Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Great Elm Capital Corp. | gecc-8k_20200930.htm |
| EX-99.3 - EX-99.3 - Great Elm Capital Corp. | gecc-ex993_7.htm |
| EX-99.2 - EX-99.2 - Great Elm Capital Corp. | gecc-ex992_9.htm |
Exhibit 99.1
Great Elm Capital Corp. Announces THIRD Quarter 2020 Financial Results HIGHLIGHTED BY NET INVESTMENT INCOME of $0.18 per share
Company to Host Quarterly Conference Call at 11:00 AM ET Today
WALTHAM, MA, November 9, 2020 – Great Elm Capital Corp. (“we,” “us,” “our,” “GECC,” or “Great Elm BDC”), (NASDAQ: GECC), a business development company (BDC), today announced its financial results for the third quarter ended September 30, 2020.
Financial Highlights
|
▪ |
Net investment income (“NII”) for the quarter increased quarter-over-quarter to $1.9 million, as compared to NII of $0.9 million for the quarter ended June 30, 2020, as the Company reported a full period of NII following the strategic repositioning of its portfolio in the prior quarter |
|
▪ |
NII per share increased to $0.18, as compared to NII per share of $0.09 for the quarter ended June 30, 2020 |
|
▪ |
As of September 30, 2020, Great Elm BDC’s asset coverage ratio was approximately 150.9%, up from 144.5% as of June 30, 2020 and up from 141.1% as of March 31, 2020, compared to a minimum asset coverage ratio of 150.0% |
|
▪ |
Net assets on September 30, 2020 grew to approximately $60.5 million, as compared to net assets of $53.2 million at June 30, 2020 and $50.8 million at March 31, 2020. |
|
▪ |
NAV per share on September 30, 2020 increased to $5.53, from $5.10 per share at June 30, 2020 |
|
▪ |
For the nine months ended September 30, 2020, we repurchased $5.3 million in aggregate principal of our senior notes at a weighted average price of $19.16 per note |
Rights Offering
|
▪ |
Subsequent to quarter end, on October 1, 2020, the Company successfully completed a non-transferable rights offering which entitled holders of rights to purchase one new share of common stock for each right held at a subscription price of $2.95 per share. In total, the Company sold 10,761,950 shares of its common stock for aggregate gross proceeds of approximately $31.7 million. |
|
▪ |
As of October 1, 2020, total shares outstanding were 21,703,720 (see selected pro-forma balance sheet information in attached tables) |
|
▪ |
NAV per share at September 30, 2020 was $4.18 after giving effect to the rights offering |
|
▪ |
Asset coverage ratio was approximately 176.5% after giving effect to the rights offering |
|
▪ |
The parent company of our external manager owns more than 25.4% of outstanding shares following the rights offering |
Management Commentary
Peter A. Reed, GECC’s Chief Executive Officer, stated, “This was an excellent turnaround quarter, as Great Elm BDC achieved NII growth during the quarter as a result of continued outperformance from specialty finance investments. We believe there are attractive new investment opportunities at compelling values on a risk-adjusted return basis during this period of dislocation in the market. We expect to utilize the proceeds from our recent rights offering to proactively seek investments in the specialty finance market. Since the beginning of our repositioning last quarter we have achieved a number of objectives: strengthening our capital base, which will
allow us to grow our investment portfolio, monetizing and redeploying over $80 million of our portfolio, and covering our distribution through a combination of investment income and realized gains.”
Portfolio and Investment Activity
As of September 30, 2020, we held 34 debt investments, totaling approximately $136.1 million and representing 80.3% of the fair market value of our total investments. First lien and/or secured debt investments comprised 98.5% of the fair market value of our debt investments.
As of the same date, we held 8 equity investments, totaling approximately $33.4 million and representing 19.7% of the fair market value of our total investments.
As of September 30, 2020, the weighted average current yield on our debt portfolio was 10.1%. Floating rate instruments comprised approximately 59.4% of the fair market value of debt investments.
During the quarter ended September 30, 2020, we deployed approximately $34.5 million into six investments(1), at a weighted average current yield of 12.3% The weighted average price of the debt deployment activity was 91% of par.
During the quarter ended September 30, 2020, we monetized, in part or in full, 12 investments for approximately $18.2 million(2), at a weighted average current yield of 9.6%. The weighted average realized price was 97% of par.
Financial Review
Total investment income for the quarter ended September 30, 2020 was approximately $6.0 million, or $0.56 per share. Total expenses for the quarter ended September 30, 2020 were approximately $4.0 million, or $0.38 per share.
Net realized losses for the quarter ended September 30, 2020 were approximately $0.1 million, or $0.02 per share. Net unrealized appreciation from investments for the quarter ended September 30, 2020 was approximately $6.0 million, or $0.56 per share.
Liquidity and Capital Resources
As of September 30, 2020, our cash balance was approximately $12.6 million, exclusive of holdings of United States Treasury Bills and restricted cash. Total debt outstanding as of September 30, 2020 was $118.7 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). During the quarter ended September 30, 2020, we repurchased $5.3 million in aggregate principal of our senior notes at a weighted average price of $21.30 per note. Importantly, as of September 30, 2020, we had no secured credit facility, which allows for greater flexibility in the use of our cash and other assets.
As of September 30, 2020, our asset coverage ratio was approximately 150.9%, up from 144.5% as of June 30, 2020 and 141.1% as of March 31, 2020.
-2-
Great Elm BDC also announced this morning that its Board set the distribution for the quarter ending March 31, 2021 at $0.10 per quarter.
The distributions will be paid in cash and covered by net investment income. The record and payment dates for the distribution are expected to be set by GECC in December pursuant to authority granted by the Board.
Conference Call and Webcast
GECC will discuss these results in a conference call later this morning (Monday, November 9, 2020) at 11:00 a.m. ET.
Conference Call Details
Date/Time:Monday, November 9, 2020 – 11:00 a.m. ET
Participant Dial-In Numbers:
(United States):844-820-8297
(International):661-378-9758
To access the call, please dial-in approximately five minutes before the start time and, when asked, provide the operator with passcode "GECC". An accompanying slide presentation will be available in .pdf format via the “Investor Relations” section of Great Elm Capital Corp.’s website at http://www.investor.greatelmcc.com/events-and-presentations/presentations after the issuance of the earnings release.
Webcast
The call and presentation will also be simultaneously webcast over the Internet via the Investor Relations section of GECC’s website or by clicking on the conference call link: Great Elm Capital Corp (GECC) Q3 2020 Conference Call Webcast.
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 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
-3-
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.
(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.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
Adam Prior
The Equity Group Inc.
+1 (212) 836-9606
aprior@equityny.com
-4-
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
Dollar amounts in thousands (except per share amounts)
|
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value (amortized cost of $144,747 and $168,269, respectively) |
|
$ |
110,194 |
|
|
$ |
147,412 |
|
|
Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $74,983 and $85,733, respectively) |
|
|
74,980 |
|
|
|
85,733 |
|
|
Affiliated investments, at fair value (amortized cost of $107,256 and $102,704, respectively) |
|
|
39,364 |
|
|
|
40,608 |
|
|
Controlled investments, at fair value (amortized cost of $18,740 and $10,601, respectively) |
|
|
19,928 |
|
|
|
9,595 |
|
|
Total investments |
|
|
244,466 |
|
|
|
283,348 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
12,570 |
|
|
|
4,606 |
|
|
Restricted cash |
|
|
600 |
|
|
|
- |
|
|
Receivable for investments sold |
|
|
1,531 |
|
|
|
- |
|
|
Interest receivable |
|
|
4,091 |
|
|
|
2,350 |
|
|
Dividends receivable |
|
|
- |
|
|
|
14 |
|
|
Due from portfolio company |
|
|
750 |
|
|
|
617 |
|
|
Due from affiliates |
|
|
- |
|
|
|
15 |
|
|
Prepaid expenses and other assets |
|
|
497 |
|
|
|
89 |
|
|
Total assets |
|
$ |
264,505 |
|
|
$ |
291,039 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Notes payable 6.50% due September 18, 2022 (including unamortized discount of $566 and $839, respectively) |
|
$ |
29,727 |
|
|
$ |
31,792 |
|
|
Notes payable 6.75% due January 31, 2025 (including unamortized discount of $1,107 and $1,321, respectively) |
|
|
44,503 |
|
|
|
45,078 |
|
|
Notes payable 6.50% due June 30, 2024 (including unamortized discount of $1,639 and $2,058, respectively) |
|
|
41,184 |
|
|
|
42,942 |
|
|
Payable for investments purchased |
|
|
77,120 |
|
|
|
72,749 |
|
|
Interest payable |
|
|
366 |
|
|
|
354 |
|
|
Distributions payable |
|
|
908 |
|
|
|
1,338 |
|
|
Accrued incentive fees payable |
|
|
8,967 |
|
|
|
8,157 |
|
|
Due to affiliates |
|
|
781 |
|
|
|
997 |
|
|
Accrued expenses and other liabilities |
|
|
485 |
|
|
|
743 |
|
|
Total liabilities |
|
$ |
204,041 |
|
|
$ |
204,150 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share (100,000,000 shares authorized, 10,941,770 shares issued and outstanding and 10,062,682 shares issued and outstanding, respectively) |
|
$ |
109 |
|
|
$ |
101 |
|
|
Additional paid-in capital |
|
|
196,742 |
|
|
|
193,114 |
|
|
Accumulated losses |
|
|
(136,387 |
) |
|
|
(106,326 |
) |
|
Total net assets |
|
$ |
60,464 |
|
|
$ |
86,889 |
|
|
Total liabilities and net assets |
|
$ |
264,505 |
|
|
$ |
291,039 |
|
|
Net asset value per share |
|
$ |
5.53 |
|
|
$ |
8.63 |
|
-5-
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Dollar amounts in thousands (except per share amounts)
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Investment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
2,718 |
|
|
$ |
4,477 |
|
|
$ |
9,800 |
|
|
$ |
11,999 |
|
|
Affiliated investments |
|
|
246 |
|
|
|
216 |
|
|
|
716 |
|
|
|
627 |
|
|
Affiliated investments (PIK) |
|
|
1,321 |
|
|
|
1,124 |
|
|
|
3,842 |
|
|
|
2,939 |
|
|
Controlled investments |
|
|
90 |
|
|
|
282 |
|
|
|
188 |
|
|
|
1,335 |
|
|
Controlled investments (PIK) |
|
|
- |
|
|
|
101 |
|
|
|
- |
|
|
|
684 |
|
|
Total interest income |
|
|
4,375 |
|
|
|
6,200 |
|
|
|
14,546 |
|
|
|
17,584 |
|
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
401 |
|
|
|
196 |
|
|
|
404 |
|
|
|
407 |
|
|
Controlled investments |
|
|
880 |
|
|
|
480 |
|
|
|
1,760 |
|
|
|
1,280 |
|
|
Total dividend income |
|
|
1,281 |
|
|
|
676 |
|
|
|
2,164 |
|
|
|
1,687 |
|
|
Other income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
295 |
|
|
|
5 |
|
|
|
351 |
|
|
|
137 |
|
|
Affiliated investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
108 |
|
|
|
75 |
|
|
|
564 |
|
|
Controlled investments |
|
|
- |
|
|
|
13 |
|
|
|
12 |
|
|
|
52 |
|
|
Total other income |
|
|
295 |
|
|
|
126 |
|
|
|
438 |
|
|
|
755 |
|
|
Total investment income |
|
$ |
5,951 |
|
|
$ |
7,002 |
|
|
$ |
17,148 |
|
|
$ |
20,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
609 |
|
|
$ |
759 |
|
|
$ |
1,898 |
|
|
$ |
2,207 |
|
|
Incentive fees |
|
|
482 |
|
|
|
654 |
|
|
|
810 |
|
|
|
2,099 |
|
|
Administration fees |
|
|
152 |
|
|
|
282 |
|
|
|
547 |
|
|
|
734 |
|
|
Custody fees |
|
|
20 |
|
|
|
15 |
|
|
|
59 |
|
|
|
45 |
|
|
Directors’ fees |
|
|
49 |
|
|
|
51 |
|
|
|
151 |
|
|
|
150 |
|
|
Professional services |
|
|
287 |
|
|
|
243 |
|
|
|
794 |
|
|
|
711 |
|
|
Interest expense |
|
|
2,225 |
|
|
|
2,308 |
|
|
|
6,920 |
|
|
|
5,333 |
|
|
Other expenses |
|
|
194 |
|
|
|
71 |
|
|
|
468 |
|
|
|
349 |
|
|
Total expenses |
|
$ |
4,018 |
|
|
$ |
4,383 |
|
|
$ |
11,647 |
|
|
$ |
11,628 |
|
|
Net investment income |
|
$ |
1,933 |
|
|
$ |
2,619 |
|
|
$ |
5,501 |
|
|
$ |
8,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|||||||
|
Net realized gain (loss) on investment transactions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
(262 |
) |
|
$ |
97 |
|
|
$ |
(11,760 |
) |
|
$ |
1,115 |
|
|
Controlled investments |
|
|
- |
|
|
|
154 |
|
|
|
- |
|
|
|
154 |
|
|
Repurchase of debt |
|
|
120 |
|
|
|
- |
|
|
|
1,237 |
|
|
|
- |
|
|
Total net realized gain (loss) |
|
|
(142 |
) |
|
|
251 |
|
|
|
(10,523 |
) |
|
|
1,269 |
|
|
Net change in unrealized appreciation (depreciation) on investment transactions from: |
|
|
|
|
|
|||||||||||
|
Non-affiliated, non-controlled investments |
|
|
3,544 |
|
|
|
(8,075 |
) |
|
|
(13,699 |
) |
|
|
(7,357 |
) |
|
Affiliated investments |
|
|
319 |
|
|
|
(4,096 |
) |
|
|
(5,796 |
) |
|
|
(7,666 |
) |
|
Controlled investments |
|
|
2,050 |
|
|
|
(345 |
) |
|
|
2,194 |
|
|
|
(600 |
) |
|
Total net change in unrealized appreciation (depreciation) |
|
|
5,913 |
|
|
|
(12,516 |
) |
|
|
(17,301 |
) |
|
|
(15,623 |
) |
|
Net realized and unrealized gains (losses) |
|
$ |
5,771 |
|
|
$ |
(12,265 |
) |
|
$ |
(27,824 |
) |
|
$ |
(14,354 |
) |
|
Net increase (decrease) in net assets resulting from operations |
|
$ |
7,704 |
|
|
$ |
(9,646 |
) |
|
$ |
(22,323 |
) |
|
$ |
(5,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
|
$ |
0.18 |
|
|
$ |
0.26 |
|
|
$ |
0.53 |
|
|
$ |
0.81 |
|
|
Earnings per share (basic and diluted): |
|
$ |
0.72 |
|
|
$ |
(0.96 |
) |
|
$ |
(2.17 |
) |
|
$ |
(0.58 |
) |
|
Weighted average shares outstanding (basic and diluted): |
|
|
10,660,894 |
|
|
|
10,062,682 |
|
|
|
10,307,771 |
|
|
|
10,312,561 |
|
-6-
Pro-Forma Balance Sheet Information (unaudited)
Dollar amounts in thousands (except per share amounts)
|
(Dollars are in ‘000s) |
|
9/30/2020 |
||||
|
|
|
Actual |
|
Adjustments |
|
As Adjusted |
|
Investments, at fair value |
|
$ 244,466 |
|
|
|
$ 244,466 |
|
Cash and cash equivalents |
|
13,170 |
|
30,357 |
|
43,527 |
|
Other assets |
|
6,869 |
|
|
|
6,869 |
|
Total Assets |
|
$ 264,505 |
|
30,357 |
|
$ 294,862 |
|
|
|
|
|
|
|
|
|
Notes payable 6.50% due September 18, 2022 (including unamortized discount of $566 and $839, respectively) |
|
29,727 |
|
|
|
29,727 |
|
Notes payable 6.75% due January 31, 2025 (including unamortized discount of $1,107 and $1,321, respectively) |
|
44,503 |
|
|
|
44,503 |
|
Notes payable 6.50% due June 30, 2024 (including unamortized discount of $1,639 and $2,058, respectively) |
|
41,184 |
|
|
|
41,184 |
|
Other liabilities |
|
88,627 |
|
|
|
88,627 |
|
Total liabilities |
|
204,041 |
|
- |
|
204,041 |
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
60,464 |
|
30,357 |
|
90,821 |
|
|
|
|
|
|
|
|
|
Total liabilities and net assets |
|
264,505 |
|
30,357 |
|
294,862 |
|
|
|
|
|
|
|
|
|
Shares outstanding |
|
10,941,770 |
|
10,761,950 |
|
21,703,720 |
|
|
|
|
|
|
|
|
|
NAV per Share |
|
$ 5.53 |
|
$ (1.35) |
|
$ 4.18 |
-7-