PURCHASE, N.Y., Jan. 29, 2016 (GLOBE NEWSWIRE) -- MVC Capital, Inc. (NYSE:MVC), a publicly traded business development company that makes private debt and equity investments, today announced its financial results for the fiscal third quarter ended July 31, 2015.
Fiscal Third Quarter 2015 Highlights
- NAV per share of $13.18 as of July 31, 2015.
- Interest income of $4.9 million for the third quarter 2015, compared to $3.2 million in the same period one year ago.
- Interest income grew 52% over the same period last year, driven by the redeployment of capital from sales of equity investments.
- Sold Vestal Manufacturing Enterprises for $17.9 million in gross proceeds1, and reinvested $6.25 million into a yielding investment and $250,000 in common equity into Vestal.
- Invested $18.0 million in four new yielding investments and $1.0 million in one follow-on yielding investment.
- Paid a quarterly dividend in the third quarter of $0.135 per share, or a total of $3.1 million; marking the Company’s 41st consecutive quarterly dividend.
Fiscal Third Quarter 2015 Results
| Quarter Ended | Nine Month Period Ended | ||||||||||||||||||
| (Unaudited) ($ in thousands except for per share data) | Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Jul-15 | Jul-14 | |||||||||||||
| Total operating income | 7,524 | 5,273 | 4,856 | 4,325 | 17,653 | 15,492 | |||||||||||||
| Management fee | 1,899 | 2,066 | 1,980 | 2,121 | 5,945 | 6,561 | |||||||||||||
| Portfolio fees - asset management | 189 | 187 | 204 | 386 | 580 | 600 | |||||||||||||
| Management fee - asset management | 77 | (18 | ) | 16 | (126 | ) | 75 | 480 | |||||||||||
| Administrative | 1,136 | 1,325 | 1,159 | 942 | 3,620 | 2,730 | |||||||||||||
| Interest, fees and other borrowing costs | 2,627 | 2,616 | 2,455 | 2,355 | 7,698 | 7,087 | |||||||||||||
| Net Incentive compensation | (3,404 | ) | (3,462 | ) | (2,120 | ) | (2,339 | ) | (8,986 | ) | (2,411 | ) | |||||||
| Total waiver by adviser | (38 | ) | (37 | ) | (38 | ) | (37 | ) | (113 | ) | (113 | ) | |||||||
| Tax expense | 1 | 1 | - | - | 2 | 2 | |||||||||||||
| Net operating income before net realized and unrealized gains | 5,037 | 2,595 | 1,200 | 1,023 | 8,832 | 556 | |||||||||||||
| Net decrease in net assets resulting from operations | (13,959 | ) | (11,813 | ) | (9,743 | ) | (10,614 | ) | (35,515 | ) | (9,228 | ) | |||||||
| Net decrease in net assets resulting from operations per share | (0.61 | ) | (0.52 | ) | (0.43 | ) | (0.46 | ) | (1.56 | ) | (0.42 | ) | |||||||
| Net asset value per share | 13.18 | 13.93 | 14.58 | 15.15 | 13.18 | 15.75 | |||||||||||||
In the third quarter of 2015, the Company earned $4.9 million in interest income, $1.0 million in dividend income and $1.7 million in fee and other income, compared to $3.2 million, $811,000 and $1.0 million for the third quarter of 2014, respectively. The increase in interest income was primarily due to the Company’s increased focus on yielding investments.
The Company reported net operating income of $5.0 million for the third quarter, compared to a net operating loss of $1.4 million for the same quarter in 2014.
Fiscal Third Quarter 2015 Portfolio Adjustments
As of July 31, 2015, the Company's net assets were $299.2 million, or $13.18 per share, compared with net assets of $316.2 million, or $13.93 per share, at the beginning of the quarter and $357.6 million, or $15.75 per share, at the end of the 2014 fiscal third quarter.
During the third quarter, the Valuation Committee adjusted the fair values of 21 portfolio companies, resulting in a net decrease of $20.6 million or $0.91 per share2.
The Valuation Committee took into account many factors, including the performance of the portfolio companies, as well as the impact of changes in market multiples within certain sectors and fluctuations in currency valuations, particularly in the Euro.
| Write ups (downs) | Quarter Ended | Nine Month Period Ended | ||||||||||||||
| Active Deals: | Q3 2015 | Q2 2015 | Q1 2015 | Jul-15 | Jul-14 | |||||||||||
| Advantage Insurance Ltd. | $ | 301,800 | $ | (27,636 | ) | $ | 20,000 | $ | 294,164 | $ | 96,000 | |||||
| Biogenics Reagents | (2,270 | ) | 852,426 | 27,987 | 878,143 | 275,000 | ||||||||||
| Biovations Acquisition Company | (167,292 | ) | -- | -- | (167,292 | ) | -- | |||||||||
| Biovation Holdings, Inc. | -- | (2,675,434 | ) | (716,230 | ) | (3,391,664 | ) | (89,295 | ) | |||||||
| Centile Holding B.V. | 48,000 | (98,000 | ) | (538,000 | ) | (588,000 | ) | (48,000 | ) | |||||||
| Custom Alloy Corporation | 191,013 | (10,688 | ) | (84,187 | ) | 96,138 | 2,660,000 | |||||||||
| Equus Total Return | (266,679 | ) | (133,339 | ) | (1,022,268 | ) | (1,422,286 | ) | 947,999 | |||||||
| Foliofn, Inc. | (383,000 | ) | (82,000 | ) | 109,000 | (356,000 | ) | (1,073,000 | ) | |||||||
| Freshii USA Inc | -- | -- | -- | -- | 23,131 | |||||||||||
| G3K Displays | -- | -- | -- | -- | (5,625,000 | ) | ||||||||||
| Inland Environmental & Remediation, Inc. | (10,000,000 | ) | (1,434,989 | ) | (713,000 | ) | (12,147,989 | ) | -- | |||||||
| JSC Tekers Invest | (35,000 | ) | 5,000 | (599,106 | ) | (629,106 | ) | (499,388 | ) | |||||||
| Morey's Seafood International LLC | (753,495 | ) | (252,867 | ) | -- | (1,006,362 | ) | -- | ||||||||
| MVC Automotive Group B.V. | (615,700 | ) | 246,000 | (5,894,000 | ) | (6,263,700 | ) | (2,259,165 | ) | |||||||
| MVC Private Equity Fund, L.P. | 751,380 | 609,647 | (758,656 | ) | 602,371 | 3,474,324 | ||||||||||
| NPWT Corporation | (1,000 | ) | (13,000 | ) | (38,000 | ) | (52,000 | ) | (148,000 | ) | ||||||
| Octagon Credit Investors, LLC | -- | -- | -- | -- | (749,648 | ) | ||||||||||
| Ohio Medical Corporation | (6,000,000 | ) | (10,500,000 | ) | -- | (16,500,000 | ) | (800,000 | ) | |||||||
| Pre-Paid Legal Services, Inc. | -- | -- | (100,000 | ) | (100,000 | ) | 100,000 | |||||||||
| RuMe, Inc. | 250,000 | 700,000 | 1,000,000 | 1,950,000 | 74,831 | |||||||||||
| Security Holdings, B.V. | (2,000,000 | ) | (850,000 | ) | (1,100,000 | ) | (3,950,000 | ) | (446,000 | ) | ||||||
| SGDA Europe B.V. | (1,050,000 | ) | (1,348,000 | ) | (748,664 | ) | (3,146,664 | ) | (1,977,451 | ) | ||||||
| SIA Tekers Invest | (117,000 | ) | (21,000 | ) | (170,000 | ) | (308,000 | ) | (116,000 | ) | ||||||
| Summit Research Labs | -- | -- | -- | -- | -- | |||||||||||
| Turf Products, LLC | 16,681 | 1,503 | 1,563 | 19,747 | (92,000 | ) | ||||||||||
| U.S. Gas & Electric | -- | -- | -- | -- | (9,000,000 | ) | ||||||||||
| U.S. Spray Drying Holding Company | -- | -- | 387,000 | 387,000 | -- | |||||||||||
| Velocitius B.V. | (774,057 | ) | (899,000 | ) | (1,129,000 | ) | (2,802,057 | ) | (2,678,000 | ) | ||||||
| Vestal Manufacturing Enterprises, Inc. (escrow) | (15,408 | ) | -- | -- | (15,408 | ) | -- | |||||||||
| Vestal Manufacturing Enterprises, Inc. (common stock) | -- | -- | -- | -- | 4,450,000 | |||||||||||
| TOTAL | $ | (20,622,027 | ) | $ | (15,931,377 | ) | $ | (12,065,561 | ) | $ | (48,618,965 | ) | $ | (13,499,662 | ) | |
Quarterly Investment Activity
During the quarter, MVC made four new yielding investments of $18.0 million and one common stock investment of $250,000, totaling approximately $18.3 million in Vestal Manufacturing Enterprises, Inc. (“Vestal”), Thunderdome Restaurants, LLC, Initials, Inc. and United States Technologies, Inc.
MVC also made four follow-on investments totaling approximately $2.6 million in MVC Automotive Group B.V., Centile Holding B.V., Biovation Acquisition Co. and Biogenic Reagents.
During the quarter, MVC monetized its investments in Prepaid Legal Services, Inc., Velocitius B.V. and Vestal for gross proceeds of approximately $37.1 million.
During the third quarter of 2015, MVC did not purchase any of its shares under the repurchase program authorized by the Board of Directors in April 2013.
Liquidity
As of July 31, 2015, the Company had investments in portfolio companies totaling $400.4 million and cash and cash equivalents of approximately $22.1 million, excluding restricted cash and cash equivalents of $5.5 million.
Dividends
The board of directors (the “Board”) declared a dividend of $0.135 per share, or a total of $3.1 million, which was paid on July 31, 2015 to shareholders of record on July 27, 2015. The distribution represents the forty-first consecutive quarterly dividend paid by the Company since implementing a dividend policy in July of 2005. The dividends issued under current management have resulted in approximately $120 million in distributions to the Company's shareholders through July 31, 2015 and approximately $130 million through January 8, 2016, including the regular dividend of $0.135 and special dividend of $0.17 per share declared on December 21, 2015.
Certain Subsequent Events
On October 29, 2015, the continuation of the Advisory Agreement between The Tokarz Group Advisers, LLC ("the Adviser") and the Company was approved by the Board for the 2016 fiscal year. For fiscal 2016, the Adviser agreed to waive a portion of the base management fee so that it is effectively reduced from 2.00% to 1.50%. Additionally, the Adviser agreed to waive $1 million of any incentive fee earned on capital gains if and when payable. The Company and the Adviser also agreed to reduce the expense cap for fiscal 2016 to 3.25% under the modified methodology (as detailed in the Form 10-Q for the period ended January 31, 2015 filed with the Securities and Exchange Commission).
On December 9, 2015, the Company entered into a three-year, $50 million revolving borrowing base credit facility with Santander Bank N.A. as a lender and lead agent and Wintrust Bank as a lender and syndication agent. The revolving credit facility can, under certain conditions, be increased up to $85 million. The new facility bears an interest rate of LIBOR plus 3.75% or the prime rate plus 1% (at MVC’s option), and includes a 1% closing fee of the commitment amount and a 0.75% unused fee. The new facility replaced the $30.0 million Bridge Loan with Firstrust Bank that matured on December 31, 2015. JMP Securities LLC served as financial advisor to MVC.
For additional subsequent event details, please reference the Subsequent Events section of the Form 10-Q for the fiscal quarter ended July 31, 2015 filed with the Securities and Exchange Commission.
MVC-G
About MVC Capital, Inc.
MVC is a business development company traded on the New York Stock Exchange that provides long-term debt and equity investment capital to fund growth, acquisitions and recapitalizations of companies in a variety of industries. For additional information about MVC, please visit the MVC's website at www.mvccapital.com.
Safe Harbor Statement
The information contained in this press release contains 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 and conditions to differ materially from those projected in these forward-looking statements, including: MVC Capital's ability to execute its yield investment strategy; the performance of MVC Capital's investments; MVC Capital’s actual level of operating expenses and net expense ratio; the timing of the filing of the 2015 annual report; the actual financial results and fair valuations to be contained in the report; and changes in economic or financial market conditions and other factors that are enumerated in the Company's periodic filings with the Securities and Exchange Commission. MVC Capital disclaims and does not undertake any obligation to update or revise any forward-looking statement in this press release.
The press release contains unaudited financial results. For ease of review, we have excluded the word "approximately" when rounding the results.
There can be no assurance that future dividend payments to MVC or MVC dividend payments will match or exceed historic ones, or that they will be made at all. There can be no assurance that MVC will achieve its investment objective.
1 The anticipated $17.9 million in gross proceeds assumes the full receipt of the escrow proceeds of $308,000.
2 Based on shares outstanding as of July 31, 2015.