Alcentra Capital Corporation Announces Second Quarter 2017 Earnings and Declares Regular Dividend of $0.34 Per Share

NEW YORK, Aug. 3, 2017 /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 of 2017.

Second Quarter 2017 Financial Highlights

• Total investment income of $8.3 million
• Net investment income of $4.8 million, or $0.36 per share based on weighted average shares of common stock outstanding
• Invested $11.4 million in debt and equity securities, inclusive of three add-on investments and one refinancing
• Received proceeds from repayments of $14.5 million
• Equity issuance of 808,161 shares for net proceeds of $10.8 million
• Paid regular quarterly dividend of $0.34 per share on July 6, 2017
• Net asset value of $181.3 million, or $12.73 per share, which is down from $13.43 in the first quarter of 2017;
• Weighted Average Portfolio Company Leverage – 3.68x, which is flat from last quarter
• Weighted Average Debt Portfolio Yield – 11.6%

Management Commentary

"We are pleased to announce that during the 2^nd quarter Alcentra Capital led a $72 million refinancing for LRI Holding, Inc. (a.k.a. Integrated Efficiency Solutions), a DFW Capital Partners portfolio company, and made an incremental investment of $7.3 million in the refinancing. We also provided incremental capital to NTI Holdings, LLC for a follow-on acquisition.  Both companies are performing in line with expectations at this juncture.

While the pace of pre-payments outpaced our redeployment of capital for this quarter with prospective Q2 investments being pushed into Q3, we have a number of new investments in the pipeline that we are pursuing that we look to close during Q3.  The number of write-ups also exceeded the number of write-downs, although we marked down a higher dollar amount of the portfolio. Total unrealized gains on the portfolio were $3.7 million which was offset by $13.7 million of unrealized losses for a net unrealized loss of $9.9 million.  The largest contributor to the unrealized loss was a $8.4 million write-down on our investment in My Alarm Center, LLC. On July 14, 2017, as part of a recapitalization and change of control transaction of My Alarm Center, LLC, we invested an additional $1.9 million into new securities pari-passu with the company's new owner, funds managed by Oaktree Capital Management, L.P., and converted our existing debt into various classes of equity securities. Our decision to invest an additional $1.9 million in My Alarm was made with a view that with a new owner and recapitalized balance sheet we may be able to not only realize an appropriate return, but recoup some portion of our original debt investment which has now been converted to equity. We also took additional write-downs of several other companies – largely in the automotive and for profit education sectors – as we work through various business and credit related matters with these borrowers.

Lastly, we continue to maintain a disciplined underwriting process which can, at times, impact the velocity of our capital deployment. While economic conditions are steady and the capital markets continue to show strength, we recognize that we are in the mid-to-late innings of the current credit cycle and take these factors into consideration when selecting investments and sectors which to pursue."

Second Quarter 2017 Financial Results

For the three months ended June 30, 2017, total investment income was $8.3 million, a decrease of $2.3 million over the $10.6 million of total investment income for the three months ended June 30, 2016. This decrease was primarily attributable to lower prepayment fee income in the second quarter of 2017 as opposed to the $1.8 million of prepayment fee income in the second quarter of 2016. There was also a shift in timing of the closing of new deals. Interest and PIK income comprised $7.7 million and other income was $0.6 million.

Net investment income for the three months ended June 30, 2017 was $4.8 million ($0.36 per share which is based on average shares outstanding of 13.6 million)

For the three months ended June 30, 2017, net expenses were $3.5 million. Interest and financing expenses for the quarter was $1.5 million and the base management fee (net of a $0.2 million waiver) was $1.1 million. There were no incentive fees earned for the three months ended June 30, 2017. Professional fees and other general and administrative expenses totaled $0.5 million for the three months ended June 30, 2017.

During the three months ended June 30, 2017, we recorded a net realized gain on investments of $0.03 million.  During the quarter, we also recorded a net change in unrealized depreciation from portfolio investments of $9.9 million attributable to net unrealized depreciation on our debt investments, in particular from the write-down of our debt investment in My Alarm Center, LLC.

As a result of these events, our net decrease in net assets resulting from operations during the three months ended June 30, 2017 was $5.2 million.

Portfolio and Investment Activities

As of June 30, 2017, the fair value of our investment portfolio totaled $271.4 million and consisted of 30 portfolio companies. The average portfolio investment on a cost basis was $10.0 million and equity constituted 8.8% of the portfolio.  During the second quarter, we invested $11.4 million in debt and equity investments, including three add-on investments and one refinancing, and received proceeds from repayments and amortizations on investments of $14.5 million. As of June 30, 2017, the weighted average yield on debt investments was 11.6%.

Add-on investments during the quarter included the following:

• NTI Holdings, LLC - $3.5 million additional investments in 1^st lien notes and $0.1 million of equity
• Black Diamond Rentals - $0.3 million investment in tranche C super senior notes
• My Alarm Center, LLC - $0.3 million investment in second lien notes
• LRI Holding, Inc. – $7.2 million additional investments in 1^st lien notes and $0.1 million of equity

As of June 30, 2017, Alcentra had two investments, Show Media, Inc. and My Alarm Center, LLC, on non-accrual status.

Liquidity and Capital Resources

At June 30, 2017, Alcentra had $3.8 million in cash and cash equivalents, $35.1 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 3, 2017, NWN Corporation repaid its 1^st lien debt totaling $3,856,608.
• On July 5, 2017, Superior Controls, Inc. repaid $825,000 of its 1^st lien debt.
• On July 6, 2017, Alcentra paid a dividend to shareholders of record as of June 30, 2017 of $0.34 per share.
• On July 7, 2017, Superior Controls, Inc. repaid an additional $175,000 of its 1^st lien debt.
• On July 11, 2017, Alcentra funded an additional $2.0 million in Lugano Diamonds & Jewelry, Inc.
• On July 14, 2017, Alcentra funded an additional $1.9 million in My Alarm Center, LLC as part of the recapitalization and change of control transaction described above in the Management Commentary.

Third Quarter 2017 Regular Dividend of $0.34 Per Share Declared

On August 3, 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the third quarter of 2017, which is payable on October 5, 2017 to stockholders of record as of September 30, 2017.

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 2017 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 10:30 am ET on Friday, August 4, 2017. 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 63896338#.

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 4, 2018.

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 $250.0 million. 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.

SOURCE Alcentra Capital Corporation