Great Elm Capital Corp. (“we,” “us,” “our,” “GECC,” or “Great Elm
BDC”), (NASDAQ: GECC), a business development company (BDC), today
announced its financial results for the third quarter ended
September 30, 2020.
Financial Highlights
- Net investment income (“NII”) for the quarter increased
quarter-over-quarter to $1.9 million, as compared to NII of $0.9
million for the quarter ended June 30, 2020, as the Company
reported a full period of NII following the strategic repositioning
of its portfolio in the prior quarter
- NII per share increased to $0.18, as compared to NII per share
of $0.09 for the quarter ended June 30, 2020
- As of September 30, 2020, Great Elm BDC’s asset coverage ratio
was approximately 150.9%, up from 144.5% as of June 30, 2020 and up
from 141.1% as of March 31, 2020, compared to a minimum asset
coverage ratio of 150.0%
- Net assets on September 30, 2020 grew to approximately $60.5
million, as compared to net assets of $53.2 million at June 30,
2020 and $50.8 million at March 31, 2020.
- NAV per share on September 30, 2020 increased to $5.53, from
$5.10 per share at June 30, 2020
- For the nine months ended September 30, 2020, we repurchased
$5.3 million in aggregate principal of our senior notes at a
weighted average price of $19.16 per note
Rights Offering
- Subsequent to quarter end, on October 1, 2020, the Company
successfully completed a non-transferable rights offering which
entitled holders of rights to purchase one new share of common
stock for each right held at a subscription price of $2.95 per
share. In total, the Company sold 10,761,950 shares of its common
stock for aggregate gross proceeds of approximately $31.7
million.
- As of October 1, 2020, total shares outstanding were 21,703,720
(see selected pro-forma balance sheet information in attached
tables)
- NAV per share at September 30, 2020 was $4.18 after giving
effect to the rights offering
- Asset coverage ratio was approximately 176.5% after giving
effect to the rights offering
- The parent company of our external manager owns more than 25.4%
of outstanding shares following the rights offering
Management CommentaryPeter A.
Reed, GECC’s Chief Executive Officer, stated, “This was an
excellent turnaround quarter, as Great Elm BDC achieved NII growth
during the quarter as a result of continued outperformance from
specialty finance investments. We believe there are attractive new
investment opportunities at compelling values on a risk-adjusted
return basis during this period of dislocation in the market. We
expect to utilize the proceeds from our recent rights offering to
proactively seek investments in the specialty finance market. Since
the beginning of our repositioning last quarter we have achieved a
number of objectives: strengthening our capital base, which will
allow us to grow our investment portfolio, monetizing and
redeploying over $80 million of our portfolio, and covering our
distribution through a combination of investment income and
realized gains.”
Portfolio and Investment
ActivityAs of September 30, 2020, we held 34 debt
investments, totaling approximately $136.1 million and representing
80.3% of the fair market value of our total investments. First lien
and/or secured debt investments comprised 98.5% of the fair market
value of our debt investments.
As of the same date, we held 8 equity
investments, totaling approximately $33.4 million and representing
19.7% of the fair market value of our total investments.
As of September 30, 2020, the weighted average
current yield on our debt portfolio was 10.1%. Floating rate
instruments comprised approximately 59.4% of the fair market value
of debt investments.
During the quarter ended September 30, 2020, we
deployed approximately $34.5 million into six investments(1), at a
weighted average current yield of 12.3% The weighted average price
of the debt deployment activity was 91% of par.
During the quarter ended September 30, 2020, we
monetized, in part or in full, 12 investments for approximately
$18.2 million(2), at a weighted average current yield of 9.6%. The
weighted average realized price was 97% of par.
Financial ReviewTotal
investment income for the quarter ended September 30, 2020 was
approximately $6.0 million, or $0.56 per share. Total expenses for
the quarter ended September 30, 2020 were approximately $4.0
million, or $0.38 per share.
Net realized losses for the quarter ended
September 30, 2020 were approximately $0.1 million, or $0.02 per
share. Net unrealized appreciation from investments for the quarter
ended September 30, 2020 was approximately $6.0 million, or $0.56
per share.
Liquidity and Capital
ResourcesAs of September 30, 2020, our cash balance was
approximately $12.6 million, exclusive of holdings of United States
Treasury Bills and restricted cash. Total debt outstanding as of
September 30, 2020 was $118.7 million, comprised of our 6.50%
senior notes due September 2022 (NASDAQ: GECCL), our 6.50% senior
notes due June 2024 (NASDAQ: GECCN) and our 6.75% senior notes due
January 2025 (NASDAQ: GECCM). During the quarter ended September
30, 2020, we repurchased $5.3 million in aggregate principal of our
senior notes at a weighted average price of $21.30 per note.
Importantly, as of September 30, 2020, we had no secured credit
facility, which allows for greater flexibility in the use of our
cash and other assets.
As of September 30, 2020, our asset coverage
ratio was approximately 150.9%, up from 144.5% as of June 30, 2020
and 141.1% as of March 31, 2020.
DistributionsGreat Elm BDC also announced this
morning that its Board set the distribution for the quarter ending
March 31, 2021 at $0.10 per quarter.
The distributions will be paid in cash and
covered by net investment income. The record and payment dates
for the distribution are expected to be set by GECC in December
pursuant to authority granted by the Board.
Conference Call and WebcastGECC
will discuss these results in a conference call later this morning
(Monday, November 9, 2020) at 11:00 a.m. ET.
Conference
Call Details |
|
Date/Time: |
Monday, November 9, 2020 – 11:00 a.m. ET |
|
|
Participant Dial-In Numbers: |
|
(United States): |
844-820-8297 |
(International): |
661-378-9758 |
To access the call, please dial-in approximately five minutes
before the start time and, when asked, provide the operator with
passcode "GECC". An accompanying slide presentation will be
available in .pdf format via the “Investor Relations” section of
Great Elm Capital Corp.’s website at
http://www.investor.greatelmcc.com/events-and-presentations/presentations
after the issuance of the earnings release.
WebcastThe call and presentation will also be
simultaneously webcast over the Internet via the Investor Relations
section of GECC’s website or by clicking on the conference call
link: Great Elm Capital Corp (GECC) Q3 2020 Conference Call
Webcast.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, specialty finance
company focused on investing in debt instruments of middle market
companies. GECC elected to be regulated as a business development
company under the Investment Company Act of 1940, as amended. GECC
seeks to generate attractive, risk-adjusted returns through both
current income and capital appreciation.
Cautionary Statement Regarding
Forward-Looking Statements Statements in this
communication that are not historical facts are “forward-looking”
statements within the meaning of the federal securities laws. These
statements are often, but not always, made through the use of words
or phrases such as “expect,” “anticipate,” “should,” “will,”
“estimate,” “designed,” “seek,” “continue,” “upside,” “potential”
and similar expressions. All such forward-looking statements
involve estimates and assumptions that are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from the results expressed in the statements.
Among the key factors that could cause actual results to differ
materially from those projected in the forward-looking statements
are: conditions in the credit markets, the price of GECC common
stock, the performance of GECC’s portfolio and investment manager
and risks associated with the economic impact of the COVID-19
pandemic on GECC and its portfolio companies. Information
concerning these and other factors can be found in GECC’s Annual
Report on Form 10-K and other reports filed with the SEC. GECC
assumes no obligation to, and expressly disclaims any duty to,
update any forward-looking statements contained in this
communication or to conform prior statements to actual results or
revised expectations except as required by law. Readers are
cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof.
This press release does not constitute an offer
of any securities for sale.
Endnotes:(1) This includes new
deals, additional fundings (inclusive of those on revolving credit
facilities), refinancings and capitalized PIK income. Amounts
included herein do not include investments in short-term
securities, including United States Treasury Bills.(2) This
includes scheduled principal payments, prepayments, sales and
repayments (inclusive of those on revolving credit facilities).
Amounts included herein do not include investments in short-term
securities, including United States Treasury Bills.
Media & Investor Contact:
Investor Relations
+1 (617)
375-3006
investorrelations@greatelmcap.com
Adam PriorThe Equity Group Inc.+1 (212)
836-9606aprior@equityny.com
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)Dollar amounts in thousands (except per
share amounts)
|
September 30,
2020 |
|
|
December 31,
2019 |
|
Assets |
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair
value (amortized cost of $144,747 and $168,269,
respectively) |
$ |
110,194 |
|
|
$ |
147,412 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $74,983 and $85,733,
respectively) |
|
74,980 |
|
|
|
85,733 |
|
Affiliated investments, at fair value (amortized cost
of $107,256 and $102,704, respectively) |
|
39,364 |
|
|
|
40,608 |
|
Controlled investments, at fair value (amortized cost
of $18,740 and $10,601, respectively) |
|
19,928 |
|
|
|
9,595 |
|
Total investments |
|
244,466 |
|
|
|
283,348 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
12,570 |
|
|
|
4,606 |
|
Restricted cash |
|
600 |
|
|
|
- |
|
Receivable for investments
sold |
|
1,531 |
|
|
|
- |
|
Interest receivable |
|
4,091 |
|
|
|
2,350 |
|
Dividends receivable |
|
- |
|
|
|
14 |
|
Due from portfolio company |
|
750 |
|
|
|
617 |
|
Due from affiliates |
|
- |
|
|
|
15 |
|
Prepaid expenses and other
assets |
|
497 |
|
|
|
89 |
|
Total
assets |
$ |
264,505 |
|
|
$ |
291,039 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Notes payable 6.50% due September
18, 2022 (including unamortized discount of $566 and
$839, respectively) |
$ |
29,727 |
|
|
$ |
31,792 |
|
Notes payable 6.75% due January
31, 2025 (including unamortized discount of $1,107 and
$1,321, respectively) |
|
44,503 |
|
|
|
45,078 |
|
Notes payable 6.50% due June 30,
2024 (including unamortized discount of $1,639 and
$2,058, respectively) |
|
41,184 |
|
|
|
42,942 |
|
Payable for investments
purchased |
|
77,120 |
|
|
|
72,749 |
|
Interest payable |
|
366 |
|
|
|
354 |
|
Distributions payable |
|
908 |
|
|
|
1,338 |
|
Accrued incentive fees
payable |
|
8,967 |
|
|
|
8,157 |
|
Due to affiliates |
|
781 |
|
|
|
997 |
|
Accrued expenses and other
liabilities |
|
485 |
|
|
|
743 |
|
Total
liabilities |
$ |
204,041 |
|
|
$ |
204,150 |
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
|
Common stock, par value $0.01 per
share (100,000,000 shares authorized, 10,941,770 shares
issued and outstanding and 10,062,682 shares issued and
outstanding, respectively) |
$ |
109 |
|
|
$ |
101 |
|
Additional paid-in capital |
|
196,742 |
|
|
|
193,114 |
|
Accumulated losses |
|
(136,387 |
) |
|
|
(106,326 |
) |
Total net
assets |
$ |
60,464 |
|
|
$ |
86,889 |
|
Total liabilities and net
assets |
$ |
264,505 |
|
|
$ |
291,039 |
|
Net asset value per
share |
$ |
5.53 |
|
|
$ |
8.63 |
|
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)Dollar amounts
in thousands (except per share amounts)
|
For the Three Months Ended
September 30, |
|
|
For the Nine Months Ended
September 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Investment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
$ |
2,718 |
|
|
$ |
4,477 |
|
|
$ |
9,800 |
|
|
$ |
11,999 |
|
Affiliated investments |
|
246 |
|
|
|
216 |
|
|
|
716 |
|
|
|
627 |
|
Affiliated investments (PIK) |
|
1,321 |
|
|
|
1,124 |
|
|
|
3,842 |
|
|
|
2,939 |
|
Controlled investments |
|
90 |
|
|
|
282 |
|
|
|
188 |
|
|
|
1,335 |
|
Controlled investments (PIK) |
|
- |
|
|
|
101 |
|
|
|
- |
|
|
|
684 |
|
Total interest income |
|
4,375 |
|
|
|
6,200 |
|
|
|
14,546 |
|
|
|
17,584 |
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
401 |
|
|
|
196 |
|
|
|
404 |
|
|
|
407 |
|
Controlled investments |
|
880 |
|
|
|
480 |
|
|
|
1,760 |
|
|
|
1,280 |
|
Total dividend income |
|
1,281 |
|
|
|
676 |
|
|
|
2,164 |
|
|
|
1,687 |
|
Other income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
295 |
|
|
|
5 |
|
|
|
351 |
|
|
|
137 |
|
Affiliated investments |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
Affiliated investments (PIK) |
|
- |
|
|
|
108 |
|
|
|
75 |
|
|
|
564 |
|
Controlled investments |
|
- |
|
|
|
13 |
|
|
|
12 |
|
|
|
52 |
|
Total other income |
|
295 |
|
|
|
126 |
|
|
|
438 |
|
|
|
755 |
|
Total investment income |
$ |
5,951 |
|
|
$ |
7,002 |
|
|
$ |
17,148 |
|
|
$ |
20,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
$ |
609 |
|
|
$ |
759 |
|
|
$ |
1,898 |
|
|
$ |
2,207 |
|
Incentive fees |
|
482 |
|
|
|
654 |
|
|
|
810 |
|
|
|
2,099 |
|
Administration fees |
|
152 |
|
|
|
282 |
|
|
|
547 |
|
|
|
734 |
|
Custody fees |
|
20 |
|
|
|
15 |
|
|
|
59 |
|
|
|
45 |
|
Directors’ fees |
|
49 |
|
|
|
51 |
|
|
|
151 |
|
|
|
150 |
|
Professional services |
|
287 |
|
|
|
243 |
|
|
|
794 |
|
|
|
711 |
|
Interest expense |
|
2,225 |
|
|
|
2,308 |
|
|
|
6,920 |
|
|
|
5,333 |
|
Other expenses |
|
194 |
|
|
|
71 |
|
|
|
468 |
|
|
|
349 |
|
Total expenses |
$ |
4,018 |
|
|
$ |
4,383 |
|
|
$ |
11,647 |
|
|
$ |
11,628 |
|
Net investment income |
$ |
1,933 |
|
|
$ |
2,619 |
|
|
$ |
5,501 |
|
|
$ |
8,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
$ |
(262 |
) |
|
$ |
97 |
|
|
$ |
(11,760 |
) |
|
$ |
1,115 |
|
Controlled investments |
|
- |
|
|
|
154 |
|
|
|
- |
|
|
|
154 |
|
Repurchase of debt |
|
120 |
|
|
|
- |
|
|
|
1,237 |
|
|
|
- |
|
Total net realized gain
(loss) |
|
(142 |
) |
|
|
251 |
|
|
|
(10,523 |
) |
|
|
1,269 |
|
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
3,544 |
|
|
|
(8,075 |
) |
|
|
(13,699 |
) |
|
|
(7,357 |
) |
Affiliated investments |
|
319 |
|
|
|
(4,096 |
) |
|
|
(5,796 |
) |
|
|
(7,666 |
) |
Controlled investments |
|
2,050 |
|
|
|
(345 |
) |
|
|
2,194 |
|
|
|
(600 |
) |
Total net change in unrealized
appreciation (depreciation) |
|
5,913 |
|
|
|
(12,516 |
) |
|
|
(17,301 |
) |
|
|
(15,623 |
) |
Net realized and unrealized gains
(losses) |
$ |
5,771 |
|
|
$ |
(12,265 |
) |
|
$ |
(27,824 |
) |
|
$ |
(14,354 |
) |
Net increase (decrease)
in net assets resulting from operations |
$ |
7,704 |
|
|
$ |
(9,646 |
) |
|
$ |
(22,323 |
) |
|
$ |
(5,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income per share
(basic and diluted): |
$ |
0.18 |
|
|
$ |
0.26 |
|
|
$ |
0.53 |
|
|
$ |
0.81 |
|
Earnings per share (basic and
diluted): |
$ |
0.72 |
|
|
$ |
(0.96 |
) |
|
$ |
(2.17 |
) |
|
$ |
(0.58 |
) |
Weighted average shares
outstanding (basic and diluted): |
|
10,660,894 |
|
|
|
10,062,682 |
|
|
|
10,307,771 |
|
|
|
10,312,561 |
|
GREAT ELM CAPITAL CORP.Pro-Forma
Balance Sheet Information (unaudited)Dollar
amounts in thousands (except per share amounts)
(Dollars are in ‘000s) |
9/30/2020 |
|
Actual |
|
|
Adjustments |
|
As Adjusted |
Investments, at fair
value |
$ |
244,466 |
|
|
|
|
$ |
244,466 |
Cash and cash equivalents |
|
13,170 |
|
|
30,357 |
|
|
|
43,527 |
Other assets |
|
6,869 |
|
|
|
|
|
6,869 |
Total Assets |
$ |
264,505 |
|
|
30,357 |
|
|
$ |
294,862 |
|
|
|
|
|
|
|
Notes payable 6.50% due September
18, 2022 (including unamortized discount of $566 and $839,
respectively) |
|
29,727 |
|
|
|
|
|
29,727 |
Notes payable 6.75% due January
31, 2025 (including unamortized discount of $1,107 and
$1,321, respectively) |
|
44,503 |
|
|
|
|
|
44,503 |
Notes payable 6.50% due June 30,
2024 (including unamortized discount of $1,639 and
$2,058, respectively) |
|
41,184 |
|
|
|
|
|
41,184 |
Other liabilities |
|
88,627 |
|
|
|
|
|
88,627 |
Total liabilities |
|
204,041 |
|
|
- |
|
|
|
204,041 |
|
|
|
|
|
|
|
NET ASSETS |
|
60,464 |
|
|
30,357 |
|
|
|
90,821 |
|
|
|
|
|
|
|
Total liabilities and net
assets |
|
264,505 |
|
|
30,357 |
|
|
|
294,862 |
|
|
|
|
|
|
|
Shares outstanding |
|
10,941,770 |
|
|
10,761,950 |
|
|
|
21,703,720 |
|
|
|
|
|
|
|
NAV per Share |
$ |
5.53 |
|
$ |
(1.35 |
) |
|
$ |
4.18 |
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