CM Finance Inc (NASDAQ: CMFN) (“CMFN” or “the Company”) announced
its financial results for its fiscal third quarter ended March 31,
2019.
HIGHLIGHTS
- CMFN made twelve investments in ten portfolio
companies. Our total invested capital in the quarter was $65.6mm
inclusive of funding of revolving and delayed draw
commitments. The weighted average yield of debt investments
made in the quarter was 10.63%
- Four investments were fully realized during the
quarter. These included our debt investments in Zinc Borrower LP,
Caelus, Sears’s DIP loan, and our equity position in U.S. Well
Services
- The weighted average yield on debt investments, at
cost, decreased 64 basis points to 10.44%, compared to 11.08% as of
December 31, 2018
- Net asset value (“NAV”) per share decreased by 3.05% to
$11.14, compared to $11.49 as of December 31, 2018
Portfolio results, as of March 31, 2019: |
Total
assets |
$319.6mm |
Investment portfolio, at fair value |
$299.1mm |
Net assets |
$151.7mm |
Weighted average yield on debt investments, at
cost |
10.44% |
Net asset value per share |
$11.14 |
Portfolio activity in the current quarter: |
|
Number of new investments |
12 |
Total capital invested |
$65.6mm |
Proceeds from repayments, sales, and amortization |
$46.5mm |
Number of portfolio companies, end of period |
32 |
Net investment income (NII) |
$3.4mm |
Net investment income per share |
$0.25 |
Net decrease in net assets from operations |
$1.4mm |
Net decrease in net assets from operations per
share |
$0.10 |
Quarterly per share distribution paid on October 5,
2018 |
$0.25 |
Mr. Michael C. Mauer, the Company’s Chief
Executive Officer, said “We continue to reposition our portfolio,
increasing our underlying diversity while emphasizing lending first
lien, senior secured debt in our borrowers’ capital structures. Our
portfolio of companies has increased to 33 as of today. We continue
to see opportunities in club and direct lending, and balance these
positions with opportunistic investments, which have greater
liquidity. While the fair value of the portfolio declined during
the quarter, we take a conservative approach to both investing and
valuing our portfolio and we believe there are opportunities to
further enhance the portfolio as our repositioning progresses in
2019.”
On May 1, 2019, the Company’s Board of Directors declared a
distribution for the quarter ending June 30, 2019 of $0.25 per
share, payable on July 5, 2019, to shareholders of record as of
June 14, 2019. This represents a 13.74% yield on the Company’s
$7.28 share price as of the close on May 6, 2019.
Distributions may include net investment income, capital gains
and/or return of capital; however, the Company does not expect the
distribution to be comprised of a return of capital. The tax status
of distributions will be determined at the end of the taxable
year.
Portfolio and Investment
Activities
During the quarter, the Company made investments
in ten portfolio companies, and funded one revolver and two delayed
draw commitments. The aggregate capital invested during the quarter
totaled $65.6 mm at cost and investments were made at a weighted
average yield of 10.63%. Seven new portfolio companies were
added in the quarter.
The Company also realized $46.5mm of repayments,
sales, and amortization, including the sale of U.S. Well Services,
LLC (Equity Interest), the repayments of our debt positions in Zinc
Acquisition Holdings, LP, Caelus Energy Alaska 03, LLC, and Sears
Holding Company, as well as the sale of a portion of the Company’s
position in AP NMT Acquisition BV. During the quarter ended March
31, 2019, the Company wrote off its positions in Trident USA Health
Services LLC. We had marked our investments in Trident to
zero as of December 31, 2018. This quarter, the unrealized
loss became a realized loss of $22.5mm. Realized and unrealized
gains and losses accounted for a decrease in the Company’s net
investments of approximately $4.8mm, or $0.35 per share. The
total net decrease in net assets resulting from operations for the
quarter was $1.4mm, or $0.10 per share.
As of March 31, 2019, the Company’s investment
portfolio consisted of investments in 32 portfolio companies, of
which 75.9% were first lien investments, 19.9% were second lien
investments, 3.8% were unitranche loans, and 0.3% were in equities,
warrants and other positions. The Company’s debt portfolio
consisted of 94.9% floating rate investments and 5.1% fixed rate
investments. As of May 6, 2019, the Company had 33 portfolio
companies.
As of March 31, 2019, the Company had one
investment on non-accrual status, Fusion Connect Inc.
Capital Resources
As of March 31, 2019, the Company had $6.8mm in cash, $3.9mm in
restricted cash and $46.0mm of capacity under its revolving credit
facility with UBS AG, London Branch.
Extension of Share Repurchase Program
On May 1, 2019, the Company’s board of directors approved an
extension of the discretionary repurchase program of up to $5.0
million shares of the Company’s common stock, until the earlier of
(i) May 1, 2020 or (ii) the repurchase of $5.0 million in aggregate
amount of the common stock unless extended by the Company’s board
of directors. Under the discretionary repurchase program, the
Company may, but is not obligated to, repurchase the outstanding
common stock from time to time in the open market provided that the
Company complies with the prohibitions under its insider trading
policies and procedures and the applicable provisions of the
Investment Company Act of 1940, as amended (the “1940 Act”), and
the Securities Exchange Act of 1934, as amended. In addition, any
repurchases will be conducted in accordance with the 1940 Act.
The timing and number of shares to be repurchased will depend on
a number of factors, including market conditions and alternative
investment opportunities and no assurances can be given that any
common stock, or any particular amount, will be purchased. The
Company will retire immediately all shares of common stock that are
purchased in connection with the share repurchase program.
Since the Board’s initial approval of the share repurchase
program, the Company has repurchased 84,841 shares for an aggregate
purchase price of $748,706. During the quarter ended March 31,
2019, the Company did not repurchase shares of its common stock on
the open market.
Subsequent Events
Subsequent to March 31, 2019 and through May 6, 2019, we
invested $9.6 million in new and existing portfolio companies, and
received sales proceeds of $11.0 million.
|
CM Finance
Inc and Subsidiaries |
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Consolidated Statements of Assets and
Liabilities |
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March 31, 2019 |
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(Unaudited) |
|
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June 30, 2018 |
|
Assets |
|
|
|
|
|
|
|
Non-controlled,
non-affiliated investments, at fair value (amortized cost of |
$ |
299,086,467 |
|
|
$ |
293,592,013 |
|
|
|
$305,248,861 and $
302,647,282, respectively) |
|
|
|
|
|
|
Derivatives, at
fair value (cost of $0 and $0, respectively) |
|
98,467 |
|
|
|
229,918 |
|
|
Cash |
|
|
|
6,757,007 |
|
|
|
5,620,441 |
|
|
Cash,
restricted |
|
3,917,010 |
|
|
|
2,706,273 |
|
|
Receivable for
investments sold |
|
5,780,774 |
|
|
|
7,751,875 |
|
|
Interest
receivable |
|
3,494,878 |
|
|
|
4,011,450 |
|
|
Deferred offering
costs |
|
121,922 |
|
|
|
121,922 |
|
|
Other
receivables |
|
- |
|
|
|
245,550 |
|
|
Prepaid expenses
and other assets |
|
328,359 |
|
|
|
255,139 |
|
|
|
Total
Assets |
$ |
319,584,884 |
|
|
$ |
314,534,581 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Notes
payable: |
|
|
|
|
|
|
|
Term loan |
$ |
102,000,000 |
|
|
$ |
102,000,000 |
|
|
|
Revolving credit
facility |
|
4,000,000 |
|
|
|
17,823,000 |
|
|
|
2023 Notes
payable |
|
34,500,000 |
|
|
|
- |
|
|
|
Deferred debt
issuance costs |
|
(2,247,389 |
) |
|
|
(1,953,771 |
) |
|
|
|
Notes payable, net |
|
138,252,611 |
|
|
|
117,869,229 |
|
|
Payable for
investments purchased |
|
21,716,437 |
|
|
|
12,569,450 |
|
|
Dividend
payable |
|
3,403,427 |
|
|
|
3,417,848 |
|
|
Deferred financing
costs payable |
|
1,037,000 |
|
|
|
2,071,167 |
|
|
Income-based
incentive fees payable |
|
1,054,776 |
|
|
|
2,294,678 |
|
|
Base management
fees payable |
|
1,369,713 |
|
|
|
1,319,853 |
|
|
Accrued provision
for taxes |
|
- |
|
|
|
2,579,337 |
|
|
Derivatives, at
fair value (cost $0 and $0, respectively) |
|
98,467 |
|
|
|
229,918 |
|
|
Interest
payable |
|
836,765 |
|
|
|
303,153 |
|
|
Directors' fees
payable |
|
92,789 |
|
|
|
99,296 |
|
|
Accrued expenses
and other liabilities |
|
36,635 |
|
|
|
257,986 |
|
|
|
Total
Liabilities |
|
167,898,620 |
|
|
|
143,011,915 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
|
Common stock, par
value $0.001 per share (100,000,000 shares authorized, |
|
|
|
|
|
|
|
13,613,707 and
13,649,504 shares issued and outstanding, respectively) |
|
13,614 |
|
|
|
13,649 |
|
|
Additional paid-in
capital |
|
198,403,095 |
|
|
|
198,700,999 |
|
|
Distributable
earnings (losses) |
|
(46,730,445 |
) |
|
|
(27,919,982 |
) |
|
|
Total Net
Assets |
|
151,686,264 |
|
|
|
170,794,666 |
|
|
|
Total
Liabilities and Net Assets |
$ |
319,584,884 |
|
|
$ |
313,806,581 |
|
|
Net Asset Value
Per Share |
$ |
11.14 |
|
|
$ |
12.51 |
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements. |
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CM Finance
Inc and Subsidiaries |
|
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Consolidated Statements of Operations
(Unaudited) |
|
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|
For the three months ended March 31, |
|
For the nine months ended March 31, |
|
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
$ |
8,564,501 |
|
|
$ |
6,897,476 |
|
|
$ |
24,700,592 |
|
|
$ |
20,861,681 |
|
Payment in-kind
interest income |
|
- |
|
|
|
1,322,134 |
|
|
|
953,928 |
|
|
|
2,336,651 |
|
Dividend
income |
|
|
15,607 |
|
|
|
255,648 |
|
|
|
46,882 |
|
|
|
255,648 |
|
Payment in-kind
dividend income |
|
- |
|
|
|
143,750 |
|
|
|
- |
|
|
|
333,333 |
|
Other fee
income |
|
|
142,483 |
|
|
|
52,369 |
|
|
|
575,003 |
|
|
|
62,248 |
|
|
|
Total
investment income |
|
8,722,591 |
|
|
|
8,671,377 |
|
|
|
26,276,405 |
|
|
|
23,849,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
2,164,625 |
|
|
|
1,568,357 |
|
|
|
6,586,019 |
|
|
|
4,607,447 |
|
Base management
fees |
|
|
1,369,713 |
|
|
|
1,236,620 |
|
|
|
4,126,865 |
|
|
|
3,551,853 |
|
Income-based
incentive fees |
|
|
723,484 |
|
|
|
933,356 |
|
|
|
1,597,526 |
|
|
|
1,840,114 |
|
Provision for tax
expense |
|
|
131,304 |
|
|
|
- |
|
|
|
144,250 |
|
|
|
- |
|
Professional
fees |
|
|
251,158 |
|
|
|
303,373 |
|
|
|
717,486 |
|
|
|
748,437 |
|
Allocation of
administrative costs from advisor |
|
346,777 |
|
|
|
292,561 |
|
|
|
1,026,473 |
|
|
|
604,352 |
|
Amortization of
deferred debt issuance costs |
|
195,377 |
|
|
|
195,377 |
|
|
|
586,131 |
|
|
|
500,093 |
|
Insurance
expense |
|
|
83,987 |
|
|
|
100,829 |
|
|
|
252,867 |
|
|
|
271,280 |
|
Directors'
fees |
|
|
101,250 |
|
|
|
99,000 |
|
|
|
303,750 |
|
|
|
297,667 |
|
Custodian and
administrator fees |
|
243,823 |
|
|
|
42,750 |
|
|
|
258,823 |
|
|
|
248,188 |
|
Offering
expense |
|
|
51,750 |
|
|
|
- |
|
|
|
155,250 |
|
|
|
186,513 |
|
Other
expenses |
|
|
18,399 |
|
|
|
165,730 |
|
|
|
373,613 |
|
|
|
556,889 |
|
|
|
Total expenses |
|
|
5,681,647 |
|
|
|
4,937,953 |
|
|
|
16,129,053 |
|
|
|
13,412,833 |
|
Waiver of
income-based incentive fees |
|
(362,478 |
) |
|
|
- |
|
|
|
(384,478 |
) |
|
|
- |
|
|
|
Net
expenses |
|
|
5,319,169 |
|
|
|
4,937,953 |
|
|
|
15,744,575 |
|
|
|
13,412,833 |
|
|
|
Net
investment income |
|
3,403,422 |
|
|
|
3,733,424 |
|
|
|
10,531,830 |
|
|
|
10,436,728 |
|
Net realized and unrealized gain/(loss) on
investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
(loss) from investments |
|
(22,553,307 |
) |
|
|
(238,076 |
) |
|
|
(22,736,499 |
) |
|
|
(7,618,766 |
) |
Net change in
unrealized appreciation (depreciation) in value |
|
- |
|
|
|
|
|
|
|
|
|
|
|
of
investments |
|
|
17,792,347 |
|
|
|
595,687 |
|
|
|
2,892,876 |
|
|
|
9,267,936 |
|
|
|
Total
realized and unrealized gain (loss) on investments |
|
(4,760,960 |
) |
|
|
357,611 |
|
|
|
(19,843,623 |
) |
|
|
1,649,170 |
|
Net increase (decrease) in net assets resulting from
operations |
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,357,538 |
) |
|
$ |
4,091,035 |
|
|
$ |
(9,311,793 |
) |
|
$ |
12,085,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income per share |
$ |
0.25 |
|
|
$ |
0.27 |
|
|
$ |
0.77 |
|
|
$ |
0.77 |
|
|
|
Earnings per share |
|
$ |
(0.10 |
) |
|
$ |
0.30 |
|
|
$ |
(0.68 |
) |
|
$ |
0.89 |
|
|
|
Weighted average
shares of common stock outstanding |
|
13,613,694 |
|
|
|
13,691,420 |
|
|
|
13,634,370 |
|
|
|
13,590,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid per common share |
$ |
0.25 |
|
|
$ |
0.25 |
|
|
$ |
0.75 |
|
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
About CM Finance Inc
The Company is an externally-managed,
closed-end, non-diversified management investment company that has
elected to be regulated as a business development company under the
Investment Company Act of 1940. The Company’s investment
objective is to maximize the total return to its stockholders in
the form of current income and capital appreciation through debt
and related equity investments by targeting investment
opportunities with favorable risk-adjusted returns. The Company
seeks to invest primarily in middle-market companies that have
annual revenues of at least $50mm and earnings before interest,
taxes, depreciation and amortization of at least $15mm. The
Company’s investment activities are managed by its investment
adviser, CM Investment Partners LLC. To learn more about CM Finance
Inc, please visit www.cmfn-inc.com.
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 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.
The Company undertakes no duty to update any forward-looking
statement made herein except as required by law. All
forward-looking statements speak only as of the date of this press
release.
ContactsCM Finance IncInvestor Relations Email:
investorrelations@cmipllc.com Phone: 212-257-5199
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