Stellus Private Credit BDC Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2022

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Mar 03, 2023, 17:29 ET

HOUSTON, March 3, 2023 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its fourth fiscal quarter and year ended December 31, 2022.

Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated, "We are pleased to report strong results for our fourth full quarter of operations. During the quarter we made three new investments and two investments in existing portfolio companies totaling $33 million at fair value, bringing the total portfolio to $158 million at fair value. On December 28, 2022, we declared our fourth quarterly dividend of $0.33 per share representing an annualized dividend yield of 9.0%. We expect our dividend to grow as we continue to build out the portfolio."


FINANCIAL HIGHLIGHTS
($ in millions, except data relating to per share amounts and shares outstanding)

	Three Months Ended		Year Ended
	December 31, 2022		December 31, 2022
	Amount	Per Share	Amount	Per Share
Net investment income	$1.88	$0.35	$4.20	$ 1.08
Net unrealized loss included in earnings	0.30	0.05	(0.52)	(0.13)
Net increase in net assets resulting from operations	$2.18	$0.41	$3.68	$0.95
Distributions	(3.51)	(0.66)	(4.28)	(1.11)
Other weighted average share adjustments⁽¹⁾	—	—	—	0.03
Net asset value	80.3	$14.64	80.3	14.64
Weighted average shares outstanding		5,344,720		3,869,643

(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
	December 31, 2022	December 31, 2021
Investments at fair value	$157.5	—
Total assets	$174.4	$0.2
Net assets	$80.3	($0.5)
Shares outstanding	5,483,433	—
Net asset value per share	$14.64	N/A

	Three Months Ended	Year Ended
	December 31, 2022	December 31, 2022
New investments	$33.3	$168.3
Repayments of investments	(3.5)	(10.5)
Net activity	$29.8	$157.8

Results of Operations

Investment income for the year ended December 31, 2022 totaled $8.0 million, most of which was interest income from portfolio investments.

Operating expenses for the year ended December 31, 2022 totaled $5.7 million, net of $2.0 million in expenses reimbursed and fees waived by the Company's investment advisor, Stellus Private BDC Advisor, LLC (the "Advisor"). For the same period, base management fees totaled $1.3 million (all of which were waived by the Advisor), income incentive fees totaled $0.7 million (net of $0.2 million which were waived as our shares were not listed on a national exchange), fees and expenses related to our borrowings totaled $2.3 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.2 million, and other expenses totaled $1.3 million.

Net investment income was $4.2 million, or $1.08 per common share of beneficial interest based on weighted average common shares of beneficial interest outstanding of 3,869,643 for the year ended December 31, 2022.

The Company's investment portfolio had a net change in unrealized depreciation of ($0.5) million for the year ended December 31, 2022.

Net increase in net assets resulting from operations totaled $3.7 million or $0.95 per common share of beneficial interest, based on weighted average common shares of beneficial interest outstanding of 3,869,643 for the year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2022, 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 $100.0 million on a committed basis. As of December 31, 2022 and December 31, 2021, we had $80.6 million and $0.0 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 December 31, 2022 and December 31, 2021, we had $0.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity


Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
Add-On Investment	October 3, 2022	BLP Buyer, Inc.*	Distributor of lifting solutions	$	1,278,711	Senior Secured – First Lien
New Investment	November 16, 2022	Onpoint Industrial Services, LLC	Provider of safety, logistics, planning, and project management services	$	6,805,027	Senior Secured – First Lien
				$	335,499	Equity
New Investment	November 22, 2022	COPILOT Provider Support Services, LLC	End-to-end HUB software platform for the healthcare industry	$	9,533,636	Senior Secured – First Lien
				$	921,585	Revolver commitment
				$	544,779	Equity
Add-On Investment	December 8, 2022	BLP Buyer, Inc.*	Distributor of lifting solutions	$	4,852,763	Senior Secured – First Lien
New Investment	December 30, 2022	Madison Logic Holdings, Inc	Provider of B2B account based marketing services	$	4,756,819	Senior Secured – First Lien
				$	388,726	Revolver commitment

* Existing portfolio company

Events Subsequent to December 31, 2022


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

Credit Facilities

On February 1, 2023, the Company further amended the Commitment Facility with Signature Bank. The Commitment Facility, as amended, provides for borrowings up to a maximum of $50.0 million on a committed basis. Any amounts borrowed under the Commitment Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on December 31, 2023.

As of March 3, 2023, the outstanding balance under the Commitment Facility was $45,000,000 and the outstanding balance under the Credit Facility was $42,000,000.

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

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	December 31, 2022		December 31, 2021
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $158,022,677)	$	157,504,755	$	—
Cash and cash equivalents		15,469,823		—
Interest receivable		1,030,274		—
Expense reimbursement receivable from the Advisor		165,638		—
Deferred offering costs		54,394		139,570
Related party receivable		9,620		—
Prepaid expenses		133,004		93,648
Receivable for sales and repayments of investments		26,996		—
Total Assets	$	174,394,504	$	233,218
LIABILITIES
Credit Facilities payable	$	79,448,134	$	—
Short-term loan payable		11,250,000		—
Dividends payable		1,809,533		—
Due to affiliate		—		460,085
Unearned revenue		539,634		—
Income incentive fee payable		328,196		—
Interest payable		563,241		—
Administrative services payable		66,064		—
Trustees' fees payable		—		42,000
Income tax payable		7,471		—
Other accrued expenses and liabilities		119,274		263,978
Total Liabilities	$	94,131,547	$	766,063
Commitments and contingencies (Note 7)
Net Assets	$	80,262,957	$	(532,845)
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 5,483,433 issued and outstanding as of December 31, 2022)	$	54,834	$	—
Paid-in capital		80,950,845		—
Total distributable loss		(742,722)		(532,845)
Net Assets	$	80,262,957	$	(532,845)
Total Liabilities and Net Assets	$	174,394,504	$	233,218
Net Asset Value Per Share	$	14.64	$	N/A

STELLUS PRIVATE CREDIT BDC

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	For the		For the period from
	year ended		Inception through
	December 31, 2022		December 31, 2021
INVESTMENT INCOME
Interest income	$	7,804,783	$	—
Other income		152,173		—
Total Investment Income	$	7,956,956	$	—
OPERATING EXPENSES
Management fees	$	1,335,054	$	—
Income incentive fees		686,398		—
Professional fees		447,045		70,800
Organization costs		90,184		416,553
Amortization of deferred offering costs		240,152		—
Administrative services expenses		226,489		—
Trustees' fees		158,000		42,000
Insurance expense		82,045		—
Valuation fees		5,519		—
Interest expense and other fees		2,312,701		—
Income tax expense		7,471		—
Other general and administrative expenses		120,343		3,492
Total Operating Expenses	$	5,711,401	$	532,845
Expenses reimbursed/fees waived by Investment Advisor (Note 2)	$	(1,952,196)	$	—
Net Operating Expenses	$	3,759,205	$	532,845
Net Investment Income	$	4,197,751	$	(532,845)
Net realized gain on foreign currency translation	$	1,950	$	—
Net change in unrealized depreciation on non-controlled non-affiliated investments		(538,883)		—
Net change in unrealized appreciation on foreign currency translations		20,961		—
Net Increase (Decrease) in Net Assets Resulting from Operations	$	3,681,779	$	(532,845)
Net Investment Income Per Share – basic and diluted	$	1.08	$	N/A
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted	$	0.95	$	N/A
Weighted Average Shares of Common Shares of Beneficial Interest Outstanding – basic and diluted		3,869,643		N/A
Distributions Per Share – basic and diluted	$	1.11	$	N/A

STELLUS PRIVATE CREDIT BDC

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	Common Shares of
	Beneficial Interest					Total
	Number of	Par		Paid-in		distributable
	shares	value		capital		loss		Net Assets
Balances at December 31, 2020	—	$	—	$	—	$	—	$	—
Net investment loss	—		—		—		(532,845)		(532,845)
Balances at December 31, 2021	—	$	—	$	—	$	(532,845)	$	(532,845)
Net investment income	—		—		—		4,197,751		4,197,751
Net realized gain on foreign currency translation	—		—		—		1,950		1,950
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(538,883)		(538,883)
Net change in unrealized appreciation on foreign currency translations	—		—		—		20,961		20,961
Return of capital and other tax related adjustments	—		—		(388,214)		388,214		—
Distributions from net investment income	—		—		—		(4,279,870)		(4,279,870)
Issuance of common shares of beneficial interest	5,483,433		54,834		81,339,059		—		81,393,893
Balances at December 31, 2022	5,483,433	$	54,834	$	80,950,845	$	(742,722)	$	80,262,957

STELLUS PRIVATE CREDIT BDC

CONSOLIDATED STATEMENT OF CASH FLOWS

			For the period
	For the		from Inception
	year ended		through
	December 31, 2022		December 31, 2021
Cash flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	3,681,779	$	(532,845)
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(168,326,016)		—
Proceeds from sales and repayments of investments		10,474,408		—
Net change in unrealized depreciation on investments		538,883		—
Net change in unrealized appreciation foreign currency translations		(20,961)		—
Amortization of premium and accretion of discount, net		(198,065)		—
Amortization of loan structure fees		478,626		—
Amortization of deferred offering costs		240,152		—
Changes in other assets and liabilities
Increase in interest receivable		(1,030,274)		—
Increase in deferred offering costs		—		(139,570)
Increase in related party receivable		(9,620)		—
Increase in expense reimbursements receivable from the Advisor		(165,638)		—
Increase in prepaid expenses		(39,356)		(93,648)
(Decrease) increase in due to affiliate		(460,085)		460,085
Increase in professional fees payable		—		263,978
(Decrease) increase in trustees' fees payable		(42,000)		42,000
Increase in administrative services payable		66,064		—
Increase in interest payable		563,241		—
Increase in income incentive fees payable		328,196		—
Increase in unearned revenue		539,634		—
Increase in income tax payable		7,471		—
Decrease in other accrued expenses and liabilities		(144,704)		—
Net Cash Used in Operating Activities	$	(153,518,265)	$	—
Net Cash Provided from Financing Activities
Proceeds from issuance of common shares of beneficial interest	$	81,393,893	$	—
Offering costs paid for common shares of beneficial interest issued		(154,976)		—
Stockholder distributions paid		(2,470,337)		—
Borrowings under Credit Facilities		124,762,500		—
Repayments of Credit Facilities		(44,147,500)		—
Financing costs paid on Credit Facilities		(1,645,492)		—
Short-term loan borrowings		11,250,000		—
Net Cash Provided by Financing Activities	$	168,988,088	$	—
Net Increase in Cash and Cash Equivalents	$	15,469,823	$	—
Cash and Cash Equivalents Balance at Beginning of period		—		—
Cash and Cash Equivalents Balance at End of Period	$	15,469,823	$	—
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	1,270,834	$	—
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan		43,893		—
Increase in dividends payable		1,809,533		—