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Alcentra Capital Corporation Announces Fourth Quarter Earnings of $0.45 per share and Full Year 2016 Financial Results of $1.66 per share. Regular Dividend of $0.34 Per Share and Special Cash Dividend of $0.03 Per Share declared for First Quarter 2017

NEW YORK, March 9, 2017 /PRNewswire/ -- Alcentra Capital Corporation (ABDC) ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market companies based in the United States, today announced its financial results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Highlights

  • Total investment income of $10.9 million
  • Net investment income of $6.1 million, or $0.45 per share
  • Invested $22.8 million in debt and equity securities, including investments in 3 new portfolio companies
  • Received proceeds from repayments of $29.6 million
  • Paid regular quarterly dividend of $0.34 per share on January 5, 2017
  • Net asset value (NAV) of $184.5 million, or $13.72 per share, which is up from $13.69 in the third quarter;
  • Weighted Average Portfolio Leverage – 3.93x, which is up from the prior quarter of 3.69x
  • Weighted Average Portfolio Yield – 11.7%

Full Year 2016 Financial Highlights

  • Total investment income of $40.6 million
  • Net Investment income of $22.4 million, or $1.66 per share
  • Net increase in net assets resulting from operations of $8.8 million, or $0.65 per share
  • Invested $153.2 million in debt and equity securities, including investments in 12 new portfolio companies
  • Received proceeds from repayments and amortizations of $164.5 million
  • Paid regular quarterly dividends totaling $1.36 per share

Management Commentary

"We exceeded expectations for net investment income earning $0.45 cents per share for the fourth quarter. We invested in 3 new portfolio companies, our fourth quarter results benefitted from the early pre-payment of our debt investment in Limbach, which had $1.5 million of pre-payment interest and warrant gains.

For the full 2016 fiscal year, we earned $1.66 per share, which is up 16.1% from last year's results of $1.43 cents per share.

As we stated in our third quarter earnings release, we made a strategic decision to reduce our equity portfolio via a secondary sale of select portfolio equity investments which we accomplished during the third quarter. We had a small remaining equity investment in Wholesome Sweeteners, which we sold back to the investor group in January 2017, thus completing the strategic realignment of the portfolio.

The secondary sale of portfolio company equity investments, in combination with the early pre-payment of the Limbach debt, accounted for the reduction of assets at year end from the third quarter. Absent the early repayment of the Limbach debt, the portfolio would have been relatively flat on a year-over-year basis.

The capital markets have improved significantly over the past few months, and we expect the M&A market to improve alongside continued strength in the stock market. We would expect the velocity of our portfolio to continue be dynamic in this environment.

We believe that recent public announcements made by certain Fortune 500 companies with regard to large investments in their US operations, particularly in the semiconductor, oil and gas, and automotive sector, will benefit some of our existing portfolio companies."

Fourth Quarter 2016 Financial Results

For the three months ended December 31, 2016, total investment income was $10.9 million. This is an increase from the same period in the prior year mainly due to an increase in prepayment interest and fees. Interest and PIK income comprised $10.0 million and other income comprised $0.8 million.

For the three months ended December 31, 2016, total expenses were $4.8 million. Interest and financing expenses for the quarter were $1.9 million and the base management fee was $1.3 million. The income based incentive fee for the three months ended December 31, 2016 was $0.9 million and there was no capital gains incentive fee accrual. Professional fees and other general and administrative expenses totaled $0.6 million for the three months ended December 31, 2016.

Net investment income for the three months ended December 31, 2016 was $6.1 million ($0.45 per share).

During the three months ended December 31, 2016, we recorded a net realized loss on investments of $5.9 million (largely due to secondary sale of portfolio company equity securities and the RT1 investment) and a net change in unrealized appreciation on investments of $7.1 million.

The net increase in net assets resulting from operations during the three months ended December 31, 2016, was $4.9 million, or $0.36 per share.

Per share results for the second quarter ended December 31, 2016 are based on average shares outstanding of 13.49 million.

Portfolio and Investment Activities

As of December 31, 2016, Alcentra had debt and equity investments in 32 portfolio companies with a total fair market value of $276.3 million. The average portfolio investment on a cost basis was $8.8 million and equity constituted 7.8% of the portfolio, down from 29% at the time of the IPO. During the fourth quarter ending December 31, 2016, Alcentra made investments of $22.8 million, including investments in 3 new portfolio companies and 2 add on financings, and received proceeds from repayments and amortizations of investments of $29.6 million. As of December 31, 2016, the weighted average yield on debt investments was 11.7%, which is a slight decrease from the weighted average yield from the September 30, 2016 reporting period of 11.8%.

Fourth quarter 2016 investment activity included the following new portfolio company investments:

  • Lugano Diamonds ("Lugano") is a leading luxury brand of jewelry to ultra-high net worth individuals. The Company designs and creates unique, luxury, artistic jewelry. Alcentra invested $5.4 million in Senior Secured Notes and $0.6 million in equity on October 24, 2016.
  • Security Alarm Financing Enterprises, L.P. ("SAFE") is a full service nationwide alarm company that services and monitors security alarm contracts. Alcentra invested $10.0 million in Senior Subordinated Notes on October 27, 2016.
  • Palmetto Moon, LLC ("Palmetto") is a specialty retailer of outdoor active lifestyle apparel and accessories, college lifestyle apparel and state and local themed apparel. Alcentra invested $5.5 million in Senior Secured Notes and $0.4 million of common equity on December 30, 2016.

Alcentra has one investment on non-accrual – a out of home media and advertising company based in Las Vegas – which has been on our Watch List intermittently and represents less than 1.5% of our portfolio.

Liquidity and Capital Resources

At December 31, 2016, Alcentra had $3.9 million in cash and cash equivalents.  Alcentra had $39.1 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.

Subsequent Events

  • On January 3, 2017, Alcentra sold its equity interest in Wholesome Sweetners in a secondary sale for $3.7 million.
  • On January 5, 2017, Alcentra invested an additional $2.7 million in LRI Energy Solutions
  • On January 31, 2017, Alcentra invested $10.2 million in Pharmalogics Recruiting (10.25% 1st Lien Debt and common equity)
  • On February 1, 2017, Alcentra invested an additional $0.402 million in Black Diamond Rentals and a further $0.064 million on February 28, 2017
  • On February 21, 2017, Duke Finance, LLC repaid their investment in the amount of $7.5 million
  • On February 27, 2017, Alpine Waste repaid their investment in the amount of $11.0 million
  • On February 28, 2017, Alcentra invested an additional $2.1 million in Pharmalogic Holdings Corporation
  • On March 9, 2017, David Scopelliti was named Executive Vice President

First Quarter 2017 Regular Dividend of $0.34 Per Share and a Special Cash Dividend of $0.03 Per Share Declared

On March 9, 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the First Quarter of 2017 and a special cash dividend of $0.03 per share, both payable on April 6, 2017 to stockholders of record as of March 31, 2017.

The special dividend is due to the estimated spillover income of approximately $5.99 million, or approximately $0.44 per share, for the year ended December 31, 2016.  This special dividend will be paid out of Alcentra Capital's undistributed taxable income ("spillover income", or taxable income in excess of dividends paid). After giving effect to the special cash dividend, the Company will have $5.59 million of estimated spillover income or $0.41 per share.

Alcentra has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

Fourth Quarter 2016 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 10:00 am ET on Friday, March 10, 2017. To participate in the conference call, please dial (844) 832-0218 approximately 10 minutes prior to the call. International callers should dial (484) 756-4314. Please reference conference ID # 83441678.

A live webcast of the conference call will be available at http://investors.alcentracapital.com/events-presentations. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

An archived webcast replay will be available on the Company's website until March 9, 2018.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $250.0 million. Alcentra' investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Alcentra seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.

Alcentra is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. In addition, for tax purposes, Alcentra has elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

FORWARD-LOOKING STATEMENTS

This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Alcentra' filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Alcentra Capital Corporation and Subsidiary






Consolidated Statements of Assets and Liabilities







As of


As of


December 31,


December 31,


2016


2015

Assets






Portfolio investments, at fair value






Non-controlled, non-affiliated investments, at fair value (cost of $248,479,039 and $219,715,263, respectively)

$

239,722,117


$

221,349,073

Non-controlled, affiliated investments, at fair value (cost of $29,734,859 and $56,426,475, respectively)


22,094,203



59,243,999

Controlled, affiliated investments, at fair value (cost of $15,122,171 and $27,289,995, respectively)


14,456,630



15,748,539

Total of portfolio investments, at fair value (cost of $293,336,069 and $303,431,733, respectively)


276,272,950



296,341,611

Cash


3,891,606



4,866,972

Dividends and interest receivable


3,240,640



2,607,205

Receivable for investments sold


2,139,463



Deferred financing costs


1,287,807



2,183,881

Deferred tax asset


1,264,811



1,382,408

Prepaid expenses and other assets


100,770



113,730

Total Assets

$

288,198,047


$

307,495,807







Liabilities






Credit facility payable

$

39,133,273


$

63,504,738

Notes payable (net of deferred note offering costs of $1,495,062 and $1,156,622, respectively)


53,504,938



38,843,378

Other accrued expenses and liabilities


282,165



271,801

Directors' fees payable


95,000



37,025

Professional fees payable


331,867



481,333

Interest and credit facility expense payable


1,008,127



813,222

Management fee payable


1,301,591



1,302,213

Income-based incentive fees payable


2,071,661



1,081,797

Distributions payable


4,586,816



4,595,700

Unearned structuring fee revenue


1,175,319



689,577

Income tax liability


182,699



842,812

Total Liabilities


103,673,456



112,463,596







Commitments and Contingencies (Note 12)












Net Assets






Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,451,633 and 13,516,766 shares issued and outstanding, respectively)


13,452



13,517

Additional paid-in capital


196,290,348



197,652,086

Accumulated net realized gain (loss)


(776,548)



2,791,590

Undistributed net investment income


4,890,065



1,130,327

Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $1,170,393 and $534,813 as of December 31, 2016 and December 31, 2015, respectively


(15,892,726)



(6,555,309)

Total Net Assets


184,524,591



195,032,211

Total Liabilities and Net Assets

$

288,198,047


$

307,495,807







Net Asset Value Per Share

$

13.72


$

14.43


 

 

Alcentra Capital Corporation and Subsidiary







Consolidated Statement of Operations 

















Three Months Ended December 31,


Alcentra Capital Corporation and Subsidiary


Alcentra Capital Corporation and Subsidiary

Investment Income:

2016


2015


For the year ended December 31, 2016


For the year ended December 31, 2015

From non-controlled, non-affiliated investments:








   Interest income from portfolio investments

$                 8,435,370


$                 5,647,278


$                    25,178,890


$                          19,225,065

   Paid in-kind income from portfolio investments

413,432


786,729


3,182,683


3,128,501

   Other income from portfolio investments

746,478


412,213


2,475,976


1,819,533

   Dividend income from portfolio investments

30,756


-


82,777


302,874

From non-controlled, affiliated investments:








   Interest income from portfolio investments

219,187


1,021,703


2,742,054


4,231,004

   Paid in-kind income from portfolio investments

418,048


734,531


2,365,373


2,632,281

   Other income from portfolio investments

65,150


-


2,352,766


72,320

   Dividend income from portfolio investments

-


-


-


-

From controlled, affiliated investments:








   Interest income from portfolio investments

403,353


533,270


1,566,173


2,280,106

   Paid in-kind income from portfolio investments

167,997


(458,810)


655,907


159,722

   Other income from portfolio investments

-


-


-


64,843

   Dividend income from portfolio investments

-


-


-


-

  Total investment income                

10,899,771


8,676,914


40,602,599


33,916,249

Expenses:








Management fees

1,301,591


1,302,213


5,209,684


4,943,886

Income-based incentive fees

930,543


521,295


3,255,167


2,270,450

Capital gains incentive fees

-


-


-


1,001,467

Professional fees

227,475


439,380


1,227,977


966,671

Valuation services

37,135


106,527


236,904


419,264

Interest and credit facility expense

1,536,789


1,271,454


5,657,154


4,142,013

Amortization of deferred financing costs

305,976


258,813


1,154,343


867,786

Directors' fees

64,201


71,900


296,809


243,726

Insurance Expense

65,913


67,341


264,209


272,331

Amortization of deferred note offering costs

101,505




193,357



Other expenses

209,488


108,389


697,809


491,953

Total expenses

4,780,616


4,147,312


18,193,413


15,619,547

Waiver of management and incentive fees by the Investment Advisor

-


-


-


-

Waiver of capital gains incentive fees





-


(1,001,467)

Net expenses

4,780,616


4,147,312


18,193,413


14,618,080

Net investment income

6,119,155


4,529,602


22,409,186


19,298,169









Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments








Net realized gain (loss) on:








   Non-controlled, non-affiliated investments

(5,557,600)


2,625,441


(4,018,220)


2,722,992

   Non-controlled, affiliated investments

(337,257)


-


11,019,205


-

   Controlled, affiliated investments

(18,961)


-


(11,282,968)


-

   Net realized gain (loss) from portfolio investments

(5,913,818)


2,625,441


(4,281,983)


2,722,992

Net change in unrealized appreciation (depreciation) on:








   Non-controlled, non-affiliated investments

7,784,736


1,510,631


(10,390,732)


230,245

   Non-controlled, affiliated investments

(1,123,826)


(674,396)


(10,458,180)


3,128,631

   Controlled, affiliated investments

474,006


(11,743,547)


10,875,915


(15,000,080)

   Net change in unrealized appreciation (depreciation) from portfolio investments

7,134,916


(10,907,312)


(9,972,997)


(11,641,204)

   Benefit/(Provision) for taxes on unrealized gain on investments



1,704,047


635,580


2,231,817

   Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio 








    investments

(1,195,769)


(6,577,824)


(13,619,400)


(6,686,395)

Net Increase in Net Assets from Operations 

$                 4,923,386


$                  (458,939)


$                      8,789,786


$                          12,611,774









Per common share data:








Net Investment income per share

0.45


0.34


1.66


1.43

Net increase/(decrease) in net assets resulting from operation per share

0.36


(0.15)


0.65


0.93

Dividends Declared per common share

0.34


0.34


1.36


1.36

 

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