Capitala Finance Corp. (Nasdaq:CPTA) ("Capitala", the “Company”,
“we”, “us”, or “our”) today announced its financial results for the
first quarter of 2021.
First Quarter Highlights
- Net asset value per share of $44.74 at March 31, 2021, an
increase of 11.3% from December 31, 2020
- Repaid $20.0 million of SBA-guaranteed debentures
- Total debt-to-equity of 1.62:1 at March 31, 2021, compared to
1.98:1 at December 31, 2020, regulatory debt-to-equity 1.03:1 at
March 31, 2021
Management Commentary
In describing the Company’s first quarter activities, Joseph B.
Alala, III, Chairman and Chief Executive Officer, stated, “We are
pleased to report a significant increase in NAV per share, driven
by improved performance of our portfolio of investments and some
recent realized exits. Current liquidity, coupled with recent and
anticipated repayments, will allow us to continue to reduce our
total debt-to-equity ratio, currently at 1.6x as of March 31, 2021.
Subsequent to quarter end, we announced a strategic partnership
whereby Mount Logan Management, LLC will serve as investment
advisor for the Company, subject to shareholder approval. We think
this is the optimal time for the Company to attach to a larger
credit platform as Capitala continues to focus on the management of
its various private funds focused on equity returns with
yields.”
First Quarter 2021 Financial Results
Total investment income was $4.9 million for the first quarter
of 2021, compared to $7.1 million in the first quarter of 2020. The
decline was attributable to lower interest and fee income,
resulting primarily from a decrease in our debt
portfolio.
Total expenses for the first quarter of 2021 were $5.7 million,
compared to $7.1 million for the first quarter of 2020. Interest
and financing expenses declined by $0.8 million, base management
fees declined by $0.4 million, and general and administrative
expenses declined by $0.2 million.
Net realized losses totaled $14.0 million, or $5.17 per share,
for the first quarter of 2021, compared to net realized gains of
$1.0 million, for the same period in 2020. During the first quarter
of 2021, the Company realized a $14.2 million loss on its
investment in Currency Capital, LLC; however, the loss did not have
an impact on net asset value as the realized amount was in line
with our previous valuation.
Net unrealized appreciation totaled $27.2 million, or $10.02 per
share, for the first quarter of 2021, compared to net unrealized
depreciation of $43.4 million for the first quarter of 2020.
The net increase in net assets resulting from operations was
$12.4 million, or $4.56 per share, for the first quarter of 2021,
compared to a net decrease of $42.4 million, or $15.70 per share,
for the same period in 2020.
Investment Portfolio
As of March 31, 2021, our portfolio consisted of 35 companies
with a fair market value of $258.2 million and a cost basis of
$234.0 million. First lien debt investments represented 53.5% of
the portfolio, second lien debt investments represented 15.2% of
the portfolio, and equity/warrant investments represented 31.3% of
the portfolio, based on fair values at March 31, 2021.
At March 31, 2021, the Company had three debt investments on
non-accrual status, with a cost basis and fair market value of
$21.3 million and $16.6 million, respectively, compared to $37.5
million and $20.8 million at December 31, 2020.
Liquidity and Capital Resources
At March 31, 2021, the Company had $59.7 million in cash and
cash equivalents. In addition, the Company had SBA-guaranteed
debentures outstanding totaling $71.0 million with an annual
weighted average interest rate of 2.62%, $72.8 million of fixed
rate notes bearing an interest rate of 6.00%, and $52.1 million of
convertible notes bearing an interest rate of 5.75%. At March 31,
2021, the Company had $0 drawn and $25.0 million available under
its senior secured revolving credit facility with KeyBank, N.A.
Recent Developments
On April 1, 2021, the Company exited its investment in Xirgo
Technologies, LLC and received $2.8 million for its equity
investment.
On April 14, 2021, the Company exited its investment in CIS
Secure Computing, Inc. and received $3.4 million for its equity
investment and $8.2 million for its first lien debt investment,
repaid at par.
On April 21, 2021, the Company announced that the Board approved
Mount Logan Management, LLC, an affiliate of BC Partners Advisors
L.P. for U.S. regulatory purposes, to serve as the new investment
advisor to the Company. The Company’s current investment advisor,
Capitala Investment Advisors, LLC, has entered into a definitive
agreement to sell certain assets to Mount Logan in connection
therewith. This transaction is contingent upon approval by the
Company’s shareholders at an upcoming special stockholder meeting
of a new investment advisory agreement to be entered into by and
between the Company and Mount Logan Management, LLC and certain
other conditions.
First Quarter 2021 Financial Results Conference
Call
Management will host a conference call to discuss the operating
and financial results at 8:30 a.m. EDT on Tuesday, May 4, 2021. The
call will be broadcast live in listen-only mode on the Company’s
investor relations website at https://investor.capitalagroup.com.
To participate in the conference call, please dial (877) 312-5507
approximately 10 minutes prior to the call.
About Capitala Finance
Corp.
Capitala Finance Corp. is a business development company that
invests primarily in first lien loans and, to a lesser extent,
second lien loans and equity securities issued by lower middle
market companies. The Company is managed by Capitala Investment
Advisors, LLC. For more information on Capitala, or to
automatically receive email notifications of Company financial
information, press releases, stock alerts, or other corporate
filings, please visit the Investor Relations section of our
website.
About Capitala Group
Capitala Group is an asset management firm that has been
providing capital to lower middle market companies throughout
North America for over twenty years. Since our inception in 1998,
Capitala Group has invested over $2.0 billion in approximately 170
companies and seeks to partner with strong management teams to
create value and aims to generate superior returns for our
individual and institutional investors. For more information,
definition and details visit our website
at www.CapitalaGroup.com.
Forward-Looking Statements
This press release contains certain forward-looking statements.
Words such as “believes,” “intends,” “expects,” “projects,”
“anticipates,” and “future” or similar expressions are intended to
identify forward-looking statements. These forward-looking
statements are not guarantees of future performance, condition or
results and involve a number of risks and uncertainties, including
the impact of COVID-19 and related changes in base interest rates
and significant volatility on our business, our portfolio
companies, our industry and the global economy. Actual
results may differ materially from those in the forward-looking
statements as a result of a number of factors, including those
described 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, except as may be required by law.
SOURCE: Capitala Finance Corp.
Capitala Finance Corp.Stephen
ArnallCFO|COOsarnall@capitalagroup.com
Capitala
Finance Corp. |
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Consolidated
Statements of Assets and Liabilities |
(in
thousands, except share and per share data) |
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As of |
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March 31, 2021 |
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December 31, 2020 |
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(unaudited) |
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ASSETS |
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Investments at fair value: |
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Non-control/non-affiliate investments (amortized cost of $158,892
and $187,744, respectively) |
|
$ |
167,208 |
|
|
$ |
172,848 |
|
|
Affiliate
investments (amortized cost of $66,180 and $80,961,
respectively) |
|
82,616 |
|
|
93,425 |
|
|
Control
investments (amortized cost of $8,898 and $8,947,
respectively) |
|
8,346 |
|
|
8,419 |
|
|
Total
investments at fair value (amortized cost of $233,970 and $277,652,
respectively) |
|
258,170 |
|
|
274,692 |
|
Cash and cash equivalents |
59,727 |
|
|
49,942 |
|
Interest and dividend receivable |
|
1,143 |
|
|
2,286 |
|
Prepaid expenses |
|
871 |
|
|
1,077 |
|
Deferred tax asset, net |
- |
|
|
- |
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Total assets |
$ |
319,911 |
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$ |
327,997 |
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LIABILITIES |
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SBA-guaranteed debentures (net of deferred financing costs of $345
and $485, respectively) |
|
$ |
70,655 |
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$ |
90,515 |
|
2022 Notes (net of deferred financing costs of $702 and $846,
respectively) |
|
72,131 |
|
|
71,987 |
|
2022 Convertible Notes (net of deferred financing costs of $458 and
$552, respectively) |
|
51,630 |
|
|
51,536 |
|
KeyBank Credit Facility (net of deferred financing costs of $499
and $546, respectively) |
|
(499 |
) |
|
(546 |
) |
Management and incentive fees payable |
|
3,762 |
|
|
3,842 |
|
Interest and financing fees payable |
|
931 |
|
|
1,688 |
|
Accounts payable and accrued expenses |
|
- |
|
|
28 |
|
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Total liabilities |
$ |
198,610 |
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$ |
219,050 |
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NET ASSETS |
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Common stock, par value $0.01, 100,000,000 common
shares authorized, 2,711,068 and 2,711,068 common shares issued and
outstanding, respectively |
|
$ |
27 |
|
|
$ |
27 |
|
Additional paid in capital |
229,481 |
|
|
229,481 |
|
Total distributable loss |
(108,207 |
) |
|
(120,561 |
) |
|
Total net assets |
$ |
121,301 |
|
|
$ |
108,947 |
|
Total liabilities and net assets |
|
$ |
319,911 |
|
|
$ |
327,997 |
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Net asset value per share |
$ |
44.74 |
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$ |
40.19 |
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Capitala
Finance Corp. |
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Consolidated
Statements of Operations |
(in
thousands, except share and per share data) |
(unaudited) |
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For the three months ended March 31, |
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2021 |
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2020 |
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INVESTMENT INCOME |
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Interest and fee income: |
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Non-control/non-affiliate investments |
|
$ |
3,196 |
|
|
$ |
4,707 |
|
|
Affiliate
investments |
|
1,306 |
|
|
1,679 |
|
|
Control
investments |
|
98 |
|
|
103 |
|
|
Total
interest and fee income |
|
4,600 |
|
|
6,489 |
|
Payment-in-kind
interest and dividend income: |
|
Non-control/non-affiliate investments |
|
71 |
|
|
336 |
|
|
Affiliate
investments |
|
99 |
|
|
180 |
|
|
Total
payment-in-kind interest and dividend income |
|
170 |
|
|
516 |
|
Dividend income: |
|
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Affiliate
investments |
|
155 |
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25 |
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Total
dividend income |
|
155 |
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25 |
|
Interest income from cash and cash equivalents |
|
1 |
|
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44 |
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Total
investment income |
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4,926 |
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|
7,074 |
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EXPENSES |
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Interest and financing expenses |
|
3,037 |
|
|
3,826 |
|
Base management fee |
1,398 |
|
|
1,757 |
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Administrative service fees |
|
350 |
|
|
350 |
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General and administrative expenses |
|
924 |
|
|
1,154 |
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Total expenses |
5,709 |
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|
7,087 |
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NET
INVESTMENT LOSS |
|
(783 |
) |
|
(13 |
) |
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REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS |
Net realized (loss) gain on investments: |
|
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Non-control/non-affiliate investments |
|
(14,023 |
) |
|
968 |
|
|
Net realized
(loss) gain on investments |
|
(14,023 |
) |
|
968 |
|
Net unrealized
appreciation (depreciation) investments: |
|
Non-control/non-affiliate investments |
|
23,212 |
|
|
(28,525 |
) |
|
Affiliate
investments |
|
3,972 |
|
|
(13,728 |
) |
|
Control
investments |
|
(24 |
) |
|
(1,142 |
) |
|
Net
unrealized appreciation (depreciation) on investments |
|
27,160 |
|
|
(43,395 |
) |
|
Net realized
and unrealized gain (loss) on investments |
|
13,137 |
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|
(42,427 |
) |
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS |
|
$ |
12,354 |
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|
$ |
(42,440 |
) |
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NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM
OPERATIONS – BASIC (1) |
|
$ |
4.56 |
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$ |
(15.70 |
) |
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WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – BASIC (1) |
|
2,711,068 |
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|
2,703,432 |
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NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM
OPERATIONS – DILUTED (1) |
|
$ |
4.04 |
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$ |
(15.70 |
) |
|
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WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - DILUTED (1) |
|
3,263,647 |
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|
2,703,432 |
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DISTRIBUTIONS PAID PER SHARE (2) |
|
$ |
- |
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$ |
1.50 |
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(1) Basic and diluted
shares of Capitala Finance Corp.'s (the "Company") common stock
have been adjusted for the three months ended March 31, 2020 to
reflect the one-for-six reverse stock split effected on August 21,
2020 on a retroactive basis |
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(2) Dividends paid per
share of the Company's common stock have been adjusted for the
three months ended March 31, 2020 to reflect the one-for-six
reverse stock split effected on August 21, 2020 on a retroactive
basis |
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