Great Elm Capital Corp. (“we”, “us”, “our” or “GECC”),
(NASDAQ:GECC), today announced its financial results for the
quarter ended June 30, 2017 and filed its quarterly report on Form
10-Q with the U.S. Securities and Exchange Commission.
FINANCIAL HIGHLIGHTS
- Net investment income (“NII”) for the quarter ended June 30,
2017 was approximately $3.5 million, or $0.29 per share, which was
in excess of our declared distribution of $0.083 per share per
month for the same period (approximately 1.16x distribution
coverage).
- In August, the Board of Directors declared a monthly
distribution of $0.083 per share for the fourth quarter of
2017.
- Net assets on June 30, 2017 were approximately $153.7 million.
Net asset value (“NAV”) per share on June 30, 2017 was $13.29, as
compared to $13.59 per share on March 31, 2017. The decrease in NAV
per share is primarily driven by unrealized, mark-to-market
depreciation in our investment portfolio, partially offset by
realized gains and accretion from our stock buy-back and tender
activity to-date.
- We had approximately $1.4 million of net realized gains on
portfolio investments that were monetized during the quarter ended
June 30, 2017, or approximately $0.11 per share, and net unrealized
depreciation of investments of approximately ($7.3) million, or
approximately ($0.60) per share.
- During the quarter ended June 30, 2017, we purchased an
aggregate of 107,031 shares through our stock buy-back program at
an average price of $10.81, utilizing approximately $1.2 million of
our $15.0 million 10b5-1 program and our overall $50 million stock
repurchase program. In addition to our stock buy-back program, we
completed a tender offer for $10 million of stock at $11.50 per
share, purchasing an additional 869,565 shares.
- From the commencement of the stock buy-back program through
August 11, 2017, we have purchased an aggregate of 513,183 shares
at a weighted average price of $11.12 per share, resulting in $5.7
million of cumulative cash paid to repurchase shares. Including the
tender offer, we have purchased an aggregate of 1,382,748 shares
to-date.
- During the quarter ended June 30, 2017, we invested
approximately $21.4 million across four portfolio companies (1),
including one new portfolio investment. During the quarter ended
June 30, 2017, we monetized approximately $37.6 million across 13
portfolio companies (in part or in full). (2)
“We are pleased with the pace and success of
realizations, both from the legacy Full Circle portfolio and the
overall GECC portfolio. We continue to prudently deploy capital
into what we view as a borrower-friendly market, evidenced by the
record covenant-lite issuance and other market trends,” said Peter
A. Reed, Chief Executive Officer of GECC. “We maintain a healthy
amount of dry powder as we anticipate both more volatility in the
leveraged credit market and a more attractive environment to
execute on our special situations, total return approach to
investing in middle market credit.”
PORTFOLIO AND INVESTMENT
ACTIVITY
As of June 30, 2017, we held 20 debt investments
across 17 companies, totaling approximately $131.2 million and
representing 99.7% of invested capital. First lien and / or senior
secured debt investments comprised 99.7% of invested capital as of
the same date.
As of June 30, 2017, the weighted average
current yield on our debt portfolio was approximately 13.17% with
approximately 48.6% of invested debt capital in floating rate
instruments.
During the quarter ended June 30, 2017, we
deployed approximately $21.4 million (1) into new and existing
investments across four companies (one new, three existing). The
weighted average price of the new debt investments was $0.99,
carrying a weighted average current yield of 11.05%. All of these
investments are first lien and / or senior secured investments.
During the quarter ended June 30, 2017, we
monetized 13 investments, in part or in full, for approximately
$37.6 million(2), at a weighted average current yield of 10.19%,
including the complete exit of one investment acquired from Full
Circle, at a slight gain. Our weighted average realization price
was $1.02.
CONSOLIDATED RESULTS OF
OPERATIONS
Total investment income for the quarter ended
June 30, 2017 was approximately $6.2 million, or $0.52 per share.
Net expenses for the period ended June 30, 2017 were approximately
$2.8 million, or $0.24 per share.
Net realized gains for the quarter ended June
30, 2017 were approximately $1.4 million, or $0.11 per share. Net
unrealized depreciation from investments for the quarter ended June
30, 2017 was approximately ($7.3) million, or ($0.60) per
share.
LIQUIDITY AND CAPITAL
RESOURCES
As of June 30, 2017, available liquidity from
cash and money market investments was approximately $58.9 million,
comprised of cash and cash equivalents, including investments in
money market mutual funds.
Total debt outstanding as of June 30, 2017 was
approximately $33.7 million, comprised entirely of the 8.25% notes
due June 30, 2020 (NASDAQ:FULLL).
RECENT DEVELOPMENTS
Distributions:
Our board of directors declared the monthly
distributions for the fourth quarter of 2017 at $0.083 per share.
The schedule of distribution payments is as follows:
Month |
Rate |
Record Date |
Payable Date |
October |
$ |
0.083 |
October 31, 2017 |
November 15, 2017 |
November |
$ |
0.083 |
November 30, 2017 |
December 15, 2017 |
December |
$ |
0.083 |
December 29, 2017 |
January 16, 2018 |
Our distribution policy has been designed to set
a base distribution rate that is well-covered by NII that will be
supplemented by special distributions from NII in excess of the
declared distribution and as catalyst-driven investments are
realized.(3)
Portfolio Investments:
In July 2017, we purchased $5.0 million par
value of Tru Taj, LLC bonds at a price of approximately 97% of par
value. Such debt security bears interest at a rate of 12.00% and
matures August 15, 2021.
In July and August, we purchased an additional
$5.0 million par value of the loan to Commercial Barge Line Company
at an average price of approximately 88% of par value. Such
debt security bears interest at a rate of LIBOR plus 8.75%, which
was 9.79% as of June 30, 2017, and matures on November 12,
2020. Including these additional acquisitions, we now have a
position size of approximately $6.9 million par value of the
loan.
Capitalization:
On July 31, 2017, we filed a registration
statement with the SEC for a baby bond offering to commence as
early as September. The intended use of proceeds is to pay off the
currently callable 8.25% notes of 2020 (NASDAQ:FULLL) that were
assumed in the merger with Full Circle and to make new investments
consistent with our investment objectives.
CONFERENCE CALL AND WEBCAST
Great Elm Capital Corp. will host a conference
call and webcast on Friday, August 18, 2017 at 10:00 a.m. New York
City time to discuss its second quarter financial results. All
interested parties are invited to participate in the conference
call by dialing +1 (844) 820-8297; international
callers should dial +1 (661) 378-9758.
Participants should enter the Conference ID 65120927 when asked.
For a copy of the slide presentation that will be referenced during
the course of our conference call, please visit
http://www.investor.greatelmcc.com/events-and-presentations/presentations.
Additionally, the conference call will be webcast simultaneously at
http://edge.media-server.com/m/p/y3rkhz84.
About Great Elm Capital
Corp.
Great Elm Capital Corp. is an externally
managed, specialty finance company focused on investing in debt
instruments of middle market companies. GECC elected to be
regulated as a business development company under the Investment
Company Act of 1940, as amended. GECC’s investment objective is to
generate both current income and capital appreciation, while
seeking to protect against risk of permanent capital loss. GECC
focuses on special situations and catalyst-driven investments as it
seeks to generate attractive risk-adjusted returns.
Cautionary Statement Regarding
Forward-Looking Statements
Statements in this communication that are not
historical facts are “forward-looking” statements within the
meaning of the federal securities laws. These statements are often,
but not always, made through the use of words or phrases such as
“expect,” “anticipate,” “should,” “will,” “estimate,” “designed,”
“seek,” “potential,” “continue,” “upside,” and “potential,” and
similar expressions. All such forward-looking statements involve
estimates and assumptions that are subject to risks, uncertainties
and other factors that could cause actual results to differ
materially from the results expressed in the statements. Among the
key factors that could cause actual results to differ materially
from those projected in the forward-looking statements are the
following: conditions in the credit markets, the price of GECC
common stock, performance of GECC’s portfolio and investment
manager. Information concerning these and other factors can be
found in GECC’s Form 10-K and other reports filed with the SEC.
GECC assumes no obligation to, and expressly disclaims any duty to,
update any forward-looking statements contained in this
communication or to conform prior statements to actual results or
revised expectations except as required by law. Readers are
cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof.
This press release does not constitute an offer
of any securities for sale.
Endnotes:
(1) This includes new deals, additional fundings
(inclusive of those on revolving credit facilities), refinancings
and PIK interest. Amounts included herein are exclusive of
transactions in short-term securities, including United States
Treasury Bills and money market mutual funds.
(2) This includes scheduled principal payments,
prepayments, sales and repayments (inclusive of those on revolving
credit facilities). Amounts included herein are exclusive of
transactions in short-term securities, including United States
Treasury Bills and money market mutual funds.
(3) There can be no assurance that any such
supplemental amounts will be received or realized, or even if
received and realized, distributed or available for distribution.
Past distributions are not indicative of future distributions.
Distributions are declared by the Board out of the funds legally
available therefor. Though GECC intends to pay distributions
monthly, it is not obligated to do so.
|
|
|
|
|
|
|
|
|
June 30,
2017 |
|
|
December 31,
2016 |
|
Assets |
|
(unaudited) |
|
|
|
|
|
Non-affiliated,
non-control investments, at fair value (amortized cost of
$131,294 and $163,809, respectively) |
|
$ |
111,852 |
|
|
$ |
150,323 |
|
Non-affiliated,
non-control short term investments, at fair value (amortized
cost of $73,943 and $0, respectively) |
|
|
73,941 |
|
|
|
— |
|
Affiliated investments,
at fair value (amortized cost of $4,240 and $4,255,
respectively) |
|
|
2,220 |
|
|
|
4,286 |
|
Control investments, at
fair value (amortized cost of $19,571 and $68,
respectively) |
|
|
17,558 |
|
|
|
68 |
|
Total investments |
|
|
205,571 |
|
|
|
154,677 |
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents* |
|
|
4,869 |
|
|
|
66,782 |
|
Receivable for
investments sold |
|
|
— |
|
|
|
9,406 |
|
Interest
receivable |
|
|
2,952 |
|
|
|
4,338 |
|
Dividends
receivable |
|
|
36 |
|
|
|
— |
|
Principal
receivable |
|
|
— |
|
|
|
786 |
|
Due from portfolio
company |
|
|
82 |
|
|
|
312 |
|
Deposit at broker |
|
|
103 |
|
|
|
56 |
|
Due from
affiliates |
|
|
— |
|
|
|
80 |
|
Prepaid expenses and
other assets |
|
|
134 |
|
|
|
107 |
|
Total
assets |
|
$ |
213,747 |
|
|
$ |
236,544 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Notes payable 8.25% due
June 30, 2020 (including unamortized premium of $763 and $888
at June 30, 2017 and December 31, 2016, respectively)
|
|
$ |
34,408 |
|
|
$ |
34,534 |
|
Payable for investments
purchased |
|
|
19,953 |
|
|
|
21,817 |
|
Distributions
payable |
|
|
960 |
|
|
|
2,123 |
|
Due to affiliates |
|
|
3,881 |
|
|
|
3,423 |
|
Accrued expenses and
other liabilities |
|
|
843 |
|
|
|
1,663 |
|
Total
liabilities |
|
$ |
60,045 |
|
|
$ |
63,560 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies (Refer to Note 6 in Form 10-Q) |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
|
|
Common stock, par value
$0.01 per share (100,000,000 shares authorized, 11,568,555
and 12,790,880 shares issued and outstanding at June 30, 2017
and December 31, 2016, respectively) |
|
$ |
116 |
|
|
$ |
128 |
|
Additional paid-in
capital |
|
|
205,233 |
|
|
|
219,317 |
|
Accumulated net
realized losses |
|
|
(30,980 |
) |
|
|
(34,341 |
) |
Undistributed net
investment income |
|
|
2,809 |
|
|
|
1,335 |
|
Net unrealized
depreciation on investments |
|
|
(23,476 |
) |
|
|
(13,455 |
) |
Total net
assets |
|
$ |
153,702 |
|
|
$ |
172,984 |
|
Total
liabilities and net assets |
|
$ |
213,747 |
|
|
$ |
236,544 |
|
Net asset value
per share |
|
$ |
13.29 |
|
|
$ |
13.52 |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
June 30, |
|
|
For the Six Months Ended
June 30, |
|
|
|
2017 |
|
|
2017 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
Investment
Income: |
|
|
|
|
|
|
|
|
Interest income
from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
5,761 |
|
|
$ |
12,042 |
|
Affiliated investments |
|
|
(90 |
) |
|
|
48 |
|
Controlled investments |
|
|
667 |
|
|
|
874 |
|
Total interest
income |
|
|
6,138 |
|
|
|
12,964 |
|
Dividend income from
non-affiliated, non-controlled investments |
|
|
85 |
|
|
|
131 |
|
Other income |
|
|
14 |
|
|
|
457 |
|
Total investment income |
|
|
6,237 |
|
|
|
13,552 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Management fees |
|
|
546 |
|
|
|
1,139 |
|
Incentive fees |
|
|
871 |
|
|
|
1,894 |
|
Administration
fees |
|
|
272 |
|
|
|
767 |
|
Custody fees |
|
|
11 |
|
|
|
24 |
|
Directors’ fees |
|
|
21 |
|
|
|
48 |
|
Professional
services |
|
|
176 |
|
|
|
507 |
|
Interest expense |
|
|
631 |
|
|
|
1,262 |
|
Other expenses |
|
|
156 |
|
|
|
269 |
|
Total
expenses |
|
|
2,684 |
|
|
|
5,910 |
|
Accrued
administration fee waiver |
|
|
75 |
|
|
|
70 |
|
Net expenses |
|
|
2,759 |
|
|
|
5,980 |
|
Net investment
income |
|
|
3,478 |
|
|
|
7,572 |
|
|
|
|
|
|
|
|
|
|
Net realized
and unrealized gains (losses) on investment transactions:
|
|
|
|
|
|
|
|
|
Net realized
gain/(loss) from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
1,381 |
|
|
|
3,361 |
|
Affiliated investments |
|
|
— |
|
|
|
— |
|
Controlled investments |
|
|
— |
|
|
|
— |
|
Total net realized
gain/(loss) |
|
|
1,381 |
|
|
|
3,361 |
|
Net change in
unrealized appreciation (depreciation) from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
(5,247 |
) |
|
|
(5,990 |
) |
Affiliated investments |
|
|
(429 |
) |
|
|
(2,020 |
) |
Controlled investments |
|
|
(1,650 |
) |
|
|
(2,011 |
) |
Total net change in
unrealized appreciation (depreciation) |
|
|
(7,326 |
) |
|
|
(10,021 |
) |
Net realized and
unrealized gains (losses) |
|
|
(5,945 |
) |
|
|
(6,660 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
$ |
(2,467 |
) |
|
$ |
912 |
|
|
|
|
|
|
|
|
|
|
Net investment income
per share (basic and diluted): |
|
$ |
0.29 |
|
|
$ |
0.61 |
|
Earnings per share
(basic and diluted): |
|
$ |
(0.20 |
) |
|
$ |
0.07 |
|
Weighted average shares
outstanding: |
|
|
12,000,180 |
|
|
|
12,313,508 |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
June 30, |
|
|
|
2017 |
|
Per Share
Data:(1) |
|
|
|
|
Net asset value,
beginning of period |
|
$ |
13.59 |
|
Net investment
income |
|
|
0.29 |
|
Net realized gains |
|
|
0.11 |
|
Net unrealized
losses |
|
|
(0.60 |
) |
Net increase in net
assets resulting from operations |
|
|
(0.20 |
) |
Accretion from share
buybacks |
|
|
0.15 |
|
Distributions declared
from net investment income(2) |
|
|
(0.25 |
) |
Distributions declared
from net realized gains(2) |
|
|
0.00 |
|
Net decrease resulting
from distributions to common stockholders |
|
|
(0.25 |
) |
Net asset value, end of
period |
|
$ |
13.29 |
|
|
|
For the Six Months Ended
June 30, |
|
|
|
2017 |
|
Per Share
Data:(1) |
|
|
|
|
Net asset value,
beginning of period |
|
$ |
13.52 |
|
Net investment
income |
|
|
0.61 |
|
Net realized gains |
|
|
0.27 |
|
Net unrealized
losses |
|
|
(0.81 |
) |
Net increase in net
assets resulting from operations |
|
|
0.07 |
|
Accretion from share
buybacks |
|
|
0.20 |
|
Distributions declared
from net investment income(2) |
|
|
(0.50 |
) |
Distributions declared
from net realized gains(2) |
|
|
0.00 |
|
Net decrease resulting
from distributions to common stockholders |
|
|
(0.50 |
) |
Net asset value, end of
period |
|
$ |
13.29 |
|
|
|
* The June 30, 2017 cash and cash equivalents figure does not
include investments held in money market funds. Including money
market funds, there was approximately $58.9 million in available
liquidity as of June 30, 2017.
(1) The per share data was derived by using
the weighted average shares outstanding during the period.
(2) The per share data for distributions
declared reflects the actual amount of distributions of record per
share for the period.
Media & Investor Contact:
Meaghan K. Mahoney
Senior Vice President
+1 (617) 375-3006
investorrelations@greatelmcap.com
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