Alcentra Capital Corporation

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Alcentra Capital Corporation Announces First Quarter 2018 Financial Results

May 7, 2018

NEW YORK, May 7, 2018 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of debt financing solutions to lower middle-market and middle-market companies based in the United States, today announced its financial results for the first quarter of 2018.

First Quarter 2018 Financial Highlights

  • Total investment income of $8.2 million; $1.4 million was from non-recurring fees
  • Net investment income of $3.8 million, or $0.27 per share
  • Invested $29.6 million of capital into one new portfolio company, two add on investments, six broadly syndicated loans, and three rated CLO debt securities
  • Received proceeds from repayments, loan dispositions, and amortizations on investments of $47.6 million
  • Paid regular quarterly dividend for the first quarter of 2018 of $0.18 per share on April 4, 2018
  • The Company's Board of Directors declared a dividend of $0.18 per share for the second quarter of 2018, which is payable on July 5, 2018 to stockholders of record as of June 29, 2018
  • Net asset value of $157.2 million, or $11.22 per share
  • On May 4, 2018, the Adviser agreed to a permanent 25 basis point reduction, effective as of May 1, 2018, across all of the base management fee breakpoints under the Company's investment advisory agreement. The Adviser has also agreed to an additional temporary 25 basis point reduction, from May 1, 2018 to April 30, 2019, across all of these base management fee breakpoints.
  • As of May 4, 2018, $3.2 million of common stock had been repurchased by the Company through its $5.0 million share repurchase program.

First Quarter 2018 Financial Results

For the three months ended March 31, 2018, total investment income was $8.2 million, a decrease of $1.0 million over the $9.2 million of total investment income for the three months ended March 31, 2017. This decrease was due to the continued yield compression in the markets, the previously announced conversion of debt to equity of Conisus, LLC and My Alarm Center, LLC as well as the loss of investment income from GST Autoleather, LLC, Southern Technical Institute, and Media Storm, LLC. For the three months ended March 31, 2018, interest and PIK income comprised $6.7 million and other non-recurring income was $1.5 million. Net investment income for the three months ended March 31, 2018 was $3.8 million or $0.27 per share as compared to $4.6 million or $0.34 per share for the three months ended March 31, 2017.

For the three months ended March 31, 2018, total expenses were $4.4 million. Interest and financing expenses for the quarter was $1.9 million, the base management fee was $1.2 million and there were no incentive fees earned. For the three months ended March 31, 2018, professional fees and other general and administrative expenses totaled $1.2 million of which $0.305 million was comprised of consulting fee expenses were incurred in connection with our exploration of measures to lower our cost of capital and other shareholder-related matters.

For the three months ended March 31, 2018, we recorded a net realized loss on investments of $0.015 million. We also recorded a net change in unrealized depreciation from portfolio investments of $0.2 million.  As a result, our net increase in net assets resulting from operations was $3.5 million after the provision for taxes.

Portfolio and Investment Activities

As of March 31, 2018, the fair value of our investment portfolio totaled $270.2 million and consisted of 37 investments including 28 companies, six broadly syndicated loans, and three rated debt securities in CLOs. The average portfolio investment size on a cost basis was $7.9 million and equity investments constituted 10.8% of the portfolio.  We received proceeds from repayments, loan dispositions, and amortizations on investments of $47.6 million during the three months ended March 31, 2018.  This included the sale of Stancor, Inc. and IGT and the repayment of debt from Metal Powder Products and NextCare Holdings, Inc.

New and add-on investments totaling $29.6 million during the quarter ended March 31, 2018 included the following:

  • BayMark Health Services - $7.0 million in L+8.25% 2nd lien secured debt
  • Healthcare Associates of Texas (HCAT) - $2.9 million of the delayed draw commitment
  • Cirrus Medical Staffing - $1.4 million of the delayed draw commitment
  • FeeCo - $1.8 million in L+8.5% 2nd lien secured debt
  • West Corporation - $2.0 million in L+3.5% 1st lien secured debt
  • Weight Watchers International - $2.0 million in L+4.75% 1st lien secured debt
  • Lumileds - $2.0 million in L+3.5% 1st lien secured debt
  • Asurion - $3.1 million in L+6.0% 2nd lien secured debt
  • Red Ventures LLC - $2.0 million in L+4.0% 1st lien secured debt
  • BlueMountain CLO 2016-3 Ltd. - Invested $2.0 million with a yield of L+6.85%
  • Goldentree Loan Management US Clo 2 Ltd. - Invested $1.9 million with a yield of L+4.7%
  • OZLM Funding IV Ltd. - Invested $1.4 million with a yield of L+6.3%

As of March 31, 2018, Alcentra had four debt investments, Show Media, Inc., Southern Technical Institute, Inc., Media Storm, LLC, and Black Diamond Rentals on non-accrual status.

A risk rating of the portfolio companies is available in our website presentation (https://investors.alcentracapital.com/events-presentations) and in the MD&A section of the Form 10-Q for the quarter ended March 31, 2018 filed with the SEC.

Liquidity and Capital Resources

At March 31, 2018, Alcentra had $13.4 million in cash and cash equivalents, $55.4 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes; resulting in a leverage ratio of 0.7x.

Subsequent Events

  • On April 2, 2018, Cirrus Medical Staffing paid down $290,909 of their deferred draw facility.
  • On April 4, 2018, Alcentra paid a dividend to shareholders of record as of March 30, 2018 of $0.18 per share.
  • On April 4, 2018, Superior Controls paid back $3 million of their 1st lien debt.
  • On April 30, 2018, Cirrus Medical Staffing paid down $363,636 of their revolver.
  • On May 1, 2018, T. Ulrich Brechbuhl stepped down as a member of the Company's Board of Directors in order to accept his appointment as Counselor to the Office of the Secretary of State. Subsequently the Board of Directors decreased the size of the board from six to five members.
  • On May 4, 2018, the Board of Directors approved the 2018 second quarter dividend of $0.18 per share for shareholders of record June 29, 2018 and payable July 5, 2018.
  • On May 4, 2018, the Adviser agreed to a permanent 25 basis point reduction, effective as of May 1, 2018, across all of the base management fee breakpoints under the Company's investment advisory agreement. The Adviser has also agreed to an additional temporary 25 basis point reduction, from May 1, 2018 to April 30, 2019, across all of these base management fee breakpoints.
  • As of May 4, 2018, $3.2 million of common stock had been repurchased by the Company through its $5.0 million share repurchase program.
  • On May 4, 2018, Paul Hatfield, the Co-Chief Investment Officer at the Adviser, resigned as the chairman and a member of our board of directors. The Company's Board of Directors appointed Vijay Rajguru, the Co-Chief Investment Officer at the Adviser, to the vacancy created by Mr. Hatfield's resignation and elected him as the chairman of the Board of Directors. Mr. Rajguru was recently appointed to head up the Adviser's US direct lending efforts and his transition onto the Company's Board of Directors is a direct outgrowth of this new appointment as well as the logistical and administrative benefits relating to board meetings and related duties given the significant amount of time that he spends in the US.  

First Quarter 2018 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 9:30 am ET on May 8, 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 8399369#.

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 May 8, 2019.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies 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's investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Alcentra seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.

Alcentra 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 has elected to be treated as a regulated investment company, under Subchapter M of the Internal Revenue Code of 1986.

FORWARD-LOOKING STATEMENTS

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's filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra 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.

 

Alcentra Capital Corporation and Subsidiary


Consolidated Statements of Assets and Liabilities



As of
March 31, 2018
(Unaudited)


As of
December 31,
2017

Assets

Portfolio investments, at fair value

     Non-controlled, non-affiliated investments, at fair value (cost of $249,671,529 and 
     $265,675,598, respectively)


$

235,987,908


$

252,325,403

     Non-controlled, affiliated investments, at fair value (cost of $50,590,919 and 
     $51,734,635, respectively)



18,721,815



19,972,905

     Controlled, affiliated investments, at fair value (cost $15,806,300 and $15,806,301, 
     respectively)



15,477,140



15,256,237

Cash



13,421,745



13,882,956

Dividends and interest receivable



1,634,770



1,942,300

Receivable for investments sold



644,733



669,733

Deferred financing costs



410,260



514,241

Deferred tax asset



4,932,473



4,934,962

Income tax asset



669,331



748,408

Prepaid expenses and other assets



45,517



79,005

     Total Assets


$

291,945,692


$

310,326,150


Liabilities

Credit facility payable


$

55,403,273


$

89,703,273

Notes payable (net of deferred note offering costs of $1,125,471 and $1,252,165,
respectively)



53,874,529



53,747,835

Payable for investments purchased



16,621,902



Other accrued expenses and liabilities



917,732



447,589

Directors' fees payable



72,250



68,917

Professional fees payable



551,938



548,455

Interest and credit facility expense payable



1,527,558



1,248,791

Management fee payable



1,234,863



1,265,172

Income-based incentive fees payable



1,294,985



1,294,985

Distributions payable



2,560,130



3,561,305

Unearned structuring fee revenue



660,983



725,653

Consulting Fees payable



43,149



     Total Liabilities


$

134,763,292


$

152,611,975


Commitments and Contingencies (Note 12)


Net Assets

Common stock, par value $0.001 per share (100,000,000 shares authorized, 14,010,374
and 14,222,945 shares issued and outstanding, respectively)



14,010



14,223

Additional paid-in capital



205,060,309



206,570,701

Accumulated net realized loss



(11,450,970)



(11,436,155)

Undistributed net investment income



5,665,152



4,449,122

Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for
deferred taxes of $3,775,784 and $3,778,273 as of March 31, 2018 and December 31,
2017, respectively



(42,106,101)



(41,883,716)

     Total Net Assets



157,182,400



157,714,175

     Total Liabilities and Net Assets


$

291,945,692


$

310,326,150


Net Asset Value Per Share


$

11.22


$

11.09







 

Alcentra Capital Corporation and Subsidiary


Consolidated Statements of Operations



For the three months
ended March 31, 2018
(Unaudited)


For the three months
ended March 31, 2017
(Unaudited)

Investment Income:

From non-controlled, non-affiliated investments:

     Interest income from portfolio investments


$

5,742,386


$

7,004,677

     Paid-in-kind interest income from portfolio investments



199,650



348,192

     Other income from portfolio investments



1,507,304



609,965

     Dividend income from portfolio investments



30,756



27,520

From non-controlled, affiliated investments:

     Interest income from portfolio investments



77,453



251,778

     Paid in-kind income from portfolio investments



123,126



387,036

     Other income from portfolio investments





From controlled, affiliated investments:

     Interest income from portfolio investments



500,890



405,835

     Paid in-kind income from portfolio investments





166,445

     Other income from portfolio investments





     Total investment income



8,181,565



9,201,448


Expenses:

Management fees



1,234,863



1,249,569

Income-based incentive fees





653,911

Professional fees



354,070



266,339

Valuation services



63,971



101,396

Interest and credit facility expense



1,694,887



1,526,907

Amortization of deferred financing costs



103,981



285,563

Directors' fees



96,202



68,136

Insurance expense



55,988



64,481

Amortization of deferred note offering costs



126,694



98,410

Consulting Fees



305,038



Other expenses



369,711



294,120

     Total expenses



4,405,405



4,608,832

     Net investment income


$

3,776,160


$

4,592,616


Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments

Net realized gain (loss) on:

     Non-controlled, non-affiliated investments



(14,815)



(1,049,239)

     Non-controlled, affiliated investments





     Controlled, affiliated investments





     Net realized gain (loss) from portfolio investments



(14,815)



(1,049,239)

Net change in unrealized appreciation (depreciation) on:

     Non-controlled, non-affiliated investments



(333,426)



(1,116,201)

     Non-controlled, affiliated investments



(107,374)



(818,281)

     Controlled, affiliated investments



220,904



146,999

     Net change in unrealized appreciation (depreciation) from 
     portfolio investments



(219,896)



(1,787,483)

     Benefit/(Provision) for taxes on unrealized gain (loss) on 
     investments



(2,489)



(724,816)

     Net realized gain (loss) and net change in unrealized appreciation 
     (depreciation) from portfolio investments



(237,200)



(3,561,538)

     Net Increase (Decrease) in Net Assets Resulting from Operations


$

3,538,960


$

1,031,078


Basic and diluted:

     Net investment income per share


$

0.27


$

0.34

     Earnings per share


$

0.25


$

0.08

     Weighted Average Shares of Common Stock Outstanding



14,198,651



13,438,800

Dividends declared per common share


$

0.180


$

0.370


 

SOURCE Alcentra Capital Corporation

For further information: David Scopelliti, Chief Executive Officer, Alcentra Capital, 212 922-6237; Ellida McMillan, Chief Financial Officer, Alcentra Capital, 212 922-6644


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