CM Finance Inc Reports Results for its Fiscal Second Quarter Ended December 31, 2018
06 Février 2019 - 10:30PM
CM Finance Inc (NASDAQ: CMFN) (“CMFN” or “the Company”) announced
its financial results for its fiscal second quarter ended December
31, 2018.
HIGHLIGHTS
- CMFN made investments in nine portfolio companies with
a total cost of $50.1mm. The weighted average yield of debt
investments made in the quarter was 10.77%
- Eight investments were fully realized, and one
investment had a significant partial realization. Realizations
during the quarter had a weighted average internal rate of return
(“IRR”) of 12.21%
- The weighted average yield on debt investments, at
cost, increased 18 basis points to 11.08% compared to 10.90% as of
September 30, 2018
- Net asset value (“NAV”) per share decreased by 7.41% to
$11.49, compared to $12.41 as of September 30, 2018
Portfolio results, as of
December 31, 2018: |
|
|
Total assets |
|
$302.0mm |
Investment portfolio,
at fair value |
|
$283.3mm |
Net assets |
|
$156.4mm |
Weighted average yield
on debt investments, at cost |
|
11.08% |
Net asset value per
share |
|
$11.49 |
Portfolio activity in
the current quarter: |
|
|
Number of new
investments |
|
14 |
Total capital
invested |
|
$50.1mm |
Proceeds from
repayments, sales, and amortization |
|
$84.5mm |
Number of portfolio
companies, end of period |
|
29 |
Net investment income
(NII) |
|
$3.7mm |
Net investment income
per share |
|
$0.25 |
Net decrease in net
assets from operations |
|
$9.4mm |
Net decrease in net
assets from operations per share |
|
$0.69 |
Quarterly per share
distribution paid on October 5, 2018 |
|
$0.25 |
Mr. Michael C. Mauer, the Company’s Chief Executive Officer,
said, “While the fair value of the portfolio declined during the
quarter, we believe that we take a prudent and conservative
approach to both investing and valuing our portfolio and we see
significant opportunity as we look forward in 2019. We have
fully written down our positions in Trident USA Health Services,
LLC, and have no other positions on non-accrual today. Our
team continues to reposition our portfolio, currently emphasizing
senior secured positions, building a diversified, resilient
portfolio that will perform throughout the cycle. We are very happy
with the progress we have made.”
On February 5, 2019, the Company’s Board of Directors declared a
distribution for the quarter ending March 31, 2019 of $0.25 per
share, payable on April 4, 2019, to shareholders of record as of
March 15, 2019. This represents a 12.5% yield on the Company’s
$8.00 share price as of the close on February 5, 2018.
Distributions may include net investment income, capital gains
and/or return of capital; however, the Company does not expect the
distribution to be comprised of a return of capital. The tax status
of distributions will be determined at the end of the taxable
year.
Portfolio and Investment
Activities
During the quarter, the Company made investments
in nine portfolio companies. These investments totaled
$50.1mm at cost and were made at a weighted average yield of
10.77%. The Company also realized $84.5mm of repayments,
sales, and amortization, primarily related to the repayments of
American Gaming Systems Inc., Montrose Environmental Group, Inc.,
FPC Holdings, Inc, and Hostway Corp. Additionally, we had a
partial realization of our investments in U.S. Well Services, LLC,
including the full realization of our position in U.S. Well
Services, LLC’s revolving credit facility. Realized and unrealized
gains and losses accounted for a decrease in the Company’s net
investments of approximately $13.1mm, or $0.96 per share. The
total net decrease in net assets resulting from operations for the
quarter was $9.4mm, or $0.69 per share.
As of December 31, 2018, the Company’s
investment portfolio consisted of investments in 29 portfolio
companies, of which 63.7% were first lien investments, 31.7% were
second lien investments, 4.1% were unitranche loans, and 0.5% were
in equities, warrants and other positions. The Company’s debt
portfolio consisted of 94.4% floating rate investments and 5.2%
fixed rate investments. As of December 31, 2018, the Company
had one investment on non-accrual status, Trident USA Health
Services, LLC.
Capital Resources
As of December 31, 2018, the Company had $6.2mm in cash, $6.0mm
in restricted cash and $50.0mm of capacity under its revolving
credit facility with UBS AG, London Branch.
Share Repurchases
During the quarter, the Company repurchased 30,999 shares of
common stock on the open market for $257,336 (including
commissions).
Subsequent Events
Subsequent to December 31, 2018 and through February 5, 2019, we
invested $23.4 million in new and existing portfolio companies, and
received repayment or sales proceeds of $29.0 million
CM
Finance Inc and Subsidiaries |
|
|
|
|
|
Consolidated Statements of Assets and
Liabilities |
|
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|
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|
|
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|
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|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
June 30, 2018 |
|
Assets |
|
|
|
|
|
Non-controlled, non-affiliated investments, at fair value
(amortized cost of $307,290,045 and $ 302,647,282,
respectively) |
$ |
283,335,302 |
|
|
$ |
293,592,013 |
|
Derivatives, at fair value (cost of $0 and $0, respectively) |
|
94,380 |
|
|
|
229,918 |
|
Cash |
|
6,197,259 |
|
|
|
5,620,441 |
|
Cash,
restricted |
|
5,981,651 |
|
|
|
2,706,273 |
|
Receivable
for investments sold |
|
397,146 |
|
|
|
7,751,875 |
|
Interest
receivable |
|
3,282,163 |
|
|
|
4,011,450 |
|
Deferred
offering costs |
|
121,922 |
|
|
|
121,922 |
|
Other
receivables |
|
2,515,625 |
|
|
|
245,550 |
|
Prepaid
expenses and other assets |
|
58,954 |
|
|
|
255,139 |
|
Total Assets |
$ |
301,984,402 |
|
|
$ |
314,534,581 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Notes
payable: |
|
|
|
|
|
Term loan |
$ |
102,000,000 |
|
|
$ |
102,000,000 |
|
Revolving credit facility |
|
- |
|
|
|
17,823,000 |
|
Baby bonds payable: |
|
34,500,000 |
|
|
|
- |
|
Deferred debt issuance costs |
|
(2,494,517 |
) |
|
|
(1,953,771 |
) |
Notes payable, net |
|
134,005,483 |
|
|
|
117,869,229 |
|
Payable for
investments purchased |
|
2,985,000 |
|
|
|
12,569,450 |
|
Dividend
payable |
|
3,410,713 |
|
|
|
3,417,848 |
|
Deferred
financing costs payable |
|
1,037,000 |
|
|
|
2,071,167 |
|
Income-based incentive fees payable |
|
1,566,513 |
|
|
|
2,294,678 |
|
Base
management fees payable |
|
1,405,297 |
|
|
|
1,319,853 |
|
Accrued
provision for taxes |
|
- |
|
|
|
2,579,337 |
|
Derivatives, at fair value (cost $0 and $0, respectively) |
|
94,380 |
|
|
|
229,918 |
|
Interest
payable |
|
845,566 |
|
|
|
303,153 |
|
Directors'
fees payable |
|
93,448 |
|
|
|
99,296 |
|
Accrued
expenses and other liabilities |
|
104,694 |
|
|
|
257,986 |
|
Total Liabilities |
|
145,548,094 |
|
|
|
143,011,915 |
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6) |
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
Common
stock, par value $0.001 per share (100,000,000 shares
authorized, 13,613,116 and 13,649,504 shares issued and
outstanding, respectively) |
|
13,613 |
|
|
|
13,649 |
|
Additional
paid-in capital |
|
198,392,175 |
|
|
|
198,700,999 |
|
Accumulated
net realized loss |
|
(21,270,472 |
) |
|
|
(21,087,280 |
) |
Undistributed (distributions in excess of) net investment
income |
|
3,255,732 |
|
|
|
2,950,567 |
|
Net
unrealized depreciation on investments |
|
(23,954,740 |
) |
|
|
(9,055,269 |
) |
Total Net Assets |
|
156,436,308 |
|
|
|
171,522,666 |
|
Total Liabilities and Net Assets |
$ |
301,984,402 |
|
|
$ |
314,534,581 |
|
Net Asset
Value Per Share |
$ |
11.49 |
|
|
$ |
12.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial
statements. |
|
|
|
|
|
|
CM
Finance Inc and Subsidiaries |
Consolidated Statements of Operations |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
For the three months ended December
31, |
|
For the six months ended
December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Investment Income: |
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
$ |
8,481,251 |
|
|
$ |
7,538,152 |
|
$ |
16,136,091 |
|
|
$ |
13,964,204 |
|
Payment
in-kind interest income |
|
540,308 |
|
|
|
722,039 |
|
|
953,928 |
|
|
|
1,014,517 |
|
Dividend
income |
|
- |
|
|
|
- |
|
|
31,275 |
|
|
|
- |
|
Payment
in-kind dividend income |
|
- |
|
|
|
189,583 |
|
|
- |
|
|
|
189,583 |
|
Other fee
income |
|
277,365 |
|
|
|
- |
|
|
432,520 |
|
|
|
9,879 |
|
Total investment income |
|
9,298,924 |
|
|
|
8,449,774 |
|
|
17,553,814 |
|
|
|
15,178,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
2,156,537 |
|
|
|
1,601,261 |
|
|
4,421,394 |
|
|
|
3,039,090 |
|
Base
management fees |
|
1,405,297 |
|
|
|
1,161,353 |
|
|
2,757,152 |
|
|
|
2,315,233 |
|
Income-based incentive fees |
|
753,721 |
|
|
|
921,782 |
|
|
874,042 |
|
|
|
906,758 |
|
Provision
for tax expense |
|
12,946 |
|
|
|
- |
|
|
12,946 |
|
|
|
- |
|
Professional fees |
|
233,528 |
|
|
|
236,024 |
|
|
466,328 |
|
|
|
445,064 |
|
Allocation
of administrative costs from advisor |
|
341,633 |
|
|
|
184,561 |
|
|
679,696 |
|
|
|
311,790 |
|
Amortization of deferred debt issuance costs |
|
195,377 |
|
|
|
179,514 |
|
|
390,754 |
|
|
|
304,716 |
|
Insurance
expense |
|
84,440 |
|
|
|
85,225 |
|
|
168,880 |
|
|
|
205,439 |
|
Directors'
fees |
|
101,250 |
|
|
|
99,000 |
|
|
202,500 |
|
|
|
198,667 |
|
Custodian
and administrator fees |
|
7,500 |
|
|
|
113,443 |
|
|
15,000 |
|
|
|
170,451 |
|
Offering
expense |
|
51,750 |
|
|
|
- |
|
|
103,500 |
|
|
|
186,513 |
|
Other
expenses |
|
236,033 |
|
|
|
180,482 |
|
|
355,214 |
|
|
|
391,158 |
|
Total expenses |
|
5,580,012 |
|
|
|
4,762,645 |
|
|
10,447,406 |
|
|
|
8,474,879 |
|
Waiver of
income-based incentive fees |
|
- |
|
|
|
- |
|
|
(22,000 |
) |
|
|
- |
|
Net expenses |
|
5,580,012 |
|
|
|
4,762,645 |
|
|
10,425,406 |
|
|
|
8,474,879 |
|
Net investment income |
|
3,718,912 |
|
|
|
3,687,129 |
|
|
7,128,408 |
|
|
|
6,703,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized
and unrealized gain/(loss) on investments: |
|
|
|
|
|
|
|
|
|
|
|
Net
realized gain (loss) from investments |
|
75,000 |
|
|
|
- |
|
|
(183,192 |
) |
|
|
(7,380,690 |
) |
Net change
in unrealized appreciation (depreciation) in value of
investments |
|
(13,176,208 |
) |
|
|
1,172,018 |
|
|
(14,899,471 |
) |
|
|
8,672,249 |
|
Total realized and unrealized gain (loss) on
investments |
|
(13,101,208 |
) |
|
|
1,172,018 |
|
|
(15,082,663 |
) |
|
|
1,291,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in net assets resulting from operations |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(9,382,296 |
) |
|
$ |
4,859,147 |
|
$ |
(7,954,255 |
) |
|
$ |
7,994,863 |
|
Basic and
diluted: |
|
|
|
|
|
|
|
|
|
|
|
Net
investment income per share |
$ |
0.27 |
|
|
$ |
0.27 |
|
$ |
0.52 |
|
|
$ |
0.49 |
|
Earnings
per share |
$ |
(0.69 |
) |
|
$ |
0.35 |
|
$ |
(0.58 |
) |
|
$ |
0.58 |
|
Weighted
average shares of common stock outstanding |
|
13,638,869 |
|
|
|
13,690,480 |
|
|
13,644,483 |
|
|
|
13,690,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid per common share |
$ |
0.25 |
|
|
$ |
0.25 |
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial
statements. |
|
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|
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|
|
|
|
|
|
About CM Finance Inc
The Company is an externally-managed,
closed-end, non-diversified management investment 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 through debt
and related equity investments by targeting investment
opportunities with favorable risk-adjusted returns. The Company
seeks to invest primarily in middle-market companies that have
annual revenues of at least $50mm and earnings before interest,
taxes, depreciation and amortization of at least $15mm. The
Company’s investment activities are managed by its investment
adviser, CM Investment Partners LLC. To learn more about CM Finance
Inc, please visit www.cmfn-inc.com.
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 except as required by law. All
forward-looking statements speak only as of the date of this press
release.
ContactsCM Finance IncInvestor Relations Email:
investorrelations@cmipllc.comPhone: 212-257-5199
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