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 its fiscal
second quarter ended April 30, 2019.
Financial Results
The Company reported total operating income of $8.6 million for
the second quarter of fiscal 2019, compared to $5.4 million for the
same quarter of fiscal 2018. The Company reported net operating
income of $4.2 million for the second quarter of fiscal 2019,
compared to $1.6 million for the same quarter of fiscal 2018.
The Company earned interest income of $6.4 million and dividend
and fee income of $2.2 million for the second quarter of fiscal
2019, compared to $4.6 million and $0.8 million, respectively, for
the same quarter of fiscal 2018.
As of April 30, 2019, the Company's net assets were $230.2
million or $12.99 per share, compared to $216.9 million or $12.24
per share at the end of the prior fiscal quarter.
As of April 30, 2019, MVC had investments in portfolio companies
valued at $331.8 million and cash and cash equivalents of $22.7
million, including $5.0 million in restricted cash.
At April 30, 2019, there were $25.0 million of borrowings under
MVC's revolving credit facility with Branch Banking and Trust
Company and $13.0 million of borrowings under its credit facility
with People’s United Bank, National Association.
Key Financial Metrics
|
Quarter Ended |
(Unaudited)($ in thousands, except per share data) |
Q2 2019 |
Q1 2019 |
Q4 2018 |
Q3 2018 |
Q2 2018 |
Total operating income |
8,593 |
|
6,441 |
|
5,888 |
|
6,151 |
|
5,440 |
|
|
|
|
|
|
|
Management fee |
1,590 |
|
1,513 |
|
1,496 |
|
1,487 |
|
1,496 |
|
Portfolio fees - asset management |
76 |
|
96 |
|
122 |
|
112 |
|
148 |
|
Management fee - asset management |
69 |
|
71 |
|
81 |
|
70 |
|
66 |
|
Administrative |
990 |
|
1,434 |
|
843 |
|
1,010 |
|
796 |
|
Interest, fees and other borrowing costs |
2,283 |
|
2,484 |
|
2,238 |
|
2,403 |
|
2,981 |
|
Loss on extinguishment of debt |
- |
|
- |
|
- |
|
- |
|
- |
|
Net Incentive compensation |
- |
|
- |
|
- |
|
(1,316 |
) |
(1,012 |
) |
Total waiver by adviser |
(635 |
) |
(604 |
) |
(598 |
) |
(595 |
) |
(599 |
) |
Tax expense |
1 |
|
- |
|
1 |
|
- |
|
1 |
|
|
|
|
|
|
|
Net operating income (loss) before net realized and unrealized
gains |
4,219 |
|
1,447 |
|
1,705 |
|
2,980 |
|
1,563 |
|
Net (decrease) increase in net assets resulting from
operations |
15,964 |
|
(3,053 |
) |
(2,220 |
) |
(5,870 |
) |
(3,393 |
) |
Net (decrease) increase in net assets resulting from operations per
share |
0.90 |
|
(0.17 |
) |
(0.10 |
) |
(0.32 |
) |
(0.18 |
) |
Net asset value per share |
12.99 |
|
12.24 |
|
12.46 |
|
12.62 |
|
13.09 |
|
|
|
|
|
|
|
|
|
|
|
|
Operational Update
- NAV increased by $0.75 per share to $12.99 as of April 30,
2019, compared to $12.24 per share as of January 31, 2019.
- Net increase in net assets resulting from operations (bottom
line performance) was $0.90 per share for the second quarter of
fiscal 2019.
- Total operating income increased to $8.6 million for the
quarter ending April 30, 2019, a 58% increase over the same quarter
of fiscal 2018. 1
- Net operating income for the quarter increased to $4.2 million
or $0.24 per share, a 170% increase over the same quarter of fiscal
2018. 1
___________________________________
1 Total operating income and net operating income for the
second quarter include one-time PIK interest and dividend income of
$2.3 million as a result of the Custom conversion.
Portfolio Activity
• On April 30, 2019, Custom Alloy Corporation (“Custom”)
redeemed its series A, B and C preferred shares and consolidated
its second lien loans in exchange for two second lien loans
totaling approximately $38.6 million. MVC also funded approximately
$595,000 at the time of the conversion, which is included in the
$38.6 million of loans outstanding as of April 30, 2019.
- Custom’s strong cash flows, new government contracts and
improved EBITDA supported the conversion from equity to debt and
positions MVC’s investment higher in the capital structure in a
secured position while also providing a stronger overall yield,
consistent with the Company’s strategy.
- The current interest rate on the $38.6 million of loans is 15%
and the loans mature on April 30, 2022.
- The transaction resulted in a realized gain of approximately
$3.2 million, in addition to receiving one-time PIK interest and
dividends of $2.3 million.
- In addition, on April 30, 2019, MVC provided Custom with a $3.0
million line of credit at a 15% interest rate with a maturity date
of April 30, 2020. There was no amount outstanding on the line of
credit as of April 30, 2019.
• As of April 30, 2019, the Company’s portfolio was comprised of
approximately 70% yielding securities (including the loans to
Custom), compared to 59% at the beginning of the fiscal year.
• During the quarter, the Company made no new investments and
three follow-on debt investments into RuMe, Inc. and Custom,
totaling $1.35M.
• During the quarter, RuMe made a principal payment on its
revolver of $500,000 and Morey’s Seafood International, LLC made a
principal payment of approximately $591,000 on its second lien
loan.
Dividends
On April 12, 2019, the Company's Board of Directors declared a
dividend of $0.15 per share, which was paid on April 30, 2019 to
shareholders of record on April 23, 2019.
Assuming no major repayments in the portfolio and no impairments
or unforeseen events, the yielding investments are anticipated to
generate net operating income for the quarter ending July 31, 2019
that meets or exceeds the Company’s current dividend level of $0.15
per share.
Since implementing its dividend policy in July of 2005, the
Company has paid fifty-six consecutive quarterly dividends. Through
April 30, 2019, dividends paid total approximately $7.59 per share
and total distributions and share repurchases (including tender
offers) have surpassed $275 million.
Subsequent Events
On May 1, 2019, the Company provided $6.5 million to Powers
Equipment Acquisition Company, LLC in the form of a first lien loan
with an interest rate of 13.5%. The loan matures on
April 30, 2024.
On May 10, 2019, the Company provided $8.0 million to
International Precision Components Corporation in the form of a
second lien loan with an interest rate of 15.5% and a maturity date
of October 3, 2024.
On June 7, 2019, the Company loaned $3.5 million to GTM
increasing the second lien loan amount to approximately $5.0
million. The interest rate is unchanged and the maturity date
was extended to December 7, 2024. The Company also invested
approximately $420,000 for additional shares of common stock.
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
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: whether the restructured
Custom Alloy investment will perform and generate increased yield
for MVC Capital; MVC Capital's ability to deliver value to
shareholders and execute its yield investment strategy; MVC
Capital’s ability to generate and grow net operating income;
the ability to pay and grow shareholder distributions (including
beyond the $0.15 dividend level recently paid); MVC Capital’s
ability to support and cover its dividend on an on-going basis; 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 those covered in the subsequent events section; 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 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
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