MVC Capital, Inc. (NYSE: MVC) (“MVC Capital” or the “Company”), a
publicly traded business development company (BDC) that makes
private debt and equity investments, announced its financial
results for the fiscal third quarter ended July 31, 2020.
Financial Results
For the third quarter of fiscal 2020, the Company earned
interest income of $5.6 million and fee and other income of $0.2
million, compared to $7.2 million and $0.3 million, respectively,
for the same quarter of fiscal 2019.
The Company reported total operating income of $5.8 million for
the third quarter of fiscal 2020, compared to $7.5 million for the
same quarter in fiscal 2019. The Company reported net operating
income of $0.9 million for the third quarter of fiscal 2020
compared to $2.8 million for the same quarter in fiscal 2019.
As of July 31, 2020, the Company’s net assets were $180.5
million or $10.18 per share, compared with $186.0 million or $10.49
per share at the end of the prior fiscal quarter.
As of July 31, 2020, MVC Capital had investments in portfolio
companies totaling $220.9 million and cash and cash equivalents of
$51.9 million, including $5.0 million in restricted cash and cash
equivalents.
Key Financial Metrics
|
Quarter Ended |
(Unaudited)($ in thousands, except per share data) |
Q3 2020 |
Q2 2020 |
Q1 2020 |
Q4 2019 |
Q3 2019 |
Total operating income |
5,780 |
|
7,652 |
|
7,786 |
|
8,046 |
|
7,469 |
|
|
|
|
|
|
|
Management fee |
1,087 |
|
1,104 |
|
1,370 |
|
1,662 |
|
1,643 |
|
Portfolio fees - asset management |
70 |
|
71 |
|
169 |
|
82 |
|
89 |
|
Management fee - asset management |
52 |
|
52 |
|
64 |
|
69 |
|
79 |
|
Administrative |
1,972 |
|
922 |
|
1,221 |
|
1,404 |
|
998 |
|
Interest, fees and other borrowing costs |
1,863 |
|
2,125 |
|
2,206 |
|
2,378 |
|
2,510 |
|
Net Incentive compensation |
- |
|
- |
|
- |
|
- |
|
- |
|
Loss on extinguishment of debt |
- |
|
345 |
|
- |
|
- |
|
- |
|
Settlement expenses |
325 |
|
- |
|
- |
|
- |
|
- |
|
Total waiver by adviser |
(446 |
) |
(452 |
) |
(551 |
) |
(660 |
) |
(654 |
) |
Tax expense |
1 |
|
- |
|
1 |
|
- |
|
1 |
|
|
|
|
|
|
|
Net operating income before net realized and unrealized gains |
856 |
|
3,485 |
|
3,306 |
|
3,111 |
|
2,803 |
|
Net increase (decrease) in net assets resulting from
operations |
(2,537 |
) |
(40,332 |
) |
4,416 |
|
3,057 |
|
348 |
|
Net increase (decrease) in net assets resulting from operations per
share |
(0.14 |
) |
(2.28 |
) |
0.25 |
|
0.17 |
|
0.02 |
|
Net asset value per share |
10.18 |
|
10.49 |
|
12.94 |
|
12.86 |
|
12.86 |
|
Operational Update
On June 5, 2020, the Company and Branch Banking & Trust
Company (“BB&T”) entered into a Waiver and Thirteenth Amendment
to the Secured Revolving Credit Agreement (the “Credit Facility”),
amending the Net Worth covenant to no less than $150 million. All
other terms of the the Credit Facility remain unchanged and
borrowings under the Credit Facility continue to be secured by
cash, short-term and long-term U.S. Treasury securities and other
governmental agency securities.
Portfolio Activity
During the third quarter of fiscal 2020, the Company made no new
or follow-on investments. For the first nine-months of fiscal 2020,
the Company made five follow-on investments in five portfolio
companies totaling approximately $11.5 million.
On May 14, 2020, Foliofn, Inc., a portfolio company, announced
it entered into an agreement to be acquired by The Goldman Sachs
Group, Inc. The acquisition, while subject to regulatory
approval, is expected to close by September 30, 2020 and the
Company expects to receive approximately $15 million from the
transaction.
On July 16, 2020, the Company sold the remaining 3,228,024
common shares of Equus Total Return, Inc. for approximately $3.8
million, resulting in a realized loss of approximately $3.7
million.
Dividends
On July 14, 2020, the Company's Board of Directors declared a
quarterly dividend of $0.17 per share, which was paid on July 31,
2020.
Since implementing its dividend policy in July of 2005, the
Company has paid sixty-one consecutive quarterly dividends. Through
July 31, 2020, dividends paid total $8.42 per share and total
distributions and share repurchases (including tender offers) have
surpassed $290 million.
In anticipation of the previously announced merger with Barings
BDC, Inc. (“BBDC”), no further ordinary dividends are expected to
be declared by the Company.
Subsequent Events
Merger with Barings BDC, Inc.
On August 10, 2020, the Company entered into and announced a
definitive Merger Agreement with BBDC under which the Company will
merge with and into BBDC, with BBDC continuing as the surviving
company (the “Merger”). The boards of directors of both BBDC and
the Company, including all of the respective independent directors,
have approved the Merger Agreement and related transactions
(collectively, the “Transaction”), which is expected to close in
the fourth quarter of 2020.
Other Subsequent Events
On August 19, 2020, the Company loaned $150,000
to RuMe, Inc. on its lines of credit, increasing the outstanding
balance to approximately $895,000.
On August 31, 2020, the Company and Truist Bank (formerly
BB&T) entered into the Fourteenth Amendment to Secured
Revolving Credit Agreement, amending the definition of “Termination
Date” to mean the earlier to occur of (i) December 31, 2020, (ii)
the effective date of the Merger Agreement, (iii) the date the
Revolver Commitment (as defined in the Credit Facility) is
terminated pursuant following the occurrence of an Event of
Default, or (iv) the date the Company terminates the Revolver
Commitment. All other terms of the Credit Facility remain unchanged
and borrowings under the Credit Facility continue to be secured by
cash, short-term and long-term U.S. Treasury securities and other
governmental agency securities.
MVC-G
About MVC Capital, Inc.
MVC Capital (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 MVC's website at
www.mvccapital.com.
Safe Harbor Statement and Other Disclosures
This press release contains “forward-looking statements,” which
are statements other than statements of historical facts, are not
guarantees of future performance or results of BBDC, MVC Capital,
or, following the Transaction, the combined company, and involve a
number of risks and uncertainties, including statements regarding
the completion of the proposed Transaction. Such forward-looking
statements may include statements preceded by, followed by or that
otherwise include the words “may,” “might,” “will,” “intend,”
“should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,”
“anticipate,” “predict,” “potential,” “plan” or similar words.
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 made by BBDC
or MVC Capital with the SEC, including those contained in the Proxy
Statement (as defined below), when such documents become
available. Certain factors could cause actual results and
conditions to differ materially from those projected in these
forward-looking statements, including, among other things:
MVC Capital's ability to deliver value to shareholders; the
performance of MVC Capital's investments, including portfolio
companies in which the Company is invested; 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 (“SEC”).
In addition, certain factors related to the Merger could cause
actual results and conditions to differ materially from those
projected, including the uncertainties associated with (i) the
timing or likelihood of the Transaction closing, (ii) the expected
synergies and savings associated with the Transaction, (iii) the
expected elimination of certain expenses and costs due to the
Transaction, (iv) the percentage of MVC Capital's stockholders
voting in favor of the Transaction, (v) the percentage of BBDC's
stockholders voting in favor of the relevant Proposals (as defined
below), (vi) the possibility that competing offers or acquisition
proposals for MVC Capital will be made; (vii) the possibility that
any or all of the various conditions to the consummation of the
Transaction may not be satisfied or waived; (viii) risks related to
diverting the attention of BBDC's management or MVC Capital's
management from ongoing business operations, (ix) the risk that
stockholder litigation in connection with the Transaction may
result in significant costs of defense and liability, (x) the
future operating results of the combined company or BBDC's, MVC
Capital's or the combined company's portfolio companies, (xi)
regulatory approvals and other factors, (xii) changes in regional
or national economic conditions, including but not limited to the
impact of the COVID-19 pandemic, and their impact on the industries
in which BBDC and MVC Capital invest, (xiii) changes to the form
and amounts of MVC Capital's tax obligations, (xiv) changes in the
Euro-to-U.S. dollar exchange rate, (xv) fluctuations in the market
price of BBDC's common stock, (xvi) the Transaction's effect on the
relationships of BBDC or MVC Capital with their respective
investors, portfolio companies, lenders and service providers,
whether or not the Transaction is completed, (xvii) the reduction
in BBDC's stockholders' and MVC Capital's stockholders' percentage
ownership and voting power in the combined company, (xviii) the
challenges and costs presented by the integration of BBDC and MVC
Capital, (xix) the uncertainty of third-party approvals, (xx) the
significant Transaction costs, (xxi) the restrictions on BBDC's and
MVC Capital's conduct of business set forth in the definitive
merger agreement and (xxii) other changes in the conditions of the
industries in which BBDC and MVC Capital invest and other factors
enumerated in BBDC's and MVC Capital's filings with the SEC. You
should not place undue reliance on such forward-looking statements,
which are and will be based upon BBDC management’s and MVC Capital
management’s respective then-current views and assumptions
regarding future events and operating performance, and speak only
as of the date any such statement is made.
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 MVC Capital will achieve its
investment objective.
Additional Information and Where to Find It
This communication relates to a proposed business combination
involving BBDC and MVC Capital, along with related proposals for
which stockholder approval will be sought (collectively, the
“Proposals”). In connection with the proposed Transaction,
BBDC and MVC Capital plan to file with the SEC and mail to their
respective stockholders a joint proxy statement on Schedule 14A
(the “Proxy Statement”), and BBDC plans to file with the SEC a
registration statement on Form N-14 (the “Registration Statement”)
that will include the Proxy Statement and a prospectus of BBDC. The
Proxy Statement and the Registration Statement will each contain
important information about BBDC, MVC Capital, the proposed
Transaction and related matters. STOCKHOLDERS OF EACH
OF BBDC AND MVC CAPITAL ARE URGED TO READ CAREFULLY AND IN THEIR
ENTIRETY ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
PROXY STATEMENT AND THE REGISTRATION STATEMENT WHEN THEY BECOME
AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS THERETO,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BBDC, MVC
CAPITAL, THE TRANSACTION AND THE PROPOSALS.
Investors and security holders will be able to obtain the documents
filed with the SEC free of charge at the SEC’s web site at
http://www.sec.gov and, for documents filed by BBDC, from the BBDC
website at http://www.baringsbdc.com or for documents filed by MVC
Capital, from the MVC Capital website at
http://www.mvccapital.com.
Participants in the Solicitation
BBDC and MVC Capital and their respective directors, executive
officers and certain other members of management and employees of
Barings LLC, The Tokarz Group Advisers LLC and their respective
affiliates, may be deemed to be participants in the solicitation of
proxies from the stockholders of BBDC and MVC Capital in connection
with the Proposals. Information about the directors and executive
officers of BBDC is set forth in its proxy statement for its 2020
annual meeting of stockholders, which was filed with the SEC on
March 10, 2020. Information about the directors and executive
officers of MVC Capital is set forth in its proxy statement for its
2020 annual meeting of stockholders, which was filed with the SEC
on June 10, 2020. Information regarding the persons who may, under
the rules of the SEC, be considered participants in the
solicitation of BBDC’s and MVC Capital’s stockholders in connection
with the Proposals will be contained in the Proxy Statement and
other relevant materials to be filed with the SEC when such
documents become available. Investors should read the Proxy
Statement and Registration Statement carefully and in their
entirety when they become available before making any voting or
investment decisions. These documents may be obtained free of
charge from the sources indicated above.
No Offer or Solicitation
This press release is for informational purposes only.
This press is not, and under no circumstances is it to be construed
as, a prospectus or an advertisement and the communication of this
press release is not, and under no circumstances is it to be
construed as, an offer to sell or a solicitation of an offer to
purchase any securities in BBDC, MVC Capital or in any fund or
other investment vehicle. No offer of securities shall be made
except by means of a prospectus meeting the requirements of Section
10 of the U.S. Securities Act of 1933.
Investor Contact
Jackie Rothchild MVC Capital 914.510.9400
Or
Jeffrey Goldberger / Allison Soss KCSA Strategic
Communications 212.896.1249 / 212.896.1267
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