MVC Capital, Inc. (NYSE:MVC) (the Company), a publicly traded
business development company (BDC) that makes private debt and
equity investments, announced its financial results for the fiscal
fourth quarter and full year ended October 31, 2018.
Financial Results
For the fourth quarter of fiscal 2018, the Company earned
interest income of $5.1 million and dividend and fee income of $0.8
million, compared to $4.4 million and $1.1 million, respectively,
for the same quarter of fiscal 2017.
The Company reported total operating income of $6.0 million for
the fourth quarter of fiscal 2018, compared to $5.5 million for the
fourth quarter of fiscal 2017. The Company reported net
operating income of $1.7 million for the fourth quarter of fiscal
2018, compared to $2.1 million for the same quarter in fiscal
2017.
For the fiscal year 2018, the Company earned interest income of
$19.4 million, (including $3.6 million of deferred interest
income), and dividend and fee income of $3.5 million, compared to
$16.6 million and $3.5 million, respectively, for the fiscal year
2017.
The Company reported total operating income of $22.9 million for
the fiscal year 2018, compared to $20.1 million for the fiscal year
2017. The Company reported net operating income of $3.8
million for the fiscal year 2018, compared to a net operating loss
of $5.6 million for the fiscal year 2017.
As of October 31, 2018, the Company's net assets were $226.7
million or $12.46 per share, compared with $237.6 million or $12.62
per share at the end of the prior fiscal quarter.
As of October 31, 2018, MVC had investments in portfolio
companies totaling $324.5 million and cash and cash equivalents of
$15.9 million, including $5.3 million in restricted cash.
At October 31, 2018, there were no outstanding borrowings under
MVC's revolving credit facility with Branch Banking and Trust
Company ("BB&T") and there were no outstanding borrowings under
its credit facility with Santander Bank N.A. (“Santander”).
Key Financial Metrics
|
Quarter Ended |
(Unaudited)($ in thousands, except per share data) |
Q4 2018 |
Q3 2018 |
Q2 2018 |
Q1 2018 |
Q4 2017 |
Total operating income |
5,967 |
|
6,211 |
|
5,500 |
|
5,207 |
|
5,490 |
|
|
|
|
|
|
|
Management fee |
1,496 |
|
1,487 |
|
1,496 |
|
1,411 |
|
1,335 |
|
Portfolio fees - asset management |
122 |
|
112 |
|
148 |
|
147 |
|
148 |
|
Management fee - asset management |
81 |
|
70 |
|
66 |
|
67 |
|
67 |
|
Administrative |
922 |
|
1,070 |
|
856 |
|
1,295 |
|
983 |
|
Interest, fees and other borrowing costs |
2,238 |
|
2,403 |
|
2,981 |
|
3,117 |
|
2,495 |
|
Loss on extinguishment of debt |
- |
|
- |
|
- |
|
1,783 |
|
- |
|
Net Incentive compensation |
- |
|
(1,316 |
) |
(1,012 |
) |
267 |
|
(1,224 |
) |
Total waiver by adviser |
(598 |
) |
(595 |
) |
(599 |
) |
(390 |
) |
(372 |
) |
Tax expense |
1 |
|
- |
|
1 |
|
- |
|
1 |
|
|
|
|
|
|
|
Net operating income (loss) before net realized and unrealized
gains |
1,705 |
|
2,980 |
|
1,563 |
|
(2,490 |
) |
2,057 |
|
Net (decrease) increase in net assets resulting from
operations |
(2,220 |
) |
(5,870 |
) |
(3,393 |
) |
950 |
|
(4,028 |
) |
Net (decrease) increase in net assets resulting from operations per
share |
(0.10 |
) |
(0.32 |
) |
(0.18 |
) |
0.05 |
|
(0.17 |
) |
Net asset value per share |
12.46 |
|
12.62 |
|
13.09 |
|
13.42 |
|
13.24 |
|
Operational Update & Portfolio Activity For Fiscal
2018
- NAV was $12.46 per share as of October 31, 2018, compared to
$12.62 per share as of July 31, 2018.
- Total operating income increased to $22.9 million for the year
ending October 31, 2018, a 14% increase over fiscal year 2017.
- The Company made six new investments totaling $41.5 million and
eight follow-on investments totaling $20.8 million during the
fiscal year. The new investments were made in Essner Manufacturing
($3.7 million), Black Diamond Equipment Rental ($7.5 million), Apex
Industrial Technologies, LLC ($15.0 million), Array Information
Technology, Inc. ($6 million), Tuf-Tug, Inc. ($5.6 million) and Tin
Roof Software, LLC ($3.7 million). The eight follow-on investments
were made in U.S. Spray Drying Holding Company, Initials, Inc. Turf
Products, LLC, Custom Alloy Corporation, MVC Automotive Group GmbH,
RuMe, Inc., Trientis GmbH and Security Holdings B.V.
- The weighted average yields on the fourth quarter new
originations was 13.36% and the leverage at the time of
underwriting was under 3.0X.1
- During fiscal 2018, the Company acquired approximately 2.3
million shares of its common stock at $10.90 per share via a
modified “Dutch Auction” Tender Offer at an aggregate cost of $25
million. Also, during fiscal 2018, the Company made open market
repurchases of its shares totaling $5.9 million at an average cost
of $9.45 per share, including commissions. The Company plans
to continue to repurchase shares to complete the $10 million share
repurchase program announced in September 2018.• The shares
repurchased, including those repurchased in the “Dutch Auction”
Tender Offer during fiscal 2018, resulted in approximately $.37 of
NAV accretion during the year.
Dividends
On October 15, 2018, the Company's Board of Directors declared a
dividend of $0.15 per share, which was paid on October 31, 2018 to
shareholders of record on October 25, 2018.
Since implementing its dividend policy in July of 2005, MVC has
paid fifty-five consecutive quarterly dividends, which have
increased over time. Through January 9, 2019, dividends paid total
approximately $7.44 per share and total distributions to
shareholders under the current team have surpassed $272 million,
including buy backs and tender offers.
The Company continues to make yielding investments to help
support and ultimately seek to grow its distributions to
shareholders.
Subsequent Events
On November 9, 2018, Custom Alloy repaid its first lien loan and
on November 13, 2018 repaid its $1.4 million second lien loan, both
with all accrued interest.
On November 28, 2018, the Company announced the extension of its
Repurchase Program beyond December 31, 2018 until the full $10
million of shares are repurchased. As of January 14, 2019, the
Company has repurchased a total of approximately $9.2 million2 of
stock since September 2018.
On December 7, 2018, the Company and an affiliated private fund
co-invested in second lien notes and common stock issued by GTM
Intermediate Holdings, Inc. The Company invested approximately $1.5
million in such notes, with a cash interest rate of 11% plus 1% PIK
and a maturity date of June 7, 2024, and $346,000 in shares of
common stock, which are held through a holding company.
On December 7, 2018, the Company’s Credit Facility with
Santander Bank NA (“Credit Facility III”) was renewed until March
9, 2019.
On December 27, 2018, the Company received proceeds from the MVC
Private Equity Fund L.P. (“PE Fund”) related to the sale of
Plymouth Rock Energy, LLC, a portfolio company of the PE Fund.
MVC-G
About MVC Capital, Inc.
MVC Capital (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 MVC's website
at www.mvccapital.com.
Safe Harbor Statement and Other Disclosures
The information contained in this press release contains
forward-looking statements, including with respect to the
continuation of share repurchases by the Company as currently
intended. 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, among other things: the Company's ability to
continue to repurchase shares and to complete the $10 million
repurchase program; MVC Capital's ability to deliver value to
shareholders and execute its yield investment strategy; the ability
to pay and grow shareholder distributions; the ability to maintain
expenses; the ability to improve net operating income; the
performance of MVC Capital's investments, including, portfolio
companies in which the Company invested this past quarter; 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 will
match or exceed historic ones, or that they will be made at all.
This press release is for informational purposes only and is not an
offer to purchase or a solicitation of an offer to sell shares of
MVC's common stock. There is no assurance that the market price of
MVC's shares, either absolutely or relative to net asset value,
will increase as a result of any share repurchases, or that the
program will enhance shareholder value over the long-term. There
can be no assurance that MVC will achieve its investment
objective.
Investor Contact
Jackie Rothchild MVC Capital 914.510.9400
Or
Jeffrey Goldberger / Allison Soss KCSA Strategic
Communications 212.896.1249 / 212.896.1267
_______________________________________
1 Leverage at the time of underwriting was based on adjusted
EBITDA and may have changed from the time of underwriting. The
entire loan portfolio generated by the Yielding team since Fiscal
2015 remains at under 4X as of the most recent valuation date for
that portion of the portfolio.
2 Based upon share repurchases settled as of January 14,
2019.
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