Attached files
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| 8-K - 8-K - American Capital Senior Floating, Ltd. | a09302014acsf8-k1.htm |
Exhibit 99.1
 | Two Bethesda Metro Center 14th Floor Bethesda MD, 20814 (301) 968-9310 www.ACSF.com IR@ACSF.com |
FOR IMMEDIATE RELEASE
November 3, 2014
Contact:
Investor Relations - (301) 968-9310
American Capital Senior Floating, Ltd. Reports Net Investment Income of $0.29 Per Share for Q3 2014
Bethesda, MD - November 3, 2014 - American Capital Senior Floating, Ltd. (“ACSF” or the “Company”) (Nasdaq: ACSF) today reported net investment income of $2.9 million, or $0.29 per share, and net earnings of $0.2 million, or $0.02 per share, for the quarter ended September 30, 2014. Net asset value (“NAV”) was $148.5 million, or $14.85 per share, as of September 30, 2014.
FINANCIAL HIGHLIGHTS
• | Net investment income of $2.9 million, or $0.29 per share |
• | Net earnings of $0.2 million, or $0.02 per share |
• | Dividend declared of $0.28 per share |
• | Estimated undistributed taxable income of $0.1 million, or $0.01 per share, as of September 30, 2014 |
• | NAV of $148.5 million, or $14.85 per share, as of September 30, 2014 |
• | $294 million investment portfolio at fair value as of September 30, 2014 |
◦ | $212 million in first lien floating rate loans |
◦ | $32 million in second lien floating rate loans |
◦ | $50 million of equity investments in collateralized loan obligations (“CLOs”) |
• | Portfolio yield at cost of 6.53% as of September 30, 2014 |
• | Debt to equity ratio of 0.91x as of September 30, 2014 |
• | Cost of funding of 2.28% as of September 30, 2014 |
“We are pleased with our performance this quarter,” said Mark Pelletier, President and Chief Investment Officer. “Despite increased volatility in the loan market, our net investment income remained stable, and importantly, we were able to take advantage of wider spreads by rotating the portfolio into more compelling investments. Overall, the portfolio is performing well from a credit perspective and we continue to feel good about ACSF’s prospects over the long term.”
Malon Wilkus, Chair and Chief Executive Officer commented, “We were pleased to announce a dividend of $0.28 per share for the third quarter. Our current annualized dividend represents a 7.5% yield on our NAV and an 8.6% yield on our September 30th closing share price. While we experienced depreciation this quarter, it is important to note that it was due to market spreads widening and not credit deterioration. As such, with active management, we believe that we were able to take advantage of widening spreads to improve the risk adjusted return on the portfolio. We look forward to continuing to deliver attractive risk adjusted returns for our shareholders in the future.”
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2014, the fair market value of ACSF’s portfolio totaled $294 million and was comprised of $212 million (or 72%) of first lien floating rate loans, $32 million (or 11%) of second lien floating rate loans (collectively, the “loan portfolio”) and $50 million (or 17%) of CLO equity (the "CLO portfolio" and, together with the loan portfolio, the "portfolio"). ACSF’s portfolio had a weighted average yield (at cost) of 6.53% as of September 30, 2014. The weighted average yield on the portfolio
increased 20 basis points from 6.33% as of June 30, 2014 as a result of active portfolio management that capitalized on higher spread new issue opportunities during the quarter combined with updates to the forecasted yield on the CLO portion of the portfolio.
As of September 30, 2014, ACSF’s loan portfolio was diversified across 122 companies and 40 industries, with the average issuer concentration at 0.7% of the portfolio and no single company representing more than 1.5% of the portfolio. ACSF’s loan portfolio was invested solely in senior secured floating rate loans as of September 30, 2014. Overall, ACSF’s loan portfolio had a weighted average yield (at cost) of 5.33% as of September 30, 2014, a 5 basis point increase from the June 30, 2014 yield.
As of September 30, 2014, ACSF’s CLO portfolio was invested across 14 issuers and 12 collateral managers, with no issuer representing more than 2.0% of the portfolio. ACSF’s CLO portfolio had a weighted average yield of 12.35% as of September 30, 2014, a 78 basis point increase from the June 30, 2014 yield of 11.57% due to portfolio optimization by the collateral managers and updates to certain default assumptions.
RESULTS OF OPERATIONS
Investment Income
Investment income for the three months ended September 30, 2014 was $4.6 million. Interest generated from ACSF’s loan portfolio totaled $3.2 million and income from ACSF’s CLO portfolio totaled $1.4 million.
Net Expenses
Net expenses for the three months ended September 30, 2014 were $1.7 million, primarily comprised of interest and other debt related costs of $0.8 million, management fees of $0.6 million and other general administrative expenses.
Interest and other debt related costs incurred during the quarter ended September 30, 2014 are related to borrowings under ACSF's $140 million revolving credit facility (the "Credit Facility"). The average interest rate on the Credit Facility during the quarter ended September 30, 2014 was 1.96% and the average total cost of funding, including fees and expenses during the quarter ended September 30, 2014 was 2.31%. As of September 30, 2014, the balance outstanding on the Credit Facility was $135.0 million with an average interest rate of 1.95%. The total cost of funding as of September 30, 2014 was 2.28%.
Management fees were $0.6 million for the quarter. Management fees are computed at 80 basis points per annum on ACSF’s total assets, excluding unrealized gains or losses on investments and cash and cash equivalents.
For the first two years following ACSF's initial public offering (the "IPO"), American Capital ACSF Management, LLC, ACSF’s manager, has agreed that other operating expenses will generally not exceed 75 basis points per annum of ACSF’s quarter end equity, excluding unrealized gains or losses. Thus, while ACSF's actual other operating expenses totaled $0.6 million for the quarter, $0.3 million of its expenses were paid by ACSF’s manager. As a result, net other operating expenses totaled $0.3 million for the three months ended September 30, 2014.
Net Investment Income
Net investment income totaled $2.9 million, or $0.29 per share, for the three months ended September 30, 2014.
Net Realized Gains / Losses
Sales and repayments of investments during the three months ended September 30, 2014 totaled $41.3 million and $11.6 million, respectively, with net realized losses during the quarter of $29 thousand, or less than $0.01 per share.
Net Unrealized Appreciation / Depreciation
During the three months ended September 30, 2014, ACSF recognized $2.6 million of unrealized depreciation which was primarily attributed to the loan portfolio. The depreciation in the loan portfolio was consistent with price changes observed in the broader market which resulted in higher market yields for both new issue and legacy loan positions relative to their credit profiles.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2014, the Company had $135.0 million in borrowings outstanding on the Credit Facility. Borrowings under the Credit Facility are advanced against eligible collateral, owned by ACSF Funding I, LLC, a wholly owned consolidated financing subsidiary of ACSF. Advance rates vary on the type of collateral owned and can range up to 80%. On a consolidated basis, as of September 30, 2014, the Company was levered at 0.91x debt to equity.
DIVIDENDS
ACSF’s Board of Directors determines dividends based primarily on estimates of taxable income, which may differ from GAAP income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation
and depreciation on investments. The Company expects the dividends paid to date to be distributions of ordinary income, however the specific tax characteristics will be reported to shareholders on Form 1099 after the end of the calendar year.
For the quarter ended September 30, 2014, ACSF’s Board of Directors declared a $0.28 dividend per share. The dividend was paid on October 10, 2014 to common shareholders of record as of September 30, 2014, with an ex-dividend date of September 26, 2014. Since its January 2014 IPO, the Company has paid a total of $7.4 million in dividends, or $0.74 per share.
Previously, the Company disclosed that it had an estimated $1.4 million of pre-IPO C corporation taxable earnings and profits that would be required to be distributed to ACSF shareholders as part of its election to be treated as a regulated investment company ("RIC"). In the current quarter, the Company concluded that it will not be required to distribute any pre-IPO C corporation taxable earnings and profits in order to qualify as a RIC.
As of September 30, 2014, the Company had approximately $0.1 million, or $0.01 per share, of estimated undistributed taxable income.
AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
($ in thousands, except per share data)
September 30, 2014 (unaudited) | December 31, 2013 | |||||||
Assets | ||||||||
Investments, fair value (cost of $295,158 and $198,268, respectively) | $ | 293,888 | $ | 199,565 | ||||
Cash and cash equivalents | 5,254 | 12,493 | ||||||
Receivable for investments sold | 5,453 | 5,394 | ||||||
Deferred financing costs | 477 | 474 | ||||||
Interest receivable | 522 | 303 | ||||||
Prepaid expenses and other assets | 167 | 467 | ||||||
Receivable from affiliate | 283 | — | ||||||
Total assets | $ | 306,044 | $ | 218,696 | ||||
Liabilities | ||||||||
Credit facility payable | $ | 135,000 | $ | 194,748 | ||||
Payable for investments purchased | 18,403 | 20,494 | ||||||
Dividends payable | 2,800 | — | ||||||
Management fee payable | 609 | — | ||||||
Interest payable | 85 | 943 | ||||||
Taxes payable | 10 | 803 | ||||||
Payable to affiliate | 228 | 295 | ||||||
Other liabilities and accrued expenses | 369 | 397 | ||||||
Total liabilities | 157,504 | 217,680 | ||||||
Net Assets | ||||||||
Common stock, par value $0.01 per share. 10,000,100 and 100 issued and outstanding respectively. 300,000,000 and 1,000 authorized respectively. | 100 | — | ||||||
Paid-in capital in excess of par | 149,610 | 1 | ||||||
Undistributed net investment income | 593 | 246 | ||||||
Accumulated net realized loss from investments | (66 | ) | (7) | |||||
Net unrealized (depreciation) appreciation on investments | (1,697 | ) | 776 | |||||
Total net assets | 148,540 | 1,016 | ||||||
Total liabilities and net assets | $ | 306,044 | $ | 218,696 | ||||
Net asset value per share | $ | 14.85 | ||||||
AMERICAN CAPITAL SENIOR FLOATING, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
Three Months Ended September 30, 2014 (unaudited) | Nine Months Ended September 30, 2014 (unaudited) | ||||||||
Investment income: | |||||||||
Interest | $ | 4,554 | $ | 12,941 | |||||
Total investment income | 4,554 | 12,941 | |||||||
Expenses: | |||||||||
Interest and other debt related costs | 789 | 2,658 | |||||||
Management fee | 609 | 1,609 | |||||||
Other operating expenses | 566 | 1,675 | |||||||
Total expenses | 1,964 | 5,942 | |||||||
Expense waiver | (283 | ) | (837 | ) | |||||
Net expenses | 1,681 | 5,105 | |||||||
Net investment income before tax | 2,873 | 7,836 | |||||||
Income tax benefit (provision) | 20 | (89 | ) | ||||||
Net investment income | 2,893 | 7,747 | |||||||
Realized and unrealized (loss) gain on investments: | |||||||||
Net realized (loss) gain on investments | (29 | ) | 235 | ||||||
Net unrealized depreciation on investments | (2,618 | ) | (2,567 | ) | |||||
Income tax provision | — | (200 | ) | ||||||
Net realized and unrealized (loss) gain on investments | (2,647 | ) | (2,532 | ) | |||||
Net increase in net assets resulting from operations | $ | 246 | $ | 5,215 | |||||
Net investment income per share | $ | 0.29 | $ | 0.77 | |||||
Earnings per share | $ | 0.02 | $ | 0.52 | |||||
Dividend declared per share | $ | 0.28 | $ | 0.74 | |||||
AMERICAN CAPITAL SENIOR FLOATING, LTD.
KEY PORTFOLIO STATISTICS
($ in thousands, except per share data)
As of | As of | As of | |||||||||
(Fair Market Value) | September 30, 2014 (unaudited) | June 30, 2014 (unaudited) | March 31, 2014 (unaudited) | ||||||||
Investment Portfolio at FMV | |||||||||||
1st Lien Floating Rate Loans | $ | 211,526 | $ | 204,396 | $ | 211,284 | |||||
2nd Lien Floating Rate Loans | 31,977 | 35,404 | 30,351 | ||||||||
Total Senior Secured Floating Rate Loans | 243,503 | 239,800 | 241,635 | ||||||||
Equity of Collateralized Loan Obligations | 50,385 | 47,733 | 37,913 | ||||||||
Total Investment Portfolio | $ | 293,888 | $ | 287,533 | $ | 279,548 | |||||
Loan Portfolio Statistics | |||||||||||
Number of Companies | 122 | 108 | 102 | ||||||||
Number of Industries | 40 | 40 | 38 | ||||||||
Largest Exposure as a % of Total Investment Portfolio | 1.5 | % | 1.6 | % | 2.3 | % | |||||
CLO Statistics | |||||||||||
Number of Issuers | 14 | 13 | 10 | ||||||||
Largest Exposure as a % of Total Investment Portfolio | 2.0 | % | 1.9 | % | 1.8 | % | |||||
Minimum % of Collateral in 1st Lien Loans | 91 | % | 91 | % | 91 | % | |||||
(Cost) | |||||||||||
Investment Portfolio at Cost | |||||||||||
1st Lien Floating Rate Loans | $ | 212,369 | $ | 203,526 | $ | 210,294 | |||||
2nd Lien Floating Rate Loans | 32,208 | 34,951 | 29,856 | ||||||||
Total Senior Secured Floating Rate Loans | 244,577 | 238,477 | 240,150 | ||||||||
Equity of Collateralized Loan Obligations | 50,581 | 47,708 | 37,857 | ||||||||
Total Investment Portfolio | $ | 295,158 | $ | 286,185 | $ | 278,007 | |||||
Asset Yield at Cost | |||||||||||
1st Lien Floating Rate Loans | 4.95 | % | 4.83 | % | 4.81 | % | |||||
2nd Lien Floating Rate Loans | 7.83 | % | 7.87 | % | 8.04 | % | |||||
Total Senior Secured Floating Rate Loans | 5.33 | % | 5.28 | % | 5.21 | % | |||||
Equity of Collateralized Loan Obligations | 12.35 | % | 11.57 | % | 13.9 | % | |||||
Total Investment Portfolio | 6.53 | % | 6.33 | % | 6.39 | % | |||||
Liquidity and Capital Resources | |||||||||||
Debt | |||||||||||
Amount Drawn on Credit Facility | $ | 135,000 | $ | 128,000 | $ | 128,900 | |||||
Weighted Average Interest Rate on Debt | 1.95 | % | 1.95 | % | 2.05 | % | |||||
Weighted Average Interest Rate on Debt including Fees | 2.28 | % | 2.33 | % | 2.45 | % | |||||
Equity | |||||||||||
Net Asset Value (NAV) | $ | 148,540 | $ | 151,189 | $ | 151,140 | |||||
NAV Per Share | $ | 14.85 | $ | 15.12 | $ | 15.11 | |||||
Debt to Equity Ratio | 0.91 x | 0.85 x | 0.85 x | ||||||||
Dividend Declared Per Share | $ | 0.28 | $ | 0.28 | $ | 0.18 | |||||
YTD Total Return Based on Market Value (1) | (11.87 | )% | (7.75 | )% | (23.12 | )% | |||||
YTD Total Return Based on Net Asset Value (1) | 6.34 | % | 9.38 | % | 10.44 | % | |||||
(1) Total return is based on the change in market price or net asset value per share during the period and takes into account dividends reinvested in accordance with the dividend reinvestment and stock purchase plan. Total returns have been annualized for periods less than one year.
SHAREHOLDER CALL
ACSF invites shareholders, prospective shareholders and analysts to attend the ACSF shareholder call on November 4, 2014 at 11:00 am ET. Callers who do not plan on asking a question and have access to the internet are encouraged to utilize the free live webcast at www.ACSF.com. Those who do plan on participating in the Q&A or do not have the internet available may access the call by dialing (877) 274-0811 (U.S. domestic) or (412) 902-6607 (international). Please advise the operator you are dialing in for the American Capital Senior Floating shareholder call.
A slide presentation will accompany the shareholder call and will be available at www.ACSF.com. Select the Q3 2014 Earnings Presentation link to download and print the presentation in advance of the shareholder call.
An archived audio replay of the shareholder call combined with the slide presentation will be made available on the ACSF website after the call on November 4, 2014. In addition, there will be a phone recording available from 1:00 pm ET November 4, 2014 until 9:00 am ET November 19, 2014. If you are interested in hearing the recording of the presentation, please access it for free on the ACSF website or dial (877) 344-7529 (U.S. domestic) or (412) 317-0088 (international). The access code for both domestic and international callers is 10054117.
For further information, please contact Investor Relations at (301) 968-9310 or IR@ACSF.com.
ABOUT AMERICAN CAPITAL SENIOR FLOATING
American Capital Senior Floating, Ltd. (Nasdaq: ACSF) is a non-diversified closed-end investment management company that invests primarily in senior secured first lien and second lien floating rate loans to large, U.S. based companies (“Senior Secured Floating Rate Loans”) and opportunistically in debt and equity tranches of collateralized loan obligations collateralized by Senior Secured Floating Rate Loans. The Company has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. The Company is externally managed by American Capital ACSF Management, LLC, an indirect subsidiary of American Capital Asset Management, LLC, a wholly-owned portfolio company of American Capital, Ltd. For further information, please refer to www.ACSF.com.
ABOUT AMERICAN CAPITAL
American Capital, Ltd. (Nasdaq: ACAS) is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate, energy & infrastructure and structured products. American Capital manages $19 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $83 billion of total assets under management (including levered assets). Through an affiliate, American Capital manages publicly traded American Capital Agency Corp. (Nasdaq: AGNC), American Capital Mortgage Investment Corp. (Nasdaq: MTGE) and American Capital Senior Floating, Ltd. (Nasdaq: ACSF) with approximately $11 billion of aggregate net book value. From its eight offices in the U.S. and Europe, American Capital and its affiliate, European Capital, will consider investment opportunities from $10 million to $750 million. For further information, please refer to www.AmericanCapital.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking information and statements. Forward-looking statements give the Company's current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements are not guarantees of performance or results, and involve known and unknown risks, uncertainties (some of which are beyond the Company's control), assumptions and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Should one or more of these risks or uncertainties materialize, the Company's actual results may vary in material respects from those projected in any forward-looking statements. A detailed discussion of these and other factors that may affect future results is contained in our filings with the U.S. Securities and Exchange Commission. Any forward-looking statement made by the Company in this press release speaks only as of the date on which it is made. The Company undertakes no
obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP, this release includes certain non-GAAP financial information, including estimated taxable income and estimated undistributed taxable income, which the Company's management uses in its internal analysis of results and believes may be informative to investors. Estimated taxable income is pre-tax income calculated in accordance with the requirements of the Internal Revenue Code rather than GAAP. Estimated taxable income differs from GAAP income because of both temporary and permanent differences in income and expense recognition. The Company believes that this non-GAAP financial measure provides information useful to investors because estimated taxable income is directly related to the amount of dividends the Company is required to distribute in order to maintain its tax status as a RIC. The Company also believes that providing investors with estimated taxable income, in addition to the related GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because estimated taxable income is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with GAAP, it should be considered as supplementary to, and not as a substitute for, the Company's net earnings computed in accordance with GAAP as a measure of the Company's financial performance.