UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the |
Date of Report: August 06, 2015
(Date of earliest event reported)
PennantPark Floating Rate Capital Ltd.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction
of incorporation)
814-00891
(Commission File Number)
27-3794690
(IRS Employer
Identification Number)
590 Madison Avenue, 15th Floor, New York, NY
(Address of principal executive offices)
10022
(Zip Code)
212-905-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
- x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
- o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
- o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
- o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
- o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Item 2.02. Results of Operations and Financial Condition On August 6, 2015, PennantPark Floating Rate Capital Ltd. issued a press release announcing financial results for the third fiscal quarter ended June 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report pursuant to Item 2.02 on Form 8-K and Regulation FD. The information in this report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities of such section. The information in this report on Form 8-K shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Act, or under the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Forward-Looking Statements This report on Form 8-K, including Exhibit 99.1 furnished herewith, 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 and Section 21E(b)(2)(B) of 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.
Item 9.01. Financial Statements and Exhibits
(a) Financial statements:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: August 06, 2015 |
PENNANTPARK FLOATING RATE CAPITAL LTD.
By: /s/ Aviv Efrat |
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| Exhibit No. | Description |
| 99.1 | Press Release of PennantPark Floating Rate Capital Ltd. dated August 06, 2015 |
NEW YORK, NY -- (Marketwired - August 06, 2015) - PennantPark Floating Rate Capital Ltd. (NASDAQ: PFLT) announced today financial results for the third fiscal quarter ended June 30, 2015.
HIGHLIGHTS Quarter ended June 30, 2015 ($ in millions, except per share amounts) Assets and Liabilities: Investment portfolio $ 358.8 Net assets $ 213.5 Net asset value per share $ 14.33 Credit Facility $ 140.0 Yield on debt investments at quarter-end 8.3% Operating Results: Net investment income $ 4.1 Net investment income per share $ 0.28 Distributions declared per share $ 0.285 Portfolio Activity: Purchases of investments $ 75.6 Sales and repayments of investments $ 53.2 Number of new portfolio companies invested 12 Number of existing portfolio companies invested 12 Number of portfolio companies 72
CONFERENCE CALL AT 10:00 A.M. ET ON AUGUST 7, 2015
PennantPark Floating Rate Capital Ltd. ("we," "our," "us" or "Company") will host a conference call at 10:00 a.m. (Eastern Time) on Friday, August 7, 2015 to discuss its financial results. All interested parties are welcome to participate. You can access the conference call by dialing (888) 516-2446 approximately 5-10 minutes prior to the call. International callers should dial (719) 325-2444. All callers should reference PennantPark Floating Rate Capital Ltd. An archived replay of the call will be available through August 21, 2015 by calling (888) 203-1112. International callers please dial (719) 457-0820. For all phone replays, please reference conference ID #9510199.
PORTFOLIO AND INVESTMENT ACTIVITY
As of June 30, 2015, our portfolio totaled $358.8 million and consisted of $304.1 million of senior secured loans, $46.3 million of second lien secured debt and $8.4 million of subordinated debt, preferred and common equity. Our debt portfolio consisted of 97% variable-rate investments (including 93% with a London Interbank Offered Rate, or LIBOR, or prime floor) and 3% fixed-rate investments. Overall, the portfolio had net unrealized depreciation of $3.3 million. Our overall portfolio consisted of 72 companies with an average investment size of $5.0 million, had a weighted average yield on debt investments of 8.3%, and was invested 85% in senior secured loans, 13% in second lien secured debt and 2% in subordinated debt, preferred and common equity.
As of September 30, 2014, our portfolio totaled $348.4 million and consisted of $302.5 million of senior secured loans, $36.5 million of second lien secured debt and $9.4 million of subordinated debt, preferred and common equity. Our debt portfolio consisted of 95% variable-rate investments (including 92% with a LIBOR or prime floor) and 5% fixed-rate investments. As of September 30, 2014, we had one non-accrual debt investment, representing 0.6% of our overall portfolio on a cost basis. Overall, the portfolio had net unrealized appreciation of $0.1 million. Our overall portfolio consisted of 72 companies with an average investment size of $4.8 million, had a weighted average yield on debt investments of 8.2%, and was invested 87% in senior secured loans, 10% in second lien secured debt and 3% in subordinated debt, preferred and common equity.
For the three months ended June 30, 2015, we invested $75.6 million in 12 new and 12 existing portfolio companies with a weighted average yield on debt investments of 6.9%. Sales and repayments of investments for the three months ended June 30, 2015 totaled $53.2 million. For the nine months ended June 30, 2015, we invested $161.0 million in 26 new and 26 existing portfolio companies with a weighted average yield on debt investments of 7.4%. Sales and repayments of investments for the nine months ended June 30, 2015 totaled $146.2 million.
For the three months ended June 30, 2014, we invested $30.6 million in four new and seven existing portfolio companies with a weighted average yield on debt investments of 7.1%. Sales and repayments of investments for the three months ended June 30, 2014 totaled $55.6 million. For the nine months ended June 30, 2014, we invested $185.0 million in 29 new and 25 existing portfolio companies with a weighted average yield on debt investments of 7.8%. Sales and repayments of investments for the nine months ended June 30, 2014 totaled $146.8 million.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three and nine months ended June 30, 2015 and 2014.
Investment Income
Investment income for the three and nine months ended June 30, 2015 was $7.1 million and $22.6 million, respectively, and was attributable to $5.4 million and $17.4 million from senior secured loans and $1.7 million and $5.2 million from second lien secured debt and subordinated debt. This compares to investment income for the three and nine months ended June 30, 2014, which was $7.7 million and $22.1 million, respectively, and was attributable to $6.2 million and $17.9 million from senior secured loans and $1.5 million and $4.2 million from second lien secured debt and subordinated debt. The decrease in investment income for the three months ended June 30, 2015 as compared to the same period in the prior year was due to the timing of deployment of capital during the quarter. The increase in investment income for the nine months ended June 30, 2015 compared to the same period over the prior year was primarily due to a higher yielding portfolio.
Expenses
Expenses for the three and nine months ended June 30, 2015 totaled $3.0 million and $8.5 million, respectively. Base management fee for the same periods totaled $0.9 million and $2.6 million, incentive fee totaled $0.6 million (including zero on net realized gains and $0.1 million on net unrealized gains accrued but not payable) and $1.7 million (including $(0.4) million on net realized gains and $(0.2) million on net unrealized gains accrued but not payable), our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, expenses totaled $1.0 million (including $0.2 million of Credit Facility amendment expenses) and $2.6 million (including $0.2 million of Credit Facility amendment expenses), general and administrative expenses totaled $0.4 million and $1.3 million and excise taxes were $0.1 million and $0.3 million, respectively. This compares to expenses for the three and nine months ended June 30, 2014, which totaled $3.3 million and $10.8 million, respectively. Base management fee for the same periods totaled $1.0 million and $2.8 million, incentive fee totaled $0.8 million (including $0.1 million on net unrealized gains accrued but not payable) and $2.9 million (including $0.6 million on net unrealized gains accrued but not payable), Credit Facility expenses totaled $0.9 million and $3.3 million (including $0.7 million of Credit Facility amendment expenses), general and administrative expenses totaled $0.5 million and $1.4 million and excise taxes were $0.1 million and $0.4 million, respectively. The decrease in expenses compared to the same periods in the prior year was primarily due to a reduction in the accrual of incentive fees on realized and unrealized gains on the portfolio.
Net Investment Income
Net investment income totaled $4.1 million and $14.0 million, or $0.28 and $0.94 per share, for the three and nine months ended June 30, 2015, respectively. Net investment income totaled $4.4 million and $11.3 million, or $0.29 and $0.76 per share, for the three and nine months ended June 30, 2014, respectively. For the three months ended June 30, 2015, net investment income decreased over the same period in the prior year as a result of changes in the yield environment, whereas, for the nine months ended June 30, 2015, net investment income increased over the same period in the prior year due to a higher yielding portfolio, and a reduction in incentive fees on net realized and net unrealized gains on the portfolio.
Net Realized Gains or Losses
Sales and repayments of investments for the three and nine months ended June 30, 2015 totaled $53.2 million and $146.2 million and net realized gains totaled zero and $0.4 million, respectively. Sales and repayments of investments totaled $55.6 million and $146.8 million and realized gains totaled $0.7 million and $1.8 million for the three and nine months ended June 30, 2014, respectively. The change in realized gains compared to the same periods in the prior year was primarily driven by changes in market conditions for our investments.
Unrealized Appreciation or Depreciation on Investments and Credit Facility
For the three and nine months ended June 30, 2015, we reported net unrealized appreciation (depreciation) on investments of $0.7 million and $(3.4) million, respectively. For the three and nine months ended June 30, 2014, we reported net unrealized (depreciation) appreciation on investments of $(0.1) million and $5.1 million, respectively. As of June 30, 2015 and September 30, 2014, net unrealized (depreciation) appreciation on investments totaled $(3.3) million and $0.1 million, respectively. The change in net unrealized appreciation (depreciation) compared to the same periods in the prior year was primarily the result of the overall variation in the leveraged finance markets.
For the three and nine months ended June 30, 2015, our Credit Facility had an unrealized depreciation of zero and $0.2 million, respectively. For each of the three and nine months ended June 30, 2014, our Credit Facility had an unrealized appreciation of zero. As of June 30, 2015 and September 30, 2014, net unrealized appreciation on our Credit Facility totaled $0.3 million and $0.5 million, respectively. The change in net unrealized appreciation 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
Net change in net assets resulting from operations totaled $4.7 million and $11.3 million, or $0.32 and $0.76 per share, respectively, for the three and nine months ended June 30, 2015. This compares to a net change in net assets resulting from operations which totaled $4.9 million and $18.2 million, or $0.33 and $1.22 per share, respectively, for the three and nine months ended June 30, 2014. The decrease in the net change in net assets from operations compared to the same periods in the prior year reflects the change in portfolio investment valuation during the reporting period.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived from public offerings, our Credit Facility, cash flows from operations, including investment sales and repayments, and income earned. 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 Credit Facility, the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
As of June 30, 2015 and September 30, 2014, we had $139.7 million and $146.4 million of outstanding borrowings under the Credit Facility, respectively, and carried an interest rate of 2.19% and 2.16%, respectively, excluding the 0.375% undrawn commitment fee. The annualized weighted average cost of debt for the nine months ended June 30, 2015 and 2014, inclusive of the fee on the undrawn commitment on the Credit Facility but excluding amendment costs, was 2.48% and 2.36%, respectively.
As of June 30, 2015 and September 30, 2014, we had $60.3 million and $53.6 million of unused borrowing capacity, respectively, subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company.
On June 30, 2015 and September 30, 2014, we had cash equivalents of $10.5 million and $13.1 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.
Our operating activities provided cash of $16.4 million for the nine months ended June 30, 2015, and our financing activities used cash of $19.0 million for the same period. Our operating activities provided cash primarily from sales and repayments on our investment activities and our financing activities used cash primarily from net repayments under the Credit Facility.
Our operating activities used cash of $37.9 million for the nine months ended June 30, 2014, and our financing activities provided cash of $43.3 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from net draws under the Credit Facility.
ACQUISITION OF MCG CAPITAL CORPORATION
On April 29, 2015, PFLT and MCG Capital Corporation (NASDAQ: MCGC), or MCG, announced that we have entered into a definitive agreement, under which we, through our wholly owned subsidiaries, PFLT Panama, LLC and PFLT Funding II, LLC, will acquire MCG in a stock and cash transaction valued at approximately $175 million, or approximately $4.75 per MCG share at closing. MCG stockholders will have the right to receive, per each share of MCG common stock, a number of shares of our common stock equal to $4.521 and $0.226 in cash (subject to an upward adjustment) paid by PennantPark Investment Advisers, LLC. At a special meeting of our stockholders to be held on August 14, 2015, our stockholders of record at the close of business on July 13, 2015 will be asked to vote on the approval of issuance of our common stock pursuant to the merger. The transaction is expected to close during the third calendar quarter of 2015.
The boards of directors of PFLT and MCG have each unanimously approved the transaction. Our board of directors unanimously recommends that our stockholders vote "FOR" approval of the issuance of our common stock to be issued pursuant to the merger agreement.
The merger will be accounted for by us under the asset acquisition method of accounting in accordance with ASC 805-50, Business Combinations-Related Issues. Under the asset acquisition method of accounting, the acquiring entity is required to fair value the assets and liabilities transferred. The cost of the group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values other than "non-qualifying" assets (for example cash or marketable securities) and does not give rise to goodwill. Furthermore, the cost of assets recognized by the acquiring entity generally includes transaction costs incurred as part of the asset acquisition, and no gain or loss is recognized in connection with such transfer.
DISTRIBUTIONS
During the three and nine months ended June 30, 2015, we declared distributions of $0.285 and $0.830 per share, respectively, for total distributions of $4.2 million and $12.3 million, respectively. For the same periods in the prior year, we declared distributions of $0.270 and $0.808 per share, respectively, for total distributions of $4.0 million and $12.0 million, respectively. We monitor available net investment income to determine if a tax return of capital 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, a portion of those distributions may be deemed to be a tax return of capital to our common stockholders. Tax characteristics of distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in our periodic reports filed with the Securities and Exchange Commission, or the SEC.
AVAILABLE INFORMATION
The Company makes available on its website its report on Form 10-Q filed with the SEC and stockholders may find the report on its website at www.pennantpark.com.
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2015 September 30,
(unaudited) 2014
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Assets
Investments at fair value
Non-controlled, non-affiliated investments
(cost--$362,124,910 and $348,354,295,
respectively) $ 358,819,617 $ 348,428,492
Cash equivalents 10,475,621 13,113,817
Interest receivable 1,983,723 1,773,870
Receivable for investments sold 1,003,750 9,001,938
Prepaid expenses and other assets 1,155,816 556,359
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Total assets 373,438,527 372,874,476
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Liabilities
Distributions payable 1,415,315 1,340,825
Payable for investments purchased 16,081,850 3,162,000
Unfunded investments -- 2,705,882
Credit Facility payable (cost--$139,700,000 and
$146,400,000, respectively) 140,015,250 146,949,000
Interest payable on Credit Facility 262,251 284,906
Management fee payable 881,953 914,978
Performance-based incentive fee payable 1,051,174 2,180,604
Accrued other expenses 278,944 808,571
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Total liabilities 159,986,737 158,346,766
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Commitments and contingencies
Net assets
Common stock, 14,898,056 shares issued and
outstanding.
Par value $0.001 per share and 100,000,000
shares authorized. 14,898 14,898
Paid-in capital in excess of par value 207,226,615 207,226,615
Undistributed net investment income 6,534,376 4,878,091
Accumulated net realized gain on investments 3,296,444 2,882,909
Net unrealized (depreciation) appreciation on
investments (3,305,293) 74,197
Net unrealized appreciation on Credit Facility (315,250) (549,000)
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Total net assets $ 213,451,790 $ 214,527,710
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Total liabilities and net assets $ 373,438,527 $ 372,874,476
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Net asset value per share $ 14.33 $ 14.40
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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ -------------------------
2015 2014 2015 2014
----------- ----------- ----------- ------------
Investment income:
From non-controlled,
non-affiliated
investments:
Interest $ 6,940,910 $ 7,524,629 $21,457,084 $ 21,808,074
Other income 163,377 143,904 1,107,182 327,828
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Total investment
income 7,104,287 7,668,533 22,564,266 22,135,902
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Expenses:
Base management fee 881,953 953,096 2,616,499 2,787,848
Performance-based
incentive fee 630,806 825,796 1,662,731 2,926,261
Interest and expenses
on the Credit
Facility 785,899 888,718 2,447,632 2,588,843
Administrative
services expenses 223,500 276,000 673,000 678,000
Other general and
administrative
expenses 212,672 241,985 650,422 766,639
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Expenses before excise
tax and amendment
costs 2,734,830 3,185,595 8,050,284 9,747,591
Excise tax 110,000 120,000 330,000 360,000
Credit Facility
amendment costs 162,311 -- 162,311 712,930
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Total expenses 3,007,141 3,305,595 8,542,595 10,820,521
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Net Investment Income 4,097,146 4,362,938 14,021,671 11,315,381
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Realized and unrealized
gain (loss) on
investments and Credit
Facility:
Net realized (loss) gain
on non-controlled, non-
affiliated investments (11,319) 697,831 413,535 1,774,685
Net change in unrealized
appreciation
(depreciation) on:
Non-controlled, non-
affiliated
investments 662,950 (118,995) (3,379,490) 5,145,786
Credit Facility
(appreciation)
depreciation (22,000) -- 233,750 --
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Net change in
unrealized
appreciation
(depreciation) on
investments and
Credit Facility 640,950 (118,995) (3,145,740) 5,145,786
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Net realized and
unrealized gain
(loss) from
investments and
Credit Facility 629,631 578,836 (2,732,205) 6,920,471
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Net increase in net
assets resulting from
operations $ 4,726,777 $ 4,941,774 $11,289,466 $ 18,235,852
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Net increase in net
assets resulting from
operations per common
share $ 0.32 $ 0.33 $ 0.76 $ 1.22
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Net investment income
per common share $ 0.28 $ 0.29 $ 0.94 $ 0.76
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ABOUT PENNANTPARK FLOATING RATE CAPITAL LTD.
PennantPark Floating Rate Capital Ltd. is a business development company which primarily invests in U.S. middle-market private companies in the form of floating rate senior secured loans. From time to time, the Company may also invest in mezzanine debt and equity investments. PennantPark Floating Rate Capital Ltd. is managed by PennantPark Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
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 SEC. The Company 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.
CONTACT: Aviv Efrat PennantPark Floating Rate Capital Ltd. Reception: (212) 905-1000 www.pennantpark.com