Alcentra Capital Corporation Announces Second Quarter 2015 Financial Results and Announces Quarterly Dividend of $0.34 Per Share

Aug 11, 2015, 09:21 ET from Alcentra Capital Corporation

NEW YORK, Aug. 11, 2015 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market companies based in the United States, today announced its financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Financial Highlights

  • Total investment income of $8.5 million
  • Net investment income of $4.6 million, or $0.34 per share
  • Adjusted net investment income of $5.0 million, or $0.376 per share(1)
  • Net increase in net assets resulting from operations of $6.4 million, or $0.47 per share
  • Invested $31.25 million in debt and equity securities, including investments in three new portfolio companies
  • Received proceeds from repayments and amortizations of $16.6 million
  • Paid regular quarterly dividend of $0.34 per share on July 6, 2015
  • Net asset value (NAV) of $203.1 million, or $15.03 per share, as of June 30, 2015, up from $14.63 at the time of the IPO
  • Weighted Average Portfolio Leverage – 3.38x, which is constant from the prior quarter
  • Weighted Average Portfolio Yield – 12.1%, up from 11.9% in the prior quarter

Management Commentary

"Our second quarter results demonstrate the strength, stability and quality of our portfolio with adjusted net investment income increasing 9.6% and 3.4% from the end of the year and from the first quarter, respectively," said Paul Echausse, President and CEO of Alcentra Capital Corporation. "We invested $31.25 million in three new portfolio companies made throughout the quarter, while we received proceeds from repayments and amortizations of $16.6 million. Our observation has been that the lower middle market M&A has been a bit slower in the first half of the year based on the published reports of our peers. Based on our pipeline, we would expect the second half of the year to be much stronger with respect to net originations. We would also expect to benefit from these improved M&A market conditions by having a number of realizations in our portfolio. We have written up the value of our portfolio for the fifth straight quarter since our IPO last May; and we would expect some of these unrealized gains to become realized over the remainder of the year. As some of our equity gains are realized, we intend to redeploy that capital into debt securities, thus continuing to rebalance the portfolio. We continue to remain prudent by focusing on high-quality companies that generate strong free cash flow and have positive long-term outlooks.

"Lastly, at a time when there is much discussion in the BDC industry about the creation of value for shareholders, it should be noted that the NAV of our shares has increased from $14.63 at the time of our IPO last year to $15.03 at June 30, 2015."

(1) Supplemental information regarding adjusted net investment income:

On a supplemental basis, we provide information relating to adjusted net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income is a useful indicator of operations exclusive of any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliations of net investment income to adjusted net investment income are set forth in Schedule 1.

Second Quarter 2015 Financial Results

For the three months ended June 30, 2015, total investment income was $8.5 million. The increase was primarily attributable to an increase in interest income resulting from higher average levels of debt investments outstanding. 

For the three months ended June 30, 2015, total expenses were $3.8 million. Interest and financing expenses for the three months ended June 30, 2015 was $1.3 million. The base management fee was $1.2 million for the three months ended June 30, 2015 due to higher average total assets less cash and cash equivalents for the three months ended June 30, 2015. The income based incentive fee for the three months ended June 30, 2015 was $0.397 million and the capital gains incentive fee accrual was $0.434 million. The administrative service fee, professional fees and other general and administrative expenses totaled $0.543 million for the three months ended June 30, 2015.

Net investment income for the three months ended June 30, 2015 was $4.6 million.

During the three months ended June 30, 2015, we recorded a net change in unrealized appreciation on investments of $2.3 million.

Alcentra Capital Corporation's net increase in net assets resulting from operations during the three months ended June 30, 2015, was $6.4 million, or $0.47 per share.

Per share results for the second quarter ended June 30, 2015 are based on shares outstanding of 13.5 million.

Portfolio and Investment Activities

As of June 30, 2015, Alcentra had debt and equity investments in 29 portfolio companies with a total fair value of $285.3 million. The average portfolio investment on a cost basis was $9.7 million and equity constitutes 20.5% of the portfolio, which is down from 28% at the time of the IPO. During the second quarter ended June 30, 2015, Alcentra made investments of $31.25 million, including investments in three new portfolio companies and received proceeds from repayments and amortizations of investments of $16.6 million. As of June 30, 2015, the weighted average yield on debt investments was 12.1%, which was an increase in the weighted average yield from the March 31, 2015 reporting period of 11.9%.

Second quarter 2015 investment activity included the following new portfolio company investments:

  • Radiant Logistics is an asset-light transportation and logistics services company, providing freight forwarding and supply chain management services.  Alcentra invested $10.0 million in subordinated notes on April 2, 2015
  • Alarm Capital Alliance is a security and alarm monitoring company which services households and small commercial businesses across the US.  Alcentra invested $9.5 million in subordinated notes on April 30,2015
  • Conisus, LLC, is a leading outsourced service provider specializing in promotional drug marketing and continuing medical education.  Alcentra invested $11.75 million in second lien notes on June 23, 2015

Alcentra had no investments on non-accrual status as of June 30, 2015.

Liquidity and Capital Resources

At June 30, 2015, Alcentra had $3.8 million in cash and cash equivalents. Alcentra had $38.1 million of borrowings outstanding on its $115 million senior secured revolving credit facility as of June 30, 2015. The weighted average interest rate on debt outstanding as of June 30, 2015 was 3.53%.

Alcentra also issued $40.0 million of Alcentra Capital InterNotes as of June 30, 2015.  The weighted average interest rate on these notes as of June 30, 2015 was 6.378%.

Subsequent Events

  • Alcentra has a commitment to fund $15.5 million to a company in the healthcare industry that is expected to close in Mid-August
  • On July 9, 2015, Alcentra funded an additional $1.7 million to A2Z Wireless Holdings, Inc.
  • On July 15, 2015 and August 6, 2015, we were repaid our debt investment in North Atlantic Petroleum of $7.5 million and $5.3 million, respectively.  This debt obligation has been paid in full
  • On August 5, 2015, we were repaid our debt investment in Datascan of $3.0 million

Third Quarter 2015 Dividend of $0.34 Per Share Declared

On August 10, 2015, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the third quarter of 2015 payable on October 6, 2015 to stockholders of record as of September 30, 2015.

Alcentra has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

Second Quarter 2015 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 1:30 pm ET on Tuesday, August 11, 2015. 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 # 98080867.

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 11, 2016.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $100.0 million. Alcentra' 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, as amended. In addition, for tax purposes, Alcentra intends to elect to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

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' 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

Alcentra Capital

Alcentra Capital

Corporation and            Subsidiary          

Corporation and            Subsidiary          

As of June 30, 2015

(Unaudited)

As of December 31,

2014

Assets

Portfolio investments, at fair value

Non-controlled, non-affiliated investments, at fair value (cost of $188,206,865 and $165,921,535, respectively)

$                   189,074,441

$                   167,325,100

Non-controlled, affiliated investments, at fair value (cost of $63,034,876 and $61,564,299, respectively)

66,136,367

61,253,192

Controlled, affiliated investments, at fair value (cost $27,001,798 and $26,596,938, respectively)

30,078,391

30,055,562

Total of portfolio investments, at fair value (cost $278,243,539 and $254,082,772, respectively)

285,289,199

258,633,854

Cash

3,806,606

10,022,617

Dividends and interest receivable

1,249,225

1,417,500

Receivable for investments sold

4,753

Deferred financing costs

1,719,764

1,986,520

Deferred note offering costs

1,040,510

25,743

Prepaid expenses and other assets

36,444

128,388

Liabilities

Credit facility payable

$                     38,054,738

$                     62,499,154

Notes payable

40,000,000

Payable for investments purchased

8,717

Other accrued expenses and liabilities

287,044

539,417

Directors' fees payable

75,250

85,692

Professional fees payable

518,261

409,628

Interest and credit facility expense payable

780,522

216,476

Management fee payable

1,219,963

615,668

Income-based incentive fee payable

1,203,128

Capital gains incentive fees payable

434,217

Distributions payable

4,595,700

4,595,700

Unearned structuring fee revenue

575,759

517,339

Income tax liability

187,738

45,272

Deferred tax liability

2,078,371

1,697,004

Commitments and Contingencies (Note 13)

Net Assets

Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,516,766 and 13,516,766 shares issued and outstanding, respectively)

 

13,517

 

13,517

Additional paid-in capital

197,765,758

197,838,155

Accumulated net realized gain (loss)

(74,737)

71,712

Undistributed net investment income

646,968

211,846

Net unrealized appreciation (depreciation) on investments, net of provision for taxes of $2,266,109 and $1,697,004 as of June 30, 2015 and December 31, 2014, respectively

 

4,779,551

 

2,854,078

Total Net Assets

203,131,057

200,989,308

Total Liabilities and Net Assets

$                   293,141,748

$                   272,219,375

                Net Asset Value Per Share 

$                              15.03

$                              14.87

 

Alcentra Capital Corporation and Subsidiary 

Consolidated Statements of Operations

Alcentra Capital Corporation and Subsidiary

BNY Mellon-Alcentra Mezzanine III, L.P.

Alcentra Capital Corporation and Subsidiary

Alcentra Capital Corporation and Subsidiary

BNY Mellon-Alcentra Mezzanine III, L.P.

Alcentra Capital Corporation and Subsidiary

For the three months ended June 30, 2015 (Unaudited)

For the period from April 1, 2014 through May 7, 2014 (Unaudited)

For the period from May 8, 2014 through June 30, 2014 (Unaudited)

For the six months ended June 30, 2015 (Unaudited)

For the period from January 1, 2014 through May 7, 2014 (Unaudited)

For the period from May 8, 2014 through June 30, 2014 (Unaudited)

Investment Income:

From non-controlled, non-affiliated investments:

Interest income from portfolio investments

$    4,286,969

$       942,684

$    1,694,875

$     8,444,528

$     2,335,475

$    1,694,875

Paid-in-kind interest income from portfolio investments

1,166,440

196,299

469,072

1,902,164

569,637

469,072

Other income from portfolio investments

295,386

544,872

955,282

649,961

Dividend income from portfolio investments

302,874

302,874

251,752

From non-controlled, affiliated investments:

Interest income from portfolio investments

988,949

364,795

574,922

2,208,005

1,089,807

574,922

Paid in-kind income from portfolio investments

631,046

146,467

252,888

1,242,545

341,850

252,888

Other income from portfolio investments

20,527

766,907

48,885

788,083

From controlled, affiliated investments:

Interest income from portfolio investments

582,229

255,633

458,872

1,158,209

769,953

458,872

Paid in-kind income from portfolio investments

206,077

115,201

183,995

404,858

521,321

183,995

Other income from portfolio investments

27,043

433,573

64,843

444,055

Total investment income

8,507,540

3,766,431

3,634,624

16,732,193

7,761,894

3,634,624

Expenses:

Management fees

1,219,963

524,548

2,367,968

699,473

524,548

Income-based incentive fees

397,028

1,203,128

Capital gains incentive fees

434,217

1,435,684

Professional fees

170,549

5,315

83,570

359,935

84,642

83,570

Valuation services

100,010

222,915

Interest and credit facility expense

1,067,118

9,267

290,134

1,673,006

50,214

290,134

Amortization of deferred financing costs

195,770

379,257

Directors' fees

76,191

80,000

114,191

80,000

Insurance expense

68,006

137,541

Organization expenses

180,953

180,953

Other expenses

129,339

7

20,792

213,512

7

20,792

Total expenses

3,858,191

14,589

1,179,997

8,107,137

834,336

1,179,997

Waiver of capital gains incentive fees

(1,001,467)

Waiver of income-based incentive fees

Net expenses

3,858,191

14,589

1,179,997

7,105,670

834,336

1,179,997

Net investment income

4,649,349

3,751,842

2,454,627

9,626,523

6,927,558

2,454,627

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

Net realized gain (loss) on:

Non-controlled, non-affiliated investments

(146,703)

(42,448)

(146,449)

51,961

Non-controlled, affiliated investments

Controlled, affiliated investments

Net realized gain (loss) from portfolio investments

(146,703)

(42,448)

(146,449)

51,961

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

587,925

239,964

(52,193)

(535,989)

2,974,591

(52,193)

Non-controlled, affiliated investments

2,016,324

(182,597)

(149,511)

3,412,598

(149,511)

Controlled, affiliated investments

(286,458)

(279,333)

1,534,177

(382,031)

1,534,177

Net change in unrealized appreciation (depreciation) from portfolio investments

2,317,791

(221,966)

1,332,473

2,494,578

2,974,591

1,332,473

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

(406,781)

(569,105)

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

1,764,307

(264,414)

1,332,473

1,779,024

3,026,552

1,332,473

Net Increase in Net Assets Resulting from Operations

$     6,413,656

$    3,487,428

$    3,787,100

$   11,405,547

$     9,954,110

$      3,787,100

Basic and diluted:

Net investment income per share

$              0.34

 N.A.

$             0.18

$              0.71

 N.A.

$               0.18

Earnings per share

$              0.47

 N.A.

$             0.28

$              0.84

 N.A.

$               0.28

Weighted Average Shares of Common Stock Outstanding

13,516,766

N.A.

13,516,766

13,516,766

N.A.

13,516,766

Dividends declared per common share

$              0.34

 N.A.

$             0.18

$              0.68

 N.A.

$               0.18

 

Schedule 1

Supplemental Information Regarding Adjusted Net Investment Income

On a supplemental basis, we provide information relating to adjusted net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income is a useful indicator of operations exclusive of any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income for the three and six months ended June 30, 2015 and 2014.

($ in thousands)

($ in thousands)

Three months ended

Six months ended 

June 30,

June 30,

(unaudited)

(unaudited)

2015

2015

Net investment income 

$4,649

$9,626

Capital gains incentive fee (reversal) expense

434

434

Adjusted net investment income 

$5,083

$10,060

($ in thousands)

($ in thousands)

Three months ended

Six months ended 

June 30,

June 30,

(unaudited)

(unaudited)

2015

2015

Net investment income 

$0.34

$0.71

Capital gains incentive fee (reversal) expense

$0.03

$0.03

Adjusted net investment income 

$0.37

$0.74

SOURCE Alcentra Capital Corporation



RELATED LINKS

http://www.alcentracapital.com