Great Elm Capital Corp. (“we,” “us,” “our” or “GECC”), (NASDAQ:
GECC), today announced its financial results for the quarter ended
March 31, 2020.
FINANCIAL HIGHLIGHTS
- During the quarter ended March 31,
2020, remarkable volatility in the leveraged credit markets
meaningfully impacted the fair value of our investments• Net
realized losses for the quarter ended March 31, 2020 were
approximately $11.3 million, or $1.12 per share. Net unrealized
depreciation from investments for the quarter ended March 31, 2020
was approximately $24.9 million, or $2.47 per share
- During the quarter ended March 31,
2020, we maintained a liquid balance sheet with approximately $22.8
million of cash and no secured credit facility
- As of March 31, 2020, our asset
coverage ratio was approximately 141.1% vs. a minimum asset
coverage ratio of 150.0% (the “Minimum ACR”)• As a result of
falling below the Minimum ACR, we will be subject to certain
limitations on our ability to incur additional debt, make cash
distributions on junior securities or repurchase junior
securities
- In May 2020, our Board of Directors
(the “Board”) set monthly distributions of $0.083 per share for the
third quarter of 2020• The distributions will be paid in cash
or shares of our common stock at the election of shareholders,
although the total amount of cash to be distributed to all
shareholders will be limited to approximately 10% of the total
distributions to be paid to all shareholders; the remainder of the
distributions (approximately 90%) will be paid in the form of
shares of our common stock
- Net investment income (“NII”) for
the quarter ended March 31, 2020 was approximately $2.7 million, or
$0.26 per share, equating to greater than 1x distribution
coverage
- Net assets on March 31, 2020 were
approximately $50.8 million. NAV per share on March 31, 2020 was
$5.05, as compared to NAV per share of $8.63 on December 31, 2019,
largely driven by unrealized losses in certain of our
investments
“The fair value of our portfolio was
significantly impacted by volatility in the credit markets
associated with the COVID-19 pandemic,” remarked Peter A. Reed,
GECC’s Chief Executive Officer. “We believe that most of our
portfolio companies are well positioned for a difficult economic
environment, but they are also grappling with meaningful
uncertainty. Consequently, we remain focused on maintaining
significant liquidity and strengthening our balance sheet. Paying a
substantial portion of our base distributions in shares helps build
our equity capital. This increased equity capital will strengthen
our balance sheet and help increase our asset coverage ratio.”
PORTFOLIO AND INVESTMENT
ACTIVITY
As of March 31, 2020, we held 28 debt
investments, totaling approximately $146.7 million and representing
88.6% 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 $18.8 million and
representing 11.4% of the fair market value of our total
investments.
As of March 31, 2020, the weighted average
current yield on our debt portfolio was 10.0%. Floating rate
instruments comprised approximately 72.1% of the fair market value
of debt investments.
During the quarter ended March 31, 2020, we
deployed approximately $31.9 million into 11 investments(1). The
weighted average price of the debt deployment activity was 99% of
par, carrying a weighted average current yield of 7.1%.
During the quarter ended March 31, 2020, we
monetized, in part or in full, 12 investments for approximately
$29.4 million(2), at a weighted average current yield of 13.7%. Our
weighted average realized price was 82% of par.
CONSOLIDATED RESULTS OF
OPERATIONS
Total investment income for the quarter ended
March 31, 2020 was approximately $6.4 million, or $0.64 per share.
Total expenses for the quarter ended March 31, 2020 were
approximately $3.8 million, or $0.38 per share.
Net realized losses for the quarter ended March
31, 2020 were approximately $11.3 million, or $1.12 per share. Net
unrealized depreciation from investments for the quarter ended
March 31, 2020 was approximately $24.9 million, or $2.47 per
share.
LIQUIDITY AND CAPITAL
RESOURCES
As of March 31, 2020, available liquidity from
cash was approximately $22.8 million, exclusive of our holdings of
United States Treasury Bills. Total debt outstanding as of March
31, 2020 was $123.8 million, comprised of our 6.50% senior notes
due September 2022 (NASDAQ: GECCL), our 6.50% senior notes due June
2024 (NASDAQ: GECCN) and our 6.75% senior notes due January 2025
(NASDAQ: GECCM). Importantly, as of March 31, 2020, we had no
secured credit facility, which allows for greater flexibility in
the use of our cash and other assets.
As of March 31, 2020, our asset coverage ratio
was approximately 141.1%. We are subject to a Minimum ACR of
150.0%, per the proposal that was approved at our 2018 Annual
Stockholders’ Meeting. As a result of falling below the Minimum
ACR, we will be subject to certain limitations on our ability to
incur additional debt, make cash distributions on junior securities
or repurchase junior securities, in each case, in accordance with
the Investment Company Act of 1940, as amended, and the indentures
governing our outstanding notes, until such time we are above the
Minimum ACR.
SELECT SUBSEQUENT ACTIVITY
Distributions As previously
announced, in March 2020, our Board declared monthly distributions
through the month ending June 30, 2020 of $0.083 per share. Such
distributions shall be paid in cash or in shares of our common
stock at the election of shareholders, although the total amount of
cash to be distributed to all shareholders will be limited to
approximately 20% of the total distributions paid to all
shareholders. The remainder of the distributions (approximately
80%) will be paid in the form of shares of our common stock.
In May 2020, our Board set monthly distributions
of $0.083 per share for the third quarter of 2020, through the
month ending September 30, 2020. The distributions will be paid in
cash or shares of our common stock at the election of shareholders,
although the total amount of cash to be distributed to all
shareholders will be limited to approximately 10% of the total
distributions to be paid to all shareholders. The remainder of the
distributions (approximately 90%) will be paid in the form of
shares of our common stock, in accordance with applicable law and
the indentures governing our outstanding notes.
CONFERENCE CALL AND WEBCAST
Great Elm Capital Corp. will host a conference
call and webcast on Monday, May 11, 2020 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 7099005
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/mmc/p/2seyne5g
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 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, the performance of
GECC’s portfolio and investment manager and risks associated with
the economic impact of the COVID-19 pandemic on GECC and its
portfolio companies. 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) 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.(2) 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.
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|
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GREAT ELM CAPITAL CORP. |
|
|
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES |
|
|
|
|
|
Dollar amounts in thousands (except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020 |
|
December 31, 2019 |
|
Assets |
|
|
|
|
|
Investments |
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $161,050 and $168,269, respectively) |
|
$ |
120,494 |
|
|
$ |
147,412 |
|
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $74,994 and $85,733, respectively) |
|
|
74,978 |
|
|
|
85,733 |
|
|
Affiliated investments, at fair value (amortized cost of $103,196
and $102,704, respectively) |
|
|
36,015 |
|
|
|
40,608 |
|
|
Controlled investments, at fair value (amortized cost of $10,086
and $10,601, respectively) |
|
|
9,003 |
|
|
|
9,595 |
|
|
Total
investments |
|
|
240,490 |
|
|
|
283,348 |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
22,837 |
|
|
|
4,606 |
|
|
Receivable
for investments sold |
|
|
5,639 |
|
|
|
- |
|
|
Interest
receivable |
|
|
3,519 |
|
|
|
2,350 |
|
|
Dividends
receivable |
|
|
400 |
|
|
|
14 |
|
|
Due from
portfolio company |
|
|
660 |
|
|
|
617 |
|
|
Due from
affiliates |
|
|
15 |
|
|
|
15 |
|
|
Prepaid
expenses and other assets |
|
|
49 |
|
|
|
89 |
|
|
Total assets |
|
$ |
273,609 |
|
|
$ |
291,039 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Notes
payable 6.50% due September 18, 2022 (including unamortized
discount of $756 and $839, respectively) |
|
$ |
31,648 |
|
|
$ |
31,792 |
|
|
Notes
payable 6.75% due January 31, 2025 (including unamortized discount
of $1,255 and $1,321, respectively) |
|
|
45,097 |
|
|
|
45,078 |
|
|
Notes
payable 6.50% due June 30, 2024 (including unamortized discount of
$1,953 and $2,058, respectively) |
|
|
43,045 |
|
|
|
42,942 |
|
|
Payable for
investments purchased |
|
|
92,222 |
|
|
|
72,749 |
|
|
Interest
payable |
|
|
359 |
|
|
|
354 |
|
|
Distributions payable |
|
|
835 |
|
|
|
1,338 |
|
|
Accrued
incentive fees payable |
|
|
8,257 |
|
|
|
8,157 |
|
|
Due to
affiliates |
|
|
855 |
|
|
|
997 |
|
|
Accrued
expenses and other liabilities |
|
|
446 |
|
|
|
743 |
|
|
Total liabilities |
|
$ |
222,764 |
|
|
$ |
204,150 |
|
|
|
|
|
|
|
|
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 10,062,682 shares
issued and outstanding, respectively) |
|
$ |
101 |
|
|
$ |
101 |
|
|
Additional
paid-in capital |
|
|
193,114 |
|
|
|
193,114 |
|
|
Accumulated
losses |
|
|
(142,370 |
) |
|
|
(106,326 |
) |
|
Total net assets |
|
$ |
50,845 |
|
|
$ |
86,889 |
|
|
Total liabilities and net assets |
|
$ |
273,609 |
|
|
$ |
291,039 |
|
|
Net
asset value per share |
|
$ |
5.05 |
|
|
$ |
8.63 |
|
|
|
|
|
|
|
|
GREAT ELM CAPITAL CORP. |
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
|
Dollar amounts in thousands (except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
Investment Income: |
|
|
|
|
Interest
income from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
4,466 |
|
|
$ |
3,849 |
|
Affiliated investments |
|
|
227 |
|
|
|
198 |
|
Affiliated investments (PIK) |
|
|
1,224 |
|
|
|
875 |
|
Controlled investments |
|
|
70 |
|
|
|
514 |
|
Controlled investments (PIK) |
|
|
- |
|
|
|
284 |
|
Total
interest income |
|
|
5,987 |
|
|
|
5,720 |
|
Dividend
income from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
3 |
|
|
|
73 |
|
Controlled investments |
|
|
400 |
|
|
|
400 |
|
Total
dividend income |
|
|
403 |
|
|
|
473 |
|
Other income
from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
30 |
|
|
|
100 |
|
Controlled investments |
|
|
9 |
|
|
|
20 |
|
Total other
income |
|
|
39 |
|
|
|
120 |
|
Total investment income |
|
$ |
6,429 |
|
|
$ |
6,313 |
|
|
|
|
|
|
Expenses: |
|
|
|
|
Management
fees |
|
$ |
698 |
|
|
$ |
706 |
|
Incentive
fees |
|
|
100 |
|
|
|
696 |
|
Administration fees |
|
|
204 |
|
|
|
211 |
|
Custody
fees |
|
|
20 |
|
|
|
15 |
|
Directors’
fees |
|
|
51 |
|
|
|
50 |
|
Professional
services |
|
|
257 |
|
|
|
239 |
|
Interest
expense |
|
|
2,305 |
|
|
|
1,454 |
|
Other
expenses |
|
|
142 |
|
|
|
158 |
|
Total
expenses |
|
$ |
3,777 |
|
|
$ |
3,529 |
|
Net
investment income |
|
$ |
2,652 |
|
|
$ |
2,784 |
|
|
|
|
|
|
Net realized and unrealized gains (losses): |
|
|
|
Net realized
gain (loss) on investment transactions from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
(11,456 |
) |
|
$ |
608 |
|
Affiliated investments |
|
|
- |
|
|
|
- |
|
Controlled investments |
|
|
- |
|
|
|
- |
|
Repurchase
of debt |
|
|
143 |
|
|
|
- |
|
Total net
realized gain (loss) |
|
|
(11,313 |
) |
|
|
608 |
|
Net change in unrealized appreciation (depreciation) on investment
transactions from: |
|
|
Non-affiliated, non-controlled investments |
|
|
(19,715 |
) |
|
|
2,143 |
|
Affiliated investments |
|
|
(5,085 |
) |
|
|
3,123 |
|
Controlled investments |
|
|
(77 |
) |
|
|
(590 |
) |
Total net
change in unrealized appreciation (depreciation) |
|
|
(24,877 |
) |
|
|
4,676 |
|
Net realized
and unrealized gains (losses) |
|
$ |
(36,190 |
) |
|
$ |
5,284 |
|
Net
increase (decrease) in net assets resulting from
operations |
|
$ |
(33,538 |
) |
|
$ |
8,068 |
|
|
|
|
|
|
Net
investment income per share (basic and diluted): |
|
$ |
0.26 |
|
|
$ |
0.26 |
|
Earnings per
share (basic and diluted): |
|
$ |
(3.33 |
) |
|
$ |
0.76 |
|
Weighted
average shares outstanding (basic and diluted): |
|
|
10,062,682 |
|
|
|
10,641,734 |
|
Media & Investor Contact:
Investor Relations+1 (617)
375-3006investorrelations@greatelmcap.com
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