIK interest
income: |
|
|
|
|
|
|
|
|
Affiliate investments |
|
42,502 |
|
|
— |
|
|
42,502 |
|
|
— |
|
Non-control/Non-affiliate
investments |
|
21,753 |
|
|
— |
|
|
62,786 |
|
|
— |
|
Total PIK interest
income |
|
64,255 |
|
|
— |
|
|
105,288 |
|
|
— |
|
Fee
income: |
|
|
|
|
|
|
|
|
Affiliate investments |
|
3,148 |
|
|
— |
|
|
3,148 |
|
|
— |
|
Non-control/Non-affiliate
investments |
|
811,548 |
|
|
2,854,182 |
|
|
2,865,229 |
|
|
7,964,019 |
|
Total fee
income |
|
814,696 |
|
|
2,854,182 |
|
|
2,868,377 |
|
|
7,964,019 |
|
Dividend and other
income: |
|
|
|
|
|
|
|
|
Control investments |
|
700,000 |
|
|
74,375 |
|
|
2,012,500 |
|
|
74,375 |
|
Total dividend and other
income |
|
700,000 |
|
|
74,375 |
|
|
2,012,500 |
|
|
74,375 |
|
Total investment
income |
|
13,114,460 |
|
|
14,140,175 |
|
|
40,222,887 |
|
|
37,404,478 |
|
Expenses: |
|
|
|
|
|
|
|
|
Base management fee |
|
1,511,490 |
|
|
1,594,872 |
|
|
4,618,171 |
|
|
4,274,950 |
|
Part I incentive fee |
|
1,219,810 |
|
|
1,107,961 |
|
|
3,733,909 |
|
|
3,835,350 |
|
Part II incentive fee |
|
— |
|
|
(587,855 |
) |
|
— |
|
|
(766,552 |
) |
Professional fees |
|
894,245 |
|
|
259,933 |
|
|
3,529,285 |
|
|
758,428 |
|
Board of Directors fees |
|
143,425 |
|
|
80,250 |
|
|
465,025 |
|
|
264,550 |
|
Interest expense |
|
2,437,152 |
|
|
4,162,905 |
|
|
7,048,434 |
|
|
6,754,197 |
|
Administrator expense |
|
92,622 |
|
|
152,647 |
|
|
406,030 |
|
|
576,344 |
|
General and administrative
expenses |
|
652,199 |
|
|
283,556 |
|
|
1,471,399 |
|
|
831,447 |
|
Total
expenses |
|
6,950,943 |
|
|
7,054,269 |
|
|
21,272,253 |
|
|
16,528,714 |
|
Net investment
income |
|
6,163,517 |
|
|
7,085,906 |
|
|
18,950,634 |
|
|
20,875,764 |
|
Unrealized
appreciation (depreciation) on investments: |
|
|
|
|
|
|
|
|
Control investments |
|
(1,348,337 |
) |
|
(571,710 |
) |
|
(5,765,722 |
) |
|
(571,710 |
) |
Affiliate investments |
|
(2,380,733 |
) |
|
— |
|
|
(2,380,733 |
) |
|
|
Non-control/Non-affiliate
investments |
|
6,988,548 |
|
|
(2,725,039 |
) |
|
(10,494,079 |
) |
|
(4,290,124 |
) |
Net unrealized
appreciation (depreciation) on investments |
|
3,259,478 |
|
|
(3,296,749 |
) |
|
(18,640,534 |
) |
|
(4,861,834 |
) |
Realized gain
(loss) on investments: |
|
|
|
|
|
|
|
|
Non-control/Non-affiliate investments |
|
(8,506,936 |
) |
|
(1,334,908 |
) |
|
(13,360,666 |
) |
|
(389,179 |
) |
Net realized loss
on investments |
|
(8,506,936 |
) |
|
(1,334,908 |
) |
|
(13,360,666 |
) |
|
(389,179 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
$ |
916,059 |
|
|
$ |
2,454,249 |
|
|
$ |
(13,050,566 |
) |
|
$ |
15,624,751 |
|
Net investment
income per common share — basic and diluted |
|
$ |
0.21 |
|
|
$ |
0.24 |
|
|
$ |
0.64 |
|
|
$ |
0.71 |
|
Earnings (loss)
per common share — basic and diluted |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
$ |
(0.44 |
) |
|
$ |
0.53 |
|
Weighted average common
shares outstanding — basic and diluted |
|
29,466,768 |
|
|
29,466,768 |
|
|
29,466,768 |
|
|
29,466,768 |
|
Distributions per
common share |
|
$ |
0.225 |
|
|
$ |
0.300 |
|
|
$ |
0.675 |
|
|
$ |
0.900 |
|
Conference Call Information
We will hold a conference call at 10:00 a.m. (Eastern Time) on
Wednesday, August 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)
359-2861. International callers can access the conference call by
dialing +1 (540) 318-1180. All callers will need to enter the
Conference ID Number 48926580 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 August 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
48926580. An archived replay will also be available online on
the "Investor Relations" section of our website under the "News
& Events - Calendar of Events" section.
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 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 18 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 the Company'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, Executive Director, Head of Investor Relations
(203) 681-3720
ir@fifthstreetfinance.com
Media Contact:
James Golden / Aura Reinhard / Andrew Squire
Joele Frank Wilkinson Brimmer Katcher
(212) 355-4449
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