Press Release

American Capital Senior Floating Announces June 30, 2017 Financial Results and Declares Monthly Cash Distributions of $0.097 Per Share for Each of August, September and October 2017

Company Release - 8/8/2017 8:00 AM ET

NEW YORK--(BUSINESS WIRE)-- American Capital Senior Floating, Ltd. (“ACSF” or the “Company”) (NASDAQ:ACSF) today reported net investment income of $2.4 million, or $0.24 per share, and net earnings of $0.4 million, or $0.04 per share, for the quarter ended June 30, 2017 and net asset value (“NAV”) of $134.1 million, or $13.41 per share, as of June 30, 2017. In addition, the Company announced that its Board of Directors declared monthly cash distributions of $0.097 per share of common stock for each of August, September and October 2017.

SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS

  • Investing activities
    • Invested $58.2 million into 24 new loan obligors and 3 new collateralized loan obligations (“CLOs”)
    • Sold $20.5 million of investments and received $32.5 million of repayments, including distributions received from our CLOs
  • Net investment income of $0.24 per share, or $2.4 million
    • Decreased $0.07 per share from Q1 2017 net investment income of $0.31 per share
  • Net earnings of $0.04 per share, or $0.4 million
    • Decreased $0.24 per share from Q1 2017 net earnings of $0.28 per share due to net realized and unrealized losses on investments in Q2 2017 as compared to net realized and unrealized gains on investments in Q1 2017
  • NAV of $13.41 per share, or $134.1 million as of June 30, 2017
    • $0.25 per share decrease from March 31, 2017 NAV per share of $13.66
  • Monthly cash distributions to stockholders of $0.097 per share ($0.291 for the quarter)
    • 8.7% annualized yield on the June 30, 2017 NAV per share
    • 9.1% annualized yield on the June 30, 2017 closing market price of $12.85 per share
  • $252.0 million investment portfolio at fair value as of June 30, 2017
    • $193.1 million, or 77%, in first lien floating rate loans
    • $14.8 million, or 6%, in second lien floating rate loans
    • $44.1 million, or 17%, of equity in CLOs
  • 6.74% investment portfolio yield at cost as of June 30, 2017
  • 3.38% cost of funds as of June 30, 2017
  • 0.73x debt to equity ratio as of June 30, 2017

“We continue to work hard to maintain quality investment returns in a market where credit spreads have declined this year,” said Kevin Braddish, Chief Executive Officer of American Capital Senior Floating. “Since taking over as manager of ACSF, we have exited and reinvested approximately 50% of the total portfolio through the end of the second quarter while increasing spreads on the loan portfolio in a tightening credit environment. In addition, we continue to be focused on improving the credit quality of the entire investment portfolio.”

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2017, the fair value of ACSF’s portfolio totaled $252.0 million and was comprised of $193.1 million of first lien floating rate loans, $14.8 million of second lien floating rate loans (collectively, the “Loan Portfolio”) and $44.1 million of CLO equity (the “CLO Portfolio” and, together with the Loan Portfolio, the “Investment Portfolio”). At June 30, 2017, the Investment Portfolio had a weighted average yield at amortized cost of 6.74%.

As of June 30, 2017, ACSF’s Loan Portfolio was diversified across 149 issuers and 38 industries and its CLO Portfolio was invested in 23 issuers across 16 different collateral managers.

RESULTS OF OPERATIONS

Net Investment Income

Net investment income totaled $2.4 million, or $0.24 per share, for the three months ended June 30, 2017. Gross investment income was $4.1 million for the quarter, with $2.7 million generated from the Loan Portfolio and $1.4 million generated from the CLO Portfolio. Expenses totaled $1.7 million for the three months ended June 30, 2017, with interest and other debt related costs of $0.8 million, management fees of $0.5 million and other operating expenses of $0.4 million net of the expense waiver.

Beginning in the first quarter of 2017, Ivy Hill Asset Management, L.P. (“IHAM” or our “Manager”) voluntarily agreed to be responsible for certain of our 2017 quarterly other operating expenses in excess of a certain percentage of our consolidated net assets less net unrealized appreciation or depreciation, each as defined under generally accepted accounting principles in the United States of America (“GAAP”), for such quarter (the “Voluntary Expense Cap”). For the three months ended June 30, 2017, in accordance with the applicable Voluntary Expense Cap our Manager agreed to be responsible for certain of our quarterly other operating expenses in excess of an annual rate of 1.00% of our consolidated net assets less net unrealized appreciation or depreciation as of June 30, 2017.

For the three months ended June 30, 2017, our Manager was responsible for $0.2 million of other operating expenses as a result of the applicable Voluntary Expense Cap.

Additionally, for each of the remaining two quarters of fiscal 2017, our Manager has voluntarily agreed to be responsible for certain of our quarterly other operating expenses in excess of (a) with respect to the three months September 30, 2017, an annual rate of 1.00% of our consolidated net assets less net unrealized appreciation or depreciation as of September 30, 2017, and (b) with respect to the three months ended December 31, 2017, an annual rate of 1.25% of our consolidated net assets less unrealized appreciation or depreciation as of December 31, 2017, provided the existing investment advisory management agreement with our Manager, approved by our stockholders on May 19, 2017, remains effective as of the date we file our Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable, for such quarter period.

Net Realized and Unrealized Loss From Investments

Net realized and unrealized loss on investments for the three months ended June 30, 2017 totaled $2.1 million and was composed of net realized loss on investments of $3.7 million and net unrealized appreciation on investments of $1.7 million. The $1.7 million of net unrealized appreciation on investments was composed of the reversal of net unrealized depreciation related to net realized losses of $3.7 million and net unrealized depreciation on investments of $2.0 million.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2017, ACSF’s wholly owned consolidated financing subsidiary, ACSF Funding I, LLC (“ACSF Funding”), had $98.2 million outstanding on its $135.0 million revolving credit facility, resulting in a consolidated debt to equity ratio of 0.73x. As of June 30, 2017, ACSF had $1.2 million in cash and cash equivalents and $36.8 million of available capacity on ACSF Funding’s revolving credit facility.

RECENT DEVELOPMENTS

Distributions to Stockholders

On August 8, 2017, the Company announced the declaration of monthly cash distributions to stockholders of $0.097 per share for each of August, September and October 2017. This cash distribution rate represents an 8.7% annualized yield on the June 30, 2017 NAV per share of $13.41 and an 9.1% annualized yield on the June 30, 2017 closing market price per share of $12.85. The monthly cash distributions will be paid to common stockholders of record as set forth in the table below:

                       

Distributions to
Stockholders

per Share

Record Date Ex-Dividend Date Payment Date
August 2017 $0.097 August 24, 2017 August 22, 2017 September 5, 2017
September 2017 $0.097 September 22, 2017 September 20, 2017 October 4, 2017
October 2017 $0.097 October 23, 2017 October 19, 2017 November 2, 2017
 

ACSF’s Board of Directors considers estimated taxable income, GAAP income and economic performance when determining distributions to stockholders. Actual taxable income may differ from GAAP income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation and depreciation on investments.

     

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except per share data)

 
 
June 30, 2017     December 31, 2016
Assets: (unaudited)
Investments, fair value $ 252,032 $ 244,872
Cash and cash equivalents 1,247 8,795
Receivable for investments sold 1,824 2,272
Other assets 1,484   1,401  
Total assets $ 256,587   $ 257,340  
 
Liabilities:
Credit facility payable $ 98,200 $ 104,900
Payable for investments purchased 22,407 12,202
Management fee payable 533 2,046
Other liabilities 363 433
Distributions to stockholders payable 970   970  
Total liabilities 122,473 120,551
 
Net Assets:
Common stock, par value $0.01 per share, 10,000 issued and outstanding, 300,000 authorized 100 100
Paid-in capital in excess of par 150,949 150,949
Undistributed net investment income 1,809 2,133
Accumulated net realized loss from investments (6,573 ) (3,300 )
Net unrealized depreciation on investments (12,171 ) (13,093 )
Total net assets 134,114   136,789  
Total liabilities and net assets $ 256,587   $ 257,340  
 
Net asset value per share $ 13.41 $ 13.68
 
         

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 
Three Months Ended June 30, Six months ended June 30,
2017     2016 2017     2016
Investment income:  
Interest $ 4,119   $ 4,272   $ 8,731     $ 8,617  
Total investment income 4,119   4,272   8,731     8,617  
Expenses:
Interest and other debt related costs 769 640 1,502 1,304
Management fee 533 511 1,064 1,008
Other operating expenses 541   733   1,255     1,250  
Total expenses 1,843 1,884 3,821 3,562
Expense reimbursement (176 ) (455 ) (614 )   (693 )
Net expenses 1,667   1,429   3,207     2,869  
Net investment income before taxes 2,452 2,843 5,524 5,748
Income tax (provision) benefit (9 ) 125   (28 )   98  
Net investment income 2,443   2,968   5,496     5,846  
Net realized and unrealized gain (loss) on investments:
Net realized loss on investments (3,735 ) (409 ) (3,273 ) (1,299 )
Net unrealized appreciation on investments 1,685   7,709   922     7,889  
Net gain (loss) on investments (2,050 ) 7,300   (2,351 )   6,590  
Net increase in net assets resulting from operations

(“Net Earnings”)

$ 393   $ 10,268   $ 3,145     $ 12,436  
 
Net investment income per share $ 0.24 $ 0.30 $ 0.55 $ 0.58
Net Earnings per share $ 0.04 $ 1.03 $ 0.31 $ 1.24
Distributions to stockholders per share $ 0.29 $ 0.29 $ 0.58 $ 0.58

Weighted average shares outstanding

10,000 10,000 10,000 10,000
 

STOCKHOLDER CALL

ACSF invites stockholders, prospective stockholders and analysts to attend the ACSF stockholder call on August 8, 2017 at 12:00 p.m. (Eastern Time). All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Relations section of our website at www.acsf.com. Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 9039085 followed by the # sign and reference “American Capital Senior Floating” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected.

A slide presentation will accompany the stockholder call and will be available at www.ACSF.com. Select the Q2 2017 Earnings Presentation link to download and print the presentation in advance of the stockholder call.

For interested parties, an archived replay of the call will be available approximately one hour after the end of the call through September 8, 2017 (Eastern Time) to domestic callers by dialing (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10110823. An archived replay will also be available on a webcast link located on the Home page of the Investor Relations section of our website.

ABOUT AMERICAN CAPITAL SENIOR FLOATING, LTD.

American Capital Senior Floating, Ltd. (NASDAQ: ACSF) is a non-diversified closed-end investment management company that invests primarily in senior first lien and second lien floating rate loans to large-market U.S. based companies and in debt and equity tranches of collateralized loan obligations collateralized by senior floating rate loans. The Company has elected to be treated as a business development company under the 1940 Act. The Company is externally managed by Ivy Hill Asset Management, L.P. For further information, please refer to www.ACSF.com.

ABOUT IVY HILL ASSET MANAGEMENT, L.P.

Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation, is an SEC-registered investment adviser, comprised of an experienced team of investment professionals focused on investing in and managing primarily middle market senior secured assets through structured investment vehicles and managed accounts. As of June 30, 2017, IHAM had total assets under management of approximately $4.3 billion across 23 vehicles.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking information and statements. Forward-looking statements give the Company’s current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can have,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements are not guarantees of performance or results, and involve known and unknown risks, uncertainties (some of which are beyond the Company’s control), assumptions and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Should one or more of these risks or uncertainties materialize, the Company’s actual results may vary in material respects from those projected in any forward-looking statements. A detailed discussion of these and other factors that may affect future results is contained in our filings with the U.S. Securities and Exchange Commission. Any forward-looking statement made by the Company in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

For American Capital Senior Floating, Ltd.
Media Relations:
Mendel Communications
Bill Mendel, 212-397-1030
bill@mendelcommunications.com
or
Investor Relations:
Carl Drake, 888-818-5298
cdrake@aresmgmt.com
or
Veronica Mendiola, 212-808-1150
vmendiola@aresmgmt.com

Source: American Capital Senior Floating, Ltd.