Kohlberg Capital Corporation (Nasdaq:KCAP) (the "Company")
announced its 2011 financial results.
Financial Highlights
- Net investment income for 2011 was approximately $16 million,
or $0.70 per share.
- Net realized and unrealized losses of $8.4 million for 2011, or
$0.37 per share.
- During the year, declared dividends of $0.70 per share.
- At December 31, 2011, the fair value of the Company's
investments totaled approximately $240 million.
- Net asset value per share of $7.85 as of December 31, 2011 as
compared to $8.21 as of December 31, 2010.
Dayl Pearson, president and chief executive officer, noted,
"During 2011 we focused positioning our portfolio for growth after
the significant de-levering of the portfolio during 2010. The
de-levering did not have a negative impact on credit
quality. During 2011, we incurred longer-term new borrowings
of $60 million and recently followed up with another financing
facility of $30 million. Our pro forma asset coverage with
these new facilities in place is approximately 300%, above the
minimum asset coverage of 200%. We also expanded our
investment in our asset management platform by acquiring Trimaran
Advisors and adding it to our existing asset manager, Katonah Debt
Advisors. On a combined basis, our portfolio company will have
over $3.4 billion of assets under management. Trimaran Advisors has
an outstanding track record, and the combination is expected to
result in significant synergies and will provide a platform to grow
our asset management business and enhance the distributions and
value to Kohlberg Capital's shareholders."
Operating Results
For the year ended December 31, 2011, the Company reported total
investment income of approximately $28 million, compared to
approximately $29.4 million, in the prior year period. Investment
income from debt securities decreased $5.0 million, from
approximately $14.4 million in 2010 to approximately $9.4 million
in 2011 due to a reduction in size of our loan portfolio primarily
due to lower average investment balances on which interest is
earned. The decrease in average assets is primarily due to
paydowns and settlements during the first half of 2011. In
addition, investment income from CLO fund securities was
approximately $14.6 million in 2011, and Katonah Debt Advisors, the
Company's wholly-owned asset manager, paid cash dividends to the
Company of $1.9 million.
Expenses for 2011 totaled approximately $12.0 million as
compared to approximately $17.5 million in 2010. The reduction in
expenses is primarily attributed to decreased interest expense and
professional fee expense. Interest expenses are lower by
approximately $2.5 million due to the reduction in average
borrowings for the year over year period. Professional fee
expenses are lower by approximately $3.4 million relative to the
prior year due to decreased legal expenses, accounting and
valuation services. This decrease in professional fees is
primarily related to legal proceeding and our complaint against our
lenders and additional legal, accounting and valuation costs
related to the restatement (and defense on the related class-action
and SEC investigation) of our year-end 2008 and first-and second-
quarter 2009 financial statements.
Net realized and unrealized losses for 2011 were approximately
$8.4 million, as compared to $26.2 million in 2010. Net
investment income in 2011 and 2010 was approximately $16.0 million
and 11.9 million, or $0.70 and $0.53 per share.
Investment Portfolio
Kohlberg Capital Corporation's portfolio fair value was $239.8
million as of December 31, 2011. The following table shows the
composition of the Company's portfolio by security type at December
31, 2011 as compared to the prior year ended December 31, 2010:
|
December 31,
2011 |
December 31,
2010 |
Security Type |
Cost |
Fair Value |
%¹ |
Cost |
Fair Value |
%¹ |
Time Deposits |
$ 229,152 |
$ 229,152 |
--% |
$ 720,225 |
$ 720,225 |
--% |
Money Market Account |
31,622,134 |
31,622,134 |
13 |
210,311 |
210,311 |
-- |
Senior Secured Loan |
54,045,184 |
45,259,328 |
19 |
34,183,551 |
22,001,256 |
12 |
Junior Secured Loan |
58,936,728 |
47,300,172 |
20 |
76,896,867 |
63,944,003 |
34 |
Mezzanine Investment |
10,931,428 |
11,588,115 |
5 |
10,744,496 |
250,000 |
-- |
Senior Subordinated Bond |
9,997,898 |
10,125,891 |
4 |
4,320,596 |
4,490,709 |
2 |
CLO Fund Securities |
65,209,809 |
46,412,000 |
19 |
68,280,200 |
53,031,000 |
28 |
Equity Securities |
16,559,610 |
6,040,895 |
3 |
13,232,266 |
4,437,871 |
2 |
Preferred |
400,000 |
400,000 |
-- |
650,961 |
607,921 |
-- |
Affiliate Asset Managers |
44,338,301 |
40,814,000 |
17 |
44,532,329 |
41,493,000 |
22 |
Total |
$ 292,270,244 |
$ 239,791,687 |
100% |
$ 253,771,802 |
$ 191,186,296 |
100% |
|
¹ Represents percentage of
total portfolio at fair value. |
The Company's loan and bond portfolio (excluding its investment
in CLO fund securities, short-term investments and affiliate asset
managers discussed further below) as of December 31, 2011 totaled
$114.7 million at fair value, of which 81% are secured loans. The
cost of such investments was $134.3 million, representing a fair
value discount to cost of 15% or approximately $0.86 per
outstanding share. As of December 31, 2011, the Company had no
exposure to mortgage securities, consumer borrowings or related
asset backed securities. The weighted average yield on the
Company's loan and bond portfolio at December 31, 2011 was
approximately 8.4%.
The portfolio of middle market corporate loan and debt
securities at quarter end, representing 48% of the total investment
portfolio, was spread across 21 different industries and 40
different entities with an average balance per entity of
approximately $3 million. As of December 31, 2011, all but
three issuers or less than 1% of total investments at fair value
were current on their debt service obligations.
Investment in CLO Fund Securities
As of December 31, 2011, the Company's investment at fair value
in CLO Fund securities was approximately $46.4 million. The
underlying assets in each of the CLO funds are generally
diversified secured and unsecured corporate debt and do not include
any asset backed securities, such as those secured by commercial or
residential mortgages. Our largest two CLO fund investments,
Katonah X CLO Ltd. and Katonah 2007-1 CLO Ltd., both managed by our
wholly-owned asset manager, Katonah Debt Advisors, represented 83%
of our investments in CLO fund securities at December 31, 2011,
have performed since inception and have not been subject to any
suspension of distributions. Two CLO Fund securities, not managed
by Katonah Debt Advisors, representing a fair value of $2,000, are
not currently providing a dividend payment to the Company.
For the year ended December 31, 2011, the weighted average
yield to fair value on CLO funds securities was approximately
28.4%.
Investment in Asset Manager
At December 31, 2011, the Company's investment at fair value in
affiliate asset managers, including Katonah Debt Advisors, was
approximately $40.8 million as compared to approximately $41.5
million at December 31, 2010. Katonah Debt Advisors' assets under
management at December 31, 2011 totaled approximately $1.9 billion.
Currently, all CLO Funds managed by Katonah Debt Advisors are
paying both their senior and subordinated management fees on a
current basis.
Liquidity and Capital Resources
At December 31, 2011, Kohlberg Capital had unrestricted cash and
time deposits of approximately $2.8 million, total assets of
approximately $248.1 million and stockholders' equity of $180.5
million. The Company's net asset value per common share was $7.85.
As of December 31, 2011, we had approximately $60 million of
outstanding borrowings at a fixed rate of interest of 8.75%, and
our asset coverage ratio of total assets to total borrowings was
401%, compliant with the minimum asset coverage level of 200%
generally required for a BDC by the 1940 Act.
At December 31, 2010, we had approximately $87 million of
outstanding indebtedness through a secured credit facility. On
January 31, 2011, we repaid in full the outstanding balance under
this facility. On March 16, 2011, we issued $55 million in
aggregate principal amount of unsecured 8.75% convertible senior
notes due 2016 ("Convertible Senior Notes"). On March 23,
2011, pursuant to an over-allotment option, we issued an additional
$5 million of such Convertible Senior Notes for a total of $60
million in aggregate principal amount.
On February 24, 2012, the Company entered into a Note
Purchase Agreement (the "Note Purchase Agreement") with Credit
Suisse AG, Cayman Islands Branch ("CS"), Credit Suisse Securities
(USA) LLC, as arranger, The Bank of New York Mellon Trust Company,
National Association, as collateral administrator and collateral
agent ("BNYM"), and KCAP Funding, a special-purpose bankruptcy
remote wholly-owned subsidiary of the Company ("KCAP Funding"),
whereby KCAP Funding purchased a portfolio of commercial bank loans
(the "Collateral Debt Obligations") with a fair market value of
approximately $42.5 million from the Company, the purchase of which
was financed by the issuance of (a) a senior note in an aggregate
principal amount of $30.0 million, issued to CS in exchange for
$30.0 million in cash and (b) a junior note in an aggregate
principal amount of $12.5 million, issued to the Company in
exchange for the sale by the Company to KCAP Funding of the
Collateral Debt Obligations.
Pursuant to the Note Purchase Agreement, the Company has agreed
to act as Portfolio Manager on behalf of KCAP Funding and CS of the
Collateral Debt Obligations, and has granted a security
interest to KCAP Funding in all of the Company's right to receive
certain management fees, and KCAP Funding granted to CS a security
interest in, among other things, the Collateral Debt Obligations
and its rights to receive the management fees pledged to it by the
Company. In its capacity as Portfolio Manager, the Company
also entered into a Collateral Administration Agreement, dated as
of February 24, 2012, with KCAP Funding, CS and BNYM, as collateral
administrator and collateral agent, whereby BNYM will, among other
things, hold the collateral on behalf of CS, as secured party,
administer the Collateral Debt Obligations and perform certain
other administrative obligations.
Subject to prevailing market conditions, we intend to grow our
portfolio of assets by raising additional capital, including
through the prudent use of leverage available to us. As a
result, we may seek to enter into new agreements with other lenders
or into other financing arrangements as market conditions
permit. Such financing arrangements may include a new secured
and/or unsecured credit facility, the issuance of preferred
securities or debt guaranteed by the SBA. We also believe that
our current cash position, certain loan investments and cash income
earned by our investment portfolio are adequate for our current
liquidity needs.
Other Activities
On February 29, 2012, the Company completed the acquisition of
Trimaran Advisors, L.L.C. ("Trimaran") through a newly-formed,
wholly-owned subsidiary of the Company. The aggregate
consideration paid for all of the outstanding equity interests in
Trimaran consisted of $13.0 million in cash and 3,600,000 shares of
common stock, par value $0.01 per share, of the Company.
Trimaran manages four CLO Funds with aggregate assets under
management of approximately $1.5 billion. Contemporaneously
with the acquisition, the Company also acquired the subordinated or
preferred share interests in certain CLO Funds managed by Trimaran
for an aggregate cash purchase price of $12.0 million.
Dividend
Generally, the Company seeks to fund dividends to shareholders
from current and distributable earnings, primarily from net
interest and dividend income generated by its investment portfolio
and any distributions from Katonah Debt Advisors. The Company
announced a regular quarterly dividend of $0.18 per share on
December 12, 2011. The record date for this dividend was December
23, 2011 and the dividend was paid on January 27, 2012. For
the year ended December 31, 2011, the Company declared dividends of
$0.70. Tax characteristics of all dividends will be reported
to stockholders on form 1099-DIV after the end of the calendar
year.
The Company has adopted a dividend reinvestment plan that
provides for reinvestment of our dividends on behalf of our
stockholders, unless a stockholder elects to receive cash. As a
result, if we declare a cash dividend, our stockholders who have
not "opted out" of our dividend reinvestment plan will have their
cash dividends automatically reinvested in additional shares of our
common stock, rather than receiving the cash dividends. Please
contact your broker or other financial intermediary for more
information regarding the dividend reinvestment plan.
Conference Call and Webcast
Kohlberg Capital Corporation will hold a conference call on
Thursday, March 15, 2012 at 4:30 p.m. Eastern Daylight Time to
discuss its 2011 financial results. Shareholders, prospective
shareholders and analysts are welcome to listen to the call or
attend the webcast. The conference call dial-in number is
877-710-0209. A replay of the call will be available from 7:30 p.m.
on March 15, 2012 until 11:59 p.m. Eastern Time on March 22, 2012.
The dial in number for the replay is 855-859-2056 and the
conference ID is 60436241. Additional information regarding the
fair value of the Company's debt investments can also be found on
the Company's website http://www.kohlbergcapital.com in the
Investor Relations section under Events.
A live audio webcast of the conference call can be accessed via
the Internet, on a listen-only basis on our Company's website
http://www.kohlbergcapital.com in the Investor Relations section
under Events. Please allow extra time, prior to the call, to visit
the site and test your connection or download the necessary
software to listen to the Internet broadcast. The online archive of
the webcast will be available for approximately 90 days on our
website in the Investor Relations section under Events.
About Kohlberg Capital Corporation (KCAP)
Kohlberg Capital Corporation is a publicly traded, internally
managed business development company. Our middle market investment
business originates, structures, finances and manages a portfolio
of term loans, mezzanine investments and selected equity securities
in middle market companies. Our wholly-owned portfolio company,
Katonah Debt Advisors, manages CLO Funds that invest in broadly
syndicated corporate term loans, high-yield bonds and other credit
instruments.
Kohlberg Capital Corporation's filings with the Securities and
Exchange Commission, earnings releases, press releases and other
financial, operational and governance information are available on
the Company's website at http://www.kohlbergcapital.com.
The Kohlberg Capital logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3121
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act. The matters discussed in this press
release, as well as in future oral and written statements by
management of Kohlberg Capital Corporation, that are
forward-looking statements are based on current management
expectations that involve substantial risks and uncertainties which
could cause actual results to differ materially from the results
expressed in, or implied by, these forward-looking statements.
Forward-looking statements relate to future events or our future
financial performance. We generally identify forward-looking
statements by terminology such as "may,'' "will,'' "should,''
"expects,'' "plans,'' "anticipates,'' "could,'' "intends,''
"target,'' "projects,'' "contemplates,'' "believes,'' "estimates,''
"predicts,'' "potential'' or "continue'' or the negative of these
terms or other similar words. Important assumptions include our
ability to originate new investments, achieve certain margins and
levels of profitability, the availability of additional capital,
and the ability to maintain certain debt to asset ratios. In light
of these and other uncertainties, the inclusion of a projection or
forward-looking statement in this press release should not be
regarded as a representation by us that our plans or objectives
will be achieved. Further information about factors that could
affect our financial and other results is included in our filings
with the Securities and Exchange Commission. We do not undertake to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required to be reported under the rules and regulations of the
Securities and Exchange Commission.
KCAP-G
|
KOHLBERG CAPITAL
CORPORATION |
BALANCE
SHEETS |
|
|
As of
December 31, 2011 |
As of
December 31, 2010 |
|
|
|
ASSETS |
|
|
Investments at fair value: |
|
|
Time deposits (cost: 2011 --
$229,152; 2010 -- $720,225) |
$ 229,152 |
$ 720,225 |
Money market account (cost:
2011 -- $31,622,134; 2010 -- $210,311) |
31,622,134 |
210,311 |
Debt securities (cost: 2011
-- $134,311,238; 2010 -- $126,545,510) |
114,673,506 |
91,042,928 |
CLO fund securities managed
by non-affiliates (cost: 2011 -- $12,544,303; 2010 --
$15,690,983) |
2,732,000 |
4,921,000 |
CLO fund securities managed
by affiliate (cost: 2011 -- $52,665,506; 2010 -- $52,589,217) |
43,680,000 |
48,110,000 |
Equity securities (cost: 2011
-- $16,559,610; 2010 -- $13,483,227) |
6,040,895 |
4,688,832 |
Asset manager affiliates
(cost: 2011 -- $44,338,301; 2010 -- $44,532,329) |
40,814,000 |
41,493,000 |
Total Investments at fair
value |
239,791,687 |
191,186,296 |
Cash |
2,555,259 |
10,175,488 |
Restricted cash |
— |
67,023,170 |
Interest and dividends
receivable |
2,548,895 |
2,574,115 |
Receivable for open trades |
— |
7,681,536 |
Accounts Receivable |
859,156 |
851,020 |
Due from affiliates |
3,517 |
— |
Other assets |
2,375,147 |
331,061 |
Total assets |
$ 248,133,661 |
$ 279,822,686 |
|
|
|
LIABILITIES |
|
|
Borrowings |
$ — |
$ 86,746,582 |
Convertible Senior Notes |
60,000,000 |
— |
Accounts payable and accrued
expenses |
3,527,682 |
2,337,767 |
Dividend payable |
4,080,037 |
3,812,670 |
Total liabilities |
$ 67,607,719 |
$ 92,897,019 |
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
Common stock, par value $0.01 per
share, 100,000,000 common shares authorized; 22,992,211 and
22,767,130 common shares issued and outstanding at December 31,
2011 and December 31, 2010, respectively. |
$ 226,648 |
$ 224,274 |
Capital in excess of par
value |
284,571,466 |
282,794,025 |
Accumulated undistributed net
investment income |
1,008,783 |
818,664 |
Accumulated net realized
losses |
(52,802,400) |
(34,325,792) |
Net unrealized depreciation on
investments |
(52,478,555) |
(62,585,504) |
Total stockholders' equity |
$ 180,525,942 |
$ 186,925,667 |
|
|
|
Total liabilities and
stockholders' equity |
$ 248,133,661 |
$ 279,822,686 |
|
|
|
NET ASSET VALUE PER COMMON
SHARE |
$ 7.85 |
$ 8.21 |
|
|
KOHLBERG CAPITAL
CORPORATION |
STATEMENTS OF
OPERATIONS |
|
|
For the Year
Ended December 31, |
|
2011 |
2010 |
2009 |
Investment Income: |
|
|
|
Interest from investments in debt
securities |
$ 9,438,493 |
$ 14,409,069 |
$ 24,157,213 |
Interest from cash and time
deposits |
21,938 |
21,531 |
17,956 |
Dividends from investments in CLO fund
securities managed by non-affiliates |
1,984,177 |
1,837,024 |
1,296,349 |
Dividends from investments in CLO fund
securities managed by affiliate |
12,565,859 |
8,371,007 |
8,025,695 |
Dividends from affiliate asset
manager |
1,910,000 |
4,500,000 |
— |
Capital structuring service fees |
86,057 |
215,233 |
399,338 |
Other Income |
2,000,000 |
— |
— |
Total investment income |
28,006,524 |
29,353,864 |
33,896,551 |
|
|
|
|
Expenses: |
|
|
|
Interest and amortization of debt
issuance costs |
4,588,482 |
7,088,202 |
9,276,563 |
Compensation |
3,907,900 |
3,322,895 |
3,222,604 |
Professional fees |
2,010,253 |
5,411,499 |
1,691,832 |
Insurance |
493,305 |
419,942 |
359,062 |
Administrative and other |
987,381 |
1,214,207 |
990,835 |
Total expenses |
11,987,321 |
17,456,745 |
15,540,896 |
|
|
|
|
Net Investment Income before Income
Tax Expense |
16,019,203 |
11,897,119 |
18,355,655 |
Excise taxes |
— |
— |
(25,000) |
Net Investment Income |
16,019,203 |
11,897,119 |
18,330,655 |
Realized And Unrealized Gains
(Losses) On Investments: |
|
|
|
Net realized gain loss from investment
transactions |
(18,476,608) |
(17,862,984) |
(15,782,121) |
Net change in unrealized appreciation
(depreciation) on: |
|
|
|
Debt securities |
15,864,850 |
9,196,912 |
25,300,586 |
Equity securities |
(1,724,319) |
(1,142,038) |
(7,485,064) |
CLO fund securities managed by
affiliate |
(4,506,289) |
3,079,974 |
12,986,453 |
CLO fund securities managed by
non-affiliates |
957,680 |
894,877 |
(473,907) |
Affiliate asset manager investments |
(484,973) |
(20,352,537) |
1,526,668 |
Net realized and unrealized appreciation
(depreciation) on investments |
(8,369,659) |
(26,185,796) |
16,072,615 |
Net Increase (Decrease) In
Stockholders' Equity Resulting From Operations |
$ 7,649,544 |
$ (14,288,677) |
$ 34,403,270 |
|
|
|
|
Net Increase (Decrease) in Stockholders'
Equity Resulting from Operations per Common Share: |
|
|
|
Basic: |
$ 0.33 |
$ (0.64) |
$ 1.56 |
Diluted: |
$ 0.33 |
$ (0.64) |
$ 1.56 |
Net Investment Income Per Common
Share: |
|
|
|
Basic: |
$ 0.70 |
$ 0.53 |
$ 0.83 |
Diluted: |
$ 0.70 |
$ 0.53 |
$ 0.83 |
Weighted Average Shares of Common Stock
Outstanding—Basic |
22,868,648 |
22,283,088 |
22,105,800 |
Weighted Average Shares of Common Stock
Outstanding—Diluted |
22,880,674 |
22,283,088 |
22,105,800 |
CONTACT: Kohlberg Capital Corporation
Denise Rodriguez, Investor Relations
(212) 455-8300
info@kohlbergcapital.com
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