NEW YORK, May 6, 2019 /PRNewswire/ -- Alcentra Capital
Corporation (NASDAQ: ABDC) (the "Company"), a provider of debt
financing solutions to middle-market companies based primarily in
the United States, today announced
its financial results for the first quarter of 2019.
First Quarter Highlights
- Total investment income of $6.4
million
- Net investment income of $2.9
million, or $0.22 per
share
- Invested approximately $26.0
million of capital into 5 new portfolio investments
- Received proceeds from repayments, loan dispositions and
amortizations on investments of approximately $50.0 million
- Net asset value of $143.9
million, or $11.17 per
share
- Weighted average debt portfolio yield of approximately
11.2%
- Repurchased 229,729 shares during the quarter as part of the
share repurchase program authorized on November 5, 2018; repurchased approximately 9.5%
of shares outstanding since January 1,
2018
Vijay Rajguru, Chairman of the
Company, stated, "The Board is pleased with the progress management
continues to make in rotating our legacy assets and stabilizing
book value per share. At the same time, as management continues to
focus on increasing value for stockholders, the Board believes it
is also important to explore additional options that may be
available to further enhance the value of the Company. As a result,
and as we previously announced, the Board decided to enter into a
formal process to evaluate potential strategic alternatives and the
process is currently ongoing."
Suhail A. Shaikh, Chief Executive
Officer of the Company, stated, "We are pleased with our
performance in the first quarter of 2019, including successfully
exiting several of our legacy investments, reducing the size of our
concentrated positions and adding new investments consistent with
our revised strategy – all with the backdrop of a relatively light
volume quarter in the direct lending market."
First Quarter 2019 Financial Results
For the three months ended March 31,
2019, total investment income was $6.4 million, a decrease of $1.8 million from the $8.2
million of total investment income for the three months
ended March 31, 2018. This decrease
was due primarily to two prepayment penalties ($1.4 million) received in the first quarter of
2018 along with the continued transition of the portfolio to
lower-yielding senior secured loans. For the three months ended
March 31, 2019, interest and PIK
income comprised $6.2 million and
other non-recurring income was $0.2
million. Net investment income for the three months ended
March 31, 2019 was $2.9 million, or $0.22 per share, as compared to $3.8 million, or $0.27 per share, for the three months ended
March 31, 2018.
For the three months ended March 31,
2019, total net expenses were $3.5
million, a decrease of $0.9
million from the $4.4 million
of total net expenses for the three months ended March 31, 2018. Net expenses decreased primarily
due to the permanent management fee reduction and temporary
management fee waiver that commenced in May
2018. The base net management fee was $0.7 million and there was a reversal of
previously accrued incentive fees of $0.5
million. For the three months ended March 31, 2019, higher professional fees and
other general and administrative expenses totaled $1.6 million, an increase of $0.3 million from March
31, 2018. The increase was due primarily to an increase in
professional, director and other of fees $0.5 million which was offset by a decrease in
consulting fees of $0.2 million. The
Company expects director fees, insurance fees, consulting fees and
other professional expenses to increase on a go-forward basis in
light of recent stockholder activist activities and the Board's
formal review process to evaluate strategic alternatives for the
Company.
For the three months ended March 31,
2019, the Company recorded a net realized loss and net
change in unrealized depreciation from portfolio investments of
$0.9 million after the provision for
taxes. As a result, the Company's net increase in net assets
resulting from operations was $2.0
million for the three months ended March 31, 2019.
Portfolio and Investment Activities
As of March 31, 2019, the fair
value of the Company's investment portfolio totaled $213.7 million and consisted of 29 investments
including 28 companies and 1 rated debt security in a CLO. The
average portfolio investment size on a cost and fair market basis
was $7.7 million and $7.5 million, respectively. The Company received
proceeds from repayments, loan dispositions, and amortizations on
investments of approximately $50.0
million during the three months ended March 31, 2019.
New and add-on investments totaling approximately $26.0 million during the quarter ended
March 31, 2019 included the
following:
- Aegis Sciences Corporation – A first lien term loan
($7.3 million) at LIBOR + 5.50%.
Aegis operates a forensic toxicology and healthcare sciences
laboratory that provides science-driven drug testing and consulting
services in the United
States.
- Cambium Learning Group – A second lien term loan ($4.7 million) at LIBOR + 8.50%. Cambium Learning
Group is a leading provider of digital resources and instructional
products for Pre-k through 12 schools, districts, teachers and
students.
- Clanwilliam Group Ltd. – Add-on first lien investment
($0.3 million) at EURIBOR + 7.00%.
Clanwillian is an existing portfolio company.
- Institutional Shareholder Services – A first lien term loan
($3.0 million) at LIBOR + 4.50% and a
second lien term loan ($1.9 million)
at LIBOR + 8.50%. ISS provides proxy advisory, corporate governance
and ESG analytic solutions to financial market participants.
- GGC Aperio Holdings – A first lien term loan ($8.5 million) at LIBOR + 5.0%. Aperio manages
domestic and international equity portfolios for ultra-high net
worth individuals via large financial intermediaries, including
registered investment advisors, broker-dealers and family
offices.
As of March 31, 2019, the Company
had one debt investment (Southern Technical Institute, Inc.) on
non-accrual status.
A risk rating of the portfolio companies is available on the
Company's 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, 2019 filed with the
SEC.
Liquidity and Capital Resources
At March 31, 2019, the Company had
$4.4 million in cash, $28.6 million of borrowings outstanding on its
$115.0 million senior secured
revolving credit facility and $55.0
million outstanding of Alcentra Capital InterNotes.
Review of Strategic Alternatives
The Company's Board, led by its Committee of Independent
Directors, continues to explore a variety of strategic alternatives
to enhance long-term stockholder value, including a sale of part or
all of the Company, a business combination and other strategic
transactions. To assist the Company in this process, the Committee
of Independent Directors has retained Houlihan Lokey as its
financial advisor. There is no assurance that the review will lead
to a transaction. No specific timetable has been set and the
Company does not expect to comment further on the review of
strategic alternatives or periodically provide updates to the
market with additional information unless and until the Board has
approved a specific transaction or otherwise deems disclosure to be
appropriate or required by law.
Subsequent Events
- On April 1 and 2, 2019, the
Company received total funds of $7.0
million in connection with a debt and equity repayment from
Champion ONE, (consisting of $1.1
million in equity value and the principal amount of
$5.9 million, respectively).
- On April 3, 2019, Superior
Controls, Inc. repaid its debt and equity for $8.5 million (consisting of the principal amount
of $7.1 million and $1.4 million in equity value).
- On April 4, 2019, the Company
paid a dividend to stockholders of record as of March 29, 2019 of $0.18 per share.
- On April 4, 2019, the Board
announced that it had entered into a formal review process to
evaluate strategic alternatives for the Company, including a sale
of the Company, a business combination and other strategic
transactions. The Board authorized its Committee of Independent
Directors to lead the process.
- On April 10, 2019, the Company
sold $5.0 million of the first lien
loan of Impact Group at 99.5% of par value.
- On May 3, 2019, the Board
approved the 2019 second quarter dividend of $0.18 per share for stockholders of record as of
June 28, 2019, payable July 3, 2019. The Board also approved a special
spillover dividend of $0.15 per share
for the stockholders of record as of June
28, 2019, payable July 3,
2019. The special dividend was declared by the Board as a
result of overearning the quarterly dividend in 2018.
- On May 3, 2019, the Adviser
agreed to a continued temporary waiver of 25 basis points across
all of the base management fee breakpoints under the Investment
Advisory Agreement, effective from May 1,
2019 to April 30, 2020.
First Quarter 2019 Financial Results Conference Call
Management will host a conference call to discuss the Company's
operating and financial results at 9:30 am
ET on May 7, 2019. 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
3891513#.
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 7, 2020.
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. The Company's investment objective is to
provide attractive risk-adjusted returns by generating current
income from its debt investments. The Company 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 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, the
Company has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute "forward-looking
statements," which relate to future events, including in connection
with the exploration of strategic alternatives, or the Company's
future performance or financial condition. These statements speak
only as of the date of this press release, are based on the
Company's current plans, expectations, estimates, projections,
beliefs and assumptions and involve risks and uncertainties that
could cause actual future events or results to be different than
those described in or implied by such forward-looking statements,
including those relating to the impact of activist stockholder
activities and the strategic alternatives review process on, among
other things, the Company's professional and consulting fees and
expenses and on management distractions, the nature and timing of
any possible transaction or other strategic alternative, or of any
potential or anticipated benefits from any such transaction or
other alternative, as well as those risks and uncertainties
described in the Company's annual report on Form 10-K filed with
the Securities and Exchange Commission (the "SEC") on March 12, 2019 and in the Company's other filings
made with the SEC from time to time. As a result, any
forward-looking statements are not guarantees and there can be no
assurance that the strategic alternatives review process will
result in a transaction or change in the Company's announced
strategy. In addition, there is no assurance that the Company will
purchase additional shares at any specific discount levels or in
any specific amounts under its repurchase program. There is no
assurance that the market price of the Company's shares, either
absolutely or relative to net asset value, will increase as a
result of any share repurchases, or that any repurchase program
will enhance stockholder value over the long term. You should
not place undue reliance on any forward-looking statements. Except
as required by applicable law or regulation, the Company does not
undertake any obligation to update its forward-looking statements
to reflect future events or circumstances.
Alcentra Capital
Corporation and Subsidiary
|
|
Consolidated
Statements of Assets and Liabilities
|
|
|
As of
March 31, 2019
(Unaudited)
|
|
As of
December 31,
2018
|
Assets
|
|
Portfolio
investments, at fair value
|
|
Non-controlled,
non-affiliated investments, at fair value (cost of $206,648,256
and
$212,280,172, respectively)
|
|
$
|
199,599,456
|
|
$
|
205,411,779
|
Non-controlled,
affiliated investments, at fair value (cost of $26,482,025 and
$26,385,612, respectively)
|
|
|
14,149,845
|
|
|
12,980,016
|
Controlled, affiliated
investments, at fair value (cost $0 and $15,212,562,
respectively)
|
|
|
—
|
|
|
16,406,021
|
Cash
|
|
|
4,362,418
|
|
|
11,049,499
|
Dividends and
interest receivable
|
|
|
1,241,095
|
|
|
454,883
|
Receivable for
investments sold
|
|
|
7,797,809
|
|
|
644,733
|
Deferred financing
costs
|
|
|
1,160,277
|
|
|
1,366,393
|
Deferred tax
asset
|
|
|
5,132,895
|
|
|
5,385,694
|
Prepaid expenses and
other assets
|
|
|
46,075
|
|
|
79,410
|
Total
Assets
|
|
$
|
233,489,870
|
|
$
|
253,778,428
|
|
|
Liabilities
|
|
Credit facility
payable
|
|
$
|
28,568,305
|
|
$
|
28,536,441
|
Notes payable (net of
deferred note offering costs of $752,071 and $855,433,
respectively)
|
|
|
54,247,929
|
|
|
54,144,567
|
Payable for
investments purchased
|
|
|
—
|
|
|
18,550,000
|
Other accrued
expenses and liabilities
|
|
|
466,521
|
|
|
535,096
|
Directors' fees
payable
|
|
|
130,000
|
|
|
36,125
|
Professional fees
payable
|
|
|
661,207
|
|
|
554,173
|
Interest and credit
facility expense payable
|
|
|
1,529,992
|
|
|
1,069,139
|
Management fee
payable
|
|
|
721,348
|
|
|
765,659
|
Income-based
incentive fees payable
|
|
|
403,672
|
|
|
890,796
|
Distributions
payable
|
|
|
2,433,102
|
|
|
2,433,102
|
Unearned structuring
fee revenue
|
|
|
59,540
|
|
|
81,643
|
Income tax
liability
|
|
|
412,944
|
|
|
379,155
|
Total
Liabilities
|
|
|
89,634,560
|
|
|
107,975,896
|
|
|
Commitments and
Contingencies (Note 12)
|
|
|
|
Net
Assets
|
|
Common stock, par
value $0.001 per share (100,000,000 shares authorized,
12,875,566
and 13,105,295 shares issued and outstanding,
respectively)
|
|
|
12,876
|
|
|
13,105
|
Additional paid-in
capital
|
|
|
197,118,476
|
|
|
198,594,662
|
Distributable
earnings (accumulated loss)
|
|
|
(53,276,042)
|
|
|
(52,805,235)
|
Total Net
Assets
|
|
|
143,855,310
|
|
|
145,802,532
|
Total Liabilities
and Net Assets
|
|
$
|
233,489,870
|
|
$
|
253,778,428
|
|
|
Net Asset Value Per
Share
|
|
$
|
11.17
|
|
$
|
11.13
|
Alcentra Capital
Corporation and Subsidiary
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
For the three
months
ended March 31, 2019
(Unaudited)
|
|
For the three
months
ended March 31, 2018
(Unaudited)
|
|
|
Investment
Income:
|
|
From non-controlled,
non-affiliated investments:
|
|
Interest income from
portfolio investments
|
|
$
|
5,806,309
|
|
$
|
5,742,386
|
|
Paid-in-kind interest
income from portfolio investments
|
|
|
84,504
|
|
|
199,650
|
|
Other income from
portfolio investments
|
|
|
107,757
|
|
|
1,507,304
|
|
Dividend income from
portfolio investments
|
|
|
—
|
|
|
30,756
|
|
From non-controlled,
affiliated investments:
|
|
Interest income from
portfolio investments
|
|
|
36,479
|
|
|
77,453
|
|
Paid in-kind income
from portfolio investments
|
|
|
96,413
|
|
|
123,126
|
|
Other income from
portfolio investments
|
|
|
—
|
|
|
—
|
|
From controlled,
affiliated investments:
|
|
Interest income from
portfolio investments
|
|
|
208,538
|
|
|
500,890
|
|
Paid in-kind income
from portfolio investments
|
|
|
—
|
|
|
—
|
|
Other income from
portfolio investments
|
|
|
87,116
|
|
|
—
|
|
Total investment
income
|
|
|
6,427,116
|
|
|
8,181,565
|
|
|
|
Expenses:
|
|
Management
fees
|
|
|
865,618
|
|
|
1,234,863
|
|
Income-based
incentive fees
|
|
|
(487,124)
|
|
|
—
|
|
Professional
fees
|
|
|
625,229
|
|
|
354,070
|
|
Valuation
services
|
|
|
71,250
|
|
|
63,971
|
|
Interest and credit
facility expense
|
|
|
1,417,450
|
|
|
1,694,887
|
|
Amortization of
deferred financing costs
|
|
|
206,116
|
|
|
103,981
|
|
Directors'
fees
|
|
|
159,676
|
|
|
96,202
|
|
Insurance
expense
|
|
|
55,835
|
|
|
55,988
|
|
Amortization of
deferred note offering costs
|
|
|
133,363
|
|
|
126,694
|
|
Consulting
fees
|
|
|
111,601
|
|
|
305,038
|
|
Excise tax
|
|
|
468,432
|
|
|
329,575
|
|
Other
expenses
|
|
|
62,448
|
|
|
40,136
|
|
Total
expenses
|
|
|
3,689,894
|
|
|
4,405,405
|
|
Waiver of management
fees
|
|
|
(144,270)
|
|
|
—
|
|
Net
expenses
|
|
|
3,545,624
|
|
|
4,405,405
|
|
Net investment
income and foreign currency transactions
|
|
|
2,881,492
|
|
|
3,776,160
|
|
|
|
Realized Gain
(Loss) and Net Change in Unrealized Appreciation (Depreciation)
From Portfolio Investments
|
|
Net realized gain
(loss) on:
|
|
Non-controlled,
non-affiliated investments
|
|
|
(1,715,758)
|
|
|
(14,815)
|
|
Non-controlled,
affiliated investments
|
|
|
—
|
|
|
—
|
|
Controlled, affiliated
investments
|
|
|
1,193,458
|
|
|
—
|
|
Foreign currency
transactions
|
|
|
40,416
|
|
|
—
|
|
Net realized gain
(loss) from portfolio investments and foreign
currency transactions
|
|
|
(481,884)
|
|
|
(14,815)
|
|
Net change in
unrealized appreciation (depreciation) on:
|
|
Non-controlled,
non-affiliated investments
|
|
|
(180,407)
|
|
|
(333,426)
|
|
Non-controlled,
affiliated investments
|
|
|
1,073,416
|
|
|
(107,374)
|
|
Controlled, affiliated
investments
|
|
|
(1,193,459)
|
|
|
220,904
|
|
Foreign currency
translation
|
|
|
115,935
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) from
portfolio investments and foreign currency
translation
|
|
|
(184,515)
|
|
|
(219,896)
|
|
Benefit (Provision)
for income taxes on unrealized gain (loss) on
investments
|
|
|
(252,798)
|
|
|
(2,489)
|
|
Net realized gain
(loss) and net change in unrealized appreciation
(depreciation) from portfolio investments
|
|
|
(919,197)
|
|
|
(237,200)
|
|
Net Increase
(Decrease) in Net Assets Resulting from Operations
|
|
$
|
1,962,295
|
|
$
|
3,538,960
|
|
|
|
Basic and
diluted:
|
|
Net investment income
per share
|
|
$
|
0.22
|
|
$
|
0.27
|
|
Earnings (loss) per
share
|
|
$
|
0.15
|
|
$
|
0.25
|
|
Weighted Average
Shares of Common Stock Outstanding
|
|
|
12,906,379
|
|
|
14,198,651
|
|
Dividends declared
per common share
|
|
$
|
0.180
|
|
$
|
0.180
|
|
|
|
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SOURCE Alcentra Capital Corporation