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MVC Capital Announces First Quarter Fiscal 2014 Results

PURCHASE, N.Y., March 12, 2014 (GLOBE NEWSWIRE) -- MVC Capital, Inc.(NYSE:MVC), a publicly traded business development company that makes private debt and equity investments, today announced its financial results for the first fiscal quarter ended January 31, 2014.

Fiscal First Quarter 2014 and Recent Financial Highlights

  • Interest income was $3.5 million, compared to $2.7 million in Q1 2013
  • NAV was $17.36, compared to $16.29 at Q1 2013 and $17.40 at Q4 2013
  • Made three yielding investments totaling $14.3 million
  • Paid quarterly dividend of $0.135 per share, totaling $3.1 million; 35th consecutive quarterly dividend

"With our portfolio continuing to generate favorable results, we completed five follow-on investments during the quarter to further capitalize on the success of these companies," said Michael Tokarz, Chairman & Portfolio Manager of MVC Capital. "Deploying this capital accelerates our shift to yielding investments as well as better positioning us to deliver strong results in 2014 and beyond."

Fiscal First Quarter 2014 Results
(Unaudited) ($ in thousands except for per share data) Q1 2014 Q1 2013 Q4 2013
Total operating income 4,613 6,386 4,469
Management fee 2,304 2,080 2,221
Portfolio fees - asset management 106 106 106
Management fee - asset management 232 232 233
Administrative 908 890 1,023
Interest, fees and other borrowing costs 2,255 937 2,254
Net Incentive compensation 554 1,175 2,160
Total waiver by adviser (38) (38) (37)
Tax expense 1 1 1
Net operating income (loss) before net realized and unrealized gains (1,709) 1,003 (3,492)
Net increase in net assets resulting from operations 2,047 6,876 3,855
Net increase per share in net assets resulting from operations 0.10 0.29 0.18
Net asset value per share 17.36 16.29 17.40

In the first quarter of 2014, the Company earned $3.5 million in interest income, $106,513 in dividend income and $963,662 in fee and other income, compared to $2.7 million, $2.9 million and $790,359 for the first quarter of 2013, respectively. The decrease in operating income over the same period last year was primarily due to a reduction in dividend income from portfolio companies, specifically U.S. Gas & Electric ("USG&E"). The Company did not receive a quarterly dividend from USG&E as it had entered into an agreement to sell the portfolio company to US Holdings, which subsequently submitted a transaction termination notice. The decrease in operating income was partially offset by an increase in interest income from portfolio companies as the Company continued its focus on yielding investments.

The Company reported a net operating loss of $1.7 million for the first quarter, compared to net operating income of $1.0 million for the same quarter in 2013. Net operating income for the quarter was primarily impacted by an increase in borrowing costs and the reduction in dividend income as mentioned above.

Fiscal First Quarter 2014 Portfolio Adjustments

As of January 31, 2014, the Company's net assets were $392.5 million,or $17.36 per share, compared with net assets of $393.6 million, or $17.40 per share, at the beginning of the quarter and $389.7 million or $16.29 per share, at the end of the same period last year.

During the quarter, the Valuation Committee, which is comprised of three independent directors, changed the fair values of 15 portfolio companies, resulting in a net increase of $2.8 million or $0.13 per share1. In arriving at these determinations and consistent with the Company's valuation procedures and ASC 820, the Valuation Committee took into account many factors, including the performance of the portfolio companies, as well as the impact of changes in market multiples within certain sectors and fluctuations in currency valuations, particularly in the Euro.

Write ups (downs)
Active Deals: Q1 2014 Q1 2013 Q4 2013
Biovations Holdings, Inc. $59,846 $ -- $87,124
Centile Holding B.V. (29,000) 90,000 568,000
Custom Alloy Corporation 4,000,000 840,000 4,160,000
Foliofn, Inc. (1,091,000) -- (3,808,000)
Freshii USA Inc 14,600 -- (11,839)
Harmony Health & Beauty, Inc. -- (100,000) --
MVC Automotive Group B.V. (1,924,409) 2,180,000 778,910
MVC Private Equity Fund, L.P. 2,204,636 11,965 648,653
NPWT Corporation 35,000 (84,091) 19,000
Octagon Credit Investors, LLC (1,153,305) 450,000 --
Ohio Medical Corporation -- (350,000) (1,900,000)
Pre-Paid Legal Services, Inc. -- 118,520 144,081
RuMe, Inc. -- 423,000 (750,000)
Security Holdings, B.V. (304,000) 2,955,000 3,358,000
SGDA Europe B.V. (57,000) (1,742,000) 141,000
SIA Tekers Invest (12,000) 234,000 214,000
Turf Products, LLC (92,000) 180,000 --
Velocitius B.V. (1,874,000) (1,054,000) 505,000
Vestal Manufacturing Enterprises, Inc. 3,000,000 1,650,000 2,675,000
TOTAL $2,777,368 $5,802,394 $6,828,869

Quarterly Investment Activity

During the quarter ended January 31, 2014, the Company made five follow-on investments in existing portfolio companies totaling approximately $19.4 million. The new investments were made in Security Holdings BV ($4.0 million), Centile ($100,000), MVC Automotive Group ($5.0 million), RuMe ($3.3 million) and Morey's Seafood ($7.0 million).

Liquidity

As of January 31, 2014, the Company had investments in portfolio companies totaling $458.8 million and cash and cash equivalents of approximately $55.0 million, excluding restricted cash and cash equivalents of $6.7 million.

Dividends

The Board of Directors declared a dividend of $0.135 per share, or a total of $3.1 million distributed to shareholders during the first quarter. The dividend was paid on January 7, 2014 to shareholders of record on December 31, 2013. This distribution represented the thirty-fifth consecutive quarterly dividend paid by the Company since implementing a dividend policy in July of 2005. The dividends issued under current management have resulted in approximately $101 million in distributions to the Company's shareholders.

MVC-G

1 Based on shares outstanding as of January 31, 2014.

About MVC Capital, Inc.

MVC is a business development company traded on the New York Stock Exchange that provides long-term debt and equity investment capital to fund growth, acquisitions and recapitalizations of companies in a variety of industries. For additional information about MVC, please visit the MVC's website at www.mvccapital.com.

Safe Harbor Statement

The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, including: MVC Capital's ability to execute its investment strategy; the performance of MVC Capital's investments; and changes in economic or financial market conditions and other factors that are enumerated in the Company's periodic filings with the Securities and Exchange Commission. MVC Capital disclaims and does not undertake any obligation to update or revise any forward-looking statement in this press release.

The press release contains unaudited financial results. For ease of review, we have excluded the word "approximately" when rounding the results.

There can be no assurance that future USG&E dividend payments to MVC or MVC dividend payments will match or exceed historic ones, or that they will be made at all. There can be no assurance that MVC will achieve its investment objective.

MVC Capital, Inc.
Consolidated Balance Sheets
January 31, October 31,
2014 2013
(Unaudited)
ASSETS
Assets
Cash and cash equivalents $55,049,730 $74,234,560
Restricted cash and cash equivalents 6,743,000 6,792,000
Investments at fair value
Short-term investments (cost $99,703,383 and $49,937,320) 99,777,105 49,826,893
Non-control/Non-affiliated investments (cost $99,750,278 and $92,139,375) 81,144,593 74,433,413
Affiliate investments (cost $137,224,491 and $136,499,386) 229,576,433 219,694,633
Control investments (cost $149,650,046 and $143,292,881) 148,078,601 146,169,917
Total investments at fair value (cost $486,328,198 and $421,868,962) 558,576,732 490,124,856
Escrow receivables, net of reserves 5,936,928 6,236,928
Dividends and interest receivables, net of reserves 3,909,563 3,528,899
Deferred financing fees 3,141,895 3,265,495
Fee and other receivables 2,607,037 2,109,538
Prepaid expenses 565,086 534,904
Prepaid taxes -- 336
Total assets $636,529,971 $586,827,516
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior notes $114,408,750 $114,408,750
Revolving credit facility 100,000,000 50,000,000
Provision for incentive compensation (Note 11) 24,513,050 23,959,109
Management fee payable 2,303,942 2,221,213
Management fee payable - Asset Management 838,347 606,766
Accrued expenses and liabilities 769,915 655,615
Professional fees payable 500,499 742,859
Interest payable 371,915 371,817
Portfolio fees payable - Asset Management 141,084 140,347
Consulting fees payable 135,511 167,968
Taxes payable 564 --
Total liabilities 243,983,577 193,274,444
Shareholders' equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 22,617,688 and 22,617,688 shares outstanding, respectively 283,044 283,044
Additional paid-in-capital 420,165,045 420,165,045
Accumulated earnings 64,321,684 66,030,475
Dividends paid to stockholders (107,590,867) (104,537,479)
Accumulated net realized loss (2,438,594) (2,201,455)
Net unrealized appreciation 72,248,534 68,255,894
Treasury stock, at cost, 5,686,760 and 5,686,760 shares held, respectively (54,442,452) (54,442,452)
Total shareholders' equity 392,546,394 393,553,072
Total liabilities and shareholders' equity $636,529,971 $586,827,516
Net asset value per share $17.36 $17.40
The accompanying notes are an integral part of these consolidated financial statements.
MVC Capital, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Quarter For the Quarter
Ended Ended
January 31, 2014 January 31, 2013
Operating Income:
Dividend income
Non-control/Non-affiliated investments $190 $974
Affiliate investments 106,323 2,385,748
Control investments -- 426,300
Total dividend income 106,513 2,813,022
Payment-in-kind dividend income
Affiliate investments -- 65,484
Total payment-in-kind dividend income -- 65,484
Interest income
Non-control/Non-affiliated investments 1,303,394 543,884
Affiliate investments 1,076,169 1,022,952
Control investments 95,305 581,774
Total interest income 2,474,868 2,148,610
Payment-in-kind interest income
Non-control/Non-affiliated investments 782,066 16,012
Affiliate investments 246,873 338,675
Control investments 39,272 213,574
Total payment-in-kind interest income 1,068,211 568,261
Fee income
Non-control/Non-affiliated investments 504 104
Affiliate investments 230,000 236,846
Control investments 80,750 133,800
Total fee income 311,254 370,750
Fee income - Asset Management1
Portfolio fees 141,435 140,613
Management Fees 308,775 308,841
Total fee income - Asset Management 450,210 449,454
Other income (loss) 202,198 (29,845)
Total operating income 4,613,254 6,385,736
Operating Expenses:
Management fee 2,303,942 2,080,237
Interest and other borrowing costs 2,255,510 937,043
Incentive compensation (Note 11) 553,941 1,174,661
Management fee - Asset Management1 231,581 231,631
Audit fees 162,400 158,300
Other expenses 140,738 133,553
Legal fees 138,000 136,000
Consulting fees 135,151 132,251
Portfolio fees - Asset Management1 106,076 105,460
Directors fees 103,125 103,125
Insurance 86,700 82,770
Administration 64,675 63,872
Public relations fees 51,000 49,500
Printing and postage 25,806 31,000
Total operating expenses 6,358,645 5,419,403
Less: Voluntary Expense Waiver by Adviser2 (37,500) (37,500)
Total waivers (37,500) (37,500)
Net operating (loss) income before taxes (1,707,891) 1,003,833
Tax Expenses:
Current tax expense 900 733
Total tax expense 900 733
Net operating (loss) income (1,708,791) 1,003,100
Net Realized and Unrealized (Loss) Gain on Investments:
Net realized loss on investments
Non-control/Non-affiliated investments (237,139) (1,922,539)
Total net realized loss on investments (237,139) (1,922,539)
Net change in unrealized appreciation on investments 3,992,640 7,795,677
Net realized and unrealized gain on investments 3,755,501 5,873,138
Net increase in net assets resulting from operations $2,046,710 $6,876,238
Net increase in net assets per share resulting from operations $0.10 $0.29
Dividends declared per share $0.135 $0.135
1These items are related to the management of the MVC Private Equity Fund, L.P. ("PE Fund"). Please see Note 10 "Management" for more information.
2 Reflects the quarterly portion of the TTG Advisers' voluntary waiver of $150,000 of expenses for the 2014 and 2013 fiscal years, that the Company
would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the "Voluntary Waiver"). Please see Note 10
"Management" for more information.
The accompanying notes are an integral part of these consolidated financial statements.

CONTACT: Investor Relations Jackie Rothchild MVC Capital, Inc. 914-510-9400 Or Jeffrey Goldberger / Garth Russell KCSA Strategic Communications 212-896-1249 / 212-896-1250 Media Inquiries Nathaniel Garnick / Patrick Scanlan Sard Verbinnen & Co. 212-687-8080Source:MVC Capital