PennantPark Floating Rate Capital Ltd. (NASDAQ: PFLT) (TASE: PFLT)
announced today financial results for the first fiscal quarter
ended December 31, 2019.
HIGHLIGHTSQuarter ended December 31, 2019($ in
millions, except per share amounts)
Assets and Liabilities: |
|
|
|
|
|
Investment portfolio
(1) |
|
|
$ |
1,176.1 |
|
PSSL investment
portfolio |
|
|
$ |
493.2 |
|
Net assets |
|
|
$ |
502.0 |
|
Net asset value per
share |
|
|
$ |
12.95 |
|
|
|
|
|
|
Credit Facility |
|
|
$ |
334.0 |
|
2023 Notes |
|
|
$ |
133.8 |
|
2031 Asset-Backed
Debt |
|
|
$ |
224.4 |
|
|
|
|
|
|
Yield on debt
investments at quarter-end |
|
|
|
8.4 |
% |
|
|
|
|
|
Operating Results: |
|
|
|
|
Net investment income |
$ |
11.1 |
|
|
Net investment income
per share |
$ |
0.29 |
|
|
Distributions declared
per share |
$ |
0.285 |
|
|
|
|
|
|
|
Portfolio Activity: |
|
|
|
|
Purchases of
investments |
$ |
239.4 |
|
|
Sales and repayments of
investments |
$ |
143.7 |
|
|
|
|
|
|
|
Number of new portfolio
companies invested |
|
10 |
|
|
Number of existing
portfolio companies invested |
|
31 |
|
|
Number of ending
portfolio companies |
|
102 |
|
|
(1) Includes investments in PennantPark Senior Secured Loan Fund
I LLC, or PSSL, an unconsolidated joint venture, totaling $171.9
million, at fair value.
CONFERENCE CALL AT 10:00 A.M. ET ON
FEBRUARY 6, 2020
PennantPark Floating Rate Capital Ltd. (“we,”
“our,” “us” or the “Company”) will host a conference call at 10:00
a.m. (Eastern Time) on Thursday, February 6, 2020 to discuss its
financial results. All interested parties are welcome to
participate. You can access the conference call by dialing
toll-free (800) 289-0438 approximately 5-10 minutes prior to the
call. International callers should dial (929) 477-0402. All callers
should reference conference ID #4990670 or PennantPark Floating
Rate Capital Ltd. An archived replay of the call will be available
through February 20, 2020 by calling toll-free (888) 203-1112.
International callers please dial (719) 457-0820. For all phone
replays, please reference conference ID #4990670.
PORTFOLIO AND INVESTMENT
ACTIVITY
“We are pleased that our current run rate net
investment income covers the dividend due to the selective growth
of the portfolio, as well as the maturation of PSSL,” said Arthur
Penn, Chairman and CEO. “Our earnings stream should have a nice
tailwind based on a gradual increase in our debt to equity ratio,
while still maintaining a prudent debt profile.”
As of December 31, 2019, our portfolio totaled
$1,176.1 million and consisted of $1,042.5 million of first lien
secured debt (including $122.2 million in PSSL), $32.9 million of
second lien secured debt and $100.7 million of preferred and common
equity (including $49.7 million in PSSL). Our debt portfolio
consisted of 99% variable-rate investments. As of December 31,
2019, we had one portfolio company on non-accrual, representing
0.4% and zero of our overall portfolio on a cost and fair value
basis, respectively. Overall, the portfolio had net unrealized
depreciation of $7.0 million. Our overall portfolio consisted of
102 companies with an average investment size of $11.5 million, had
a weighted average yield on debt investments of 8.4%, and was
invested 89% in first lien secured debt (including 10% in PSSL), 3%
in second lien secured debt and 8% in preferred and common equity
(including 4% in PSSL). As of December 31, 2019, 97% of the
investments held by PSSL were first lien secured debt.
As of September 30, 2019, our portfolio totaled
$1,081.7 million and consisted of $944.9 million of first lien
secured debt (including $122.2 million in PSSL), $34.4 million of
second lien secured debt and $102.4 million of preferred and common
equity (including $50.0 million in PSSL). Our debt portfolio
consisted of 99% variable-rate investments. As of September 30,
2019, we had one portfolio company on non-accrual, representing
0.4% and zero of our overall portfolio on a cost and fair value
basis, respectively. Overall, the portfolio had net unrealized
depreciation of $3.5 million. Our overall portfolio consisted of 95
companies with an average investment size of $11.4 million, had a
weighted average yield on debt investments of 8.7%, and was
invested 87% in first lien secured debt (including 11% in PSSL), 3%
in second lien secured debt and 10% in preferred and common equity
(including 5% in PSSL). As of September 30, 2019, 97% of the
investments held by PSSL were first lien secured debt.
For the three months ended December 31, 2019, we
invested $239.4 million in 10 new and 31 existing portfolio
companies with a weighted average yield on debt investments of
8.2%. Sales and repayments of investments for the three months
ended December 31, 2019 totaled $143.7 million.
For the three months ended December 31, 2018, we
invested $180.7 million in nine new and 24 existing portfolio
companies with a weighted average yield on debt investments of
8.6%. Sales and repayments of investments for the three months
ended December 31, 2018 totaled $190.3 million.
PennantPark Senior Secured Loan Fund I
LLC
As of December 31, 2019, PSSL’s portfolio
totaled $493.2 million, consisted of 49 companies with an average
investment size of $10.1 million and had a weighted average yield
on debt investments of 7.4%. As of September 30, 2019, PSSL’s
portfolio totaled $488.5 million, consisted of 45 companies with an
average investment size of $10.9 million and had a weighted average
yield on debt investments of 7.6%.
For the three months ended December 31, 2019,
PSSL invested $69.1 million (of which $68.9 million was purchased
from the Company) in eight new and one existing portfolio companies
with a weighted average yield on debt investments of 7.5%. PSSL’s
sales and repayments of investments for the three months ended
December 31, 2019 totaled $66.4 million. For the three months ended
December 31, 2018, PSSL invested $142.4 million (of which $38.0
million was purchased from the Company) in nine new and three
existing portfolio companies with a weighted average yield on debt
investments of 8.1%. PSSL’s sales and repayments of investments for
the three months ended December 31, 2018 totaled $70.7 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations
for the three months ended December 31, 2019 and 2018.
Investment Income
Investment income for the three months ended
December 31, 2019 was $24.6 million and was attributable to $22.4
million from first lien secured debt and $2.2 million from second
lien secured debt, subordinated debt and preferred and common
equity, respectively. This compares to investment income for the
three months ended December 31, 2018, which was $23.2 million and
was attributable to $21.1 million from first lien secured debt and
$2.1 million from second lien secured debt, subordinated debt and
preferred and common equity, respectively. The increase in
investment income compared to the same periods in the prior year
was primarily due to the growth of our portfolio.
Expenses
Expenses for the three months ended December 31,
2019 totaled $13.5 million. Base management fee for the same period
totaled $2.8 million, incentive fee totaled $2.3 million (including
$2.3 million on net investment income and zero accrued but not
payable on realized gains), debt related interest and expenses
totaled $7.3 million, general and administrative expenses totaled
$1.0 million, and provision for taxes of $0.1 million. This
compares to expenses for the three months ended December 31, 2018,
which totaled $12.2 million. Base management fee for the same
period totaled $2.5 million, incentive fee totaled $(1.2) million
(including $0.2 million on net investment income and $(1.4) million
accrued but not payable on realized gains), debt related interest
and expenses totaled $9.8 million (including $4.5 million in Credit
Facility amendment costs) and general and administrative expenses
totaled $1.1 million. The increase in expenses for the three months
ended December 31, 2019 compared to the same period in the prior
year was primarily due to increase in management and incentive fees
and debt related interest and expenses due to the growth of our
portfolio in the current period.
Net Investment Income
Net investment income totaled $11.1 million or
$0.29 for the three months ended December 31, 2019. Net investment
income totaled $10.9 million or $0.28 per share for the three
months ended December 31, 2018. The change in net investment income
compared to the same period in the prior year was primarily due to
the growth of our portfolio in the current year as well as
financing costs incurred in the prior year.
Net Realized Gains or
Losses
Sales and repayments of investments for the
three months ended December 31, 2019 totaled $143.7 million and net
realized gains totaled $1.0 million. Sales and repayments of
investments for the three months ended December 31, 2018 totaled
$190.3 million, and net realized gains totaled $0.9 million. The
change in realized gains/losses was primarily due to changes in the
market conditions of our investments and the values at which they
were realized.
Unrealized Appreciation or Depreciation
on Investments, the Credit Facility and the 2023 Notes
For the three months ended December 31, 2019, we
reported net change in unrealized depreciation on investments of
$3.5 million. For the three months ended December 31, 2018, we
reported net change in unrealized depreciation on investments of
$12.4 million. As of December 31, 2019 and 2018, our net unrealized
depreciation on investments totaled $7.0 million and $13.3 million,
respectively. The net change in unrealized depreciation on our
investments compared to the same period in the prior year was
primarily due to changes in the capital market conditions, the
financial performance of certain portfolio companies and the
reversal of unrealized appreciation/depreciation on investments
that were realized.
For the three months ended December 31, 2019 and
2018, the Credit Facility and the 2023 Notes had a net change in
unrealized appreciation of $1.4 million and $5.5 million,
respectively. As of December 31, 2019 and 2018, the net unrealized
depreciation on the Credit Facility and the 2023 Notes totaled $6.0
million and $4.7 million, respectively. The net change in net
unrealized depreciation compared to the same period in the prior
year was primarily due to changes in the capital markets.
Net Change in Net Assets Resulting from
Operations
Net change in net assets resulting from
operations totaled $10.0 million or $0.26 per share, respectively,
for the three months ended December 31, 2019. This compares to a
net change in net assets resulting from operations of $5.0 million
or $0.13 per share for the three months ended December 31, 2018.
The increase net assets from operations compared to the same period
in the prior year was primarily due to appreciation of the
portfolio in the current period.
LIQUIDITY AND CAPITAL
RESOURCES
Our liquidity and capital resources are derived
primarily from proceeds of securities offerings, debt capital and
cash flows from operations, including investment sales and
repayments, and income earned. Our primary use of funds from
operations includes investments in portfolio companies and payments
of fees and other operating expenses we incur. We have used, and
expect to continue to use, our debt capital, proceeds from the
rotation of our portfolio and proceeds from public and private
offerings of securities to finance our investment objectives.
The annualized weighted average cost of debt for
the three months ended December 31, 2019 and 2018, inclusive of the
fee on the undrawn commitment on the Credit Facility, amendment
costs and debt issuance costs, was 4.5% and 5.3%, respectively. As
of December 31, 2019 and September 30, 2019, we had $184.7 million
and $254.7 million of unused borrowing capacity under the Credit
Facility, respectively, subject to the regulatory restrictions.
As of December 31, 2019 and September 30, 2019,
PennantPark Floating Rate Funding I, LLC, or Funding I, borrowed
$335.3 million and $265.3 under the Credit Facility, respectively.
The Credit Facility had a weighted average interest rate of 3.7%
and 4.1%, exclusive of the fee on undrawn commitments as of
December 31, 2019 and September 30, 2019, respectively.
As of December 31, 2019 and September 30, 2019,
we had cash equivalents of $56.3 million and $63.3 million,
respectively, available for investing and general corporate
purposes. We believe our liquidity and capital resources are
sufficient to take advantage of market opportunities.
Our operating activities used cash of $66.1
million for the three months ended December 31, 2019, and our
financing activities provided cash of $58.9 million for the same
period. Our operating activities used cash primarily for our
investment activities and our financing activities provided cash
primarily from draws on our credit facility, partially offset by
distributions paid to stockholders.
Our operating activities used cash of $43.6
million for the three months ended December 31, 2018 and our
financing activities provided cash of $6.1 million for the same
period. Our operating activities used cash primarily for our
investment activities and our financing activities provided cash
primarily from draws on our credit facility, partially offset by
distributions paid to stockholders.
DISTRIBUTIONS
During the three months ended December 31, 2019
and 2018, we declared distributions of $0.285 per share, for total
distributions of $11.1 million. We monitor available net investment
income to determine if a return of capital for tax purposes may
occur for the fiscal year. To the extent our taxable earnings fall
below the total amount of our distributions for any given fiscal
year, stockholders will be notified of the portion of those
distributions deemed to be a tax return of capital. Tax
characteristics of all distributions will be reported to
stockholders subject to information reporting on Form 1099-DIV
after the end of each calendar year and in our periodic reports
filed with the Securities and Exchange Commission, or the SEC.
AVAILABLE INFORMATION
The Company makes available on its website its
report on Form 10-Q filed with the SEC and stockholders may find
the report on its website at www.pennantpark.com.
PENNANTPARK FLOATING RATE CAPITAL LTD.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
ASSETS AND LIABILITIES
|
|
December 31, 2019 |
|
|
September 30, 2019 |
|
|
|
(unaudited) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Investments at fair value |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments (cost—$983,709,595 and
$886,955,156, respectively) |
|
$ |
988,154,489 |
|
|
$ |
889,113,264 |
|
Non-controlled, affiliated investments (cost—$24,922,178 and
$23,645,693, respectively) |
|
|
16,039,827 |
|
|
|
20,430,565 |
|
Controlled, affiliated investments (cost—$174,562,500 and
$174,562,500, respectively) |
|
|
171,921,598 |
|
|
|
172,163,080 |
|
Total of investments (cost—$1,183,194,273 and $1,085,172,349,
respectively) |
|
|
1,176,115,914 |
|
|
|
1,081,706,909 |
|
Cash and cash equivalents
(cost—$56,261,842 and $63,367,237, respectively) |
|
|
56,292,541 |
|
|
|
63,337,728 |
|
Interest receivable |
|
|
3,144,695 |
|
|
|
3,892,292 |
|
Receivable for investments
sold |
|
|
58,425,962 |
|
|
|
2,997,546 |
|
Prepaid expenses and other
assets |
|
|
402,760 |
|
|
|
441,337 |
|
Total assets |
|
|
1,294,381,872 |
|
|
|
1,152,375,812 |
|
Liabilities |
|
|
|
|
|
|
|
|
Distributions payable |
|
|
3,683,347 |
|
|
|
3,683,347 |
|
Payable for investments
purchased |
|
|
85,457,647 |
|
|
|
12,033,794 |
|
Credit Facility payable, at fair
value (cost—$335,307,500 and $265,307,500, respectively) |
|
|
334,040,510 |
|
|
|
263,988,583 |
|
2023 Notes payable, at fair value
(par—$138,579,858) |
|
|
133,826,569 |
|
|
|
135,240,084 |
|
2031 Asset-Backed Debt, net
(par—$228,000,000) |
|
|
224,393,947 |
|
|
|
224,321,845 |
|
Interest payable on debt |
|
|
4,085,056 |
|
|
|
3,275,481 |
|
Base management fee payable |
|
|
2,830,159 |
|
|
|
2,728,019 |
|
Performance-based incentive fee
payable |
|
|
2,315,834 |
|
|
|
2,532,205 |
|
Accrued other expenses |
|
|
1,768,439 |
|
|
|
1,514,943 |
|
Total liabilities |
|
|
792,401,508 |
|
|
|
649,318,301 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
|
|
Common stock, 38,772,074 shares
issued and outstanding Par value $0.001 per share and
100,000,000 shares authorized |
|
|
38,772 |
|
|
|
38,772 |
|
Paid-in capital in excess of par
value |
|
|
538,632,828 |
|
|
|
538,632,828 |
|
Distributable income |
|
|
(36,691,236 |
) |
|
|
(35,614,089 |
) |
Total net assets |
|
$ |
501,980,364 |
|
|
$ |
503,057,511 |
|
Total liabilities and net assets |
|
$ |
1,294,381,872 |
|
|
$ |
1,152,375,812 |
|
Net asset value per
share |
|
$ |
12.95 |
|
|
$ |
12.97 |
|
PENNANTPARK FLOATING RATE CAPITAL LTD.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
|
|
Three Months Ended December 31, |
|
|
|
2019 |
|
|
2018 |
|
Investment
income: |
|
|
|
|
|
|
|
|
From non-controlled,
non-affiliated investments: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
18,909,894 |
|
|
$ |
18,169,998 |
|
Other income |
|
|
773,103 |
|
|
|
621,189 |
|
From non-controlled, affiliated
investments: |
|
|
|
|
|
|
|
|
Interest |
|
|
225,353 |
|
|
|
— |
|
From controlled, affiliated
investments: |
|
|
|
|
|
|
|
|
Interest |
|
|
3,155,324 |
|
|
|
2,818,045 |
|
Dividend |
|
|
1,575,000 |
|
|
|
1,575,000 |
|
Total investment income |
|
|
24,638,674 |
|
|
|
23,184,232 |
|
Expenses: |
|
|
|
|
|
|
|
|
Base management fee |
|
|
2,830,159 |
|
|
|
2,498,766 |
|
Performance-based incentive fee |
|
|
2,315,834 |
|
|
|
(1,192,409 |
) |
Interest and expenses on debt |
|
|
7,307,264 |
|
|
|
5,305,478 |
|
Administrative services expenses |
|
|
350,000 |
|
|
|
500,000 |
|
Other general and administrative expenses |
|
|
616,077 |
|
|
|
616,075 |
|
Expenses before amendment costs, debt issuance costs and
provision for taxes |
|
|
13,419,334 |
|
|
|
7,727,910 |
|
Credit Facility amendment costs and debt issuance costs |
|
|
— |
|
|
|
4,512,279 |
|
Provision for taxes |
|
|
100,000 |
|
|
|
— |
|
Total expenses |
|
|
13,519,334 |
|
|
|
12,240,189 |
|
Net investment income |
|
|
11,119,340 |
|
|
|
10,944,043 |
|
Realized and unrealized
loss on investments and debt: |
|
|
|
|
|
|
|
|
Net realized gain on
investments: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
|
1,012,313 |
|
|
|
923,466 |
|
Net realized loss on investments |
|
|
1,012,313 |
|
|
|
923,466 |
|
Net change in unrealized
depreciation on: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
|
2,379,358 |
|
|
|
(10,041,539 |
) |
Controlled and non-controlled, affiliated investments |
|
|
(5,899,705 |
) |
|
|
(2,364,468 |
) |
Debt depreciation |
|
|
1,361,588 |
|
|
|
5,533,693 |
|
Net change in unrealized depreciation on investments and
debt |
|
|
(2,158,759 |
) |
|
|
(6,872,314 |
) |
Net realized and
unrealized loss from investments and debt |
|
|
(1,146,446 |
) |
|
|
(5,948,848 |
) |
Net increase in net
assets resulting from operations |
|
$ |
9,972,894 |
|
|
$ |
4,995,195 |
|
Net increase in net assets
resulting from operations per common share |
|
$ |
0.26 |
|
|
$ |
0.13 |
|
Net investment income per common
share |
|
$ |
0.29 |
|
|
$ |
0.28 |
|
ABOUT PENNANTPARK FLOATING RATE CAPITAL
LTD.
PennantPark Floating Rate Capital Ltd. is a
business development company which primarily invests in U.S.
middle-market companies in the form of floating rate senior secured
loans, including first lien secured debt, second lien secured debt
and subordinated debt. From time to time, the Company may also
invest in equity investments. PennantPark Floating Rate Capital
Ltd. is managed by PennantPark Investment Advisers, LLC.
ABOUT PENNANTPARK INVESTMENT ADVISERS, LLC
PennantPark Investment Advisers, LLC is a
leading middle market credit platform, which has approximately $3.8
billion of assets under management. Since its inception in 2007,
PennantPark Investment Advisers, LLC has provided investors access
to middle market credit by offering private equity firms and their
portfolio companies as well as other middle-market borrowers a
comprehensive range of creative and flexible financing solutions.
PennantPark Investment Advisers, LLC is headquartered in New York
and has offices in Chicago, Houston and Los Angeles.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. You should understand that under Section
27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section
21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995 do not apply to
forward-looking statements made in periodic reports we file under
the Exchange Act. All statements other than statements of
historical facts included in this press release are forward-looking
statements and are not guarantees of future performance or results,
and involve a number of risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements as a
result of a number of factors, including those described from time
to time in filings with the SEC. The Company undertakes no duty to
update any forward-looking statement made herein. You should not
place undue influence on such forward-looking statements as such
statements speak only as of the date on which they are made.
We may use words such as “anticipates,”
“believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and
similar expressions to identify forward-looking statements. Such
statements are based on currently available operating, financial
and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations.
CONTACT:
Aviv Efrat PennantPark
Floating Rate Capital Ltd. (212)
905-1000 www.pennantpark.com
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