CMFN - CM Finance Inc Reports Results for its Fiscal Third Quarter Ended March 31 2019
NEW YORK, May 07, 2019 (GLOBE NEWSWIRE) -- CM Finance Inc (NASDAQ: CMFN) (“CMFN” or “the Company”) announced its financial results for its fiscal third quarter ended March 31, 2019.
HIGHLIGHTS
- CMFN made twelve investments in ten portfolio companies. Our total invested capital in the quarter was $65.6mm inclusive of funding of revolving and delayed draw commitments. The weighted average yield of debt investments made in the quarter was 10.63%
- Four investments were fully realized during the quarter. These included our debt investments in Zinc Borrower LP, Caelus, Sears’s DIP loan, and our equity position in U.S. Well Services
- The weighted average yield on debt investments, at cost, decreased 64 basis points to 10.44%, compared to 11.08% as of December 31, 2018
- Net asset value (“NAV”) per share decreased by 3.05% to $11.14, compared to $11.49 as of December 31, 2018
| Portfolio results, as of March 31, 2019: |
| Total assets |
| $319.6mm |
| Investment portfolio, at fair value |
| $299.1mm |
| Net assets |
| $151.7mm |
| Weighted average yield on debt investments, at cost |
| 10.44% |
| Net asset value per share |
| $11.14 |
| Portfolio activity in the current quarter: |
| Number of new investments |
| 12 |
| Total capital invested |
| $65.6mm |
| Proceeds from repayments, sales, and amortization |
| $46.5mm |
| Number of portfolio companies, end of period |
| 32 |
| Net investment income (NII) |
| $3.4mm |
| Net investment income per share |
| $0.25 |
| Net decrease in net assets from operations |
| $1.4mm |
| Net decrease in net assets from operations per share |
| $0.10 |
| Quarterly per share distribution paid on October 5, 2018 |
| $0.25 |
Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said “We continue to reposition our portfolio, increasing our underlying diversity while emphasizing lending first lien, senior secured debt in our borrowers’ capital structures. Our portfolio of companies has increased to 33 as of today. We continue to see opportunities in club and direct lending, and balance these positions with opportunistic investments, which have greater liquidity. While the fair value of the portfolio declined during the quarter, we take a conservative approach to both investing and valuing our portfolio and we believe there are opportunities to further enhance the portfolio as our repositioning progresses in 2019.”
On May 1, 2019, the Company’s Board of Directors declared a distribution for the quarter ending June 30, 2019 of $0.25 per share, payable on July 5, 2019, to shareholders of record as of June 14, 2019. This represents a 13.74% yield on the Company’s $7.28 share price as of the close on May 6, 2019. Distributions may include net investment income, capital gains and/or return of capital; however, the Company does not expect the distribution to be comprised of a return of capital. The tax status of distributions will be determined at the end of the taxable year.
Portfolio and Investment Activities
During the quarter, the Company made investments in ten portfolio companies, and funded one revolver and two delayed draw commitments. The aggregate capital invested during the quarter totaled $65.6 mm at cost and investments were made at a weighted average yield of 10.63%. Seven new portfolio companies were added in the quarter.
The Company also realized $46.5mm of repayments, sales, and amortization, including the sale of U.S. Well Services, LLC (Equity Interest), the repayments of our debt positions in Zinc Acquisition Holdings, LP, Caelus Energy Alaska 03, LLC, and Sears Holding Company, as well as the sale of a portion of the Company’s position in AP NMT Acquisition BV. During the quarter ended March 31, 2019, the Company wrote off its positions in Trident USA Health Services LLC. We had marked our investments in Trident to zero as of December 31, 2018. This quarter, the unrealized loss became a realized loss of $22.5mm. Realized and unrealized gains and losses accounted for a decrease in the Company’s net investments of approximately $4.8mm, or $0.35 per share. The total net decrease in net assets resulting from operations for the quarter was $1.4mm, or $0.10 per share.
As of March 31, 2019, the Company’s investment portfolio consisted of investments in 32 portfolio companies, of which 75.9% were first lien investments, 19.9% were second lien investments, 3.8% were unitranche loans, and 0.3% were in equities, warrants and other positions. The Company’s debt portfolio consisted of 94.9% floating rate investments and 5.1% fixed rate investments. As of May 6, 2019, the Company had 33 portfolio companies.
As of March 31, 2019, the Company had one investment on non-accrual status, Fusion Connect Inc.
Capital Resources
As of March 31, 2019, the Company had $6.8mm in cash, $3.9mm in restricted cash and $46.0mm of capacity under its revolving credit facility with UBS AG, London Branch.
Extension of Share Repurchase Program
On May 1, 2019, the Company’s board of directors approved an extension of the discretionary repurchase program of up to $5.0 million shares of the Company’s common stock, until the earlier of (i) May 1, 2020 or (ii) the repurchase of $5.0 million in aggregate amount of the common stock unless extended by the Company’s board of directors. Under the discretionary repurchase program, the Company may, but is not obligated to, repurchase the outstanding common stock from time to time in the open market provided that the Company complies with the prohibitions under its insider trading policies and procedures and the applicable provisions of the Investment Company Act of 1940, as amended (the “1940 Act”), and the Securities Exchange Act of 1934, as amended. In addition, any repurchases will be conducted in accordance with the 1940 Act.
The timing and number of shares to be repurchased will depend on a number of factors, including market conditions and alternative investment opportunities and no assurances can be given that any common stock, or any particular amount, will be purchased. The Company will retire immediately all shares of common stock that are purchased in connection with the share repurchase program.
Since the Board’s initial approval of the share repurchase program, the Company has repurchased 84,841 shares for an aggregate purchase price of $748,706. During the quarter ended March 31, 2019, the Company did not repurchase shares of its common stock on the open market.
Subsequent Events
Subsequent to March 31, 2019 and through May 6, 2019, we invested $9.6 million in new and existing portfolio companies, and received sales proceeds of $11.0 million.
| CM Finance Inc and Subsidiaries |
| Consolidated Statements of Assets and Liabilities |
| March 31, 2019 |
| (Unaudited) |
| June 30, 2018 |
| Assets |
| Non-controlled, non-affiliated investments, at fair value (amortized cost of |
| $ |
| 299,086,467 |
| $ |
| 293,592,013 |
| $305,248,861 and $ 302,647,282, respectively) |
| Derivatives, at fair value (cost of $0 and $0, respectively) |
| 98,467 |
| 229,918 |
| Cash |
| 6,757,007 |
| 5,620,441 |
| Cash, restricted |
| 3,917,010 |
| 2,706,273 |
| Receivable for investments sold |
| 5,780,774 |
| 7,751,875 |
| Interest receivable |
| 3,494,878 |
| 4,011,450 |
| Deferred offering costs |
| 121,922 |
| 121,922 |
| Other receivables |
| - |
| 245,550 |
| Prepaid expenses and other assets |
| 328,359 |
| 255,139 |
| Total Assets |
| $ |
| 319,584,884 |
| $ |
| 314,534,581 |
| Liabilities |
| Notes payable: |
| Term loan |
| $ |
| 102,000,000 |
| $ |
| 102,000,000 |
| Revolving credit facility |
| 4,000,000 |
| 17,823,000 |
| 2023 Notes payable |
| 34,500,000 |
| - |
| Deferred debt issuance costs |
| (2,247,389 |
| ) |
| (1,953,771 |
| ) |
| Notes payable, net |
| 138,252,611 |
| 117,869,229 |
| Payable for investments purchased |
| 21,716,437 |
| 12,569,450 |
| Dividend payable |
| 3,403,427 |
| 3,417,848 |
| Deferred financing costs payable |
| 1,037,000 |
| 2,071,167 |
| Income-based incentive fees payable |
| 1,054,776 |
| 2,294,678 |
| Base management fees payable |
| 1,369,713 |
| 1,319,853 |
| Accrued provision for taxes |
| - |
| 2,579,337 |
| Derivatives, at fair value (cost $0 and $0, respectively) |
| 98,467 |
| 229,918 |
| Interest payable |
| 836,765 |
| 303,153 |
| Directors' fees payable |
| 92,789 |
| 99,296 |
| Accrued expenses and other liabilities |
| 36,635 |
| 257,986 |
| Total Liabilities |
| 167,898,620 |
| 143,011,915 |
| Commitments and Contingencies (Note 6) |
| Net Assets |
| Common stock, par value $0.001 per share (100,000,000 shares authorized, |
| 13,613,707 and 13,649,504 shares issued and outstanding, respectively) |
| 13,614 |
| 13,649 |
| Additional paid-in capital |
| 198,403,095 |
| 198,700,999 |
| Distributable earnings (losses) |
| (46,730,445 |
| ) |
| (27,919,982 |
| ) |
| Total Net Assets |
| 151,686,264 |
| 170,794,666 |
| Total Liabilities and Net Assets |
| $ |
| 319,584,884 |
| $ |
| 313,806,581 |
| Net Asset Value Per Share |
| $ |
| 11.14 |
| $ |
| 12.51 |
| See notes to unaudited consolidated financial statements. |
| CM Finance Inc and Subsidiaries |
| Consolidated Statements of Operations (Unaudited) |
| For the three months ended March 31, |
| For the nine months ended March 31, |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| Investment Income: |
| Interest income |
| $ |
| 8,564,501 |
| $ |
| 6,897,476 |
| $ |
| 24,700,592 |
| $ |
| 20,861,681 |
| Payment in-kind interest income |
| - |
| 1,322,134 |
| 953,928 |
| 2,336,651 |
| Dividend income |
| 15,607 |
| 255,648 |
| 46,882 |
| 255,648 |
| Payment in-kind dividend income |
| - |
| 143,750 |
| - |
| 333,333 |
| Other fee income |
| 142,483 |
| 52,369 |
| 575,003 |
| 62,248 |
| Total investment income |
| 8,722,591 |
| 8,671,377 |
| 26,276,405 |
| 23,849,561 |
| Expenses: |
| Interest expense |
| 2,164,625 |
| 1,568,357 |
| 6,586,019 |
| 4,607,447 |
| Base management fees |
| 1,369,713 |
| 1,236,620 |
| 4,126,865 |
| 3,551,853 |
| Income-based incentive fees |
| 723,484 |
| 933,356 |
| 1,597,526 |
| 1,840,114 |
| Provision for tax expense |
| 131,304 |
| - |
| 144,250 |
| - |
| Professional fees |
| 251,158 |
| 303,373 |
| 717,486 |
| 748,437 |
| Allocation of administrative costs from advisor |
| 346,777 |
| 292,561 |
| 1,026,473 |
| 604,352 |
| Amortization of deferred debt issuance costs |
| 195,377 |
| 195,377 |
| 586,131 |
| 500,093 |
| Insurance expense |
| 83,987 |
| 100,829 |
| 252,867 |
| 271,280 |
| Directors' fees |
| 101,250 |
| 99,000 |
| 303,750 |
| 297,667 |
| Custodian and administrator fees |
| 243,823 |
| 42,750 |
| 258,823 |
| 248,188 |
| Offering expense |
| 51,750 |
| - |
| 155,250 |
| 186,513 |
| Other expenses |
| 18,399 |
| 165,730 |
| 373,613 |
| 556,889 |
| Total expenses |
| 5,681,647 |
| 4,937,953 |
| 16,129,053 |
| 13,412,833 |
| Waiver of income-based incentive fees |
| (362,478 |
| ) |
| - |
| (384,478 |
| ) |
| - |
| Net expenses |
| 5,319,169 |
| 4,937,953 |
| 15,744,575 |
| 13,412,833 |
| Net investment income |
| 3,403,422 |
| 3,733,424 |
| 10,531,830 |
| 10,436,728 |
| Net realized and unrealized gain/(loss) on investments: |
| Net realized gain (loss) from investments |
| (22,553,307 |
| ) |
| (238,076 |
| ) |
| (22,736,499 |
| ) |
| (7,618,766 |
| ) |
| Net change in unrealized appreciation (depreciation) in value |
| - |
| of investments |
| 17,792,347 |
| 595,687 |
| 2,892,876 |
| 9,267,936 |
| Total realized and unrealized gain (loss) on investments |
| (4,760,960 |
| ) |
| 357,611 |
| (19,843,623 |
| ) |
| 1,649,170 |
| Net increase (decrease) in net assets resulting from operations |
| $ |
| (1,357,538 |
| ) |
| $ |
| 4,091,035 |
| $ |
| (9,311,793 |
| ) |
| $ |
| 12,085,898 |
| Basic and diluted: |
| Net investment income per share |
| $ |
| 0.25 |
| $ |
| 0.27 |
| $ |
| 0.77 |
| $ |
| 0.77 |
| Earnings per share |
| $ |
| (0.10 |
| ) |
| $ |
| 0.30 |
| $ |
| (0.68 |
| ) |
| $ |
| 0.89 |
| Weighted average shares of common stock outstanding |
| 13,613,694 |
| 13,691,420 |
| 13,634,370 |
| 13,590,589 |
| Distributions paid per common share |
| $ |
| 0.25 |
| $ |
| 0.25 |
| $ |
| 0.75 |
| $ |
| 0.75 |
| See notes to unaudited consolidated financial statements. |
About CM Finance Inc
The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50mm and earnings before interest, taxes, depreciation and amortization of at least $15mm. The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com.
Forward-Looking Statements
Statements included herein may contain “forward-looking statements,” which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release.
Contacts
CM Finance Inc
Investor Relations
Email: investorrelations@cmipllc.com
Phone: 212-257-5199