MDLQ - Medley Capital Corporation Announces June 30 2020 Financial Results

August, 07 2020 04:04 PM Medley LLC 7.25% Notes due 2024

NEW YORK, Aug. 07, 2020 (GLOBE NEWSWIRE) -- Medley Capital Corporation (NYSE: MCC) (TASE: MCC) (the “Company”) today announced financial results for the quarter ended June 30, 2020.

Third Quarter Summary

Net asset value of $149.3 million, or, $54.83 per share, vs. $141.7 million, or, $52.04 per share, at March 31, 2020
Net investment loss of $(0.26) per share
Fully repaid Series A Israeli Notes (the “Israeli Notes”)
The board of directors did not declare a dividend this quarter

Post Quarter End Summary

Completed a one-for-twenty reverse stock split on July 24, 2020¹

Portfolio Investments

The total value of our investments was $250.6 million at June 30, 2020. During the quarter ended June 30, 2020, the Company originated $2.9 million of investments and had $17.3 million of repayments and sales, resulting in net repayments and sales of $14.4 million. As of June 30, 2020, the Company had investments in securities of 43 portfolio companies with approximately 42.8% consisting of senior secured first lien investments, 5.3% consisting of senior secured second lien investments, 1.3% consisting of unsecured debt, 18.8% in MCC Senior Loan Strategy JV and 31.8% in equities / warrants. As of June 30, 2020, the weighted average yield based upon the cost basis of our income bearing portfolio investments, excluding cash and cash equivalents, was 8.8%.

Results of Operations

For the three months ended June 30, 2020, the Company reported net investment loss per share and net income per share of $(0.26) and $2.79, respectively, calculated based upon the weighted average shares outstanding.

For the nine months ended June 30, 2020, the Company reported net investment loss per share and net loss per share of $(0.68) and $(24.63), respectively, calculated based upon the weighted average shares outstanding.

Investment Income

For the three months ended June 30, 2020, total investment income was approximately $4.3 million and consisted of $2.9 million of portfolio interest income, $1.2 million of dividend income and $0.2 million of fee income.

For the nine months ended June 30, 2020, total investment income was approximately $17.1 million and consisted of $11.4 million of portfolio interest income, $4.7 million of dividend income, $0.4 million of interest from cash and cash equivalents and $0.6 million of fee income.

Expenses

On June 12, 2020, the Company entered into an expense support agreement (the "ESA") with MCC Advisors LLC and Medley LLC, pursuant to which MCC Advisors LLC and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company's other operating expenses (except interest expenses, certain extraordinary strategic transaction expenses, and other expenses approved by the special committee of the board of directors) at $667,000 per month (the "Cap"). The Cap became effective on June 1, 2020 and expires on September 30, 2020.

For the three months ended June 30, 2020, total expenses before the ESA were approximately $5.4 million and consisted of the following: base management fees of $1.3 million, interest and financing expenses of $2.7 million, net professional fees of $(0.5) million, administrator expenses of $0.6 million, directors’ fees of $0.4 million, and other general and administrative related expenses of $0.9 million. During the month of June, total expenses subject to the Cap were $1.0 million, which resulted in $0.3 million of expense support due from MCC Advisors LLC. After taking the ESA into account, for the three months ended June 30, 2020, total expenses were approximately $5.0 million.

For the nine months ended June 30, 2020, total expenses before the ESA were approximately $19.3 million and consisted of the following: base management fees of $5.0 million, interest and financing expenses of $12.3 million, net professional fees of $(4.8) million, administrator expenses of $1.7 million, directors’ fees of $1.0 million, and other general and administrative related expenses of $4.1 million. For the three months ended June 30, 2020, total expenses after the ESA were approximately $19.0 million.

Net Investment Income/Loss

For the three months ended June 30, 2020, the Company reported net investment loss of $(0.7) million, or $(0.26), on a weighted average per share basis.

For the nine months ended June 30, 2020, the Company reported net investment loss of $(1.9) million, or $(0.68), on a weighted average per share basis.

Net Realized and Unrealized Gains/Losses

For the three and nine months ended June 30, 2020, the Company reported net realized gains/(losses) of $(37.9) million and $(39.8) million, respectively.

For the three and nine months ended June 30, 2020, the Company reported unrealized appreciation/(depreciation) of $46.9 million and $(22.9) million, respectively.

For the three and nine months ended June 30, 2019, the Company reported a loss on extinguishment of debt of $(0.7) million and $(2.5) million, respectively.

For the three months ended June 30, 2020, the Company recorded a change in provision for deferred taxes on the unrealized depreciation on investments of $35,970. For the nine months ended June 30, 2020, the Company recorded a change in provision for deferred taxes on the unrealized appreciation on investments of $49,694.

Liquidity and Capital Resources

As of June 30, 2020, the Company had a cash balance of $52.2 million.

As of June 30, 2020, the Company had $74.0 million outstanding in aggregate principal amount of 6.50% unsecured notes due 2021 and $77.8 million outstanding in aggregate principal amount of 6.125% unsecured notes due 2023.

During the quarter ended June 30, 2020 the Company repaid the remaining $21.1 million Israeli Notes outstanding.

Dividend Declaration

The board of directors did not declare a dividend this quarter.

Financial Statements


Medley Capital Corporation Consolidated Statements of Assets and Liabilities (in thousands, except share and per share data)





June 30, 2020

September 30, 2019

(unaudited)


ASSETS



Investments at fair value



Non-controlled/non-affiliated investments (amortized cost of $139,961 and $204,736, respectively)
$
116,697


$
189,895

Affiliated investments (amortized cost of $86,469 and $108,310, respectively)
80,257


99,540

Controlled investments (amortized cost of $117,875 and $154,601, respectively)
53,665


107,454

Total investments at fair value
250,619


396,889

Cash and cash equivalents
52,203


68,245

Restricted cash
—


16,039

Other assets
2,042


2,974

Interest receivable
663


1,592

Receivable for dispositions and investments sold
1,302


419

Fees receivable
119


109

Total assets
$
306,948


$
486,267





LIABILITIES



Notes payable (net of debt issuance costs of $1,134 and $5,274, respectively)
$
150,732


$
251,732

Accounts payable and accrued expenses
4,376


11,957

Interest and fees payable
802


2,905

Management and incentive fees payable
1,317


2,231

Administrator expenses payable
265


862

Deferred revenue
29


103

Due to affiliate
31


44

Deferred tax liability
50


—

Total liabilities
$
157,602


$
269,834





NET ASSETS



Common stock, par value $0.001 per share, 100,000,000 common shares authorized, 2,723,711 and 2,723,711 common shares issued and outstanding, respectively
$
3


$
3

Capital in excess of par value
673,584


673,584

Total distributable earnings/(loss)
(524,241
)

(457,154
)
Total net assets
149,346


216,433

Total liabilities and net assets
$
306,948


$
486,267





NET ASSET VALUE PER SHARE⁽¹⁾
$
54.83


$
79.46

^{(1) Authorized, issued and outstanding common shares and net asset value per share have been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis.}


Medley Capital Corporation Consolidated Statements of Operations (in thousands, except share and per share data)





For the three months ended June 30

For the nine months ended June 30

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

(unaudited)
INVESTMENT INCOME







Interest from investments







Non-controlled/non-affiliated investments:







Cash
$
1,961


$
5,663


$
7,499


$
21,250

Payment-in-kind
138


306


465


1,484

Affiliated investments:







Cash
292


496


691


1,708

Payment-in-kind
487


669


2,141


2,285

Controlled investments:







Cash
—


86


85


249

Payment-in-kind
—


819


501


2,609

Total interest income
2,878


8,039


11,382


29,585

Dividend income
1,225


2,012


4,725


6,104

Interest from cash and cash equivalents
4


140


377


513

Fee income
202


1,203


618


1,981

Total investment income
4,309


11,394


17,102


38,183









EXPENSES







Base management fees
1,317


2,689


4,967


8,958

Incentive fees
—


—


—


—

Interest and financing expenses
2,736


6,834


12,312


18,741

General and administrative
540


1,162


3,140


4,647

Administrator expenses
615


762


1,743


2,462

Insurance
334


127


988


364

Directors fees
347


420


960


1,089

Professional fees, net
(512
)

3,223


(4,797
)

14,580

Expenses before expense support reimbursement and management and incentive fee waivers
5,377


15,217


19,313


50,841

Expense support reimbursement
(349
)

—


(349
)

—

Management fee waiver
—


—


—


—

Incentive fee waiver
—


—


—


—

Total expenses net of management and incentive fee waivers
5,028


15,217


18,964


50,841

NET INVESTMENT INCOME
(719
)

(3,823
)

(1,862
)

(12,658
)








REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS







Net realized gain/(loss) from investments







Non-controlled/non-affiliated investments
(532
)

(8,963
)

(690
)

(24,762
)
Affiliated investments
—


—


—


—

Controlled investments
(37,390
)

—


(39,076
)

(51,539
)
Net realized gain/(loss) from investments
(37,922
)

(8,963
)

(39,766
)

(76,301
)
Net unrealized appreciation/(depreciation) on investments







Non-controlled/non-affiliated investments
7,380


5,159


(8,423
)

25,324

Affiliated investments
8,137


(653
)

2,558


(6,127
)
Controlled investments
31,389


(20,155
)

(17,062
)

6,764

Net unrealized appreciation/(depreciation) on investments
46,906


(15,649
)

(22,927
)

25,961

Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments
36


—


(50
)

—

Net loss on extinguishment of debt
(697
)

(1,806
)

(2,481
)

(1,929
)
Net realized and unrealized gain/(loss) on investments
8,323


(26,418
)

(65,224
)

(52,269
)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$
7,604


$
(30,241
)

$
(67,086
)

$
(64,927
)








WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE⁽¹⁾
$
2.79


$
(11.10
)

$
(24.63
)

$
(23.84
)
WEIGHTED AVERAGE - BASIC AND DILUTED NET INVESTMENT INCOME PER COMMON SHARE⁽¹⁾
$
(0.26
)

$
(1.40
)

$
(0.68
)

$
(4.65
)
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED⁽¹⁾
2,723,711


2,723,711


2,723,711


2,723,711

DIVIDENDS DECLARED PER COMMON SHARE⁽²⁾
$
—


$
—


$
—


$
3.00

^{(1) Basic and diluted shares has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis.}
^{(2) Dividends declared per common share has been adjusted for the periods shown to reflect the one-for twenty reverse stock split effected on July 24, 2020 on a retroactive basis.}

ABOUT MEDLEY CAPITAL CORPORATION

Medley Capital Corporation is a closed-end, externally managed business development company ("BDC") that has common stock which trades on the New York Stock Exchange (NYSE: MCC) and the Tel Aviv Stock Exchange (TASE: MCC) and has outstanding bonds which trade on the New York Stock Exchange under the symbols (NYSE: MCV) and (NYSE: MCX). Medley Capital Corporation's investment objective is to generate current income and capital appreciation by lending to privately-held middle market companies, primarily through directly originated transactions, to help these companies expand their businesses, refinance and make acquisitions. Our portfolio generally consists of senior secured first lien loans and senior secured second lien loans. Medley Capital Corporation is externally managed by MCC Advisors LLC, which is an investment adviser registered under the Investment Advisers Act of 1940, as amended. For additional information, please visit Medley Capital Corporation at www.medleycapitalcorp.com.

ABOUT MCC ADVISORS LLC

MCC Advisors LLC is a subsidiary of Medley Management Inc. (NYSE: MDLY, “Medley”). Medley is an alternative asset management firm offering yield solutions to retail and institutional investors. Medley’s national direct origination franchise is a premier provider of capital to the middle market in the U.S. Medley has $3.8 billion of assets under management in two business development companies, Medley Capital Corporation (NYSE: MCC) (TASE: MCC) and Sierra Income Corporation, and several private investment vehicles. Over the past 18 years, we have provided capital to over 400 companies across 35 industries in North America.² For additional information, please visit Medley Management Inc. at www.mdly.com.

Medley LLC, the operating company of Medley Management Inc., has outstanding bonds which trade on the New York Stock Exchange under the symbols (NYSE:MDLX) and (NYSE:MDLQ).

FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking” statements, including statements regarding the impact of the ESA. Such forward-looking statements reflect current views with respect to future events and financial performance, and the Company may make related oral forward-looking statements on or following the date hereof. Statements that include the words “should,” “would,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this material or similar oral statements for purposes of the U.S. federal securities laws or otherwise. Forward-looking statements include, but are not limited to, the introduction, withdrawal, success and timing of business initiatives and strategies; changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes in the value of our assets; the relative and absolute investment performance and operations of MCC Advisors LLC; our business prospects and the prospects of our portfolio companies; the uncertainty regarding actual level of expenses the Company incurs that may not be materially lower than current expenses due to a variety of factors, such as unexpected expenses not covered by the ESA; and uncertainties associated with the impact from the COVID-19 pandemic, including its impact on the global and U.S. capital markets and the global and U.S. economy, the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak, the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our and their ability to achieve their respective objectives, and the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the “Risk Factors” and other sections of the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q. The forward-looking statements in this press release represent the Company’s views as of the date of hereof. The Company anticipates that subsequent events and developments will cause its views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company does not have any current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing the Company’s views as of any date subsequent to the date of this material.

SOURCE: Medley Capital Corporation

Investor Relations Contact:
Sam Anderson
Head of Capital Markets & Risk Management
Medley Management Inc.
212-759-0777

Media Contact:
Jonathan Gasthalter/Nathaniel Garnick
Gasthalter & Co. LP
212-257-4170

¹ All per share data in this press release has been adjusted for periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis.

² Medley Management Inc. is the parent company of Medley LLC and several registered investment advisors (collectively, “Medley”). Assets under management refers to assets of Medley’s funds, which represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund level, including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). Assets under management are as of March 31, 2020.

Company Name:	Medley LLC 7.25% Notes due 2024
Stock Symbol:	MDLQ
Market:	NYSE

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