WALTHAM, Mass., Aug. 07, 2020 (GLOBE NEWSWIRE) -- Great Elm Capital Corp., (NASDAQ: GECC), today announced its financial results for the quarter ended June 30, 2020.

FINANCIAL HIGHLIGHTS

• During the quarter ended June 30, 2020, we began repositioning the portfolio, including intentionally taking actions that depressed net investment income (“NII”) in order to create liquidity
  • Specifically, as the impact of COVID-19 increased volatility in the leveraged credit secondary markets, we proactively monetized investments in anticipation of more attractive redeployment opportunities
  • Toward the end of the quarter ended June 30, 2020 and following quarter end, we redeployed a majority of our cash into new, cash-generative investment opportunities that diversify our holdings
  • As we continue to diversify our holdings, we intend to weight investments in specialty finance businesses, like Prestige Capital Finance, LLC (“Prestige”), whose performance has exceeded internal expectations, more significantly in our future portfolio
• NII for the quarter ended June 30, 2020 was approximately $0.9 million, or $0.09 per share, as compared to NII per share of $2.7 million or $0.26 per share for the quarter ended March 31, 2020
  • The quarter-over-quarter reduction in NII was driven by the monetization of certain income-generating investments as we continued to meaningfully grow our cash balance and the loss of cash and noncash income from investments placed on nonaccrual status during the prior quarter
• Net realized gains for the quarter ended June 30, 2020 were approximately $0.9 million, or $0.09 per share. Net unrealized appreciation from investments for the quarter ended June 30, 2020 was approximately $1.7 million, or $0.16 per share
• As of June 30, 2020, our asset coverage ratio was approximately 144.5%, up from 141.1% as of March 31, 2020, vs. a minimum asset coverage ratio of 150.0% (the “Minimum ACR”)
  • As a result of continuing to report an asset coverage ratio below the Minimum ACR, we are subject to certain limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities
• During the quarter ended June 30, 2020, we repurchased $4.2 million in aggregate principal of our senior notes at a weighted average price of $19.18 per note
• In August 2020, our Board of Directors (the “Board”) set monthly distributions of $0.083 per share for the fourth quarter of 2020
  • The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders; the remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock
• Net assets on June 30, 2020 were approximately $53.2 million as compared to net assets on March 31, 2020 of $50.8 million, a 4.5% increase. NAV per share on June 30, 2020 was $5.10, as compared to NAV per share of $5.05 on March 31, 2020, as our share count increased by approximately 3.6%

“This quarter marked the beginning of GECC’s portfolio repositioning,” remarked Peter A. Reed, GECC’s Chief Executive Officer. “Our net investment income was substantially reduced by, among other drivers, proactive sales of investments to improve our liquidity profile. Since quarter end, we have made meaningful progress redeploying the bulk of our cash balance into high quality, income-generating investments. We remain focused on diversifying our portfolio, maintaining significant liquidity and further strengthening our balance sheet. Our investment in Prestige continues to exceed our expectations and has led to an increased number of opportunities in specialty finance. Going forward, we intend to increase our focus on the specialty finance sector.”

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2020, we held 29 debt investments, totaling approximately $121.0 million and representing 82.7% of the fair market value of our total investments. First lien and/or secured debt investments comprised 98.4% of the fair market value of our debt investments. As of the same date, we held eight equity investments, totaling approximately $25.2 million and representing 17.3% of the fair market value of our total investments.

As of June 30, 2020, the weighted average current yield on our debt portfolio was 10.2%. Floating rate instruments comprised approximately 62.6% of the fair market value of debt investments.

During the quarter ended June 30, 2020, we deployed approximately $15.9 million into nine investments⁽¹⁾, at a weighted average current yield of 12.2% The weighted average price of the debt deployment activity was 92% of par.

During the quarter ended June 30, 2020, we monetized, in part or in full, 17 investments for approximately $37.5 million⁽²⁾, at a weighted average current yield of 6.5%. The weighted average realized price was 98% of par.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the quarter ended June 30, 2020 was approximately $4.8 million, or $0.47 per share. Total expenses for the quarter ended June 30, 2020 were approximately $3.9 million, or $0.38 per share.

Net realized gains for the quarter ended June 30, 2020 were approximately $0.9 million, or $0.09 per share. Net unrealized appreciation from investments for the quarter ended June 30, 2020 was approximately $1.7 million, or $0.16 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2020, our cash balance was approximately $31.0 million, exclusive of our holdings of United States Treasury Bills. Total debt outstanding as of June 30, 2020 was $119.5 million, comprised of our 6.50% senior notes due September 2022 (NASDAQ: GECCL), our 6.50% senior notes due June 2024 (NASDAQ: GECCN) and our 6.75% senior notes due January 2025 (NASDAQ: GECCM). During the quarter ended June 30, 2020, we repurchased $4.2 million in aggregate principal of our senior notes at a weighted average price of $19.18 per note. Importantly, as of June 30, 2020, we had no secured credit facility, which allows for greater flexibility in the use of our cash and other assets.

As of June 30, 2020, our asset coverage ratio was approximately 144.5%, up from 141.1% as of March 31, 2020. We are subject to a Minimum ACR of 150.0%, per the proposal that was approved at our 2018 Annual Stockholders’ Meeting. As a result of continuing to report an asset coverage ratio below the Minimum ACR during the quarter ended June 30, 2020, we are subject to certain limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities, in each case, in accordance with the Investment Company Act of 1940, as amended, and the indentures governing our outstanding notes, until such time we are above the Minimum ACR.

SELECT SUBSEQUENT ACTIVITY

Distributions
As previously announced, in May 2020, our Board set monthly distributions of $0.083 per share for the third quarter of 2020, through the month ending September 30, 2020. The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders. The remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock, in accordance with applicable law and the indentures governing our outstanding notes.

In August 2020, our Board set monthly distributions of $0.083 per share for the fourth quarter of 2020, through the month ending December 31, 2020. The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders. The remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock, in accordance with applicable law and the indentures governing our outstanding notes.

About Great Elm Capital Corp.

Great Elm Capital Corp. is an externally managed, specialty finance company focused on investing in debt instruments of middle market companies. GECC elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. GECC targets catalyst-driven investments as it seeks to generate attractive, risk-adjusted returns through both current income and capital appreciation.