OFS Credit Company Announces Financial Results for the Third Fiscal Quarter 2023
- Core net investment income increased by $1M
- Quarterly distribution declared at $0.55 per share
- Net investment income decreased from previous quarter
- Net asset value per common share decreased to $8.02
THIRD QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
, or$3.8 million per common share, for the fiscal quarter ended July 31, 2023. This compares to NII of$0.34 , or$3.6 million per common share, for the fiscal quarter ended April 30, 2023. The decrease in net investment income per common share was primarily due to a decrease in the portfolio’s earned investment yield and an increase in the weighted average shares outstanding primarily related to common stock issued pursuant to our “At-the-Market” offering.$0.35 -
Core net investment income (“Core NII”)1 of
, or$7.0 million per common share, for the fiscal quarter ended July 31, 2023. Core NII increased$0.62 , or$1.0 million per common share, from the prior quarter. The increase in Core NII was primarily due to an increase in CLO equity issuers making their initial cash distribution payments.$0.03 -
Net asset value (“NAV”) per common share of
as of July 31, 2023, a decrease of$8.02 from NAV of$0.46 as of April 30, 2023.$8.48 -
During the fiscal quarter ended July 31, 2023, the earned income yield of our investment portfolio at amortized cost was
14.7% .
OTHER RECENT EVENTS
-
On September 1, 2023, OFS Credit’s board of directors declared a quarterly distribution of
per share of common stock for the fiscal quarter ending October 31, 2023. The distribution is payable on October 31, 2023 in cash or shares of our common stock to stockholders of record as of September 15, 2023. The total amount of cash distributed to all stockholders will be limited to$0.55 20% of the total distribution, excluding any cash paid for fractional shares.
SELECTED FINANCIAL HIGHLIGHTS |
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(in millions, except per share data) (unaudited) |
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As of July 31, 2023 |
As of April 30, 2023 |
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Investment portfolio, at fair value |
|
$ |
147.1 |
$ |
142.6 |
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NAV per common share |
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|
8.02 |
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8.48 |
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For the Fiscal Quarter Ended |
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(Per common share) |
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July 31, 2023 |
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April 30, 2023 |
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Net investment income |
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$ |
0.34 |
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$ |
0.35 |
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Net unrealized depreciation on investments |
|
|
(0.29 |
) |
|
|
(1.49 |
) |
Net earnings (loss) |
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$ |
0.05 |
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$ |
(1.14 |
) |
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Core NII — Non-GAAP1 |
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Net investment income |
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$ |
0.34 |
|
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$ |
0.35 |
|
CLO equity adjustments |
|
|
0.28 |
|
|
|
0.24 |
|
Core NII |
|
$ |
0.62 |
|
|
$ |
0.59 |
1 |
On a supplemental basis, we disclose Core NII, which is a financial measure calculated and presented on a basis of methodology other than in accordance with accounting principles generally accepted in |
MANAGEMENT COMMENTARY
“We continue to deploy capital into new investments both in the primary and secondary markets,” said Bilal Rashid, Chief Executive Officer. “We continue to believe that our balance sheet remains well positioned with
PORTFOLIO AND INVESTMENT ACTIVITIES
As of July 31, 2023, the total fair value of our investment portfolio was approximately
Subsequent to July 31, 2023, we deployed
Portfolio Overview ($ in millions) |
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As of July 31, 2023 |
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As of April 30, 2023 |
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Investment portfolio, at fair value |
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$ |
147.1 |
|
|
$ |
142.6 |
|
Total number of portfolio companies |
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74 |
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|
|
69 |
|
Weighted-average effective yield |
|
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14.11 |
% |
|
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14.58 |
% |
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For the Fiscal Quarter Ended |
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Portfolio Activity ($ in millions) |
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July 31, 2023 |
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April 30, 2023 |
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CLO equity investments |
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$ |
3.9 |
|
|
$ |
— |
|
CLO debt investments |
|
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6.4 |
|
|
|
9.6 |
|
Loan accumulation facility investments |
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0.6 |
|
|
|
0.1 |
|
Total investments |
|
$ |
10.9 |
|
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$ |
9.7 |
|
Weighted-average effective yield |
|
|
20.23 |
% |
|
|
13.65 |
% |
|
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As of July 31, 2023 |
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Portfolio Composition ($ in millions) |
|
Cost |
|
Fair Value |
||||
CLO equity investments |
|
$ |
166.2 |
|
$ |
117.5 |
||
CLO debt investments |
|
|
20.5 |
|
|
20.7 |
||
Loan accumulation facility investments |
|
|
8.1 |
|
|
8.0 |
||
Other CLO equity-related investments |
|
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0.8 |
|
|
0.9 |
||
Total investments |
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$ |
195.6 |
|
$ |
147.1 |
RESULTS OF OPERATIONS
Interest Income
During the fiscal quarter ended July 31, 2023, interest income increased by
Expenses
During the fiscal quarter ended July 31, 2023, total expenses remained stable at
Net realized and unrealized gain (loss)
During the fiscal quarter ended July 31, 2023, net change in unrealized depreciation of
DISTRIBUTIONS
On September 1, 2023, our board of directors declared the following distribution on shares of our common stock:
Record Date |
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Payable Date |
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Distribution Per Common Share2 |
September 15, 2023 |
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October 31, 2023 |
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2 |
The total amount of cash distributed to all stockholders will be limited to |
OFS Credit Company, Inc. |
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Statement of Assets and Liabilities |
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As of July 31, 2023 |
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(unaudited) |
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Assets: |
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Investments, at fair value (amortized cost of |
|
$ |
147,075,483 |
|
Cash |
|
|
22,541,930 |
|
Interest receivable |
|
|
729,155 |
|
Other assets |
|
|
791,002 |
|
Total assets |
|
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171,137,570 |
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|
|
|
||
Liabilities: |
|
|
||
Preferred stock (net of deferred issuance costs of |
|
|
62,651,642 |
|
Payable to adviser and affiliates |
|
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2,252,174 |
|
Accrued professional fees |
|
|
402,026 |
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Other liabilities |
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|
74,000 |
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Total liabilities |
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65,379,842 |
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Net assets |
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$ |
105,757,728 |
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Net assets consist of: |
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Common stock, par value of |
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$ |
13,187 |
|
Paid-in capital in excess of par |
|
|
141,706,879 |
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Total accumulated losses |
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(35,962,338 |
) |
Total net assets |
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$ |
105,757,728 |
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Net asset value per share |
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$ |
8.02 |
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OFS Credit Company, Inc. |
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Statements of Operations |
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Three Months Ended |
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Nine Months Ended |
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July 31, 2023 |
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July 31, 2023 |
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(unaudited) |
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(unaudited) |
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Investment income: |
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|
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Interest income |
$ |
7,228,780 |
|
|
$ |
21,616,886 |
|
|
|
|
|
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Operating expenses: |
|
|
|
||||
Interest expense |
|
1,021,241 |
|
|
|
3,063,723 |
|
Management fees |
|
750,181 |
|
|
|
2,169,362 |
|
Incentive fees |
|
962,141 |
|
|
|
2,826,032 |
|
Administration fees |
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322,663 |
|
|
|
891,910 |
|
Professional fees |
|
243,736 |
|
|
|
636,317 |
|
Excise tax provision (benefit) |
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(70,000 |
) |
|
|
230,000 |
|
Other expenses |
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150,253 |
|
|
|
495,416 |
|
Total operating expenses |
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3,380,215 |
|
|
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10,312,760 |
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Net investment income |
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3,848,565 |
|
|
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11,304,126 |
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Net realized and unrealized loss: |
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Net change in unrealized depreciation on investments |
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(3,319,205 |
) |
|
|
(15,186,923 |
) |
Net realized and unrealized loss |
|
(3,319,205 |
) |
|
|
(15,186,923 |
) |
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Net increase (decrease) in net assets resulting from operations |
$ |
529,360 |
|
|
$ |
(3,882,797 |
) |
About OFS Credit Company, Inc.
OFS Credit is a non-diversified, externally managed closed-end management investment company. The Company’s investment objective is to generate current income, with a secondary objective to generate capital appreciation primarily through investment in CLO debt and subordinated securities. The Company's investment activities are managed by OFS Capital Management, LLC, an investment adviser registered under the Investment Advisers Act of 19403, as amended, and headquartered in
Forward-Looking Statements
Statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: the Company’s results of operations, including NII, Core NII, earnings per share and net asset value and the factors that may affect such results; management’s belief that the Company’s balance sheet is well positioned due to liabilities that have a fixed rate of interest with maturities that do not come due until 2026, when there can be no assurance that such a composition will lead to future success; and other factors may constitute forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including those risks, uncertainties and factors referred to in documents that may be filed by OFS Credit from time to time with the Securities and Exchange Commission (“SEC”), such as rising interest rates and elevated inflation rates, the ongoing war between
3 |
Registration does not imply a certain level of skill or training |
Supplemental Information Regarding Core Net Investment Income
We provide information relating to Core NII (a non-GAAP measure) on a supplemental basis. This measure is not provided as a substitute for GAAP NII, but in addition to it. Our non-GAAP measures may differ from similar measures by other companies, even in the event of similar terms being utilized to identify such measures. Core NII represents GAAP NII adjusted for differences in applicable cash distributions received on our CLO equity investments relative to income recognized in accordance with GAAP. OFS Capital Management, LLC, our investment adviser, uses this information in its internal analysis of results and believes that this information may be informative in gauging the quality of the Company’s financial performance, identifying trends in its results, and providing meaningful period-to-period comparisons.
Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method; this is based on an effective yield to the expected redemption utilizing estimated cash flows, at current amortized cost, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an effective yield for the investment in which the respective investment’s cost basis is adjusted quarterly based on the difference between the actual cash received, or distributions entitled to be received, and the effective yield calculation. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by the Company during the period (referred to below as “CLO equity adjustments”).
Furthermore, in order for the Company to continue to qualify for tax treatment as a regulated investment company, we are required, among other things, to distribute at least
The following table provides a reconciliation of GAAP NII to Core NII for the fiscal quarters ended July 31, 2023 and April 30, 2023 (unaudited):
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For the Fiscal Quarter Ended July 31, 2023 |
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For the Fiscal Quarter Ended April 30, 2023 |
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Amount |
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Per Common Share Amount |
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Amount |
|
Per Common Share Amount |
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Net investment income |
|
$ |
3,848,565 |
|
$ |
0.34 |
|
$ |
3,611,303 |
|
$ |
0.35 |
CLO equity adjustments |
|
|
3,160,851 |
|
|
0.28 |
|
|
2,439,456 |
|
|
0.24 |
Core NII |
|
$ |
7,009,416 |
|
$ |
0.62 |
|
$ |
6,050,759 |
|
$ |
0.59 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230908846004/en/
INVESTOR RELATIONS:
OFS Credit Company, Inc.
Steve Altebrando, 646-652-8473
saltebrando@ofsmanagement.com
Source: OFS Credit Company, Inc.