Equus Announces Second Quarter Net Asset Value
August 13 2020 - 7:26PM
Equus Total Return, Inc. (NYSE: EQS) (the “Fund”
or “Equus”) reports net assets as of June 30, 2020, of $41.5
million, an increase of approximately $2.6 million since March 31,
2020. Net asset value per share increased to $3.07 as of June
30, 2020 from $2.88 as of March 31, 2020. Comparative data is
summarized below (in thousands, except per share amounts):
As of the Quarter Ended |
6/30/2020 |
3/31/2020 |
12/31/2019 |
9/30/2019 |
6/30/2020 |
|
|
|
|
|
|
|
|
|
|
|
Net assets |
$ |
41,469 |
$ |
38,895 |
$ |
45,989 |
$ |
49,024 |
$ |
47,933 |
Shares outstanding |
|
13,518 |
|
13,518 |
|
13,518 |
|
13,518 |
|
13,518 |
Net assets per share |
$ |
3.07 |
$ |
2.88 |
$ |
3.40 |
$ |
3.63 |
$ |
3.55 |
|
|
|
|
|
|
|
|
|
|
|
The following were the portfolio companies that
experienced increases in their fair values during the second
quarter of 2020:
- Increase in the Value of
PalletOne. Equus holds an 18.7% fully-diluted share
interest in PalletOne, Inc. (“PalletOne”) one of the nation’s
largest wooden pallet manufacturers and a major supplier of treated
lumber in the southeastern United States. The fair value of
the Fund’s share interest in PalletOne increased from $26.5 million
to $27.5 million during the second quarter of 2020, principally as
a result of strong operational results during the quarter and the
trailing twelve months ended June 30, 2020. The Fund received
advice and assistance from a third-party valuation firm to support
its determination of the fair value of this investment.
Notwithstanding the strong operational results of PalletOne, it
remains uncertain as to the extent that the general economic
contraction caused by the coronavirus may have on the business of
PalletOne in subsequent quarters in 2020 and into 2021 (see A Note
About the Coronavirus and Other Events below).
- Increase in the Value of
Equus Energy. The price of crude oil, which began
the second quarter of 2020 at $20.48 per barrel, ended the quarter
at $40.65, largely as a result of the partial resumption of
economic activity in states and countries that had imposed
significant restrictions on their populations in connection with
the onset of COVID-19. Principally due to such price
increases, the value of this investment increased from $4.5 million
at March 31, 2020 to $5.5 million at June 30, 2020. The Fund
received advice and assistance from a third-party valuation firm to
support its determination of the fair value of this investment (see
A Note About the Coronavirus and Other Events below).
- Increase in the Value of
MVC Capital Shares. The trading price of MVC
Capital, Inc.’s (“MVC”) common stock increased from $4.37 per share
on March 31, 2020 to $6.53 per share as of June 30, 2020. The
Fund received $67,293 in cash and 4,449 MVC shares as stock
dividends during the quarter, resulting in a total of 578,596 MVC
shares held at June 30, 2020. The fair value of this holding
increased from $2.5 million at March 31, 2020 to $3.8 million as of
June 30, 2020.
A Note About The Coronavirus and Other
Events
The Impact of the Coronavirus Generally.
In 2019, SARS-CoV-2, a highly contagious pathogen which causes
COVID-19, coronavirus disease, or simply, the ‘coronavirus’, arose
in Wuhan Province, China. The coronavirus has had a substantial
detrimental impact on markets and economic forecasts for
governments and businesses worldwide. During the first and
second quarters of 2020, national, state, and local governments
across the United States implemented significant travel, movement,
and assembly restrictions, as well as restrictions on the movement
of goods, all of which have had, and are expected to continue to
have, a material adverse impact upon consumer and business demand.
Commencing in the second quarter of 2020, certain states
began to ease such restrictions, but such efforts may not be
sufficient to stimulate the resumption of economic activity at
levels that existed prior to the onset of the coronavirus.
Moreover, the easing of such restrictions has resulted in an
increased number of coronavirus infections, which in turn has
caused states to delay or even reverse allowances for movement and
assembly, each of which are expected to protract the adverse
economic effects of the coronavirus. If the coronavirus
continues to spread, or if the economic disruption caused thus far
by the coronavirus continues, our operations and financial
condition could be materially adversely affected.
Impact of the Coronavirus on Our Operations. The
highly contagious nature of the coronavirus has caused numerous
private and public organizations to substantially alter the way in
which they operate. Many such organizations have, to the extent
possible, required employees to work remotely to reduce
opportunities for contagion. We have also taken steps to minimize
the exposure of our employees and service providers by requiring
all such persons to work from a remote location. We utilize a
cloud-based storage and retrieval system for our records and can
communicate electronically or by telephone with third parties such
as our financial institutions, legal and accounting advisors, and
our portfolio companies. However, government directives on social
distancing and shelter-in-place mandates have rendered us unable to
travel to attend in-person board meetings, negotiations, and other
functions which are endemic to the interpersonal nature of private
equity investing. Should these disruptions and restrictions on
travel continue as a result of the coronavirus, we cannot,
therefore, assure you that our operations will not be materially
adversely affected thereby.
Impact of the Coronavirus on Our Portfolio
Companies. As noted above, certain of our portfolio companies
have been affected by various force majeure events that include the
global outbreak of the coronavirus. These events have had,
and may continue to have, a material adverse impact on our
portfolio companies’ supply chains, limit access to key commodities
or technologies, otherwise impact their employees, customers,
manufacturers or suppliers or otherwise cause material disruptions
to their industry or the industries they serve. In the case of the
coronavirus, such a force majeure event has had, and may continue
to have, a broader negative impact on the world economy and
international business activity generally. A protracted
negative impact to one or more of our portfolio companies as a
result of the coronavirus could have a material adverse effects on
our business, financial condition and results of operations.
Impact of Geopolitical Events and the
Coronavirus on the Oil and Gas Sector. The first quarter of 2020
witnessed substantial price decreases for crude oil, falling from
$61.06 at December 31, 2019 to $20.48 at March 31, 2020 before
partially recovering to $40.65 at June 30, 2020. The collapse
in prices was the result of a price war between the Russian
Federation and Saudi Arabia and a massive drop in forecasted demand
as a consequence of the coronavirus. Despite the price of
crude oil almost doubling during the second quarter of 2020, should
such prices not continue to recover to sustainable levels, a number
of smaller oil and gas firms that have incurred leverage could
experience severe economic challenges, including insolvency and
bankruptcy. Other firms, such as Equus Energy, could see
future capital expenditures to generate additional reserves from
existing mineral interests postponed indefinitely, which could have
a material adverse effect upon the operations and financial
condition of Equus Energy.
About Equus
The Fund is a business development company that
trades as a closed-end fund on the New York Stock Exchange under
the symbol "EQS". Additional information on the Fund may be
obtained from the Fund’s website at www.equuscap.com.
This press release may contain certain
forward-looking statements regarding future circumstances. These
forward-looking statements are based upon the Fund’s current
expectations and assumptions and are subject to various risks and
uncertainties that could cause actual results to differ materially
from those contemplated in such forward-looking statements
including, in particular, the performance of the Fund, including
our ability to achieve our expected financial and business
objectives, and the other risks and uncertainties described in the
Fund’s filings with the SEC. Actual results, events, and
performance may differ. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
to the date hereof. Except as required by law, the Fund undertakes
no obligation to release publicly any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The inclusion of any statement in this
release does not constitute an admission by the Fund or any other
person that the events or circumstances described in such
statements are material.
Contact:
Patricia Baronowski Pristine Advisers, LLC (631) 756-2486
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