Great Elm Capital Corp. (“we,” “us,” “our” or “GECC”), (NASDAQ:
GECC), today announced its financial results for the quarter ended
September 30, 2019.
FINANCIAL HIGHLIGHTS
- Net investment income (“NII”) for the quarter ended September
30, 2019 was approximately $2.6 million, or $0.26 per share,
equating to greater than 1.0x distribution coverage.
- In November 2019, the Board of Directors (the “Board”) set
monthly distributions of $0.083 per share for the first quarter of
2020, representing a yield of approximately 11.0% on September 30,
2019 net asset value (“NAV”).
- Net assets on September 30, 2019 were approximately $91.5
million. NAV per share on September 30, 2019 was $9.09, as compared
to NAV per share of $10.30 on June 30, 2019, driven primarily by
unrealized losses in certain of our investments
- We had approximately $0.3 million of net realized gains during
the quarter ended September 30, 2019, or approximately $0.02 per
share, and net unrealized depreciation of approximately $12.5
million, or approximately $1.24 per share.
- Unrealized depreciation in the Avanti Communications Group, plc
investments accounted for $4.1 million of the $12.5 million net
unrealized loss during the quarter
- During the quarter ended September 30, 2019, we invested
approximately $46.1 million across 15 investments(1), including
four new issuers. During the quarter ended September 30, 2019, we
monetized (in part or in full) approximately $44.6 million across
16 investments(2).
- Strong performance from our investment in the equity interests
of Prestige Capital Finance, LLC led to significant NII generation
in our second full quarter of ownership
- We issued $45 million of 6.50% senior unsecured bonds due June
2024 during the second and third quarter (NASDAQ: GECCN).
“I’m pleased to report that NII covered our base distribution
again this quarter,” remarked Peter A. Reed, GECC’s Chief Executive
Officer. “Despite volatility in the fair value of certain of our
investments, our team continues to be encouraged by the portfolio’s
underlying credit quality, outlook and increasing diversity.”
PORTFOLIO AND INVESTMENT
ACTIVITY
As of September 30, 2019, we held 29 debt
investments, totaling approximately $168.3 million and representing
86.4% of the fair market value of our total investments. First lien
and/or secured debt investments comprised 100.0% of the fair market
value of our debt investments. As of the same date, we held seven
equity investments, totaling approximately $26.5 million and
representing 13.6% of the fair market value of our total
investments.
As of September 30, 2019, the weighted average
current yield on our debt portfolio was 11.0%. Floating rate
instruments comprised approximately 71.9% of the fair market value
of debt investments.
During the quarter ended September 30, 2019, we
deployed approximately $46.1 million into 15 investments (which
included investments in four new companies and nine existing
portfolio companies)(1). The weighted average price of the debt
deployment activity was 97% of par, carrying a weighted average
current yield of 10.2%.
During the quarter ended September 30, 2019, we
monetized, in part or in full, 16 investments for approximately
$44.6 million(2), at a weighted average current yield of 10.8%. Our
weighted average realized price was par.
LEGACY FULL CIRCLE
PORTFOLIO
Since the Full Circle Capital Corporation (“Full
Circle”) merger closed in November 2016, we have been diligently
focused on monetizing the legacy portfolio. To date, we have exited
24 positions across 16 portfolio companies, realizing an aggregate
total return of $5.1 million. These realized gains represents
109% of NAV, a significant achievement given the
market’s previous assessment of this portfolio.
CONSOLIDATED RESULTS OF
OPERATIONS
Total investment income for the quarter ended
September 30, 2019 was approximately $7.0 million, or $0.70 per
share. Total expenses for the quarter ended September 30, 2019 were
approximately $4.4 million, or $0.44 per share.
Net realized gains for the quarter ended
September 30, 2019 were approximately $0.3 million, or $0.02 per
share. Net unrealized depreciation from investments for the quarter
ended September 30, 2019 was approximately $12.5 million, or $1.24
per share.
LIQUIDITY AND CAPITAL
RESOURCES
As of September 30, 2019, available liquidity
from cash and money market investments was approximately $24.8
million, exclusive of our holdings of United States Treasury Bills.
Total debt outstanding as of September 30, 2019 was $124.0 million,
comprised of our 6.50% senior notes due September 2022 (NASDAQ:
GECCL), our 6.75% senior notes due January 2025 (NASDAQ: GECCM) and
our newly issued 6.50% senior notes due June 2024 (NASDAQ: GECCN).
Our asset coverage ratio was approximately 173.8% and our
debt-to-equity ratio was 1.36x.
SELECT SUBSEQUENT ACTIVITY
Distributions In November 2019, our Board set
the monthly distributions for the first quarter of 2020 at a rate
of $0.083 per share, representing an annualized base distribution
yield of approximately 11.0% on September 30, 2019 NAV. Our
distribution policy has been designed to set an annual base
distribution rate that is covered by NII. From time to time, as
catalyst-driven investments are realized or when we out-earn our
declared distributions, we may supplement monthly distributions
with special distributions from NII generated in excess of the
declared distributions(3).
CONFERENCE CALL AND WEBCAST
Great Elm Capital Corp. will host a conference call and webcast
on Thursday, November 14, 2019 at 10:00 a.m. Eastern Time to
discuss its third 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 6868201 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.
The conference call will be webcast simultaneously
at: https://edge.media-server.com/mmc/p/tzdhm2c9.
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 targets special situations
and catalyst-driven investments as it seeks to generate attractive,
risk-adjusted returns through both current income and capital
appreciation.
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,” “continue,” “upside,” “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: conditions in the
credit markets, the price of GECC common stock and the performance
of GECC’s portfolio and investment manager. Information concerning
these and other factors can be found in GECC’s Annual Report on
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 capitalized PIK income. Amounts included herein do not include
investments 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 do not include investments 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.
|
GREAT ELM CAPITAL CORP. |
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES |
Dollar amounts in thousands (except per share
amounts) |
|
|
|
September 30, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
|
Investments |
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $162,496 and $137,852, respectively) |
|
$ |
145,608 |
|
$ |
128,318 |
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $96,110 and $78,093,
respectively) |
|
96,098 |
|
78,085 |
Affiliated investments, at fair value (amortized cost of
$100,409 and $89,854, respectively) |
|
38,554 |
|
35,665 |
Controlled investments, at fair value (amortized cost of
$11,682 and $20,648, respectively) |
|
10,637 |
|
20,203 |
Total investments |
|
290,897 |
|
262,271 |
|
|
|
|
|
Cash and cash equivalents |
|
3,370 |
|
4,167 |
Receivable for investments sold |
|
- |
|
10,887 |
Interest receivable |
|
3,131 |
|
3,255 |
Dividends receivable |
|
47 |
|
9 |
Due from portfolio company |
|
605 |
|
555 |
Due from affiliates |
|
15 |
|
5 |
Prepaid expenses and other assets |
|
129 |
|
414 |
Total assets |
|
$ |
298,194 |
|
$ |
281,563 |
|
|
|
|
|
Liabilities |
|
|
|
|
Notes payable 6.50% due September 18, 2022 (including unamortized
discount of $917 and $1,141, respectively) |
|
$ |
31,715 |
|
$ |
31,490 |
Notes payable 6.75% due January 31, 2025 (including unamortized
discount of $1,386 and $1,588, respectively) |
|
45,012 |
|
44,811 |
Notes payable 6.50% due June 30, 2024 (including unamortized
discount of $2,173 and $0, respectively) |
|
42,827 |
|
- |
Payable for investments purchased |
|
76,844 |
|
84,102 |
Interest payable |
|
362 |
|
354 |
Distributions payable |
|
835 |
|
3,441 |
Accrued incentive fees payable |
|
7,522 |
|
5,422 |
Due to affiliates |
|
1,005 |
|
1,069 |
Accrued expenses and other liabilities |
|
583 |
|
758 |
Total liabilities |
|
$ |
206,705 |
|
$ |
171,447 |
|
|
|
|
|
Commitments and contingencies (Note 6) |
|
$ - |
|
$ - |
|
|
|
|
|
Net Assets |
|
|
|
|
Common stock, par value $0.01 per share (100,000,000 shares
authorized, 10,062,682 shares issued and outstanding and
10,652,401 shares issued and outstanding, respectively) |
|
$ |
101 |
|
$ |
107 |
Additional paid-in capital |
|
193,253 |
|
198,247 |
Accumulated losses |
|
(101,865) |
|
(88,238) |
Total net assets |
|
$ |
91,489 |
|
$ |
110,116 |
Total liabilities and net assets |
|
$ |
298,194 |
|
$ |
281,563 |
Net asset value per share |
|
$ |
9.09 |
|
$ |
10.34 |
GREAT ELM CAPITAL CORP. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
Dollar amounts in thousands (except per share
amounts) |
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Investment
Income: |
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
4,477 |
|
$ |
4,326 |
|
$ |
11,999 |
|
$ |
11,363 |
Non-affiliated, non-controlled investments (PIK) |
|
- |
|
- |
|
- |
|
- |
Affiliated investments |
|
216 |
|
(630) |
|
627 |
|
568 |
Affiliated investments (PIK) |
|
1,124 |
|
1,671 |
|
2,939 |
|
6,238 |
Controlled investments |
|
282 |
|
499 |
|
1,335 |
|
1,609 |
Controlled investments (PIK) |
|
101 |
|
261 |
|
684 |
|
696 |
Total interest income |
|
6,200 |
|
6,127 |
|
17,584 |
|
20,474 |
Dividend income from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
196 |
|
23 |
|
407 |
|
178 |
Controlled investments |
|
480 |
|
- |
|
1,280 |
|
- |
Total dividend income |
|
676 |
|
23 |
|
1,687 |
|
178 |
Other income from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
5 |
|
10 |
|
137 |
|
52 |
Affiliated investments |
|
- |
|
- |
|
2 |
|
90 |
Affiliated investments (PIK) |
|
108 |
|
- |
|
564 |
|
- |
Controlled investments |
|
13 |
|
21 |
|
52 |
|
47 |
Total other income |
|
126 |
|
31 |
|
755 |
|
189 |
Total investment income |
|
$ |
7,002 |
|
$ |
6,181 |
|
$ |
20,026 |
|
$ |
20,841 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Management fees |
|
$ |
759 |
|
$ |
768 |
|
$ |
2,207 |
|
$ |
2,215 |
Incentive fees |
|
654 |
|
576 |
|
2,099 |
|
(607) |
Administration fees |
|
282 |
|
202 |
|
734 |
|
999 |
Custody fees |
|
15 |
|
15 |
|
45 |
|
44 |
Directors’ fees |
|
51 |
|
51 |
|
150 |
|
150 |
Professional services |
|
243 |
|
326 |
|
711 |
|
791 |
Interest expense |
|
2,308 |
|
1,457 |
|
5,333 |
|
4,188 |
Other expenses |
|
71 |
|
101 |
|
349 |
|
432 |
Total expenses |
|
$ |
4,383 |
|
$ |
3,496 |
|
$ |
11,628 |
|
$ |
8,212 |
Net investment income |
|
$ |
2,619 |
|
$ |
2,685 |
|
$ |
8,398 |
|
$ |
12,629 |
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) on investment
transactions: |
|
|
|
|
Net realized gain (loss)
from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
97 |
|
$ |
898 |
|
$ |
1,115 |
|
$ |
1,815 |
Affiliated investments |
|
- |
|
- |
|
- |
|
- |
Controlled investments |
|
154 |
|
- |
|
154 |
|
210 |
Total net realized gain
(loss) |
|
251 |
|
898 |
|
1,269 |
|
2,025 |
Net change in unrealized
appreciation (depreciation) from: |
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
(8,075) |
|
(115) |
|
(7,357) |
|
(2,003) |
Affiliated investments |
|
(4,096) |
|
620 |
|
(7,666) |
|
(9,442) |
Controlled investments |
|
(345) |
|
770 |
|
(600) |
|
258 |
Total net change in unrealized
appreciation (depreciation) |
|
(12,516) |
|
1,275 |
|
(15,623) |
|
(11,187) |
Net realized and unrealized gains (losses) |
|
$ |
(12,265) |
|
$ |
2,173 |
|
$ |
(14,354) |
|
$ |
(9,162) |
Net increase (decrease) in net assets resulting from
operations |
|
$ |
(9,646) |
|
$ |
4,858 |
|
$ |
(5,956) |
|
$ |
3,467 |
|
|
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
|
$ |
0.26 |
|
$ |
0.25 |
|
$ |
0.81 |
|
$ |
1.19 |
Earnings per share (basic and diluted): |
|
$ |
(0.96) |
|
$ |
0.46 |
|
$ |
(0.58) |
|
$ |
0.33 |
Weighted average shares outstanding (basic and diluted): |
|
10,062,682 |
|
10,652,401 |
|
10,312,561 |
|
10,652,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media & Investor Contact:
Investor Relations
+1 (617)
375-3006
investorrelations@greatelmcap.com
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