OHA Investment Corporation (NASDAQ: OHAI) (the “Company”) today
announced its financial results for the quarter ended June 30,
2019. Management will discuss the Company's results summarized
below on a conference call on Tuesday, August 13, 2019, at 10:00
a.m. (Eastern Time).
Summary results for the quarter ended
June 30, 2019:Total investment income: $1.5 million,
or $0.08 per shareNet investment loss: ($0.5) million, or
($0.02) per shareNet realized and unrealized gains: $0.9
million, or $0.04 per shareNet asset value: $37.0 million, or
$1.83 per shareNew portfolio investments added during the
quarter: $5.5 million (par value)Fair value of portfolio
investments: $66.4 million
Operating ResultsInvestment
income totaled $1.5 million for the second quarter of 2019,
decreasing 42% compared to $2.6 million in the corresponding
quarter of 2018. The decrease in investment income was primarily
attributable to placing our investment in OCI subordinated notes on
full non-accrual in October 2018, which was partially offset by an
increase of $0.2 million in non-affiliate investment interest
income. In the second quarter of 2018, OCI subordinated notes
contributed $1.2 million of investment income.
Operating expenses for the second quarter of
2019 were $2.0 million, an increase of $0.1 million, or 4%,
compared to operating expenses for the second quarter of 2018.
Interest expense and bank fees decreased by 24% to $0.6 million
from $0.8 million compared to the same period in the prior year
largely due to lower amount outstanding on our Credit Facility, as
well as lower amortization of debt issuance costs. Management fees
decreased by 21% to $0.3 million from $0.4 million due to lower
average asset base subject to the base management fee. During the
second quarter of 2019, we also recorded a $78 thousand capital
gains incentive fee. Costs related to strategic alternatives review
increased by 100.0% to $0.3 million. Professional fees decreased by
24% to $0.2 million from $0.3 million primarily due to lower legal
costs. Other general and administrative expenses increased by 17%
to $0.4 million from $0.4 million.
The resulting net investment loss was ($501)
thousand or ($0.02) per share, for the second quarter of 2019,
compared to net investment income of $667 thousand, or $0.03 per
share, for the second quarter of 2018.
We recorded net realized and unrealized gains on
investments totaling $0.9 million, or $0.04 per share, for the
second quarter of 2019, compared to net realized and unrealized
gains of $0.3 million, or $0.02 per share, for the second quarter
of 2018. In the second quarter of 2019, we realized net capital
gains of $0.4 million, or $0.02 per share, which was primarily
related to the sale of our remaining investment in TIBCO.
Additionally, in the second quarter of 2019, we recorded net
unrealized appreciation of $0.4 million, or $0.02 per share
Overall, we experienced a net increase in net
assets resulting from operations of $0.4 million, or $0.02 per
share, for the second quarter of 2019. After declaring a quarterly
distribution during the period of $0.02 per share, our net asset
value decreased 1% from $1.84 per share as of March 31, 2019 to
$1.83 per share as of June 30, 2019.
Portfolio ActivityThe fair
value of our investment portfolio was $66.4 million at June 30,
2019, increasing 4.8% compared to March 31, 2019. In the second
quarter of 2019, the Company added investments in four new
portfolio companies and an add-on to an existing OHA investment,
totaling $5.4 million, and had realizations of $3.1 million. The
current weighted average yield of our portfolio based on the cost
and fair value of our yielding investments was 10.4% and 10.3%,
respectively, as of June 30, 2019.
In April 2019, we purchased $1.4 million of
second lien term loan in Aptean, a global leader in enterprise
business software. The Aptean second lien term loan was purchased
at a 2.0% discount to par, included a 1.0% commitment fee, earns
interest payable in cash at a rate of Libor+8.50% and matures in
April 2027.
Also in April 2019, we purchased $1.5 million of
second lien term loan in Blackboard Transact, an educational
technology company. The Blackboard Transact second lien term loan
was purchased at a 2.0% discount to par, included a 1.5% commitment
fee, earns interest payable in cash at a rate of Libor+8.50% and
matures in April 2027.
Also in April 2019, we sold our remaining
investment in TIBCO at a price of 106.375% to par, resulting in a
realized capital gain of $0.2 million or $0.01 per share and
generated a gross internal rate of return of 18.6% and return on
investment of 1.38x.
In May 2019, we purchased $0.6 million of second
lien term loan in Allied Universal, adding to our $1.25 million
position which was previously acquired in March 2018. The $0.6
million loan was purchased at a 0.75% discount to par, earns
interest payable in cash at a rate of Libor+8.50% with a 1% floor
and matures in July 2023.
In June 2019, we purchased $0.8 million of
second lien term loan and $0.2 million of delayed draw term loan in
Imperial Dade, a leading independently owned distributor of food
service packaging, facilities maintenance supplies and equipment.
The Imperial Dade second lien term loan was purchased at a 1%
discount to par, included a 1.5% commitment fee, earns interest
payable in cash at a rate of Libor+8.0%, and matures in June
2027.
Also in June 2019, we purchased $1.2 million of
first lien term loan, $0.4 million of delayed draw term loan, and
$0.1 million of revolving loan facility in JS Held, a global
consulting firm with expertise in construction, environmental
health and safety equipment, forensic architecture and engineering
services. The JS Held first lien term loan was purchased at a 1%
discount to par, included a 1.5% commitment fee, earns interest
payable in cash at a rate of Libor+6.0%, and matures in July
2025.
Liquidity and Capital
ResourcesAt June 30, 2019, we had cash and cash
equivalents totaling $2.8 million, with $1.2 million due to a
broker for unsettled trades, and a total of $2.1 million of
unfunded commitments on our investments in two revolving credit
facilities and two delayed draw term loans. The total amount
outstanding under our Credit Facility at June 30, 2019 was $30.0
million with $4.0 million available to draw. On August 5, 2019, we
exercised our option to extend the maturity date on our Credit
Facility to March 9, 2020.
Review of Strategic
AlternativesOn July 31, 2019, we entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Portman Ridge
Finance Corporation (“PTMN”), Storm Acquisition Sub Inc.
(“Acquisition Sub”), and Sierra Crest Investment Management LLC,
the investment adviser to PTMN and an affiliate of BC
Partners Advisors L.P. and LibreMax Capital LLC. (“PTMN
Advisor”). The transaction is the result of OHAI’s previously
announced review of strategic alternatives and has been approved by
a unanimous vote of the Special Committee of the Board of Directors
of OHAI, the Board of Directors of OHAI (other than directors
affiliated with Oak Hill Advisors, L.P., the external adviser to
OHAI, who abstained from voting) and the Board of Directors of
PTMN.
Under the terms of the proposed transaction,
OHAI stockholders will receive a combination of (i) a minimum
of $8 million in cash (approximately $0.40 per share) from
PTMN (as may be adjusted as described below); (ii) PTMN shares
valued at 100% of PTMN’s net asset value per share at the time of
closing of the transaction in an aggregate number equal to OHAI’s
net asset value at closing minus the $8 million PTMN cash
merger consideration (as may be adjusted as described below); and
(iii) an additional cash payment from Sierra Crest, the
external adviser to PTMN, of $3 million in the aggregate, or
approximately $0.15 per share.
If the aggregate number of shares of PTMN stock
to be issued in connection with the merger would exceed 19.9% of
the issued and outstanding shares of PTMN common stock immediately
prior to the transaction closing, then the cash consideration
payable by PTMN will be increased to the minimum extent necessary
such that the aggregate number of shares of PTMN common stock to be
issued in connection with the merger does not exceed such
threshold. The exact exchange ratio for the stock component of the
merger will be determined by the net asset value of OHAI and PTMN
as of the closing, calculated as of 5:00 p.m. New York City time on
the day prior to the closing of the transaction. In addition to
approval by OHAI’s stockholders, the closing of the merger is
subject to customary conditions. The parties currently expect the
transaction to be completed in the fourth calendar quarter of
2019.
Webcast / Conference Call at 10:00 a.m.
Eastern Time on August 13, 2019We invite all interested
persons to participate in our conference call on Tuesday, August
13, 2019, at 10:00 a.m. Eastern Time. The dial-in number for the
call is (877) 303-7617. International callers can access the
conference by dialing (760) 666-3609. Conference ID is 2748643.
Callers are encouraged to dial in at least 5-10 minutes prior to
the call. The presentation materials for the call will be
accessible on the Investor Relations page of the Company’s website
at www.ohainvestmentcorporation.com.
About OHA Investment CorporationOHA Investment
Corporation (NASDAQ: OHAI) is a specialty finance company designed
to provide its investors with current income and capital
appreciation. OHAI focuses primarily on providing creative direct
lending solutions to middle market private companies across
industry sectors. OHAI is externally managed by Oak Hill Advisors,
L.P., a leading independent investment firm
(www.oakhilladvisors.com). Oak Hill Advisors has deep experience in
direct lending, having invested approximately $6.9 billion in over
160 direct lending investments over the past 15+ years.
OHAI’s filings with the Securities and Exchange
Commission (“SEC”), earnings releases, press releases and other
financial, operational and governance information are available on
OHAI’s website at http://ir.ohainvestmentcorporation.com/home.
About Portman Ridge Finance
CorporationPortman Ridge Finance Corporation (NASDAQ:
PTMN) is a publicly traded, externally managed investment company
that has elected to be regulated as a business development company
under the Investment Company Act of 1940. PTMN’s middle market
investment business originates, structures, finances and manages a
portfolio of term loans, mezzanine investments and selected equity
securities in middle market companies. PTMN’s investment activities
are managed by its investment adviser, Sierra Crest Investment
Management LLC, an affiliate of BC Partners Advisors, LP and
LibreMax Capital LLC.
PTMN's filings with the SEC, earnings releases,
press releases and other financial, operational and governance
information are available on PTMN's website at
www.portmanridge.com.
Forward-Looking StatementsThis
press release may contain forward-looking statements that involve
substantial risks and uncertainties, including statements regarding
the completion of the transaction between OHAI and PTMN. We may use
words such as "anticipates," "believes," "intends," "plans,"
"expects," "projects," "estimates," "will," "should," "may" and
similar expressions to identify forward-looking statements. These
forward-looking statements are subject to various risks and
uncertainties. Certain factors could cause actual results and
conditions to differ materially from those projected, including the
uncertainties associated with (i) the timing or likelihood of the
transaction closing, (ii) the expected synergies and savings
associated with the transaction, (iii) the expected elimination of
certain expenses and costs due to the transaction, (iv) the
percentage of OHAI stockholders voting in favor of the transaction,
(v) the possibility that competing offers or acquisition proposals
for OHAI will be made; (vi) the possibility that any or all of the
various conditions to the consummation of the merger may not be
satisfied or waived; (vii) risks related to diverting management’s
attention from OHAI’s ongoing business operations, (viii) the risk
that stockholder litigation in connection with the transactions
contemplated by the merger agreement may result in significant
costs of defense and liability, (ix) the future operating results
of our portfolio companies or the combined company, (x) regulatory
factors, (xi) changes in regional or national economic conditions
and their impact on the industries in which we invest, and (xii)
other changes in the conditions of the industries in which we
invest and other factors enumerated in our filings with the SEC.
You should not place undue reliance on such forward-looking
statements, which speak only as of the date of this press release.
We undertake no obligation to update our forward-looking statements
made herein, unless required by law. You should, therefore, not
rely on these forward-looking statements as representing our views
as of any date subsequent to the date of this press release. You
should read this communication and the documents that we reference
in this communication completely and with the understanding that
our actual future results may be materially different from what we
expect. We qualify all of our forward-looking statements by these
cautionary statements.
Additional Information and Where to Find
ItThis communication relates to a proposed business
combination involving OHAI and PTMN for which OHAI stockholder
approval will be sought (the “Proposal”). In connection with the
Proposal, each of OHAI and PTMN intend to file relevant materials
with the SEC, including a registration statement on Form N-14,
which will include a proxy statement of OHAI and a prospectus of
PTMN. This communication does not constitute an offer to sell or
the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. No offer of securities shall
be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act. STOCKHOLDERS OF OHAI ARE URGED TO
READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY
STATEMENT OF OHAI REGARDING THE PROPOSAL (THE “PROXY STATEMENT”)
WHEN IT BECOMES AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS
THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
OHAI, PTMN, THE MERGER AND THE PROPOSAL. Investors and security
holders will be able to obtain the documents filed with the SEC
free of charge at the SEC’s web site, http://www.sec.gov or, for
documents filed by OHAI, from OHAI’s website at
http://ir.ohainvestmentcorporation.com/home.
Participants in the
SolicitationOHAI and PTMN and their respective directors,
executive officers and certain other members of management,
employees of Oak Hill Advisors, L.P and its affiliates and
employees of Sierra Crest Investment Management LLC and its
affiliates, may be deemed to be participants in the solicitation of
proxies from the stockholders of OHAI in connection with the
Proposal. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of
the OHAI stockholders in connection with the Proposal will be
contained in the Proxy Statement when such document becomes
available. This document may be obtained free of charge from the
sources indicated above.
CONTACTS:Steven T. Wayne –
President and Chief Executive OfficerCory E. Gilbert – Chief
Financial OfficerKahyeong Lee – Chief Compliance
OfficerOHAICInvestorRelations@oakhilladvisors.com
For media inquiries, contact Kekst and Company,
(212) 521-4800Jeremy Fielding – Jeremy.Fielding@kekst.com
OHA INVESTMENT
CORPORATIONCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
|
June 30, 2019 |
|
December 31, 2018 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Investments in portfolio
securities at fair value |
|
|
|
|
Affiliate investments (cost: $26,028 and $26,028,
respectively) |
|
$ |
2,532 |
|
|
$ |
2,271 |
|
Non-affiliate investments (cost: $84,135 and $85,306,
respectively) |
|
63,825 |
|
|
63,335 |
|
Total portfolio investments (cost: $110,163 and $111,334,
respectively) |
|
66,357 |
|
|
65,606 |
|
Investments in U.S. Treasury Bills at fair value (cost:
$9,998 and $14,989, respectively) |
|
9,998 |
|
|
14,989 |
|
Total investments |
|
76,355 |
|
|
80,595 |
|
Cash and cash equivalents |
|
2,781 |
|
|
3,124 |
|
Accounts receivable and other
current assets |
|
726 |
|
|
499 |
|
Interest receivable |
|
185 |
|
|
224 |
|
Other prepaid assets |
|
51 |
|
|
19 |
|
Deferred tax asset |
|
158 |
|
|
316 |
|
Total current assets |
|
3,901 |
|
|
4,182 |
|
Total assets |
|
$ |
80,256 |
|
|
$ |
84,777 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Distributions payable |
|
$ |
403 |
|
|
$ |
403 |
|
Accounts payable and accrued expenses |
|
1,394 |
|
|
683 |
|
Due to broker |
|
1,176 |
|
|
3,251 |
|
Due to affiliate |
|
136 |
|
|
571 |
|
Management and incentive fees payable |
|
382 |
|
|
366 |
|
Income taxes payable |
|
39 |
|
|
39 |
|
Repurchase agreement |
|
9,798 |
|
|
14,689 |
|
Short-term debt, net of debt issuance costs |
|
29,922 |
|
|
— |
|
Total current liabilities |
|
43,250 |
|
|
20,002 |
|
Long-term debt, net of debt
issuance costs |
|
— |
|
|
28,866 |
|
Total liabilities |
|
43,250 |
|
|
48,868 |
|
Commitments and
contingencies |
|
|
|
|
Net
assets |
|
|
|
|
Common stock, $.001 par value,
250,000,000 shares authorized; 20,172,392 and 20,172,392 shares
issued and outstanding, respectively |
|
20 |
|
|
20 |
|
Paid-in capital in excess of
par |
|
211,907 |
|
|
211,907 |
|
Total distributable earnings
(loss) |
|
(174,921 |
) |
|
(176,018 |
) |
Total net assets |
|
37,006 |
|
|
35,909 |
|
Total liabilities and net assets |
|
$ |
80,256 |
|
|
$ |
84,777 |
|
Net asset value per
share |
|
$ |
1.83 |
|
|
$ |
1.78 |
|
OHA INVESTMENT
CORPORATIONCONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data)
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Investment
income: |
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
Interest income |
|
$ |
1,500 |
|
|
$ |
2,525 |
|
|
$ |
3,003 |
|
|
$ |
4,753 |
|
Money market interest |
|
17 |
|
|
91 |
|
|
32 |
|
|
140 |
|
Other income |
|
3 |
|
|
11 |
|
|
14 |
|
|
17 |
|
Total investment income |
|
1,520 |
|
|
2,627 |
|
|
3,049 |
|
|
4,910 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Interest expense and bank fees |
|
611 |
|
|
801 |
|
|
1,240 |
|
|
1,624 |
|
Management fees |
|
304 |
|
|
384 |
|
|
620 |
|
|
784 |
|
Incentive fees |
|
78 |
|
|
(1 |
) |
|
78 |
|
|
— |
|
Costs related to strategic alternatives review |
|
282 |
|
|
— |
|
|
309 |
|
|
75 |
|
Professional fees |
|
235 |
|
|
309 |
|
|
488 |
|
|
952 |
|
Other general and administrative expenses |
|
435 |
|
|
372 |
|
|
823 |
|
|
742 |
|
Director fees |
|
61 |
|
|
62 |
|
|
122 |
|
|
123 |
|
Total operating expenses |
|
2,006 |
|
|
1,927 |
|
|
3,680 |
|
|
4,300 |
|
Incentive fee waiver |
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
Net operating expenses |
|
2,006 |
|
|
1,928 |
|
|
3,680 |
|
|
4,300 |
|
Income tax provision, net |
|
15 |
|
|
32 |
|
|
15 |
|
|
38 |
|
Net investment income
(loss) |
|
(501 |
) |
|
667 |
|
|
(646 |
) |
|
572 |
|
|
|
|
|
|
|
|
|
|
Net realized capital gain on
investments |
|
409 |
|
|
(55,965 |
) |
|
629 |
|
|
(55,952 |
) |
Benefit(provision) for
taxes |
|
— |
|
|
— |
|
|
— |
|
|
(42 |
) |
Total net realized
capital gain (loss) on investments |
|
409 |
|
|
(55,965 |
) |
|
629 |
|
|
(55,994 |
) |
|
|
|
|
|
|
|
|
|
Total net unrealized
appreciation on investments |
|
449 |
|
|
56,306 |
|
|
1,921 |
|
|
58,161 |
|
|
|
|
|
|
|
|
|
|
Net increase in net
assets resulting from operations |
|
$ |
357 |
|
|
$ |
1,008 |
|
|
$ |
1,904 |
|
|
$ |
2,739 |
|
|
|
|
|
|
|
|
|
|
Net increase in net assets
resulting from operations per common share |
|
$ |
0.02 |
|
|
$ |
0.05 |
|
|
$ |
0.09 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
Distributions declared per
common share |
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
$ |
0.04 |
|
Weighted average shares
outstanding - basic and diluted |
|
20,172 |
|
|
20,172 |
|
|
20,172 |
|
|
20,172 |
|
|
|
|
|
|
|
|
|
|
Per Share
Data(1) |
|
|
|
|
|
|
|
|
Net asset value, beginning of
period |
|
$ |
1.84 |
|
|
$ |
2.43 |
|
|
$ |
1.78 |
|
|
$ |
2.37 |
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) |
|
(0.02 |
) |
|
0.03 |
|
|
(0.03 |
) |
|
0.02 |
|
Net realized and unrealized gain on investments |
|
0.04 |
|
|
0.02 |
|
|
0.13 |
|
|
0.11 |
|
Net increase in net assets
resulting from operations |
|
0.02 |
|
|
0.05 |
|
|
0.10 |
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
Distributions to common
stockholders |
|
(0.02 |
) |
|
(0.02 |
) |
|
(0.04 |
) |
|
(0.04 |
) |
Net decrease in net assets
from distributions |
|
(0.02 |
) |
|
(0.02 |
) |
|
(0.04 |
) |
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Net asset value, end of
period |
|
$ |
1.83 |
|
|
$ |
2.46 |
|
|
$ |
1.83 |
|
|
$ |
2.46 |
|
|
(1) Per share
data is based on weighted average number of common shares
outstanding for the period. Per share data may not total due to
rounding. |
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