Stellus Private Credit BDC Reports Results for its second fiscal quarter ended June 30, 2022

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Aug 05, 2022, 07:00 ET

HOUSTON, Aug. 5, 2022 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or "the Company") today announced financial results for its second fiscal quarter ended June 30, 2022.

Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated, "We are pleased to report strong results for our second full quarter of operations. During the quarter we made seven new investments totaling $41 million, bringing the total portfolio to $79 million at fair value. We have continued to stay active since quarter end, growing the portfolio to $99 million over 18 investments today. On August 4, 2022, we declared our first quarterly dividend of $0.21 per share representing an annualized dividend yield of 5.7% based on net asset value at the beginning of the period. 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		Six Months Ended
	June 30, 2022		June 30, 2022
	Amount	Per Share	Amount	Per Share
Net investment income	$0.70	$0.23	$0.78	$0.28
Net unrealized depreciation included in earnings	(0.08)	(0.03)	(0.19)	(0.07)
Net increase in net assets resulting from operations	0.62	0.20	0.59	0.21
Other weighted average share adjustments⁽¹⁾	-	(0.03)	-	(0.05)
Net asset value	55.05	14.93	55.05	14.93
Weighted average shares outstanding		3,092,695		2,790,962

Return on equity (annualized)	4.6 %		2.6 %


(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
	June 30, 2022	December 31, 2021
Investments at fair value	$78.6	-
Total assets	$127.0	$0.2
Net assets	$55.1	($0.5)
Shares outstanding	3,688,347	-
Net asset value per share	$14.93	N/A

	Quarter Ended	Six Months Ended
	June 30, 2022	June 30, 2022
New investments	$41.4	$79.5
Repayments of investments	(0.2)	(0.7)
Net activity	$41.2	$78.8

Results of Operations

Investment income for the three months ended June 30, 2022 totaled $1.3 million, most of which was interest income from portfolio investments.

Operating expenses for the three months ended June 30, 2022 totaled $0.6 million, net of $0.4 million in expenses reimbursed and fees waived by the Company's advisor, Stellus Private BDC Advisor, LLC. For the same period, base management fees totaled $0.3 million (which were waived by the Company's advisor), income incentive fees totaled $0.1 million, fees and expenses related to our borrowings totaled $0.3 million (including interest and amortization of deferred financing costs), administrative expenses totaled less than $0.1 million, and other expenses totaled $0.3 million.

Net investment income was $0.7 million, or $0.23 per common share of beneficial interest based on weighted average common shares of beneficial interest outstanding for the three months ended June 30, 2022 of 3,092,695.

The Company's investment portfolio had a net change in unrealized depreciation for the three months ended June 30, 2022 of $0.1 million.

Net increase in net assets resulting from operations totaled $0.6 million or $0.20 per common share of beneficial interest, based on weighted average common shares of beneficial interest outstanding for the three months ended June 30, 2022 of 3,092,695.

Liquidity and Capital Resources

As of June 30, 2022, our amended and restated senior secured revolving credit agreement with Signature Bank (as amended from time to time, the "Credit Facility") provided for borrowings in an aggregate amount of up to $100.0 million on a committed basis. As of June 30, 2022 and December 31, 2021, we had $46.5 million and $0 million in outstanding borrowings under the Credit Facility, respectively.

Recent Portfolio Activity

On April 1, 2022, we invested $5.0 million in the first lien term loan and committed $1.2 million in the revolver of International Designs Group LLC, a regional distributor, seller, and custom fabricator of high-end ceramic and stone tile products and accessories. Additionally, we invested $0.2 million in the equity of the company.

On April 1, 2022, we invested $6.0 million in the first lien term loan and committed $1.0 million in the revolver of Tilley Chemical Company, Inc., a distributor of specialty chemicals, oils, and lubricants into the food & beverage, lubricants, flavor and fragrances, personal care, and other chemicals end-markets.

On April 4, 2022, we invested $5.0 million in the first lien term loan and committed $0.9 million in the revolver of Microbe Formulas LLC, a provider of dietary supplements and other natural solutions for detox and gut health.

On April 29, 2022, we invested $1.3 million in the first lien term loan and committed $1.9 million in the revolver and $1.0 million in the delayed draw term loan of Florachem Holdings, LLC, a distiller and supplier of natural citrus, pine, and specialty inputs. Additionally, we invested $0.2 million in the equity of the company.

On May 17, 2022, we invested $8.9 million in the first lien term loan and committed $1.6 million in the revolver of AIP ATCO Buyer, LLC, a provider of quality assurance services for automotive OEMs and suppliers.

On May 24, 2022, we invested $6.1 million in the first lien term loan and committed €1.3 million in the revolver and €3.6 million in the delayed draw term loan of Monitorus Holding, LLC, a provider of media monitoring and evaluation services.

On June 6, 2022, we invested $6.2 million in the first lien term loan and committed $0.7 million in the revolver of Lightning Intermediate II, LLC, a vitamins, minerals, and supplements brand. Additionally, we invested $0.2 million in the equity of the company.

On June 24, 2022, we invested an additional $0.5 million in the first lien term loan of BDS Solutions Intermediateco, LLC, an existing portfolio company.

Events Subsequent to June 30, 2022

On July 1, 2022, we invested $7.5 million in the first lien term loan and committed $1.5 million in the revolver of Heat Makes Sense Shared Services, LLC, a branded haircare platform. Additionally, we invested $0.4 million in the equity of the company.

On July 5, 2022, we invested $6.2 million in the first lien term loan of Baker Manufacturing Company, LLC, a manufacturer of water well equipment, specialized filtration pumps, and custom castings. Additionally, we invested $0.3 million in the equity of the company.

On July 12, 2022, we fully funded $3.6 million in the delayed draw term loan of Monitorus Holding, LLC, an existing portfolio company.

On July 15, 2022, we received full repayment on the first lien term loan of International Designs Group, LLC for total proceeds of $5.3 million.

On July 29, 2022, we invested $3.6 million in the first lien term loan and committed $1.3 million in the revolver and $3.9 million in the delayed draw term loan of a provider of product testing and consumer insights. Additionally, we invested $0.3 million in the equity of the company.

On August 2, 2022, we partially funded $2.4 million in the delayed draw term loan and an additional $0.1 million in the equity of Inoapps Bidco, LLC, an existing portfolio company.

Credit Facility

The outstanding balance under the Credit Facility as of August 5, 2022 was $44.4 million.

Distributions Declared

On August 4, 2022, our board of trustees declared a regular distribution for the second quarter of 2022 of $0.21 per share, payable to shareholders of record as of August 11, 2022 which will be paid on August 15, 2022.

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, including statements about COVID-19 and its impacts, 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

	June 30, 2022
	(unaudited)		December 31, 2021
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $78,820,633)	$	78,630,023	$	—
Cash and cash equivalents		47,051,204		—
Interest receivable		488,877		—
Related party receivable		383,465		—
Expense reimbursement receivable from the Advisor		245,356		—
Deferred offering costs		163,546		139,570
Prepaid expenses		48,444		93,648
Other receivables		12,997		—
Total Assets	$	127,023,912	$	233,218
LIABILITIES
Credit Facility payable	$	46,164,986	$	—
Short-term loan payable		25,000,000		—
Due to affiliate		—		460,085
Unearned revenue		365,021		—
Interest payable		92,113		—
Income incentive fee payable		77,677		—
Administrative services payable		64,174		—
Trustees' fees payable		—		42,000
Other accrued expenses and liabilities		206,871		263,978
Total Liabilities	$	71,970,842	$	766,063
Commitments and contingencies (Note 7)
Net Assets	$	55,053,070	$	(532,845)
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 3,688,347 issued and outstanding as of June 30, 2022)	$	36,883	$	—
Paid-in capital		54,963,117		—
Accumulated undistributed surplus (deficit)		53,070		(532,845)
Net Assets	$	55,053,070	$	(532,845)
Total Liabilities and Net Assets	$	127,023,912	$	233,218
Net Asset Value Per Share	$	14.93	$	N/A

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	For the three		For the six
	months ended		months ended
	June 30, 2022		June 30, 2022
INVESTMENT INCOME
Interest income	$	1,247,218	$	1,606,229
Other income		30,608		41,351
Total Investment Income	$	1,277,826	$	1,647,580
OPERATING EXPENSES
Management fees	$	299,076	$	391,365
Interest expense and other fees		277,904		350,671
Professional fees		116,476		225,064
Organization costs		—		90,184
Income incentive fees		77,677		77,677
Amortization of deferred offering costs		62,954		97,831
Administrative services expenses		40,257		108,399
Trustees' fees		40,000		78,000
Other general and administrative expenses		30,392		48,369
Insurance expense		20,495		40,796
Total Operating Expenses	$	965,231	$	1,508,356
Expenses reimbursed/waived by Investment Advisor (Note 2)	$	(386,500)	$	(636,722)
Net Operating Expenses	$	578,731	$	871,634
Net Investment Income	$	699,095	$	775,946
Net change in unrealized depreciation on non-controlled, non-affiliated investments	$	(82,562)	$	(190,610)
Net change in unrealized appreciation on foreign currency translation	$	579	$	579
Net Increase in Net Assets Resulting from Operations	$	617,112	$	585,915
Net Investment Income Per Share – basic and diluted	$	0.23	$	0.28
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted	$	0.20	$	0.21
Weighted Average Shares of Common Shares of Beneficial Interest Outstanding – basic and diluted		3,092,695		2,790,962

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

	Common Shares of
	Beneficial Interest					Accumulated
	Number of	Par		Paid-in		undistributed
	shares	value		capital		(deficit) surplus		Net Assets
Balances at December 31, 2021	—	$	—	$	—	$	(532,845)	$	(532,845)
Net investment income	—		—		—		76,851		76,851
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(108,048)		(108,048)
Issuance of common shares of beneficial interest	2,333,334		23,333		34,976,667		—		35,000,000
Balances at March 31, 2022	2,333,334	$	23,333	$	34,976,667	$	(564,042)	$	34,435,958
Net investment income	—		—		—		699,095		699,095
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(82,562)		(82,562)
Net change in unrealized appreciation on foreign currency translation	—		—		—		579		579
Issuance of common shares of beneficial interest	1,355,013		13,550		19,986,450		—		20,000,000
Balances at June 30, 2022	3,688,347	$	36,883	$	54,963,117	$	53,070	$	55,053,070

STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

	For the six
	months ended
	June 30, 2022
Cash flows from operating activities
Net increase in net assets resulting from operations	$	585,915
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(79,461,775)
Proceeds from sales and repayments of investments		690,802
Net change in unrealized depreciation on investments		190,610
Net change in unrealized appreciation on foreign currency translation		(579)
Amortization of premium and accretion of discount, net		(49,672)
Amortization of loan structure fees		144,559
Amortization of deferred offering costs		97,831
Changes in other assets and liabilities
Increase in interest receivable		(488,877)
Increase in other receivable		(12,997)
Increase in receivable from related party		(383,465)
Increase in expense reimbursements receivable from the Advisor		(245,356)
Decrease in prepaid expenses		45,204
Decrease in due to affiliate		(460,085)
Decrease in trustees' fees payable		(42,000)
Increase in administrative services payable		64,174
Increase in interest payable		92,113
Increase in income incentive fees payable		77,677
Increase in unearned revenue		365,612
Decrease in other accrued expenses and liabilities		(57,107)
Net Cash Used In Operating Activities	$	(78,847,416)
Cash flows from Financing Activities
Proceeds from the issuance of common shares of beneficial interest	$	55,000,000
Offering costs paid for common shares of beneficial interest issued		(121,807)
Borrowings under Credit Facility		59,950,000
Repayments of Credit Facility		(13,500,000)
Financing costs paid on Credit facility		(429,573)
Short-term loan borrowings		25,000,000
Net Cash Provided by Financing Activities	$	125,898,620
Net Increase in Cash and Cash Equivalents	$	47,051,204
Cash and Cash Equivalents balance at Beginning of period		—
Cash and Cash Equivalents Balance at End of Period	$	47,051,204
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	113,999
Increase in deferred offering costs	$	23,976