New management at Alcentra (NASDAQ:ABDC) has made significant progress revamping the portfolio and stabilizing NAV. The company was even able to pay a special $0.15 dividend this quarter. For the second quarter of 2019, net investment income was $2.5 million, or $0.20 per share versus $3.5 million and $0.25 per share last year. Total investment income was $6.1 million versus $7.3 million last year, a decline of 15%. This decrease was due to the continued portfolio rotation of legacy investments to investments more senior in the capital structure of its portfolio companies, and the associated decrease in weighted-average yields as older higher yielding investments are repaid and the LIBOR rate declines.
NAV was down 1.3% from the March quarter after having paid the special $0.15 dividend to stockholders of record as of June 28, 2019. NAV is virtually flat with last year’s quarter. NAV has declined from the $14.63 per share at the time of its May 2014 IPO, but had been on the rise since new management took over. Alcentra’s current dividend yield, not including the special dividend is 8.8%, still below the average of 10.0%. At $8.22, the shares trade at a 24% discount to the company’s current $11.02 NAV (net asset value) per share. Management has been working to reduce the discount to NAV up to and including exploring strategic alternatives including the sale of the company.
Of the 28 portfolio companies, there were three write-downs this quarter totaling $0.5 million:
• Aegis Toxicology – debt valuation adjusted lower based upon mark to market ($0.1 million)
• Impact Group – debt valuation was adjusted lower due to financial performance ($0.3 million)
• Manna Pro – debt valuation adjusted lower based upon incremental funding price ($0.1 million)
Four positions were written up this quarter, totaling $1.0 million:
• Aperio – based on recent market trade at higher price ($0.4 million)
• Cambium – based on recent sale of a portion of our position ($0.1 million)
• Conisus – based on improved financial performance ($0.4 million)
• Goldentree Loan Management (CLO) – mark to market of CLO debt ($0.1 million)
The portfolio value increased to $219 million from $214 million in Q1 2019.
During Q2 the company invested $29 million and received proceeds from repayments, loan dispositions and amortization on investments of approximately $22.1 million.
New portfolio company investments were:
• Investment of $5.0 million in the first lien tranche and $5.0 million in the second lien tranche of Perforce Software, Inc.;
• Investment of $7.0 million in the first lien tranche of Digital Room Holdings, Inc.
Existing portfolio company investments and committed capital funding:
• Investment of $6.1 million in the first lien tranche of Manna Pro Products, LLC.
• Investment of $4.8 million in the second lien tranche of Pharmalogic Holdings Corp.
• Investment of $1.0 million in the second lien tranche of BayMark Health Services, Inc.
On July 3, 2019, the Company paid a quarterly dividend of $0.18 per share and a special dividend of $0.15 per share to stockholders of record as of June 28, 2019.
On August 5, 2019, the Board approved the 2019 third quarter dividend of $0.18 per share for stockholders of record as of September 26, 2019, payable on October 3, 2019.
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