HOUSTON, May 5, 2017 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or "the Company") today announced financial results for its first fiscal quarter ended March 31, 2017.

"Our equity raise in April generated approximately $43 million of net proceeds, which will enable us to fully capitalize our SBIC subsidiary and continue to grow our asset base," said Robert T. Ladd, Chief Executive Officer of Stellus.

Portfolio and Investment Activity

We completed the first quarter of 2017 with a portfolio of $351.7 million (at fair value) invested in 46 companies. As of March 31, 2017, our portfolio included approximately 27% of first lien debt, 45% of second lien debt, 22% of unsecured debt and 6% of equity investments at fair value.  Our debt portfolio consisted of 71% floating rate investments (subject to interest rate floors) and 29% fixed rate investments. The average size of our portfolio company investments was $7.8 million and our largest aggregate investment in a portfolio company was approximately $21.4 million at fair value. The weighted average yield on all of our debt investments as of March 31, 2017 was approximately 11.3%.

During the quarter ended March 31, 2017, we made $23.2 million of investments in three new portfolio companies and two existing portfolio companies, and received $39.3 million in proceeds from amortization, repayments and sales of certain other investments

This compares to the portfolio as of March 31, 2016, which had a fair value of $352.5 million invested in 40 companies, comprised 37% of first lien debt, 39% of second lien debt, 20% of unsecured debt and 4% of equity investments at fair value. The weighted average yield on all of our debt investments as of March 31, 2016 was approximately 10.6%. The debt portfolio consisted of 76% floating rate investments (subject to interest rate floors) and 24% fixed rate investments.

Results of Operations

Investment income for the quarter ended March 31, 2017 and 2016, totaled $9.9 million and $9.5 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the quarter ended March 31, 2017 and 2016, totaled $5.7 million and $5.4 million, respectively. For the same respective periods, base management fees totaled $1.6 million and $1.5 million, incentive fees totaled $1.0 million and $1.0 million, fees and expenses related to our borrowings totaled $2.1 million and $1.9 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.3 million for both periods and other expenses totaled $0.7 million for both periods.

Net investment income was $4.1 million, or $0.33 per common share, based on weighted average common shares outstanding for both quarters ended March 31, 2017 and 2016.

For the quarter ended March 31, 2017 and 2016, the Company had a realized loss of $0.7 million and a realized gain of $894, respectively. The Company's investment portfolio had a net change in unrealized appreciation (depreciation) for the quarter ended March 31, 2017 and 2016, of $2.6 million and ($1.7) million, respectively. 

Our net increase in net assets resulting from operations totaled $6.0 million and $2.5 million, or $0.48 and $0.20 per common share, based on weighted average common shares outstanding, for the quarter ended March 31, 2017 and 2016, respectively.

Liquidity and Capital Resources

Our liquidity and capital resources are derived from our credit facility and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as the payment of dividends to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from any future public and private offerings of securities to finance our investment activities.

As of March 31, 2017 and 2016, our credit facility provided for borrowings in an aggregate amount up to $120 million on a committed basis. As of March 31, 2017 and 2016, we had $102.5 million and $109.5 million in outstanding borrowings under the credit facility, respectively.

For the three months ended March 31, 2017, our operating activities provided cash of $20.1 million primarily in connection with cash interest received and repayments of our investments. For the same period, our financing activities used cash of $17.8 million, which included distributions to stockholders of $4.2 million paid during the period, and net repayments of $13.5 million under the credit facility.

For the three months ended March 31, 2016, our operating activities used cash of $0.1 million primarily due to the purchase of new investments offset by cash interest received. For the same period, our financing activities used cash of $4.2 million, due to distributions to stockholders during the period.

Distributions

During the three months ended March 31, 2017 and 2016, we declared aggregate 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 that occurred during the quarter ended March 31, 2017 are summarized as follows:

• On January 5, 2017, we sold our position in Securus Technologies Holdings, Inc. for proceeds of $8.4 million.  We realized a loss of $42 thousand related to the sale.
• On January 25, 2017, we received full repayment on the first lien term loan of Momentum Telecom, Inc. for proceeds of $15.3 million, including a $0.2 million premium.
• On February 1, 2017, our first lien term loan in Glori Energy Production, Inc. was converted to an equity position, resulting in a realized loss of $0.8 million.  This realized loss was previously recorded as an unrealized loss at December 31, 2016; therefore there is no impact on earnings or NAV during the quarter ended March 31, 2017.
• On February 3, 2017, we invested $6.3 million in the unsecured term loan of Time Manufacturing, Inc., a global manufacturer of vehicle-mounted aerial lift equipment. Additionally, we invested $0.5 million in the equity of the company.
• On February 8, 2017, we received full repayment on the second lien term loan of MTC Intermediate Holdco for proceeds of $10.4 million, including a $0.1 million premium. Additionally, we received $0.7 million in dividends for the equity in MTC Parent, LP., which under GAAP are recorded as a return of capital rather than dividend income.
• On March 1, 2017, we received full repayment on the first lien term loan of 360 Holdings III Corp for proceeds of $4.0 million, including a $0.04 million premium. 
• On March 27, 2017, we invested $5.0 million in the second lien term loan of Beneplace, Inc., an employee voluntary benefit program management company. Additionally, we invested $0.5 million in the equity of the company.
• On March 31, 2017, we invested $10 million in the second lein term loan of National Trench Safety, LLC, a rental and seller of underground equipment and trench safety products. Additionally, we invested $0.5 million in the equity of the company.

Events Subsequent to March 31, 2017

Equity Offering

On April 5, 2017, the Company priced a public offering of 2,750,000 shares of common stock in an underwritten public offering. The public offering price was set at $14.10 per share and net proceeds from the offering, after deducting underwriting discounts and estimated offering expenses payable by the Company, proceeds to the company was approximately $37.5 million. The Company also granted the underwriters an option, exercisable for 30 days, to purchase up to 412,500 additional shares of common stock, which was exercised on April 24, 2017, resulting in net proceeds to the Company of an additional $5.6 million.

On May 1, 2017, we received full repayment on the second lien term loan of Telecommunications Management, LLC for proceeds of $5.0 million.

Credit Facility

The outstanding balance under the Credit Facility as of May 4, 2017 was $53 million.

Dividend Declared

On April 14, 2017, the Company's board of directors declared a regular monthly dividend for each of April, May and June 2017 as follows:

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on Friday, May 5, 2017, at 10:00 a.m. Central Daylight 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 888-572-7029 (domestic). Use passcode 1752487. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through May 13, 2017 by dialing (888) 203-1112 and entering passcode 1752487. The replay will also be available on the company's website.

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

 

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SOURCE Stellus Capital Investment Corporation