PennantPark Floating Rate Capital Ltd. (the “Company”) (NASDAQ:
PFLT) (TASE: PFLT) announced today that it issued an open
letter to its stakeholders regarding a business update amid the
COVID-19 pandemic.
The full text of the letter follows:
Dear Stakeholders:
We felt it important to provide an update on
PennantPark Floating Rate Capital Ltd. (“PFLT,” “we,” “us” or
“our”) in light of the massive economic and capital markets
disruptions caused by COVID-19. First and foremost, we hope
that you are safe and healthy in these difficult times.
Fortunately, our entire PennantPark team is safe and healthy and
has been successfully working remotely from home for the past three
weeks. Our contingency planning has functioned effectively and as
intended. As a result, the transition of our entire team to remote
work has been smooth, and we are currently fully capable of
maintaining our normal functionality to complete our operational
requirements. We have also taken several measures to maintain
the strong culture that we cherish despite the distance. We
have always believed in open and transparent communication with all
of our stakeholders and remain committed to those principles today.
While it is too early to quantify the impact of COVID-19 on PFLT,
we want to take this opportunity to share certain observations as
we navigate through these unprecedented circumstances.
We have an experienced investment team that has
managed through multiple economic cycles, including the Global
Financial Crisis. Our principal focus has been on our
existing portfolio. Because we believe in proactive
communication, we have been in frequent dialogue with our portfolio
companies’ management teams and their sponsor owners over the last
month. In addition, we have strong analytics around the portfolio,
so that we can understand and assess the likely impacts of the
ongoing disruption caused by COVID-19 on our portfolio companies,
as well as their ability to withstand those likely impacts.
We have built resilience into the PFLT portfolio
through a disciplined, diversified investment strategy. The
PFLT portfolio includes investments in 102 companies, representing
42 different industries. Our value-oriented investment
philosophy focuses on preserving capital and ensuring that our
investments have an appropriate return profile in relation to risk.
We have positioned our portfolio away from direct exposure to areas
of the economy that we believe, based on currently available
information, are likely to be most impacted by the COVID-19
pandemic. In particular, we have generally avoided
direct investments in more cyclical industries that have been hard
hit by the spread of COVID-19, including restaurants, retail,
apparel, and airlines. In addition, we have no direct
investments in energy or oil and gas related companies.
Nevertheless, there are some companies in our portfolio that have
seen a significant drop in revenues during March given the impact
of COVID-19, such as those in the events and gaming industries, and
we know that others are likely to suffer declines as economic
disruptions continue. As of December 31, 2019, gaming
represented approximately 8.3% of the portfolio and its
subsidiaries, across seven investments. Fortunately, our
largest investment in the gaming industry was substantially
refinanced in the last 10 days, and two other portfolio companies
are undertaking construction-phase projects which provide them with
interest reserves into mid-2021. On the positive side, many of
our portfolio companies are in businesses such as government
services, defense contracting, software/communications, and
cybersecurity, which collectively comprise a substantial portion of
our portfolio, and which we believe, based on current
circumstances, will be less impacted by COVID-19 and its associated
economic disruptions.
Our portfolio is also made more robust by our
investment positioning at the top of our portfolio companies’
capital structure -- fully 89% of our investments are first lien,
senior secured loans made at reasonable leverage ratios, with
leverage through our security of approximately 4.2x as of December
31, 2019. Moreover, we have focused our lending activity on
the U.S. middle market, which we believe represents a highly
dynamic segment of the economy and benefits from terms, structures
and yields that are more attractive to lenders than those of larger
companies.
PFLT has a strong capital structure with
diversified funding sources and no near-term maturities, including
a $520 million revolving credit facility maturing in 2023 with a
syndicate of 11 banks ($336 million drawn as of December 31, 2019);
$139 million unsecured senior notes maturing in 2023; and $228
million of asset-backed debt associated with PennantPark CLO I,
Ltd. due 2031. We have been in consistent dialogue with our lenders
since the beginning of the COVID-19 disruption and are thankful for
their support.
Based on all of these factors, we believe PFLT
is well positioned to confront the COVID-19 downturn and to prosper
when the economy eventually recovers. Our management team has
sought to align interests closely with investors. As previously
disclosed, since mid-February, officers, directors and employees
have purchased over 500,000 additional shares of PFLT common
stock.
In closing, we want you to know our deeply
experienced team is working tirelessly to protect principal and
maximize value in the portfolio for all of our stakeholders.
Sincerely,
Art PennChief Executive Officer
ABOUT PENNANTPARK FLOATING RATE CAPITAL LTD.
PennantPark Floating Rate Capital Ltd. is a
business development company which primarily invests in U.S.
middle-market private companies in the form of floating rate senior
secured loans, including first lien secured debt, second lien
secured debt and subordinated debt. From time to time, the Company
may also invest in equity investments. PennantPark Floating Rate
Capital Ltd. is managed by PennantPark Investment Advisers,
LLC.
ABOUT PENNANTPARK INVESTMENT ADVISERS, LLC
PennantPark Investment Advisers, LLC is a
leading middle market credit platform, which has approximately $3.8
billion of assets under management. Since its inception in
2007, PennantPark Investment Advisers, LLC has provided investors
access to middle market credit by offering private equity firms and
their portfolio companies as well as other middle-market borrowers
a comprehensive range of creative and flexible financing
solutions. PennantPark Investment Advisers, LLC is
headquartered in New York and has offices in Chicago, Houston and
Los Angeles.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. You should understand that under Section
27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the
Exchange Act the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995 do not apply to forward-looking
statements made in periodic reports PennantPark Floating Rate
Capital Ltd. files under the Exchange Act. All statements
other than statements of historical facts included in this press
release are forward-looking statements and are not guarantees of
future performance or results and involve a number of risks and
uncertainties. Actual results may differ materially from those in
the forward-looking statements as a result of a number of factors,
including those described from time to time in filings with the
Securities and Exchange Commission. PennantPark Floating Rate
Capital Ltd. undertakes no duty to update any forward-looking
statement made herein. You should not place undue influence on such
forward-looking statements as such statements speak only as of the
date on which they are made.
The information contained herein is based on
current tax laws, which may change in the future. The Company
cannot be held responsible for any direct or incidental loss
resulting from applying any of the information provided in this
publication or from any other source mentioned. The information
provided in this material does not constitute any specific legal,
tax or accounting advice. Please consult with qualified
professionals for this type of advice.
CONTACT:Aviv EfratPennantPark Floating Rate Capital Ltd.(212)
905-1000www.pennantpark.com
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