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THL Credit Announces Second Quarter 2012 Financial Results
and Declares an Increased Dividend of $0.32 Per Share
GlobeNewswire
2012-07-31
BOSTON, July 30, 2012 (GLOBE NEWSWIRE) -- THL Credit, Inc.
(Nasdaq:TCRD) ("THL Credit" or the "Company"), a direct capital
provider to middle market companies, today announced financial results
for its second fiscal quarter ended June 30, 2012. Additionally, THL
Credit announced that its Board of Directors has declared a third
fiscal quarter 2012 dividend of $0.32 per share payable on September
28, 2012, to stockholders of record as of September 14, 2012, an
increase over the prior quarter's dividend of $0.02 per share.
HIGHLIGHTS
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($ in millions, except per share amounts)
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As of
June
30,
Portfolio results 2012
----------------------------------- ------- -------
Total assets $341.9
----------------------------------- ------- -------
Investment portfolio, at fair
value $330.3
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Net assets $266.3
----------------------------------- ------- -------
Net asset value per share $13.17
----------------------------------- ------- -------
Weighted average yield on
investments 14.2%
----------------------------------- ------- -------
Quarter Quarter
ended ended
June June
30, 30,
2012 2011
----------------------------------- ------- -------
Portfolio activity
-----------------------------------------------------
Total investments made, at par $66.8 $56.0
----------------------------------- ------- -------
Investments in new portfolio
companies, at par $64.4 $48.9
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Number of new portfolio companies 6 5
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Number of portfolio companies at
end of period 30 22
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Operating results
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Total investment income $11.8 $9.1
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Net investment income $6.5 $5.0
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Net increase in net assets from
operations $6.0 $6.6
----------------------------------- ------- -------
Net investment income per share $0.32 $0.25
----------------------------------- ------- -------
Dividends declared per share $0.30 $0.25
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"We are pleased with our investment pace this quarter, our most active
since our IPO in 2010, and more importantly, with the overall credit
quality of our portfolio. We remain cautious on the economic
environment and our deployment of shareholder capital will continue to
be done prudently and patiently," said James K. Hunt, chief executive
officer of THL Credit. "Our origination efforts continue to produce
actionable investment opportunities and we have over $120 million of
liquidity to acquit our pipeline."
PORTFOLIO AND INVESTMENT ACTIVITY
During the quarter, THL Credit closed on $66.8 million of investments
comprised of $64.4 million in six new portfolio companies and $2.4
million of follow-on investments in three existing portfolio companies.
Activity for the quarter included:
-- $8.7 million investment in the subordinated term loan of Martex Fiber
Southern Corp., a vertically integrated niche manufacturer operating in
the textile waste recycling industry in the southern United States,
based in Philadelphia, PA;
-- $13.0 million investment in the subordinated term loan of IMDS
Corporation, an innovator in contract, full-service medical device
development and manufacturing, based in Fort Worth, TX;
-- $9.6 million investment in the senior secured term loan and equity of YP
Intermediate Holdings Corp., a holding company for AT&T Ad
Solutions/Interactive, or Yellow Pages, which sells advertising in
United States print directories, online and mobile platforms, based in
Atlanta, GA;
-- $9.3 million investment in the subordinated term loan of Dr. Fresh Inc.,
a company engaged in the design, manufacture and sale of oral care
products, based in Buena Park, CA;
-- $12.5 million investment in tax receivable agreement payment rights of
Duff & Phelps Corporation, a provider of independent advisory and
investment banking services, based in New York, NY;
-- $11.3 million investment in the second lien loan and equity of AIM Media
Texas Operating, LLC, an operator of regional newspapers in Texas, based
in Dallas, TX;
-- $2.4 million in follow-on investments in Country Pure Foods, LLC and
Trinity Services Group, Inc., both in connection with acquisitions, and
a delayed draw funding;
-- Realization of THL Credit's remaining investment in Charming Charlie,
Inc. at par plus a prepayment premium, resulting in total proceeds of
$7.8 million;
-- Sale of THL Credit's investment in Hickory Farm, Inc. at par, resulting
in proceeds of $9.5 million;
-- Partial realizations, totaling $6.6 million, of THL Credit's investments
in Hart InterCivic, Inc., LCP Capital Fund LLC, and CRS Reprocessing,
LLC.
The weighted average yield on investments made during the second
quarter at their current cost basis, as of June 30, 2012, was 15.3
percent.
These transactions bring the total fair value of THL Credit's
investment portfolio to $330.3 million across 30 portfolio companies,
including THL Credit Greenway Fund LLC, at the quarter ended June 30,
2012. The weighted average yield of the debt and income-producing
interests in the investment portfolio at their current cost basis, as
of June 30, 2012, was 14.2 percent. The weighted average yield on the
debt investments alone at their current cost basis, as of June 30,
2012, was 14.0 percent.
As of June 30, 2012, THL Credit's investment portfolio at fair value
was allocated 24 percent in first lien debt including unitranche
investments, 21 percent in second lien debt, 48 percent in subordinated
debt, 6 percent in income-producing investments in funds and payment
rights and 1 percent in equity.
This compares to its portfolio as of Dec. 31, 2011, which had a fair
value of $267.0 million allocated 34 percent in first lien debt, 22
percent in second lien debt, 38 percent in subordinated debt, 5 percent
in income-producing fund interests and 1 percent in equity. The
weighted average yield of the debt and income-producing fund interests
in the investment portfolio at their cost basis as of Dec. 31, 2011,
was 14.0 percent. The weighted average yield on the debt investments
alone at their cost basis as of Dec. 31, 2011, was 13.8 percent.
RESULTS OF OPERATIONS
Investment income
Total investment income for the three months ended June 30, 2012, was
$11.8 million compared with $9.1 million in the prior year. In the
second quarter of 2012, total investment income consisted of $10.4
million in interest income on debt securities and cash (including $1.2
million of PIK interest and $0.2 in prepayment premiums), $0.6 million
of interest income on income-producing investments, as well as $0.8
million of other income, mainly related to fees from THL Credit
Greenway Fund LLC ("Greenway"). This compares to $9.1 million of total
investment income for the three months ended June 30, 2011, which
consisted of $7.4 million of interest income on debt securities and
cash (including PIK interest of $0.6 million), $0.6 million of interest
income on income-producing investments, $0.3 million of dividend
income, and $0.8 million of other income, mainly related to fees from
Greenway.
The increase in the investment income compared to the same period in
the prior year is due to the growth of THL Credit's investment
portfolio.
Operating expenses
Operating expenses for the three months ended June 30, 2012, and 2011,
were $5.2 million and $4.1 million, respectively. Base management fees
for the same periods were $1.1 million and $1.0 million; incentive fees
totaled $1.6 million and $1.1 million; administrator expenses were $0.7
million and $0.7 million; other expenses totaled $0.8 million and $0.8
million; and fees and expenses related to THL Credit's credit facility
totaled $1.0 million and $0.5 million, respectively.
The increase in base management fees and incentive fee expense is due
to the growth and performance of the investment portfolio. The increase
in expenses and fees related to the credit facility is due principally
to the level of borrowings and increased commitment size.
Net investment income
Net investment income totaled $6.5 million and $5.0 million, or $0.32
and $0.25 per share, for the three months ended June 30, 2012 and 2011,
respectively.
Net change in unrealized appreciation on investments
For the second quarter, THL Credit's investment portfolio had
unrealized appreciation of $0.03 million in 2012, compared to
unrealized appreciation of $1.6 million in 2011. As of June 30, 2012,
and Dec. 31, 2011, net unrealized appreciation on investments was $3.4
million and $3.9 million, respectively.
The change in the net change in unrealized appreciation compared to the
prior period was driven primarily by changes in the capital market
conditions and in the financial performance of certain portfolio
companies.
Unrealized depreciation on interest rate derivative
For the second quarter, THL Credit's interest rate derivative
agreement, which was entered into on May 10, 2012, had unrealized
depreciation of $0.6 million, which was due to capital markets changes
impacting interest rate swap spreads.
Net increase in net assets resulting from operations
Net increase in net assets resulting from operations totaled $6.0
million and $6.6 million, or $0.30 and $0.32 per share, respectively,
for the three months ended June 30, 2012 and 2011, respectively.
This decrease in net assets from operations is due to the net change in
unrealized appreciation on investments and the unrealized depreciation
on the interest rate derivative agreement.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2012, THL Credit had cash of $2.2 million. THL Credit's
liquidity and capital resources are derived from its credit facility
and cash flows from operations, including investment sales and
repayments, and income earned. Its primary use of funds from operations
includes making investments in portfolio companies and funding
operating expenses it incurs. THL Credit used, and expects to continue
to use, these capital resources, together with proceeds from turnover
within the portfolio and from future public and private offerings of
securities, to finance its investment objectives.
On May 10, 2012, the Company entered into an amendment to its existing
revolving credit agreement to expand the size from $125.0 million to
$140.0 million and entered into a new $50.0 million senior secured term
loan credit facility with ING Capital LLC.
At June 30, 2012, THL Credit had $70.2 million in outstanding
borrowings, which includes $20.2 million outstanding under its revolver
and $50.0 million outstanding under its term loan facility. The credit
facility had a weighted average interest rate of 4.10 percent,
exclusive of the fee on undrawn commitments. THL Credit borrowed $67.8
million under its revolving credit facility and $50.0 million under its
term loan for the six months ended June 30, 2012 and repaid $52.6
million funds on its revolving credit facility from proceeds received
from the term loan, prepayments and investment income. There were no
borrowings or repayments for the six months ended June 30, 2011.
For the six months ended June 30, 2012, THL Credit's operating
activities used cash of $52.6 million primarily in connection with the
purchase of investments, and its financing activities provided cash of
$65.2 million from net borrowings and used cash of $15.9 million from
the payment of dividends to stockholders and payment of financing costs
related to the credit facility and term loan.
For the six months ended June 30, 2011, THL Credit's operating
activities used cash of $78.3 million primarily in connection with the
purchase of investments, and its financing activities used cash of
$11.2 million primarily from the payment of dividends to stockholders
and financing costs related to the credit facility.
CONFERENCE CALL
THL Credit will host a conference call to discuss these results on July
31, 2012, at 8:30 a.m. Eastern Daylight Time. The conference call will
be led by James K. Hunt, chief executive officer, and Terrence W.
Olson, chief operating officer and chief financial officer.
For those wishing to participate by telephone, please dial (877)
375-9141 (domestic) or (253) 237-1151 (international). Use passcode
99455043. THL Credit will also broadcast the conference call live via
its website at www.thlcredit.com. Starting approximately two hours
after the conclusion of the call, a replay will be available through
August 13, 2012, by dialing (855) 859-2056 (domestic) or (404) 537-3406
(international) and entering passcode 99455043. The replay will also be
available on the Company's website.
AVAILABLE INFORMATION
THL Credit's filings with the Securities and Exchange Commission, press
releases, earnings releases, investor presentation and other financial
information are available on its website at www.thlcredit.com.
THL CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
June 30, December 31,
2012 2011
(unaudited)
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Assets:
Investments at fair value:
Non-controlled,
non-affiliated investments
(cost of $326,881,792 and
$263,100,758, respectively) $ 330,324,550 $ 266,981,836
Non-controlled, affiliated
investments (cost of $14,060
and $10,864, respectively) 14,060 11,496
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Total investments at fair
value (cost of $326,895,852
and $263,111,622,
respectively) 330,338,610 266,993,332
Cash 2,222,164 5,572,753
Deferred financing costs 4,335,736 1,860,484
Interest receivable 3,379,046 1,440,057
Due from affiliate 685,250 511,842
Deferred offering costs 425,187 327,267
Receivable for paydown of
investment 258,621 258,621
Prepaid expenses and other
assets 235,145 185,075
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Total assets $ 341,879,759 $ 277,149,431
============= =============
Liabilities:
Loans payable $ 70,200,000 $ 5,000,000
Accrued incentive fees 2,668,113 2,689,030
Base management fees payable 1,107,244 1,013,048
Accrued expenses 502,357 466,030
Accrued credit facility fees
and interest 478,586 5,451
Interest rate derivative 574,427 --
Accrued administrator expenses -- 338,569
Due to affiliate -- 20,597
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Total liabilities 75,530,727 9,532,725
Net Assets:
Preferred stock, par value
$0.001 per share, 100,000,000
preferred shares authorized,
no preferred shares issued and
outstanding -- --
Common stock, par value $0.001
per share, 100,000,000 common
shares authorized, 20,220,202
and 20,220,200 shares issued
and outstanding at June 30,
2012 and December 31, 2011,
respectively 20,220 20,220
Paid-in capital in excess of
par 262,289,377 262,289,351
Net unrealized appreciation on
investments 3,442,758 3,881,710
Net unrealized depreciation on
interest rate derivative (574,427) --
Accumulated undistributed net
realized gain -- 917,830
Accumulated undistributed net
investment income 1,171,104 507,595
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Total net assets 266,349,032 267,616,706
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Total liabilities and net
assets $ 341,879,759 $ 277,149,431
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Net asset value per share $ 13.17 $ 13.24
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THL CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended June
30, Six months ended June 30,
------------------------- ----------------------------
2012 2011 2012 2011
------------ ----------- ------------- -------------
Investment Income:
From non-controlled,
non-affiliated
investments:
Interest income $ 11,002,847 $ 8,125,991 $ 21,153,170 $ 15,005,664
Other income 62,366 157,220 131,300 255,827
Dividend income -- 279,676 -- 279,676
From non-controlled,
affiliated investment:
Other income 693,338 554,148 1,223,672 634,330
------------ ----------- ------------- -------------
Total investment income 11,758,551 9,117,035 22,508,142 16,175,497
Expenses:
Incentive fees 1,635,336 1,113,150 3,061,584 1,614,903
Base management fees 1,107,244 998,805 2,146,554 1,990,265
Credit facility interest
and fees 759,860 315,973 1,212,693 385,556
Administrator expenses 676,996 715,971 1,500,888 1,284,036
Professional fees 356,727 312,474 562,405 533,942
Amortization of deferred
financing costs 237,285 210,045 448,915 256,978
Other general and
administrative expenses 224,544 221,166 401,871 418,172
Directors' fees 134,875 134,875 269,750 269,750
Insurance expenses 111,065 123,700 216,875 315,308
------------ ----------- ------------- -------------
Total expenses 5,243,932 4,146,159 9,821,535 7,068,910
------------ ----------- ------------- -------------
Net investment income 6,514,619 4,970,876 12,686,607 9,106,587
Net change in unrealized
appreciation on
investments:
Non-controlled,
non-affiliated
investments 26,690 1,579,444 (438,320) 2,327,819
Non-controlled, affiliated
investments -- 100 (632) 100
------------ ----------- ------------- -------------
Net change in unrealized
appreciation on
investments 26,690 1,579,544 (438,952) 2,327,919
Net change in unrealized
depreciation on interest
rate derivative (574,427) -- (574,427) --
------------ ----------- ------------- -------------
Net increase in net assets
resulting from operations $ 5,966,882 $ 6,550,420 $ 11,673,228 $ 11,434,506
============ =========== ============= =============
Net investment income per
common share:
Basic and diluted $ 0.32 $ 0.25 $ 0.63 $ 0.45
Net increase in net assets
resulting from operations
per common share:
Basic and diluted $ 0.30 $ 0.32 $ 0.58 $ 0.57
Weighted average shares of
common stock outstanding:
Basic and diluted 20,220,201 20,220,197 20,220,201 20,113,105
ABOUT THL CREDIT
THL Credit is an externally-managed, non-diversified closed-end
management investment company that has elected to be treated as a
business development company (BDC) under the Investment Company Act of
1940. THL Credit's investment objective is to generate both current
income and capital appreciation, primarily through investments in
privately negotiated debt and equity securities of middle market
companies.
THL Credit is headquartered in Boston, with additional investment teams
in Los Angeles and Houston. THL Credit invests primarily in junior
capital securities of sponsored and unsponsored issuers, including
subordinated debt and second lien secured debt, which junior capital
may include an associated equity component such as warrants, preferred
stock or other similar securities. THL Credit may also selectively
invest in first lien senior secured loans that generally have
structures with higher interest rates, which include unitranche
investments. In certain instances THL Credit will also make direct
equity investments. THL Credit targets investments in middle market
companies with annual revenues of between $25 million and $500 million
that require capital for growth and acquisitions. THL Credit's
investment activities are managed by THL Credit Advisors LLC, an
investment adviser registered under the Investment Advisers Act of
1940.
The THL Credit logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=12478
FORWARD-LOOKING STATEMENTS
Statements made in this press release may constitute forward-looking
statements. Such statements reflect various assumptions by THL Credit
concerning anticipated results and are not guarantees of future
performance. The accuracy of such statements involves known and unknown
risks, uncertainties and other factors that, in some ways, are beyond
management's control, including the factors described from time to time
in filings by THL Credit with the Securities and Exchange Commission.
THL Credit undertakes no duty to update any forward-looking statements
made herein. All forward-looking statements speak only as of the date
of this press release.
CONTACT: Investor Contact:
THL Credit, Inc.
Terrence W. Olson, COO & CFO
800-450-4424
Media Contact:
Sard Verbinnen & Co
Michael Henson
212-687-8080
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