BlackRock Kelso Capital Corporation Declares Regular Quarterly Dividend of $0.26 per Share, Announces September 30, 2013 Quarterly Financial Results
HIGHLIGHTS: | ||
Investment Portfolio: $1,152.8 million | ||
Net Assets: $696.3 million | ||
Indebtedness (borrowings under credit facility, term loan, senior secured notes & convertible notes): $412.9 million | ||
Net Asset Value per share: $9.38 | ||
Portfolio Activity for the Quarter Ended September 30, 2013: | ||
Cost of investments during period: $133.1 million | ||
Sales, repayments and other exits during period: $16.0 million | ||
Number of portfolio companies at end of period: 47 | ||
Operating Results for the Quarter Ended September 30, 2013: | ||
Net investment income per share: $0.12 | ||
Dividends declared per share: $0.26 | ||
Earnings per share: $0.27 | ||
Net investment income: $8.9 million | ||
Net realized and unrealized gains: $11.0 million | ||
Net increase in net assets from operations: $19.8 million | ||
Net investment income per share, as adjusted1: $0.22 | ||
Net investment income, as adjusted1: $16.1 million | ||
Portfolio and Investment Activity
We had a strong third quarter for new investments, experiencing a net
increase in our overall portfolio for the quarter of
During the quarter, we also finalized the restructuring of a portfolio company we have been actively engaged in since year end. Details of the transaction are as follows:
-
During
July 2013 , we restructured our investment in the 16.0% first lien term loan of The Bargain!Shop Holdings Inc. (“TBS”). We completed the purchase of substantially all of TBS assets through a newly-formed entity calledRed Apple Stores Inc. (“Red Apple”). The majority of the existing term loan was converted into$20.0 million of a new 16.0% senior secured term loan and the remaining$1.5 million was converted to common equity. Additionally, we contributed$12.0 million toRed Apple in the form of a$5.0 million 18.0% subordinated PIK note and another$7.0 million for a controlling interest in its common equity. The entire investment was valued at par as ofSeptember 30, 2013 . We also received a$1.3 million capital structuring fee in conjunction with our services performed in structuring the transaction.
At
The weighted average yield of the debt and income producing equity
securities in our portfolio at its current cost basis was 11.7% at
At
Results of Operations
Results comparisons are for the three and nine months ended
Investment Income
For the three and nine months ended
Expenses
Total expenses for the three and nine months ended
Incentive management fees for the three and nine months ended
Interest and credit facility related expenses were
Professional fees were
Removing the incentive management fee accrual based on capital gains,
total expenses for the nine months ended
Net Investment Income
Net investment income (“NII”) totaled
Net Realized Gain or Loss
Total net realized gain or loss for the three and nine months ended
Net Unrealized Appreciation or Depreciation
For the three and nine months ended
Net Increase in Net Assets from Operations
The net increase in net assets from operations for the three and nine
months ended
Liquidity and Capital Resources
At
Dividends
On
We continue to remain focused on our dividend coverage, although
challenging in today’s environment. Our net investment income, as
adjusted, was
We have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code. To maintain our status as a RIC, we must distribute annually to our stockholders at least 90% of our investment company taxable income; and to avoid an excise tax imposed on RICs, we must distribute annually to our stockholders at least 98% of our ordinary income and 98.2% of our net capital gains. As part of our strategic tax planning, from time to time we are able to reduce our investment company taxable income by losses taken on ordinary assets, thus minimizing the amount of taxable income to be reported by our shareholders. Tax characteristics of all dividends are reported to stockholders on Form 1099 after the end of the calendar year. We have made, and intend to continue to make, timely distributions sufficient to satisfy the annual distribution requirements to maintain our qualification as a RIC. We also intend to make distributions of net realized capital gains, if any, at least annually. We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2012.
For more information on our dividends, please refer to the Section 19 Notice that will be posted to BlackRock Kelso Capital’s website within the Distribution History section of the Investor Relations page (http://www.blackrockkelso.com/InvestorRelations/DistributionHistory/index.htm).
Dividend Reinvestment Plan
We maintain an “opt out” dividend reinvestment plan for our common
stockholders. As a result, if we declare a dividend, stockholders’ cash
dividends will be automatically reinvested in additional shares of our
common stock, unless they specifically “opt out” of the dividend
reinvestment plan so as to receive cash dividends. With respect to our
dividends paid to stockholders for the nine months ended
Share Repurchase Plan
In 2008, our Board of Directors approved a share repurchase plan under
which we may repurchase up to 2.5% of our outstanding shares of common
stock from time to time in open market or privately negotiated
transactions. In 2009, our Board of Directors approved an extension and
increase to the plan which authorized us to repurchase up to an
additional 2.5% of our outstanding shares of common stock. In
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that from time to time we may purchase shares of our common stock in the open market at prevailing market prices.
Conference Call
Both the teleconference and webcast will be available for replay by
PRIOR TO THE WEBCAST/TELECONFERENCE, AN INVESTOR PRESENTATION THAT COMPLEMENTS THE EARNINGS CONFERENCE CALL WILL BE POSTED TO BLACKROCK KELSO CAPITAL’S WEBSITE WITHIN THE PRESENTATIONS SECTION OF THE INVESTOR RELATIONS PAGE (http://www.blackrockkelso.com/InvestorRelations/Presentations/index.htm).
BlackRock Kelso Capital Corporation Consolidated Statements of Assets and Liabilities (Unaudited) |
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September 30, |
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December 31, |
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Assets | ||||||||||||
Investments at fair value: | ||||||||||||
Non-controlled, non-affiliated investments (cost of $791,002,833 and $849,028,227) |
$ |
802,818,060 |
$ | 850,511,125 | ||||||||
Non-controlled, affiliated investments (cost of $98,337,878 and $50,983,674) | 143,726,372 | 67,750,172 | ||||||||||
Controlled investments (cost of $149,890,939 and $137,337,392) | 192,543,797 | 143,336,244 | ||||||||||
Total investments at fair value (cost of $1,039,231,650 and $1,037,349,293) | 1,139,088,229 | 1,061,597,541 | ||||||||||
Cash and cash equivalents | 13,727,451 | 9,122,141 | ||||||||||
Unrealized appreciation on forward foreign currency contracts | — | 369,417 | ||||||||||
Receivable for investments sold | 10,357,911 | 504,996 | ||||||||||
Interest receivable | 18,739,382 | 14,048,248 | ||||||||||
Prepaid expenses and other assets | 11,666,665 | 4,375,527 | ||||||||||
Total Assets |
$ |
1,193,579,638 |
$ | 1,090,017,870 | ||||||||
Liabilities | ||||||||||||
Payable for investments purchased |
$ |
30,675,753 |
$ | 440,243 | ||||||||
Debt | 412,919,440 | 346,850,000 | ||||||||||
Interest payable | 3,365,354 | 5,277,132 | ||||||||||
Dividend distributions payable | 19,302,790 | 19,196,418 | ||||||||||
Base management fees payable | 5,286,986 | 5,626,893 | ||||||||||
Incentive management fees payable | 20,269,011 | 20,277,930 | ||||||||||
Accrued administrative services | 221,967 | 277,000 | ||||||||||
Other accrued expenses and payables | 5,238,135 | 4,692,562 | ||||||||||
Total Liabilities | 497,279,436 | 402,638,178 | ||||||||||
Net Assets | ||||||||||||
Common stock, par value $.001 per share, 200,000,000 common shares
authorized, |
75,667 | 75,258 | ||||||||||
Paid-in capital in excess of par | 922,588,375 | 917,534,577 | ||||||||||
Distributions in excess of taxable net investment income | (37,031,405 | ) | (22,291,022 | ) | ||||||||
Accumulated net realized loss | (277,308,567 | ) | (219,270,607 | ) | ||||||||
Net unrealized appreciation | 97,452,808 | 20,808,162 | ||||||||||
Treasury stock at cost, 1,425,507 and 1,425,507 shares held | (9,476,676 | ) | (9,476,676 | ) | ||||||||
Total Net Assets | 696,300,202 | 687,379,692 | ||||||||||
Total Liabilities and Net Assets |
$ |
1,193,579,638 |
$ | 1,090,017,870 | ||||||||
Net Asset Value Per Share |
$ |
9.38 |
$ | 9.31 | ||||||||
BlackRock Kelso Capital Corporation Consolidated Statement of Operations (Unaudited) |
Three months ended September 30, 2013 |
Three months ended September 30, 2012 |
Nine months ended September 30, 2013 |
Nine months ended September 30, 2012 |
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Investment Income: | ||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||
Non-controlled, non-affiliated investments | $ |
21,370,250 |
$ | 27,543,637 | $ | 73,117,037 | $ | 81,802,597 | ||||||||||||||
Non-controlled, affiliated investments | 3,876,098 | 1,037,387 | 5,958,969 | 4,053,330 | ||||||||||||||||||
Controlled investments | 2,702,931 | 3,071,070 | 7,641,475 | 6,501,767 | ||||||||||||||||||
Total interest income | 27,949,279 | 31,652,094 | 86,717,481 | 92,357,694 | ||||||||||||||||||
Fee income: | ||||||||||||||||||||||
Non-controlled, non-affiliated investments | 29,875 | 8,369,140 | 7,578,694 | 15,457,315 | ||||||||||||||||||
Non-controlled, affiliated investments | — | 602,344 | — | 735,708 | ||||||||||||||||||
Controlled investments | 2,350,000 | 57,679 | 2,638,680 | 136,170 | ||||||||||||||||||
Total fee income | 2,379,875 | 9,029,163 | 10,217,374 | 16,329,193 | ||||||||||||||||||
Dividend income: | ||||||||||||||||||||||
Non-controlled, non-affiliated investments | 640,163 | 38,845 | 1,226,348 | 706,157 | ||||||||||||||||||
Non-controlled, affiliated investments | 413,302 | — | 487,141 | — | ||||||||||||||||||
Controlled investments | — | — | — | — | ||||||||||||||||||
Total dividend income | 1,053,465 | 38,845 | 1,713,489 | 706,157 | ||||||||||||||||||
Total investment income |
31,382,619 | 40,720,102 | 98,648,344 | 109,393,044 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||
Incentive management fees | 9,358,529 | 2,963,803 | 16,692,244 | 5,177,662 | ||||||||||||||||||
Interest and credit facility fees | 5,455,017 | 5,180,706 | 15,128,057 | 14,917,849 | ||||||||||||||||||
Base management fees | 5,286,986 | 5,964,904 | 15,826,168 | 16,877,541 | ||||||||||||||||||
Amortization of debt issuance costs | 568,678 | 634,677 | 1,431,226 | 1,890,236 | ||||||||||||||||||
Professional fees | 541,180 | 577,051 | 1,647,600 | 1,080,582 | ||||||||||||||||||
Investment advisor expenses | 479,871 | 511,774 | 1,520,714 | 1,364,420 | ||||||||||||||||||
Director fees | 194,500 | 113,500 | 474,000 | 347,063 | ||||||||||||||||||
Administrative services | 174,288 | 164,074 | 607,429 | 416,608 | ||||||||||||||||||
Other | 449,909 | 671,341 | 2,263,313 | 1,975,362 | ||||||||||||||||||
Total expenses | 22,508,958 | 16,781,830 | 55,590,751 | 44,047,323 | ||||||||||||||||||
Net Investment Income | 8,873,661 | 23,938,272 | 43,057,593 | 65,345,721 | ||||||||||||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||||||||||||
Net realized gain (loss): | ||||||||||||||||||||||
Non-controlled, non-affiliated investments | 307,321 | (4,417 | ) | (25,980,491 | ) | (75,340,007 | ) | |||||||||||||||
Non-controlled, affiliated investments | — | 2,441,751 | 21 | 2,123,846 | ||||||||||||||||||
Controlled investments | 769,604 | — | (31,890,556 | ) | — | |||||||||||||||||
Foreign currency | (933,861 | ) | 362,009 | (166,934 | ) | (217,703 | ) | |||||||||||||||
Net realized gain (loss) | 143,064 | 2,799,343 | (58,037,960 | ) | (73,433,864 | ) | ||||||||||||||||
Net change in unrealized appreciation or depreciation: | ||||||||||||||||||||||
Non-controlled, non-affiliated investments | (408,094 | ) | (1,814,151 | ) | 21,595,785 | 77,069,859 | ||||||||||||||||
Non-controlled, affiliated investments | 4,602,853 | 5,287,500 | 28,621,996 | 6,300,604 | ||||||||||||||||||
Controlled investments | 6,507,911 | (14,735,396 | ) | 26,688,350 | (20,004,775 | ) | ||||||||||||||||
Foreign currency translation | 124,348 | (1,146,461 | ) | (261,485 | ) | 331,946 | ||||||||||||||||
Net change in unrealized appreciation or depreciation | 10,827,018 | (12,408,508 | ) | 76,644,646 | 63,697,634 | |||||||||||||||||
Net realized and unrealized gain (loss) | 10,970,082 | (9,609,165 | ) | 18,606,686 | (9,736,230 | ) | ||||||||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 19,843,743 | $ | 14,329,107 | $ | 61,664,279 | $ | 55,609,491 | ||||||||||||||
Net Investment Income Per Share - basic | $ | 0.12 | $ | 0.32 | $ | 0.58 | $ | 0.89 | ||||||||||||||
Earnings Per Share – basic | $ | 0.27 | $ | 0.19 | $ | 0.83 | $ | 0.76 | ||||||||||||||
Basic and Diluted Weighted-Average Shares Outstanding - basic | 74,239,932 | 73,692,104 | 74,099,028 | 73,555,011 | ||||||||||||||||||
Net Investment Income Per Share - diluted | $ | 0.12 | $ | 0.32 | $ | 0.57 | $ | 0.89 | ||||||||||||||
Earnings Per Share – diluted | $ | 0.26 | $ | 0.19 | $ | 0.80 | $ | 0.76 | ||||||||||||||
Basic and Diluted Weighted-Average Shares Outstanding - diluted | 84,136,659 | 73,692,104 | 82,183,168 | 73,555,011 | ||||||||||||||||||
Dividends Declared Per Share | $ | 0.26 | $ | 0.26 | $ | 0.78 | $ | 0.78 | ||||||||||||||
The Company reports its financial results on a GAAP basis; however, management believes that evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company’s financial performance over time. The Company’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
The Company records its liability for incentive management fees based on
income as it becomes legally obligated to pay them, based on a
hypothetical liquidation at the end of each reporting period. The
Company’s obligation to pay incentive management fees with respect to
any fiscal quarter is based on a formula that reflects the Company’s
results over a trailing four-fiscal quarter period ending with the
current fiscal quarter. The Company is legally obligated to pay the
amount resulting from the formula less any cash payments of incentive
management fees during the prior three quarters. The formula’s
requirement to reduce the incentive management fee by amounts paid with
respect to such fees in the prior three quarters has caused the
Company’s incentive management fee expense to become, and currently is
expected to be, concentrated in the fourth quarter of each year.
Management believes that reflecting incentive management fees throughout
the year, as the related investment income is earned, is an effective
measure of the Company’s profitability and financial performance that
facilitates comparison of current results with historical results and
with those of the Company’s peers. The Company’s “as adjusted” results
reflect incentive management fees based on the formula the Company
utilizes for each trailing four-fiscal quarter period, with the formula
applied to the current quarter’s incremental earnings and without any
reduction for incentive management fees paid during the prior three
quarters. The resulting amount represents an upper limit of each
quarter’s incremental incentive management fees that the Company may
become legally obligated to pay at the end of the year. Prior year
amounts are estimated in the same manner. These estimates represent
upper limits because, in any calendar year, subsequent quarters’
investment underperformance could reduce the incentive management fees
payable by the Company with respect to prior quarters’ operating
results. Similarly, the Company records its liability for incentive
management fees based on capital gains by performing a hypothetical
liquidation at the end of each reporting period. The accrual of this
hypothetical capital gains incentive management fee is required by GAAP,
but it should be noted that a fee so calculated and accrued is not due
and payable until the end of the measurement period, or every
Computations for the periods below are derived from the Company's financial statements as follows:
Three months
ended |
Three months
ended |
Nine months
ended |
Nine months
ended |
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GAAP Basis: | ||||||||||||||||||
Net Investment Income | $ | 8,873,661 | $ | 23,938,272 | $ | 43,057,593 | $ | 65,345,721 | ||||||||||
Net Investment Income per share | 0.12 | 0.32 | 0.58 | 0.89 | ||||||||||||||
Addback: GAAP incentive management fee expense based on Gains | 9,358,529 | 2,963,803 | 14,774,276 | 2,963,803 | ||||||||||||||
Addback: GAAP incentive management fee expense based on Income |
— |
— |
1,917,968 | 2,213,859 | ||||||||||||||
Pre-Incentive Fee2: | ||||||||||||||||||
Net Investment Income | $ | 18,232,190 | $ | 26,902,075 | $ | 59,749,837 | $ | 70,523,383 | ||||||||||
Net Investment Income per share | 0.25 | 0.37 | 0.81 | 0.96 | ||||||||||||||
Less: Incremental incentive management fee expense based on Income | 2,114,510 | 5,013,423 | 8,390,983 | 11,425,802 | ||||||||||||||
As Adjusted1: | ||||||||||||||||||
Net Investment Income | $ | 16,117,680 | $ | 21,888,652 | $ | 51,358,854 | $ | 59,097,581 | ||||||||||
Net Investment Income per share | 0.22 | 0.30 | 0.69 | 0.80 | ||||||||||||||
As Adjusted1: Amounts are adjusted to remove the incentive management fee expense based on Gains, as required by GAAP, and to include the incremental incentive management fee expense based on Income. The incremental incentive management fee is based on each trailing four-fiscal quarter period, applied to the current quarter's incremental earnings, and without any reduction for incentive management fees paid during the prior three quarters. Amounts reflect the Company's ongoing operating results and reflect the Company's financial performance over time.
Pre-Incentive Fee2: Amounts are adjusted to remove all incentive management fees. Such fees are calculated but not necessarily due and payable at this time.
About
The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.
Forward-Looking Statements
This press release, and other statements that
In addition to factors previously disclosed in
BlackRock Kelso Capital’s Annual Report on Form 10-K for the year ended
Available Information
BlackRock Kelso Capital’s filings with the
1 Non-GAAP basis financial measure. See Supplemental Information on page 8.
Source:
BlackRock Kelso Capital Corporation
Investors:
Corinne
Pankovcin, 212-810-5798
or
Press:
Brian Beades,
212-810-5596