Stellus Private Credit BDC Reports Results for its First Fiscal Quarter Ended March 31, 2023
HOUSTON, May 11, 2023 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its first fiscal quarter ended March 31, 2023.
Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated: "We are pleased to report solid results in the first quarter in which we generated $0.48 per share of net investment income and maintained net asset value. During the quarter we made three new investments and one investment in an existing portfolio company, and had one payoff, totaling net portfolio growth of $7 million at fair value, bringing the total portfolio to $165 million at fair value. On March 14, 2023, we declared our first quarter dividend of $0.42 per share which was covered by net investment income and represents an annualized dividend yield of 11.4%."
FINANCIAL HIGHLIGHTS | ||||||
($ in millions, except data relating to per share amounts and shares outstanding) | ||||||
Three Months Ended | Three Months Ended | |||||
March 31, 2023 | March 31, 2022 | |||||
Amount | Per Share | Amount | Per Share | |||
Net investment income | $2.64 | $0.48 | $0.08 | $0.03 | ||
Net unrealized loss included in earnings | (0.06) | (0.01) | (0.11) | (0.04) | ||
Net increase in net assets resulting from operations | $2.58 | $0.47 | (0.03) | (0.01) | ||
Distributions | (2.31) | (0.42) | — | — | ||
Other weighted average share adjustments(1) | — | (0.01) | — | — | ||
Net asset value | 85.7 | $14.68 | 80.3 | $14.76 | ||
Weighted average shares outstanding | 5,501,765 | 2,333,334 | ||||
(1) | Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end. | ||||
PORTFOLIO ACTIVITY | ||||
($ in millions) | ||||
As of | As of | |||
March 31, 2023 | December 31, 2022 | |||
Investments at fair value | $164.8 | $157.5 | ||
Total assets | $174.4 | $174.4 | ||
Net assets | $85.7 | $80.3 | ||
Shares outstanding | 5,832,979 | 5,483,433 | ||
Net asset value per share | $14.68 | $14.64 | ||
Three Months Ended | Three Months Ended | |||
March 31, 2023 | March 31, 2022 | |||
New investments | $17.1 | $38.0 | ||
Repayments of investments | (9.8) | (0.5) | ||
Net activity | $7.3 | $37.5 |
Results of Operations
Investment income for the three months ended March 31, 2023 and 2022 totaled $4.9 million and $0.4 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months ended March 31, 2023 and 2022 totaled $3.2 million and $0.5 million, respectively, net of $1.0 million and $0.3 million in expenses reimbursed and fees waived by the Company's investment advisor, Stellus Private BDC Advisor, LLC (the "Advisor"), respectively. For the same periods, base management fees totaled $0.6 million and $0.1 million (all of which were waived by the Advisor), income incentive fees totaled $0.4 million (net of $0.1 million which were waived as our shares were not listed on a national exchange) and $0.0 million, respectively, fees and expenses related to our borrowings totaled $1.7 million and $0.1 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million for both periods, and other expenses totaled $0.4 million and $0.3 million, respectively.
Net investment income was $2.6 million and $0.1 million, or $0.48 and $0.03 per common share based on weighted average common shares outstanding for the three months ended March 31, 2023 and 2022 of 5,501,765 and 2,333,334, respectively.
The Company's investment portfolio had a net change in unrealized depreciation of ($0.1) million for both the three months ended March 31, 2023 and 2022.
Net increase (decrease) in net assets resulting from operations totaled $2.6 million and $(0.0) million, or $0.47 and ($0.01) per common share, based on weighted average common shares outstanding for the three months ended March 31, 2023 and 2022 of 5,501,765 and 2,333,334, respectively.
Liquidity and Capital Resources
As of March 31, 2023, our amended and restated senior secured revolving credit agreement with Signature Bank (as amended from time to time, the "Commitment Facility") provided for borrowings in an aggregate amount of up to $50.0 million on a committed basis. On March 10, 2023, Signature Bank was placed into receivership by the Federal Deposit Insurance Corporation ("FDIC"), however, the Commitment Facility remained in full force and effect. As of March 31, 2023 and December 31, 2022, we had $45.0 million and $80.6 million in outstanding borrowings under the Commitment Facility, respectively.
On September 30, 2022, the Company entered into a senior secured revolving credit agreement with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the "Credit Facility", together with the Commitment Facility, the "Credit Facilities"). The Credit Facility, as amended, provides for borrowings up to a maximum of $130.0 million on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $200.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions. As of March 31, 2023 and December 31, 2022, we had $31.0 million and $0.0 million in outstanding borrowings under the Credit Facility.
Recent Portfolio Activity
The Company invested in the following portfolio companies for the three months ended March 31, 2023:
Activity Type | Date | Company Name | Company Description | Investment Amount | Instrument Type | ||||||
New Investment | January 31, 2023 | Red's All Natural, LLC | Premium frozen food manufacturer | $ | 4,900,742 | Senior Secured – First Lien | |||||
$ | 318,998 | Equity | |||||||||
New Investment | March 15, 2023 | Cerebro Buyer, LLC | Manufacturer of single-use electrodes for medical procedures | $ | 2,114,000 | Senior Secured – First Lien | |||||
$ | 478,771 | Revolver commitment | |||||||||
$ | 184,925 | Equity | |||||||||
$ | 34,135 | Equity | |||||||||
Add-On Investment | March 27, 2023 | BDS Solutions Intermediateco, LLC* | Leading provider of outsourced marketing services | $ | 653,070 | Senior Secured – First Lien | |||||
New Investment | March 31, 2023 | American Refrigeration, LLC | Provider of industrial refrigeration installation and maintenance services | $ | 3,736,348 | Senior Secured – First Lien | |||||
$ | 1,243,392 | Revolver commitment | |||||||||
$ | 482,132 | Delayed Draw Term Loan Commitment | |||||||||
$ | 91,031 | Equity | |||||||||
* | Existing portfolio company | ||||
The Company received proceeds from payoffs from the following portfolio companies for the three months ended March 31, 2023:
Activity Type | Date | Company Name | Proceeds Received | Instrument Type | |||||
Full Repayment | March 29, 2023 | AIP ATCO Buyer, LLC | $ | 8,823,357 | First lien term loan | ||||
Events Subsequent to March 31, 2023
The Company's management has evaluated subsequent events through May 11, 2023. There have been no subsequent events that require recognition or disclosure except for the following described below.
Investment Portfolio
The Company invested in the following portfolio companies subsequent to March 31, 2023:
Activity Type | Date | Company Name | Company Description | Investment Amount | Instrument Type | ||||||
Add-On Investment | April 14, 2023 | BLP Buyer, Inc.* | Distributor of lifting solutions | $ | 781,051 | Senior Secured – First Lien | |||||
$ | 102,981 | Equity | |||||||||
Add-On Investment | April 17, 2023 | Axis Portable Air, LLC* | Air conditioning, heating, and air quality equipment rental company | $ | 854,937 | Senior Secured – First Lien | |||||
New Investment | April 28, 2023 | Impact Home Services, LLC | Residential, garage door, electrical, and plumbing services provider | $ | 2,680,423 | Senior Secured – First Lien | |||||
$ | 735,885 | Revolver commitment | |||||||||
$ | 175,908 | Equity | |||||||||
New Investment | May 1, 2023 | RIA Advisory, LLC | Provider of Oracle software implementation services | $ | 4,173,954 | Senior Secured – First Lien | |||||
$ | 683,288 | Revolver commitment | |||||||||
$ | 193,866 | Equity | |||||||||
Credit Facility
On April 26, 2023, the Company entered into an increase agreement to the September 30, 2022 by and between the Company, as the borrower and Zions Bancorporation, N.A., dba Amegy Bank and various other lenders. The increase agreement amends the Credit Facility and increases the maximum commitment amount under the Credit Facility from $130,000,000 to $150,000,000 on a committed basis.
The outstanding balance under the Commitment Facility as of May 11, 2023 was $45,000,000 and the outstanding balance under the Credit Facility was $39,650,000.
Sale of Unregistered Securities
Since March 31, 2023, the Company sold 339,316 common shares of beneficial interest at a price of $14.68 per share for aggregate proceeds of $5.0 million, which includes less than $0.1 million of Organizational Expense Allocation pursuant to the Immediate Share Issuance Agreement. The sale of common shares of beneficial interest was made pursuant to subscription agreements entered into by the Company and its shareholders. Additionally, the Company entered into a Capital Draw Down Subscription Agreement for an aggregate of $5.0 million in undrawn commitments. Under the terms of the subscription agreements, are required to fund drawdowns to purchase shares of common stock up to the amount of their respective capital commitments on an as-needed basis with a minimum of ten days' prior notice to shareholders.
Since March 31, 2023, the Company also issued 10,629 common shares of beneficial interest under the DRIP.
About Stellus Private Credit BDC
The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans and second lien loans, with corresponding equity co-investments. The Company's investment activities are managed by its investment adviser, Stellus Private BDC Advisor, LLC.
Forward-Looking Statements
Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Contacts
Stellus Private Credit BDC
W. Todd Huskinson, Chief Financial Officer
(713) 292-5414
[email protected]
STELLUS PRIVATE CREDIT BDC | ||||||
March 31, 2023 | ||||||
(unaudited) | December 31, 2022 | |||||
ASSETS | ||||||
Non-controlled, non-affiliated investments, at fair value (amortized cost of $165,413,414 and $158,022,677, respectively) | $ | 164,829,686 | $ | 157,504,755 | ||
Cash and cash equivalents | 7,690,197 | 15,469,823 | ||||
Other receivable | 16,200 | — | ||||
Interest receivable | 1,260,895 | 1,030,274 | ||||
Expense reimbursement receivable from the Advisor (Note 2) | 364,274 | 165,638 | ||||
Deferred offering costs | 93,643 | 54,394 | ||||
Related party receivable | 59,271 | 9,620 | ||||
Prepaid expenses | 96,495 | 133,004 | ||||
Receivable for sales and repayments of investments | 23,834 | 26,996 | ||||
Total Assets | $ | 174,434,495 | $ | 174,394,504 | ||
LIABILITIES | ||||||
Credit Facilities payable | $ | 74,807,833 | $ | 79,448,134 | ||
Short-term loan payable | 4,500,000 | 11,250,000 | ||||
Related party payable | 5,000,000 | — | ||||
Dividends payable | 2,306,409 | 1,809,533 | ||||
Unearned revenue | 535,226 | 539,634 | ||||
Income incentive fee payable | 621,306 | 328,196 | ||||
Interest payable | 669,021 | 563,241 | ||||
Administrative services payable | 140,522 | 66,064 | ||||
Income tax payable | 15,306 | 7,471 | ||||
Other accrued expenses and liabilities | 187,202 | 119,274 | ||||
Total Liabilities | $ | 88,782,825 | $ | 94,131,547 | ||
Commitments and contingencies (Note 7) | ||||||
Net Assets | $ | 85,651,670 | $ | 80,262,957 | ||
NET ASSETS | ||||||
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 5,832,979 and 5,483,433 issued and outstanding, respectively) | $ | 58,330 | $ | 54,834 | ||
Paid-in capital | 86,066,803 | 80,950,845 | ||||
Total distributable loss | (473,463) | (742,722) | ||||
Net Assets | $ | 85,651,670 | $ | 80,262,957 | ||
Total Liabilities and Net Assets | $ | 174,434,495 | $ | 174,394,504 | ||
Net Asset Value Per Share | $ | 14.68 | $ | 14.64 | ||
STELLUS PRIVATE CREDIT BDC | |||||||
Three Months Ended | |||||||
March 31, 2023 | March 31, 2022 | ||||||
INVESTMENT INCOME | |||||||
Interest income | $ | 4,731,952 | $ | 359,011 | |||
Other income | 176,069 | 10,743 | |||||
Total Investment Income | $ | 4,908,021 | $ | 369,754 | |||
OPERATING EXPENSES | |||||||
Management fees | $ | 601,839 | $ | 92,289 | |||
Income incentive fees | 439,666 | — | |||||
Professional fees | 211,808 | 108,588 | |||||
Organization costs | 1,000 | 90,184 | |||||
Amortization of deferred offering costs | 57,623 | 34,877 | |||||
Administrative services expenses | 93,760 | 68,142 | |||||
Trustees' fees | 40,000 | 38,000 | |||||
Insurance expense | 20,084 | 20,301 | |||||
Valuation fees | 17,659 | — | |||||
Interest expense and other fees | 1,703,503 | 72,767 | |||||
Income tax expense | 7,835 | — | |||||
Other general and administrative expenses | 43,520 | 17,977 | |||||
Total Operating Expenses | $ | 3,238,297 | $ | 543,125 | |||
Expenses reimbursed/fees waived by Investment Advisor (Note 2) | $ | (968,275) | $ | (250,222) | |||
Net Operating Expenses | $ | 2,270,022 | $ | 292,903 | |||
Net Investment Income | $ | 2,637,999 | $ | 76,851 | |||
Net realized gain on foreign currency translation | $ | 3,475 | $ | — | |||
Net change in unrealized depreciation on non-controlled non-affiliated investments | (72,026) | (108,048) | |||||
Net change in unrealized appreciation on foreign currency translations | 6,220 | — | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 2,575,668 | $ | (31,197) | |||
Net Investment Income Per Share – basic and diluted | $ | 0.48 | $ | 0.03 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations Per Share – basic and diluted | $ | 0.47 | $ | (0.01) | |||
Weighted Average Common Shares of Beneficial Interest Outstanding – basic and diluted | 5,501,765 | 2,333,334 | |||||
Distributions Per Share – basic and diluted | $ | 0.42 | $ | — | |||
STELLUS PRIVATE CREDIT BDC | ||||||||||||||
Common Shares of | ||||||||||||||
Beneficial Interest | Total | |||||||||||||
Number of | Par | Paid-in | distributable | |||||||||||
shares | value | capital | loss | Net Assets | ||||||||||
Balances at December 31, 2021 | — | $ | — | $ | — | $ | (532,845) | $ | (532,845) | |||||
Net investment loss | — | — | — | 76,851 | 76,851 | |||||||||
Net change in unrealized depreciation on non-controlled, non-affiliated investments | (108,048) | |||||||||||||
Issuance of common shares of beneficial interest | 2,333,334 | 23,333 | 34,976,667 | — | 3,500,000 | |||||||||
Balances at March 31, 2022 | 2,333,334 | $ | 23,333 | $ | 34,976,667 | $ | (564,042) | $ | 34,435,958 | |||||
Balances at December 31, 2022 | 5,483,433 | $ | 54,834 | $ | 80,950,845 | $ | (742,722) | $ | 80,262,957 | |||||
Net investment income | — | — | — | 2,637,999 | 2,637,999 | |||||||||
Net realized gain on foreign currency translation | — | — | — | 3,475 | 3,475 | |||||||||
Net change in unrealized depreciation on non-controlled, non-affiliated investments | — | — | — | (72,026) | (72,026) | |||||||||
Net change in unrealized appreciation on foreign currency translations | — | — | — | 6,220 | 6,220 | |||||||||
Distributions from net investment income | — | — | — | (2,306,409) | (2,306,409) | |||||||||
Issuance of common shares of beneficial interest | 349,546 | 3,496 | 5,115,958 | — | 5,119,454 | |||||||||
Balances at March 31, 2023 | 5,832,979 | $ | 58,330 | $ | 86,066,803 | $ | (473,463) | $ | 85,651,670 | |||||
STELLUS PRIVATE CREDIT BDC | ||||||
Three Months Ended | ||||||
March 31, 2023 | March 31, 2022 | |||||
Cash flows from Operating Activities | ||||||
Net increase (decrease) in net assets resulting from operations | $ | 2,575,668 | $ | (31,197) | ||
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: | ||||||
Purchases of investments | (17,104,559) | (38,042,681) | ||||
Proceeds from sales and repayments of investments | 9,823,196 | 457,829 | ||||
Net change in unrealized depreciation on investments | 72,026 | 108,048 | ||||
Net change in unrealized appreciation foreign currency translations | (6,220) | — | ||||
Amortization of premium and accretion of discount, net | (106,212) | (12,063) | ||||
Amortization of loan structure fees | 156,894 | 47,368 | ||||
Amortization of deferred offering costs | 57,623 | 34,877 | ||||
Changes in other assets and liabilities | ||||||
Increase in interest receivable | (230,621) | (161,594) | ||||
Increase in other receivable | (16,200) | (30) | ||||
Increase in related party receivable | (49,651) | — | ||||
Increase in expense reimbursements receivable from the Advisor | (198,636) | (157,933) | ||||
Decrease in prepaid expenses | 36,509 | 20,185 | ||||
Increase in related party payable | 5,000,000 | — | ||||
Decrease in due to affiliate | — | (460,085) | ||||
Increase in trustees' fees payable | — | 38,000 | ||||
Increase in administrative services payable | 74,458 | 63,975 | ||||
Increase in interest payable | 105,780 | 25,399 | ||||
Increase in income incentive fees payable | 293,110 | — | ||||
(Decrease) increase in unearned revenue | (4,408) | 185,844 | ||||
Increase in income tax payable | 7,835 | — | ||||
Increase in other accrued expenses and liabilities | 67,928 | 403,148 | ||||
Net Cash Provided (Used) in Operating Activities | $ | 554,520 | $ | (37,480,910) | ||
Cash flows from Financing Activities | ||||||
Proceeds from issuance of common shares of beneficial interest | $ | 5,119,454 | $ | 35,000,000 | ||
Offering costs paid for common shares of beneficial interest issued | (96,872) | (76,195) | ||||
Stockholder distributions paid | (1,809,533) | — | ||||
Borrowings under Credit Facilities | 49,500,000 | 34,000,000 | ||||
Repayments of Credit Facilities | (54,115,000) | — | ||||
Financing costs paid on Credit Facilities | (182,195) | (293,382) | ||||
Short-term loan repayments | (6,750,000) | — | ||||
Net Cash (Used) Provided by Financing Activities | $ | (8,334,146) | $ | 68,630,423 | ||
Net (Decrease) Increase in Cash and Cash Equivalents | $ | (7,779,626) | $ | 31,149,513 | ||
Cash and Cash Equivalents Balance at Beginning of period | 15,469,823 | — | ||||
Cash and Cash Equivalents Balance at End of Period | $ | 7,690,197 | $ | 31,149,513 | ||
Supplemental and Non-Cash Activities | ||||||
Cash paid for interest expense | $ | 1,440,829 | $ | — | ||
Increase in deferred offering costs | 39,249 | 41,319 | ||||
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan | 119,453 | — | ||||
Increase in dividends payable | 496,876 | — | ||||
SOURCE Stellus Private Credit BDC
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