TMCnet News
OFS Capital Corporation Announces Third Quarter 2019 Financial ResultsOFS Capital Corporation (NASDAQ:OFS) ("OFS Capital," the "Company," "we," "us," or "our") today announced its financial results for the quarter ended September 30, 2019. FINANCIAL HIGHLIGHTS
"Our net investment income again exceeded our distribution," said Bilal Rashid, OFS Capital's Chairman and Chief Executive Officer. "We are pleased to declare our 28th consecutive quarterly distribution of $0.34 per share since our IPO in late 2012. Over the last five years, our total net investment income has exceeded our total regular distribution. We also remain focused on capital preservation. Our $2.2 billion platform has been in existence since 1994 and navigated multiple credit cycles. As a result, we believe we are well positioned for the future."
PORTFOLIO AND INVESTMENT ACTIVITIES During the third quarter of 2019, OFS Capital closed $25.5 million of senior secured debt investments in four new portfolio companies. In addition, we made $13.4 million of new senior secured debt investments in existing portfolio companies and a $2.4 million investment in a new structured finance note. The total fair value of OFS Capital's investment portfolio was $502.2 million at September 30, 2019, which was equal to approximately 96% of amortized cost. As of September 30, 2019, the fair value of OFS Capital's debt investment portfolio totaled $437.9 million in 67 portfolio companies, of which 90% and 10% were senior secured loans and subordinated loans, respectively. As of September 30, 2019, we also held approximately $42.0 million in equity investments, at fair value, in 14 portfolio companies in which we also held debt investments, as well as six portfolio companies in which we solely held an equity investment. As of September 30, 2019, our investment portfolio also included four investments in structured finance notes with a fair value of $22.2 million. We had unfunded commitments of $4.7 million to four portfolio companies at September 30, 2019. As of September 30, 2019, floating rate loans as a percentage of fair value comprised 90% of OFS Capital's debt investment portfolio, with the remaining 10% in fixed rate loans. RESULTS OF OPERATIONS Income Investment Income Interest income increased by $2.8 million for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, primarily due to a $3.2 million increase caused by an approximately $104 million increase in the average outstanding performing loan balance offset, in part, by a $0.4 million decrease resulting from a 33 basis point decrease in the recurring earned yield on our portfolio. We recognized fee income of $0.3 million for the three months ended September 30, 2019, primarily due to $0.2 million of prepayment fees and $0.1 million of syndication fees resulting from the $17.0 million in loan originations during the period in which OFS Capital Management, LLC sourced, structured, and arranged the lending group, and for which we were additionally compensated. Expenses Interest expense Interest expense for the three months ended September 30, 2019 increased $2.1 over the corresponding period in the prior year primarily due to the issuance of $48.5 million in unsecured notes in October 2018, borrowings under the BNP credit facility during the third quarter of 2019, as well as an increase in the average dollar amount of borrowings under our senior secured revolving credit facility with Pacific Western Bank. Management fee Management fee expense for the three months ended September 30, 2019 increased $0.5 million over the corresponding period in the prior year due to an increase in our average total assets, resulting primarily from the deployment of the $98.5 million from the issuance of unsecured notes during April and October 2018 and the deployment of $46.7 million from the BNP credit facility. Incentive fee Incentive fee expense remained stable for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 as net investment income did not significantly change compared to the corresponding period. Administration fee Administration fee expense for the three months ended September 30, 2019 increased $0.1 million over the corresponding period in the prior year primarily due to an increase in our allocable portion of OFS Services's overhead. Net Gain (Loss) on Investments We recognized net losses of $4.0 million on senior secured debt during the three months ended September 30, 2019, primarily as a result of unrealized depreciation of $4.1 million on Constellis Holdings, LLC and $0.8 million on MAI Holdings, Inc., offset by unrealized appreciation of $0.6 million on TRS Services, LLC. We recognized net losses of $0.9 million on subordinated debt during the three months ended September 30, 2019, primarily as a result of unrealized depreciation of $0.9 million on Online Tech Stores, LLC. We recognized net gains of $2.4 million on preferred equity investments for the three months ended September 30, 2019, primarily as a result of unrealized appreciation of $2.9 million on TRS Services, LLC Class A units, offset by unrealized depreciation of $0.5 million on Contract Datascan Series A units. We recognized net gains of $0.8 million on common equity and warrant investments for the three months ended September 30, 2019, primarily as a result of unrealized appreciation of $1.3 million on Pfanstiehl Holdings, Inc. and $0.9 million on Professional Pipe Holdings, LLC, offset by unrealized depreciation of $1.5 million on MTE Holdings Corporation. We recognized unrealized depreciation of $1.4 million on structured finance notes for the three months ended September 30, 2019, primarily as a result of unrealized depreciation due to net negative impact of mark-to-market adjustments in the third quarter. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2019, we had $8.0 million in cash, which includes cash of $4.0 million held by our wholly owned small business investment company OFS SBIC I, LP ("SBIC I LP"). Our use of cash held by SBIC I LP is restricted by SBA regulation, including limitations on the amount of cash SBIC I LP can distribute to OFS Capital as parent company. As of September 30, 2019, we had $29.2 million available for additional borrowings under our senior secured revolving credit facility with Pacific Western Bank, as well as an unused commitment of $103.4 million under our BNP revolving credit facility. RECENT DEVELOPMENTS Registered unsecured bond offering In October and November 2019, we closed the public offering of $54.3 million in aggregate principal amount of 5.95% notes due 2026 (the "Unsecured Notes Due October 2026"), which included a partial exercise of the underwriters overallotment option. The total net proceeds to us from the Unsecured Notes Due October 2026, after deducting underwriting discounts of approximately $1.7 million and estimated offering expenses of $0.3 million, were approximately $52.3 million. The Unsecured Notes Due October 2026 will mature on October 31, 2026 and bear an effective interest rate, including amortization of deferred debt issuance costs, of 6.48%. Because the Unsecured Notes Due October 2026 are not secured by any of our assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility. The Unsecured Notes Due October 2026 may be redeemed in whole or in part at any time or from time to time at our option on or after October 31, 2021 at the redemption price of 100% of the aggregate principal amount thereof plus accrued and unpaid interest. The indenture governing the Unsecured Notes Due October 2026 contain covenants substantially identical to the Unsecured Notes. CONFERENCE CALL OFS Capital will host a conference call to discuss these results on Friday, November 8, 2019, at 10:00 AM Eastern Time. Interested parties may participate in the call via the following: INTERNET: Go to www.ofscapital.com at least 15 minutes prior to the start time of the call to register, download, and install any necessary audio software. A replay will be available for 90 days on OFS Capital's website at www.ofscapital.com. TELEPHONE: Dial (877) 510-7674 (Domestic) or (412) 902-4139 (International) approximately 15 minutes prior to the call. A telephone replay of the conference call will be available through November 18, 2019 at 9:00 AM Eastern Time and may be accessed by calling (877) 344-7529 (Domestic) or (412) 317-0088 (International) and utilizing conference ID #10136690. For more detailed discussion of the financial and other information included in this press release, please refer to OFS Capital's Form 10-Q for the third quarter ended September 30, 2019, which we expect to file with the Securities and Exchange Commission later today.
ABOUT OFS CAPITAL The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company. The Company's investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments. The Company invests primarily in privately held middle-market companies in the United States, including lower-middle-market companies, targeting investments of $3 to $20 million in companies with annual EBITDA between $3 million and $50 million. The Company offers flexible solutions through a variety of asset classes including senior secured loans, which includes first-lien, second-lien and unitranche loans, as well as subordinated loans and, to a lesser extent, warrants and other equity securities. The Company's investment activities are managed by OFS Capital Management, LLC, an investment adviser registered under the Investment Advisers Act of 19401, as amended, and headquartered in Chicago, Illinois, with additional offices in New York and Los Angeles. FORWARD-LOOKING STATEMENTS Statements in this press release regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: OFS Capital's results of operations, including net investment income, net asset value and net investment gains and losses and the factors that may affect such results; the belief that the Company is well positioned for the future when there can be no assurance of future results; and other factors may constitute forward-looking statements for purposes of the safe harbor protection under applicable securities laws. Forward-looking statements can be identified by terminology such as "anticipate," "believe," "could," "could increase the likelihood," "estimate," "expect," "intend," "is planned," "may," "should," "will," "will enable," "would be expected," "look forward," "may provide," "would" or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including those risks, uncertainties and factors referred to in OFS Capital's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission under the section "Risk Factors," as well as other documents that may be filed by OFS Capital from time to time with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. OFS Capital is providing the information in this press release as of this date and assumes no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191108005117/en/ |