OHA Investment Corporation (NASDAQ:OHAI) (the “Company”) today
announced its financial results for the quarter ended March 31,
2018. Management will discuss the Company's results summarized
below on a conference call on Tuesday, May 15, 2018, at 10:00
a.m.(Eastern Time).
Summary results for the quarter ended
March 31, 2018:Total investment income: $2.3
million, or $0.11 per shareNet investment loss: $(0.1)
million, or $(0.01) per shareNet realized and unrealized
gains: $1.8 million, or $0.09 per shareNet asset value:
$49.1 million, or $2.43 per shareNew portfolio investments added
during the quarter: $10.9 million (par value)Fair value of
portfolio investments: $65.0 million
Portfolio ActivityThe fair
value of our investment portfolio was $65.0 million at March 31,
2018, increasing 0.2% compared to December 31, 2017. In the first
quarter of 2018, the Company added investments in six new portfolio
companies, investing $10.8 million, and had realizations totaling
$13.6 million. During the quarter, our energy exposure in our
investment portfolio was reduced to 0% as of the result of the
redemption of our $11.5 million investment in the Talos senior
unsecured notes at par in February. The current weighted average
yield of our portfolio based on the cost and fair value of our
yielding investments was 13.6% and 14.1%, respectively, as of March
31, 2018.
In January 2018, we purchased $0.7 million of
second lien term loan in Safe Fleet, a provider of safety products
for fleet vehicles worldwide. The Safe Fleet second lien term loan
was purchased at a 0.50% discount to par, earns interest payable in
cash at a rate of LIBOR+6.75% with a 1% floor, and matures in
February 2026.
Also in January 2018, we purchased $0.5 million
of second lien term loan in MedRisk LLC., or MedRisk, a leading
provider of managed care services for the workers' compensation
industry and related market sectors. The MedRisk second lien term
loan was purchased at a 0.50% discount to par, earns interest
payable in cash at a rate of LIBOR+6.75%, and matures in December
2025.
In February 2018, our remaining position in
Talos of $11.5 million was redeemed at par. This legacy energy
investment was initiated in February 2013, generated a gross
unlevered internal rate of return of 9.95%, and a return on
investment of 1.30x.
Also in February 2018, we added $5.0 million of
second lien term loan in CVS Holdings, I, LP., or MyEyeDr., a
provider of vision care services, prescription eyeglasses and
sunglasses, and contact lenses. The MyEyeDr. second lien term loan
was purchased at a 0.50% discount to par, earns interest payable in
cash at a rate of LIBOR+6.75% with a 1% floor, and matures in
February 2026.
Also in February 2018, we purchased $0.3 million
of second lien term loan in EaglePicher Technologies LLC., or
EaglePicher, a leading provider of mission-critical power solutions
for high-value applications within the defense, aerospace, and
medical end-markets. The EaglePicher second lien term loan was
purchased at a 0.75% discount to par, earns interest payable in
cash at a rate of LIBOR+7.25%, and matures in March 2026.
In March 2018, we purchased $1.25 million of
second lien term loan in AlliedUniversal HoldCo LLC., or
AlliedUniversal, a provider of contract security services in the
United States. The AlliedUniversal second lien term loan was
purchased at par, earns interest payable in cash at a rate of
LIBOR+8.50% with a 1% floor and matures in July 2023.
Also in March 2018, we purchased $1.6 million of
first lien last out revolver and $0.5 million of first lien last
out term loan to CC Dental Implants Intermediate, or ClearChoice, a
provider of full-mouth dental restoration and dental implant
services throughout the United States. The ClearChoice first lien
last out revolver and term loan were purchased at a 1% discount to
par, earn interest of LIBOR+6.50% with 1% floor, and mature in
January 2023. At March 31, 2018, the funded portion balance of the
ClearChoice revolver was $0.6 million. Both the first lien last out
revolver and term loan are entitled to skim interest on the first
lien first out term loan which will initially increase the interest
rate spread by approximately 28 basis points.
Operating ResultsInvestment
income totaled $2.3 million for the first quarter of 2018,
decreasing 7.0% compared to $2.5 million in the corresponding
quarter of 2017. The decrease was primarily attributable to a
decrease in investment income due to a lower average portfolio
balance partially offset by a higher weighted average yield on our
investments for the three months ended March 31, 2018 compared to
the three months ended March 31, 2017.
Operating expenses for the first quarter of 2018
were $2.4 million, an increase of $0.1 million, or 5.1%, compared
to operating expenses for the first quarter of 2017. Interest
expense and bank fees decreased by 15.5% to $0.8 million from $1.0
million compared to the same period in the prior year largely due
to lower principal balance due to a partial repayment in December
2017. Management fees decreased by 29.8% to $0.4 million from $0.6
million due to lower base management fees as a result of lower
average asset base subject to the base management fee. Professional
fees increased by 137.3% to $0.6 million from $0.3 million
primarily due to an increase in legal fees. Other general and
administrative expenses decreased by 3.1% to $0.4 million from $0.4
million primarily due to a decrease in employee related expenses
compared to the three months ended March 31, 2017.
The resulting net investment loss was $(0.1)
million or $(0.01) per share, for the first quarter of 2018,
compared to $0.2 million, or $0.01 per share, for the first quarter
of 2017. The decrease in net investment income was driven by lower
investment income and an increase in legal fees.
We recorded net realized and unrealized gain on
investments totaling $1.8 million or $0.09 per share, for the first
quarter of 2018, compared to $19.3 million loss, or $(0.96) per
share, for the first quarter of 2017. A significant portion of the
loss recognized in the first quarter of 2017 was the $21.2 million
write-down in Castex, a legacy energy portfolio investment.
Overall, we experienced a net increase in net
assets resulting from operations of $1.7 million, or $0.08 per
share, for the first quarter of 2018. After declaring a quarterly
dividend during the period of $0.02 per share, our net asset value
increased 2.5% from $2.37 per share as of December 31, 2017 to
$2.43 per share as of March 31, 2018.
Liquidity and Capital
ResourcesAt March 31, 2018, we had cash and cash
equivalents totaling $22.2 million. The total amount outstanding
under our credit facility at March 31, 2018 was $36.0 million with
$0.0 million available to draw.
On February 2, 2018, we exercised the option to
extend the Credit Facility to September 9, 2018, as permitted in
our existing Credit Agreement.
On May 7, 2018, the Company's Board of Directors
declared a quarterly distribution of $0.02 per share, payable on
July 9, 2018 to holders of record as of June 30, 2018.
Additional
DisclosureInvestments are considered to be fully realized
when the original investment at the security level has been fully
exited. Internal rate of return, or IRR, is a measure of our
discounted cash flows (inflows and outflows). Specifically, IRR is
the discount rate at which the net present value of all cash flows
is equal to zero. That is, IRR is the discount rate at which the
present value of total capital invested in our investments is equal
to the present value of all realized returns from the investments.
Our IRR calculations are unaudited. Capital invested, with
respect to an investment, represents the aggregate cost of the
investment, net of any upfront fees paid at closing. Realized
returns, with respect to an investment, represents the total cash
received with respect to an investment, including all amortization
payments, interest, dividends, prepayment fees, administrative
fees, amendment fees, accrued interest, and other fees and
proceeds. Gross IRR, with respect to an investment, is calculated
based on the dates that we invested capital and dates we received
distributions. Gross IRR reflects historical results relating
to our past performance and is not necessarily indicative of our
future results. In addition, gross IRR does not reflect the effect
of management fees, expenses, incentive fees or taxes borne, or to
be borne, by us or our stockholders, and would be lower if it
did.
Webcast / Conference Call at 10:00 a.m.
Eastern Time on May 15, 2018We invite all interested
persons to participate in our conference call on Tuesday, May 15,
2018, at 10:00 a.m. (Eastern Time). The dial-in number for the call
is (877) 303-7617. International callers can access the conference
by dialing (760) 666-3609. Conference ID is 7459767. Callers are
encouraged to dial in at least 5-10 minutes prior to the call. The
presentation materials for the call will be accessible on the
Investor Relations page of the Company’s website at
www.ohainvestmentcorporation.com.
OHA INVESTMENT
CORPORATIONCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
|
March 31, 2018 |
|
December 31, 2017 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Investments in
portfolio securities at fair value |
|
|
|
|
Affiliate
investments (cost: $24,267 and $23,263, respectively) |
|
$ |
18,177 |
|
|
$ |
18,179 |
|
Non-affiliate investments (cost: $129,681 and $132,429,
respectively) |
|
46,863 |
|
|
46,751 |
|
Total
portfolio investments (cost: $153,948 and $155,692,
respectively) |
|
65,040 |
|
|
64,930 |
|
Investments in U.S. Treasury Bills at fair value (cost:
$14,996 and $19,994, respectively) |
|
14,996 |
|
|
19,994 |
|
Total
investments |
|
80,036 |
|
|
84,924 |
|
Cash and cash
equivalents |
|
22,235 |
|
|
19,939 |
|
Accounts receivable and
other current assets |
|
6 |
|
|
— |
|
Interest
receivable |
|
457 |
|
|
632 |
|
Due from broker |
|
103 |
|
|
— |
|
Other prepaid
assets |
|
11 |
|
|
21 |
|
Deferred tax asset |
|
591 |
|
|
632 |
|
Total
current assets |
|
23,403 |
|
|
21,224 |
|
Total assets |
|
$ |
103,439 |
|
|
$ |
106,148 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Distributions payable |
|
$ |
403 |
|
|
$ |
403 |
|
Accounts
payable and accrued expenses |
|
1,682 |
|
|
1,585 |
|
Due to
broker |
|
1,250 |
|
|
— |
|
Due to
affiliate |
|
96 |
|
|
562 |
|
Management and incentive fees payable |
|
400 |
|
|
426 |
|
Income
taxes payable |
|
30 |
|
|
24 |
|
Repurchase agreement |
|
14,695 |
|
|
19,592 |
|
Short-term debt, net of debt issuance costs |
|
35,783 |
|
|
35,785 |
|
Total
current liabilities |
|
54,339 |
|
|
58,377 |
|
Long-term debt, net of
debt issuance costs |
|
— |
|
|
— |
|
Total liabilities |
|
54,339 |
|
|
58,377 |
|
Commitments and
contingencies |
|
|
|
|
Net
assets |
|
|
|
|
Common stock, $.001 par
value, 250,000,000 shares authorized; 20,172,392 and 20,172,392
shares issued and outstanding, respectively |
|
20 |
|
|
20 |
|
Paid-in capital in
excess of par |
|
234,553 |
|
|
234,553 |
|
Undistributed net
investment loss |
|
(2,611 |
) |
|
(2,113 |
) |
Undistributed net
realized capital loss |
|
(97,072 |
) |
|
(97,043 |
) |
Net unrealized
depreciation on investments |
|
(85,790 |
) |
|
(87,646 |
) |
Total net assets |
|
49,100 |
|
|
47,771 |
|
Total liabilities and net assets |
|
$ |
103,439 |
|
|
$ |
106,148 |
|
Net asset value
per share |
|
$ |
2.43 |
|
|
$ |
2.37 |
|
|
OHA INVESTMENT
CORPORATIONCONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data)
|
|
For the three monthsended
March 31, |
|
|
2018 |
|
2017 |
Investment
income: |
|
|
|
|
Interest income: |
|
|
|
|
Interest
income |
|
$ |
2,228 |
|
|
$ |
2,404 |
|
Dividend
income |
|
— |
|
|
— |
|
Money
market interest |
|
49 |
|
|
— |
|
Other
income |
|
6 |
|
|
51 |
|
Total investment income |
|
2,283 |
|
|
2,455 |
|
Operating
expenses: |
|
|
|
|
Interest
expense and bank fees |
|
823 |
|
|
974 |
|
Management fees |
|
400 |
|
|
570 |
|
Incentive
fees |
|
1 |
|
|
— |
|
Costs
related to strategic alternatives review |
|
75 |
|
|
— |
|
Professional fees |
|
643 |
|
|
271 |
|
Other
general and administrative expenses |
|
370 |
|
|
382 |
|
Director
fees |
|
61 |
|
|
61 |
|
Total operating expenses |
|
2,373 |
|
|
2,258 |
|
Waived
incentive fees |
|
(1 |
) |
|
— |
|
Income tax provision,
net |
|
6 |
|
|
4 |
|
Net investment
income (loss) |
|
(95 |
) |
|
193 |
|
|
|
|
|
|
Net realized capital
gain (loss) on investments, net of tax |
|
(29 |
) |
|
95 |
|
Total net
realized capital gain (loss) on investments |
|
(29 |
) |
|
95 |
|
|
|
|
|
|
Net unrealized
appreciation (depreciation) on investments, net of tax |
|
1,856 |
|
|
(19,379 |
) |
Total net
unrealized appreciation (depreciation) on investments |
|
1,856 |
|
|
(19,379 |
) |
|
|
|
|
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
1,732 |
|
|
$ |
(19,091 |
) |
|
|
|
|
|
Net increase (decrease)
in net assets resulting from operations per common share |
|
$ |
0.08 |
|
|
$ |
(0.95 |
) |
|
|
|
|
|
Distributions declared
per common share |
|
$ |
0.02 |
|
|
$ |
0.02 |
|
Weighted average shares
outstanding - basic and diluted |
|
20,172 |
|
|
20,172 |
|
|
|
|
|
|
|
|
Per Share
Data |
|
|
|
|
|
|
Net asset value,
beginning of period |
|
$ |
2.37 |
|
|
$ |
3.99 |
|
|
|
|
|
|
Net investment
income |
|
(0.01 |
) |
|
0.01 |
|
Net realized and
unrealized loss on investments |
|
0.09 |
|
|
(0.96 |
) |
Net increase (decrease)
in net assets resulting from operations |
|
0.08 |
|
|
(0.95 |
) |
Distributions to common
stockholders |
|
|
|
|
Distributions from net investment income |
|
(0.02 |
) |
|
(0.02 |
) |
Net decrease in net
assets from distributions |
|
(0.02 |
) |
|
(0.02 |
) |
|
|
|
|
|
Net asset value, end of
period |
|
$ |
2.43 |
|
|
$ |
3.02 |
|
|
|
|
|
|
|
|
About OHA Investment Corporation
OHA Investment Corporation (NASDAQ:OHAI) is a
specialty finance company designed to provide its investors with
current income and capital appreciation. OHAI focuses primarily on
providing creative direct lending solutions to middle market
private companies across industry sectors. OHAI is externally
managed by Oak Hill Advisors, L.P., a leading independent
investment firm (www.oakhilladvisors.com). Oak Hill Advisors has
deep experience in direct lending, having invested over $5 billion
in over 140 direct lending investments over the past 15 years.
Forward-Looking StatementsThis
press release may contain forward-looking statements. We may use
words such as "anticipates," "believes," "intends," "plans,"
"expects," "projects," "estimates," "will," "should," "may" and
similar expressions to identify forward-looking statements. These
forward-looking statements are subject to various risks and
uncertainties. Certain factors could cause actual results and
conditions to differ materially from those projected, including the
uncertainties associated with the timing or likelihood of
transaction closings, changes in interest rates, availability of
transactions, the future operating results of our portfolio
companies, regulatory factors, changes in regional or national
economic conditions and their impact on the industries in which we
invest, other changes in the conditions of the industries in which
we invest and other factors enumerated in our filings with the
Securities and Exchange Commission (the "SEC"). You should not
place undue reliance on such forward-looking statements, which
speak only as of the date they are made. We undertake no obligation
to update our forward-looking statements made herein, unless
required by law.
CONTACTS:Steven T. Wayne –
President and Chief Executive OfficerCory E. Gilbert – Chief
Financial OfficerLisa R. Price - Chief Compliance
OfficerOHAICInvestorRelations@oakhilladvisors.com
For media inquiries, contact Kekst and Company,
(212) 521-4800Jeremy Fielding – Jeremy.Fielding@kekst.comAduke
Thelwell – Aduke.Thelwell@kekst.com
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