Alcentra Capital Corporation

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Alcentra Capital Corporation Announces Second Quarter 2018 Financial Results

Aug 6, 2018

NEW YORK, Aug. 6, 2018 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of debt financing solutions to middle-market companies based in the United States, today announced its financial results for the second quarter of 2018.

Second Quarter 2018 Financial Highlights

  • Total investment income of $7.3 million
  • Net investment income of $3.5 million, or $0.25 per share
  • Invested $19.6 million of capital into one new portfolio company, two add on investments and one loan refinancing
  • Received proceeds from repayments, amortizations on investments and a loan refinancing of $30.9 million
  • Paid regular quarterly dividend for the second quarter of 2018 of $0.18 per share on July 5, 2018
  • The Company's Board of Directors declared a dividend of $0.18 per share for the third quarter of 2018, which is payable on October 4, 2018 to stockholders of record as of September 28, 2018
  • Net asset value of $149.6 million, or $11.01 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.
  • Weighted average debt portfolio yield – 10.9%

Second Quarter 2018 Financial Results

For the three months ended June 30, 2018, total investment income was $7.3 million, a decrease of $1.0 million over the $8.3 million of total investment income for the three months ended June 30, 2017. This decrease was due to the continued yield compression in the markets and the continued transition of the portfolio. For the three months ended June 30, 2018, interest and PIK income comprised $6.7 million and other non-recurring income was $0.6 million as compared to $7.7 million of interest and PIK income and $0.6 of other non-recurring income as of June 30, 2017. Net investment income for the three months ended June 30, 2018 was $3.5 million or $0.25 per share as compared to $4.8 million or $0.36 per share for the three months ended June 30, 2017.

For the three months ended June 30, 2018, total expenses were $3.8 million. Interest and financing expenses for the quarter were $2.0 million, the base management fee, after the management fee waiver, was $0.9 million and there were no incentive fees earned. For the three months ended June 30, 2018, professional fees and other general and administrative expenses totaled $0.9 million of which $0.2 million was comprised of consulting fee expenses incurred in connection with our exploration of measures to lower our cost of capital and other shareholder-related matters.

For the three months ended June 30, 2018, we recorded a net realized loss and net change in unrealized depreciation from portfolio investments of $5.7 million after the provision for taxes.  As a result, our net decrease in net assets resulting from operations was $2.2 million after the provision for taxes.

During the quarter five investments were written down: Black Diamond ($1.6mm), My Alarm Capital ($3.1mm), SAFE ($0.2mm), Tunnel Hill ($1.7mm) and XGS ($0.8mm) for approximately a $7.4 million decrease.

Portfolio and Investment Activities

As of June 30, 2018, the fair value of our investment portfolio totaled $246.2 million and consisted of 35 investments including 27 companies, 5 broadly syndicated loans, and 3 rated debt securities in CLOs. The average portfolio investment size on a cost basis was $7.1 million and equity investments constituted 10.0% of the portfolio.  We received proceeds from repayments, amortizations on investments and a loan refinancing of $30.9 million during the three months ended June 30, 2018.  This included the sale of Red Ventures, Inc., the repayment of debt from Lugano Diamonds, Superior Controls and Cirrus Medical Staffing, the assignment of 25% of Healthcare Associates of Texas and the refinancing of Pharmalogic Holding.

New and add-on investments including one loan re-financing totaled $19.6 million during the quarter ended June 30, 2018 included the following:

  • Manna Pro Products, Inc. - $1.3 million in L+6.00% 1st lien secured debt
  • Healthcare Associates of Texas (HCAT) - $1.0 million of the delayed draw commitment
  • NTI - $1.2 million of the delayed draw commitment
  • Pharmalogic Holdings - refinance $16.1 million subordinated fixed debt (12%) to floating 2nd lien debt (L + 8.0%)

As of June 30, 2018, Alcentra had three debt investments, Show Media, Inc., Southern Technical Institute, Inc., 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 June 30, 2018 filed with the SEC.

Liquidity and Capital Resources

At June 30, 2018, Alcentra had $12.7 million in cash and cash equivalents, $58.6 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.

Subsequent Events

  • On July 5, 2018, Alcentra paid a dividend to shareholders of record as of June 29, 2018 of $0.18 per share
  • On July 10, 2018, a $6.0 million 2nd Lien investment was made into Value Based Care Solutions ("VBC") at L + 8.125%
  • On August 6, 2018 the Company's Board of Directors declared a dividend of $0.18 per share for the third quarter of 2018, which is payable on October 4, 2018 to stockholders of record as of September 28, 2018
  • As of August 6, 2018, $0.3 million of common stock had been repurchased by the Company through its $5.0 million share repurchase program.

Second 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 August 7, 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 8777017.

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 August 7, 2019.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to middle-market companies, which the Company generally defines as U.S. based companies having between $15.0 million and $75.0 million of EBITDA. 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
June 30, 2018
(Unaudited)


As of
December 31, 2017

Assets







Portfolio investments, at fair value







Non-controlled, non-affiliated investments, at fair value (cost of $222,388,011 and $265,675,598, respectively)


$

212,917,961


$

252,325,403

Non-controlled, affiliated investments, at fair value (cost of $40,536,590 and $51,734,635, respectively)



17,987,393



19,972,905

Controlled, affiliated investments, at fair value (cost $15,583,666 and $15,806,301, respectively)



15,254,506



15,256,237

Cash



12,704,301



13,882,956

Dividends and interest receivable



2,715,171



1,942,300

Receivable for investments sold



669,733



669,733

Deferred financing costs



419,191



514,241

Deferred tax asset



5,955,112



4,934,962

Income tax asset



644,319



748,408

Prepaid expenses and other assets



208,562



79,005

Total Assets


$

269,476,249


$

310,326,150








Liabilities






Credit facility payable


$

58,553,273


$

89,703,273

Notes payable (net of deferred note offering costs of $1,036,205 and $1,252,165, respectively)



53,963,795



53,747,835

Other accrued expenses and liabilities



523,720



447,589

Directors' fees payable



36,125



68,917

Professional fees payable



643,322



548,455

Interest and credit facility expense payable



1,158,173



1,248,791

Management fee payable



926,841



1,265,172

Income-based incentive fees payable



1,294,985



1,294,985

Distributions payable



2,449,591



3,561,305

Unearned structuring fee revenue



331,680



725,653

Total Liabilities


$

119,881,505


$

152,611,975








Commitments and Contingencies (Note 12)














Net Assets







Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,582,751 and 14,222,945 shares outstanding, respectively)



13,583



14,223

Additional paid-in capital



202,161,682



206,570,701

Accumulated net realized loss



(31,726,764)



(11,436,155)

Undistributed net investment income



6,699,149



4,449,122

Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $4,795,501 and $3,778,273 as of June 30, 2018 and December 31, 2017, respectively



(27,552,906)



(41,883,716)

Total Net Assets



149,594,744



157,714,175

Total Liabilities and Net Assets


$

269,476,249


$

310,326,150








Net Asset Value Per Share


$

11.01


$

11.09

 

 

Alcentra Capital Corporation and Subsidiary


Consolidated Statements of Operations



For the three months ended June 30, 2018
(Unaudited)


For the three months ended June 30, 2017
 (Unaudited)


For the six months ended June 30, 2018
(Unaudited)


For the six months ended June 30, 2017
(Unaudited)

Investment Income:













From non-controlled, non-affiliated investments:













Interest income from portfolio investments

$

5,865,711


$

6,187,702



$

11,608,097


$

13,192,379

Paid-in-kind interest income from portfolio investments


45,481



302,190




245,131



650,382

Other income from portfolio investments


611,812



587,782




2,119,116



1,197,747

Dividend income from portfolio investments


30,756



29,049




61,512



56,569

From non-controlled, affiliated investments:













Interest income from portfolio investments


129,080



594,972




206,533



846,750

Paid in-kind income from portfolio investments


90,004



63,345




213,130



450,381

From controlled, affiliated investments:













Interest income from portfolio investments


481,106



573,069




981,996



978,904

Paid in-kind income from portfolio investments









166,445

Total investment income


7,253,950



8,338,109




15,435,515



17,539,557














Expenses:













Management fees


1,036,122



1,229,648




2,270,985



2,479,217

Income-based incentive fees









653,911

Professional fees


379,082



226,849




733,152



493,188

Valuation services


(10,038)



68,345




53,933



169,741

Interest and credit facility expense


1,745,485



1,513,067




3,440,372



3,039,974

Amortization of deferred financing costs


103,570



288,048




207,551



573,611

Directors' fees


116,826



74,344




213,028



142,480

Insurance expense


56,519



60,102




112,507



124,583

Amortization of deferred note offering costs


119,267



105,418




245,961



203,828

Consulting fees


176,702






481,740



Other expenses


156,108



98,437




525,819



392,557

Total expenses


3,879,643



3,664,258




8,285,048



8,273,090

Waiver of management fees


(109,281)



(169,524)




(109,281)



(169,524)

Net expenses


3,770,362



3,494,734




8,175,767



8,103,566

Net investment income


3,483,588



4,843,375




7,259,748



9,435,991


















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

Net realized gain (loss) on:













Non-controlled, non-affiliated investments


(10,108,277)



30,002




(10,123,092)



(1,019,237)

Non-controlled, affiliated investments


(10,167,517)






(10,167,517)



Controlled, affiliated investments









Net realized gain (loss) from portfolio investments


(20,275,794)



30,002




(20,290,609)



(1,019,237)

Net change in unrealized appreciation (depreciation) on:













Non-controlled, non-affiliated investments


4,213,571



(8,084,209)




3,880,145



(9,200,410)

Non-controlled, affiliated investments


9,319,907



(2,168,452)




9,212,533



(2,986,733)

Controlled, affiliated investments




328,527




220,904



475,526

Net change in unrealized appreciation (depreciation) from portfolio investments


13,533,478



(9,924,134)




13,313,582



(11,711,617)

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


1,019,717



(102,309)




1,017,228



(827,125)

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


(5,722,599)



(9,996,441)




(5,959,799)



(13,557,979)

Net Increase (Decrease) in Net Assets Resulting from Operations

$

(2,239,011)


$

(5,153,066)



$

1,299,949


$

(4,121,988)















Basic and diluted:













Net investment income per share

$

0.25


$

0.36



$

0.52


$

0.68

Earnings (loss) per share

$

(0.16)


$

(0.38)



$

0.09


$

(0.30)

Weighted Average Shares of Common Stock Outstanding


13,725,423



13,612,059




13,960,729



13,783,414

Dividends declared per common share

$

0.180


$

0.340



$

0.360


$

0.710

 

SOURCE Alcentra Capital Corporation

For further information: Vijay Rajguru, Chief Executive Officer, Alcentra Capital, 212 922-4215 or Ellida McMillan, Chief Financial Officer, Alcentra Capital, 212 922-6644


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