OHA Investment Corporation (NASDAQ: OHAI) (the “Company”) today
announced its financial results for the quarter ended September 30,
2018. Management will discuss the Company's results summarized
below on a conference call on Thursday, November 15, 2018, at 10:00
a.m. (Eastern Time).
Summary results for the quarter ended
September 30, 2018:Total investment income: $1.9
million, or $0.09 per shareNet investment income: $0.1
million, or $0.00 per shareNet realized and unrealized
losses: $(6.0) million, or $(0.30) per shareNet asset
value: $43.4 million, or $2.15 per shareNew portfolio
investments added during the quarter: $4.1 million (par
value)Fair value of portfolio investments: $69.1
millionInvestment in OCI's Subordinated Note written down $0.39 per
share
Portfolio ActivityThe fair
value of our investment portfolio was $69.1 million at September
30, 2018, decreasing 6% compared to June 30, 2018, primarily driven
by the write-down of our investment in OCI's subordinated note, a
legacy non-energy portfolio company, from $18.0 million to $10.9
million. In the third quarter of 2018, the Company added
investments in two new portfolio companies and an add-on to an
existing OHA investment, totaling $4.1 million, and had
realizations of $1.9 million. The current weighted average yield of
our portfolio based on the cost and fair value of our yielding
investments was 10.1% and 11.8%, respectively, as of September 30,
2018.
In July 2018, we purchased $1.7 million of
second lien term loan in Hayward Industries, Inc. adding to our
$1.4 million position which was previously acquired in July 2017.
The $1.7 million of Hayward second lien term loan was purchased at
a 0.625% premium to par, earns interest payable in cash at a rate
of Libor+8.25%, and matures in August 2025. Subsequent to
this purchase, Hayward redeemed $0.8 million of our second lien
term loan at par, plus a 1% call premium.
In August 2018, we purchased $0.4 million of
second lien term loan in NAVEX Global, Inc., a provider of a
comprehensive ethics and compliance software platform. The NAVEX
second lien term loan was purchased at a 1.0% discount to par,
earns interest payable in cash at a rate of Libor+7.00%, and
matures in September 2026.
Also in August 2018, we purchased $2.0 million
of second lien term loan in CentralSquare Technologies, a provider
of software and services for public, government, and nonprofit
agencies. The CentralSquare second lien term loan was purchased at
a 2.57% discount to par, earns interest payable in cash at a rate
of Libor+7.50%, and matures in August 2026.
We now consider the ATP Litigation matter
resolved in our favor. The deadline for the Statutory Lien
Claimants to file a petition for certiorari with the United States
Supreme Court was September 4, 2018. No appeal was filed.
Accordingly, we consider the matter concluded and the Fifth
Circuit's decision final.
Operating ResultsInvestment
income totaled $1.9 million for the third quarter of 2018,
decreasing 31% compared to $2.8 million in the corresponding
quarter of 2017. The decrease in investment income is primarily due
to reserving $828 thousand of paid-in-kind interest income related
to our investment in OCI's subordinated note in the quarter.
Operating expenses for the third quarter of 2018
were $1.8 million, a decrease of $0.6 million, or 24%, compared to
operating expenses for the third quarter of 2017. Interest expense
and bank fees decreased by 24% to $0.8 million from $1.0 million
compared to the same period in the prior year largely due to a
lower average balance outstanding on our Credit Facility and lower
amortization of debt issuance costs. Management fees decreased by
10% to $397 thousand from $440 thousand due to lower base
management fees as a result of a lower average asset base subject
to the base management fee. Professional fees decreased by 36% to
$254 thousand from $394 thousand primarily due to lower legal and
audit related expenses. Other general and administrative expenses
decreased by 16% to $344 thousand from $410 thousand compared to
same quarter prior year.
The resulting net investment income was $56
thousand or $0.00 per share, for the third quarter of 2018,
compared to $323 thousand, or $0.02 per share, for the third
quarter of 2017.
We recorded net realized and unrealized loss on
investments totaling $(6.0) million or $(0.30) per share, for the
third quarter of 2018, compared to net realized and unrealized loss
of $(8.5) million, or $(0.42) per share, for the third quarter of
2017. In the third quarter of 2018 we wrote down our investment in
OCI's subordinated note, a legacy non-energy portfolio company, to
$10.9 million at September 30, 2018, resulting in an unrealized
loss of $0.39 per share.
Overall, we experienced a net decrease in net
assets resulting from operations of $(5.9) million, or $(0.29) per
share, for the third quarter of 2018. After declaring a quarterly
distribution during the period of $0.02 per share, our net asset
value decreased 13% from $2.46 per share as of June 30, 2018 to
$2.15 per share as of September 30, 2018.
Liquidity and Capital
ResourcesOn September 7, 2018 we entered into an amendment
to extend the maturity date of the MidCap Credit Facility to
September 9, 2019, which can be extended for an additional
six-month period at the Company's option. In connection with the
extension, the Company made a repayment of principal of $7.0
million, reducing the principal amount outstanding on the Credit
Facility to $29.0 million. The $7.0 million principal repayment is
available to the Company to be re-borrowed as a delayed draw term
loan, which is committed until September 9, 2019. In addition, the
interest rate for the borrowings under the Credit Facility was
reduced to Libor plus 4.95% for Eurodollar Loans and prime plus
3.95% for Base Rate Loans. Certain financial covenants were also
amended.
At September 30, 2018, we had cash and cash
equivalents totaling $3.7 million, with $7.0 million available
under our delayed draw term loan.
Review of Strategic AlternativesAs previously
announced, OHAI’s Board of Directors continues to explore a variety
of options that could provide more scale to OHAI. These options
could include, among other things, raising additional capital, a
merger or joint venture with another party, the acquisition of
existing investment portfolios, or other strategic transactions. To
assist OHAI in this process, the Board has retained Keefe, Bruyette
& Woods, Inc. ("KBW") as its financial advisor and investment
banker. While we are actively working with KBW to explore these
options and committed to taking actions that we believe will
maximize shareholder value, there is no assurance that the Company
will execute on any of them. No specific timetable or formal
process has been set and OHAI does not expect to comment further or
periodically provide updates to the market with additional
information unless and until the Company’s Board of Directors has
approved a specific transaction or otherwise deems disclosure
appropriate or necessary.
Webcast / Conference Call at 10:00 a.m.
Eastern Time on November 15, 2018We invite all interested
persons to participate in our conference call on Thursday, November
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 2288127.
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) |
|
|
September 30, 2018 |
|
December 31, 2017 |
|
(unaudited) |
|
|
Assets |
|
|
|
Investments in
portfolio securities at fair value |
|
|
|
Affiliate
investments (cost: $26,028 and $23,263, respectively) |
$ |
10,880 |
|
|
$ |
18,179 |
|
Non-affiliate investments (cost: $81,670 and $132,429,
respectively) |
58,209 |
|
|
46,751 |
|
Total
portfolio investments (cost: $107,698 and $155,692,
respectively) |
69,089 |
|
|
64,930 |
|
Investments in U.S. Treasury Bills at fair value (cost:
$21,993 and $19,994, respectively) |
21,993 |
|
|
19,994 |
|
Total
investments |
91,082 |
|
|
84,924 |
|
Cash and cash
equivalents |
3,718 |
|
|
19,939 |
|
Accounts receivable and
other current assets |
7 |
|
|
— |
|
Interest
receivable |
405 |
|
|
632 |
|
Other prepaid
assets |
25 |
|
|
21 |
|
Deferred tax asset |
593 |
|
|
632 |
|
Total
current assets |
4,748 |
|
|
21,224 |
|
Total assets |
$ |
95,830 |
|
|
$ |
106,148 |
|
|
|
|
|
Liabilities |
|
|
|
Current
liabilities |
|
|
|
Distributions payable |
$ |
403 |
|
|
$ |
403 |
|
Accounts
payable and accrued expenses |
1,117 |
|
|
1,585 |
|
Due to
affiliate |
128 |
|
|
562 |
|
Management and incentive fees payable |
397 |
|
|
426 |
|
Income
taxes payable |
44 |
|
|
24 |
|
Repurchase agreement |
21,552 |
|
|
19,592 |
|
Short-term debt, net of debt issuance costs |
— |
|
|
35,785 |
|
Total
current liabilities |
23,641 |
|
|
58,377 |
|
Long-term debt, net of
debt issuance costs |
28,837 |
|
|
— |
|
Total liabilities |
52,478 |
|
|
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 |
|
Total distributable
earnings (loss) |
(191,221 |
) |
|
(186,802 |
) |
Total net assets |
43,352 |
|
|
47,771 |
|
Total liabilities and net assets |
$ |
95,830 |
|
|
$ |
106,148 |
|
Net asset value
per share |
$ |
2.15 |
|
|
$ |
2.37 |
|
|
|
OHA INVESTMENT
CORPORATIONCONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data) |
|
|
For the three monthsended
September 30, |
|
For the nine months ended September
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Investment
income: |
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
Interest income |
$ |
1,819 |
|
|
$ |
2,744 |
|
|
$ |
6,572 |
|
|
$ |
7,613 |
|
Money
market interest |
50 |
|
|
— |
|
|
190 |
|
|
— |
|
Other
income |
17 |
|
|
7 |
|
|
34 |
|
|
68 |
|
Total investment income |
1,886 |
|
|
2,751 |
|
|
6,796 |
|
|
7,681 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Interest
expense and bank fees |
767 |
|
|
1,012 |
|
|
2,391 |
|
|
2,970 |
|
Management fees |
397 |
|
|
440 |
|
|
1,181 |
|
|
1,506 |
|
Incentive
fees |
6 |
|
|
104 |
|
|
6 |
|
|
104 |
|
Costs
related to strategic alternatives review |
— |
|
|
— |
|
|
75 |
|
|
— |
|
Professional fees |
254 |
|
|
394 |
|
|
1,206 |
|
|
1,066 |
|
Other
general and administrative expenses |
344 |
|
|
410 |
|
|
1,086 |
|
|
1,169 |
|
Director
fees |
61 |
|
|
61 |
|
|
184 |
|
|
184 |
|
Total operating expenses |
1,829 |
|
|
2,421 |
|
|
6,129 |
|
|
6,999 |
|
Waived
incentive fees |
(6 |
) |
|
— |
|
|
(6 |
) |
|
— |
|
Income tax provision,
net |
7 |
|
|
7 |
|
|
45 |
|
|
21 |
|
Net investment
income |
56 |
|
|
323 |
|
|
628 |
|
|
661 |
|
|
|
|
|
|
|
|
|
Net realized capital
gain (loss) on investments, net of tax |
— |
|
|
1,004 |
|
|
(55,952 |
) |
|
(11,560 |
) |
Total net
realized capital gain (loss) on investments |
3 |
|
|
1,004 |
|
|
(55,991 |
) |
|
(11,560 |
) |
|
|
|
|
|
|
|
|
Net unrealized
appreciation (depreciation) on investments, net of tax |
(6,008 |
) |
|
(9,512 |
) |
|
52,154 |
|
|
(21,273 |
) |
Total net
unrealized appreciation (depreciation) on investments |
(6,008 |
) |
|
(9,512 |
) |
|
52,154 |
|
|
(21,273 |
) |
|
|
|
|
|
|
|
|
Net decrease in
net assets resulting from operations |
$ |
(5,949 |
) |
|
$ |
(8,185 |
) |
|
$ |
(3,209 |
) |
|
$ |
(32,172 |
) |
|
|
|
|
|
|
|
|
Net decrease in net
assets resulting from operations per common share |
$ |
(0.29 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.16 |
) |
|
$ |
(1.59 |
) |
|
|
|
|
|
|
|
|
Distributions declared
per common share |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
Weighted average shares
outstanding - basic and diluted |
20,172 |
|
|
20,172 |
|
|
20,172 |
|
|
20,172 |
|
|
|
|
|
|
|
|
|
Per Share
Data |
|
|
|
|
|
|
|
Net asset value,
beginning of period |
$ |
2.46 |
|
|
$ |
2.76 |
|
|
$ |
2.37 |
|
|
$ |
3.99 |
|
|
|
|
|
|
|
|
|
Net investment
income |
— |
|
|
0.02 |
|
|
0.03 |
|
|
0.03 |
|
Net realized and
unrealized loss on investments(1) |
(0.29 |
) |
|
(0.42 |
) |
|
(0.19 |
) |
|
(1.62 |
) |
Net decrease in net
assets resulting from operations |
(0.29 |
) |
|
(0.40 |
) |
|
(0.16 |
) |
|
(1.59 |
) |
Distributions to common
stockholders |
|
|
|
|
|
|
|
Distributions from net investment income |
(0.02 |
) |
|
(0.02 |
) |
|
(0.06 |
) |
|
(0.06 |
) |
Net decrease in net
assets from distributions |
(0.02 |
) |
|
(0.02 |
) |
|
(0.06 |
) |
|
(0.06 |
) |
|
|
|
|
|
|
|
|
Net asset value, end of
period |
$ |
2.15 |
|
|
$ |
2.34 |
|
|
$ |
2.15 |
|
|
$ |
2.34 |
|
(1) May include a balancing amount necessary to
reconcile the change in net asset value per share with other per
share information presented due to rounding.
About OHA Investment CorporationOHA 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 150 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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