Great Elm Capital Corp. Announces Second Quarter 2022 Financial Results

WALTHAM, Mass., Aug. 04, 2022 (GLOBE NEWSWIRE) — Great Elm Capital Corp. (NASDAQ: GECC), a business development company, today announced its financial results for the second quarter ended June 30, 2022.

Financial and Operating Highlights

  • Completed previously announced rights offering, selling approximately 3.0 million shares of common stock for aggregate gross proceeds of $37.5 million.
  • Net investment income (“NII”) for the quarter ended June 30, 2022 was $1.2 million, or $0.23 per share.
  • Net assets were $97.6 million on June 30, 2022, as compared to $69.3 million on March 31, 2022, and $91.7 million on June 30, 2021.
  • NAV per share was $12.84 as of June 30, 2022, as compared to $15.06 as of March 31, 2022, and $23.40 as of June 30, 2021.
  • GECC’s asset coverage ratio was approximately 166.9% as of June 30, 2022, as compared to 147.5% as of March 31, 2022, and 166.2% as of June 30, 2021.
  • Board of Directors has approved a quarterly dividend of $0.45 per share for the fourth quarter of 2022, equating to a 14.0% annualized yield on June 30, 2022 NAV per share.

Management Commentary
“We completed our rights offering in June, which strengthened our balance sheet, enhanced our asset coverage ratio and provided added liquidity which we are deploying opportunistically into new higher-yielding investments,” said Matt Kaplan, GECC’s Chief Executive Officer. “We are navigating through the challenging macro environment and have been able to take advantage of volatility in the secondary markets. Moving forward, we continue to focus on our strategy of growing our Specialty Finance platforms as we seek to grow our NII and NAV over time and create stockholder value.”

Rights Offering
On June 13, 2022, the Company announced the final results of a non-transferable rights offering, which entitled holders of rights to purchase one new share of common stock for every one right held at a subscription price of $12.50 per share. The company sold approximately 3.0 million shares of common stock for aggregate gross proceeds of $37.5 million.

Net proceeds from the offering will be deployed opportunistically in accordance with the Company’s investment objectives and policies, including into investments in specialty finance businesses.

Financial Highlights – Per Share Data(1)

Q2/20211 Q3/20211 Q4/20211 Q1/20221 Q2/20221
Earnings Per Share (“EPS”) $0.63 ($0.79) ($4.95) ($1.12) ($0.87)
Net Investment Income (“NII”) Per Share $0.54 $0.39 $1.58 $1.31 $0.23
Net Realized and Unrealized Gains / (Losses) Per Share $0.10 ($1.18) ($6.53) ($2.43) ($1.10)
Net Asset Value Per Share at Period End $23.40 $22.17 $16.63 $15.06 $12.84
Distributions Paid / Declared Per Share $0.60 $0.60 $0.60 $0.60 $0.45

Portfolio and Investment Activity

As of June 30, 2022, GECC held total investments of $204.6 million at fair value, as follows:

  • 38 debt investments in corporate credit, totaling approximately $122.2 million and representing 59.7% of the fair market value of the Company’s total investments. Secured debt investments comprised a substantial majority of the fair market value of the Company’s debt investments.
  • 9 debt investments in specialty finance, totaling approximately $31.2 million and representing 15.3% of the fair market value of the Company’s total investments.
  • 3 income generating equity investments in specialty finance companies, totaling approximately $26.8 million, representing 13.1% of the fair market value of the Company’s total investments.
  • 3 income generating preferred equity investments, totaling approximately $21.0 million, representing 10.3% of the fair market value of the Company’s total investments.
  • Other equity investments, totaling approximately $3.4 million and representing 1.6% of the fair market value of the Company’s total investments.

As of June 30, 2022, the weighted average current yield on the Company’s debt portfolio was 10.3%. Floating rate instruments comprised approximately 33.4% of the fair market value of debt investments and the Company’s fixed rate debt investments had a weighted average maturity of 3.1 years.

During the quarter ended June 30, 2022, we deployed approximately $44.7 million into 27 investments(2) at a weighted average current yield of 9.2%.

During the quarter ended June 30, 2022, we monetized, in part or in full, 21 investments for approximately $34.0 million(3) excluding SPACs, at a weighted average current yield of 10.8%. Monetizations include $27.0 million of mandatory debt paydowns and redemptions at a weighted average current yield of 11.1%. Sales aggregated $7.0 million at a weighted average current yield of 9.8%

Financial Review
Total investment income for the quarter ended June 30, 2022 was $5.5 million, or $1.06 per share. Net expenses for the quarter ended June 30, 2022 were approximately $4.3 million, or $0.83 per share.

Net realized and unrealized losses for the quarter ended June 30, 2022 were approximately ($5.7) million, or ($1.10) per share. Net realized and unrealized losses were driven largely by general market weakness and spread widening, largely in June, impacting portfolio marks, as well as a further write-down of investments in Avanti. As of June 30, 2022, the fair value of investments in Avanti was approximately $0.2 million, or less than 1% of portfolio fair value.

Liquidity and Capital Resources
As of June 30, 2022, cash and money market securities totaled approximately $34.1 million, exclusive of holdings of United States Treasury Bills.

Total debt outstanding (par value) as of June 30, 2022 was $145.9 million, comprised of 6.50% senior notes due June 2024 (NASDAQ: GECCN), 6.75% senior notes due January 2025 (NASDAQ: GECCM), and 5.875% senior notes due June 2026 (NASDAQ: GECCO). The Company also has a $25.0 million revolving credit facility due May 2024, which was undrawn as of June 30, 2022.

Distributions
On May 11, 2022, the Company announced that its Board of Directors approved a quarterly cash distribution of $0.45 per share for the quarter ending September 30, 2022. The third quarter distribution will be payable on September 30, 2022 to stockholders of record as of September 15, 2022.

In addition, the Company’s Board of Directors has approved a $0.45 per share cash distribution for the quarter ending December 31, 2022. The distribution equates to a 14.5% annualized dividend yield on the Company’s closing market price on August 3, 2022 of $12.42 and a 14.0% annualized dividend yield on the Company’s June 30, 2022 NAV of $12.85 per share. The record and payment dates for the distribution are expected to be set in the fourth quarter, pursuant to authority granted by the Company’s Board of Directors.

About Great Elm Capital Corp.

Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including investments in specialty finance businesses.