Estimating .27 to.31 NII???? That's not what was said last quarter. Should be .36 to .41. What the hell happened.
PSEC has had unusually high NII in 2012 because of the big gains realized on Gas Solutions & NRG back in January 2012.
Back in December 2011 PSEC formed a holding company Energy Solutions Holdings, and put a lot of their energy assets, including Gas Solutions & NRG, in the holding company.
When those assets were sold, they weren't treated as long term capital gains for PSEC. They were long term capital gains for the holding company, which coincidentally had losses to offset these big gains. Over the last several quarters Energy Solutions Holdings has been passing along the gains from these two exits up to PSEC, only now they are treated as distributions from the holding company, not long term capital gains. As distributions, this capital is now treated as investment income instead of realized capital gains, very fortunate for PSEC, and is the reason PSEC had such a big boost in NII beginning in 2012.
Here's 2011's & 2012's reported NII from PSEC.
Q111 -- $0.27
Q211 -- $0.31
Q311 -- $0.26
Q411 -- $0.33
Q112 -- $0.51
Q212 -- $0.51
Q312 -- $0.46
Q412 -- $0.51
The huge increase in NII beginning in 2012 is attributable to what I've explained above.
The problem is that those gains were not recurring income, and now those gains have all been distributed. Those NII numbers produced in 2012 were not representative of what PSEC's portfolio is capable of producing on a recurring basis.
This is why PSEC is guiding for this big drop in NII going forward.
While they won't covering the dividend going forward, they have built up a cushion of undistributed NII that they can use to cover any dividend shortfall. I imagine the plan is that by the time they've used up the undistributed NII they have to help with dividend coverage, they will have improved their dividend coverage from recurring income to fully cover the dividend.
I perfectly understand the large capital gains and distributions from those sales--they have been well documented in the calls. But also documented, especially when the TOWER deal was announced, was the forward NII estimates (excluding any capital transactions) would be .36 to .41 and thus the reasonable arguement from most that the dividend should be increased and was. Sorry, but this is a change from previous calls and not a good one.
Exactly what I was wondering. Have to wait till tomorrow - conceptually only way for that to happen is massive roll off of investments. If so, why the offering in nov. Could, however, be the calc of weighted avg shares. Not full quarter o/s and not enough in pipeline. Still don't get the argument for such a large offering at that time. But, gota have faith.
Window dressing. Management is full of it. They are always up to the same tricks.. The dividend should never have been raised. Look at nav. Its down from $10.88 to $10.81 and they under distributed this quarter but where did that undistributed money go? Obviously not to nav unless the company has had some write downs and that just went to keep nav close to the same level. What happens if psec loses access to raising capital in the public markets? Forget the extra fee income, it goes out the window. Oh and all this new investing and new investments really looks like it did nothing to add to noi. 0.27 to 0.31... Give me a break. No wonder psec trades so close to nav vs main and tcap.
distributable income and net increase in assets from operations are two different calculations.....the "money" is still on the balance sheet, NAV includes unrealized depreciation....they are not up to tricks, the distributable income is real income....NAV floats every quarter and floats up and down due to the appreciation or depreciation of assets....know the difference before commenting on it.....in the investing game one should know how it works...
Some of their NII comes from loan origination fees. The 27 to 31 cents per share is probably fair if you counted only interest income.
The NII of 51 cent/share this quarter adds to the existing amount of undistributed earnings, which is over 50 cetns/share. That's a nice buffer to ensure safe dividends for a long time.