NEW YORK, March 14, 2018 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market and middle-market companies based in the United States, today announced its financial results for the fourth quarter and full year of 2017.
Fourth Quarter 2017 Financial Summary
- Total investment income of $8.2 million
- Net investment income of $4.0 million, or $0.28 per share based on weighted average shares of common stock outstanding
- Net decrease in net assets resulting from operations of ($13.4) million
- Invested $36.8 million in debt securities; one new investment, one refinancing and one add on investment
- Received proceeds from repayments of $15.7 million
- Paid quarterly dividend for the Q4 2017 of $0.25 per share on January 4, 2018
- On November 16, 2017, the Board of Directors expanded the open market stock repurchase program by $2.5 million to $5.0 million. Net asset value of $157.7 million, or $11.09 per share, which is down from $12.27 in the third quarter of 2017
- Weighted Average Debt Portfolio Yield – 11.3%
Full Year 2017 Financial Summary
- Total investment income of $33.4 million
- Net Investment income of $18.3 million, or $1.32 per share
- Net decrease in net assets resulting from operations of ($19.1) million
- Invested $135.5 million in debt and equity securities, including investments in 4 new portfolio companies
- Received proceeds from repayments of $90.1 million
- Paid dividends totaling $1.30 per share (inclusive of $0.03 special dividend)
First Quarter 2018 Dividend
- On March 8, 2018, the Company's Board of Directors declared a quarterly dividend of $0.18 per share for the first quarter of 2018, which is payable on April 4, 2018 to stockholders of record as of March 30, 2018.
On March 8, 2018, the Board of Directors reduced the first quarter 2018 quarterly dividend to $0.18 per share. David Scopelliti, the Company's CEO, stated, "The board's view on the dividend policy is to make distributions to shareholders in line with the earnings potential of the portfolio. The market environment and yield profile has changed since the initial dividend rate of $0.34 per share was established following our IPO in May 2014. Contributing to the dividend reduction this quarter was (i) lower earnings associated with the portfolio of high yielding unsecured subordinated debt (ii) further credit markdowns in Q4 2017, (iii) ongoing repayments of high coupon performing loans, (iv) rotation to senior secured loans, which have lower pricing than the subordinated debt portfolio and (v) overall private credit market yield compression. Given that we believe we are in the late stages of the credit cycle, we are pursuing a portfolio construction with more senior secured debt to reduce risk of principal loss or impairment. This strategy will allow us to generate income without reducing the quality of new investments by reaching for yield. Mr. Scopelliti further stated, "We continue to be committed to creating shareholder value through share repurchases and aligning the dividend with the current earnings power of the portfolio."
Fourth Quarter 2017 Financial Results
For the three months ended December 31, 2017, total investment income was $8.2 million, a decrease of $2.7 million over the $10.9 million of total investment income for the three months ended December 31, 2016. This decrease was primarily attributable to the conversion of Conisus debt to equity, the addition of Southern Technical Institute to non-accrual status, the further write down of Media Storm along with a shift in timing of the closing of new deals. Interest and PIK income comprised $6.2 million and $1.3 million, respectively and other income was $0.7 million. Net investment income for the three months ended December 31, 2017 was $4.0 million ($0.28 per share based on average shares outstanding of 14.2 million).
For the three months ended December 31, 2017, net expenses were $4.2 million, a decrease of $0.6 million from the $4.8 million of net expenses for the three months ended December 31, 2016. This decrease is due largely to the decrease in earned incentive fees. Interest and financing expenses for the quarter was $2.1 million and the base management fee was $1.3 million. Professional fees and other general and administrative expenses totaled $0.8 million for the three months ended December 31, 2017.
During the quarter, we also recorded a net change in unrealized depreciation from portfolio investments of $15.6 million attributable largely to unrealized depreciation of our debt investments in Southern Technical Institute, Media Storm and Conisus. The net decrease in net assets resulting from operations post benefit for taxes during the three months ended December 31, 2017 was ($13.4) million.
Portfolio and Investment Activities
As of December 31, 2017, the fair value of our investment portfolio totaled $287.6 million and consisted of 29 portfolio companies. The average portfolio investment at amortized cost was $11.5 million and equity constituted 10.1% of the fair value of the portfolio. During the fourth quarter, we invested $36.8 million in debt and equity investments, including one new investment and two add-on investments and received proceeds from repayments on investments of $15.7 million. As of December 31, 2017, the weighted average yield on debt investments was 11.3%.
New and add-on investments during the quarter included the following:
- Cirrus Medical Staffing - $19.3 million in L+8.25% 1st lien secured debt
- Healthcare Associates of Texas - Refinanced our 2nd lien debt at 12.25% with 1st lien secured debt at L+8.0%; $15.0 million of additional capital invested
- Medsurant - Additional $2.5 million of 2nd lien secured debt at 13.0%
As of December 31, 2017, Alcentra had three debt investments on non-accrual - Show Media, Southern Technical Institute, Media Storm.
Liquidity and Capital Resources
At December 31, 2017, Alcentra had $13.9 million in cash and cash equivalents, $89.7 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.
- On January 3, 2018, Stancor, Inc. First Lien debt was sold at par for $4.1 million.
- On January 3, 2018, IGT First Lien debt was sold at par for $7.8 million.
- On January 3, 2018, $6.0 million of the outstanding Cirrus Medical Staffing First Lien debt was syndicated.
- On January 4, 2018, Alcentra paid a dividend to shareholders of record as of December 29, 2017 of $0.25 per share.
- On February 1, 2018, Alcentra funded an incremental $1.5 million to Healthcare Associates of Texas LLC's revolver commitment.
- On February 15, 2018, Metal Powder Products LLC repaid its 2nd Lien debt totaling $8.3 million and a prepayment fee of $0.250 million.
- On February 28, 2018, NextCare Holdings, Inc. repaid its 2nd Lien debt totaling $15.9 million and a prepayment fee of $1.1 million.
- On March 2, 2018 Alcentra invested $7.0 million in BayMark Health Services (L+8.25 2nd Lien).
- On March 5, 2018, Alcentra syndicated a net $1.2 million of Cirrus Medical Staffing First Lien debt.
- On March 8, 2018, the Board of Directors approved the 2018 first quarter dividend of $0.18 per share for shareholders of record March 29, 2018 and payable April 4, 2018.
- On March 12, 2018, Battery Solutions, Inc. repaid a portion of its subordinated debt totaling $1.25 million.
Fourth Quarter 2017 Financial Results Conference Call
Management will host a conference call to discuss the operating and financial results at 10:00 am ET on March 15, 2018. To participate in the conference call, please dial (844) 832-0218 approximately 10 minutes prior to the call. International callers should dial (484) 756-4314. Please reference conference ID 5618338#.
A live webcast of the conference call will be available at http://investors.alcentracapital.com/events-presentations . Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.
An archived webcast replay will be available on the Company's website until March 14, 2019.
ABOUT ALCENTRA CAPITAL CORPORATION
Alcentra Capital Corporation provides debt financing solutions to lower middle and middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $250.0 million. Alcentra Capital Corporation's investment objective is to generate both current income and to a lesser extent capital appreciation primarily by making direct investments in lower middle and middle-market companies in the form of first lien, second lien, unitranche and, to a lesser extent given the current credit environment, subordinated debt and equity investments. Alcentra seeks to partner with management teams, financial sponsors and other stakeholders by providing financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.
Alcentra Capital Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. In addition, for tax purposes, Alcentra Capital Corporation has elected to be treated as a regulated investment company, under Subchapter M of the Internal Revenue Code of 1986.
This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Alcentra Capital Corporation's filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra Capital Corporation undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
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SOURCE Alcentra Capital Corporation