GREENWICH, CT, Aug. 13, 2014 (GLOBE NEWSWIRE) -- Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or "we") announces its financial results for the third fiscal quarter ended June 30, 2014.
Third Fiscal Quarter 2014 Financial Highlights
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Net investment income for the quarter ended June 30, 2014 was $1.9 million or $0.28 per share, as compared to $1.8 million or $0.27 per share for the quarter ended March 31, 2014. This represents the fourth consecutive quarter of increasing net investment income per share;
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Net asset value was unchanged from the previous quarter at $15.13 per share as of June 30, 2014;
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Weighted average cash yield on debt investments increased to 7.0% at June 30, 2014, as compared to 6.7% at March 31, 2014;
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We closed $79.7 million of investments during the quarter ended June 30, 2014; and
- We operated within our target leverage range of 0.8x-0.9x during the quarter — our leverage ratio as of June 30, 2014 was 0.89x.
Portfolio and Investment Activity
Our Board of Directors determined the fair value of our portfolio at June 30, 2014 to be $191.5 million, as compared to $179.8 million at March 31, 2014 and $48.7 million at September 30, 2013. Total assets increased to $208.7 million at June 30, 2014, as compared to $192.5 million at March 31, 2014 and $101.5 million at September 30, 2013.
During the quarter ended June 30, 2014, we closed $79.7 million of investments in 19 new and one existing portfolio companies, and funded $77.3 million across new and existing portfolio companies. We also received $64.5 million in connection with full or partial payoffs and open market sales of 19 of our debt investments.
At June 30, 2014, our portfolio consisted of investments in 42 companies, and 100% of our portfolio consisted of senior secured debt investments that bore interest at floating rates. The portfolio remained highly diversified and our average portfolio company debt investment size at fair value was $4.6 million at June 30, 2014. The average portfolio company EBITDA was $62.9 million as of June 30, 2014.
"We are pleased to report strong results for the June quarter. Since our IPO in June 2013, our Board of Directors has declared four consecutive increases in our quarterly dividend," stated our President and Chief Investment Officer, Ivelin M. Dimitrov, adding, "We continue to benefit from a robust origination pipeline."
Our weighted average cash yield on debt investments was 7.0% at June 30, 2014, which increased from 6.7% at March 31, 2014.
Results of Operations
Total investment income for the quarter ended June 30, 2014 was $3.8 million, which consisted of $3.0 million of interest income and $0.8 million of fee income on our portfolio investments.
Expenses for the quarter ended June 30, 2014 were $2.0 million and primarily consisted of interest expense, the base management fee, the Part I incentive fee and professional fees. The base management fee was calculated at an annual rate of 1% of the average of our gross assets (excluding cash and cash equivalents) during the quarter.
Liquidity and Capital Resources
As of June 30, 2014, we had $5.1 million of cash and cash equivalents, $2.3 million of restricted cash, portfolio investments (at fair value) of $191.5 million, $7.0 million of receivables from unsettled transactions, dividend payable of $1.8 million, $89.8 million of borrowings under our credit facility and unfunded commitments of $11.7 million.
As of September 30, 2013, we had $52.3 million of cash and cash equivalents, portfolio investments (at fair value) of $48.7 million, $0.4 million of interest and fees receivable and unfunded commitments of $5.8 million.
Dividends Declared
Since inception, our Board of Directors has declared the following quarterly dividends:
- $0.30 per share for the quarter ending September 30, 2014, payable on October 15, 2014 to stockholders of record on September 15, 2014;
- $0.27 per share for the quarter ended June 30, 2014, which was paid on July 15, 2014 to stockholders of record on June 30, 2014;
- $0.23 per share for the quarter ended March 31, 2014, which was paid on April 15, 2014 to stockholders of record on March 31, 2014;
- $0.20 per share for the quarter ended December 31, 2013, which was paid on January 31, 2014 to stockholders of record on December 16, 2013; and
- $0.01 per share for the quarter ended September 30, 2013, which was paid on October 31, 2013 to stockholders of record on October 21, 2013.
Dividends are paid primarily from distributable (taxable) income. Our Board of Directors determines dividends based on estimates of distributable (taxable) income, which differ from book income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation and depreciation on investments.
Our amended dividend reinvestment plan ("DRIP") provides for reinvestment of dividends, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash dividend, our stockholders whose shares are registered in their name and who have not "opted out" of our DRIP will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving cash dividends. We provide up to a 5% discount on newly-issued shares purchased through the DRIP (provided that shares will not be issued at less than net asset value per share). If you are a stockholder and 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.
Portfolio Asset Quality
We utilize the following investment ranking system for our investment portfolio:
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Investment Ranking 1 is used for investments that are performing above expectations and/or capital gains are expected.
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Investment Ranking 2 is used for investments that are performing substantially within our expectations, and whose risks remain materially consistent with the potential risks at the time of the original or restructured investment. All new investments are initially ranked 2.
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Investment Ranking 3 is used for investments that are performing below our expectations and for which risk has materially increased since the original or restructured investment. The portfolio company may be out of compliance with debt covenants and may require closer monitoring. To the extent that the underlying agreement has a PIK interest provision, investments with a ranking of 3 are generally those on which we are not accruing PIK interest.
- Investment Ranking 4 is used for investments that are performing substantially below our expectations and for which risk has increased substantially since the original or restructured investment. Investments with a ranking of 4 are those for which some loss of principal is expected and are generally those on which we are not accruing cash interest.
At June 30, 2014 and September 30, 2013, the distribution of our investments on the 1 to 4 investment ranking scale at fair value was as follows:
| June 30, 2014 | September 30, 2013 | |||||
| Fair Value | % of Portfolio | Leverage Ratio | Fair Value | % of Portfolio | Leverage Ratio | |
| 1 | — | — | — | — | — | — |
| 2 | $ 191,524,140 | 100.00% | 4.14 | $ 48,653,617 | 100.00% | 4.32 |
| 3 | — | — | — | — | — | — |
| 4 | — | — | — | — | — | — |
| Total | $ 191,524,140 | 100.00% | 4.14 | $ 48,653,617 | 100.00% | 4.32 |
Recent Developments
On July 23, 2014, we announced that our Board of Directors made several management changes. Richard A. Petrocelli was promoted to chief financial officer, Steven M. Noreika stepped down as our chief financial officer and Alexander C. Frank stepped down as our chief operating officer. Both Messrs. Noreika and Frank continue in their respective roles at our investment adviser, Fifth Street Management LLC.
| Fifth Street Senior Floating Rate Corp. | ||
| Consolidated Statements of Assets and Liabilities | ||
| (in thousands, except per share amounts) | ||
| (unaudited) | ||
|
June 30, 2014 |
September 30, 2013 | |
| ASSETS | ||
| Investments at fair value: | ||
| Non-control/Non-affiliate investments (cost June 30, 2014: $192,150,906; cost September 30, 2013: $48,653,617) | $ 191,524,140 | $ 48,653,617 |
| Total investments at fair value (cost June 30, 2014: $192,150,906; cost September 30, 2013: $48,653,617) | 191,524,140 | 48,653,617 |
| Cash and cash equivalents | 5,104,352 | 52,346,831 |
| Restricted cash | 2,257,512 | — |
| Interest and fees receivable | 727,154 | 394,023 |
| Due from portfolio company | 29,368 | 8,333 |
| Receivables from unsettled transactions | 7,002,881 | — |
| Deferred financing costs | 1,683,318 | — |
| Other assets | 334,743 | 47,240 |
| Total assets | $ 208,663,468 | $ 101,450,044 |
| LIABILITIES AND NET ASSETS | ||
| Liabilities: | ||
| Accounts payable, accrued expenses and other liabilities | $ 1,200,083 | $ 484,066 |
| Base management fee payable | 485,544 | 61,379 |
| Part I incentive fee payable | 349,835 | — |
| Due to FSC CT, Inc. | 199,617 | 61,721 |
| Interest payable | 333,568 | — |
| Dividend payable | 1,800,027 | — |
| Payables from unsettled transactions | 13,630,000 | — |
| Credit facility payable | 89,826,910 | — |
| Total liabilities | 107,825,584 | 607,166 |
| Commitments and contingencies | ||
| Net assets: | ||
| Common stock, $0.01 par value, 150,000,000 shares authorized, 6,666,768 shares issued and outstanding at June 30, 2014 and September 30, 2013 | 66,668 | 66,668 |
| Additional paid-in-capital | 99,934,852 | 99,934,852 |
| Net unrealized depreciation on investments | (626,766) | — |
| Net realized gain on investments | 198,481 | — |
| Accumulated undistributed net investment income | 1,264,649 | 841,358 |
| Total net assets (equivalent to $15.13 per common share at June 30, 2014 and September 30, 2013) | 100,837,884 | 100,842,878 |
| Total liabilities and net assets | $ 208,663,468 | $ 101,450,044 |
| Fifth Street Senior Floating Rate Corp. | ||
| Consolidated Statements of Operations | ||
| (in thousands, except per share amounts) | ||
| (unaudited) | ||
|
Three months ended June 30, 2014 |
Nine months ended June 30, 2014 |
|
| Interest income: | ||
| Non-control/Non-affiliate investments | $ 2,979,029 | $ 6,849,976 |
| Interest on cash and cash equivalents | 353 | 2,570 |
| Total interest income | 2,979,382 | 6,852,546 |
| Fee income: | ||
| Non-control/Non-affiliate investments | 866,030 | 2,705,129 |
| Total fee income | 866,030 | 2,705,129 |
| Total investment income | 3,845,412 | 9,557,675 |
| Expenses: | ||
| Base management fee | 485,544 | 1,127,180 |
| Part I incentive fee | 349,835 | 630,432 |
| Professional fees | 247,967 | 573,667 |
| Board of Directors fees | 31,750 | 129,250 |
| Interest expense | 537,006 | 1,112,999 |
| Administrator expense | 142,965 | 361,589 |
| General and administrative expenses | 187,833 | 465,862 |
| Total expenses | 1,982,900 | 4,400,979 |
| Net investment income | 1,862,512 | 5,156,696 |
| Unrealized depreciation on investments: | ||
| Non-control/Non-affiliate investments | (13,387) | (626,766) |
| Net unrealized depreciation on investments | (13,387) | (626,766) |
| Realized gain (loss) on investments: | ||
| Non-control/Non-affiliate investments | (56,332) | 198,481 |
| Net realized gain (loss) on investments | (56,332) | 198,481 |
| Net increase in net assets resulting from operations | $ 1,792,793 | $ 4,728,411 |
| Net investment income per common share — basic and diluted | $ 0.28 | $ 0.77 |
| Earnings per common share — basic and diluted | $ 0.27 | $ 0.71 |
| Weighted average common shares outstanding — basic and diluted | 6,666,768 | 6,666,768 |
| Distributions per common share | $ 0.27 | $ 0.71 |
About Fifth Street Senior Floating Rate Corp.
Fifth Street Senior Floating Rate Corp. is a specialty finance company that provides financing solutions in the form of floating rate senior secured loans to mid-sized companies, primarily in connection with investments by private equity sponsors. The company's investment objective is to maximize its portfolio's total return by generating current income from its debt investments while seeking to preserve its capital. The company has elected to be regulated as a business development company and is externally managed by Fifth Street Management LLC. Fifth Street Management LLC is an SEC-registered investment adviser and leading alternative asset manager with $5 billion in assets under management. With a track record of more than 16 years, Fifth Street's nationally recognized platform has the ability to hold loans up to $150 million, commit up to $250 million and structure and syndicate transactions up to $500 million. Fifth Street received the 2014 ACG New York Champion's Award for "Senior Lender Firm of the Year" and was named both 2013 "Lender Firm of the Year" by The M&A Advisor and "Lender of the Year" by Mergers & Acquisitions. FSFR's website can be found at fsfr.fifthstreetfinance.com.
Forward-Looking Statements
This press release may contain certain forward-looking statements, including statements with regard to the future performance of the company. Words such as "believes," "expects," "estimates," "projects," "anticipates," 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 these factors are identified 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.