GREENWICH, CT, May 11, 2015 (GLOBE NEWSWIRE) -- Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) ("FSFR" or "we") announces its financial results for the second fiscal quarter ended March 31, 2015.
Second Fiscal Quarter 2015 Financial Highlights
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Net investment income for the quarter ended March 31, 2015 was $6.7 million or $0.23 per share;
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Net asset value per share was $12.46 as of March 31, 2015;
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Weighted average cash yield on debt investments increased to 7.4% at March 31, 2015, as compared to 6.7% at March 31, 2014;
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We closed $109.9 million of investments during the quarter ended March 31, 2015; and
- Our Board of Directors has decided to move from quarterly to monthly distributions and declared distributions of $0.10 per share from May through August 2015.
Portfolio and Investment Activity
Our Board of Directors determined the fair value of our portfolio at March 31, 2015 to be $583.6 million, as compared to $300.0 million at September 30, 2014. Total assets increased to $673.9 million at March 31, 2015, as compared to $412.5 million at September 30, 2014.
During the quarter ended March 31, 2015, we closed $109.9 million of investments in eight new and one existing portfolio companies, and funded $116.5 million across new and existing portfolio companies. We also received $128.7 million in connection with full or partial payoffs and sales of 20 of our debt investments.
At March 31, 2015, our portfolio consisted of investments in 59 companies, and 99.9% of our portfolio consisted of senior secured debt investments that bore interest at floating rates, at cost and fair value. The portfolio remained diversified and our average portfolio company debt investment size at fair value was $9.9 million at March 31, 2015. The average portfolio company EBITDA was $64.9 million as of March 31, 2015.
Our weighted average cash yield on debt investments was 7.4% at March 31, 2015, which increased from 6.7% at March 31, 2014.
"During the March quarter, FSFR continued to optimize its capital structure, closing on a $175 million credit facility with Citibank. This facility provides us with the necessary capital to continue investing in strong risk-adjusted senior secured loans and also allows us to reach our targeted leverage range," stated Ivelin M. Dimitrov, Chief Executive Officer, "Additionally, since the end of the March quarter, our joint venture with the Glick Family entered into a $200 million credit facility with Credit Suisse, which the FSFR Glick JV has already utilized to invest in an initial portfolio of senior secured loans. We believe the joint venture should generate a low-teens return on FSFR's investment and be accretive to earnings as we continue to ramp it over the upcoming quarters."
Results of Operations
Total investment income for the quarter ended March 31, 2015 was $11.9 million, consisting of $9.6 million of interest income and $2.3 million of fee income from portfolio investments. For the quarter ended March 31, 2014, total investment income was $3.4 million, which consisted of $2.6 million of interest income and $0.8 million of fee income from portfolio investments.
Total expenses for the quarters ended March 31, 2015 and March 31, 2014 were $5.2 million and $1.6 million, respectively.
Liquidity and Capital Resources
As of March 31, 2015, we had $78.0 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $583.6 million, receivables from unsettled transactions of $5.9 million, distribution payable of $8.8 million, payables from unsettled transactions of $12.3 million and $280.1 million borrowings outstanding under our credit facilities.
As of September 30, 2014, we had $109.6 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $300.0 million, distribution payable of $8.8 million and payables from unsettled transactions of $27.9 million.
Dividend Policy
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 would 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.
- 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 March 31, 2015 and September 30, 2014, the distribution of our investments on the 1 to 4 investment ranking scale at fair value was as follows:
| March 31, 2015 | September 30, 2014 | |||||
| Investment Ranking | Fair Value | % of Portfolio | Leverage Ratio | Fair Value | % of Portfolio | Leverage Ratio |
| 1 | — | — | — | — | — | — |
| 2 | $ 583,559,421 | 100.00% | 4.48 | $ 300,001,397 | 100.00% | 4.48 |
| 3 | — | — | — | — | — | — |
| 4 | — | — | — | — | — | — |
| Total | $ 583,559,421 | 100.00% | 4.48 | $ 300,001,397 | 100.00% | 4.48 |
Recent Developments
In April 2015, we invested $53.4 million in FSFR Glick JV LLC ("FSFR Glick JV") to facilitate the acquisition of $94.4 million in principal amount of senior secured loans. FSFR Glick JV has drawn $34.4 million under its $200.0 million revolving credit facility with Credit Suisse Securities (USA) LLC. These transactions were in connection with our agreement in November 2014 with entities controlled by members of the Glick Family ("GF Funding") to provide $100.0 million of subordinated notes and equity to the FSFR Glick JV, with us providing $87.5 million and GF Funding providing $12.5 million. The FSFR Glick JV invests in middle market and other corporate debt securities. In future reporting periods, our debt and equity investment in the FSFR Glick JV will be accounted for as a control investment within the Consolidated Schedule of Investments.
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Fifth Street Senior Floating Rate Corp. Consolidated Statements of Assets and Liabilities (unaudited) |
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March 31, 2015 |
September 30, 2014 |
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| ASSETS | ||
| Investments at fair value: | ||
| Non-control/Non-affiliate investments (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247) | $ 583,559,421 | $ 300,001,397 |
| Total investments at fair value (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247) | 583,559,421 | 300,001,397 |
| Cash and cash equivalents | 72,308,303 | 107,429,760 |
| Restricted cash | 5,680,208 | 2,127,405 |
| Interest and fees receivable | 1,350,840 | 1,120,010 |
| Due from portfolio companies | 463,848 | 200,840 |
| Receivables from unsettled transactions | 5,877,625 | — |
| Deferred financing costs | 4,556,252 | 1,625,932 |
| Other assets | 144,268 | — |
| Total assets | $ 673,940,765 | $ 412,505,344 |
| LIABILITIES AND NET ASSETS | ||
| Liabilities: | ||
| Accounts payable, accrued expenses and other liabilities | $ 1,980,680 | $ 1,213,683 |
| Base management fee payable | 1,523,159 | 475,437 |
| Part I incentive fee payable | 1,161,808 | 926,180 |
| Part II incentive fee payable | — | 54,826 |
| Due to FSC CT | 213,019 | 239,617 |
| Interest payable | 813,942 | 205,646 |
| Distribution payable | 8,840,030 | 8,840,030 |
| Payables from unsettled transactions | 12,284,000 | 27,863,000 |
| Credit facilities payable | 280,097,646 | — |
| Total liabilities | 306,914,284 | 39,818,419 |
| Commitments and contingencies | ||
| Net assets: | ||
| Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding at March 31, 2015 and September 30, 2014 | 294,668 | 294,668 |
| Additional paid-in-capital | 374,101,816 | 374,101,816 |
| Net unrealized appreciation (depreciation) on investments | (3,547,065) | 4,150 |
| Net realized loss on investments | (1,556,035) | — |
| Accumulated overdistributed net investment income | (2,266,903) | (1,713,709) |
| Total net assets (equivalent to $12.46 and $12.65 per common share at March 31, 2015 and September 30, 2014, respectively) | 367,026,481 | 372,686,925 |
| Total liabilities and net assets | $ 673,940,765 | $ 412,505,344 |
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Fifth Street Senior Floating Rate Corp. Consolidated Statements of Operations (unaudited) |
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Three months ended March 31, 2015 |
Three months ended March 31, 2014 |
Six months ended March 31, 2015 |
Six months ended March 31, 2014 |
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| Interest income: | ||||
| Non-control/Non-affiliate investments | $ 9,621,423 | $ 2,567,868 | $ 17,505,207 | $ 3,870,947 |
| Interest on cash and cash equivalents | 5,250 | 197 | 9,185 | 2,217 |
| Total interest income | 9,626,673 | 2,568,065 | 17,514,392 | 3,873,164 |
| Fee income: | ||||
| Non-control/Non-affiliate investments | 2,265,158 | 837,855 | 10,237,804 | 1,839,099 |
| Total fee income | 2,265,158 | 837,855 | 10,237,804 | 1,839,099 |
| Total investment income | 11,891,831 | 3,405,920 | 27,752,196 | 5,712,263 |
| Expenses: | ||||
| Base management fee | 1,523,167 | 407,087 | 2,680,078 | 641,636 |
| Part I incentive fee | 1,161,808 | 280,597 | 3,754,403 | 280,597 |
| Part II incentive fee | — | — | (54,826) | — |
| Professional fees | 188,709 | 204,167 | 498,495 | 325,699 |
| Board of Directors fees | 86,050 | 43,250 | 184,300 | 97,500 |
| Interest expense | 1,705,137 | 434,960 | 2,591,292 | 575,993 |
| Administrator expense | 177,562 | 111,364 | 423,697 | 218,624 |
| General and administrative expenses | 347,740 | 133,781 | 547,891 | 278,029 |
| Total expenses | 5,190,173 | 1,615,206 | 10,625,330 | 2,418,078 |
| Net investment income | 6,701,658 | 1,790,714 | 17,126,866 | 3,294,185 |
| Unrealized appreciation (depreciation) on investments: | ||||
| Non-control/Non-affiliate investments | 837,791 | (318,940) | (3,551,215) | (613,379) |
| Net unrealized appreciation (depreciation) on investments | 837,791 | (318,940) | (3,551,215) | (613,379) |
| Realized gain (loss) on investments: | ||||
| Non-control/Non-affiliate investments | (996,243) | 232,188 | (1,556,035) | 254,813 |
| Net realized gain (loss) on investments | (996,243) | 232,188 | (1,556,035) | 254,813 |
| Net increase in net assets resulting from operations | $ 6,543,206 | $ 1,703,962 | $ 12,019,616 | $ 2,935,619 |
| Net investment income per common share — basic and diluted | $ 0.23 | $ 0.27 | $ 0.58 | $ 0.49 |
| Earnings per common share — basic and diluted | $ 0.22 | $ 0.26 | $ 0.41 | $ 0.44 |
| Weighted average common shares outstanding — basic and diluted | 29,466,768 | 6,666,768 | 29,466,768 | 6,666,768 |
| Distributions per common share | $ 0.30 | $ 0.23 | $ 0.60 | $ 0.44 |
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. FSFR'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 a subsidiary of Fifth Street Asset Management Inc. (NASDAQ:FSAM), a growing credit-focused asset manager with over $6 billion in assets under management across multiple public and private vehicles. With a track record of 17 years, Fifth Street's nationally recognized platform has the ability to hold loans 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.