OHA Investment Corporation (NASDAQ: OHAI) (the “Company”) today
announced its financial results for the quarter ended March 31,
2019. Management will discuss the Company's results summarized
below on a conference call on Wednesday, May 15, 2019, at 10:00
a.m. (Eastern Time).
Summary results for the quarter ended
March 31, 2019:Total investment income: $1.5
million, or $0.08 per shareNet investment loss: ($0.1)
million, or ($0.01) per shareNet realized and unrealized
gains: $1.7 million, or $0.08 per shareNet asset value:
$37.1 million, or $1.84 per shareNew portfolio investments added
during the quarter: $2.4 million (par value)Fair value of
portfolio investments: $63.3 million
Portfolio ActivityThe fair
value of our investment portfolio was $63.3 million at March 31,
2019, decreasing 3.5% compared to December 31, 2018. In the first
quarter of 2019, the Company had realizations of $6.3 million,
which were partially offset by the addition of two new portfolio
companies and an add-on to an OHA investment, totaling $2.3
million. During the quarter, we had net unrealized gains of $1.5
million, primarily due to a $0.9 million write up of our ATP
limited term overriding royalty interests, a legacy energy
investment, and $0.5 million of net mark-to-market unrealized gains
on our OHA portfolio investments. The current weighted average
yield of our portfolio based on the cost and fair value of our
yielding investments was 10.6% and 10.5%, respectively, as of March
31, 2019.
In January 2019, we purchased $0.1 million of
EaglePicher, adding to our $0.3 million position that was
previously acquired in February 2018. The $0.1 million EaglePicher
second lien term loan was purchased at a 6% discount to par, earns
interest payable in cash at a rate of LIBOR+7.25%, and matures in
March 2026.
In February 2019, we purchased $1.1 million of
second lien term loan in Caliber, a leading provider of automobile
collision repair. The Caliber second lien term loan was purchased
at a 1.75% discount to par, earns interest payable in cash at a
rate of LIBOR+7.25% and matures in February 2027.
Also in February 2019, we purchased $1.2 million
of second lien term loan in PharMerica, a leading provider of
health and pharmacy services to assisted living, skilled nursing,
public health, long-term care, and post-acute care settings. The
PharMerica second lien term loan was purchased at a 2.5% discount
to par, earns interest payable in cash at a rate of LIBOR+8.5% with
a 1% LIBOR floor and matures in March 2027.
During the quarter, we sold our entire $5.0
million of senior unsecured notes in Avantor at an average price of
104.5% of par, resulting in a realized capital gain of $223,000 or
$0.01 per share. This investment was initiated in September 2017
and generated a gross unlevered internal rate of return of 12.5%
and a return on investment of 1.17x. In March 2019, we sold $0.4
million and $0.1 million of our second lien term loans in WASH and
Coinamatic, respectively, at a price of 99.0% of par.
Operating ResultsInvestment
income totaled $1.5 million for the first quarter of 2019,
decreasing 33% compared to $2.3 million in the corresponding
quarter of 2018. The decrease in investment income was primarily
attributable to placing our investment in OCI subordinated notes on
full non-accrual in October 2018, which was partially offset by an
increase of $0.4 million in non-affiliate investment interest
income.
Operating expenses for the first quarter of 2019
were $1.7 million, a decrease of $0.7 million, or 29%, compared to
operating expenses for the first quarter of 2018. Interest expense
and bank fees decreased by 24% to $0.6 million from $0.8 million
compared to the same period in the prior year largely due to lower
amount outstanding on our Credit Facility, as well as lower
amortization of debt issuance costs. Management fees decreased by
21% to $0.3 million from $0.4 million due to lower average asset
base subject to the base management fee. Professional fees
decreased by 61% to $0.3 million from $0.6 million primarily due to
lower legal costs. Other general and administrative expenses
increased by 5% to $0.4 million from $0.4 million.
The resulting net investment loss was ($145)
thousand or ($0.01) per share, for the first quarter of 2019,
compared to net investment loss of ($95) thousand, or ($0.00) per
share, for the first quarter of 2018.
We recorded net realized and unrealized gains on
investments totaling $1.7 million, or $0.08 per share, for the
first quarter of 2019, compared to net realized and unrealized
gains of $1.8 million, or $0.09 per share, for the first quarter of
2018. In the first quarter of 2019, we recorded net unrealized
appreciation of $1.5 million, or $0.07 per share. Additionally, in
the first quarter of 2019 we realized net capital gains of $220
thousand, or $0.01 per share, which was primarily related to the
sale of our investment in Avantor.
Overall, we experienced a net increase in net
assets resulting from operations of $1.5 million, or $0.08 per
share, for the first quarter of 2019. After declaring a quarterly
distribution during the period of $0.02 per share, our net asset
value increased 3% from $1.78 per share as of December 31, 2018 to
$1.84 per share as of March 31, 2019.
Liquidity and Capital
ResourcesAt March 31, 2019, we had cash and cash
equivalents totaling $4.6 million, with $2.9 million committed to
two new portfolio investments which had not yet closed as of March
31, 2019 but settled in the second quarter of 2019. On January 7,
2019, we borrowed an additional $3.0 million under the Credit
Facility of our delayed draw term loan. On February 11, 2019, we
repaid $2.0 million of the Credit Facility. The total amount
outstanding under our Credit Facility at March 31, 2019 was $30.0
million with $4.0 million available to draw.
Review of Strategic AlternativesOHAI’s Board of
Directors continues to explore a variety of strategic alternatives
to enhance shareholder value, including, among other things,
raising additional capital, the sale of part or all of the Company,
a merger or joint venture with another party, the acquisition of
existing investment portfolios and other strategic transactions. To
assist OHAI in this process, the Board of Directors has retained
Keefe, Bruyette & Woods, Inc. ("KBW") as its financial advisor
and investment banker. While we are actively working with KBW to
explore these options and committed to taking actions that we
believe will maximize shareholder value, there is no assurance that
the Company will execute on any of them. No specific timetable or
formal process has been set and OHAI does not expect to comment
further on the review of strategic alternatives or periodically
provide updates to the market with additional information unless
and until the Company’s Board of Directors has approved a specific
transaction or otherwise deems disclosure appropriate or
necessary.
Webcast / Conference Call at 10:00 a.m.
Eastern Time on May 15, 2019We invite all interested
persons to participate in our conference call on Wednesday, May 15,
2019, at 10:00 a.m. (Eastern Time). The dial-in number for the call
is (877) 303-7617. International callers can access the conference
by dialing (760) 666-3609. Conference ID is 5286428. Callers are
encouraged to dial in at least 5-10 minutes prior to the call. The
presentation materials for the call will be accessible on the
Investor Relations page of the Company’s website at
www.ohainvestmentcorporation.com.
OHA INVESTMENT
CORPORATIONCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
|
March 31, 2019 |
|
December 31, 2018 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Investments in portfolio
securities at fair value |
|
|
|
|
Affiliate investments (cost: $26,028 and $26,028,
respectively) |
|
$ |
2,331 |
|
|
$ |
2,271 |
|
Non-affiliate investments (cost: $81,571 and $85,306,
respectively) |
|
61,011 |
|
|
63,335 |
|
Total portfolio investments (cost: $107,599 and $111,334,
respectively) |
|
63,342 |
|
|
65,606 |
|
Investments in U.S. Treasury Bills at fair value (cost:
$9,996 and $14,989, respectively) |
|
9,996 |
|
|
14,989 |
|
Total investments |
|
73,338 |
|
|
80,595 |
|
Cash and cash equivalents |
|
4,556 |
|
|
3,124 |
|
Accounts receivable and other
current assets |
|
487 |
|
|
499 |
|
Interest receivable |
|
281 |
|
|
224 |
|
Other prepaid assets |
|
32 |
|
|
19 |
|
Deferred tax asset |
|
158 |
|
|
316 |
|
Total current assets |
|
5,514 |
|
|
4,182 |
|
Total assets |
|
$ |
78,852 |
|
|
$ |
84,777 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Distributions payable |
|
$ |
403 |
|
|
$ |
403 |
|
Accounts payable and accrued expenses |
|
1,121 |
|
|
683 |
|
Due to broker |
|
— |
|
|
3,251 |
|
Due to affiliate |
|
231 |
|
|
571 |
|
Management and incentive fees payable |
|
316 |
|
|
366 |
|
Income taxes payable |
|
39 |
|
|
39 |
|
Repurchase agreement |
|
9,796 |
|
|
14,689 |
|
Short-term debt, net of debt issuance costs |
|
29,893 |
|
|
— |
|
Total current liabilities |
|
41,799 |
|
|
20,002 |
|
Long-term debt, net of debt
issuance costs |
|
— |
|
|
28,866 |
|
Total liabilities |
|
41,799 |
|
|
48,868 |
|
Commitments and
contingencies |
|
|
|
|
Net
assets |
|
|
|
|
Common stock, $.001 par value,
250,000,000 shares authorized; 20,172,392 and 20,172,392 shares
issued and outstanding, respectively |
|
20 |
|
|
20 |
|
Paid-in capital in excess of
par |
|
211,907 |
|
|
211,907 |
|
Total distributable earnings
(loss) |
|
(174,874 |
) |
|
(176,018 |
) |
Total net assets |
|
37,053 |
|
|
35,909 |
|
Total liabilities and net
assets |
|
$ |
78,852 |
|
|
$ |
84,777 |
|
Net asset value per
share |
|
$ |
1.84 |
|
|
$ |
1.78 |
|
|
|
|
|
|
|
|
|
|
OHA INVESTMENT
CORPORATIONCONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data)
|
|
For the three months ended March 31, |
|
|
2019 |
|
2018 |
Investment
income: |
|
|
|
|
Interest income: |
|
|
|
|
Interest income |
|
$ |
1,503 |
|
|
$ |
2,228 |
|
Money market interest |
|
15 |
|
|
49 |
|
Other income |
|
11 |
|
|
6 |
|
Total investment income |
|
1,529 |
|
|
2,283 |
|
Operating
expenses: |
|
|
|
|
Interest expense and bank fees |
|
629 |
|
|
823 |
|
Management fees |
|
316 |
|
|
400 |
|
Incentive fees |
|
— |
|
|
1 |
|
Costs related to strategic alternatives review |
|
27 |
|
|
75 |
|
Professional fees |
|
253 |
|
|
643 |
|
Other general and administrative expenses |
|
388 |
|
|
370 |
|
Director fees |
|
61 |
|
|
61 |
|
Total operating expenses |
|
1,674 |
|
|
2,373 |
|
Incentive fee waiver |
|
— |
|
|
(1 |
) |
Net operating expenses |
|
1,674 |
|
|
2,372 |
|
Income tax provision, net |
|
— |
|
|
6 |
|
Net investment income
(loss) |
|
(145 |
) |
|
(95 |
) |
|
|
|
|
|
Net realized capital gain on
investments |
|
220 |
|
|
13 |
|
Benefit(provision) for
taxes |
|
— |
|
|
(42 |
) |
Total net realized
capital gain (loss) on investments |
|
220 |
|
|
(29 |
) |
|
|
|
|
|
Total net unrealized
appreciation on investments |
|
1,472 |
|
|
1,856 |
|
|
|
|
|
|
Net increase in net
assets resulting from operations |
|
$ |
1,547 |
|
|
$ |
1,732 |
|
|
|
|
|
|
Net increase in net assets
resulting from operations per common share |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
|
|
|
Distributions declared per
common share |
|
$ |
0.02 |
|
|
$ |
0.02 |
|
Weighted average shares
outstanding - basic and diluted |
|
20,172 |
|
|
20,172 |
|
|
|
|
|
|
Per Share
Data(1) |
|
|
|
|
Net asset value, beginning of
period |
|
$ |
1.78 |
|
|
$ |
2.37 |
|
|
|
|
|
|
Net investment income
(loss) |
|
(0.01 |
) |
|
(0.01 |
) |
Net realized and unrealized gain on investments |
|
0.08 |
|
|
0.09 |
|
Net increase in net assets
resulting from operations |
|
0.08 |
|
|
0.08 |
|
|
|
|
|
|
Distributions to common
stockholders |
|
(0.02 |
) |
|
(0.02 |
) |
Net decrease in net assets
from distributions |
|
(0.02 |
) |
|
(0.02 |
) |
|
|
|
|
|
Net asset value, end of
period |
|
$ |
1.84 |
|
|
$ |
2.43 |
|
|
|
|
|
|
(1) Per share data is based on weighted average number of common
shares outstanding for the period. Per share data may not total due
to rounding.
About OHA Investment CorporationOHA Investment
Corporation (NASDAQ: OHAI) is a specialty finance company designed
to provide its investors with current income and capital
appreciation. OHAI focuses primarily on providing creative direct
lending solutions to middle market private companies across
industry sectors. OHAI is externally managed by Oak Hill Advisors,
L.P., a leading independent investment firm
(www.oakhilladvisors.com). Oak Hill Advisors has deep experience in
direct lending, having invested over $6.5 billion in over 150
direct lending investments over the past 15+ years.
Forward-Looking StatementsThis
press release may contain forward-looking statements. We may use
words such as "anticipates," "believes," "intends," "plans,"
"expects," "projects," "estimates," "will," "should," "may" and
similar expressions to identify forward-looking statements. These
forward-looking statements are subject to various risks and
uncertainties. Certain factors could cause actual results and
conditions to differ materially from those projected, including the
uncertainties associated with the timing or likelihood of
transaction closings, changes in interest rates, availability of
transactions, the future operating results of our portfolio
companies, regulatory factors, changes in regional or national
economic conditions and their impact on the industries in which we
invest, other changes in the conditions of the industries in which
we invest and other factors enumerated in our filings with the
Securities and Exchange Commission (the "SEC"). You should not
place undue reliance on such forward-looking statements, which
speak only as of the date they are made. We undertake no obligation
to update our forward-looking statements made herein, unless
required by law.
CONTACTS:Steven T. Wayne –
President and Chief Executive OfficerCory E. Gilbert – Chief
Financial OfficerLisa R. Price – Chief Compliance
OfficerOHAICInvestorRelations@oakhilladvisors.com
For media inquiries, contact Kekst and Company,
(212) 521-4800Jeremy Fielding – Jeremy.Fielding@kekst.comAduke
Thelwell – Aduke.Thelwell@kekst.com
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