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PennantPark Floating Rate Capital Ltd. Announces Financial Results for the Quarter Ended June 30, 2024
Source: Nasdaq GlobeNewswire / 07 Aug 2024 15:05:28 America/Chicago
MIAMI, Aug. 07, 2024 (GLOBE NEWSWIRE) -- PennantPark Floating Rate Capital Ltd. (NYSE: PFLT) announced today its financial results for the third quarter ended June 30, 2024.
HIGHLIGHTS
Quarter ended June 30, 2024 (Unaudited)
($ in millions, except per share amounts)Assets and Liabilities: Investment portfolio (1) $ 1,658.9 Net assets $ 816.7 GAAP net asset value per share $ 11.34 Quarterly increase in GAAP net asset value per share (0.5 )% Adjusted net asset value per share (2) $ 11.34 Quarterly increase in adjusted net asset value per share (2) (0.5 )% Credit Facility $ 218.9 2036 Asset-Backed Debt $ 284.0 2031 Asset-Backed Debt $ 209.9 2026 Notes $ 183.6 Regulatory debt to equity 1.11x Weighted average yield on debt investments at quarter-end 12.1 % Operating Results: Net investment income $ 21.2 Net investment income per share (GAAP) $ 0.31 Core net investment income per share (3) $ 0.31 Distributions declared per share $ 0.31 Portfolio Activity: Purchases of investments $ 320.9 Sales and repayments of investments $ 137.6 PSSL Portfolio data: PSSL investment portfolio $ 904.2 Purchases of investments $ 84.5 Sales and repayments of investments $ 47.0 _______________________
(1) Includes investments in PennantPark Senior Secured Loan Fund I LLC, or PSSL, an unconsolidated joint venture, totaling $297.0 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 unrealized amounts on the Company's multi-currency senior secured revolving credit facility with Truist Bank and the other lenders (the "Credit Facility"). 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) Core net investment income (“Core NII”) is a non-GAAP financial measure. The Company believes that Core NII provides useful information to investors and management because it reflects the Company's financial performance excluding one-time or non-recurring investment income and expenses. 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. For the quarter ended June 30 2024, there were no one-time events resulting in $0.31 of Core NII. CONFERENCE CALL AT 9:00 A.M. ET ON AUGUST 8, 2024
The Company will also host a conference call at 9:00 a.m. (Eastern Time) on Thursday August 8, 2024 to discuss its financial results. All interested parties are welcome to participate. You can access the conference call by dialing toll-free (888) 204-4368 approximately 5-10 minutes prior to the call. International callers should dial (646) 828-8193 All callers should reference conference ID #5158165 or PennantPark Floating Rate Capital Ltd. An archived replay will also be available on a webcast link located on the Quarterly Earnings page in the Investor section of PennantPark’s website.
PORTFOLIO AND INVESTMENT ACTIVITY
“We are pleased to have another quarter of solid performance. We are actively investing in this strong vintage of new core middle market loans,” said Art Penn, Chairman and CEO. “We have been proactively growing PFLT's investment capacity in order to best position the company for meaningfully increased income.”
As of June 30, 2024, our portfolio totaled $1,658.9 million, and consisted of $1,449.2 million of first lien secured debt (including $237.7 million in PSSL), $1.2 million of second lien secured debt and subordinated debt and $208.6 million of preferred and common equity (including $59.3 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of June 30, 2024, we had three portfolio companies on non-accrual, representing 1.5% and 1.1% of our overall portfolio on a cost and fair value basis, respectively. As of June 30, 2024, the portfolio had net unrealized depreciation of $15.7 million. Our overall portfolio consisted of 151 companies with an average investment size of $11.0 million and had a weighted average yield on debt investments of 12.1%.
As of September 30, 2023, our portfolio totaled $1,067.2 million and consisted of $906.2 million of first lien secured debt (including $210.1 million in PSSL), $0.1 million of second lien secured debt and $160.9 million of preferred and common equity (including $50.9 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of September 30, 2023, we had three portfolio companies on non-accrual, representing 0.9% and 0.2% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2023, the portfolio had net unrealized depreciation of $25.7 million. Our overall portfolio consisted of 131 companies with an average investment size of $8.1 million, had a weighted average yield on debt investments of 12.6%.
For the three months ended June 30, 2024, we invested $320.9 million in nine new and 45 existing portfolio companies at a weighted average yield on debt investments of 11.5%. For the three months ended June 30, 2024, sales and repayments of investments totaled $137.6 million, including $69.1 million of sales to PSSL. For the nine months ended June 30, 2024, we invested $961.8 million in 33 new and 71 existing portfolio companies at a weighted average yield on debt investments of 11.7%. For the nine months ended June 30, 2024, sales and repayments of investments totaled $386.3 million, including $209.0 million of sales to PSSL.
PennantPark Senior Secured Loan Fund I LLC
As of June 30, 2024, PSSL’s portfolio totaled $904.2 million and consisted of 108 companies with an average investment size of $8.4 million and at a weighted average yield on debt investments of 11.9%. As of September 30, 2023, PSSL’s portfolio totaled $785.9 million, consisted of 105 companies with an average investment size of $7.5 million and at a weighted average yield on debt investments of 12.1%.
For the three months ended June 30, 2024, PSSL invested $84.5 million (including $69.1 million purchased from the Company) in five new and 11 existing portfolio companies at a weighted average yield on debt investments of 11.6%. Sales and repayments of investments for the three months ended June 30, 2024 totaled $47.0 million. For the nine months ended June 30, 2024, PSSL invested $240.4 million (including $209.0 million purchased from the Company) in 15 new and 20 existing portfolio companies at a weighted average yield on debt investments of 11.8%. Sales and repayments of investments for the nine months ended June 30, 2024 totaled $124.2 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three and nine months ended June 30, 2024 and 2023.
Investment Income
For the three and nine months ended June 30, 2024, investment income was $48.5 million and $130.8 million, respectively, which was attributable to $42.7 million and $114.9 million from first lien secured debt and $5.8 million and $15.9 million from other investments, respectively. For the three and nine months ended June 30, 2023, investment income was $37.7 million and $103.6 million, respectively, which was attributable to $30.4 million and $88.6 million from first lien secured debt and $7.3 million and $15.0 million from other investments, respectively. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the size of our debt portfolio.
Expenses
For the three and nine months ended June 30, 2024, expenses totaled $27.3 million and $71.1 million, respectively and were comprised of: $16.3 million and $39.9 million of debt related interest and expenses, $3.9 million and $10.3 million of base management fees, $5.3 million and $14.9 million of performance-based incentive fees, $1.5 million and $5.0 million of general and administrative expenses, $0.2 million and $0.9 million of taxes, and $0.1 million and $0.1 million of Credit Facility amendment costs. For the three and nine months ended June 30, 2023, expenses totaled $19.2 million and $54.6 million, respectively and were comprised of; $10.0 million and $29.6 million of debt related interest and expenses, $2.8 million and $8.6 million of base management fee, $4.6 million and $12.2 million of performance-based incentive fee, $1.6 million and $3.3 million of general and administrative expenses and $0.2 million and $0.8 million of taxes. The increase in expenses compared to the same period in the prior year was primarily due to the increase in interest expense from increased borrowings and an increase in base management fees as a result of the increase in our investment portfolio.
Net Investment Income
For the three and nine months ended June 30, 2024, net investment income totaled $21.2 million or $0.31 per share, and $59.7 million or $0.95 per share, respectively. For the three and nine months ended June 30, 2023, net investment income totaled $18.5 million or $0.36 per share, and $49.0 million or $1.02 per share, respectively. The increase in net investment income was primarily due to an increase in investment income partially offset by an increase in expenses compared to the same period in the prior year.
Net Realized Gains or Losses
For the three and nine months ended June 30, 2024, net realized gains (losses) totaled $(0.4) million and $0.6 million, respectively. For the three and nine months ended June 30, 2023, net realized (losses) totaled $(6.1) million and $(13.8) million, respectively. The change in net realized gains (losses) compared to the same period in the prior year 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 and Debt
For the three and nine months ended June 30, 2024, we reported net change in unrealized appreciation (depreciation) on investments of $(4.0) million and $10.0 million, respectively. For the three and nine months ended June 30, 2023, we reported net change in unrealized appreciation (depreciation) on investments of $(1.1) million and $(22.0) million, respectively. As of June 30, 2024 and September 30, 2023, our net unrealized appreciation (depreciation) on investments totaled $(15.7) million and $(25.7) million, respectively. The net change in unrealized appreciation (depreciation) on our investments compared to the same period in the prior year was primarily due to the operating performance of the portfolio companies within our portfolio and changes in the capital market conditions of our investments.
For the three and nine months ended June 30, 2024, our Credit Facility had a net change in unrealized appreciation (depreciation) of less than $0.1 million and less than $(0.1) million, respectively. For the three and nine months ended June 30, 2023, our Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of $(5.8) million and $(4.8) million, respectively. As of June 30, 2024 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility and the 2023 Notes totaled less than $0.1 million and zero, respectively. The net change in net unrealized appreciation or (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
For the three and nine months ended June 30, 2024, net increase (decrease) in net assets resulting from operations totaled $16.9 million or $0.25 per share, and $70.5 million or $1.12 per share, respectively. For the three and nine months ended June 30, 2023, net increase (decrease) in net assets resulting from operations totaled $5.6 million or $0.11 per share and $11.2 million or $0.23 per share, respectively. The net increase or (decrease) from operations compared to the same period in the prior year was primarily due to operating performance of our portfolio and changes in capital market conditions of our investments along with change in size and cost yield of our debt portfolio and costs of financing.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived primarily from cash flows from operations, including income earned, proceeds from investment sales and repayments, and proceeds of securities offerings and debt financings. 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 our portfolio and proceeds from public and private offerings of securities to finance our investment objectives and operations.
As of June 30, 2024 and September 30, 2023, we had $218.9 million and $9.4 million in outstanding borrowings under the Credit Facility, respectively, and the weighted average interest rate was 7.7% and 7.7%, respectively. As of June 30, 2024 and September 30, 2023, we had $392.1 million and $376.6 million of unused borrowing capacity under the Credit Facility, as applicable, respectively, subject to leverage and borrowing base restrictions.
As of June 30, 2024 and September 30, 2023, we had cash equivalents of $84.6 million and $100.6 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to allow us to efficiently operate the business.
For the nine months ended June 30, 2024, our operating activities used cash of $509.6 million and our financing activities provided cash of $493.7 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily due to borrowings under our Credit Facility, proceeds from public offerings under our ATM program and proceeds from the 2036 Asset-Backed Debt partially offset by the repayment of the 2023 Notes.
For the nine months ended June 30, 2023, our operating activities provided cash of $62.4 million and our financing activities used cash of $54.2 million. Our operating activities provided cash primarily realized from our investment activities and our financing activities used cash primarily due to repayments under our Credit Facility and principal repayment of our 2023 Notes partially offset by proceeds from our equity offering.
DISTRIBUTIONS
During the three and nine months ended June 30, 2024, we declared distributions of $0.3075 and $0.9225 per share for total distributions of $21.0 million and $57.9 million, respectively. During the three and nine months ended June 30, 2023, we declared distributions of $0.3025 and $0.8775 per share for total distributions of $15.4 million and $42.4 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 SEC.
RECENT DEVELOPMENTS
On July 25, 2024, we completed the refinancing of the 2031 Asset-Backed Debt from a $301 million to $351 million debt securitization in the form of a collateralized loan obligation. We retained $85.0 million of the securitization in the form of Class D-R Notes and Subordinate Notes through a consolidated subsidiary.
For the period subsequent to June 30, 2024 through August 2, 2024, we invested $116.4 million in portfolio companies.
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
(in thousands, except per share data)
(Unaudited)June 30, 2024
(Unaudited)September 30, 2023 Assets Investments at fair value Non-controlled, non-affiliated investments (amortized cost— $1,303,071 and $768,240, respectively) $ 1,314,452 $ 772,178 Controlled, affiliated investments (amortized cost— $371,613 and $324,639, respectively) 344,492 294,996 Total investments (amortized cost— $1,674,684 and $1,092,878, respectively) 1,658,944 1,067,174 Cash and cash equivalents (cost— $84,589 and $100,555, respectively) 84,590 100,555 Interest receivable 12,510 10,423 Distributions receivable 635 565 Due from affiliate 65 — Prepaid expenses and other assets 152 894 Total assets 1,756,896 1,179,611 Liabilities Credit Facility payable, at fair value (cost— $218,855 and $9,400, respectively) 218,862 9,400 2036 Asset-Backed Debt, net (par—$287,000) 283,951 — 2031 Asset-Backed Debt, net (par—$210,699 and $228,000, respectively) 209,931 226,759 2026 Notes payable, net (par—$185,000) 183,637 183,054 Interest payable on debt 15,119 8,615 Distributions payable 7,380 6,020 Payable for investments purchased 9,201 4,905 Incentive fee payable 5,307 4,628 Base management fee payable 3,908 2,759 Deferred tax liability 1,564 1,794 Accounts payable and accrued expenses 1,310 1,287 Due to affiliates — 566 2023 Notes payable, at fair value (par—$0 and $76,219, respectively) — 76,219 Total liabilities 940,170 526,006 Net assets Common stock, 71,998,138 and 58,734,702 shares issued and outstanding, respectively
Par value $0.001 per share and 100,000,000 shares authorized72 59 Paid-in capital in excess of par value 915,684 765,187 Accumulated deficit (99,030 ) (111,641 ) Total net assets $ 816,726 $ 653,605 Total liabilities and net assets $ 1,756,896 $ 1,179,611 Net asset value per share $ 11.34 $ 11.13 PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)Three Months Ended June 30, Nine Months Ended June 30, 2024 2023 2024 2023 Investment income: From non-controlled, non-affiliated investments: Interest $ 34,456 $ 21,988 $ 88,693 $ 65,440 Dividend 768 4,390 1,853 5,602 Other income 591 734 3,622 1,460 From controlled, affiliated investments: Interest 8,841 8,151 25,595 22,701 Dividend 3,719 2,450 10,938 8,400 Other income 130 — 130 — Total investment income 48,505 37,713 130,831 103,603 Expenses: Interest and expenses on debt 16,293 9,985 39,923 29,595 Performance-based incentive fee 5,307 4,625 14,937 12,245 Base management fee 3,908 2,840 10,283 8,643 General and administrative expenses 1,050 1,134 3,293 2,545 Administrative services expenses 450 477 1,661 764 Expenses before provision for taxes and financing costs 27,008 19,061 70,097 53,792 Provision for taxes on net investment income 193 150 894 834 Credit Facility amendment costs 94 — 94 — Total expenses 27,295 19,211 71,085 54,626 Net investment income 21,210 18,502 59,746 48,977 Realized and unrealized gain (loss) on investments and debt: Net realized gain (loss) on: Non-controlled, non-affiliated investments (353 ) (6,065 ) 568 (13,520 ) Non-controlled and controlled, affiliated investments — — — — Provision for taxes on realized gain on investments — — — (300 ) Net realized gain (loss) on investments (353 ) (6,065 ) 568 (13,820 ) Net change in unrealized appreciation (depreciation) on: Non-controlled, non-affiliated investments (1,064 ) 3,051 7,443 (12,204 ) Controlled and non-controlled, affiliated investments (2,889 ) (4,143 ) 2,519 (9,825 ) Provision for taxes on unrealized appreciation (depreciation) on investments — — 230 2,929 Debt (appreciation) depreciation 16 (5,752 ) (7 ) (4,842 ) Net change in unrealized appreciation (depreciation) on investments and debt (3,937 ) (6,844 ) 10,185 (23,942 ) Net realized and unrealized gain (loss) from investments and debt (4,290 ) (12,909 ) 10,753 (37,762 ) Net increase (decrease) in net assets resulting from operations $ 16,920 $ 5,593 $ 70,499 $ 11,215 Net increase (decrease) in net assets resulting from operations per common share $ 0.25 $ 0.11 $ 1.12 $ 0.23 Net investment income per common share $ 0.31 $ 0.36 $ 0.95 $ 1.02 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 $7.7 billion of investable capital, including available 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 Miami and has offices in New York, Chicago, Houston, Los Angeles, and Amsterdam.
FORWARD-LOOKING STATEMENTS AND OTHER
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. 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.
The information contained herein is based on current tax laws, which may change in the future. The Company cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. The information provided in this material does not constitute any specific legal, tax or accounting advice. Please consult with qualified professionals for this type of advice.
CONTACT: Richard T. Allorto, Jr. PennantPark Floating Rate Capital Ltd. (212) 905-1000 www.pennantpark.com 
