GREENWICH, CT, Aug. 10, 2015 (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, 2015.
Third Fiscal Quarter 2015 Financial Highlights
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Adjusted net investment income for the quarter ended June 30, 2015 (excluding a one-time debt securitization charge) was $7.4 million or $0.25 per share, as compared to $6.7 million or $0.23 per share for the quarter ended March 31, 2015;
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Net asset value per share was $12.23 as of June 30, 2015; and
- We closed $336.5 million of investments during the quarter ended June 30, 2015.
Portfolio and Investment Activity
Our Board of Directors determined the fair value of our portfolio at June 30, 2015 to be $627.6 million, as compared to $300.0 million at September 30, 2014. Total assets increased to $749.8 million at June 30, 2015, as compared to $412.5 million at September 30, 2014.
During the quarter ended June 30, 2015, we closed $336.5 million of investments in 26 new and eight existing portfolio companies, and funded $282.9 million across new and existing portfolio companies. We also received $234.8 million in connection with full or partial payoffs and sales of 43 of our debt investments.
At June 30, 2015, our portfolio consisted of investments in 62 companies. 91.4% of our portfolio at fair value consisted of senior secured floating rate debt investments, and 8.4% of the portfolio consisted of investments in the subordinated notes and LLC equity interests of FSFR Glick JV LLC ("FSFR Glick JV"). The portfolio remained diversified and our average portfolio company debt investment size at fair value was $10.0 million at June 30, 2015. The average portfolio company EBITDA was $58.4 million as of June 30, 2015.
In October 2014, we entered into an LLC agreement with GF Equity Funding 2014 LLC to form FSFR Glick JV, and on April 21, 2015, FSFR Glick JV began investing primarily in senior secured loans of middle market companies. As of June 30, 2015, FSFR Glick JV had $147.6 million in assets including senior secured loans to 20 portfolio companies. The joint venture generated income of $0.8 million for FSFR during the third fiscal quarter, which represented a 9.1% weighted average annualized return on investment for the initial partial quarter.
Our weighted average cash yield on debt investments, including the return on FSFR Glick JV, was 7.6% at June 30, 2015, which increased from 7.4% at March 31, 2015.
"During the June quarter we completed the optimization of FSFR's balance sheet, which provided us with the necessary capital to reach our targeted leverage range. We remain excited about the market opportunity to continue deploying capital into senior secured floating rate assets with strong risk-adjusted returns," stated Ivelin M. Dimitrov, Chief Executive Officer adding, "An important step in positioning FSFR for future flexibility is moving to a more conservative monthly dividend distribution that is covered by sustainable net investment income, which should allow for greater consistency around future distributions."
Results of Operations
Total investment income for the quarter ended June 30, 2015 was $13.7 million, primarily consisting of $10.6 million of interest income and $3.0 million of fee income from portfolio investments. For the quarter ended June 30, 2014, total investment income was $3.8 million, which consisted of $3.0 million of interest income and $0.8 million of fee income from portfolio investments.
Total expenses for the quarters ended June 30, 2015 and June 30, 2014 were $7.4 million and $2.0 million, respectively. Total expenses for the quarter ended June 30, 2015 included a one-time charge of $2.1 million, partially offset by the related reduction in the incentive fee, related to a debt securitization that closed during the quarter. Net investment income including this one time charge was $6.3 million for the quarter.
The following table presents a reconciliation of net investment income to adjusted net investment income (excluding a one-time debt securitization charge) for the quarters and nine months ended June 30, 2015 and June 30, 2014:
|
Three months ended June 30, 2015 |
Three months ended June 30, 2014 |
Nine months ended June 30, 2015 |
Nine months ended June 30, 2014 |
|
| Net investment income | $ 6,338,912 | $ 1,862,512 | $ 23,465,779 | $ 5,156,696 |
| Adjustment for one-time debt securitization charge, net of reduction in incentive fee | 1,056,011 | — | 1,056,011 | — |
| Adjusted net investment income | $ 7,394,923 | $ 1,862,512 | $ 24,521,790 | $ 5,156,696 |
| Weighted average common shares outstanding - basic and diluted | 29,466,768 | 6,666,768 | 29,466,768 | 6,666,768 |
| Adjusted net investment income per share | $ 0.25 | $ 0.28 | $ 0.83 | $ 0.77 |
Liquidity and Capital Resources
As of June 30, 2015, we had $69.9 million of cash and cash equivalents (including restricted cash), portfolio investments (at fair value) of $627.6 million, receivables from unsettled transactions of $43.2 million, distribution payable of $2.9 million, payables from unsettled transactions of $74.0 million, $127.4 million of borrowings outstanding under our Citibank credit facility and $180.0 million of borrowings outstanding under our debt securitization.
On May 28, 2015, we completed a $309.0 million debt securitization in which we issued $222.6 million of long-term senior secured notes, $22.6 million of which are held by FSFR and $86.4 million of unsecured subordinated notes held entirely by FSFR. The senior secured notes were issued to refinance our existing $200.0 million Natixis credit facility and bear interest at an average annualized rate of 2.44%. The vehicle has a four-year reinvestment period with a ten-year maturity and two-year non-call period.
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
On August 5, 2015, our Board of Directors declared the following dividends:
- $0.075 per share, payable on September 15, 2015 to stockholders of record on September 4, 2015;
- $0.075 per share, payable on October 15, 2015 to stockholders of record on October 6, 2015; and
- $0.075 per share, payable on November 16, 2015 to stockholders of record on November 5, 2015.
Dividends are paid primarily from distributable (taxable) income. To the extent our taxable earnings for a fiscal taxable year fall below the total amount of our dividend distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders. 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 June 30, 2015 and September 30, 2014, the distribution of our investments on the 1 to 4 investment ranking scale at fair value was as follows:
| June 30, 2015 | September 30, 2014 | |||||
| Investment Ranking | Fair Value | % of Portfolio | Leverage Ratio | Fair Value | % of Portfolio | Leverage Ratio |
| 1 | — | — | — | — | — | — |
| 2 | $ 624,195,669 | 99.46 % | 4.56 | $ 300,001,397 | 100.00 % | 4.48 |
| 3 | 3,389,625 | 0.54 | 6.32 | — | — | — |
| 4 | — | — | — | — | — | — |
| Total | $ 627,585,294 | 100.00 % | 4.57 | $ 300,001,397 | 100.00 % | 4.48 |
Recent Developments
Effective July 10, 2015, our Board of Directors promoted Steven M. Noreika to Chief Financial Officer, replacing Richard A. Petrocelli.
On August 5, 2015, our Board of Directors declared the following dividends:
- $0.075 per share, payable on September 15, 2015 to stockholders of record on September 4, 2015;
- $0.075 per share, payable on October 15, 2015 to stockholders of record on October 6, 2015; and
- $0.075 per share, payable on November 16, 2015 to stockholders of record on November 5, 2015.
| Fifth Street Senior Floating Rate Corp. | ||
| Consolidated Statements of Assets and Liabilities | ||
| (unaudited) | ||
|
June 30, 2015 |
September 30, 2014 |
|
| ASSETS | ||
| Investments at fair value: | ||
| Control investments (cost June 30, 2015: $53,442,506; cost September 30, 2014: $0) | $ 52,870,796 | $ — |
| Non-control/Non-affiliate investments (cost June 30, 2015: $580,171,424; cost September 30, 2014: $299,997,247) | 574,714,498 | 300,001,397 |
| Total investments at fair value (cost June 30, 2015: $633,613,930; cost September 30, 2014: $299,997,247) | 627,585,294 | 300,001,397 |
| Cash and cash equivalents | 66,443,565 | 107,429,760 |
| Restricted cash | 3,459,896 | 2,127,405 |
| Interest, dividends and fees receivable | 3,242,254 | 1,120,010 |
| Due from portfolio companies | 509,899 | 200,840 |
| Receivables from unsettled transactions | 43,240,396 | — |
| Deferred financing costs | 5,203,456 | 1,625,932 |
| Other assets | 164,009 | — |
| Total assets | $ 749,848,769 | $ 412,505,344 |
| LIABILITIES AND NET ASSETS | ||
| Liabilities: | ||
| Accounts payable, accrued expenses and other liabilities | $ 1,938,070 | $ 1,213,683 |
| Base management fee payable | 1,594,864 | 475,437 |
| Part I incentive fee payable | 833,515 | 926,180 |
| Part II incentive fee payable | — | 54,826 |
| Due to FSC CT | 236,863 | 239,617 |
| Interest payable | 575,853 | 205,646 |
| Distributions payable | 2,946,677 | 8,840,030 |
| Payables from unsettled transactions | 74,029,636 | 27,863,000 |
| Credit facility payable | 127,366,000 | — |
| Notes payable | 180,000,000 | — |
| Total liabilities | 389,521,478 | 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 June 30, 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 | (6,028,636) | 4,150 |
| Net realized loss on investments | (3,272,536) | — |
| Accumulated overdistributed net investment income | (4,768,021) | (1,713,709) |
| Total net assets (equivalent to $12.23 and $12.65 per common share at June 30, 2015 and September 30, 2014, respectively) | 360,327,291 | 372,686,925 |
| Total liabilities and net assets | $ 749,848,769 | $ 412,505,344 |
| Fifth Street Senior Floating Rate Corp. | ||||
| Consolidated Statements of Operations | ||||
| (unaudited) | ||||
|
Three months ended June 30, 2015 |
Three months ended June 30, 2014 |
Nine months ended June 30, 2015 |
Nine months ended June 30, 2014 |
|
| Interest income: | ||||
| Control investments | $ 754,216 | $ — | $ 754,216 | $ — |
| Non-control/Non-affiliate investments | 9,862,889 | 2,979,029 | 27,368,097 | 6,849,976 |
| Interest on cash and cash equivalents | 7,042 | 353 | 16,227 | 2,570 |
| Total interest income | 10,624,147 | 2,979,382 | 28,138,540 | 6,852,546 |
| Fee income: | ||||
| Non-control/Non-affiliate investments | 3,008,068 | 866,030 | 13,245,872 | 2,705,129 |
| Total fee income | 3,008,068 | 866,030 | 13,245,872 | 2,705,129 |
| Dividend and other income: | ||||
| Control investments | 74,375 | — | 74,375 | — |
| Total dividend and other income | 74,375 | — | 74,375 | — |
| Total investment income | 13,706,590 | 3,845,412 | 41,458,787 | 9,557,675 |
| Expenses: | ||||
| Base management fee | 1,594,872 | 485,544 | 4,274,950 | 1,127,180 |
| Part I incentive fee | 833,515 | 349,835 | 4,587,918 | 630,432 |
| Part II incentive fee | — | — | (54,826) | — |
| Professional fees | 259,933 | 247,967 | 758,428 | 573,667 |
| Board of Directors fees | 80,250 | 31,750 | 264,550 | 129,250 |
| Interest expense | 4,162,905 | 537,006 | 6,754,197 | 1,112,999 |
| Administrator expense | 152,647 | 142,965 | 576,344 | 361,589 |
| General and administrative expenses | 283,556 | 187,833 | 831,447 | 465,862 |
| Total expenses | 7,367,678 | 1,982,900 | 17,993,008 | 4,400,979 |
| Net investment income | 6,338,912 | 1,862,512 | 23,465,779 | 5,156,696 |
| Unrealized appreciation (depreciation) on investments: | ||||
| Control investments | (571,710) | — | (571,710) | — |
| Non-control/Non-affiliate investments | (1,909,861) | (13,387) | (5,461,076) | (626,766) |
| Net unrealized depreciation on investments | (2,481,571) | (13,387) | (6,032,786) | (626,766) |
| Realized gain (loss) on investments: | ||||
| Non-control/Non-affiliate investments | (1,716,501) | (56,332) | (3,272,536) | 198,481 |
| Net realized gain (loss) on investments | (1,716,501) | (56,332) | (3,272,536) | 198,481 |
| Net increase in net assets resulting from operations | $ 2,140,840 | $ 1,792,793 | $ 14,160,457 | $ 4,728,411 |
| Net investment income per common share — basic and diluted | $ 0.22 | $ 0.28 | $ 0.80 | $ 0.77 |
| Earnings per common share — basic and diluted | $ 0.07 | $ 0.27 | $ 0.48 | $ 0.71 |
| 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 | $ 0.27 | $ 0.90 | $ 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. 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 nationally recognized credit-focused asset manager with over $6 billion in assets under management (as of March 31, 2015) across multiple public and private vehicles. With a track record of over 17 years, Fifth Street's platform has the ability to hold loans up to $250 million and structure and syndicate transactions up to $500 million. Fifth Street received the 2015 ACG New York Champion's Award for "Lender Firm of the Year," and other previously received accolades include the ACG New York Champion's Award for "Senior Lender Firm of the Year," "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.