CMFN CM Financial Inc

CM Finance Inc (NASDAQ:CMFN) (“CMFN” or “the Company”) announced its financial results for its fiscal first quarter ended September 30, 2017.

HIGHLIGHTS

• The weighted average yield on debt investments, at cost, increased to 10.67% from 9.73% as of June 30, 2017
• CMFN made investments in three new portfolio companies during the quarter with a total cost of $46.9mm and a weighted average yield of 11.70% 
• Three investments were fully realized during the quarter with a weighted average IRR of 10.52%
• Net asset value (“NAV”) per share declined by 0.2% to $12.39, compared to $12.41 as of June 30, 2017

Portfolio results, as of September 30, 2017:
Total assets	$311.2mm
Investment portfolio, at fair value	$271.9mm
Net assets	$169.7mm
Weighted average yield on debt investments, at cost	10.67%
Net asset value per share	$12.39
Portfolio activity in the current quarter:
Number of new investments	3
Total capital invested	$46.9mm
Proceeds from repayments, sales, and amortization	$30.5mm
Number of portfolio companies, end of period	23
Net investment income (NII)	$3.0mm
Net investment income per share	$0.22
Net increase in net assets from operations	$3.1mm
Net increase in net assets from operations per share	$0.23
Quarterly per share distribution paid on October 5, 2017	$0.25

Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said “We have had continued success by focusing on developing direct lending opportunities and club relationships which accounted for two of our three new investments during the quarter, as well as an additional club investment after quarter-end. Direct and club lending enables us to focus on appropriate structures to protect our capital as well as enabling us to invest capital at more attractive yields than are generally available in the syndicated markets.” 

On November 7, 2017, the Company’s Board of Directors declared a distribution for the quarter ending December 31, 2017 of $0.25 per share, payable on January 4, 2018, to shareholders of record as of December 15, 2017. This represents a 11.63% yield on our $8.60 share price as of the close on November 6.  Distributions may include net investment income, capital gains and/or return of capital. The tax status of distributions will be determined at the end of the taxable year.

Portfolio and Investment ActivitiesDuring the quarter, we made investments in three new portfolio companies.  Two of three investments were 1st lien term loans and one was a 2nd lien term loan. These three investments totaled $46.9mm at cost and were made at a weighted average yield of 11.70%.  We also realized $29.2mm of repayments, sales, and amortization, primarily related to the repayment of our 2nd lien loan to Transaction Network Services and our sales of Melissa & Doug and YRC Worldwide.  Realized and unrealized gains accounted for an increase in our net investments of approximately $0.1mm, or $0.01 per share.  The total net increase in net assets resulting from operations for the quarter was $3.1mm, or $.23 per share. 

As of September 30, 2017, our investment portfolio consisted of investments in 23 portfolio companies, of which 51.0% were first lien investments, 44.6% were second lien investments and 4.4% were equity investments.  Our debt portfolio consisted of 96.0% floating rate investments.  As of September 30, 2017, we had one loan non-accrual status representing 2.8% of our portfolio at fair value.

Capital ResourcesAs of September 30, 2017, we had $14.5 mm in cash, $16.1mm in restricted cash and $22.7mm of capacity under our revolving credit facility with Citibank.

Subsequent EventsSubsequent to quarter end, the Company invested $8.0 mm in one new portfolio company and received $7.0 mm in repayments and sales proceeds.

CM Finance Inc and subsidiariesConsolidated Statements of Assets and Liabilities

Assets		September 30, 2017(Unaudited)				June 30, 2017
Non-controlled, non-affiliated investments, at fair value (amortized cost of $280,174,244 and $270,467,740, respectively)		$	271,862,946			$	254,907,171
Derivatives, at fair value (cost $0 and $0, respectively)			6,550,448				5,830,501
Cash			14,537,986				10,646,697
Cash, restricted			16,143,582				22,616,177
Interest receivable			1,702,662				1,627,774
Other receivable			219,914				-
Deferred offering costs			37,395				186,513
Prepaid expenses and other assets			140,751				219,045
Total Assets			311,195,684				296,033,878
Liabilities
Notes Payable:
Term loan			102,000,000				102,000,000
Revolving credit facility			27,260,000				-
Deferred debt issuance costs			(1,487,038	)			(578,074	)
Notes Payable, net			127,772,962				101,421,926
Base management fees payable			1,153,880				1,132,391
Income-based incentive fees payable			240,538				274,073
Derivatives, at fair value (cost $0 and $0, respectively)			6,550,448				5,830,501
Distribution payable			3,422,432				3,422,307
Payable for investments purchased			-				12,490,000
Deferred financing costs payable			1,654,667				620,500
Interest payable			232,555				205,027
Directors’ fees payable			97,043				100,000
Accrued expenses and other liabilities			397,948				589,041
Total Liabilities			141,522,473				126,085,766
Commitments and Contingencies (Note 6)
Net Assets
Common Stock, par value $0.001 per share (100,000,000 shares authorized, 13,690,480 and 13,689,221 shares issued and outstanding, respectively)			13,689				13,689
Additional paid-in capital			199,077,936				199,066,123
Accumulated net realized loss			(18,612,517	)			(11,231,827	)
Distributions in excess of net investment income			(2,745,559	)			(2,339,304	)
Net unrealized depreciation on investments			(8,060,338	)			(15,560,569	)
Total Net Assets			169,673,211				169,948,112
Total Liabilities and Net Assets			311,195,684				296,033,878
Net Asset Value Per Share		$	12.39			$	12.41

CM Finance Inc and subsidiariesConsolidated Statements of Operations (Unaudited)

		For the three months ended September 30,
Investment Income:		2017				2016
Interest income		$	6,426,053			$	7,368,382
Payment in-kind interest income			292,478				—
Other fee Income			9,879				216,467
Total investment income			6,728,410				7,584,849
Expenses:
Base management fees			1,153,880				1,211,535
Interest expense			1,437,829				991,390
Professional fees			209,041				194,589
Offering expense			186,513				—
Allocation of administrative costs from advisor			127,229				268,242
Amortization of deferred debt issuance costs			125,202				364,196
Directors’ fees			99,667				100,000
Custodian and administrator fees			91,996				108,689
Insurance expense			85,225				92,560
Other expenses			195,652				282,845
Total expenses			3,712,234				3,614,046
Waiver of income-based incentive fees			—				—
Net expenses			3,712,234				3,614,046
Net Investment Income			3,016,176				3,970,803
Net Realized and Unrealized Gain/(Loss) on Investments
Net realized loss from investments			(7,380,690	)			(8,028,289	)
Net change in unrealized appreciation in value of investments			7,500,231				8,362,443
Net realized and unrealized gain on investments			119,541				334,154
Net Increase in Net Assets Resulting from Operations		$	3,135,717			$	4,304,957
Basic and diluted
Net investment income per share		$	0.22			$	0.29
Net increase in net assets resulting from operations per share		$	0.23			$	0.31
Weighted Average Shares of Common Stock Outstanding			13,689,885				13,680,817
Distributions paid per common share		$	0.2500			$	0.3516

About CM Finance Inc

The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940.  The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50mm and earnings before interest, taxes, depreciation and amortization of at least $15mm. The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com. 

Forward-Looking Statements

Statements included herein may contain “forward-looking statements,” which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release. 

ContactsCM Finance IncInvestor Relations Email: investorrelations@cmipllc.comPhone: 212-257-5199