OFS Credit Company Announces Fourth Quarter and Year End 2019 Financial Results
HIGHLIGHTS
-
Net investment income ("NII") of
$1.2 million , or$0.42 per common share for the fiscal quarter endedOctober 31, 2019 . -
Core net investment income ("Core NII")1 of
$2.6 million , or$0.90 per common share, which approximated 180% of our distributions for the fiscal quarter endedOctober 31, 2019 . -
Increased monthly distributions on common shares through
January 2020 of$0.17 per share, implying an annualized distribution of$2.04 per share. -
Net asset value of
$14.98 per common share as ofOctober 31, 2019 , a decrease from$17.44 as ofJuly 31, 2019 . -
Closed investments totaling approximately
$8.8 million during the fiscal quarter endedOctober 31, 2019 . -
The weighted average GAAP (as defined below) effective yield of our CLO equity investments at current cost was 14.94% as of
October 31, 2019 .
Management Commentary
“In October, our Board of Directors increased our monthly distribution for our common stockholders,” said
“We see compelling investment opportunities today as a result of the recent price volatility in the loan and CLO markets. We believe our commitment to strong, long-term performance is aligned with the interests of
(1) Non-GAAP Financial Measure - Core NII
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
For GAAP purposes, interest income from investments in the “equity” class securities of CLO vehicles is recognized in accordance with the effective interest method, which is based on estimated cash flows to the expected redemption of the investments, and the investments' current amortized cost. The result is an effective yield for the investments which differs from the actual cash received. The effective yield is recognized as an increase to the amortized cost of the investment, and distributions received are recognized as a reduction in the amortized cost basis. Accordingly, interest income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions received by the Company during the period (referred to below as “CLO equity adjustments”).
Our measure of Core NII utilizes the interest account waterfall distributions of the underlying CLOs, determined by the underlying CLOs’ trustees in accordance with the applicable CLO indentures, in lieu of the GAAP measure of effective-yield interest income. Management believes this measure to be informative of the cash component of taxable income to be reported to us by the underlying CLOs. However, taxable income to be reported to us by the underlying CLOs may also include non-cash components—such as the amortization of premium or discounts on the underlying CLOs’ investments in commercial loans and the amortization of deferred debt issuance costs on the underlying CLOs’ debt obligations—as well as realized capital gains or losses resulting from trading activities within the underlying CLOs, which are generally retained in the principal account of (i.e., not distributed by) the underlying CLOs; and will be impacted by tax attribute carry-over (e.g., loss carry-forwards) within the CLO vehicles. Moreover, the taxable income we recognize may also be influenced by differences between our fiscal year end and the fiscal year end of any of the CLOs in which we invest, the legal form of the CLO vehicles, and other factors.
For the Company to continue to qualify as a regulated investment company for U.S. federal income tax purposes, we are required, among other things, to distribute annually at least 90% of our investment company taxable income. Thus, management monitors Core NII as an indication of our estimated taxable income for a reporting period. We can offer no assurance that these estimates will reflect the final amount or tax character of our earnings, which cannot be determined until we receive tax reports from the underlying CLOs and prepare our tax returns following the close of our fiscal year. We also 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.
|
Three Months Ended October 31, 2019 |
|
|
Amount |
Per Common
|
GAAP Net investment income |
$1,226,427 |
$0.42 |
CLO equity adjustments |
1,370,215 |
0.48 |
Core Net investment income |
$2,596,642 |
$0.90 |
Distributions
On
Record Date |
|
Payable Date |
|
Distribution Per Common Share |
November 22, 2019 |
|
November 29, 2019 |
|
$0.17 |
December 24, 2019 |
|
December 31, 2019 |
|
$0.17 |
January 24, 2020 |
|
January 31, 2020 |
|
$0.17 |
On
Record Date |
|
Payable Date |
|
Dividend Per Preferred Share |
November 22, 2019 |
|
November 29, 2019 |
|
$0.1432292 |
December 24, 2019 |
|
December 31, 2019 |
|
$0.1432292 |
January 24, 2020 |
|
January 31, 2020 |
|
$0.1432292 |
RESULTS OF OPERATIONS
During the quarter ended
Interest income increased
The
Investments depreciated
OFS Credit Company, Inc. |
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Statement of Assets and Liabilities |
||||
October 31, 2019 |
||||
|
|
|
||
Assets: |
|
|
||
Investments at fair value (cost of $76,275,113) |
|
$ |
64,147,358 |
|
Cash |
|
3,931,208 |
|
|
Prepaid expenses and other assets |
|
54,062 |
|
|
Total assets |
|
68,132,628 |
|
|
|
|
|
||
Liabilities: |
|
|
||
6.875% Series A Term Preferred Stock (net of deferred debt issuance costs of $733,672) |
|
20,582,828 |
|
|
Payable to adviser and affiliates |
|
1,039,310 |
|
|
Payable for investment purchased |
|
320,000 |
|
|
Accrued professional fees |
|
292,748 |
|
|
Other liabilities |
|
42,434 |
|
|
Total liabilities |
|
22,277,320 |
|
|
|
|
|
||
Commitments and contingencies |
|
|
||
|
|
|
||
Net assets |
|
$ |
45,855,308 |
|
|
|
|
||
Net assets consists of: |
|
|
||
Common stock, par value of $0.001 per share; 90,000,000 shares authorized and 3,061,858 shares issued and outstanding as of October 31, 2019 |
|
$ |
3,062 |
|
Paid-in capital in excess of par |
|
50,946,200 |
|
|
Total distributable earnings |
|
(5,093,954 |
) |
|
Total net assets |
|
45,855,308 |
|
|
|
|
|
||
Total liabilities and net assets |
|
$ |
68,132,628 |
|
|
|
|
||
Net asset value per share |
|
$ |
14.98 |
|
Statement of Operations |
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Year Ended October 31, 2019 |
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|
|
|
||
Investment income |
|
|
||
Interest income |
|
$ |
8,857,672 |
|
|
|
|
||
Operating expenses |
|
|
||
Interest expense |
|
982,195 |
|
|
Management fees |
|
1,098,919 |
|
|
Incentive fees |
|
1,063,672 |
|
|
Administration fees |
|
739,165 |
|
|
Professional fees |
|
364,308 |
|
|
Board of directors fees |
|
180,000 |
|
|
Other expenses |
|
321,313 |
|
|
Total operating expenses |
|
4,749,572 |
|
|
Less: waiver of management fee |
|
(220,441 |
) |
|
Net operating expenses |
|
4,529,131 |
|
|
|
|
|
||
Net investment income |
|
4,328,541 |
|
|
|
|
|
||
Realized and unrealized gain (loss) on investments |
|
|
||
Net realized gain on investments |
|
10,175 |
|
|
Net unrealized depreciation on investments |
|
(12,197,225 |
) |
|
Net loss on investments |
|
(12,187,050 |
) |
|
|
|
|
||
Net decrease in net assets resulting from operations |
|
$ |
(7,858,509 |
) |
About
Forward-Looking Statements
Statements in this press release regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: management’s view of investment opportunities resulting from price volatility in the loan and CLO market; management’s belief that its commitment to strong, long-term performance is aligned with the interests of
1 Registration does not imply a certain level of skill or training
View source version on businesswire.com: https://www.businesswire.com/news/home/20191217005142/en/
Source:
INVESTOR RELATIONS:
OFS Credit Company, Inc.
Steve Altebrando, 646-652-8473
saltebrando@ofsmanagement.com