U.S. markets open in 3 hours 17 minutes
  • S&P Futures

    4,511.00
    -0.25 (-0.01%)
     
  • Dow Futures

    35,326.00
    +3.00 (+0.01%)
     
  • Nasdaq Futures

    15,399.25
    +0.75 (+0.00%)
     
  • Russell 2000 Futures

    2,269.60
    -3.20 (-0.14%)
     
  • Crude Oil

    82.28
    -0.68 (-0.82%)
     
  • Gold

    1,779.50
    +9.00 (+0.51%)
     
  • Silver

    23.98
    +0.10 (+0.41%)
     
  • EUR/USD

    1.1628
    -0.0009 (-0.08%)
     
  • 10-Yr Bond

    1.6350
    0.0000 (0.00%)
     
  • Vix

    15.68
    -0.63 (-3.86%)
     
  • GBP/USD

    1.3762
    -0.0032 (-0.23%)
     
  • USD/JPY

    114.4840
    +0.1240 (+0.11%)
     
  • BTC-USD

    63,989.91
    +1,777.52 (+2.86%)
     
  • CMC Crypto 200

    1,483.54
    +20.19 (+1.38%)
     
  • FTSE 100

    7,216.05
    -1.48 (-0.02%)
     
  • Nikkei 225

    29,255.55
    +40.03 (+0.14%)
     

PennantPark Floating Rate Capital Ltd. Announces Financial Results for the Quarter Ended June 30, 2021

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·22 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

NEW YORK, Aug. 04, 2021 (GLOBE NEWSWIRE) -- PennantPark Floating Rate Capital Ltd. (NASDAQ: PFLT) (TASE: PFLT) announced today financial results for the third fiscal quarter ended June 30, 2021.

HIGHLIGHTS

Quarter ended June 30, 2021
($ in millions, except per share amounts)

Assets and Liabilities:

Investment portfolio (1)

$

1,035.8

PSSL investment portfolio

$

529.6

Net assets

$

496.6

GAAP net asset value per share

$

12.81

Quarterly increase GAAP net asset value per share

0.8%

Adjusted net asset value per share (2)

$

12.62

Credit Facility

$

133.1

2023 Notes

$

110.6

2026 Notes

$

97.0

2031 Asset-Backed Debt

$

225.3

Regulatory Debt to Equity

1.18x

Regulatory Net Debt to Equity (3)

1.08x

GAAP Net Debt to Equity (4)

1.04x

Yield on debt investments at quarter-end

7.5%


Operating Results:

Net investment income

$

10.3

Net investment income per share

$

0.27

Distributions declared per share

$

0.285

PFLT Portfolio Activity:

Purchases of investments

$

248.3

Sales and repayments of investments

$

283.3

Number of new portfolio companies invested

10

Number of existing portfolio companies invested

16

Number of ending portfolio companies

100

PSSL Portfolio Activity:

Purchases of investments

$

133.7

Sales and repayments of investments

$

88.8


(1)

Includes investments in PennantPark Senior Secured Loan Fund I LLC, or PSSL, an unconsolidated joint venture, totaling $191.3 million, at fair value.

(2)

This is a non-GAAP financial measure. The Company believes that this number provides useful information to investors and management because it reflects the Company’s financial performance excluding the impact of the $7.5 million unrealized loss on our multi-currency senior secured revolving credit facility, as amended and restated, with Truist Bank (formerly SunTrust Bank) and other lenders, or the Credit Facility, and our 4.3% Series A notes due 2023, or the 2023 Notes. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

(3)

This is a non-GAAP financial measure. The Company believes that this number provides useful information to investors and management because it reflects the Company’s financial performance net of $48.7 million of cash and cash equivalents. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

(4)

This is a non-GAAP financial measure. The Company believes that this number provides useful information to investors and management because it reflects the Company’s financial performance including the impact of the $7.5 million unrealized loss on the Credit Facility and the 2023 Notes net of $48.7 million of cash and cash equivalents. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

CONFERENCE CALL AT 9:00 A.M. ET ON AUGUST 5, 2021

PennantPark Floating Rate Capital Ltd. (“we,” “our,” “us” or the “Company”) will host a conference call at 9:00 a.m. (Eastern Time) on Thursday, August 5, 2021 to discuss its financial results. All interested parties are welcome to participate. You can access the conference call by dialing toll-free (800) 263-0877 approximately 5-10 minutes prior to the call. International callers should dial (646) 828-8143. All callers should reference conference ID #2369860 or PennantPark Floating Rate Capital Ltd. An archived replay of the call will be available through August 20, 2021 by calling toll-free (888) 203-1112. International callers please dial (719) 457-0820. For all phone replays, please reference conference ID #2369860.

PORTFOLIO AND INVESTMENT ACTIVITY

“We are pleased with the strong performance of our portfolio this past quarter,” said Arthur Penn, Chairman and CEO. “Our PSSL joint venture saw significant growth. We believe that the growth of PSSL in conjunction with the Company’s growing, more optimized balance sheet and the rotation of equity positions into debt instruments, positions the Company well for increased income over time.”

As of June 30, 2021, our portfolio totaled $1,035.8 million, which consisted of $883.2 million of first lien secured debt (including $140.9 million in PSSL), $17.6 million of second lien secured debt and $135.0 million of preferred and common equity (including $50.5 million in PSSL). Our debt portfolio consisted of 98% variable-rate investments. As of June 30, 2021, we had two portfolio companies on non-accrual, representing 2.8% and 2.7% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized appreciation of $18.9 million. Our overall portfolio consisted of 100 companies with an average investment size of $10.4 million, had a weighted average yield on debt investments of 7.5%, and was invested 85% in first lien secured debt (including 14% in PSSL), 2% in second lien secured debt and 13% in preferred and common equity (including 5% in PSSL). As of June 30, 2021, 97% of the investments held by PSSL were first lien secured debt.

As of September 30, 2020, our portfolio totaled $1,086.9 million, which consisted of $968.6 million of first lien secured debt (including $125.4 million in PSSL), $29.9 million of second lien secured debt and $88.4 million of preferred and common equity (including $39.9 million in PSSL). Our debt portfolio consisted of 99% variable-rate investments. As of September 30, 2020, we had three portfolio companies on non-accrual, representing 2.1% and 1.8% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $29.9 million. Our overall portfolio consisted of 102 companies with an average investment size of $10.7 million, had a weighted average yield on debt investments of 7.3%, and was invested 89% in first lien secured debt (including 12% in PSSL), 3% in second lien secured debt and 8% in preferred and common equity (including 4% in PSSL). As of September 30, 2020, 97% of the investments held by PSSL were first lien secured debt.

For the three months ended June 30, 2021, we invested $248.3 million in 10 new and 16 existing portfolio companies with a weighted average yield on debt investments of 7.5%. Sales and repayments of investments for the three months ended June 30, 2021 totaled $283.3 million. For the nine months ended June 30, 2021, we invested $475.5 million in 19 new and 50 existing portfolio companies with a weighted average yield on debt investments of 7.5%. Sales and repayments of investments for the nine months ended June 30, 2021 totaled $565 million.

For the three months ended June 30, 2020, we invested $14.4 million in one new and 18 existing portfolio companies with a weighted average yield on debt investments of 8.1%. Sales and repayments of investments for the three months ended June 30, 2020 totaled $104.1 million. For the nine months ended June 30, 2020, we invested $421.4 million in 18 new and 86 existing portfolio companies with a weighted average yield on debt investments of 8.0%. Sales and repayments of investments for the nine months ended June 30, 2020 totaled $347.2 million.

PennantPark Senior Secured Loan Fund I LLC

As of June 30, 2021, PSSL’s portfolio totaled $529.6 million, consisted of 66 companies with an average investment size of $8.0 million and had a weighted average yield on debt investments of 7.2%. As of September 30, 2020, PSSL’s portfolio totaled $393.0 million, consisted of 45 companies with an average investment size of $8.7 million and had a weighted average yield on debt investments of 6.8%.

For the three months ended June 30, 2021, PSSL invested $133.7 million (including $98.9 million purchased from the Company) in six new and 15 existing portfolio companies with a weighted average yield on debt investments of 7.0%. Sales and repayments of investments for the three months ended June 30, 2021 totaled $88.8 million. For the nine months ended June 30, 2021, PSSL invested $277.8 million (including $224.1 million purchased from the Company) in 30 new and 26 existing portfolio companies with a weighted average yield on debt investments of 7.2%. Sales and repayments of investments for the nine months ended June 30, 2021 totaled $163.1 million.

For the three months ended June 30, 2020, PSSL did not make any new or follow-on investments. Sales and repayments of investments for the three months ended June 30, 2020 totaled $28.3 million. For the nine months ended June 30, 2020, PSSL invested $87.1 million (including $86.7 million purchased from the Company) in 11 new and two existing portfolio companies with a weighted average yield on debt investments of 7.4%. Sales and repayments of investments for the nine months ended June 30, 2020 totaled $102.6 million.

RESULTS OF OPERATIONS

Set forth below are the results of operations for the three and nine months ended June 30, 2021 and 2020.

Investment Income

Investment income for the three and nine months ended June 30, 2021 was $20.9 million and $61.1 million, respectively, which was attributable to $18.2 million and $53.5 million from first lien secured debt and $2.7 million and $7.6 million from other investments, respectively. This compares to investment income for the three and nine months ended June 30, 2020, which was $22.8 million and $73.7 million, respectively, and was attributable to $21.0 million and $67.5 million from first lien secured debt and $1.8 million and $6.2 million from other investments, respectively. The decrease in investment income compared to the same periods in the prior year was primarily due to a decrease in the size of our portfolio and decreases in the London Interbank Offered Rate.

Expenses

Expenses for the three and nine months ended June 30, 2021 totaled $10.6 million and $30.8 million, respectively. Base management fee for the same periods totaled $2.6 million and $8.0 million, incentive fee totaled $1.7 million and $4.7 million, debt related interest and expenses totaled $5.9 million and $16.0 million and general and administrative expenses totaled $0.4 million and $1.8 million, respectively. This compares to expenses for the three and nine months ended June 30, 2020 which totaled $12.6 million and $40.7 million, respectively. Base management fee for the same periods totaled $2.9 million and $8.7 million, incentive fee totaled $2.0 million and $7.2 million, debt related interest and expenses totaled $6.7 million and $21.6 million and general and administrative expenses totaled $1.0 million and $2.9 million, respectively. The decrease in expenses for the three and nine months ended June 30, 2021 compared to the same periods in the prior year was primarily due to a decrease in management fees and debt related interest and expenses.

Net Investment Income

Net investment income totaled $10.3 million and $30.3 million, or $0.27 and $0.78 per share, for the three and nine months ended June 30, 2021, respectively. Net investment income totaled $10.2 million and $33.1 million, or $0.26 and $0.85 per share, for the three and nine months ended June 30, 2020, respectively.

Net Realized Gains or Losses

Sales and repayments of investments for the three and nine months ended June 30, 2021 totaled $283.3 million and $565.5 million, respectively, and net realized losses totaled $13.0 million and $15.3 million, respectively. Sales and repayments of investments for the three and nine months ended June 30, 2020 totaled $104.1 million and $347.2 million, respectively, and net realized losses totaled $7.4 million and $8.0 million, respectively. The change in realized gains/losses was primarily due to changes in the market conditions of our investments and the values at which they were realized.

Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2023 Notes

For the three and nine months ended June 30, 2021, we reported net change in unrealized appreciation on investments of $14.2 million and $48.8 million, respectively. For the three and nine months ended June 30, 2020, we reported net change in unrealized appreciation (depreciation) on investments of $21.9 million and $(46.4) million, respectively. As of June 30, 2021 and September 30, 2020, our net unrealized appreciation (depreciation) on investments totaled $18.9 million and $(29.9) million, respectively. The net change in unrealized appreciation on our investments compared to the same period in the prior year was primarily due to unrealized gains in our equity co-investment program, including ITC Rumba, LLC (Cano Health, LLC).

For the three and nine months ended June 30, 2021, the Credit Facility and the 2023 Notes had a net change in unrealized depreciation (appreciation) of $3.2 million and $(11.3) million, respectively. For the three and nine months ended June 30, 2020, the Credit Facility and the 2023 Notes had a net change in unrealized (appreciation) depreciation of $(12.2) million and $22.7 million, respectively. As of June 30, 2021 and September 30, 2020, the net unrealized depreciation on the Credit Facility and the 2023 Notes totaled $7.5 million and $18.8 million, respectively. The net change in net unrealized depreciation compared to the same period in the prior year was primarily due to changes in the capital markets.

Net Change in Net Assets Resulting from Operations

Net increase in net assets resulting from operations totaled $14.7 million and $52.5 million, or $0.38 and $1.35 per share, respectively, for the three and nine months ended June 30, 2021. This compares to a net change in net assets resulting from operations of $12.6 million and $1.4 million, or $0.32 and $0.04 per share, respectively, for the three and nine months ended June 30, 2020. The increase in the net change in net assets from operations for the three and nine months ended June 30, 2021 compared to the same periods in the prior year was primarily due to unrealized gains in our equity co-investment program, including ITC Rumba, LLC (Cano Health, LLC).

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital 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 payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. For more information on how the COVID-19 pandemic may impact our ability to comply with the covenants of the Credit Facility, see our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, including “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations – COVID-19 Developments”.

The annualized weighted average cost of debt for the nine months ended June 30, 2021 and 2020, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 3.4% and 3.9%, respectively. As of June 30, 2021 and September 30, 2020, we had $266.6 million and $211.4 million of unused borrowing capacity under the Credit Facility, respectively, subject to leverage and borrowing base restrictions.

As of June 30, 2021 and September 30, 2020, our wholly owned subsidiary, PennantPark Floating Rate Funding I, LLC, borrowed $133.4 million and $308.6 million under the Credit Facility, respectively. The Credit Facility had a weighted average interest rate of 2.1% and 2.2%, exclusive of the fee on undrawn commitments as of June 30, 2021 and September 30, 2020, respectively.

As of June 30, 2021 and September 30, 2020, we had cash equivalents of $48.7 million and $57.5 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.

Our operating activities provided cash of $124.4 million for the nine months ended June 30, 2021, and our financing activities used cash of $132.3 million for the same period. Our operating activities provided cash primarily from our investment activities and our financing activities used cash primarily to pay down our Credit Facility, partially offset by proceeds from the issuance of our 4.25% notes due 2026.

Our operating activities used cash of $63.0 million for the nine months ended June 30, 2020, and our financing activities provided cash of $53.1 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from draws on our Credit Facility, partially offset by distributions paid to stockholders.

RECENT DEVELOPMENTS

Subsequent to quarter end, PFLT had new originations of $102.0 million, and PSSL had new originations of $29.0 million.

Subsequent to quarter end we and a subsidiary of Kemper Corporation (NYSE: KMPR), Trinity Universal Insurance Company, have agreed to increase our capital commitments to PSSL from $230 million to $275 million.

DISTRIBUTIONS

During the three and nine months ended June 30, 2021 and 2020, we declared distributions of $0.285 and $0.855 per share, respectively, for total distributions of $11.1 and $33.2 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the Securities and Exchange Commission, or the SEC.

AVAILABLE INFORMATION

The Company makes available on its website its Quarterly Report on Form 10-Q filed with the SEC, and stockholders may find such report on its website at www.pennantpark.com.


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

June 30, 2021

September 30, 2020

(unaudited)

Assets

Investments at fair value

Non-controlled, non-affiliated investments (cost—$793,425,027 and $915,874,757, respectively)

$

818,638,740

$

910,552,309

Non-controlled, affiliated investments (cost— Zero and $21,964,181, respectively)

11,086,834

Controlled, affiliated investments (cost—$223,660,639 and $179,112,500, respectively)

217,184,933

165,289,324

Total investments (cost—$1,017,085,666 and $1,116,951,438, respectively)

1,035,823,673

1,086,928,467

Cash and cash equivalents (cost—$48,702,743 and $57,534,421, respectively)

48,702,743

57,511,928

Interest receivable

6,319,900

3,673,502

Receivable for investments sold

11,953,906

Prepaid expenses and other assets

173,318

Total assets

1,102,800,222

1,148,287,215

Liabilities

Distributions payable

3,683,347

3,683,347

Payable for investments purchased

27,277,154

3,800,000

Credit Facility payable, at fair value (cost—$133,400,000 and $308,598,500, respectively)

133,066,500

299,047,275

2023 Notes payable, at fair value (par—$117,792,879 and $138,579,858, respectively)

110,607,514

129,295,008

2026 Notes payable, net (par—$100,000,000)

97,013,575

2031 Asset-Backed Debt, net (par—$228,000,000)

225,339,466

224,866,334

Interest payable on debt

3,098,401

3,601,479

Base management fee payable

2,621,573

2,776,477

Performance-based incentive fee payable

1,652,278

2,071,622

Accrued other expenses

1,808,734

1,875,281

Total liabilities

606,168,542

671,016,823

Commitments and contingencies

Net assets

Common stock, 38,772,074 shares issued and outstanding Par value $0.001 per share and 100,000,000
shares authorized

38,772

38,772

Paid-in capital in excess of par value

538,151,527

538,151,528

Accumulated distributable net loss

(41,558,619

)

(60,919,908

Total net assets

$

496,631,680

$

477,270,392

Total liabilities and net assets

$

1,102,800,222

$

1,148,287,215

Net asset value per share

$

12.81

$

12.31

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

2021

2020

2021

2020

Investment income:

From non-controlled, non-affiliated investments:

Interest

$

14,494,948

$

17,543,157

$

43,520,917

$

56,760,434

Other income

1,161,193

820,997

2,533,741

2,734,600

From non-controlled, affiliated investments:

Interest

195,904

279,900

655,029

Other income

36,170

122,570

36,170

From controlled, affiliated investments:

Interest

2,931,015

2,944,290

8,252,910

9,169,399

Dividend

2,318,750

1,225,000

6,168,750

4,375,000

Other income

195,630

Total investment income

20,905,906

22,765,518

61,074,418

73,730,632

Expenses:

Base management fee

2,621,574

2,872,725

7,971,461

8,651,825

Performance-based incentive fee

1,652,278

1,975,831

4,716,177

7,228,690

Interest and expenses on debt

5,902,727

6,653,045

16,025,180

21,586,859

Administrative services expenses

150,000

350,000

750,000

1,050,000

Other general and administrative expenses

200,000

616,077

1,000,000

1,848,230

Expenses before provision for taxes:

10,526,579

12,467,678

30,462,818

40,365,604

Provision for taxes

100,000

100,000

300,000

300,000

Total expenses

10,626,579

12,567,678

30,762,818

40,665,604

Net investment income

10,279,327

10,197,840

30,311,600

33,065,028

Realized and unrealized gain (loss) on investments and debt:

Net realized gain (loss) on investments:

Non-controlled, non-affiliated investments

7,613,904

(1,694,710

)

6,379,865

(2,281,683

Non-controlled and controlled, affiliated investments

(20,587,656

)

(5,683,145

)

(21,639,704

)

(5,683,145

Net realized gain (loss) on investments

(12,973,752

)

(7,377,855

)

(15,259,839

)

(7,964,828

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

(6,281,187

)

13,962,606

28,406,639

(23,662,521

Controlled and non-controlled, affiliated investments

20,451,408

7,931,471

20,370,222

(22,751,006

Debt (appreciation) depreciation

3,231,683

(12,158,917

)

(11,317,211

)

22,740,317

Net change in unrealized appreciation (depreciation) on investments and debt

17,401,904

9,735,160

37,459,650

(23,673,210

Net realized and unrealized gain (loss) from investments and debt

4,428,152

2,357,305

22,199,811

(31,638,038

Net increase in net assets resulting from operations

$

14,707,479

$

12,555,145

$

52,511,411

$

1,426,990

Net increase in net assets resulting from operations per common share

$

0.38

$

0.32

$

1.35

$

0.04

Net investment income per common share

$

0.27

$

0.26

$

0.78

$

0.85

ABOUT PENNANTPARK FLOATING RATE CAPITAL LTD.

PennantPark Floating Rate Capital Ltd. is a business development company which primarily invests in U.S. middle-market companies in the form of floating rate senior secured loans, including first lien secured debt, second lien secured debt and subordinated debt. From time to time, the Company may also invest in equity investments. PennantPark Floating Rate Capital Ltd. is managed by PennantPark Investment Advisers, LLC.

ABOUT PENNANTPARK INVESTMENT ADVISERS, LLC

PennantPark Investment Advisers, LLC is a leading middle-market credit platform, managing $5.2 billion of investable capital, including potential leverage. Since its inception in 2007, PennantPark Investment Advisers, LLC has provided investors access to middle-market credit by offering private equity firms and their portfolio companies as well as other middle-market borrowers a comprehensive range of creative and flexible financing solutions. PennantPark Investment Advisers, LLC is headquartered in New York and has offices in Chicago, Houston, and Los Angeles.

FORWARD-LOOKING STATEMENTS

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act. All statements other than statements of historical facts included in this press release are forward-looking statements and are not guarantees of future performance or results, and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission as well as changes in the economy and risks associated with possible disruption in the Company’s operations or the economy generally due to terrorism, natural disasters or pandemics such as COVID-19. PennantPark Floating Rate Capital Ltd. undertakes no duty to update any forward-looking statement made herein. You should not place undue influence on such forward-looking statements as such statements speak only as of the date on which they are made.

We may use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations.

CONTACT:

Richard Cheung

PennantPark Floating Rate Capital Ltd.

(212) 905-1000

www.pennantpark.com