PennantPark Investment Corporation (NASDAQ:PNNT) announced today
financial results for the fourth quarter and fiscal year ended
September 30, 2017.
HIGHLIGHTS
Quarter ended September
30, 2017($ in millions, except per share amounts) |
Assets and
Liabilities: |
|
|
|
Investment
portfolio |
|
$ |
1,153.6 |
|
Net assets |
|
$ |
646.8 |
|
Net asset value
per share |
|
$ |
9.10 |
|
|
|
|
|
|
Credit
Facility |
|
$ |
76.0 |
|
2019 Notes |
|
$ |
255.7 |
|
SBA
debentures |
|
$ |
194.4 |
|
Yield on debt
investments at quarter-end |
|
|
11.5 |
% |
Operating Results: |
Quarter Ended September 30, 2017 |
|
Year Ended September 30, 2017 |
|
Net investment
income |
$ |
12.8 |
|
$ |
56.4 |
|
Net investment
income per share |
$ |
0.18 |
|
$ |
0.79 |
|
Distributions
declared per share |
$ |
0.18 |
|
$ |
0.82 |
|
|
|
|
|
|
|
|
Portfolio
Activity: |
|
|
|
|
|
|
Purchases of
investments |
$ |
129.4 |
|
$ |
508.3 |
|
Sales and
repayments of investments |
$ |
78.6 |
|
$ |
544.0 |
|
|
|
|
|
|
|
|
Number of new
portfolio companies invested |
|
4 |
|
|
18 |
|
Number of
existing portfolio companies invested |
|
4 |
|
|
24 |
|
Number of ending
portfolio companies |
|
55 |
|
|
55 |
|
|
|
|
|
|
|
|
CONFERENCE CALL AT 10:00 A.M. ET ON
NOVEMBER 30, 2017
PennantPark Investment Corporation (“we,” “our,”
“us” or “Company”) will host a conference call at 10:00 a.m.
(Eastern Time) on Thursday, November 30, 2017 to discuss its
financial results. All interested parties are welcome to
participate. You can access the conference call by dialing
toll-free (844) 455-1365 approximately 5-10 minutes prior to the
call. International callers should dial (612) 979-9872. All callers
should reference PennantPark Investment Corporation. An archived
replay of the call will be available through December 14, 2017 by
calling toll-free (855) 859-2056. International callers please dial
(404) 537-3406. For all phone replays, please reference conference
ID #99339136.
RECENT DEVELOPMENTS
Effective January 1, 2018, PennantPark
Investment Advisers, LLC has voluntarily and irrevocably agreed, in
consultation with the board of directors, to (i) reduce base
management fees to 1.50% of the Company’s “average adjusted gross
assets”, (ii) reduce the incentive fee to 17.5% of the Company’s
pre-incentive fee net investment income (subject to a 7.00%
annualized “hurdle rate” and 100% “catch-up” with a ceiling of
8.4848%) and (iii) reduce the incentive fee to 17.5% of the
Company’s cumulative net realized capital gains.
PORTFOLIO AND INVESTMENT
ACTIVITY
As of September 30, 2017, our portfolio
totaled $1,153.6 million and consisted of $466.1 million of first
lien secured debt, $399.5 million of second lien secured debt,
$120.7 million of subordinated debt and $167.3 million of preferred
and common equity. Our debt portfolio consisted of 82%
variable-rate investments (including 13% where London Interbank
Offered Rate, or LIBOR, was below the floor) and 18% fixed-rate
investments. As of September 30, 2017, we had no companies on
non-accrual. Overall, the portfolio had net unrealized depreciation
of $56.4 million as of September 30, 2017. Our overall portfolio
consisted of 55 companies with an average investment size of $21.0
million, had a weighted average yield on interest bearing debt
investments of 11.5% and was invested 40% in first lien secured
debt, 35% in second lien secured debt, 10% in subordinated debt and
15% in preferred and common equity.
As of September 30, 2016, our portfolio
totaled $1,153.7 million and consisted of $397.1 million of first
lien secured debt, $425.4 million of second lien secured debt,
$177.6 million of subordinated debt and $153.6 million of preferred
and common equity. Our debt portfolio consisted of 78%
variable-rate investments (including 72% with a LIBOR or prime
floor) and 22% fixed-rate investments. As of September 30, 2016, we
had four companies on non-accrual, representing 5.3% and 2.8% of
our overall portfolio on a cost and fair value basis, respectively.
Overall, the portfolio had net unrealized depreciation of $100.3
million as of September 30, 2016. Our overall portfolio consisted
of 56 companies with an average investment size of $20.6 million,
had a weighted average yield on interest bearing debt investments
of 11.9% and was invested 35% in first lien secured debt, 37% in
second lien secured debt, 15% in subordinated debt and 13% in
preferred and common equity.
For the three months ended September 30, 2017,
we invested $129.4 million of investments in four new and four
existing portfolio companies with a weighted average yield on debt
investments of 9.5%. Sales and repayments of investments for the
same period totaled $78.6 million. This compares to the three
months ended September 30, 2016, in which we invested $23.3 million
in five existing portfolio companies with a weighted average yield
on debt investments of 12.6%. Sales and repayments of investments
for the same period totaled $135.6 million.
For the fiscal year ended September 30, 2017, we
invested $508.3 million of investments in 18 new and 24 existing
portfolio companies with a weighted average yield on debt
investments of 10.5%. Sales and repayments of investments for the
same period totaled $544.0 million. This compares to the fiscal
year ended September 30, 2016, in which we invested $330.6 million
in four new and 25 existing portfolio companies with a weighted
average yield on debt investments of 11.9%. Sales and repayments of
investments for the same period totaled $439.7 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations
for the three month periods and fiscal years ended September 30,
2017 and 2016.
Investment Income
Investment income for the three months ended
September 30, 2017 and 2016 was $27.9 million and $32.2 million,
respectively, and was primarily attributable to $12.1 million and
$13.2 million from first lien secured debt, $12.7 million and $14.4
million from second lien secured debt and $3.1 million and $4.6
million from subordinated debt, respectively.
Investment income for the fiscal years ended
September 30, 2017 and 2016 was $124.5 million and $142.1 million,
respectively, and was attributable to $54.4 million and $59.9
million from first lien secured debt, $50.4 million and $60.5
million from second lien secured debt, $17.3 million and $20.9
million from subordinated debt and $2.4 million and $0.8 million
from preferred and common equity, respectively. The decrease in
investment income over the prior year was primarily due to a
reduction of our portfolio at cost.
Expenses
Net expenses for the three months ended
September 30, 2017 and 2016 totaled $15.1 million and $17.0
million, respectively. Base management fee totaled $4.8 million
(after a base management fee waiver of $0.9 million) and $5.0
million (after a base management fee waiver of $1.0 million),
incentive fee totaled $2.3 million (after an incentive fee waiver
of $0.4 million) and $2.9 million (after an incentive fee waiver of
$0.5 million), debt related interest and expenses totaled $6.0
million and $6.9 million, general and administrative expenses
totaled $1.6 million and $1.8 million and taxes totaled $0.4
million and $0.4 million, respectively, for the same periods.
Net expenses for the fiscal years ended
September 30, 2017 and 2016 totaled $68.1 million and $71.5
million, respectively. Base management fee totaled $20.3 million
(after a base management fee waiver of $3.9 million) and $20.9
million (after a base management fee waiver of $4.0 million),
incentive fee totaled $9.3 million (after an incentive fee waiver
of $1.8 million) and $13.5 million (after an incentive fee waiver
of $2.5 million), debt related interest and expenses totaled $30.5
million (including $3.9 million in amendment costs on our
multi-currency, senior secured revolving credit facility, or the
Credit Facility) and $27.6 million, general and administrative
expenses totaled $6.3 million and $7.1 million and taxes totaled
$1.7 million and $2.4 million, respectively, for the same periods.
The decrease in expenses over the prior year was primarily due to
lower incentive fees and general and administrative expenses.
Net Investment Income
Net investment income totaled $12.8 million and
$15.2 million, or $0.18 and $0.21 per share, for the three months
ended September 30, 2017 and 2016, respectively.
Net investment income totaled $56.4 million and
$70.6 million, or $0.79 and $0.99 per share, for the fiscal years
ended September 30, 2017 and 2016, respectively. The decrease in
net investment income per share compared to the prior year was
primarily due to the repayments of higher yielding investments.
Net Realized Gains or
Losses
Sales and repayments of investments for the
three months ended September 30, 2017 and 2016 totaled $78.6
million and $135.6 million, respectively, and net realized (losses)
gains totaled $(0.2) million and $1.6 million, respectively, for
the same periods.
Sales and repayments of investments for the
fiscal years ended September 30, 2017 and 2016 totaled $544.0
million and $439.7 million, respectively, and net realized losses
totaled $31.0 million and $80.5 million, respectively, for the same
periods. The change in realized losses compared to the prior year
was primarily due to changes in the market conditions of our
investments and the values at which they were realized.
Unrealized Appreciation or Depreciation
on Investments, Credit Facility, 2019 Notes and 2025
Notes
For the three months ended September 30, 2017
and 2016, net unrealized appreciation on investments totaled less
than $0.1 million and $22.8 million, respectively. Net unrealized
appreciation on our Credit Facility, our 4.50% notes due 2019, or
2019 Notes, and our 6.25% senior notes due 2025, or 2025 Notes,
totaled $5.1 million and $11.8 million, respectively, for the same
periods.
For the fiscal years ended September 30, 2017
and 2016, net unrealized appreciation on investments totaled $43.9
million and $24.9 million, respectively. Net unrealized
(appreciation) depreciation on our Credit Facility, 2019 Notes and
2025 Notes totaled $(7.6) million and $3.7 million for the same
periods, respectively. The net change in unrealized appreciation
(depreciation) on our investments compared to the prior year was
driven primarily by changes in the capital market conditions,
financial performance of certain portfolio companies and the
reversal of unrealized depreciation (appreciation) of investments
that were realized. The change in unrealized (appreciation)
depreciation on the Credit Facility, the 2019 Notes and the 2025
Notes compared to the prior year was due to the fluctuating
interest rate environment.
Net Change in Net Assets Resulting from
Operations
Net change in net assets resulting from
operations totaled $7.4 million and $27.7 million, or $0.10 and
$0.39 per share, for the three months ended September 30, 2017 and
2016, respectively.
Net change in net assets resulting from
operations totaled $61.7 million and $18.7 million, or $0.87 and
$0.26 per share, for the fiscal years ended September 30, 2017 and
2016, respectively. The increase in the net change in net assets
from operations compared to the prior year was primarily due to the
change in portfolio investment values offset by lower net
investment income.
LIQUIDITY AND CAPITAL
RESOURCES
Our liquidity and capital resources are derived
primarily from proceeds of securities offerings, debt capital and
cash flows from operations, including investment sales and
repayments, and income earned. Our primary use of funds from
operations includes investments in portfolio companies and payments
of fees and other operating expenses we incur. We have used, and
expect to continue to use, our debt capital and proceeds from the
rotation of our portfolio and proceeds from public and private
offerings of securities to finance our investment objectives.
As of September 30, 2017 and 2016, there was
$79.4 million and $50.3 million, respectively, in outstanding
borrowings under the Credit Facility. The Credit Facility had a
weighted average interest rate of 2.42% and 2.76%, respectively,
exclusive of the fee on undrawn commitments, as of September 30,
2017 and 2016. The annualized weighted average cost of debt for the
years ended September 30, 2017 and 2016, inclusive of the fee on
the undrawn commitment of 0.375% on the Credit Facility and upfront
fees on Small Business Administration, or SBA, debentures, was
5.04% and 4.35%, respectively.
As of September 30, 2017 and 2016, we had $365.6
million and $494.7 million of unused borrowing capacity under our
Credit Facility, respectively, subject to regulatory
restrictions.
As of September 30, 2017 and 2016, we had $250.0
million in aggregate principal amount of 2019 Notes outstanding,
with a fixed interest rate of 4.50% per year. As of September 30,
2017 and 2016, we had zero and $71.3 million, respectively, in
aggregate principal amount of 2025 Notes outstanding, with a fixed
interest rate of 6.25% per year. On June 29, 2017, the 2025 Notes
were redeemed. The 2025 Notes had been scheduled to mature on
February 1, 2025. As of September 30, 2017 and 2016, we had $300.0
million and $225.0 million in SBA debt commitments, respectively,
of which $199.0 million and $197.5 million was drawn,
respectively.
As of September 30, 2017 and 2016, we had cash
and cash equivalents of $38.2 million and $75.6 million,
respectively, available for investing and general corporate
purposes. We believe our liquidity and capital resources are
sufficient to take advantage of market opportunities.
Our operating activities provided cash of $69.2
million for the fiscal year ended September 30, 2017, and our
financing activities used cash proceeds of $107.6 million for the
same period. Our operating activities provided cash primarily from
sales and repayments on our investments and our financing
activities used cash primarily to redeem our 2025 Notes.
Our operating activities provided cash of $157.7
million for the fiscal year ended September 30, 2016, and our
financing activities used cash proceeds of $132.7 million for the
same period. Our operating activities provided cash primarily from
sales and repayments on our investments and our financing
activities used cash primarily for net repayments on our Credit
Facility and our stock repurchase program.
DISTRIBUTIONS
During the fiscal years ended September 30,
2017 and 2016, we declared distributions of $0.82 and $1.12 per
share, respectively, for total distributions of $58.3 million and
$79.8 million. We monitor available net investment income to
determine if a return of capital for taxation purposes may occur
for the fiscal year. To the extent our taxable earnings fall below
the total amount of our distributions for any given fiscal year,
common stockholders will be notified of the portion of those
distributions deemed to be a return of capital. Tax characteristics
of all distributions will be reported to stockholders subject to
information reporting on Form 1099-DIV after the end of the
calendar year and in our periodic reports filed with the Securities
and Exchange Commission, or the SEC.
AVAILABLE INFORMATION
The Company makes available on its website its
report on Form 10-K filed with the SEC and stockholders may find
the report on our website at www.pennantpark.com.
PENNANTPARK INVESTMENT CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES
|
|
September 30, 2017 |
|
|
September 30, 2016 |
|
Assets |
|
|
|
|
|
|
|
|
Investments at fair
value |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments (cost—$824,106,322 and
$805,189,545, respectively) |
|
$ |
849,351,548 |
|
|
$ |
813,467,491 |
|
Non-controlled, affiliated investments (cost—$185,799,943 and
$262,476,906, respectively) |
|
|
189,674,977 |
|
|
|
215,192,547 |
|
Controlled, affiliated investments (cost—$200,120,407 and
$186,290,695, respectively) |
|
|
114,550,983 |
|
|
|
125,019,637 |
|
Total of
investments (cost—$1,210,026,672 and $1,253,957,146,
respectively) |
|
|
1,153,577,508 |
|
|
|
1,153,679,675 |
|
Cash and cash
equivalents (cost—$38,182,373 and $75,617,133, respectively) |
|
|
38,202,068 |
|
|
|
75,608,113 |
|
Interest
receivable |
|
|
5,906,976 |
|
|
|
7,032,858 |
|
Prepaid expenses and
other assets |
|
|
4,509,289 |
|
|
|
2,615,232 |
|
Total assets |
|
|
1,202,195,841 |
|
|
|
1,238,935,878 |
|
Liabilities |
|
|
|
|
|
|
|
|
Distributions
payable |
|
|
12,790,950 |
|
|
|
19,897,034 |
|
Payable for investments
purchased |
|
|
1,014,000 |
|
|
|
— |
|
Credit Facility payable
(cost—$79,392,900 and $50,339,700, respectively) |
|
|
76,037,341 |
|
|
|
39,551,187 |
|
2019 Notes payable
(par—$250,000,000) |
|
|
255,665,000 |
|
|
|
254,175,000 |
|
2025 Notes payable
(par—zero and $71,250,000, respectively) |
|
|
— |
|
|
|
72,618,000 |
|
SBA debentures payable,
net (par—$199,000,000 and $197,500,000, respectively) |
|
|
194,364,653 |
|
|
|
193,244,534 |
|
Base management fee
payable, net |
|
|
4,845,237 |
|
|
|
5,074,830 |
|
Performance-based
incentive fee payable, net |
|
|
2,270,008 |
|
|
|
2,865,444 |
|
Interest payable on
debt |
|
|
6,876,756 |
|
|
|
7,520,113 |
|
Accrued other
expenses |
|
|
1,523,425 |
|
|
|
622,880 |
|
Total liabilities |
|
|
555,387,370 |
|
|
|
595,569,022 |
|
Commitments and
contingencies |
|
|
— |
|
|
|
— |
|
Net
assets |
|
|
|
|
|
|
|
|
Common stock,
71,060,836 shares issued and outstanding Par value $0.001 per
share and 100,000,000 shares authorized |
|
|
71,061 |
|
|
|
71,061 |
|
Paid-in capital in
excess of par value |
|
|
818,737,784 |
|
|
|
819,983,676 |
|
Undistributed net
investment income |
|
|
3,333,195 |
|
|
|
3,119,380 |
|
Accumulated net
realized loss on investments |
|
|
(116,598,355 |
) |
|
|
(84,771,820 |
) |
Net unrealized
depreciation on investments |
|
|
(56,425,773 |
) |
|
|
(100,280,954 |
) |
Net unrealized
(appreciation) depreciation on debt |
|
|
(2,309,441 |
) |
|
|
5,245,513 |
|
Total net assets |
|
$ |
646,808,471 |
|
|
$ |
643,366,856 |
|
Total liabilities and net assets |
|
$ |
1,202,195,841 |
|
|
$ |
1,238,935,878 |
|
Net asset value
per share |
|
$ |
9.10 |
|
|
$ |
9.05 |
|
|
|
|
|
|
|
|
|
|
PENNANTPARK INVESTMENT CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS
|
Years Ended September 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
Investment
income: |
|
|
|
|
|
|
|
|
From non-controlled,
non-affiliated investments: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
84,685,961 |
|
|
$ |
103,659,182 |
|
Payment
in kind |
|
|
3,819,996 |
|
|
|
848,834 |
|
Other
income |
|
|
7,079,034 |
|
|
|
10,945,240 |
|
From non-controlled,
affiliated investments: |
|
|
|
|
|
|
|
|
Interest |
|
|
10,339,444 |
|
|
|
12,374,621 |
|
Payment
in kind |
|
|
5,475,491 |
|
|
|
680,746 |
|
Other
income |
|
|
1,609,935 |
|
|
|
80,521 |
|
From controlled,
affiliated investments: |
|
|
|
|
|
|
|
|
Interest |
|
|
734,163 |
|
|
|
731,381 |
|
Payment
in kind |
|
|
10,790,300 |
|
|
|
12,750,302 |
|
Other
income |
|
|
— |
|
|
|
— |
|
Total investment income |
|
|
124,534,324 |
|
|
|
142,070,827 |
|
Expenses: |
|
|
|
|
|
|
|
|
Base
management fee |
|
|
24,218,029 |
|
|
|
24,852,898 |
|
Performance-based incentive fee |
|
|
11,077,956 |
|
|
|
16,018,790 |
|
Interest
and expenses on debt |
|
|
26,642,113 |
|
|
|
27,601,242 |
|
Administrative services expenses |
|
|
3,576,000 |
|
|
|
3,566,667 |
|
Other
general and administrative expenses |
|
|
2,662,640 |
|
|
|
3,605,923 |
|
Expenses before Management Fees waiver and provision for
taxes |
|
|
68,176,738 |
|
|
|
75,646,520 |
|
Management Fees wavier |
|
|
(5,647,358 |
) |
|
|
(6,539,475 |
) |
Provision
for taxes |
|
|
1,700,000 |
|
|
|
2,350,000 |
|
Credit
Facility amendment costs |
|
|
3,866,633 |
|
|
|
— |
|
Net expenses |
|
|
68,096,013 |
|
|
|
71,456,045 |
|
Net investment income |
|
|
56,438,311 |
|
|
|
70,614,782 |
|
Realized and
unrealized gain (loss) on investments and debt: |
|
|
|
|
|
|
|
|
Net realized (loss)
gain on investments |
|
|
(31,027,037 |
) |
|
|
(80,530,707 |
) |
Net change in
unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
|
16,950,900 |
|
|
|
48,052,466 |
|
Non-controlled and controlled, affiliated investments |
|
|
26,904,281 |
|
|
|
(23,126,408 |
) |
Debt
(appreciation) depreciation |
|
|
(7,554,954 |
) |
|
|
3,726,573 |
|
Net change in unrealized appreciation (depreciation) on
investments and debt |
|
|
36,300,227 |
|
|
|
28,652,631 |
|
Net realized
and unrealized gain (loss) from investments and debt |
|
|
5,273,190 |
|
|
|
(51,878,076 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
$ |
61,711,501 |
|
|
$ |
18,736,706 |
|
Net increase (decrease)
in net assets resulting from operations per common share |
|
$ |
0.87 |
|
|
$ |
0.26 |
|
Net investment income
per common share |
|
$ |
0.79 |
|
|
$ |
0.99 |
|
|
|
|
|
|
|
|
|
|
ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business
development company which principally invests in U.S. middle-market
private companies in the form of first lien secured debt, second
lien secured debt, subordinated debt and equity investments.
PennantPark Investment Corporation is managed by PennantPark
Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. You should understand that under Section
27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section
21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995 do not apply to
forward-looking statements made in periodic reports we file under
the Exchange Act. All statements other than statements of
historical facts included in this press release are forward-looking
statements and are not guarantees of future performance or results
and involve a number of risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements as a
result of a number of factors, including those described from time
to time in filings with the SEC. The Company undertakes no duty to
update any forward-looking statement made herein. You should not
place undue influence on such forward-looking statements as such
statements speak only as of the date on which they are made.
We may use words such as “anticipates,”
“believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and
similar expressions to identify forward-looking statements. Such
statements are based on currently available operating, financial
and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations.
CONTACT: Aviv EfratPennantPark Investment CorporationReception:
(212) 905-1000www.pennantpark.com
PennantPark Investment (NASDAQ:PNNT)
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