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Fifth Street Senior Floating Rate Corp. Announces Quarter Ended December 31, 2014 Financial Results

GREENWICH, CT, Feb. 9, 2015 (GLOBE NEWSWIRE) -- Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or "we") announces its financial results for the first fiscal quarter ended December 31, 2014.

First Fiscal Quarter 2015 Financial Highlights

  • Net investment income for the quarter ended December 31, 2014 was $10.4 million or $0.35 per share;
  • Net asset value per share was $12.53 as of December 31, 2014;
  • Weighted average cash yield on debt investments increased to 7.1% at December 31, 2014, as compared to 6.6% at December 31, 2013;
  • We closed $466.1 million of investments during the quarter ended December 31, 2014; and
  • In addition to the already declared $0.30 per share distribution payable on April 15, 2015, our Board of Directors has decided to move from quarterly to monthly distributions and declared distributions of $0.10 per share from May through August 2015.

Portfolio and Investment Activity

Our Board of Directors determined the fair value of our portfolio at December 31, 2014 to be $595.9 million, as compared to $300.0 million at September 30, 2014. Total assets increased to $635.9 million at December 31, 2014, as compared to $412.5 million at September 30, 2014.

During the quarter ended December 31, 2014, we closed $466.1 million of investments in 23 new and two existing portfolio companies, and funded $443.3 million across new and existing portfolio companies. We also received $142.4 million in connection with full or partial payoffs and sales of 22 of our debt investments.

At December 31, 2014, our portfolio consisted of investments in 57 companies, and 99.9% of our portfolio consisted of senior secured debt investments that bore interest at floating rates. The portfolio remained diversified and our average portfolio company debt investment size at fair value was $10.4 million at December 31, 2014. The average portfolio company EBITDA was $58.6 million as of December 31, 2014.

Our weighted average cash yield on debt investments was 7.1% at December 31, 2014, which increased from 6.6% at December 31, 2013.

"During the December quarter, FSFR deployed the remaining capital raised during our August 2014 follow-on equity offering and utilized leverage provided by our Natixis credit facility to close $466.1 million in originations, which surpassed our expectations," stated Ivelin M. Dimitrov, Chief Executive Officer, adding, "With the additional leverage obtained through our new Citibank credit facility, we look forward to continue growing FSFR by investing in senior secured floating rate loans with strong risk-adjusted returns."

Results of Operations

Total investment income for the quarter ended December 31, 2014 was $15.9 million, consisting of $7.9 million of interest income and $8.0 million of fee income from portfolio investments. For the quarter ended December 31, 2013, total investment income was $2.3 million, which consisted of $1.3 million of interest income and $1.0 million of fee income from portfolio investments.

Expenses for the quarters ended December 31, 2014 and December 31, 2013 were $5.4 million and $0.8 million, respectively.

Liquidity and Capital Resources

As of December 31, 2014, we had $13.3 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $595.9 million, receivables from unsettled transactions of $22.2 million, distribution payable of $8.8 million, payables from unsettled transactions of $65.7 million, $184.8 million borrowings outstanding under our credit facility and unfunded commitments of $40.1 million.

As of September 30, 2014, we had $109.6 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $300.0 million, distribution payable of $8.8 million, payables from unsettled transactions of $27.9 million and unfunded commitments of $19.6 million.

Dividend Policy

Dividends are paid primarily from distributable (taxable) income. Our Board of Directors determines dividends based on estimates of distributable (taxable) income, which differ from book income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation and depreciation on investments.

Our amended dividend reinvestment plan ("DRIP") provides for reinvestment of dividends, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash dividend, our stockholders whose shares are registered in their name and who have not "opted out" of our DRIP will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving cash dividends. We provide up to a 5% discount on newly-issued shares purchased through the DRIP (provided that shares will not be issued at less than net asset value per share). If you are a stockholder and your shares of our common stock are held through a brokerage firm or other financial intermediary and you wish to participate in the DRIP, please contact your broker or other financial intermediary.

Portfolio Asset Quality

We utilize the following investment ranking system for our investment portfolio:

  • Investment Ranking 1 is used for investments that are performing above expectations and/or capital gains are expected.
  • Investment Ranking 2 is used for investments that are performing substantially within our expectations, and whose risks remain materially consistent with the potential risks at the time of the original or restructured investment. All new investments are initially ranked 2.
  • Investment Ranking 3 is used for investments that are performing below our expectations and for which risk has materially increased since the original or restructured investment. The portfolio company may be out of compliance with debt covenants and may require closer monitoring.
  • Investment Ranking 4 is used for investments that are performing substantially below our expectations and for which risk has increased substantially since the original or restructured investment. Investments with a ranking of 4 are those for which some loss of principal is expected and are generally those on which we are not accruing cash interest.

At December 31, 2014 and September 30, 2014, the distribution of our investments on the 1 to 4 investment ranking scale at fair value was as follows:

December 31, 2014 September 30, 2014
Fair Value % of Portfolio Leverage Ratio Fair Value % of Portfolio Leverage Ratio
1
2 $595,854,254 100.00% 4.66 $300,001,397 100.00% 4.48
3
4
Total $595,854,254 100.00% 4.66 $300,001,397 100.00% 4.48

Recent Developments

On January 15, 2015, we and our wholly-owned, special purpose financing subsidiary, FS Senior Funding II LLC, entered into a five-year $175 million senior secured revolving credit facility with Citibank, N.A. (the "Citibank Facility"). The Citibank Facility has a three-year reinvestment period and bears interest at a rate of LIBOR plus 2.00% per annum for borrowings used to acquire broadly syndicated loans and LIBOR plus 2.25% per annum for other loans.

On February 4, 2015, our Board of Directors declared the following monthly dividends:

  • $0.10 per share, payable on May 15, 2015 to stockholders of record on May 1, 2015;
  • $0.10 per share, payable on June 15, 2015 to stockholders of record on June 1, 2015;
  • $0.10 per share, payable on July 15, 2015 to stockholders of record on July 1, 2015; and
  • $0.10 per share, payable on August 17, 2015 to stockholders of record on August 3, 2015.

Fifth Street Senior Floating Rate Corp.
Consolidated Statements of Assets and Liabilities
(unaudited)
December 31, September 30,
2014 2014
ASSETS
Investments at fair value:
Non-control/Non-affiliate investments (cost December 31, 2014: $600,239,110; cost September 30, 2014: $299,997,247) $595,854,254 $300,001,397
Total investments at fair value (cost December 31, 2014: $600,239,110; cost September 30, 2014: $299,997,247) 595,854,254 300,001,397
Cash and cash equivalents 10,175,926 107,429,760
Restricted cash 3,120,810 2,127,405
Interest and fees receivable 1,733,979 1,120,010
Due from portfolio companies 149,903 200,840
Receivables from unsettled transactions 22,245,540
Deferred financing costs 2,565,169 1,625,932
Other assets 32,136
Total assets $635,877,717 $412,505,344
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities $2,356,861 $1,213,683
Base management fee payable 1,156,911 475,437
Part I incentive fee payable 2,592,595 926,180
Part II incentive fee payable 54,826
Due to FSC CT 378,881 239,617
Interest payable 645,988 205,646
Distribution payable 8,840,030 8,840,030
Payables from unsettled transactions 65,735,500 27,863,000
Credit facility payable 184,847,646
Total liabilities 266,554,412 39,818,419
Commitments and contingencies
Net assets:
Common stock, $0.01 par value, 150,000,000 shares authorized 29,466,768 shares issued and outstanding at December 31, 2014 and September 30, 2014 294,668 294,668
Additional paid-in-capital 374,101,816 374,101,816
Net unrealized appreciation (depreciation) on investments (4,384,856) 4,150
Net realized loss on investments (559,792)
Accumulated overdistributed net investment income (128,531) (1,713,709)
Total net assets (equivalent to $12.53 and $12.65 per common share at December 31, 2014 and September 30, 2014, respectively) 369,323,305 372,686,925
Total liabilities and net assets $635,877,717 $412,505,344

Fifth Street Senior Floating Rate Corp.
Consolidated Statements of Operations
(unaudited)
Three months
ended
December 31, 2014
Three months
ended
December 31, 2013
Interest income:
Non-control/Non-affiliate investments $7,883,784 $1,303,079
Interest on cash and cash equivalents 3,935 2,020
Total interest income 7,887,719 1,305,099
Fee income:
Non-control/Non-affiliate investments 7,972,646 1,001,244
Total fee income 7,972,646 1,001,244
Total investment income 15,860,365 2,306,343
Expenses:
Base management fee 1,156,911 234,549
Part I incentive fee 2,592,595
Part II incentive fee (54,826)
Professional fees 309,786 121,532
Board of Directors fees 98,250 54,250
Interest expense 886,155 141,033
Administrator expense 246,135 107,259
General and administrative expenses 200,151 144,247
Total expenses 5,435,157 802,870
Net investment income 10,425,208 1,503,473
Unrealized depreciation on investments:
Non-control/Non-affiliate investments (4,389,006) (294,439)
Net unrealized depreciation on investments (4,389,006) (294,439)
Realized gain (loss) on investments:
Non-control/Non-affiliate investments (559,792) 22,625
Net realized gain (loss) on investments (559,792) 22,625
Net increase in net assets resulting from operations $5,476,410 $1,231,659
Net investment income per common share — basic and diluted $0.35 $0.23
Earnings per common share — basic and diluted $0.19 $0.18
Weighted average common shares outstanding — basic and diluted 29,466,768 6,666,768
Distributions per common share $0.30 $0.21

About Fifth Street Senior Floating Rate Corp.

Fifth Street Senior Floating Rate Corp. is a specialty finance company that provides financing solutions in the form of floating rate senior secured loans to mid-sized companies, primarily in connection with investments by private equity sponsors. FSFR's investment objective is to maximize its portfolio's total return by generating current income from its debt investments while seeking to preserve its capital. The company has elected to be regulated as a business development company and is externally managed by a subsidiary of Fifth Street Asset Management Inc. (NASDAQ:FSAM), a growing credit-focused asset manager with over $6 billion in assets under management across multiple public and private vehicles. With a track record of more than 16 years, Fifth Street's nationally recognized platform has the ability to hold loans up to $250 million and structure and syndicate transactions up to $500 million. Fifth Street received the 2014 ACG New York Champion's Award for "Senior Lender Firm of the Year" and was named both 2013 "Lender Firm of the Year" by The M&A Advisor and "Lender of the Year" by Mergers & Acquisitions. FSFR's website can be found at fsfr.fifthstreetfinance.com.

Forward-Looking Statements

This press release may contain certain forward-looking statements, including statements with regard to the future performance of the company. Words such as "believes," "expects," "estimates," "projects," "anticipates," and "future" or similar expressions are intended to identify 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 to differ materially from those projected in these forward-looking statements, and these factors are identified from time to time in the company's filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: Investor Contact: Robyn Friedman, Vice President, Investor Relations (203) 681-3720 ir@fifthstreetfinance.com Media Contact: Nick Rust Prosek Partners (212) 279-3115 ext. 252 pro-fifthstreet@prosek.com

Source:Fifth Street Senior Floating Rate Corp.