BOSTON, May 6, 2013 (GLOBE NEWSWIRE) -- THL Credit, Inc. (Nasdaq:TCRD) ("THL Credit" or the "Company"), a direct lender to middle market companies, today announced financial results for its fiscal first quarter ended March 31, 2013. Additionally, THL Credit announced that its Board of Directors has declared a second fiscal quarter 2013 dividend of $0.34 per share payable on June 28, 2013, to stockholders of record as of June 14, 2013. This represents an increase of $0.01 per share over the prior quarter's dividend.
|($ in millions, except per share amounts)|
|Portfolio results||As of March 31, 2013|
|Investment portfolio, at fair value||$431.1|
|Net asset value per share||$13.20|
|Weighted average yield on investments||13.7%|
| Quarter ended |
March 31, 2013
| Quarter ended |
March 31, 2012
|Total investments made, at par||$58.0||$36.7|
|Number of new portfolio companies||5||2|
|Number of portfolio companies at end of period||40||26|
|Total investment income||$14.4||$10.7|
|Net investment income||$7.4||$6.2|
|Net increase in net assets from operations||$8.6||$5.7|
|Net investment income per share||$0.28||$0.31|
"This was another solid quarter for the firm and represents marked progress year-over-year," said James K. Hunt, chief executive officer of THL Credit. "We are pleased with the five new investments we made this quarter as well as the more limited amount of prepayment activity during the quarter compared to recent quarters. Apart from regularly scheduled amortization and planned sell down of our holdings in Gold, Inc., we continued with our strategy of prudent and patient growth in the portfolio, which when coupled with increased leverage, we believe will drive earnings growth going forward. Our pipeline, particularly unsponsored transactions, remains active and we have $150 million of borrowing capacity as of March 31, 2013 under our newly upsized and extended credit facility closed in March to fund near term investment opportunities."
PORTFOLIO AND INVESTMENT ACTIVITY
In the first quarter, THL Credit closed on $58.0 million in five new investment transactions and a small follow-on investment in one existing portfolio company.
Notable activity for the quarter included:
- $12.0 million investment in the senior secured term loan of Embarcadero Technologies, Inc., a provider of database management solutions for companies and independent software developers, headquartered in San Francisco, CA;
- $20.4 million investment in the subordinated term loan of Tri-Starr Management Services, Inc., a distribution, technology and integrated third-party logistics provider, headquartered in Portsmouth, NH;
- $8.1 million investment in the second lien term loan of Connecture, Inc., a provider of web-based health insurance marketplace systems and administration technology for insurance companies, headquartered in Brookfield, WI;
- $10.0 million investment in the subordinated notes of Adirondack Park CLO Ltd., a collateralized loan obligation ("CLO") managed by GSO;
- $6.9 million investment in the subordinated notes of Sheridan Square CLO Ltd., a CLO managed by GSO; and
- $17.9 million sale of THL Credit's investment in Gold, Inc. to THL Credit Greenway Fund II LLC and outside investors as anticipated at the time of THL Credit's initial investment in December 2012.
These transactions bring the total fair value of THL Credit's investment portfolio to $431.1 million across 40 portfolio companies at the end of the first quarter. As of March 31, 2013, the weighted average yield of the debt and income-producing securities in the investment portfolio at their current cost basis was 13.7 percent. The weighted average yield on the debt investments alone at their current cost basis was 13.6 percent. As of March 31, 2013, no loans were on non-accrual status.
As of March 31, 2013, THL Credit's investment portfolio at fair value was allocated 26 percent in first lien debt, including unitranche investments, 18 percent in second lien debt, 43 percent in subordinated debt, 11 percent in income-producing securities and 2 percent in equity securities.
This compares to its portfolio as of Dec. 31, 2012, which had a fair value of $394.3 million across 34 companies allocated 26 percent in first lien debt, 18 percent in second lien debt, 47 percent in subordinated debt, 7 percent in income-producing securities and 2 percent in equity securities. The weighted average yield of the debt and income-producing securities in the investment portfolio at their cost basis as of Dec. 31, 2012, was 13.9 percent. The weighted average yield on the debt investments alone at their cost basis as of Dec. 31, 2012, was 13.7 percent.
RESULTS OF OPERATIONS
Total investment income for the three months ended March 31, 2013 and 2012 was $14.4 million and $10.7 million, respectively, and consisted of $12.7 million and $9.6 million of interest income on debt securities (which included $1.1 million and $0.8 million, respectively, of PIK interest and $0 and $0.1 million, respectively, of prepayment premiums), $1.2 million and $0.5 million of interest income on income-producing securities and $0.5 million and $0.6 million of other income, respectively, primarily related to fees from THL Credit's portfolio companies, THL Credit Greenway Fund LLC ("Greenway") and THL Credit Greenway Fund II LLC ("Greenway II").
The increase in the investment income compared to the same periods in prior years is due to the growth of THL Credit's investment portfolio.
Expenses for the three months ended March 31, 2013 and 2012 were $7.0 million and $4.6 million, respectively. Base management fees for the same periods were $1.5 million and $1.0 million; incentive fees for the same periods totaled $2.3 million and $1.4 million, which included $0.4 million and ($0.1) million of incentive fee expense (income) related to unrealized appreciation and depreciation on investments; administrator and other expenses for the same periods totaled $1.6 million and $1.5 million; and fees and expenses related to THL Credit's credit facility for the same periods totaled $1.6 million and $0.7 million, respectively.
The increase in base management fees and incentive fee expense is due to the growth in both the investment portfolio and net investment income. The increase in expenses and fees related to the credit facility is due to the level of borrowings, the increased commitment size of the revolving and term loan credit facilities and one-time amortization expenses related to deferred financing costs associated with an amendment.
Net investment income
Net investment income totaled $7.4 million and $6.2 million, or $0.28 and $0.31 per share based upon weighted average common shares outstanding, for the three months ended March 31, 2013 and 2012, respectively.
The increase in net investment income compared to the same period in the prior year is due to the growth of THL Credit's investment portfolio.
Net change in unrealized appreciation on investments
For the three months ended March 31, 2013 and 2012, THL Credit's investment portfolio had a net change in unrealized appreciation of $1.7 million and ($0.5) million, respectively. As of March 31, 2013 and Dec. 31, 2012, net unrealized appreciation on investments was $4.3 million and $2.6 million, respectively.
The net change in unrealized appreciation compared to the same period in the prior year was driven by changes in capital market conditions and in the financial performance of certain portfolio companies.
Provision for taxes on unrealized appreciation on investments
For the three months ended March 31, 2013, the provision for taxes on unrealized appreciation on investments was $0.5 million. There was no provision for taxes on unrealized appreciation on investments for the three months ended March 31, 2012.
Realized and unrealized gain (loss) on interest rate derivative
For the three months ended March 31, 2013, THL Credit's interest rate derivative agreement, which was entered into on May 10, 2012, had unrealized appreciation of $0.1 million, which was due to capital markets changes impacting interest rate swap spreads. THL Credit also recognized a realized loss related to amounts paid on the interest rate derivative of $0.1 million.
Net increase in net assets resulting from operations
Net increase in net assets resulting from operations totaled $8.6 million and $5.7 million, or $0.33 and $0.28 per share, respectively, for the three months ended March 31, 2013 and 2012, respectively.
This increase in net assets from operations is due to the continued growth in net investment income, which is a result of growing the portfolio and the net change in unrealized appreciation on investments.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2013, THL Credit had cash of $0.8 million.
THL Credit's liquidity and capital resources are derived from its revolving credit facility, term loan facility, equity raises and cash flows from operations, including investment sales and repayments, and income earned. Its primary use of funds from operations includes making investments in portfolio companies, payment of dividends to stockholders and funding operating expenses it incurs. THL Credit used, and expects to continue to use, these capital resources, together with proceeds from the turnover within the portfolio and from future public and private offerings of securities to finance its investment objectives.
On March 15, 2013, THL Credit closed an additional $50.0 million of commitments to its senior secured revolving loan and term loan credit facilities (the "Credit Facility"), which brings the aggregate size of the Credit Facility to $240.0 million of commitments. At March 31, 2013, THL Credit had $70.0 million in outstanding borrowings on its term loan and $19.9 million outstanding on its revolving credit facility with a weighted average interest rate of 4.05 percent. THL Credit borrowed $87.7 million under its revolving credit facility and increased the size of its term loan facility by $20.0 million for the three months ended March 31, 2013 and repaid $67.9 million on its revolving credit facility with proceeds from the increase in its term loan facility in March 2013, investment sales and income earned.
For the three months ended March 31, 2013, THL Credit's operating activities used cash of $34.1 million primarily in connection with the purchase of investments, and its financing activities provided cash of $39.9 million from the net proceeds received from net borrowings and used cash of $9.8 million for the payment of dividends to stockholders and financing costs related to the credit facility.
For the three months ended March 31, 2012, THL Credit's operating activities used cash of $16.1 million primarily in connection with the purchase of investments and used cash of $6.9 million for the payment of dividends to stockholders.
On April 11, 2013, THL Credit received $19.3 million in proceeds in connection with the realization of a subordinated debt investment in one of its portfolio companies, which included a prepayment premium. In addition, THL Credit received $1.2 million in dividend proceeds from its equity holdings in the portfolio company. THL Credit subsequently closed on a $15.0 million second lien investment in the portfolio company on April 19, 2013.
THL Credit will host a conference call to discuss these results and its business outlook on May 7, 2013, at 8:30 a.m. Eastern Daylight Time. The conference call will be led by James K. Hunt, chief executive officer, and Terrence W. Olson, chief operating officer and chief financial officer, and W. Hunter Stropp, co-president.
For those wishing to participate by telephone, please dial (877) 375-9141 (domestic) or (253) 237-1151 (international). Use passcode 31523302. THL Credit will also broadcast the conference call live via its website at www.thlcredit.com. Starting approximately two hours after the conclusion of the call, a replay will be available through May 14, 2013, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering passcode 31523302. The replay will also be available on the Company's website.
THL Credit's filings with the Securities and Exchange Commission, press releases, earnings releases, investor presentation and other financial information are available on its website at www.thlcredit.com.
|THL CREDIT, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES|
|March 31, 2013||December 31, 2012|
|Investments at fair value:|
|Non-controlled, non-affiliated investments (cost of $426,707,073 and $391,698,777, respectively)||$ 431,046,940||$ 394,339,072|
|Non-controlled, affiliated investments (cost of $11,355 and $10,062, respectively)||11,355||10,062|
|Total investments at fair value (cost of $426,718,428 and $391,708,839, respectively)||431,058,295||394,349,134|
|Deferred financing costs||4,803,052||3,817,044|
|Due from affiliate||657,501||420,301|
|Receivable for paydown of investment||898,674||125,000|
|Prepaid expenses and other assets||174,829||134,319|
|Total assets||$ 444,959,970||$ 406,258,494|
|Loans payable||$ 89,850,000||$ 50,000,000|
|Accrued incentive fees||3,258,933||3,277,937|
|Base management fees payable||1,523,469||1,514,422|
|Interest rate derivative||911,473||1,053,221|
|Accrued credit facility fees and interest||272,977||115,013|
|Deferred tax liability||982,436||453,558|
|Accrued administrator expenses||8,454||304,491|
|Due to affiliate||23,186||--|
|Preferred stock, par value $0.001 per share, 100,000,000 preferred shares authorized, no preferred shares issued and outstanding||--||--|
|Common stock, par value $0.001 per share, 100,000,000 common shares authorized, 26,315,202 shares issued and outstanding at March 31, 2013 and December 31, 2012|| |
|Paid-in capital in excess of par||343,722,878||343,722,878|
|Net unrealized appreciation on investments, net of provision for taxes||3,357,432||2,186,737|
|Net unrealized depreciation on interest rate derivative||(911,473)||(1,053,221)|
|Interest rate derivative periodic interest payments, net||(283,644)||(179,581)|
|Accumulated net realized gain||348,548||348,548|
|Accumulated undistributed net investment income||1,155,000||2,433,267|
|Total net assets||347,415,056||347,484,943|
|Total liabilities and net assets||$ 444,959,970||$ 406,258,494|
|Net asset value per share||$ 13.20||$ 13.20|
|THL CREDIT, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)|
|For the three months ended March 31,|
|From non-controlled, non-affiliated investments:|
|Interest income||$ 13,889,640||$ 10,150,323|
|From non-controlled, affiliated investments:|
|Total investment income||14,422,633||10,749,591|
|Base management fees||1,523,469||1,039,310|
|Credit facility interest and fees||1,094,206||452,833|
|Amortization of deferred financing costs||495,942||211,630|
|Other general and administrative expenses||235,636||177,327|
|Total operating expenses||7,016,883||4,577,603|
|Net investment income||7,405,750||6,171,988|
|Interest rate derivative periodic interest payments, net||(104,063)||—|
|Net change in unrealized appreciation on:|
|Non-controlled, non-affiliated investments||1,699,573||(465,010)|
|Non-controlled, affiliated investments||—||(632)|
|Net change in unrealized appreciation||1,699,573||(465,642)|
|Provision for taxes on unrealized appreciation||(528,878)||—|
|Net change in unrealized depreciation on interest rate derivative||141,748||—|
|Net increase in net assets resulting from operations||$ 8,614,130||$ 5,706,346|
|Net investment income per common share:|
|Basic and diluted||$ 0.28||$ 0.31|
|Net increase in net assets resulting from operations per common share:|
|Basic and diluted||$ 0.33||$ 0.28|
|Weighted average shares of common stock outstanding:|
|Basic and diluted||26,315,202||20,220,200|
ABOUT THL CREDIT
THL Credit is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940. THL Credit's investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies.
THL Credit is headquartered in Boston, with additional investment teams in Los Angeles, New York and Houston. THL Credit is a direct lender to middle market companies and invests in subordinated, or mezzanine, debt and second lien secured debt, which may include an associated equity component such as warrants, preferred stock or other similar securities. THL Credit also selectively invests in first lien secured loans that generally have structures with higher interest rates, which include unitranche investments, or loan structures that combine characteristics of traditional first lien senior secured loans as well as second lien and subordinated loans. In certain instances THL Credit will also make direct equity investments, including equity investments into or through funds, and may also selectively invest in more broadly syndicated first lien secured loans from time to time. THL Credit's investment activities are managed by THL Credit Advisors LLC, an investment adviser registered under the Investment Advisers Act of 1940.
Statements made in this press release may constitute forward-looking statements. Such statements reflect various assumptions by THL Credit concerning anticipated results and are not guarantees of future performance. The accuracy of such statements involves known and unknown risks, uncertainties and other factors that, in some ways, are beyond management's control, including the factors described from time to time in filings by THL Credit with the Securities and Exchange Commission. THL Credit undertakes no duty to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this press release.
CONTACT: Investor Contact: THL Credit, Inc. Terrence W. Olson, COO & CFO 800-450-4424 Media Contact: Sard Verbinnen & Co Matt Benson 212-687-8080
Source:THL Credit, Inc.