NEW YORK, Nov. 6, 2014 (GLOBE NEWSWIRE) -- OHA Investment Corporation (Nasdaq:OHAI) (the "Company") today announced its financial results for the third quarter of 2014. Oak Hill Advisors, L.P. became the Company's new investment advisor on September 30, 2014.
Management will present the Company's new investment strategy and future plans, along with a discussion of the quarterly results summarized below, on a webcast today at 11:00 a.m. Eastern Time.
| Highlights for the quarter ended September 30, 2014: |
| Operating results: |
| Total investment income: $5.6 million, or $0.27 per share |
| Costs related to strategic alternatives review: $5.4 million, or $0.26 per share |
| Net investment loss: $2.8 million, or $0.14 per share |
| Net asset value: $167.2 million, or $8.11 per share |
| Quarterly dividends declared: $0.16 per share |
| Portfolio and investment activity: |
| New investments in portfolio securities during the quarter: $1.0 million |
| Realization of portfolio securities during the quarter: $11.4 million |
| Fair value of portfolio investments at September 30, 2014: $171.0 million |
| Weighted average yield on portfolio investments at September 30, 2014: 10.4% at cost; 11.3% at current fair value |
| Number of portfolio companies at September 30, 2014: 13 |
Operating Results
Investment income totaled $5.6 million for the third quarter of 2014, decreasing 7% compared to $6.0 million in the corresponding quarter of 2013. The decline in 2014 was primarily a result of a decrease in the size of our investment portfolio due to realizations in excess of new investments between the two periods. Our portfolio balance, on a cost basis, decreased from $227.8 million at September 30, 2013 to $186.5 million at September 30, 2014, primarily as a result of realizations in excess of new portfolio investments.
Operating expenses for the third quarter of 2014 were $8.3 million, an increase of $5.0 million, compared to operating expenses for the third quarter of 2013. The increase was primarily attributable to $5.4 million, or $0.26 per share, of costs related to our strategic alternatives review that resulted in the appointment of Oak Hill Advisors, L.P. as our new investment advisor.
The resulting net investment loss was $2.8 million, or $0.14 per share, for the third quarter of 2014, compared to $2.6 million of net investment income, or $0.13 per share, for the third quarter of 2013.
We recorded net realized and unrealized losses on investments totaling $3.3 million, or $0.16 per share, during the third quarter of 2014, compared to net realized and unrealized gains on investments totaling $2.4 million, or $0.12 per share, during the third quarter of 2013. Third quarter 2014 losses were primarily driven by a reduction in the fair value of our Senior Secured Term Loan and equity investment in Contour Highwall Holdings, LLC ("Contour"), by $3.9 million to an aggregate value of $7.5 million. We recorded this adjustment in value to reflect the current weak industry conditions in the highwall coal mining market, and their impact on Contour's operations, cash flows and underlying value of its assets.
Overall, we experienced a net decrease in net assets resulting from operations of $6.1 million for the third quarter of 2014. As a result, and after declaring dividends during the period of $0.16 per share, our net asset value decreased from $8.57 per share as of June 30, 2014 to $8.11 per share as of September 30, 2014.
Subsequent Portfolio Activity
On November 4, 2014, in connection with a refinancing, Nekoosa Coated Products Holdings, Inc. ("Nekoosa"), prepaid its Second Lien Term Loan in the amount of $18.4 million. This prepayment included a 2%, or $0.4 million, call premium, and we will record previously unamortized original issue discount of $0.3 million as additional interest income in the fourth quarter as a result of this prepayment. This investment was initiated in April 2013 and generated an internal rate of return of 19.6% and a return on investment of 1.3x.
Webcast at 11:00 a.m. Eastern Time on November 6, 2014
We invite all interested persons to participate in our webcast on Thursday, November 6, 2014 at 11:00 a.m. Eastern Time. The webcast will be accessible via the internet, on our Investor Relations page at www.ohainvestmentcorporation.com. The dial-in number for the call is (877) 303-7617. International callers can access the conference by dialing (760) 666-3609. Callers are encouraged to dial in at least 5-10 minutes prior to the call.
| OHA INVESTMENT CORPORATION | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands, Except Share and Per Share Amounts) | ||
| September 30, | December 31, | |
| 2014 | 2013 | |
| (Unaudited) | ||
| Assets | ||
| Investments in portfolio securities at fair value | ||
| Control investments | ||
| (cost: $28,655 and $27,459, respectively) | $ 14,953 | $ 24,218 |
| Affiliate investments | ||
| (cost: $17,855 and $17,510, respectively) | 16,970 | 17,043 |
| Non-affiliate investments | ||
| (cost: $140,004 and $176,988, respectively) | 139,033 | 170,110 |
| Total portfolio investments | ||
| (cost: $186,514 and $221,957, respectively) | 170,956 | 211,371 |
| Investments in U.S. Treasury Bills at fair value | ||
| (cost: $30,610 and $46,000, respectively) | 30,610 | 46,000 |
| Total investments | 201,566 | 257,371 |
| Cash and cash equivalents | 55,602 | 29,298 |
| Accounts receivable and other current assets | 881 | 464 |
| Interest receivable | 675 | 2,397 |
| Prepaid assets | 1,807 | 3,093 |
| Total current assets | 58,965 | 35,252 |
| Total assets | $ 260,531 | $ 292,623 |
| Liabilities and net assets | ||
| Current liabilities | ||
| Accounts payable and accrued expenses | $ 1,718 | $ 1,313 |
| Management and incentive fees payable | 1,254 | 1,387 |
| Dividends payable | 3,299 | 3,280 |
| Income taxes payable | 56 | 91 |
| Short-term debt | 30,000 | 45,000 |
| Total current liabilities | 36,327 | 51,071 |
| Long-term debt | 57,000 | 53,000 |
| Total liabilities | 93,327 | 104,071 |
| Commitments and contingencies | ||
| Net assets | ||
| Common stock, $.001 par value, 250,000,000 shares authorized; 20,616,422 and 20,499,188 shares issued and outstanding | 21 | 20 |
| Paid-in capital in excess of par | 248,758 | 247,759 |
| Undistributed net investment income (loss) | (9,843) | (583) |
| Undistributed net realized capital gain (loss) | (59,292) | (51,176) |
| Net unrealized appreciation (depreciation) on investments | (12,440) | (7,468) |
| Total net assets | 167,204 | 188,552 |
| Total liabilities and net assets | $ 260,531 | $ 292,623 |
| Net asset value per share | $ 8.11 | $ 9.20 |
| OHA INVESTMENT CORPORATION | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In Thousands, Except Per Share Data) | ||||
| (Unaudited) | ||||
| For The Three Months Ended | For The Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Investment income | ||||
| Interest income: | ||||
| Control investments | $ 456 | $ 546 | $ 1,480 | $ 1,439 |
| Affiliate investments | 630 | 513 | 1,700 | 4,568 |
| Non-affiliate investments | 3,414 | 3,896 | 10,510 | 12,356 |
| Dividend income: | ||||
| Non-affiliate investments | 1,010 | 1,005 | 2,992 | 2,983 |
| Royalty income, net of amortization: | ||||
| Control investments | 22 | 19 | 63 | 34 |
| Non-affiliate investments | 10 | 16 | 65 | 16 |
| Other income (loss) | 31 | (29) | 134 | (14) |
| Total investment income | 5,573 | 5,966 | 16,944 | 21,382 |
| Operating expenses | ||||
| Interest expense and bank fees | 405 | 655 | 1,569 | 2,468 |
| Management and incentive fees | 1,254 | 1,405 | 3,906 | 4,602 |
| Costs related to strategic alternatives review | 5,352 | -- | 6,017 | -- |
| Professional fees | 210 | 271 | 777 | 830 |
| Insurance expense | 187 | 180 | 545 | 539 |
| Other general and administrative expenses | 936 | 811 | 3,476 | 2,478 |
| Total operating expenses | 8,344 | 3,322 | 16,290 | 10,917 |
| Income tax provision, net | 17 | 11 | 56 | 49 |
| Net investment income (loss) | (2,788) | 2,633 | 598 | 10,416 |
| Net realized capital gain (loss) on investments | ||||
| Control investments | -- | -- | (325) | (464) |
| Affiliate investments | -- | -- | 95 | (250) |
| Non-affiliate investments | 962 | -- | (7,886) | 1,550 |
| Benefit (provision) for taxes on realized gain (loss) | -- | (53) | -- | (53) |
| Total net realized capital gain (loss) on investments | 962 | (53) | (8,116) | 783 |
| Net unrealized appreciation (depreciation) on investments | ||||
| Control investments | (3,644) | (459) | (10,460) | (3,469) |
| Affiliate investments | 666 | 189 | (418) | 270 |
| Non-affiliate investments | (1,275) | 2,741 | 5,906 | (7,044) |
| Benefit (provision) for taxes on unrealized appreciation (depreciation) on investments | -- | -- | -- | 1 |
| Total net unrealized appreciation (depreciation) on investments | (4,253) | 2,471 | (4,972) | (10,242) |
| Net increase (decrease) in net assets resulting from operations | $ (6,079) | $ 5,051 | $ (12,490) | $ 957 |
| Net increase (decrease) in net assets resulting from operations per common share | $ (0.30) | $ 0.25 | $ (0.61) | $ 0.05 |
| Dividends declared per common share | $ 0.16 | $ 0.16 | $ 0.48 | $ 0.48 |
| Weighted average shares outstanding - basic and diluted | 20,500 | 20,499 | 20,500 | 20,764 |
| OHA INVESTMENT CORPORATION | ||||
| PER SHARE DATA | ||||
| (Unaudited) | ||||
| For The Three Months Ended | For The Nine Months Ended | |||
| September 30, | September 30, | |||
| Per Share Data (1) | 2014 | 2013 | 2014 | 2013 |
| Net asset value, beginning of period | $ 8.57 | $ 9.13 | $ 9.20 | $ 9.57 |
| Net investment income (loss) | (0.14) | 0.13 | 0.03 | 0.50 |
| Net realized and unrealized gain (loss) on investments | (0.16) | 0.12 | (0.64) | (0.45) |
| Net increase (decrease) in net assets resulting from operations | (0.30) | 0.25 | (0.61) | 0.05 |
| Dividends declared | (0.16) | (0.16) | (0.48) | (0.48) |
| Other (2) | -- | -- | -- | 0.08 |
| Net asset value, end of period | $ 8.11 | $ 9.22 | $ 8.11 | $ 9.22 |
| (1) Per Share Data is based on weighted average number of common shares outstanding for the period. | ||||
| (2) Represents the impact of common stock repurchases. | ||||
About OHA Investment Corporation
OHA Investment Corporation (Nasdaq:OHAI) is a specialty finance company designed to provide its investors with current income and capital appreciation. OHAI focuses primarily on providing creative direct lending solutions to middle market private companies across industry sectors. OHAI is externally managed by Oak Hill Advisors, L.P., a leading independent investment firm (www.oakhilladvisors.com). Oak Hill Advisors has deep experience in direct lending, having invested approximately $3 billion in nearly 100 direct lending investments over the past 12 years.
OHAI was formerly known as NGP Capital Resources Company prior to Oak Hill Advisors assuming the external manager role for the Company on September 30, 2014. OHAI has elected to be regulated as a business development company, or a BDC, under the Investment Company Act of 1940.
Forward-Looking Statements
This press release may contain forward-looking statements. We may use words such as "anticipates," "believes," "intends," "plans," "expects," "projects," "estimates," "will," "should," "may" and similar expressions to identify forward-looking statements. These forward-looking statements are subject to various risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with the timing or likelihood of transaction closings, changes in interest rates, availability of transactions, the future operating results of our portfolio companies, regulatory factors, changes in regional, national, or international economic conditions and their impact on the industries in which we invest, other changes in the conditions of the industries in which we invest and other factors enumerated in our filings with the Securities and Exchange Commission (the "SEC"). You should not place undue reliance on such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update our forward-looking statements made herein, unless required by law.
Persons considering an investment in OHA Investment Corporation should consider the investment objectives, risks, and charges and expenses of the Company carefully before investing. Such information and other information about us is available in our annual report on Form 10-K, in our quarterly reports on Form 10-Q, in our current reports on Form 8-K, and in prospectuses we issue from time to time in connection with our offering of securities. Such materials are filed with the SEC and copies are available on the SEC's website, www.sec.gov, and in the Investor Relations section of our website at www.ohainvestmentcorporation.com. Prospective investors should read such materials carefully before investing.