Stellus Private Credit BDC Reports Results for its Third Fiscal Quarter Ended September 30, 2022
HOUSTON, Nov. 4, 2022 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its third fiscal quarter ended September 30, 2022.
Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated "We are pleased to report strong results for our third full quarter of operations. During the quarter we made seven new investments and three investments in existing portfolio companies totaling $56 million at fair value, bringing the total portfolio to $127 million at fair value. On November 3, 2022, we declared our second quarterly dividend of $0.33 per share representing an annualized dividend yield of 8.8%. We expect our dividend to grow as we continue to build out the portfolio."
FINANCIAL HIGHLIGHTS | ||||||
($ in millions, except data relating to per share amounts and shares outstanding) | ||||||
Three Months Ended | Nine Months Ended | |||||
September 30, 2022 | September 30, 2022 | |||||
Amount | Per Share | Amount | Per Share | |||
Net investment income | $1.54 | $0.37 | $2.32 | $0.70 | ||
Net unrealized depreciation included in earnings | (0.63) | (0.15) | (0.82) | (0.25) | ||
Net increase in net assets resulting from operations | 0.91 | 0.22 | 1.50 | 0.45 | ||
Distributions | (0.77) | (0.19) | (0.77) | (0.23) | ||
Other weighted average share adjustments(1) | — | (0.06) | — | (0.09) | ||
Net asset value | $76.5 | $14.90 | $76.5 | $14.90 | ||
Weighted average shares outstanding | 4,165,010 | 3,311,178 | ||||
(1) | Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end. |
PORTFOLIO ACTIVITY | ||||||||
($ in millions) | ||||||||
As of | As of | |||||||
September 30, 2022 | December 31, 2021 | |||||||
Investments at fair value | $127.4 | — | ||||||
Total assets | $141.2 | $0.2 | ||||||
Net assets | $76.5 | ($0.5) | ||||||
Shares outstanding | 5,138,740 | — | ||||||
Net asset value per share | $14.90 | N/A | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2022 | September 30, 2022 | |||||||
New investments | $55.6 | $135.0 | ||||||
Repayments of investments | (6.2) | (6.9) | ||||||
Net activity | $49.3 | $128.1 | ||||||
Results of Operations
Investment income for the three months ended September 30, 2022 totaled $2.6 million, most of which was interest income from portfolio investments.
Operating expenses for the three months ended September 30, 2022 totaled $1.6 million, net of $0.5 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 $0.4 million (which were waived by the Advisor), income incentive fees totaled $0.2 million, fees and expenses related to our borrowings totaled $0.7 million (including interest and amortization of deferred financing costs), administrative expenses totaled less than $0.1 million, and other expenses totaled $0.2 million.
Net investment income was $1.5 million, or $0.37 per common share of beneficial interest based on weighted average common shares of beneficial interest outstanding of 4,165,010 for the three months ended September 30, 2022.
The Company's investment portfolio had a net change in unrealized depreciation of $0.6 million for the three months ended September 30, 2022.
Net increase in net assets resulting from operations totaled $0.9 million or $0.22 per common share of beneficial interest, based on weighted average common shares of beneficial interest outstanding of 4,165,010 for the three months ended September 30, 2022.
Liquidity and Capital Resources
As of September 30, 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 September 30, 2022 and December 31, 2021, we had $54.6 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 provides for borrowings up to a maximum of $105.0 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 September 30, 2022 and December 31, 2021, we had $0.8 million and $0 in outstanding borrowings under the Credit Facility, respectively.
Recent Portfolio Activity
New and Add-On Investments
Activity Type | Date | Company Name | Company Description | Investment | Instrument Type |
New Investment | July 1, 2022 | Heat Makes Sense Shared Services, LLC | Branded haircare platform | $7,498,862 | First lien term loan |
1,477,049 | Revolver commitment | ||||
383,465 | Equity investment | ||||
New Investment | July 5, 2022 | Baker Manufacturing Company, LLC | Manufacturer of water well equipment, specialized | 6,169,082 | Last out term loan |
filtration pumps, and custom castings | 330,978 | Equity investment | |||
New Investment | July 29, 2022 | Curion Holdings, LLC | Provider of product testing and consumer insights | 3,551,651 | First lien term loan |
1,275,886 | Revolver commitment | ||||
3,879,736 | Delayed draw term loan commitment | ||||
343,529 | Equity investment | ||||
Add-On Investment | August 2, 2022 | Inoapps Holdings, LLC | Existing portfolio company | 31,238 | Equity investment |
Add-On Investment | August 8, 2022 | International Designs Holdings LLC | Existing portfolio company | 227,671 | Equity investment |
New Investment | August 11, 2022 | Archer Systems, LLC | Provider of mass tort settlement administrative | 9,727,427 | First lien term loan |
solutions | 1,025,607 | Revolver commitment | |||
496,967 | Equity investment | ||||
New Investment | August 26, 2022 | Heartland Business Systems, LLC | End-to-end IT solutions provider | 3,210,687 | First lien term loan |
6,632,305 | Delayed draw term loan commitment | ||||
157,008 | Equity investment | ||||
New Investment | August 31, 2022 | Pearl Media Holdings, LLC | Provider of street-level, out-of-home advertising | 2,677,934 | First lien term loan |
696,773 | Revolver commitment | ||||
3,594,043 | Delayed draw term loan commitment | ||||
Add-On Investment | September 1, 2022 | Sapphire Aggregator S.a r.l. | Existing portfolio company | € 293,323 | Equity investment |
New Investment | September 2, 2022 | MacKenzie-Childs Acquisition, Inc. | Lifestyle home décor brand | 9,402,047 | First lien term loan |
1,536,470 | Revolver commitment | ||||
311,482 | Equity investment |
Full Repayments and Realizations
Activity Type | Date | Company Name | Company Description | Proceeds Received | Instrument Type |
Full Repayment | July 15, 2022 | International Designs Group LLC | Existing portfolio company | $5,021,456 | First lien term loan |
247,908 | Revolver |
Events Subsequent to September 30, 2022
Activity Type | Date | Company Name | Company Description | Investment Amount | Instrument Type |
Add-On Investment | October 12, 2022 | BLP Buyer, Inc. | Existing portfolio company | $1,278,711 | First lien term loan |
Credit Facilities
The outstanding balance under the Credit Facilities as of November 4, 2022 was $49.1 million.
Distributions Declared
On November 3, 2022, our board of trustees declared a regular distribution for the third quarter of 2022 of $0.33 per share, payable to shareholders of record as of November 10, 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 | ||||||
September 30, 2022 | ||||||
(unaudited) | December 31, 2021 | |||||
ASSETS | ||||||
Non-controlled, non-affiliated investments, at fair value (amortized cost of 128,200,252) | $ | 127,382,778 | $ | — | ||
Cash and cash equivalents | 11,133,994 | — | ||||
Other receivable | 1,246,743 | — | ||||
Interest receivable | 861,191 | — | ||||
Expense reimbursement receivable from the Advisor | 324,831 | — | ||||
Deferred offering costs | 114,130 | 139,570 | ||||
Related party receivable | 43,105 | — | ||||
Prepaid expenses | 42,998 | 93,648 | ||||
Receivable for sales and repayments of investments | 12,967 | — | ||||
Total Assets | $ | 141,162,737 | $ | 233,218 | ||
LIABILITIES | ||||||
Credit Facilities payable | $ | 54,441,084 | $ | — | ||
Short-term loan payable | 9,000,000 | — | ||||
Due to affiliate | — | 460,085 | ||||
Unearned revenue | 498,153 | — | ||||
Income incentive fee payable | 246,156 | — | ||||
Interest payable | 233,971 | — | ||||
Administrative services payable | 106,190 | — | ||||
Trustees' fees payable | — | 42,000 | ||||
Other accrued expenses and liabilities | 90,123 | 263,978 | ||||
Total Liabilities | $ | 64,615,677 | $ | 766,063 | ||
Commitments and contingencies (Note 7) | ||||||
Net Assets | $ | 76,547,060 | $ | (532,845) | ||
NET ASSETS | ||||||
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 5,138,740 issued and outstanding as of September 30, 2022) | $ | 51,387 | $ | — | ||
Paid-in capital | 76,302,940 | — | ||||
Accumulated undistributed surplus (deficit) | 192,733 | (532,845) | ||||
Net Assets | $ | 76,547,060 | $ | (532,845) | ||
Total Liabilities and Net Assets | $ | 141,162,737 | $ | 233,218 | ||
Net Asset Value Per Share | $ | 14.90 | $ | N/A | ||
STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||
For the three | For the nine | ||||||
months ended | months ended | ||||||
September 30, 2022 | September 30, 2022 | ||||||
INVESTMENT INCOME | |||||||
Interest income | $ | 2,583,194 | $ | 4,189,423 | |||
Other income | 46,509 | 87,860 | |||||
Total Investment Income | $ | 2,629,703 | $ | 4,277,283 | |||
OPERATING EXPENSES | |||||||
Management fees | $ | 396,989 | $ | 788,354 | |||
Income incentive fees | 168,479 | 246,156 | |||||
Professional fees | 92,630 | 317,694 | |||||
Organization costs | — | 90,184 | |||||
Amortization of deferred offering costs | 67,151 | 164,982 | |||||
Administrative services expenses | 48,843 | 157,242 | |||||
Trustees' fees | 40,000 | 118,000 | |||||
Insurance expense | 20,530 | 61,326 | |||||
Interest expense and other fees | 699,425 | 1,050,096 | |||||
Other general and administrative expenses | 32,607 | 80,976 | |||||
Total Operating Expenses | $ | 1,566,654 | $ | 3,075,010 | |||
Expenses reimbursed/waived by Investment Advisor (Note 2) | $ | (476,464) | $ | (1,113,186) | |||
Net Operating Expenses | $ | 1,090,190 | $ | 1,961,824 | |||
Net Investment Income | $ | 1,539,513 | $ | 2,315,459 | |||
Net realized gain on foreign currency translation | $ | 2,146 | $ | 2,146 | |||
Net change in unrealized depreciation on non-controlled, non-affiliated investments | $ | (522,403) | $ | (713,013) | |||
Net change in unrealized depreciation on foreign currency translation | $ | (105,040) | $ | (104,461) | |||
Net Increase in Net Assets Resulting from Operations | $ | 914,216 | $ | 1,500,131 | |||
Net Investment Income Per Share – basic and diluted | $ | 0.37 | $ | 0.70 | |||
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted | $ | 0.22 | $ | 0.45 | |||
Weighted Average Shares of Common Shares of Beneficial Interest Outstanding – basic and diluted | 4,165,010 | 3,311,178 | |||||
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 translations | — | — | — | 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 | |||||
Net investment income | — | — | — | 1,539,513 | 1,539,513 | |||||||||
Net realized gain on foreign currency translation | — | — | — | 2,146 | 2,146 | |||||||||
Net change in unrealized depreciation on non-controlled, non-affiliated investments | — | — | — | (522,403) | (522,403) | |||||||||
Net change in unrealized depreciation on foreign currency translations | — | — | — | (105,040) | (105,040) | |||||||||
Distributions from net investment income | — | — | — | (774,553) | (774,553) | |||||||||
Issuance of common shares of beneficial interest | 1,450,393 | 14,504 | 21,339,823 | — | 21,354,327 | |||||||||
Balances at September 30, 2022 | 5,138,740 | $ | 51,387 | $ | 76,302,940 | $ | 192,733 | $ | 76,547,060 | |||||
STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) | ||||
For the nine | ||||
months ended | ||||
September 30, 2022 | ||||
Cash flows from operating activities | ||||
Net increase in net assets resulting from operations | $ | 1,500,131 | ||
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: | ||||
Purchases of investments | (135,023,930) | |||
Proceeds from sales and repayments of investments | 6,925,278 | |||
Net change in unrealized depreciation on investments | 713,013 | |||
Net change in unrealized depreciation on foreign currency translations | 104,461 | |||
Amortization of premium and accretion of discount, net | (114,567) | |||
Amortization of loan structure fees | 277,541 | |||
Amortization of deferred offering costs | 164,982 | |||
Changes in other assets and liabilities | ||||
Increase in interest receivable | (861,191) | |||
Increase in other receivable | (1,246,743) | |||
Increase in related party receivable | (43,105) | |||
Increase in expense reimbursements receivable from the Advisor | (324,831) | |||
Increase in prepaid expenses | 50,650 | |||
Decrease in due to affiliate | (460,085) | |||
Decrease in trustees' fees payable | (42,000) | |||
Increase in administrative services payable | 106,190 | |||
Increase in interest payable | 233,971 | |||
Increase in income incentive fees payable | 246,156 | |||
Increase in unearned revenue | 498,153 | |||
Increase in other accrued expenses and liabilities | (173,855) | |||
Net Cash Used In Operating Activities | $ | (127,469,781) | ||
Cash flows from Financing Activities | ||||
Proceeds from the issuance of common shares of beneficial interest | $ | 76,354,327 | ||
Offering costs paid for common shares of beneficial interest issued | (139,542) | |||
Stockholder distributions paid | (774,553) | |||
Borrowings under Credit Facilities | 90,290,000 | |||
Repayments of Credit Facilities | (34,890,000) | |||
Financing costs paid on Credit Facilities | (1,236,457) | |||
Short-term loan borrowings | 9,000,000 | |||
Net Cash Provided by Financing Activities | $ | 138,603,775 | ||
Net Increase in Cash and Cash Equivalents | $ | 11,133,994 | ||
Cash and Cash Equivalents Balance at Beginning of period | — | |||
Cash and Cash Equivalents Balance at End of Period | $ | 11,133,994 | ||
Supplemental and Non-Cash Activities | ||||
Cash paid for interest expense | $ | 539,122 | ||
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan | 4,328 | |||
SOURCE Stellus Private Credit BDC
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