WESTPORT, Conn., March 16, 2009 (GLOBE NEWSWIRE) -- Patriot Capital Funding, Inc. (Nasdaq:PCAP) today announced results for the three-month period and the year ended December 31, 2008.
2008 Fourth Quarter Summary
* Total investment income of $10.2 million * Net investment income of $6.0 million, or $0.29 per basic and diluted share * Net loss of $16.9 million, or a loss of $0.81 per basic and diluted share * Originated approximately $22.5 million in new gross investment commitments * Net asset value per share of common stock at December 31, 2008 was $8.65, as compared to $9.74 at September 30, 2008 and $10.73 at December 31, 2007
Portfolio Activity
During the 2008 fourth quarter, we acted as lead arranger and administrative agent on a $32.5 million financing to a leading provider of services for the biomedical research industry. We committed $22.5 million to the financing, which was comprised of senior and subordinated debt and an equity investment, and we syndicated the remaining $10.0 million, which was comprised of senior secured debt, to another financial institution. We funded $21.3 million of our commitment at closing.
Also during the 2008 fourth quarter:
* We received proceeds of $1.4 million in conjunction with the sale of our senior secured term loan in a publisher of textbooks and educational materials. We realized a loss of approximately $459,000 upon the sale. * We received proceeds of $1.4 million in conjunction with the sale of our senior secured term loan in a provider of electrical services. We realized a loss of approximately $446,000 upon the sale.
Subsequent to the 2008 fourth quarter we received proceeds of $3.9 million in connection with the full repayment of our senior subordinated debt investment in a distributor of automotive oils, chemicals and parts. No realized gain or loss was recorded as a result of this paydown.
Portfolio Yield
The weighted average yield on all of our debt investments for the year ended December 31, 2008 was 12.1%, as compared to a weighted average yield of 12.4% for the year ended December 31, 2007.
Portfolio Asset Quality
We utilize the following investment rating system for our entire portfolio of debt investments:
Investment Rating 1 - Investments that exceed expectations and/or a capital gain is expected. Investment Rating 2 - Investments that are generally performing in accordance with expectations. Investment Rating 3 - Investments that require closer monitoring. Investment Rating 4 - Investments performing below expectations where a higher risk of loss exists. Investment Rating 5 - Investments performing significantly below expectations where we expect a loss.
At December 31, 2008, the distribution of our debt investments on the 1 to 5 investment rating scale at fair value was as follows:
Investment Rating 1 investments totaled $82.2 million (26.7% of the total portfolio) Investment Rating 2 investments totaled $184.5 million (59.9% of the total portfolio) Investment Rating 3 investments totaled $21.3 million (6.9% of the total portfolio) Investment Rating 4 investments totaled $8.5 million (2.7% of the total portfolio) Investment Rating 5 investments totaled $11.6 million (3.8% of the total portfolio)
At December 31, 2008, we had loans from three of our portfolio companies on non-accrual status. At December 31, 2007, none of our loans were on non-accrual status.
Liquidity and Capital Resources
At December 31, 2008, we had cash and cash equivalents of $6.4 million, total assets of $354.3 million and net assets of $180.1 million. We had $162.6 million of borrowings outstanding at December 31, 2008 under our second amended and restated securitization revolving credit facility (the "Credit Facility"). Currently, we are in compliance with the terms of the Credit Facility. At December 31, 2008, the interest rate on our Credit Facility was 3.6% and our regulatory asset coverage was 211%. We are required to maintain regulatory asset coverage of at least 200%.
Since the turmoil in the financial markets began in mid-2007, we have taken a number of steps to help ensure the continued availability of liquidity, including largely curtailing investment originations that fall outside the parameters of the Credit Facility. However, in light of the recent worsening of the conditions in the financial markets and the U.S. economy overall, we are considering other measures to help ensure adequate liquidity, including the sale of selected portfolio investments, forming and licensing a Small Business Investment Company subsidiary, further operating expense reductions, lowering our dividends and availing ourselves to a recent IRS revenue procedure that will allow us to maintain our regulated investment company tax status through the payment of a dividend partly in cash and partly in shares of our common stock.
Moreover, we are currently negotiating the renewal of the liquidity facility, which matures in April 2009, supporting our Credit Facility with our lenders. In the event that our lenders do not renew the liquidity facility, the terms of the Credit Facility require that all principal and interest collected from the debt investments secured by the Credit Facility must be used to pay down amounts outstanding under the Credit Facility by April 2011. Because substantially all of our debt investments are secured by our Credit Facility, we cannot provide any assurance that we would have sufficient cash and liquid assets to fund normal operations and dividend distributions to our stockholders during the period of time when we are required to repay amounts outstanding under the Credit Facility if such amounts became due. If the liquidity facility is not renewed, we believe that we may be able to negotiate an arrangement with the lenders of the Credit Facility for repayment terms that do not require us to use all principal and interest collected from the debt investments secured by the Credit Facility to pay down amounts outstanding thereunder. Such an arrangement may allow us to continue to operate our business in a more normal manner while we pay down the outstanding balance under the Credit Facility.
Our lenders have provided us with a term sheet that outlines the terms and conditions under which they would consider renewing the liquidity facility. Because the term sheet is non-binding and remains subject to credit approval of each lender and satisfactory documentation, there is no assurance that the liquidity facility will be renewed. As a result of the uncertainty surrounding the renewal of the liquidity facility, our independent registered public accounting firm is expected to include an explanatory paragraph in its 2008 audit opinion that expresses substantial doubt about our ability to continue as a going concern.
Dividend Information
Historically, our board of directors has declared our quarterly dividends prior to the completion of the fiscal quarter to which such dividends relate. However, our board of directors has postponed making a decision regarding the declaration of our first quarter 2009 dividend until we have more information on whether the liquidity facility will be renewed. Moreover, in light of the unprecedented uncertainty regarding the financial markets and the economy, our board of directors is considering whether to alter its existing dividend declaration practice and declare dividends subsequent to the completion of the fiscal quarter to which such dividends relate.
Our dividend is paid from taxable income. Our board of directors determines the dividend based on annual estimates of taxable income, which differs from book income due to changes in unrealized appreciation and depreciation of investments and due to temporary and permanent differences in income and expense recognition.
We have adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of our dividends on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if we declare a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. If your shares of our common stock are held through a brokerage firm or other financial intermediary and you wish to participate in the DRIP, please contact your broker or other financial intermediary.
2008 Fourth Quarter Conference Call/Webcast Information
Conference Call: Today - March 16, 2009 at 8:30 a.m. EDT Dial-in Number: 800/771-7941 Call Replay Until: March 18, 2009 at 10:30 a.m. EDT Replay Number: 800/633-8284 Replay Access Code: 21416961 Webcast: www.patcapfunding.com Web Replay: 30 days
About Patriot Capital Funding, Inc.
Patriot Capital Funding, Inc. (www.patcapfunding.com) is a specialty finance company providing customized financing solutions primarily to private equity sponsors focused on making investments in small- to mid-sized companies. Patriot Capital Funding typically invests in companies with annual revenues ranging from $10 million to $100 million that operate in diverse industry sectors. Investments usually take the form of senior secured loans, junior secured loans, and/or subordinated debt investments -- which may contain equity or equity-related instruments. Patriot Capital Funding also offers "one-stop" financing, which typically includes a revolving credit line, one or more senior term loans and a subordinated debt investment. Patriot Capital Funding also makes equity co-investments of generally up to $3.0 million and investments in broadly syndicated loans.
Forward-Looking Statements
This press release may contain certain forward-looking statements, including statements with regard to the liquidity facility and the future performance of Patriot Capital Funding. Words such as "believes," "expects," "projects," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in Patriot Capital Funding's Form 10-K for the year ended December 31, 2008, and other filings with the Securities and Exchange Commission. Patriot Capital Funding undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Financial Statements
Patriot Capital Funding, Inc.
Consolidated Balance Sheets
December 31,
------------
2008 2007
--------------------------
ASSETS
Investments at fair value:
Non-control/non-affiliate investments
($269,577,008 - 2008,
$294,686,727 - 2007) $240,486,620 $290,225,759
Affiliate investments (cost of
$53,129,533 - 2008, $86,577,905 - 2007) 51,457,082 85,171,605
Control investments (cost of
$43,192,484 - 2008, $6,980,389 - 2007) 30,427,046 9,328,389
--------------------------
Total investments 322,370,748 384,725,753
Cash and cash equivalents 6,449,454 789,451
Restricted cash 22,155,073 10,487,202
Interest receivable 1,390,285 1,758,954
Other assets 1,897,086 617,448
--------------------------
TOTAL ASSETS $354,262,646 $398,378,808
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Borrowings $162,600,000 $164,900,000
Interest payable 514,125 821,124
Dividends payable 5,253,709 6,814,650
Accounts payable, accrued expenses and
other 5,777,642 4,245,350
--------------------------
TOTAL LIABILITIES 174,145,476 176,781,124
--------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding -- --
Common stock, $.01 par value, 49,000,000
shares authorized; 20,827,334 and
20,650,455 shares issued and outstanding
at December 31, 2008, and December 31,
2007, respectively 208,274 206,504
Paid-in capital 234,385,063 233,722,593
Accumulated net investment loss (1,912,061) (1,912,061)
Distributions in excess of net investment
income (1,758,877) (2,824,651)
Net realized loss on investments (4,053,953) (3,171,365)
Net unrealized depreciation on interest
rate swaps (3,097,384) (762,365)
Net unrealized depreciation on investments (43,653,892) (3,660,971)
--------------------------
TOTAL STOCKHOLDERS' EQUITY 180,117,170 221,597,684
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $354,262,646 $398,378,808
==========================
NET ASSET VALUE PER COMMON SHARE $ 8.65 $ 10.73
==========================
Certain prior period amounts have been reclassified to the current
presentation.
Patriot Capital Funding, Inc.
Consolidated Statements of Operations
Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited) (audited)
------------------------- -------------------------
2008 2007 2008 2007
------------------------- -------------------------
INVESTMENT INCOME
Interest and
dividends:
Non-control/
non-affiliate
investments $ 7,351,849 $ 8,565,426 $ 29,261,759 $31,729,397
Affiliate
investments 1,496,905 1,899,496 8,504,451 4,947,294
Control
investments 728,766 178,382 2,373,877 470,584
------------------------- -------------------------
Total interest
and dividend
income 9,577,520 10,643,304 40,140,087 37,147,275
------------------------- -------------------------
Fees
Non-control/
non-affiliate
investments 465,563 349,879 809,113 1,080,929
Affiliate
investments 73,469 43,475 432,435 93,419
Control
investments 54,328 6,250 168,065 106,013
------------------------- -------------------------
Total fee income 593,360 399,604 1,409,613 1,280,361
------------------------- -------------------------
Other investment
income:
Non-control/
non-affiliate
investments -- 99,771 300,076 534,901
Affiliate
investments -- -- 307,245 --
------------------------- -------------------------
Control
investments -- -- 142,383 --
------------------------- -------------------------
Total other
investment
income -- 99,771 749,704 534,901
------------------------- -------------------------
Total Investment
Income 10,170,880 11,142,679 42,299,404 38,962,537
------------------------- -------------------------
EXPENSES
Compensation
expense 532,752 1,526,490 3,973,030 5,410,075
Interest expense 2,383,965 2,205,408 8,158,473 7,421,596
Professional fees 624,400 222,644 1,635,519 887,021
General and
administrative
expense 666,875 680,987 2,807,113 2,498,724
------------------------- -------------------------
Total Expenses 4,207,992 4,635,529 16,574,135 16,217,416
------------------------- -------------------------
Net Investment
Income 5,962,888 6,507,150 25,725,269 22,745,121
------------------------- -------------------------
NET REALIZED GAIN
AND (LOSS) AND
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
Net realized gain
(loss) on
investments -
non-control/
non-affiliate
investments (904,726) -- (990,993) 91,601
Net realized gain
on investments -
affiliate
investments -- -- 458,405 --
Net realized loss
on investments -
control
investments -- -- (350,000) --
Net unrealized
depreciation on
investments -
non-control/
non-affiliate
investments (12,210,075) (2,996,224) (22,894,683) (4,620,406)
Net unrealized
depreciation on
investments -
affiliate
investments (1,143,006) (288,200) (9,613,047) (1,365,300)
Net unrealized
appreciation
(depreciation)
on investments -
control
investments (6,272,559) 653,800 (7,485,191) 2,348,000
Net unrealized
depreciation on
interest rate
swaps (2,369,791) (515,790) (2,335,019) (775,326)
------------------------- -------------------------
Net Realized Gain
(Loss) and Net
Unrealized
Appreciation
(Depreciation) (22,900,157) (3,146,414) (43,210,528) (4,321,431)
------------------------- -------------------------
NET INCOME
(LOSS) $(16,937,269) $ 3,360,736 $(17,485,259) $18,423,690
========================= =========================
Earnings (loss)
per share,
basic $ (0.81) $ 0.16 $ (0.84) $ 0.99
========================= =========================
Earnings (loss)
per share,
diluted $ (0.81) $ 0.16 $ (0.84) $ 0.98
========================= =========================
Weighted average
shares
outstanding,
basic 20,806,978 20,589,650 20,713,540 18,670,904
========================= =========================
Weighted average
shares
outstanding,
diluted 20,806,978 20,748,959 20,713,540 18,830,213
========================= =========================