HIGHLIGHTS
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Fiscal year ended September 30, 2008
($ in millions, except per share amounts)
Investment portfolio $ 372.1
Net assets $ 210.7
Net asset value per share $ 10.00
Amount drawn under credit facility (excluding temporary draw) $ 162.0
Investment portfolio composition and yield:
Subordinated debt, second lien secured debt, and equity $ 293.3
Senior secured debt $ 78.8
Weighted average yield on debt 11.1%
Weighted average yield on core investment debt 12.5%
Weighted average yield on non-core senior secured debt 5.2%
Year Ended Quarter Ended
September 30, September 30,
Operating Results: 2008 2008
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Net investment income $ 18.6 $ 5.4
Net investment income per share $ 0.88 $ 0.26
Distributions declared per share $ 0.90 $ 0.24
Portfolio Activity:
Purchase of long term investments $ 206.8 $ 57.4
Sales and repayments of long term
investments $ 70.1 $ 55.7
Number of new portfolio companies
invested 14 3
Number of existing portfolio companies
invested 2 -
Number of portfolio companies at end of
period 37 37
CONFERENCE CALL AT 10:00 A.M. ET ON NOVEMBER 21, 2008
The Company will host a conference call at 10:00 a.m. (Eastern Time) on
Friday, November 21, 2008 to discuss its fourth quarter and fiscal year
2008 results. All interested parties are welcome to participate. You can
access the conference call by dialing (877) 856-1965 approximately 5-10
minutes prior to the call. International callers should dial (719)
325-4823. All callers should reference PennantPark Investment Corporation.
An archived replay of the call will be available through December 5, 2008
by calling (888)
203-1112. International callers please dial (719)
457-0820. For all replays, please reference conference ID #3324697.
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2008, our portfolio totaled $372.1 million and
consisted of $166.2 million of subordinated debt, $104.2 million of second
lien secured debt, $22.9 million of equity investments and $78.8 million of
senior secured loans. This compares to our portfolio which totaled $291.0
million and consisted of $57.3 million of subordinated debt, $67.8 million
of second lien secured debt, $7.0 million of equity investments and $158.9
million of senior secured loans as of September 30, 2007.
As of September 30, 2008, our core assets (consisting of subordinated debt,
second lien secured debt, equity investments and selective senior secured
loans) totaled $305.5 million and consisted of investments in nineteen
different companies with an average investment size of $16.1 million per
company and a weighted average yield of 12.5% on debt investments. This
compares to our core assets which totaled $132.1 million and consisted of
investments in eight different companies with an average investment size
of $16.5 million per company and weighted average yield of 13.0% on debt
investments as of September 30, 2007.
On September 30, 2008, our non-core senior secured loan portfolio totaled
$66.6 million and consisted of nineteen different companies (including one
company also in our core portfolio) with an average investment size of $3.5
million, and a weighted average yield of 5.2%. This compares to our
non-core senior secured loan portfolio which totaled $158.9 million and
consisted of thirty-one different companies (including one company also in
our core portfolio) with an average investment size of $5.3 million and a
weighted average yield of 7.5% as of September 30, 2007.
As of September 30, 2008, our overall portfolio consisted of thirty-seven
companies with an average investment size of $10.1 million and a weighted
average yield on debt investments of 11.1%, and was invested 45% in
subordinated debt, 28% in second lien secured debt, 6% in preferred and
common equity investments and 21% in senior secured loans. This compares to
our portfolio which consisted of thirty-eight companies with an average
investment size of $7.6 million and a weighted average yield on debt
investments of 10.1%, and which was invested 20% in subordinated debt, 23%
in second lien secured debt, 2% in common equity investments and 55% in
senior secured loans as of September 30, 2007.
Due to the overall decline in market values, our portfolio had unrealized
depreciation of $5.9 million and $48.1 million for the three months and
fiscal year ended September 30, 2008, respectively.
For the three months ended September 30, 2008, we invested $57.4 million in
three new portfolio companies with an overall average yield of 14.2% on
debt investments. Sales and repayments of primarily senior secured loans
for the same period totaled $55.7 million. For the fiscal year ended
September 30, 2008, we invested $206.8 million in fourteen new and two
existing portfolio companies with an overall average yield of 13.8% on debt
investments. Sales and repayments of primarily senior secured loans for the
same period totaled $70.1 million.
"We believe that we are well positioned to deal with the challenging market
and economic environment," said Arthur Penn, Chairman and Chief Executive
Officer. "We are well matched. Our underlying portfolio companies
generally have strong interest coverage that is paid to us as interest
income and covers our dividend. We have substantial liquidity to make new
investments in this opportunistic environment to generate more cash flow,
to grow income, and cushion for potential defaults. All of this should
translate into a stable dividend stream and over time, growth in Net Asset
Value."
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three months and
fiscal year ended September 30, 2008, for the three months ended September
30, 2007 and for the period from January 11, 2007 (inception) through
September 30, 2007.
We have adopted SFAS 157 on October 1, 2008 and believe that this
implementation does not affect the Company's financial position or its
results of operations.
We have also adopted SFAS 159 on October 1, 2008 and have made an
irrevocable election to apply the fair value option to our credit facility
liability. After adoption, subsequent changes in the fair value of our
credit facility will be recorded in the Statement of Operations. We have
not elected to apply the fair value option to any other financial assets or
liabilities.
Investment Income
Investment income for the three months ended September 30, 2008 and
September 30, 2007, was $11.4 million and $6.9 million, respectively.
Investment income for the three months ended September 30, 2008 was
primarily attributed to $4.7 million of interest income from senior secured
loan investments; $3.8 million from second lien secured debt investments;
and $2.1 million from subordinated debt investments. The remaining
investment income for the same period was primarily attributed to interest
income from short-term investments and to accretion of discount and
amortization of premium. This compares to investment income for the three
months ended September 30, 2007 which was primarily attributed to interest
income from senior secured loan investments.
Investment income for the fiscal year ended September 30, 2008 and for the
period from January 11, 2007 (inception) through September 30, 2007, was
$39.8 million and $13.1 million, respectively. Investment income for the
fiscal year ended September 30, 2008 was primarily attributed to $16.2
million of interest income from senior secured loan investments; $14.7
million from second lien secured debt investments; and $7.2 million from
subordinated debt investments. The remaining investment income for the
same period was primarily attributed to interest income from short-term
investments and to accretion of discount and amortization of premium. This
compares to investment income for the period from January 11, 2007
(inception) through September 30, 2007, which was primarily attributed to
interest income from senior secured loan investments.
Expenses
Net expenses for the three months ended September 30, 2008 and September
30, 2007, totaled $6.0 million and $2.6 million, respectively. Of these
totals, $1.9 million and $0.2 million were attributable to credit facility
related expenses, and approximately $811,000 and $1.2 million to general
and administrative expenses, for the same period, respectively. Net base
management fee for the same periods totaled $1.9 million and $1.1 million,
and performance-based incentive fee totaled $1.4 million and zero,
respectively.
Net expenses for the fiscal year ended September 30, 2008 and for the
period from January 11, 2007 (inception) through September 30, 2007,
totaled $21.2 million and $5.8 million, respectively. Of these totals, $6.3
million and $1.8 were attributable to credit facility related expenses, and
$4.4 million and $2.1 million (including non-recurring expenses) to general
and administrative expenses, for the same periods, respectively. Net base
management fee for the same periods totaled $6.7 million and $1.9 million,
and performance-based incentive fee totaled $3.8 million and zero,
respectively.
Net Investment Income
Net investment income totaled $5.4 million and $4.3 million or $0.26 and
$0.21 per share for the three months ended September 30, 2008 and September
30, 2007, respectively.
Net investment income totaled $18.6 million and $7.3 million or $0.88 and
$0.35 per share for the fiscal year ended September 30, 2008 and for the
period from January 11, 2007 (inception) through September 30, 2007,
respectively.
Net Realized Loss
Sales and repayments of long-term investments totaled $55.7 million and
$7.0 million, for the three months ended September 30, 2008 and September
30, 2007, respectively. Net realized losses totaled $10.5 million and
approximately $66,000, respectively, for the same periods, primarily due to
the sale of senior secured loans.
Sales and repayments of long-term investments totaled $70.1 million and
$99.6 million, respectively, for the fiscal year ended September 30, 2008
and for the period from January 11, 2007 (inception) through September 30,
2007. Net realized losses totaled $11.2 million and $82,000, respectively,
for the same periods.
Net Unrealized Depreciation on Investments and Cash Equivalents
The Company's investments and cash equivalents had a net increase in
unrealized depreciation of $5.9 million and $18.8 million, respectively,
for the three months ended September 30, 2008 and September 30, 2007,
respectively, primarily due to the overall decline in market values.
The Company's investments and cash equivalents had a net increase in
unrealized depreciation of $48.1 million and $23.9 million, for the fiscal
year ended September 30, 2008 and for the period from January 11, 2007
(inception) through September 30, 2007, respectively, primarily due to the
erosion in the market prices of leveraged finance instruments.
On September 30, 2008 and September 30, 2007, net unrealized depreciation
on investments totaled $72.0 million and $23.9 million, respectively.
Net Decrease in Net Assets from Operations
Net decrease in net assets resulting from operations totaled $11.0 million
and $14.5 million, or $0.53 and $0.70 per share, for the three months ended
September 30, 2008 and September 30, 2007, respectively.
Net decrease in net assets resulting from operations totaled $40.7 million
and $16.7 million, or $1.93 and $0.80 per share, respectively, for the
fiscal year ended September 30, 2008 and for the period from January 11,
2007 (inception) through September 30, 2007.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources are generated primarily
through its senior secured, multi-currency, $300 million, five-year
revolving credit facility maturing in June 2012 as well as from cash flows
from operations, investment sales and prepayments, and income earned from
investments and cash equivalents. On September 30, 2008, the Company had
$202.0 million in borrowings outstanding, including $40.0 million of
temporary draws invested in cash equivalents. Our operating activities
resulted in a net use of cash of $390.7 million and $37.9 million,
respectively, for the fiscal year ended September 30, 2008 and for the
period from January 11, 2007 (inception) through September 30, 2007, and
our financing activities resulted in a net inflow of cash of $173.0 million
and $295.8 million, respectively, for the same periods, primarily from net
borrowings under our credit facilities and prior year issuance of our
common stock.
DISTRIBUTIONS
Distributions declared to stockholders totaled $19.0 million and $7.6
million, or $0.90 and $0.36 per share, respectively, for the fiscal year
ended September 30, 2008 and for the period from January 11, 2007
(inception) through September 30, 2007. Tax characteristics of all
dividends will be reported to stockholders on form 1099-DIV after the end
of the calendar year.
AVAILABLE INFORMATION
PennantPark Investment Corporation will make available on its website its
Annual Report on Form 10-K, which also serves as its annual report to
stockholders. The Company has filed its Annual Report on Form 10-K with the
Securities Exchange Commission, and stockholders may find the report on
www.pennantpark.com. Stockholders may receive a hard copy of the annual
report free of charge by submitting a written request to the Company.
PENNANTPARK INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
(Audited)
September 30, September 30,
2008 2007
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Assets
Investments at fair value
Non-controlled, non-affiliated investments,
at fair value (cost -- $427,481,745 and
$298,789,297, respectively) $ 354,261,950 $ 274,679,030
Non-controlled, affiliated investments, at
fair value (cost -- $16,692,261 and
$16,092,573, respectively) 17,885,870 16,337,578
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Investments at fair value 372,147,820 291,016,608
Cash equivalents (cost -- $40,249,201 and
$258,016,351, respectively) 40,249,201 257,959,635
Interest receivable 6,046,199 4,517,850
Prepaid expenses and other assets 1,367,479 1,513,583
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Total assets 419,810,699 555,007,676
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Liabilities
Distributions payable 5,056,505 -
Payable for cash equivalents purchased - 252,759,931
Payable for investments purchased - 16,583,921
Unfunded investments - 3,989,948
Credit facility payable 202,000,000 10,000,000
Interest payable 725,317 170,989
Accrued other expenses 1,300,617 1,109,793
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Total liabilities 209,082,439 284,614,582
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Net Assets
Common stock, par value $0.001 per share,
100,000,000 shares authorized and 21,068,772
shares issued and outstanding 21,069 21,069
Paid-in capital in excess of par 294,586,604 294,586,604
Distributions in excess of net investment
income (602,660) (196,769)
Accumulated net realized loss (11,250,567) (95,832)
Net unrealized depreciation on investments
and cash equivalents (72,026,186) (23,921,978)
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Total net assets $ 210,728,260 $ 270,393,094
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Total liabilities and net assets $ 419,810,699 $ 555,007,676
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Net asset value per share $ 10.00 $ 12.83
PENNANTPARK INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS
(Audited)
Period from
January 11, 2007
(inception)
Year ended through
September 30, September 30,
2008 2007
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Investment income:
From non-controlled, non-affiliated
investments:
Interest $ 37,809,280 $ 12,013,028
Dividends 340,533 879,537
Other 255,944 4,995
From non-controlled, affiliated investments:
Interest 1,405,205 209,781
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Total investment income 39,810,962 13,107,341
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Expenses:
Base management fee 7,136,580 2,565,085
Performance-based incentive fee 3,791,900 -
Interest and other credit facility expenses 6,308,933 1,835,816
Administrative services expenses 2,301,973 778,587
Other general and administrative expenses 2,136,303 1,158,750
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Expenses before base management fee waiver 21,675,689 6,338,238
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Base management fee waiver (420,731) (641,273)
Income tax expense - 105,880
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Net expenses 21,254,958 5,802,845
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Net investment income 18,556,004 7,304,496
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Realized and unrealized gain (loss) on
investments and cash equivalents:
Net realized loss on investments and cash
equivalents (11,154,735) (81,769)
Net change in unrealized appreciation
(depreciation) on:
Non-controlled, non-affiliated
investments and cash equivalents (49,052,812) (24,166,983)
Non-controlled, affiliated investments 948,604 245,005
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Net change in unrealized depreciation (48,104,208) (23,921,978)
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Net realized and unrealized loss from
investments and cash equivalents (59,258,943) (24,003,747)
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Net decrease in net assets resulting from
operations $ (40,702,939) $ (16,699,251)
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Loss per common share $ (1.93) $ (0.80)
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ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business development company which
principally invests in U.S. middle-market private companies in the form of
mezzanine debt, senior secured loans and equity investments. From time to
time, we may also invest in public companies whose securities are thinly
traded. PennantPark Investment Corporation is managed by PennantPark
Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this press
release are forward-looking statements and are not guarantees of future
performance or results and involve a number of risks and uncertainties.
Actual results may differ materially from those in the forward-looking
statements as a result of a number of factors, including those described
from time to time in filings with the Securities and Exchange Commission.
The Company undertakes no duty to update any forward-looking statement made
herein. All forward-looking statements speak only as of the date of this
press release.
We may use words such as "anticipates," "believes," "expects," "intends,"
"will," "should," "may" and similar expressions to identify forward-looking
statements. Such statements are based on currently available operating,
financial and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially from our
historical experience and our present expectations. Undue reliance should
not be placed on such forward-looking statements as such statements speak
only as of the date on which they are made. We do not undertake to update
our forward-looking statements unless required by law.
Contact Information: Contact: Aviv Efrat PennantPark Investment Corporation (212) 905-1000 Or visit us on the web at: www.pennantpark.com