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CST: 07/12/2019 07:37:31   

Great Elm Capital Corp. Announces Second Quarter 2019 Financial Results; Second Quarter Net Investment Income of $0.29 per Share; Board Set Fourth Quarter 2019 Distribution of $0.083 per Share per Month; Issued New Senior Unsecured Notes

116 Days ago

WALTHAM, Mass., Aug. 13, 2019 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (“we,” “us,” “our” or “GECC”), (NASDAQ: GECC), today announced its financial results for the quarter ended June 30, 2019.

FINANCIAL HIGHLIGHTS (1)

  • Net investment income (“NII”) for the quarter ended June 30, 2019 was approximately $3.0 million, or $0.29 per share, equating to 1.2x distribution coverage for the quarter.
  • In August 2019, the Board of Directors (the “Board”) set monthly distributions of $0.083 per share for the fourth quarter of 2019, representing a yield of approximately 9.7% on June 30, 2019 net asset value (“NAV”).
  • Net assets on June 30, 2019 were approximately $103.6 million. NAV per share on June 30, 2019 was $10.30, as compared to NAV per share of $10.89 on March 31, 2019, driven primarily by unrealized losses in certain of our investments in Avanti Communications Group, plc
  • We had approximately $0.4 million of net realized gains during the quarter ended June 30, 2019, or approximately $0.04 per share, and net unrealized depreciation of approximately $7.8 million, or approximately $0.76 per share.
    • Unrealized depreciation in the Avanti Communications Group, plc investments accounted for $6.7 million of the $7.8 million net unrealized loss during the quarter
  • During the quarter ended June 30, 2019, we invested approximately $61.7 million across 15 investments(2), including three new issuers. During the quarter ended June 30, 2019, we monetized (in part or in full) approximately $36.6 million across 16 investments(3).
  • Strong performance from our investment in the equity interests of Prestige Capital Corporation led to significant NII generation in our first full quarter of ownership
  • We issued $45 million of 6.50% senior unsecured bonds due June 2024 during the second and third quarter (NASDAQ: GECCN).
  • We repurchased 397,719 GECC shares in the open market during the quarter ended June 30, 2019

“I’m pleased to report that NII covered our base distribution by such a wide margin this quarter,” remarked Peter A. Reed, GECC’s Chief Executive Officer. “Our team continues to be encouraged by the portfolio’s performance, outlook and increasing diversity.”

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2019, we held 27 debt investments, totaling approximately $173.2 million and representing 84.8% of the fair market value of our total investments. First lien and/or secured debt investments comprised 100.0% of the fair market value of our debt investments. As of the same date, we held seven equity investments, totaling approximately $31.0 million and representing 15.2% of the fair market value of our total investments.

As of June 30, 2019, the weighted average current yield on our debt portfolio was 11.4%. Floating rate instruments comprised approximately 74.4% of the fair market value of debt investments.

During the quarter ended June 30, 2019, we deployed approximately $61.7 million into 15 investments (which included investments in three new companies and 10 existing portfolio companies)(2). The weighted average price of the debt deployment activity was 98% of par, carrying a weighted average current yield of 10.9%.

During the quarter ended June 30, 2019, we monetized, in part or in full, 16 investments for approximately $36.6 million(3), at a weighted average current yield of 10.8%. Our weighted average realized price was par.

LEGACY FULL CIRCLE PORTFOLIO

Since the Full Circle Capital Corporation (“Full Circle”) merger closed in November 2016, we have been diligently focused on monetizing the legacy portfolio. To date, we have exited 24 positions across 16 portfolio companies, realizing an aggregate total return of $5.1 million. These realized gains represents 109% of NAV, a significant achievement given the market’s previous assessment of this portfolio.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the quarter ended June 30, 2019 was approximately $6.7 million, or $0.66 per share. Total expenses for the quarter ended June 30, 2019 were approximately $3.7 million, or $0.36 per share. 

Net realized gains for the quarter ended June 30, 2019 were approximately $0.4 million, or $0.04 per share. Net unrealized depreciation from investments for the quarter ended June 30, 2019 was approximately $7.8 million, or $0.76 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2019, available liquidity from cash and money market investments was approximately $52.8 million, exclusive of our holdings of United States Treasury Bills. Total debt outstanding as of June 30, 2019 was $121.5 million, comprised of our 6.50% senior notes due September 2022 (NASDAQ: GECCL), our 6.75% senior notes due January 2025 (NASDAQ: GECCM) and our newly issued 6.50% senior notes due June 2024 (NASDAQ: GECCN). Our asset coverage ratio was approximately 185.6% and our debt-to-equity ratio was 1.17x.

SELECT SUBSEQUENT ACTIVITY

PE Facility Solutions, LLC

On May 10, 2019, PE Facility Solutions, LLC (“PEFS”), a majority-owned subsidiary of GECC, entered into an asset purchase agreement to sell substantially all of its assets to Kellermeyer Bergensons Services, LLC for $23.75 million. The sale was completed on July 31, 2019. In connection with this sale, GECC’s Revolving Loan and Term Loan A to PEFS were repaid at par plus accrued interest and GECC received a partial repayment of its Term Loan B.  We anticipate that the remaining balance of the Term Loan B will be repaid over time from collections of account receivables and the release of escrowed purchase price.  

Distributions

In August 2019, our Board set the monthly distributions for the fourth quarter of 2019 at a rate of $0.083 per share, representing an annualized base distribution yield of 9.7% on June 30, 2019 NAV.

Our distribution policy has been designed to set an annual base distribution rate that is covered by NII. From time to time, as catalyst-driven investments are realized or when we out-earn our declared distributions, we may supplement monthly distributions with special distributions from NII generated in excess of the declared distributions(4).

CONFERENCE CALL AND WEBCAST

Great Elm Capital Corp. will host a conference call and webcast on Tuesday, August 13, 2019 at 10:00 a.m. Eastern Time to discuss its first quarter financial results. All interested parties are invited to participate in the conference call by dialing +1 (844) 820-8297; international callers should dial +1 (661) 378-9758. Participants should enter the Conference ID 5665734 when asked. For a copy of the slide presentation that will be referenced during the course of our conference call, please visit: http://www.investor.greatelmcc.com/events-and-presentations/presentations.                                                                                               

The conference call will be webcast simultaneously at:
https://edge.media-server.com/m6/p/oqxawux9.

About Great Elm Capital Corp.

Great Elm Capital Corp. is an externally managed, specialty finance company focused on investing in debt instruments of middle market companies. GECC elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. GECC targets special situations and catalyst-driven investments as it seeks to generate attractive, risk-adjusted returns through both current income and capital appreciation.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are: conditions in the credit markets, the price of GECC common stock and the performance of GECC’s portfolio and investment manager. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

This press release does not constitute an offer of any securities for sale.

Endnotes:

(1) The per share figures are based on a weighted average of shares outstanding for the three months ended June 30, 2019, except where such amounts need to be adjusted to be consistent with the financial highlights of our consolidated financial statements.
(2) This includes new deals, additional fundings (inclusive of those on revolving credit facilities), refinancings and capitalized PIK income. Amounts included herein do not include investments in short-term securities, including United States Treasury Bills and money market mutual funds.
(3) This includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities). Amounts included herein do not include investments in short-term securities, including United States Treasury Bills and money market mutual funds.
(4) There can be no assurance that any such supplemental amounts will be received or realized, or even if received and realized, distributed or available for distribution. Past distributions are not indicative of future distributions. Distributions are declared by the Board out of the funds legally available therefor.

GREAT ELM CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
Dollar amounts in thousands (except per share amounts)

    June 30, 2019   December 31, 2018
Assets        
Investments        
Non-affiliated, non-controlled investments, at fair value
  (amortized cost of $144,040 and $137,852, respectively)
  $   135,222     $   128,318  
Non-affiliated, non-controlled short-term investments, at fair value
  (amortized cost of $124,914 and $78,093, respectively)
      124,908         78,085  
Affiliated investments, at fair value
  (amortized cost of $97,833 and $89,854, respectively)
      40,074         35,665  
Controlled investments, at fair value
  (amortized cost of $29,622 and $20,648, respectively)
      28,922         20,203  
Total investments       329,126         262,271  
         
Cash and cash equivalents       2,543         4,167  
Receivable for investments sold       25         10,887  
Interest receivable       2,190         3,255  
Dividends receivable       57         9  
Due from portfolio company       591         555  
Due from affiliates       15         5  
Prepaid expenses and other assets       10         414  
Total assets   $   334,557     $   281,563  
         
Liabilities        
Notes payable 6.50% due September 18, 2022 (including unamortized discount
  of $994 and $1,141, respectively)
  $   31,637     $   31,490  
Notes payable 6.75% due January 31, 2025 (including unamortized discount
  of $1,452 and $1,588, respectively)
      44,947         44,811  
Notes payable 6.50% due June 30, 2024 (including unamortized discount
  of $2,200 and $0, respectively)
      40,300         -  
Payable for investments purchased       104,109         84,102  
Interest payable       453         354  
Distributions payable       835         3,441  
Accrued incentive fees payable       6,867         5,422  
Due to affiliates       957         1,069  
Accrued expenses and other liabilities       812         758  
Total liabilities   $   230,917     $   171,447  
         
Commitments and contingencies (Note 6)   $   -     $   -  
         
Net Assets        
Common stock, par value $0.01 per share (100,000,000 shares authorized,
  10,062,682 shares issued and outstanding and 10,652,401 shares issued and
  outstanding, respectively)
  $   101     $   107  
Additional paid-in capital       193,253         198,247  
Accumulated losses       (89,714 )       (88,238 )
Total net assets   $   103,640     $   110,116  
Total liabilities and net assets   $   334,557     $   281,563  
Net asset value per share   $   10.30     $   10.34  



GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
Dollar amounts in thousands (except per share amounts)

    For the Three Months Ended June 30,   For the Six Months Ended June 30,
      2019       2018       2019       2018  
Investment Income:                
Interest income from:                
Non-affiliated, non-controlled investments   $   3,673     $   3,925     $   7,522     $   7,037  
Non-affiliated, non-controlled investments (PIK)       -         -         -         -  
Affiliated investments       213         777         411         1,198  
Affiliated investments (PIK)       940         1,514         1,815         4,567  
Controlled investments       539         555         1,053         1,110  
Controlled investments (PIK)       299         211         583         435  
Total interest income       5,664         6,982         11,384         14,347  
Dividend income from:                
Non-affiliated, non-controlled investments       138         49         211         155  
Controlled investments       400         -         800         -  
Total dividend income       538         49         1,011         155  
Other income from:                
Non-affiliated, non-controlled investments       32         29         132         42  
Affiliated investments       2         87         2         90  
Affiliated investments (PIK)       456         -         456         -  
Controlled investments       19         15         39         26  
Total other income       509         131         629         158  
Total investment income   $   6,711     $   7,162     $   13,024     $   14,660  
                 
Expenses:                
Management fees   $   742     $   754     $   1,448     $   1,447  
Incentive fees       749         (2,149 )       1,445         (1,183 )
Administration fees       241         487         452         797  
Custody fees       15         15         30         29  
Directors’ fees       49         50         99         99  
Professional services       229         294         468         465  
Interest expense       1,571         1,456         3,025         2,731  
Other expenses       120         177         278         331  
Total expenses   $   3,716     $   1,084     $   7,245     $   4,716  
Net investment income   $   2,995     $   6,078     $   5,779     $   9,944  
                 
Net realized and unrealized gains (losses) on investment transactions:        
Net realized gain (loss) from:                
Non-affiliated, non-controlled investments   $   410     $   810     $   1,018     $   917  
Affiliated investments       -         -         -         -  
Controlled investments       -         -         -         210  
Total net realized gain (loss)       410         810         1,018         1,127  
Net change in unrealized appreciation (depreciation) from:                
Non-affiliated, non-controlled investments       (1,425 )       2,527         718         (1,888 )
Affiliated investments       (6,693 )       (6,566 )       (3,570 )       (10,062 )
Controlled investments       335         (201 )       (255 )       (512 )
Total net change in unrealized appreciation (depreciation)       (7,783 )       (4,240 )       (3,107 )       (12,462 )
Net realized and unrealized gains (losses)   $   (7,373 )   $   (3,430 )   $   (2,089 )   $   (11,335 )
Net increase (decrease) in net assets resulting from operations   $   (4,378 )   $   2,648     $   3,690     $   (1,391 )
                 
Net investment income per share (basic and diluted):   $   0.29     $   0.57     $   0.55     $   0.93  
Earnings per share (basic and diluted):   $   (0.43 )   $   0.25     $   0.35     $   (0.13 )
Weighted average shares outstanding (basic and diluted):       10,239,631         10,652,401         10,439,572         10,652,401  


Media & Investor Contact:

Investor Relations                                                               
+1 (617) 375-3006                                                                                         
investorrelations@greatelmcap.com  

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