Attached files
| file | filename |
|---|---|
| EX-2.1 - EXHIBIT 2.1 - Portman Ridge Finance Corp | tv510177_ex2-1.htm |
| 8-K - FORM 8-K - Portman Ridge Finance Corp | tv510177_8k.htm |
Exhibit 99.1
KCAP FINANCIAL INC.
TABLE OF CONTENTS
| Page | |
| Unaudited Pro Forma Condensed Consolidated Financial Statements | 2 |
| Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2018 | 3 |
| Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2018 | 4 |
| Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2017 | 5 |
| Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements | 6 |
KCAP FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 31, 2018, a subsidiary of KCAP Financial, Inc. (the “Company”) completed the sale (the “AMA Sale”) of three of its wholly-owned asset management subsidiaries: Trimaran Advisors, L.L.C., Trimaran Advisors Management, L.L.C. and Katonah Debt Advisors, L.L.C. (together, the “Disposed Asset Manager Affiliates”).
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2018 included in Exhibit 99.1 has been prepared giving effect to the AMA Sale as if it was completed on September 30, 2018.
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2018 and the year ended December 31, 2017 included in Exhibit 99.1 have been prepared giving effect to the AMA Sale as if it occurred on January 1, 2017, the beginning of the earliest period presented.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations of the Company had the AMA Sale been completed as of the beginning of the earliest period presented, nor indicative of future results of operations or future financial position of the Company. The unaudited pro forma condensed consolidated financial statements should be read in connection with the historical consolidated financial statements and notes thereto of the Company, included as Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and as Item 1 in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
The unaudited pro forma condensed consolidated financial statements reflect management’s best estimates based on currently available information.
| 2 |
KCAP FINANCIAL, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2018
| ASSETS | KCAP Financial, Inc. | Asset Manager Affiliates Disposed | Pro Forma | |||||||||
| Investments at fair value: | ||||||||||||
| Short term investments | $ | 24,431,512 | $ | 33,800,000 | $ | 58,231,512 | ||||||
| Debt securities | 139,799,027 | — | 139,799,027 | |||||||||
| CLO Fund Securities managed by affiliates | 45,531,058 | (45,531,058 | ) | — | ||||||||
| CLO Fund Securities managed by non-affiliates | 2,452,873 | 45,531,058 | 47,983,931 | |||||||||
| Equity Securities | 4,079,336 | — | 4,079,336 | |||||||||
| Asset Manager Affiliates | 35,818,000 | (33,818,000 | ) | 2,000,000 | ||||||||
| Joint Venture | 21,373,570 | — | 21,373,570 | |||||||||
| Total Investments | 273,485,375 | (18,000 | ) | 273,467,376 | ||||||||
| Cash and restricted cash | 2,701,724 | 12,805 | 2,714,529 | |||||||||
| Due from affiliates | 935,120 | (12,830 | ) | 922,290 | ||||||||
| Other assets | 2,616,634 | — | 2,616,634 | |||||||||
| Total Assets | $ | 279,738,854 | $ | (18,025 | ) | $ | 279,720,829 | |||||
| LIABILITIES | ||||||||||||
| Borrowings | $ | 103,735,536 | $ | — | $ | 103,735,536 | ||||||
| Other liabilities | 2,094,686 | — | 2,094,686 | |||||||||
| Due to affiliates | 127 | (25 | ) | 102 | ||||||||
| Total liabilities | 105,830,349 | (25 | ) | 105,830,324 | ||||||||
| COMMITMENTS AND CONTINGENCIES | — | — | — | |||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Common stock | 373,492 | — | 373,492 | |||||||||
| Capital in excess of par value | 330,404,400 | — | 330,404,400 | |||||||||
| Excess distribution of net investment income | (13,201,062 | ) | — | (13,201,062 | ) | |||||||
| Accumulated net realized losses | (86,338,209 | ) | (17,791,230 | ) | (104,129,439 | ) | ||||||
| Net unrealized depreciation on investments | (57,330,116 | ) | 17,773,230 | (39,556,886 | ) | |||||||
| Total stockholders' equity | 173,908,505 | (18,000 | ) | 173,890,505 | ||||||||
| Total liabilities and stockholders' equity | $ | 279,738,854 | $ | (18,025 | ) | $ | 279,720,829 | |||||
| Net asset value per common share | $ | 4.66 | $ | — | $ | 4.66 | ||||||
Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.
| 3 |
KCAP FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
| KCAP Financial, Inc. | Asset Manager Affiliates Disposed | Pro Forma | ||||||||||
| Investment income: | ||||||||||||
| Interest from investments in debt securities | $ | 12,857,664 | $ | 2,028,000 | $ | 14,885,664 | ||||||
| Interest from cash and time deposits | 71,183 | — | 71,183 | |||||||||
| Investment income on CLO Fund Securities managed by affiliates | 4,428,032 | (4,428,032 | ) | — | ||||||||
| Investment income on CLO Fund Securities managed by non-affiliates | 292,694 | 4,428,032 | 4,720,726 | |||||||||
| Dividends from Asset Manager Affiliates | 920,000 | — | 920,000 | |||||||||
| Investment income - Joint Venture | 2,150,000 | — | 2,150,000 | |||||||||
| Capital structuring service fees | 114,097 | — | 114,097 | |||||||||
| Total investment income | 20,833,670 | 2,028,000 | 22,861,670 | |||||||||
| Expenses: | ||||||||||||
| Interest expense | 5,582,467 | — | 5,582,467 | |||||||||
| Operating expenses | 7,307,010 | 1,380,056 | 8,687,066 | |||||||||
| Total expenses | 12,889,477 | 1,380,056 | 14,269,533 | |||||||||
| Net Investment Income | 7,944,193 | 647,944 | 8,592,137 | |||||||||
| Realized and Unrealized Gains (Losses) On Investments: | ||||||||||||
| Net realized losses from investment transactions | (137,336 | ) | — | (137,336 | ) | |||||||
| Net change in unrealized (depreciation (appreciation) on: | ||||||||||||
| Debt securities | (2,357,578 | ) | — | (2,357,578 | ) | |||||||
| Equity securities | (335,348 | ) | — | (335,348 | ) | |||||||
| CLO Fund Securities managed by affiliates | (325,678 | ) | 325,678 | — | ||||||||
| CLO Fund Securities managed by non-affiliates | 200,723 | (325,678 | ) | (124,955 | ) | |||||||
| Asset Manager Affiliates investments | (2,031,000 | ) | 2,031,000 | — | ||||||||
| Joint Venture Investment | (142,430 | ) | — | (142,430 | ) | |||||||
| Total net change in unrealized appreciation (depreciation) | (4,991,311 | ) | 2,031,000 | (2,960,311 | ) | |||||||
| Net realized and unrealized appreciation (depreciation) on investments | (5,128,647 | ) | 2,031,000 | (3,097,647 | ) | |||||||
| Realized losses on extinguishments of Debt | (169,074 | ) | — | (169,074 | ) | |||||||
| Net Increase (Decrease) In Stockholders' Equity Resulting from Operations | $ | 2,646,472 | $ | 2,678,944 | $ | 5,325,416 | ||||||
| Net Increase (Decrease) In Stockholders' Equity Resulting from Operations per Common Share: | ||||||||||||
| Basic | $ | 0.07 | $ | 0.07 | $ | 0.14 | ||||||
| Diluted | $ | 0.07 | $ | 0.07 | $ | 0.14 | ||||||
| Net Investment Income per Common Share: | ||||||||||||
| Basic | $ | 0.21 | $ | 0.02 | $ | 0.23 | ||||||
| Diluted | $ | 0.21 | $ | 0.02 | $ | 0.23 | ||||||
| Weighted Average Shares of Common Stock Outstanding - Basic | 37,354,449 | — | 37,354,449 | |||||||||
| Weighted Average Shares of Common Stock Outstanding - Diluted | 37,354,449 | — | 37,354,449 | |||||||||
Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.
| 4 |
KCAP FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
| KCAP Financial, Inc. | Asset Manager Affiliates Disposed | Pro Forma | ||||||||||
| Investment income: | ||||||||||||
| Interest from investments in debt securities | $ | 15,063,193 | $ | 3,054,400 | $ | 18,117,593 | ||||||
| Interest from cash and time deposits | 71,934 | — | 71,934 | |||||||||
| Investment income on CLO Fund Securities managed by affiliates | 10,807,490 | (10,807,490 | ) | — | ||||||||
| Investment income on CLO Fund Securities managed by non-affiliates | 420,766 | 10,807,490 | 11,228,256 | |||||||||
| Dividends from Asset Manager Affiliates | 460,000 | — | 460,000 | |||||||||
| Investment income - Joint Venture | 949,037 | — | 949,037 | |||||||||
| Capital structuring service fees | 491,279 | — | 491,279 | |||||||||
| Total investment income | 28,263,699 | 3,054,400 | 31,318,099 | |||||||||
| Expenses: | ||||||||||||
| Interest expense | 7,661,407 | — | 7,661,407 | |||||||||
| Operating expenses | 9,583,161 | 1,840,075 | 11,423,236 | |||||||||
| Total expenses | 17,244,568 | 1,840,075 | 19,084,643 | |||||||||
| Net Investment Income | 11,019,131 | 1,214,325 | 12,233,456 | |||||||||
| Realized and Unrealized Gains (Losses) On Investments: | ||||||||||||
| Net realized losses from investment transactions | (6,899,044 | ) | (17,161,230 | ) | (24,060,274 | ) | ||||||
| Net change in unrealized (depreciation) appreciation on: | ||||||||||||
| Debt securities | 4,194,914 | — | 4,194,914 | |||||||||
| Equity securities | (823,671 | ) | — | (823,671 | ) | |||||||
| CLO Fund Securities managed by affiliates | 2,102,279 | (2,102,279 | ) | — | ||||||||
| CLO Fund Securities managed by non-affiliates | (85,671 | ) | 2,102,279 | 2,016,608 | ||||||||
| Asset Manager Affiliates investments | 1,401,000 | 17,143,230 | 18,544,230 | |||||||||
| Joint Venture Investment | (3,398,858 | ) | — | (3,398,858 | ) | |||||||
| Total net change in unrealized appreciation (depreciation) | 3,389,993 | 17,143,230 | 20,533,223 | |||||||||
| Net realized and unrealized appreciation (depreciation) on investments | (3,509,051 | ) | (18,000 | ) | (3,527,051 | ) | ||||||
| Realized losses on extinguishments of Debt | (4,121,998 | ) | — | (4,121,998 | ) | |||||||
| Net Increase (Decrease) In Stockholders' Equity Resulting from Operations | $ | 3,388,082 | $ | 1,196,325 | $ | 4,584,407 | ||||||
| Net Increase (Decrease) In Stockholders' Equity Resulting from Operations per Common Share: | ||||||||||||
| Basic | $ | 0.09 | $ | 0.03 | $ | 0.12 | ||||||
| Diluted | $ | 0.09 | $ | 0.03 | $ | 0.12 | ||||||
| Net Investment Income per Common Share: | ||||||||||||
| Basic | $ | 0.30 | $ | 0.03 | $ | 0.33 | ||||||
| Diluted | $ | 0.30 | $ | 0.03 | $ | 0.33 | ||||||
| Weighted Average Shares of Common Stock Outstanding - Basic | 37,235,130 | — | 37,235,130 | |||||||||
| Weighted Average Shares of Common Stock Outstanding - Diluted | 37,235,130 | — | 37,235,130 | |||||||||
Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.
| 5 |
KCAP FINANCIAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2018 is presented as if the AMA Sale had been completed on September 30, 2018. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2018 and for the year ended December 31, 2017 reflect adjustments related to the AMA Sale as if it had been completed on January 1, 2017, the beginning of the earliest period presented.
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and, in the opinion of management, reflect all necessary adjustments that are: (i) directly attributable to the AMA Sale; (ii) factually supportable; and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results of the Company.
2. Asset Manager Affiliates Disposition
Adjustments to the unaudited pro forma condensed consolidated balance sheet at September 30, 2018 reflect adjustments to:
| · | Exclude the value of the Disposed Asset Manager Affiliates, with the AMA Sale proceeds reflected in short term investments |
| · | Reclassify debt and subordinated securities issued by collateralized loan obligation funds (“CLO Fund Securities”) managed by affiliates to CLO Fund Securities managed by non-affiliates |
| · | Reflect the assumed repayment of all balances due to or from the Disposed Asset Manager Affiliates |
| · | Reclassify the unrealized loss on the Disposed Asset Manager Affiliates to accumulated net realized losses |
Adjustments to the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 and the year ended December 31, 2017 reflect adjustments to:
| · | Reflect investment income from debt securities which are assumed to have been purchased with the proceeds of the AMA Sale |
| · | Reclassify investment income and unrealized gains/losses on CLO Fund Securities managed by affiliates to Investment income and unrealized gains/losses on CLO Fund Securities managed by non-affiliates |
| · | Recognize expenses which would have been allocated to the Disposed Asset Manager Affiliates |
| · | Reclassify the unrealized loss on the Disposed Asset Manager Affiliates to net realized losses (year-ended December 31, 2017 only) |
| 6 |