MVC Capital, Inc. (NYSE:MVC) (the Company), a publicly traded
business development company (BDC) that makes private debt and
equity investments, announced its financial results for the fiscal
second quarter ended April 30, 2017.
Quarterly Highlights
- MVC’s largest portfolio holding, U.S. Gas & Electric, Inc.
(“USG&E”), entered into a definitive agreement to be acquired
(See “Subsequent Events” below.)
- Converted its equity investment in Turf Products, LLC (“Turf
Products”) to a yielding investment, receiving a $323K distribution
which was treated as a return of capital, and realizing a capital
gain of $609K. The additional subordinated debt of $3.8 million
increased MVC’s total debt investment in Turf Products to $7.7
million at a 10% interest rate.
- Sold its common stock and warrant of Vestal Manufacturing
Enterprises, Inc. for $1.1 million, resulting in a realized capital
gain of $850K.
- Reported total operating income of $3.9 million for the second
quarter of fiscal 2017, compared to $15.9 million (including a $10
million dividend from USG&E) for the same quarter of fiscal
2016.
- Reported a net increase in net assets from operations of $3.1
million or $0.14 per share, the third quarter in a row of positive
bottom line performance.
- Paid 48th consecutive quarterly dividend of $0.135 per share on
April 28, 2017.
Financial Results
|
|
Quarter Ended |
(Unaudited) ($ in thousands except for per share data) |
|
Q2 2017 |
Q1 2017 |
Q4 2016 |
Q3 2016 |
Q2 2016 |
Total operating income |
|
3,929 |
|
3,380 |
|
5,417 |
|
8,005 |
|
15,855 |
|
|
|
|
|
|
|
|
Management fee |
|
1,696 |
|
1,814 |
|
1,721 |
|
1,932 |
|
1,958 |
|
Portfolio fees - asset management |
|
138 |
|
177 |
|
183 |
|
185 |
|
186 |
|
Management fee - asset management |
|
49 |
|
62 |
|
72 |
|
60 |
|
86 |
|
Administrative |
|
1,172 |
|
1,474 |
|
802 |
|
1,319 |
|
1,174 |
|
Interest, fees and other borrowing costs |
|
2,606 |
|
2,538 |
|
2,598 |
|
2,488 |
|
2,497 |
|
Net incentive compensation |
|
985 |
|
760 |
|
577 |
|
(1,512 |
) |
1,135 |
|
Total waver by adviser |
|
(461 |
) |
(491 |
) |
(467 |
) |
(521 |
) |
(1,527 |
) |
Tax expense |
|
0 |
|
1 |
|
1 |
|
- |
|
1 |
|
|
|
|
|
|
|
|
Net operating (loss) income before net realized and unrealized
gains |
|
(2,256 |
) |
(2,955 |
) |
(70 |
) |
4,054 |
|
10,345 |
|
Net increase (decrease) in net assets resulting from
operations |
|
3,069 |
|
4,377 |
|
5,279 |
|
(3,536 |
) |
6,046 |
|
Net increase (decrease) in net assets resulting from operations per
share |
|
0.14 |
|
0.19 |
|
0.23 |
|
(0.16 |
) |
0.26 |
|
Net asset value per share |
|
12.45 |
|
12.45 |
|
12.39 |
|
12.27 |
|
12.56 |
|
In the second quarter of fiscal 2017, the Company earned $3.4
million in interest income and $509,000 in dividend and fee income,
compared to $5.3 million and $10.6 million, respectively, in the
same quarter of fiscal 2016.
The Company reported a net operating loss of $2.3 million for
the second quarter of fiscal 2017, compared to net operating income
of $10.3 million (including a $10 million dividend from USG&E)
for the same quarter in fiscal 2016.
Portfolio Adjustments
As of April 30, 2017, the Company’s net assets were $280.9
million, or $12.45 per share, compared with net assets of $280.9
million, or $12.45 per share, at the end of the prior fiscal
quarter.
During the second quarter of fiscal 2017, the fair values of 19
portfolio company securities and escrow receivables were revised by
MVC’s Valuation Committee, resulting in a net increase of $5.2
million or $0.23 per share.
Investment Activity
During the second quarter of fiscal 2017, MVC made no new
investments and one follow-on bridge loan to Security Holdings,
B.V., an existing portfolio company, totaling approximately $4.1
million.
On March 7, 2017, the Company exchanged its shares of Turf
Products for $3.8 million of additional subordinated debt.
After the exchange, the Company’s outstanding subordinated loan to
Turf Products was $7.7 million and carried a 10% interest
rate. Prior to the exchange, MVC received a cash distribution
of $323K, which was treated as a return of capital. The exchange
resulted in a realized capital gain of $609,000. Both the
warrant and the guarantee were retired as part of the
recapitalization.
On March 22, 2017, the Company sold its common stock and warrant
in Vestal for $1.1 million, resulting in a realized capital gain of
$850,000. The Company also received a principal payment of
approximately $4.1 million on its senior subordinated loan,
resulting in an outstanding balance of approximately $2.5 million
at a revised interest rate of 12%.
Liquidity
As of April 30, 2017, MVC had investments in portfolio companies
totaling $358.9 million and cash and cash equivalents of $30.6
million, including $300,176 in restricted cash.
There were $25.0 million of borrowings under MVC’s $100
million revolving credit facility with Branch Banking and
Trust Company ("BB&T") at April 30, 2017. There were no
outstanding borrowings under its credit facility with Santander
Bank N.A. at April 30, 2017.
Dividends
During the second quarter of fiscal 2017, the Board of Directors
declared a dividend of $3.0 million or $0.135 per share, paid on
April 28, 2017 to shareholders of record on April 24, 2017.
Since implementing its dividend policy in July of 2005, MVC has
paid forty-eight consecutive quarterly dividends. To date,
dividends paid through April 30, 2017 total approximately $145
million or $6.40 per share.
Subsequent Events
On April 24, 2017, Equus Total Return, Inc. (NYSE:EQS) (“Equus”)
entered into a definitive agreement to acquire USG&E (the
“Equus Merger Agreement”). On May 30, 2017, MVC and USG&E
terminated the Equus Merger Agreement and USG&E paid a
termination fee of $2.5 million to Equus, in favor of a superior
proposal.
On May 30, 2017, USG&E entered into a definitive agreement
to be acquired by Crius Energy Trust (“Crius”) for $172.5 million
in cash, second-lien notes, and Crius trust units. At the
closing of the transaction which is expected to occur in early
July, MVC is expected to receive consideration of approximately
$128.7 million (including the repayment of two outstanding loans to
USG&E and the payment of deferred consulting fees), a 28.4%
premium over the Company’s fair value investments in USG&E as
of April 30, 2017. The transaction is subject to a number of
conditions, including, but not limited to, regulatory approval, the
approval of certain holders of USG&E stock and the completion
of delivery and other obligations specified in the merger
agreement. For further information on the transaction, please see
the Current Report on Form 8-K filed with the U.S. Securities and
Exchange Commission on June 1, 2017.
On June 8, 2017, the Company received total proceeds of
approximately $18.1 million for the repayment of the outstanding
Biogenic Reagents (“Biogenic”) loans. The total proceeds include
repayment of all outstanding principal and a substantial portion of
the unpaid accrued interest related to the loans that was
previously reserved against in full beginning on April 1,
2016. Biogenic was fair valued at $15.1 million as of April
30, 2017.
MVC-G
About MVC Capital, Inc.
MVC is a business development company traded on the New York
Stock Exchange that provides long-term debt and equity investment
capital to fund growth, acquisitions and recapitalizations of
companies in a variety of industries. For additional information
about MVC, please visit the MVC's website at
www.mvccapital.com.
Safe Harbor Statement and Other Disclosures
The information contained in this press release contains
forward-looking statements. These forward-looking statements are
subject to the inherent uncertainties in predicting future results
and conditions. Certain factors could cause actual results and
conditions to differ materially from those projected in these
forward-looking statements, including: MVC Capital's ability to
deliver value to all shareholders and execute its yield investment
strategy; the ability to pay and grow MVC distributions; the
performance of Crius, USG&E and MVC Capital's investments; the
anticipated timing of the transaction with Crius; the satisfaction
of the conditions to, and the ability to consummate, the
transaction with Crius; the future performance of Crius and
its impact on MVC's interest in Crius; MVC's and Crius's financial
results generally; MVC's, Crius's, and USG&E's ability to
complete the transaction on the anticipated terms and schedule,
including the ability to obtain regulatory, stock exchange or other
approvals; risks relating to any unforeseen liabilities, future
capital expenditures, revenues, expenses, earnings, synergies,
economic performance, indebtedness, financial condition, losses,
and future prospects; the risk that benefits from the transaction
with Crius may not be fully realized or may take longer to realize
than expected; and changes in economic or financial market
conditions and other factors that are enumerated in the Company's
periodic filings with the Securities and Exchange Commission. MVC
Capital disclaims and does not undertake any obligation to update
or revise any forward-looking statement in this press release.
The press release contains unaudited financial results. For ease
of review, we have excluded the word "approximately" when rounding
the results.
There can be no assurance that future dividend payments will
match or exceed historic ones, or that they will be made at all.
This press release is for informational purposes only and is not an
offer to purchase or a solicitation of an offer to sell shares of
MVC’s common stock. There is no assurance that the market price of
MVC’s shares, either absolutely or relative to net asset value,
will increase as a result of any share repurchases, or that the
program will enhance shareholder value over the long-term. There
can be no assurance that MVC will achieve its investment objective.
Past performance does not guarantee future results.
Contact:
Investor Relations
Jackie Rothchild
MVC Capital
914.510.9400
Or
Jeffrey Goldberger / Allison Soss
KCSA Strategic Communications
212.896.1249 / 212.896.1267
Media Inquiries
Patrick Scanlan
Sard Verbinnen & Co.
212.687.8080
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