OFS Credit Company Announces Financial Results for the Fourth Fiscal Quarter 2023
FOURTH QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
$5.3 million , or$0.36 per common share, for the fiscal quarter endedOctober 31, 2023 . This compares to NII of$3.8 million , or$0.34 per common share, for the fiscal quarter endedJuly 31, 2023 . The increase in net investment income per common share was primarily due to non-recurring income realized upon the repayment of a loan accumulation facility. -
Core net investment income (“Core NII”)1 of
$9.1 million , or$0.62 per common share, for the fiscal quarter endedOctober 31, 2023 . Core NII per common share of$0.62 was stable compared to the prior quarter. Total waterfall payments from CLO equity investments for the fiscal quarter endedOctober 31, 2023 increased$0.5 million to$10.1 million , primarily driven by cash flows from issuers making their initial payments. -
Net asset value (“NAV”) per common share of
$7.55 as ofOctober 31, 2023 , a decrease of$0.47 from NAV of$8.02 as ofJuly 31, 2023 . -
During the fiscal quarter ended
October 31, 2023 , the earned income yield of our investment portfolio at amortized cost was 17.02%. -
During the fiscal quarter ended
October 31, 2023 , we issued 1,785,850 shares of common stock pursuant to our At-the-Market offering, for net proceeds of approximately$14.1 million , which enabled the growth of our investment portfolio at cost by$24.4 million , or 12.5%, compared to the prior quarter.
OTHER RECENT EVENTS
-
On
November 19, 2023 , the Company redeemed all of the issued and outstanding shares of its 6.60% Series B Term Preferred Stock Due 2023, including the accumulated unpaid dividends, for approximately$3.0 million . -
On
November 28, 2023 , our board of directors (the “Board”) declared monthly all-cash distributions of$0.10 per common share for each of the three months in the quarter endingJanuary 31, 2024 . See additional information under “Distributions” below.
SELECTED FINANCIAL HIGHLIGHTS |
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(in millions, except per share data) (unaudited) |
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As of |
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As of |
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Investment portfolio, at fair value |
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$ |
168.1 |
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$ |
147.1 |
NAV per common share |
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7.55 |
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8.02 |
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For the Fiscal Quarter Ended |
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(Per common share) |
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Net investment income |
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$ |
0.36 |
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$ |
0.34 |
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Net unrealized depreciation on investments |
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(0.23 |
) |
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(0.29 |
) |
Net earnings |
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$ |
0.13 |
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$ |
0.05 |
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Core NII — Non-GAAP1 |
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Net investment income |
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$ |
0.36 |
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$ |
0.34 |
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CLO equity adjustments |
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0.26 |
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0.28 |
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Core NII |
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$ |
0.62 |
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$ |
0.62 |
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1 On a supplemental basis, we disclose Core NII, which is a financial measure calculated and presented on a basis of methodology other than in accordance with accounting principles generally accepted in |
MANAGEMENT COMMENTARY
“We are excited about the Board’s recent declaration of an all-cash distribution of
PORTFOLIO AND INVESTMENT ACTIVITIES
As of
Portfolio Overview ($ in millions) |
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As of |
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As of |
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Investment portfolio, at fair value |
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$ |
168.1 |
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$ |
147.1 |
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Total number of portfolio companies |
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83 |
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74 |
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Weighted-average effective yield |
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14.16 |
% |
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14.11 |
% |
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For the Fiscal Quarter Ended |
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Portfolio Activity ($ in millions) |
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CLO equity investments |
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$ |
9.7 |
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$ |
3.9 |
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CLO debt investments |
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21.9 |
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6.4 |
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Loan accumulation facility investments |
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4.9 |
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0.6 |
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Total investments |
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$ |
36.5 |
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$ |
10.9 |
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Weighted-average effective yield |
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16.62 |
% |
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20.23 |
% |
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As of |
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Portfolio Composition ($ in millions) |
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Cost |
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Fair Value |
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CLO equity investments |
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$ |
171.9 |
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$ |
119.6 |
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CLO debt investments |
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41.6 |
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42.0 |
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Loan accumulation facility investments |
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5.6 |
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5.6 |
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Other CLO equity-related investments |
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0.9 |
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0.9 |
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Total investments |
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$ |
220.0 |
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$ |
168.1 |
RESULTS OF OPERATIONS
Interest Income
During the fiscal quarter ended
Expenses
During the fiscal quarter ended
Net realized and unrealized gain (loss)
During the fiscal quarter ended
DISTRIBUTIONS
On
Month |
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Record Date |
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Payable Date |
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Cash Distribution Per Common Share |
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Dividend Reinvestment Plan – DRIP Shares Issued at 95% of Market Price
On
Statement of Assets and Liabilities |
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As of |
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Assets: |
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Investments, at fair value (amortized cost of |
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$ |
168,097,728 |
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Cash |
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16,781,214 |
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Interest receivable |
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833,143 |
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Other assets |
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221,190 |
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Total assets |
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185,933,275 |
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Liabilities: |
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Preferred stock (net of deferred issuance costs of |
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62,766,821 |
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Payable to adviser and affiliates |
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2,772,467 |
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Other liabilities |
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205,000 |
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Total liabilities |
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65,744,288 |
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Net assets |
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$ |
120,188,987 |
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Net assets consist of: |
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Common stock, par value of |
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$ |
15,917 |
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Paid-in capital in excess of par |
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163,082,987 |
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Total accumulated losses |
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(42,909,917 |
) |
Total net assets |
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$ |
120,188,987 |
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Net asset value per common share |
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$ |
7.55 |
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Statements of Operations |
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Three Months Ended |
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Year Ended |
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(unaudited) |
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Investment income: |
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Interest income |
$ |
9,079,506 |
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$ |
30,696,392 |
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Operating expenses: |
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Interest expense |
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1,021,241 |
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4,084,965 |
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Incentive fees |
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1,332,506 |
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4,158,538 |
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Management fees |
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815,223 |
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2,984,585 |
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Administration fees |
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315,464 |
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1,207,374 |
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Professional fees |
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184,380 |
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820,697 |
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Excise tax provision (benefit) |
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(84,547 |
) |
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145,453 |
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Other expenses |
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165,216 |
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660,630 |
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Total operating expenses |
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3,749,483 |
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14,062,242 |
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Net investment income |
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5,330,023 |
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16,634,150 |
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Net realized and unrealized loss: |
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Net change in unrealized depreciation on investments |
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(3,335,586 |
) |
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(18,522,509 |
) |
Net realized and unrealized loss |
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(3,335,586 |
) |
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(18,522,509 |
) |
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Net increase (decrease) in net assets resulting from operations |
$ |
1,994,437 |
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$ |
(1,888,359 |
) |
About
2 Registration does not imply a certain level of skill or training
Forward-Looking Statements
Statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: the Company’s results of operations, including NII, Core NII, earnings per share and net asset value and the factors that may affect such results; management’s belief that the current strength of the Company’s balance sheet allows the Company to convert to an all-cash distribution; management’s belief that the Company’s CLO equity investments continue to generate strong recurring cash flows notwithstanding market volatility; and other factors may constitute forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including those risks, uncertainties and factors referred to in documents that may be filed by
Supplemental Information Regarding Core Net Investment Income
We provide information relating to Core NII (a non-GAAP measure) on a supplemental basis. This measure is not provided as a substitute for GAAP NII, but in addition to it. Our non-GAAP measures may differ from similar measures by other companies, even in the event of similar terms being utilized to identify such measures. Core NII represents GAAP NII adjusted for differences in applicable cash distributions received on our CLO equity investments relative to income recognized in accordance with GAAP.
Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method; this is based on an effective yield to the expected redemption utilizing estimated cash flows, at current amortized cost, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an effective yield for the investment in which the respective investment’s cost basis is adjusted quarterly based on the difference between the actual cash received, or distributions entitled to be received, and the effective yield calculation. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by the Company during the period (referred to below as “CLO equity adjustments”).
Furthermore, in order for the Company to continue to qualify for tax treatment as a regulated investment company, we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, Core NII may provide a better indication of our estimated taxable income for a reporting period than GAAP NII; we can offer no assurance that will be the case, however, as the ultimate tax character of our earnings cannot be determined until our tax returns are prepared after the close of a fiscal year. We note that this non-GAAP measure may not serve as a useful indicator of taxable earnings, particularly during periods of market disruption and volatility, and, as such, our taxable income may differ materially from our Core NII.
The following table provides a reconciliation of GAAP NII to Core NII for the fiscal quarters ended
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For the Fiscal Quarter Ended |
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For the Fiscal Quarter Ended |
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Amount |
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Per Common Share Amount |
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Amount |
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Per Common Share Amount |
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Net investment income |
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$ |
5,330,023 |
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$ |
0.36 |
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$ |
3,848,565 |
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$ |
0.34 |
CLO equity adjustments |
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|
3,798,856 |
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0.26 |
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3,160,851 |
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|
0.28 |
Core NII |
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$ |
9,128,879 |
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$ |
0.62 |
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$ |
7,009,416 |
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$ |
0.62 |
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The following table provides a reconciliation of GAAP NII to Core NII for the fiscal years ended
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For the Fiscal Year Ended |
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For the Fiscal Year Ended |
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Amount |
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Per Common Share Amount |
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Amount |
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Per Common Share Amount |
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Net investment income |
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$ |
16,634,150 |
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$ |
1.46 |
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$ |
13,048,495 |
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$ |
1.58 |
CLO equity adjustments |
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9,176,823 |
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0.80 |
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9,144,817 |
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|
1.11 |
Core NII |
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$ |
25,810,973 |
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$ |
2.26 |
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$ |
22,193,312 |
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$ |
2.69 |
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INVESTOR RELATIONS:
saltebrando@ofsmanagement.com
Source: