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Fifth Street Senior Floating Rate Corp. Announces Quarter Ended March 31, 2015 Financial Results

GREENWICH, CT, May 11, 2015 (GLOBE NEWSWIRE) -- Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or "we") announces its financial results for the second fiscal quarter ended March 31, 2015.

Second Fiscal Quarter 2015 Financial Highlights

  • Net investment income for the quarter ended March 31, 2015 was $6.7 million or $0.23 per share;
  • Net asset value per share was $12.46 as of March 31, 2015;
  • Weighted average cash yield on debt investments increased to 7.4% at March 31, 2015, as compared to 6.7% at March 31, 2014;
  • We closed $109.9 million of investments during the quarter ended March 31, 2015; and
  • 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 March 31, 2015 to be $583.6 million, as compared to $300.0 million at September 30, 2014. Total assets increased to $673.9 million at March 31, 2015, as compared to $412.5 million at September 30, 2014.

During the quarter ended March 31, 2015, we closed $109.9 million of investments in eight new and one existing portfolio companies, and funded $116.5 million across new and existing portfolio companies. We also received $128.7 million in connection with full or partial payoffs and sales of 20 of our debt investments.

At March 31, 2015, our portfolio consisted of investments in 59 companies, and 99.9% of our portfolio consisted of senior secured debt investments that bore interest at floating rates, at cost and fair value. The portfolio remained diversified and our average portfolio company debt investment size at fair value was $9.9 million at March 31, 2015. The average portfolio company EBITDA was $64.9 million as of March 31, 2015.

Our weighted average cash yield on debt investments was 7.4% at March 31, 2015, which increased from 6.7% at March 31, 2014.

"During the March quarter, FSFR continued to optimize its capital structure, closing on a $175 million credit facility with Citibank. This facility provides us with the necessary capital to continue investing in strong risk-adjusted senior secured loans and also allows us to reach our targeted leverage range," stated Ivelin M. Dimitrov, Chief Executive Officer, "Additionally, since the end of the March quarter, our joint venture with the Glick Family entered into a $200 million credit facility with Credit Suisse, which the FSFR Glick JV has already utilized to invest in an initial portfolio of senior secured loans. We believe the joint venture should generate a low-teens return on FSFR's investment and be accretive to earnings as we continue to ramp it over the upcoming quarters."

Results of Operations

Total investment income for the quarter ended March 31, 2015 was $11.9 million, consisting of $9.6 million of interest income and $2.3 million of fee income from portfolio investments. For the quarter ended March 31, 2014, total investment income was $3.4 million, which consisted of $2.6 million of interest income and $0.8 million of fee income from portfolio investments.

Total expenses for the quarters ended March 31, 2015 and March 31, 2014 were $5.2 million and $1.6 million, respectively.

Liquidity and Capital Resources

As of March 31, 2015, we had $78.0 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $583.6 million, receivables from unsettled transactions of $5.9 million, distribution payable of $8.8 million, payables from unsettled transactions of $12.3 million and $280.1 million borrowings outstanding under our credit facilities.

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 and payables from unsettled transactions of $27.9 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 would 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 March 31, 2015 and September 30, 2014, the distribution of our investments on the 1 to 4 investment ranking scale at fair value was as follows:

March 31, 2015 September 30, 2014
Investment Ranking Fair Value % of Portfolio Leverage Ratio Fair Value % of Portfolio Leverage Ratio
1
2 $ 583,559,421 100.00% 4.48 $ 300,001,397 100.00% 4.48
3
4
Total $ 583,559,421 100.00% 4.48 $ 300,001,397 100.00% 4.48

Recent Developments

In April 2015, we invested $53.4 million in FSFR Glick JV LLC ("FSFR Glick JV") to facilitate the acquisition of $94.4 million in principal amount of senior secured loans. FSFR Glick JV has drawn $34.4 million under its $200.0 million revolving credit facility with Credit Suisse Securities (USA) LLC. These transactions were in connection with our agreement in November 2014 with entities controlled by members of the Glick Family ("GF Funding") to provide $100.0 million of subordinated notes and equity to the FSFR Glick JV, with us providing $87.5 million and GF Funding providing $12.5 million. The FSFR Glick JV invests in middle market and other corporate debt securities. In future reporting periods, our debt and equity investment in the FSFR Glick JV will be accounted for as a control investment within the Consolidated Schedule of Investments.

Fifth Street Senior Floating Rate Corp.
Consolidated Statements of Assets and Liabilities
(unaudited)
March 31,
2015
September 30,
2014
ASSETS
Investments at fair value:
Non-control/Non-affiliate investments (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247) $ 583,559,421 $ 300,001,397
Total investments at fair value (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247) 583,559,421 300,001,397
Cash and cash equivalents 72,308,303 107,429,760
Restricted cash 5,680,208 2,127,405
Interest and fees receivable 1,350,840 1,120,010
Due from portfolio companies 463,848 200,840
Receivables from unsettled transactions 5,877,625
Deferred financing costs 4,556,252 1,625,932
Other assets 144,268
Total assets $ 673,940,765 $ 412,505,344
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities $ 1,980,680 $ 1,213,683
Base management fee payable 1,523,159 475,437
Part I incentive fee payable 1,161,808 926,180
Part II incentive fee payable 54,826
Due to FSC CT 213,019 239,617
Interest payable 813,942 205,646
Distribution payable 8,840,030 8,840,030
Payables from unsettled transactions 12,284,000 27,863,000
Credit facilities payable 280,097,646
Total liabilities 306,914,284 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 March 31, 2015 and September 30, 2014 294,668 294,668
Additional paid-in-capital 374,101,816 374,101,816
Net unrealized appreciation (depreciation) on investments (3,547,065) 4,150
Net realized loss on investments (1,556,035)
Accumulated overdistributed net investment income (2,266,903) (1,713,709)
Total net assets (equivalent to $12.46 and $12.65 per common share at March 31, 2015 and September 30, 2014, respectively) 367,026,481 372,686,925
Total liabilities and net assets $ 673,940,765 $ 412,505,344
Fifth Street Senior Floating Rate Corp.
Consolidated Statements of Operations
(unaudited)
Three months
ended
March 31, 2015
Three months
ended
March 31, 2014
Six months
ended
March 31, 2015
Six months
ended
March 31, 2014
Interest income:
Non-control/Non-affiliate investments $ 9,621,423 $ 2,567,868 $ 17,505,207 $ 3,870,947
Interest on cash and cash equivalents 5,250 197 9,185 2,217
Total interest income 9,626,673 2,568,065 17,514,392 3,873,164
Fee income:
Non-control/Non-affiliate investments 2,265,158 837,855 10,237,804 1,839,099
Total fee income 2,265,158 837,855 10,237,804 1,839,099
Total investment income 11,891,831 3,405,920 27,752,196 5,712,263
Expenses:
Base management fee 1,523,167 407,087 2,680,078 641,636
Part I incentive fee 1,161,808 280,597 3,754,403 280,597
Part II incentive fee (54,826)
Professional fees 188,709 204,167 498,495 325,699
Board of Directors fees 86,050 43,250 184,300 97,500
Interest expense 1,705,137 434,960 2,591,292 575,993
Administrator expense 177,562 111,364 423,697 218,624
General and administrative expenses 347,740 133,781 547,891 278,029
Total expenses 5,190,173 1,615,206 10,625,330 2,418,078
Net investment income 6,701,658 1,790,714 17,126,866 3,294,185
Unrealized appreciation (depreciation) on investments:
Non-control/Non-affiliate investments 837,791 (318,940) (3,551,215) (613,379)
Net unrealized appreciation (depreciation) on investments 837,791 (318,940) (3,551,215) (613,379)
Realized gain (loss) on investments:
Non-control/Non-affiliate investments (996,243) 232,188 (1,556,035) 254,813
Net realized gain (loss) on investments (996,243) 232,188 (1,556,035) 254,813
Net increase in net assets resulting from operations $ 6,543,206 $ 1,703,962 $ 12,019,616 $ 2,935,619
Net investment income per common share — basic and diluted $ 0.23 $ 0.27 $ 0.58 $ 0.49
Earnings per common share — basic and diluted $ 0.22 $ 0.26 $ 0.41 $ 0.44
Weighted average common shares outstanding — basic and diluted 29,466,768 6,666,768 29,466,768 6,666,768
Distributions per common share $ 0.30 $ 0.23 $ 0.60 $ 0.44

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 17 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.