HOUSTON, TX -- (Marketwired) -- 11/06/15 -- Stellus Capital Investment Corporation (NYSE: SCM) ("Stellus" or "the Company") today announced financial results for its third fiscal quarter ended September 30, 2015.

HIGHLIGHTS
($in millions, except data relating to per share amounts and number of portfolio companies)
Portfolio results	As of September 30, 2015
Total assets	$337.0
Investment portfolio, at fair value	$323.0
Net assets $170.0	$170.0
Weighted average yield on debt investments	10.6%
Net asset value per share	$13.62
	Quarter	Quarter
	ended	ended
	September 30, 2015	September 30, 2014
Portfolio activity
Total investments made, at par	$25.5	$7.0
Number of new investments	5	3
Repayments of investments, including amortization	$22.5	$1.2
Number of portfolio companies at end of period	35	28
Operating results
Total investment income	$8.6	$7.8
Net investment income	$3.8	$5.3
Net investment income per share	$0.31	$0.42
Regular dividends declared per share	$0.34	$0.34
Net increase (decrease) in net assets from operations	($0.6)	$2.1
Net increase (decrease) in net assets from operations per share	($0.05)	$0.17

"We are pleased to report that our originations exceeded payoffs during the third quarter. We are seeing a number of interesting opportunities and we are continuing to access SBA-guaranteed debentures," said Robert T. Ladd, Chief Executive Officer of Stellus.

Portfolio and Investment Activity

We completed the third quarter of 2015 with a portfolio of $323.0 million (at fair value) invested in 35 companies. As of September 30, 2015, our portfolio included approximately 30% of first lien debt, 44% of second lien debt, 23% of mezzanine debt and 3% of equity investments at fair value. Our debt portfolio consisted of 27% fixed rate investments and 73% floating rate investments (subject to interest rate floors). The average size of our portfolio company investments was $9.2 million and our largest portfolio company investment was approximately $21.6 million at fair value. The weighted average yield on all of our debt investments as of September 30, 2015 was approximately 10.6%.

During the three months ended September 30, 2015, we made $25.5 million of investments in two new portfolio companies and three existing portfolio companies and received $22.5 million of proceeds from the repayment of investments, including $1.3 million from amortization of certain other investments.

This compares to the portfolio as of December 31, 2014, which had a fair value of $316.0 million invested in 32 companies comprising 24% of first lien debt, 32% of second lien debt, 41% of mezzanine debt and 3% of equity investments at fair value. As of December 31, 2014, our debt investments had a weighted average yield of 10.9% and consisted of 44% fixed rate investments and 56% floating rate investments (subject to interest rate floors).

Results of Operations

Investment income for the three months ended September 30, 2015 and 2014 totaled $8.6 million and $7.8 million, respectively, most of which was interest income from portfolio investments.

Operating expenses, net of fee waiver for the three months ended September 30, 2015 and 2014, totaled $4.8 million and $2.6 million, respectively. For the same respective periods, base management fees totaled $1.5 million and $1.3 million, incentive fees totaled $1.0 million and $0.4 million, fees and expenses related to our borrowings totaled $1.5 million and $1.4 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.2 million and $0.3 million and other expenses totaled $0.6 million and $0.6. The Advisor waived no incentive fees for the three months ended September 30, 2015. The Advisor voluntarily waived incentive fees of $1.4 million during the three months ended September 30, 2014.

Net investment income was $3.8 million and $5.3 million, or $0.31 and $0.42 per common share based on weighted average common shares outstanding for the three months ended September 30, 2015 and 2014.

The Company's investment portfolio had a net change in unrealized depreciation for the three months ended September 30, 2015 and 2014, of $4.6 million and $3.0 million, respectively. For the three months ended September 30, 2015 and 2014 the Company had realized gains of $2 thousand and $4 thousand, respectively.

Our net increase (decrease) in net assets resulting from operations totaled ($0.6) million and $2.1 million, or ($0.05) and $0.17 per common share based on weighted average common shares outstanding for the three months ended September 30, 2015 and 2014, respectively.

Liquidity and Capital Resources

As of September 30, 2015 and 2014, our credit facility provided for borrowings in an aggregate amount up to $120 million and $150 million, respectively, on a committed basis. As of September 30, 2015, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $195 million. As of September 30, 2015 and December 31, 2014, we had $110.8 million and $106.5 million, respectively, in outstanding borrowings under the credit facility.

For the nine months ended September 30, 2015, our operating activities provided cash of $3.3 million primarily in connection with cash interest received and repayments of our investments. For the same period, our financing activities provided cash of $0.7 million, primarily related to the issuance of SBA debentures.

For the nine months ended September 30, 2014 our operating activities provided cash of $2.1 million primarily in connection with cash interest received and repayments of our investments, and our financing activities used cash of $11.6 million, primarily due to repayments on the credit facility.

Distributions

During the three months ended September 30, 2015 and 2014, we declared distributions of $0.34 per share ($4.2 million) for each quarter. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year. None of these dividends are expected to include a return of capital.

Recent Portfolio Activity

New investment transactions and repayments which occurred during the three months ended September 30, 2015 are summarized as follows:

• On July 8, 2015, we received full repayment on our second lien term loan of Telular Corp. at par plus a 1% prepayment premium, resulting in total proceeds of $7.6 million.
• On August 6, 2015, we made a $12.5 million investment in the first lien loan of Catapult Learning, LLC, a leading provider of specialized education services.
• On August 10, 2015, we funded $2.4 million under the delay draw term loan of Software Paradigms International, reducing our unfunded commitment to $0.4 million.
• On August 17, 2015, we received full repayment on the unsecured term loan of Snowman Holdings, LLC at par, resulting in proceeds of $11.2 million.
• On August 20, 2015, we made a $0.6 million equity investment in an existing portfolio company, Colford Capital Holdings, LLC.
• On August 27, 2015, we received a partial repayment on the second lien term loan of Calero Software LLC resulting in proceeds of $2.5 million, and made an additional equity investment of $25.0 thousand.
• On September 24, 2015, we made a $10.0 million investment in the second lien term loan of Sitel Worldwide Corporation, a leading outsourced provider of marketing services, with a focus on the technology, e-commerce, insurance, and consumer goods markets.

Events Subsequent to September 30, 2015

On October 9, 2015, we received full repayment on our second lien term loan of Help/Systems Holding Inc. at par, resulting in total proceeds of $15.0 million.

On October 29, 2015, we invested $10.5 million in the first lien debt and $0.3 million in the equity of Apex Environmental, LLC.

Credit Facility

The outstanding balance under our credit facility as of November 3, 2015 was $94.5 million.

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on November 6, 2015, at 10:00 a.m. Central Standard Time. The conference call will be led by Robert T. Ladd, chief executive officer, and W. Todd Huskinson, chief financial officer, chief compliance officer, treasurer, and secretary.

For those wishing to participate by telephone, please dial (888) 417-8533 (domestic). Use passcode 2970643. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through November 14, 2015 by dialing (888) 203-1112 and entering passcode 2970643. The replay will also be available on the company's website.

PART I - FINANCIAL INFORMATION
STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
			September 30,
			2015			December 31,
			(Unaudited)			2014
ASSETS
	Non-controlled, non-affiliated investments, at fair value
		(amortized cost of $332,172,782 and $321,955,480, respectively)	$	322,966,189		$	315,965,434
	Cash and cash equivalents			6,079,062			2,046,563
	Interest receivable			4,346,553			5,082,665
	Deferred offering costs			261,761			261,761
	Deferred financing costs			665,337			828,956
	Accounts receivable			7,684			696
	Prepaid loan fees on SBA debentures			1,106,738			681,947
	Prepaid loan structure fees			1,382,333			1,774,630
	Prepaid expenses			140,504			419,283
		Total Assets	$	336,956,161		$	327,061,935
LIABILITIES
	Notes Payable		$	25,000,000		$	25,000,000
	Credit facility payable			110,750,000			106,500,000
	SBA Debentures			26,000,000			16,250,000
	Dividends payable			1,413,982			1,413,983
	Base management fees payable			1,462,024			1,360,019
	Incentive fees payable			1,129,318			1,121,556
	Interest payable			325,931			346,204
	Unearned revenue			40,534			157,403
	Administrative services payable			380,240			591,744
	Deferred tax liability			254,941			288,122
	Other accrued expenses and liabilities			206,525			83,452
		Total Liabilities	$	166,963,495		$	153,112,483
Commitments and contingencies (Note 7)
Net Assets			$	169,992,666		$	173,949,452
NET ASSETS
	Common Stock, par value $0.001 per share (100,000,000 shares authorized, 12,479,962 and 12,479,962 shares issued and outstanding, respectively)		$	12,480		$	12,480
	Paid-in capital			180,994,764			180,994,783
	Accumulated undistributed net realized gain			294,863			-
	Distributions in excess of net investment income			(1,847,907)			(779,643)
	Net unrealized depreciation on investments and cash equivalents, net of provision for taxes of $254,941 and $288,122, respectively.			(9,461,534)			(6,278,168)
Net Assets			$	169,992,666		$	173,949,452
	Total Liabilities and Net Assets		$	336,956,161		$	327,061,935
	Net Asset Value Per Share		$	13.62		$	13.94

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
				For the				For the				For the				For the
				three months				three months				nine months				nine months
				ended				ended				ended				ended
				September 30,				September 30,				September 30,				September 30,
				2015				2014				2015				2014
INVESTMENT INCOME
	Interest income			$	8,509,804			$	7,766,986			$	25,776,147			$	23,126,699
	Other income				93,009				55,511				231,219				557,753
		Total Investment Income		$	8,602,813			$	7,822,497			$	26,007,366			$	23,684,452
OPERATING EXPENSES
	Management fees			$	1,462,024			$	1,281,231			$	4,322,488			$	3,842,971
	Valuation fees				139,266				128,815				328,065				344,952
	Administrative services expenses				224,836				312,870				800,863				856,804
	Incentive fees				954,908				410,134				2,914,633				2,173,966
	Professional fees				92,320				115,463				454,675				399,490
	Directors' fees				76,000				86,000				260,000				290,000
	Insurance expense				119,417				121,730				354,603				361,220
	Interest expense and other fees				1,557,629				1,409,565				4,522,176				3,841,487
	Other general and administrative expenses				156,782				105,418				391,330				256,385
		Total Operating Expenses		$	4,783,182			$	3,971,226			$	14,348,833			$	12,367,275
	Waiver of Incentive Fee				-				(1,399,226	)			-				(1,399,226	)
		Total Operating Expenses, net of fee waivers		$	4,783,182			$	2,572,000			$	14,348,833			$	10,968,049
		Net Investment Income		$	3,819,631			$	5,250,497			$	11,658,533			$	12,716,403
		Net Realized Gain on Investments and Cash Equivalents		$	2,146			$	3,907			$	294,863			$	441,364
		Net Change in Unrealized Depreciation on Investments and Cash Equivalents		$	(4,593,553	)		$	(2,955,085	)		$	(3,216,547	)		$	(3,803,120	)
		Benefit (provision) for taxes on unrealized gain on investments		$	147,439			$	(185,888	)		$	33,181			$	(185,888	)
		Net Increase (Decrease) in Net Assets Resulting from Operations		$	(624,337	)		$	2,113,431			$	8,770,030			$	9,168,759
		Net Investment Income Per Share		$	0.31			$	0.42			$	0.93			$	1.04
		Net Increase (Decrease) in Net Assets Resulting from Operations Per Share		$	(0.05	)		$	0.17			$	0.70			$	0.75
		Weighted Average Shares of Common Stock Outstanding			12,479,962				12,404,485				12,479,962				12,214,875
		Distributions Per Share		$	0.34			$	0.34			$	1.02			$	1.09

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
		For the				For the
		nine months				nine months
		ended				ended
		September 30,				September 30,
		2015				2014
Increase in Net Assets Resulting from Operations
Net investment income		$	11,658,533			$	12,716,403
Net realized gain on investments and cash equivalents			294,863				441,364
Net change in unrealized depreciation on investments and cash equivalents			(3,216,547	)			(3,803,120	)
Benefit (provision) for taxes on unrealized appreciation on investments			33,181				(185,888	)
Net Increase in Net Assets Resulting from Operations		$	8,770,030			$	9,168,759
Stockholder distributions
Net investment income			(12,726,816	)			(12,473,610	)
Net realized capital gains			-				(786,436	)
Total Distributions		$	(12,726,816	)		$	(13,260,046	)
Capital share transactions
Issuance of common stock			-				5,087,335
Reinvestments of stockholder distributions			-				313,113
Sales load			-				(75,510	)
Offering costs			-				(29,904	)
Net increase in net assets resulting from capital share transactions		$	-			$	5,295,034
Total increase (decrease) in net assets		$	(3,956,786	)		$	1,203,747
Net assets at beginning of period		$	173,949,452			$	175,891,514
Net assets at end of period (includes $1,847,907 and $1,019,866 of distributions in excess of net investment income, respectively)		$	169,992,666			$	177,095,261

STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
					For the			For the
					nine months			nine months
					ended			ended
					September 30, 2015			September 30, 2014
Cash flows from operating activities
Net increase in net assets resulting from operations					$	8,770,030		$	9,168,759
	Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
		Purchases of investments				(85,108,716)			(58,454,022)
		Proceeds from sales and repayments of investments				76,333,638			49,485,710
		Net change in unrealized depreciation on investments				3,216,547			3,803,220
		Deferred tax provision (benefit)				(33,181)			185,888
		Increase in investments due to PIK				(387,975)			(538,457)
		Amortization of premium and accretion of discount, net				(759,387)			(488,829)
		Amortization of loan structure fees				392,297			452,054
		Amortization of deferred financing costs				163,619			74,964
		Amortization of loan fees on SBIC debentures				136,646			-
		Net realized gain on investments				(294,863)			(446,239)
	Changes in other assets and liabilities
			Decrease (increase) in interest receivable			736,112			(643,642)
			Decrease in receivable for affiliated transaction			-			43,450
			Increase in accounts receivable			(6,988)			(31,013)
			Decrease in prepaid expenses and fees			278,779			29,522
			Increase in management fees payable			102,005			104,501
			Decrease in directors' fees payable			-			(10,000)
			Increase (decrease) in incentive fees payable			7,762			(841,055)
			Increase (decrease) in administrative services payable			(211,504)			288,157
			Increase (decrease) in interest payable			(20,273)			102,224
			Decrease in unearned revenue			(116,869)			(17,417)
			Increase (decrease) in other accrued expenses and liabilities			123,073			(161,558)
Net cash provided by operating activities					$	3,320,752		$	2,106,217
Cash flows from financing activities
		Proceeds from notes issued				-			25,000,000
		Proceeds from SBA Debentures				9,750,000			-
		Financing costs paid on notes issued				-			(997,317)
		Financing costs paid on SBA Debentures				(561,437)			-
		Proceeds from the issuance of common stock				-			5,116,989
		Sales load for common stock issued				-			(75,510)
		Offering costs paid for common stock issued				-			(116,149)
		Stockholder distributions paid				(12,726,816)			(11,533,709)
		Borrowings under credit facility				86,500,000			78,000,000
		Repayments of credit facility				(82,250,000)			(98,000,000)
		Repayments of short-term loan				-			(9,000,000)
Net cash provided by (used in) financing activities					$	711,747		$	(11,605,696)
Net increase (decrease) in cash and cash equivalents						4,032,499			(9,499,479)
Cash and cash equivalents balance at beginning of period						2,046,563			13,663,542
Cash and cash equivalents balance at end of period					$	6,079,062		$	4,164,063
Supplemental and non-cash financing activities
		Accrued deferred offering costs			$	-		$	4,752
		Shares issued pursuant to Dividend Reinvestment Plan			$	-		$	313,113
		Interest expense paid			$	3,844,890		$	3,206,081

About Stellus Capital Investment Corporation

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien, second lien, unitranche and mezzanine debt financing, and corresponding equity investments. The Company's investment activities are managed by its investment adviser, Stellus Capital Management. To learn more about Stellus Capital Investment Corporation, visit www.stelluscapital.com under the Stellus Capital Investment Corporation link.

Forward Looking Statements

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Available Information

Stellus' filings with the Securities and Exchange Commission, press releases, earnings release, and other financial information are available on its website at www.stelluscapital.com under the Stellus Capital Investment Corporation link.

Contact
Stellus Capital Investment Corporation
W. Todd Huskinson
(713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com

Source: Stellus Capital Investment Corporation

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