NEW YORK, Aug. 3, 2017 /PRNewswire/ -- Alcentra Capital
Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a
provider of customized debt and equity financing solutions
primarily to lower middle-market companies based in the United States, today announced its
financial results for the second quarter of 2017.
Second Quarter 2017 Financial Highlights
- Total investment income of $8.3
million
- Net investment income of $4.8
million, or $0.36 per share
based on weighted average shares of common stock outstanding
- Invested $11.4 million in debt
and equity securities, inclusive of three add-on investments and
one refinancing
- Received proceeds from repayments of $14.5 million
- Equity issuance of 808,161 shares for net proceeds of
$10.8 million
- Paid regular quarterly dividend of $0.34 per share on July 6,
2017
- Net asset value of $181.3
million, or $12.73 per share,
which is down from $13.43 in the
first quarter of 2017;
- Weighted Average Portfolio Company Leverage – 3.68x, which is
flat from last quarter
- Weighted Average Debt Portfolio Yield – 11.6%
Management Commentary
"We are pleased to announce that during the 2nd
quarter Alcentra Capital led a $72
million refinancing for LRI Holding, Inc. (a.k.a. Integrated
Efficiency Solutions), a DFW Capital Partners portfolio company,
and made an incremental investment of $7.3
million in the refinancing. We also provided incremental
capital to NTI Holdings, LLC for a follow-on acquisition.
Both companies are performing in line with expectations at this
juncture.
While the pace of pre-payments outpaced our redeployment of
capital for this quarter with prospective Q2 investments being
pushed into Q3, we have a number of new investments in the pipeline
that we are pursuing that we look to close during Q3. The
number of write-ups also exceeded the number of write-downs,
although we marked down a higher dollar amount of the portfolio.
Total unrealized gains on the portfolio were $3.7 million which was offset by $13.7 million of unrealized losses for a net
unrealized loss of $9.9
million. The largest contributor to the unrealized
loss was a $8.4 million write-down on
our investment in My Alarm Center, LLC. On July 14, 2017, as part of a recapitalization and
change of control transaction of My Alarm Center, LLC, we invested
an additional $1.9 million into new
securities pari-passu with the company's new owner, funds managed
by Oaktree Capital Management, L.P., and converted our existing
debt into various classes of equity securities. Our decision to
invest an additional $1.9 million in
My Alarm was made with a view that with a new owner and
recapitalized balance sheet we may be able to not only realize an
appropriate return, but recoup some portion of our original debt
investment which has now been converted to equity. We also took
additional write-downs of several other companies – largely in the
automotive and for profit education sectors – as we work through
various business and credit related matters with these
borrowers.
Lastly, we continue to maintain a disciplined underwriting
process which can, at times, impact the velocity of our capital
deployment. While economic conditions are steady and the capital
markets continue to show strength, we recognize that we are in the
mid-to-late innings of the current credit cycle and take these
factors into consideration when selecting investments and sectors
which to pursue."
Second Quarter 2017 Financial Results
For the three months ended June 30,
2017, total investment income was $8.3 million, a decrease of $2.3 million over the $10.6 million of total investment income for the
three months ended June 30, 2016.
This decrease was primarily attributable to lower prepayment fee
income in the second quarter of 2017 as opposed to the $1.8 million of prepayment fee income in the
second quarter of 2016. There was also a shift in timing of the
closing of new deals. Interest and PIK income comprised
$7.7 million and other income was
$0.6 million.
Net investment income for the three months ended June 30, 2017 was $4.8
million ($0.36 per share which
is based on average shares outstanding of 13.6 million)
For the three months ended June 30,
2017, net expenses were $3.5
million. Interest and financing expenses for the quarter was
$1.5 million and the base management
fee (net of a $0.2 million waiver)
was $1.1 million. There were no
incentive fees earned for the three months ended June 30, 2017. Professional fees and other
general and administrative expenses totaled $0.5 million for the three months ended
June 30, 2017.
During the three months ended June 30,
2017, we recorded a net realized gain on investments of
$0.03 million. During the
quarter, we also recorded a net change in unrealized depreciation
from portfolio investments of $9.9
million attributable to net unrealized depreciation on our
debt investments, in particular from the write-down of our debt
investment in My Alarm Center, LLC.
As a result of these events, our net decrease in net assets
resulting from operations during the three months ended
June 30, 2017 was $5.2 million.
Portfolio and Investment Activities
As of June 30, 2017, the fair
value of our investment portfolio totaled $271.4 million and consisted of 30 portfolio
companies. The average portfolio investment on a cost basis was
$10.0 million and equity constituted
8.8% of the portfolio. During the second quarter, we invested
$11.4 million in debt and equity
investments, including three add-on investments and one
refinancing, and received proceeds from repayments and
amortizations on investments of $14.5
million. As of June 30, 2017,
the weighted average yield on debt investments was 11.6%.
Add-on investments during the quarter included the
following:
- NTI Holdings, LLC - $3.5 million
additional investments in 1st lien notes and
$0.1 million of equity
- Black Diamond Rentals - $0.3
million investment in tranche C super senior notes
- My Alarm Center, LLC - $0.3
million investment in second lien notes
- LRI Holding, Inc. – $7.2 million
additional investments in 1st lien notes and
$0.1 million of equity
As of June 30, 2017, Alcentra had
two investments, Show Media, Inc. and My Alarm Center, LLC, on
non-accrual status.
Liquidity and Capital Resources
At June 30, 2017, Alcentra had
$3.8 million in cash and cash
equivalents, $35.1 million of
borrowings outstanding on its $135
million senior secured revolving credit facility and
$55.0 million outstanding of Alcentra
Capital InterNotes.
Subsequent Events
- On July 3, 2017, NWN Corporation
repaid its 1st lien debt totaling $3,856,608.
- On July 5, 2017, Superior
Controls, Inc. repaid $825,000 of its
1st lien debt.
- On July 6, 2017, Alcentra paid a
dividend to shareholders of record as of June 30, 2017 of $0.34 per share.
- On July 7, 2017, Superior
Controls, Inc. repaid an additional $175,000 of its 1st lien debt.
- On July 11, 2017, Alcentra funded
an additional $2.0 million in Lugano
Diamonds & Jewelry, Inc.
- On July 14, 2017, Alcentra funded
an additional $1.9 million in My
Alarm Center, LLC as part of the recapitalization and change of
control transaction described above in the Management
Commentary.
Third Quarter 2017 Regular Dividend of $0.34 Per Share Declared
On August 3, 2017, the Company's
Board of Directors declared a regular quarterly dividend of
$0.34 per share for the third quarter
of 2017, which is payable on October 5,
2017 to stockholders of record as of September 30, 2017.
Alcentra has adopted a dividend reinvestment plan ("DRIP") that
provides for reinvestment of dividends on behalf of its
stockholders, unless a stockholder elects to receive cash. As a
result, when the Company declares a cash dividend, stockholders who
have not "opted out" of the DRIP at least three days prior to the
dividend payment date will have their cash dividends automatically
reinvested in additional shares of the Company's common stock.
Those stockholders whose shares are held by a broker or other
financial intermediary may receive dividends in cash by notifying
their broker or other financial intermediary of their election.
Second Quarter 2017 Financial Results Conference Call
Management will host a conference call to discuss the operating
and financial results at 10:30 am ET
on Friday, August 4, 2017. To
participate in the conference call, please dial (844) 832-0218
approximately 10 minutes prior to the call. International callers
should dial (484) 756-4314. Please reference conference ID
63896338#.
A live webcast of the conference call will be available at
http://investors.alcentracapital.com/events-presentations. Please
access the website 15 minutes prior to the start of the call to
download and install any necessary audio software.
An archived webcast replay will be available on the Company's
website until August 4, 2018.
ABOUT ALCENTRA CAPITAL CORPORATION
Alcentra Capital Corporation provides customized debt and equity
financing solutions to lower middle-market companies, which the
Company generally defines as U.S. based companies having revenues
between $10.0 million and $250.0
million. Alcentra's investment objective is to provide
attractive risk-adjusted returns by generating both current income
from our debt investments and capital appreciation from our equity
related investments. Alcentra seeks to partner with business
owners, management teams and financial sponsors by providing
customized financing for change of ownership transactions,
recapitalizations, strategic acquisitions, business expansion and
other growth initiatives.
Alcentra is an externally managed, closed-end, non-diversified
management investment company that has elected to be treated as a
business development company under the Investment Company Act of
1940. In addition, for tax purposes, Alcentra has elected to be
treated as a regulated investment company, under Subchapter M of
the Internal Revenue Code of 1986.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking
statements. Any such statements, other than statements of
historical fact, are based on management's current expectations,
estimates, projections, beliefs and assumptions about the Company,
its current and prospective portfolio investments, and its
industry. These statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, some of
which are beyond the Company's control, difficult to predict and
could cause actual results to differ materially from those expected
or forecasted in such forward-looking statements. Actual
developments and results are likely to vary materially from these
estimates and projections as a result of a number of factors,
including those described from time to time in Alcentra's filings
with the Securities and Exchange Commission. Such statements speak
only as of the time when made, and Alcentra undertakes no
obligation to update any such forward-looking statements, whether
as a result of new information, future events, or otherwise, except
as required by law.
Alcentra Capital
Corporation and Subsidiary
|
|
Consolidated
Statements of Assets and Liabilities
|
|
|
As of
June 30, 2017
(Unaudited)
|
|
As of
December 31, 2016
|
Assets
|
|
Portfolio
investments, at fair value
|
|
Non-controlled,
non-affiliated investments, at fair value (cost of $253,680,500 and
$248,479,039, respectively)
|
|
$
|
235,723,168
|
|
$
|
239,722,117
|
Non-controlled,
affiliated investments, at fair value (cost of $31,005,209 and
$29,734,859, respectively)
|
|
|
20,377,820
|
|
|
22,094,203
|
Controlled, affiliated
investments, at fair value (cost $15,459,015 and $15,122,171,
respectively)
|
|
|
15,269,000
|
|
|
14,456,630
|
Total of portfolio
investments, at fair value (cost $300,144,724 and $293,336,069,
respectively)
|
|
|
271,369,988
|
|
|
276,272,950
|
Cash
|
|
|
3,802,620
|
|
|
3,891,606
|
Dividends and
interest receivable
|
|
|
1,070,251
|
|
|
3,240,640
|
Receivable for
investments sold
|
|
|
470,983
|
|
|
2,139,463
|
Deferred financing
costs
|
|
|
848,054
|
|
|
1,287,807
|
Deferred tax
asset
|
|
|
1,498,264
|
|
|
1,264,811
|
Income tax
asset
|
|
|
795,364
|
|
|
—
|
Prepaid expenses and
other assets
|
|
|
209,428
|
|
|
100,770
|
Total
Assets
|
|
$
|
280,064,952
|
|
$
|
288,198,047
|
|
|
Liabilities
|
|
Credit facility
payable
|
|
$
|
35,133,273
|
|
$
|
39,133,273
|
Notes payable (net of
deferred note offering costs of $1,436,280 and $1,495,062,
respectively)
|
|
|
53,563,720
|
|
|
53,504,938
|
Other accrued
expenses and liabilities
|
|
|
375,037
|
|
|
282,165
|
Directors' fees
payable
|
|
|
73,000
|
|
|
95,000
|
Professional fees
payable
|
|
|
246,602
|
|
|
331,867
|
Interest and credit
facility expense payable
|
|
|
1,132,888
|
|
|
1,008,127
|
Management fee
payable
|
|
|
1,060,125
|
|
|
1,301,591
|
Income-based
incentive fees payable
|
|
|
1,310,651
|
|
|
2,071,661
|
Distributions
payable
|
|
|
4,843,375
|
|
|
4,586,816
|
Unearned structuring
fee revenue
|
|
|
1,050,677
|
|
|
1,175,319
|
Income tax
liability
|
|
|
—
|
|
|
182,699
|
Total
Liabilities
|
|
$
|
98,789,348
|
|
$
|
103,673,456
|
|
|
Commitments and
Contingencies (Note 12)
|
|
|
|
Net
Assets
|
|
Common stock, par
value $0.001 per share (100,000,000 shares authorized, 14,245,220
and 13,451,633 shares issued and outstanding,
respectively)
|
|
|
14,245
|
|
|
13,452
|
Additional paid-in
capital
|
|
|
206,977,643
|
|
|
196,290,348
|
Accumulated net
realized loss
|
|
|
(2,198,897)
|
|
|
(776,548)
|
Undistributed net
investment income
|
|
|
4,914,081
|
|
|
4,890,065
|
Net unrealized
appreciation (depreciation) on investments, net of
benefit/(provision) for taxes of $343,268 and $1,170,393 as of June
30, 2017 and December 31, 2016, respectively
|
|
|
(28,431,468)
|
|
|
(15,892,726)
|
Total Net
Assets
|
|
|
181,275,604
|
|
|
184,524,591
|
Total Liabilities
and Net Assets
|
|
$
|
280,064,952
|
|
$
|
288,198,047
|
|
|
Net Asset Value Per
Share
|
|
$
|
12.73
|
|
$
|
13.72
|
|
|
|
|
|
|
|
|
|
Alcentra Capital
Corporation and Subsidiary
|
|
Consolidated
Statements of Operations
|
|
|
|
|
For the three
months ended June 30, 2017
(Unaudited)
|
|
For the three
months ended June 30, 2016
(Unaudited)
|
|
For the six months
ended June 30, 2017
(Unaudited)
|
|
For the six months
ended June 30, 2016
(Unaudited)
|
|
Investment
Income:
|
|
From non-controlled,
non-affiliated investments:
|
|
Interest income from
portfolio investments
|
$
|
6,187,702
|
|
$
|
5,169,619
|
|
|
$
|
13,192,379
|
|
$
|
10,437,162
|
|
Paid-in-kind interest
income from portfolio investments
|
|
302,190
|
|
|
1,008,525
|
|
|
|
650,382
|
|
|
2,359,613
|
|
Other income from
portfolio investments
|
|
587,782
|
|
|
652,786
|
|
|
|
1,197,747
|
|
|
1,571,450
|
|
Dividend income from
portfolio investments
|
|
29,049
|
|
|
—
|
|
|
|
56,569
|
|
|
—
|
|
From non-controlled,
affiliated investments:
|
|
Interest income from
portfolio investments
|
|
594,972
|
|
|
785,044
|
|
|
|
846,750
|
|
|
1,695,367
|
|
Paid in-kind income
from portfolio investments
|
|
63,345
|
|
|
634,025
|
|
|
|
450,381
|
|
|
1,485,164
|
|
Other income from
portfolio investments
|
|
—
|
|
|
1,845,055
|
|
|
|
—
|
|
|
1,950,937
|
|
From controlled,
affiliated investments:
|
|
Interest income from
portfolio investments
|
|
573,069
|
|
|
382,888
|
|
|
|
978,904
|
|
|
764,635
|
|
Paid in-kind income
from portfolio investments
|
|
—
|
|
|
162,027
|
|
|
|
166,445
|
|
|
322,032
|
|
Other income from
portfolio investments
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Total investment
income
|
|
8,338,109
|
|
|
10,639,969
|
|
|
|
17,539,557
|
|
|
20,586,360
|
|
|
|
Expenses:
|
|
Management
fees
|
|
1,229,648
|
|
|
1,283,763
|
|
|
|
2,479,217
|
|
|
2,572,799
|
|
Income-based
incentive fees
|
|
—
|
|
|
926,158
|
|
|
|
653,911
|
|
|
1,716,885
|
|
Professional
fees
|
|
226,849
|
|
|
372,535
|
|
|
|
493,188
|
|
|
726,537
|
|
Valuation
services
|
|
68,345
|
|
|
71,061
|
|
|
|
169,741
|
|
|
142,047
|
|
Interest and credit
facility expense
|
|
1,513,067
|
|
|
1,334,510
|
|
|
|
3,039,974
|
|
|
2,643,454
|
|
Amortization of
deferred financing costs
|
|
288,048
|
|
|
283,805
|
|
|
|
573,611
|
|
|
548,435
|
|
Directors'
fees
|
|
74,344
|
|
|
84,372
|
|
|
|
142,480
|
|
|
149,295
|
|
Insurance
expense
|
|
60,102
|
|
|
65,771
|
|
|
|
124,583
|
|
|
132,381
|
|
Amortization of
deferred note offering costs
|
|
105,418
|
|
|
—
|
|
|
|
203,828
|
|
|
—
|
|
Other
expenses
|
|
98,437
|
|
|
319,648
|
|
|
|
392,557
|
|
|
451,289
|
|
Total
expenses
|
|
3,664,258
|
|
|
4,741,623
|
|
|
|
8,273,090
|
|
|
9,083,122
|
|
Waiver of management
fees
|
|
(169,524)
|
|
|
—
|
|
|
|
(169,524)
|
|
|
—
|
|
Net
expenses
|
|
3,494,734
|
|
|
4,741,623
|
|
|
|
8,103,566
|
|
|
9,083,122
|
|
Net investment
income
|
|
4,843,375
|
|
|
5,898,346
|
|
|
|
9,435,991
|
|
|
11,503,238
|
|
|
|
Realized Gain
(Loss) and Net Change in Unrealized Appreciation (Depreciation)
From Portfolio Investments
|
|
Net realized gain
(loss) on:
|
|
Non-controlled,
non-affiliated investments
|
|
30,002
|
|
|
23,802
|
|
|
|
(1,019,237)
|
|
|
1,900,440
|
|
Non-controlled,
affiliated investments
|
|
—
|
|
|
1,626,964
|
|
|
|
—
|
|
|
2,021,697
|
|
Controlled, affiliated
investments
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(11,154,495)
|
|
Net realized gain
(loss) from portfolio investments
|
|
30,002
|
|
|
1,650,766
|
|
|
|
(1,019,237)
|
|
|
(7,232,358)
|
|
Net change in
unrealized appreciation (depreciation) on:
|
|
Non-controlled,
non-affiliated investments
|
|
(8,084,209)
|
|
|
(3,575,425)
|
|
|
|
(9,200,410)
|
|
|
(9,560,426)
|
|
Non-controlled,
affiliated investments
|
|
(2,168,452)
|
|
|
(2,228,352)
|
|
|
|
(2,986,733)
|
|
|
351,589
|
|
Controlled, affiliated
investments
|
|
328,527
|
|
|
(62,999)
|
|
|
|
475,526
|
|
|
11,143,915
|
|
Net change in
unrealized appreciation (depreciation) from portfolio
investments
|
|
(9,924,134)
|
|
|
(5,866,776)
|
|
|
|
(11,711,617)
|
|
|
1,935,078
|
|
Benefit/(Provision)
for taxes on unrealized gain (loss) on investments
|
|
(102,309)
|
|
|
(287,167)
|
|
|
|
(827,125)
|
|
|
(497,031)
|
|
Net realized gain
(loss) and net change in unrealized appreciation (depreciation)
from portfolio investments
|
|
(9,996,441)
|
|
|
(4,503,177)
|
|
|
|
(13,557,979)
|
|
|
(5,794,311)
|
|
Net Increase
(Decrease) in Net Assets Resulting from Operations
|
$
|
(5,153,066)
|
|
$
|
1,395,169
|
|
|
$
|
(4,121,988)
|
|
$
|
5,708,927
|
|
|
|
Basic and
diluted:
|
|
Net investment income
per share
|
$
|
0.36
|
|
$
|
0.44
|
|
|
$
|
0.68
|
|
$
|
0.85
|
|
Earnings per
share
|
$
|
(0.38)
|
|
$
|
0.10
|
|
|
$
|
(0.30)
|
|
$
|
0.42
|
|
Weighted Average
Shares of Common Stock Outstanding
|
|
13,612,059
|
|
|
13,500,429
|
|
|
|
13,783,414
|
|
|
13,507,973
|
|
Dividends declared
per common share
|
$
|
0.340
|
|
$
|
0.340
|
|
|
$
|
0.710
|
|
$
|
0.680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/alcentra-capital-corporation-announces-second-quarter-2017-earnings-and-declares-regular-dividend-of-034-per-share-300499608.html
SOURCE Alcentra Capital Corporation