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CM Finance Inc - Portfolio Update as of December 31, 2014

NEW YORK, Jan. 15, 2015 (GLOBE NEWSWIRE) -- In light of the recent volatility in the energy sector, CM Finance Inc (Nasdaq:CMFN) ("CMFN" or "the Company") is providing preliminary information related to its investment portfolio as of the second fiscal quarter ended December 31, 2014. The Company intends to issue its regularly scheduled earnings release and host an earnings call for the second fiscal quarter ended December 31, 2014, to be announced at a later date in February 2015. Although the Company is announcing preliminary information related to its investment portfolio as of the second fiscal quarter ended December 31, 2014 separate from its regularly scheduled earnings release for the second fiscal quarter ended December 31, 2014, it does not undertake to announce updates as of a particular quarter-end apart from its regularly scheduled earnings release and call in the future.

The aggregate investment portfolio at fair value on December 31, 2014 was $316.1 million, compared to $298.7 million at September 30, 2014. Cash balance at December 31, 2014 was $32.9 million, compared with $30.1 million on September 30, 2014. Total debt outstanding on December 31, 2014 was $141.4 million, compared with $123.5 million on September 30, 2014. In addition, the Company had $4.6 million in distributions payable at both September 30 and December 31, 2014.

As of December 31, 2014, the Company had net unrealized gains of approximately $4.6 million, comprised primarily of $10.6 million unrealized gain from its investment in Virgin America Inc. (Nasdaq:VA) ("Virgin America"), offset by unrealized losses from its energy investments (oil and gas and oilfield services) and net unrealized losses across various other sectors of approximately $4.5 million and $1.5 million, respectively.

During the three months ended December 31, 2014, the Company recorded approximately $1.0 million in realized gains and no realized losses. The Company recorded a net unrealized gain of approximately $2.4 million during the three months ended December 31, 2014, which included a $10.6 million unrealized gain on Virgin America and a $4.6 million (2.3% of net assets at September 30, 2014) unrealized loss on its energy investments.

In November 2014, the Company converted its debt and warrant position in Virgin America Inc. to cash and 570,917 shares of common stock of Virgin America, in connection with Virgin America's initial public offering. The Company's shares of Virgin America are subject to a six month "lock-up" that expires on May 13, 2015. Further details on the Company's investment in Virgin America are as follows:

As of September 30, 2014 (unaudited)
Investment Principal / Shares Interest Receivable Amortized Cost Fair Value
Senior Secured First Lien Term Loan $5,886,125 $407,110 $5,623,400 $5,886,125
Senior Secured Second Lien Term Loan $5,924,521 $402,867 $5,823,433 $5,924,521
Warrants 898,333 -- $237,557 $593,516
Total $809,977 $11,684,390 $12,404,162
Proceeds upon IPO and Value at December 31, 2014 (unaudited)
Cost (IPO Date) Market Price
December 31, 2014
Fair Value
December 31, 2014 (2)
Price per share of VA $20.91 $43.25 (1) $39.44 (2)
570,917 Shares of VA $11,940,458 $24,692,160 $22,516,966
Cash received upon IPO $2,155,540 $2,155,540 $2,155,540
$14,095,998 $26,847,700 $24,672,506
(1) Based on the closing price of Virgin America on the Nasdaq on December 31, 2014.
(2) After taking into account a discount for the "lock-up" determined in accordance with GAAP.

During the three months ended December 31, 2014, the Company made investments in two new portfolio companies. In October 2014, the Company invested $15.0 million in Bird Electric, a Texas-based utility service provider, which serves the oil and gas and regulated electricity distribution industries and provides storm relief services primarily across the south and southeastern United States. In December 2014, the Company invested $20.0 million in A.S.V., Inc., a manufacturer of skid steer loaders and compact track loaders, which serve the construction and building industries.

During the three months ended December 31, 2014, in addition to the Virgin America transaction discussed above, the Company fully realized investments in two portfolio companies. In November 2014, the Company sold its $2.0 million investment in Ikaria Acquisition, Inc. at a price of 101.5% of par. In December 2014, the Company's $12.0 million investment in CT Technologies Intermediate Holdings, Inc. was prepaid at par plus a prepayment premium of 2%.

CM Finance Inc and subsidiaries
Consolidated Schedule of Investments
(Unaudited)
December 31, 2014
Investments(1) Industry Interest
Rate
Base Floor
Rate
Maturity
Date
Principal
Amount/
Shares(2)
Amortized
Cost
Fair Value
Non-Controlled/Non-Affiliates
Senior Secured First Lien Term Loans
A.S.V., Inc.(3) Construction & Building 1M L + 9.50%(4) 1.00% 12/19/2019 $ 20,000,000 $ 19,602,033 $ 19,600,000
AAR Intermediate Holdings, LLC Oilfield Services 1M L + 12.00%(4) 1.00% 3/30/2019 19,257,426 17,775,430 17,715,783
AM General, LLC Automobiles and Components 3M L + 9.00%(4) 1.25% 3/22/2018 9,822,222 9,713,552 9,036,445
American Gaming Systems, Inc. Entertainment and Leisure 3M L + 8.25%(4) 1.00% 12/21/2020 14,850,000 14,470,213 14,701,500
Butler Burgher Group LLC(5) Services 1M L + 13.25%(4) 0.25% 6/30/2017 8,583,333 8,450,592 8,466,442
Capital Petroleum Group Retail 11.00% cash, 3.00% PIK(2)(4)(6) -- 9/30/2019 14,370,779 13,983,479 14,370,779
Crestwood Holdings, LLC Pipelines 3M L + 6.00%(4) 1.00% 6/19/2019 9,747,179 9,711,070 9,259,820
JAC Holdings Corp. Automobiles and Components 11.50%(4) -- 10/1/2019 7,750,000 7,813,821 7,827,500
New Standard Energy Texas LLC(7) Oil and Gas 7.00% cash, 6.00% PIK(2)(4)(8) -- 11/28/2016 6,106,218 6,092,484 5,495,596
PR Wireless, Inc. Telecommunications 3M L + 9.00%(4) 1.00% 6/27/2020 16,915,000 15,318,212 15,392,650
U.S. Well Services, LLC(9) Oilfield Services 1M L + 11.50% 0.50% 5/2/2019 9,643,520 9,348,487 9,450,649
YRC Worldwide, Inc.(10) Trucking and Leasing 3M L + 7.00%(4) 1.00% 1/1/2020 14,850,000 14,727,671 14,701,500
Total Senior Secured First Lien Term Loans 151,895,677 147,007,044 146,018,664
Senior Secured Second Lien Term Loans
AP NMT Acquisition BV(10) Media 3M L + 9.00%(4) 1.00% 8/13/2022 20,000,000 18,719,033 19,200,000
Bennu Oil & Gas, LLC Oil and Gas 3M L + 7.50%(4) 1.25% 11/1/2018 11,852,415 11,800,601 9,007,835
Bird Electric Utilities 3M L + 12.00%(4) -- 10/9/2020 15,000,000 14,707,730 14,700,000
Caelus Energy Alaska 03 LLC Oil and Gas 3M L + 7.50%(4) 1.25% 4/15/2020 14,000,000 13,740,382 12,740,000
North American Lifting Holdings, Inc. Industrial 3M L + 9.00%(4) 1.00% 11/27/2021 16,200,000 15,158,426 15,552,000
RCHP, Inc. Healthcare-Products/Services 3M L + 9.50%(4) 1.00% 10/23/2019 15,000,000 14,795,803 14,887,500
Road Infrastructure Investment, LLC Construction & Building 3M L + 6.75%(4) 1.00% 9/30/2021 5,000,000 4,977,591 4,625,000
Telecommunications Management, LLC Telecommunications 3M L + 8.00%(4) 1.00% 10/30/2020 11,539,815 11,469,261 11,193,620
Telular Corp. Telecommunications 3M L + 8.00%(4) 1.25% 6/24/2020 7,500,000 7,412,530 7,470,000
TNS, Inc. Telecommunications 3M L + 8.00%(4) 1.00% 8/14/2020 17,112,500 17,117,987 17,026,938
Trident USA Health Services, Inc. Healthcare-Products/Services 3M L + 9.00%(4) 1.25% 7/31/2020 20,000,000 19,952,320 19,700,000
Total Senior Secured Second Lien Term Loans 153,204,730 149,851,664 146,102,893
Equity, Warrants and Other Investments
AAR Intermediate Holdings, LLC (Warrants)(11) Oilfield Services 9/30/2024 1,251,058 1,251,058 1,251,058
Endeavour International Holding B.V., $3.01 strike (Warrants)(10)(11) Oil and Gas 11/30/2017 160,000 160,000 1
PR Wireless, Inc., $0.01 strike (Warrants)(11) Telecommunications 6/24/2024 201 1,374,009 254,766
Virgin America, Inc. (Common Stock)(10)(11)(12) Airlines 570,917 11,940,458 22,516,967
Total Equity, Warrants and Other Investments 1,982,176 14,725,525 24,022,792
Total Non-Controlled/Non-Affiliates $ 307,082,583 $ 311,584,233 $ 316,144,349
CM Finance Inc and subsidiaries
Consolidated Schedule of Investments (continued)
(Unaudited)
December 31, 2014
(1) All investments are in non-controlled and non-affiliated issuers. All investments are valued in good faith by the investment advisor and approved by the board of directors.
(2) Principal amount includes capitalized PIK interest and is net of repayments and unfunded commitments.
(3) $12,000,000 held by the Company indirectly through a wholly-owned subsidiary, CM Finance SPV, Ltd. and pledged as collateral for the Total Return Swaps.
(4) Held by the Company indirectly through CM Finance SPV, Ltd. and pledged as collateral for the Total Return Swaps.
(5) Does not include $250,000 of unfunded commitment.
(6) Previously classified as Senior Secured Notes.
(7) $4,636,318 held by the Company indirectly through CM Finance SPV, Ltd. and pledged as collateral for the Total Return Swaps.
(8) In addition to interest, the borrower pays an overriding royalty interest of 1.25% of gross sales proceeds, subject to certain maximum amounts.
(9) Does not include $5,000,000 of unfunded commitment.
(10) The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 16.2% of assets.
(11) Security is non-income producing.
(12) The Company is subject to a six month "lock-up" that expires on May 13, 2015 on the shares.
1M L - 1 month LIBOR (0.17% as of December 31, 2014)
3M L - 3 month LIBOR (0.26% as of December 31, 2014)
PIK - Payment-In-Kind

Portfolio Composition Tables (Unaudited)

The composition of the Company's investments as of December 31, 2014, as a percentage of total portfolio at amortized cost and fair value, are as follows:

Investments at
Amortized Cost
Percentage Investments at
Fair Value
Percentage
Senior Secured First Lien Term Loans $147,007,044 47.18% $146,018,664 46.19%
Senior Secured Second Lien Term Loans 149,851,664 48.09% 146,102,893 46.21%
Equity, Warrants and Other Investments 14,725,525 4.73% 24,022,792 7.60%
Total $311,584,233 100.00% $316,144,349 100.00%

The following table shows the portfolio by industry grouping at fair value at December 31, 2014:

Investments at
Fair Value
Percentage
Telecommunications $51,337,974 16.24%
Healthcare-Products/Services 34,587,500 10.94%
Oilfield Services 28,417,490 8.99%
Oil and Gas 27,243,432 8.62%
Construction & Building 24,225,000 7.66%
Airlines 22,516,967 7.12%
Media 19,200,000 6.07%
Automobiles and Components 16,863,945 5.33%
Industrial 15,552,000 4.92%
Entertainment and Leisure 14,701,500 4.65%
Trucking and Leasing 14,701,500 4.65%
Utilities 14,700,000 4.65%
Retail 14,370,779 4.55%
Pipelines 9,259,820 2.93%
Services 8,466,442 2.68%
Total $316,144,349 100.00%

About CM Finance Inc

The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50 million and earnings before interest, taxes, depreciation and amortization of at least $15 million. The Company's investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com.

Forward-Looking Statements

Statements included herein may contain "forward-looking statements," which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release.

CONTACT: CM Finance Inc Investor Relations Email: investorrelations@cmfn-inc.com Phone: 212-257-5199

Source:CM Finance