Great Elm Capital Corp (GECC)

[Enterprising Investor]

Great Elm Capital Corp. Announces 2016 Financial Results (3/29/17)

BOSTON, March 29, 2017 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (“we”, “us”, “our” or “GECC”), (NASDAQ:GECC), today announced its financial results for the quarter ended December 31, 2016 and filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission.


FINANCIAL HIGHLIGHTS

•Net investment income (“NII”) for the period ended December 31, 2016 was $5,000. Excluding one-time merger and formation transaction-related professional fees, NII for the period ended December 31, 2016 was $3.5 million, or $0.28 per share, which was significantly in excess of our declared distribution of $0.166 per share for the same period (approximately 1.7x distribution coverage).

•Beginning in January 2017, monthly distributions were declared at $0.083 per share for the first quarter. In March, the Board of Directors declared a monthly distribution of $0.083 per share for the second quarter of 2017.

•Net assets on December 31, 2016 were approximately $173.0 million. Net asset value (“NAV”) per share at December 31, 2016 was $13.52 as compared to $14.41 per share on November 3, 2016, the day of the merger closing. The decrease in NAV per share is primarily driven by unrealized mark-to-market adjustments of the carrying value of the portfolio. We had a $0.3 million realized net gain on portfolio investments that were monetized during the period ended December 31, 2016 and net unrealized depreciation of investments of approximately $13.5 million, or approximately ($1.05) per share.

•During the period ended December 31, 2016, we purchased 98,172 shares of our stock through our stock buyback program at an average price of $10.73, utilizing $1.1 million of our $50.0 million buyback program. From the commencement of the stock buyback program through March 24, 2017, we purchased 338,306 shares at a weighted average price of $11.18 per share, resulting in $3.8 million of cumulative cash paid to repurchase shares.

•During the period ended December 31, 2016, we invested $42.5 million across eight portfolio companies (1), including three new portfolio investments. During the period ended December 31, 2016, we monetized $41.7 million across 16 portfolio companies (2) (in part or in full), including the complete exit of six of the legacy Full Circle portfolio investments at a net gain.

“In reflecting on our first quarter managing GECC, we are pleased with the current state of our portfolio, with the investments we have made and with our ability to monetize the legacy Full Circle portfolio at a much quicker rate than we had anticipated. Furthermore, we see significant upside potential in the portfolio today across a number of catalyst-driven investments, which we believe will allow us to grow both NAV per share and our distributions,” said Peter A. Reed, Chief Executive Officer of GECC.

PORTFOLIO AND INVESTMENT ACTIVITY

As of December 31, 2016, we had investments in debt instruments of 21 companies, totaling $154.2 million. Debt investments represented 99.7% of invested capital, as of December 31, 2016, with 91.8% of invested capital allocated to first lien and/or senior secured debt instruments and 7.9% of invested capital in unsecured debt obligations. We also had equity investments in five companies, totaling approximately $0.5 million.

As of December 31, 2016, the weighted average current yield on our debt portfolio was approximately 12.76% with approximately 38% of invested capital in floating rate debt instruments.

During the period ended December 31, 2016, we deployed approximately $42.5 million into new and existing investments across eight companies (three new, five existing). The weighted average price of the new debt investments was $0.9255, carrying a weighted average current yield of 12.18%. All of these instruments are characterized as first lien and / or senior secured investments.

During the period ended December 31, 2016, we monetized sixteen investments, in part or in full, for approximately $41.7 million, at a weighted average current yield of 10.54%, including the complete exit of six investments acquired from Full Circle in the merger, which were sold at a net gain. The weighted average price we received for the investments was $0.9852.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the period ended December 31, 2016 was approximately $5.8 million, or $0.45 per share. Net expenses for the period ended December 31, 2016 were approximately $5.8 million, or $0.45 per share. Included in this quarter’s operating expenses was $3.5 million, or $0.27 per share, of professional fees associated with the Full Circle/Great Elm merger and formation transactions that are one-time in nature.

After deducting those one-time charges, net investment income for the period ended December 31, 2016 was $5,000.

Net realized gains for the period ended December 31, 2016 were $0.3 million, or approximately $0.02 per share. Net unrealized depreciation from investments for the period ended December 31, 2016 was approximately $13.5 million, or approximately ($1.05) per share.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2016, available liquidity from cash and cash equivalents was approximately $66.8 million, comprised of cash and investments in money market mutual funds.

Total debt outstanding as of December 31, 2016 was approximately $33.7 million, comprised entirely of the 8.25% notes due June 30, 2020. (NASDAQ:FULLL).

RECENT DEVELOPMENTS

Distributions:

Our board of directors declared the monthly distributions for the second quarter of 2017 at $0.083 per month. The schedule of distribution payments is as follows:


Month Rate Record Date Payable Date
April $ 0.083 April 28, 2017 May 15, 2017
May $ 0.083 May 31, 2017 June 15, 2017
June $ 0.083 June 30, 2017 July 14, 2017


Our distribution policy has been designed to set a base distribution rate that is well-covered by NII that will be supplemented by special distributions from the realization of catalyst-driven investments. We currently have approximately $1.8 million, or approximately $0.14 per share, of spillback income that we will be required to distribute during the first nine months of 2017.

Portfolio Investments:

On January 27, 2017, Avanti Communications Group plc announced the completion of its previously announced refinancing, with the settlement of its (1) consent solicitation to permit, among other things, the incurrence of up to $132.5 million in super senior PIK Toggle Notes and the payment of PIK interest on the Existing Notes in lieu of cash for certain future interest payments due on the Existing Notes, (2) the New Money Offer and (3) offer to holders participating in the New Money Offer to exchange a portion of their Existing Notes for additional PIK Toggle Notes. Holders who elected to backstop the New Money Offer also received their pro rata share of additional common equity issued by Avanti in an aggregate amount equal to 9.09% of Avanti’s total outstanding shares. Through completion of the consent solicitation and the New Money Offer, Avanti received $80.0 million of new cash funding, with an additional $50.0 million of funding available on a delayed draw basis, and will have the ability to defer up to $112.0 million of future interest payments through April 2018. We took part in the refinancing, exchanging $22.9 million of Existing Notes for new PIK Toggle Notes and purchasing an additional $9.2 million of PIK Toggle Notes for $8.9 million. We continue to hold $47.2 million of Existing Notes.

In January 2017, we purchased an aggregate of $8.0 million face value of Nana Development Corp bonds. These senior secured bonds have a coupon of 9.50% and mature March 15, 2019.

In January and February 2017, we sold all of our holdings in Trilogy International Partners, LLC at an average price of 102.9% of par, resulting in a realized gain of approximately $0.3 million.

In February 2017, we sold our loan to JN Medical Corporation for total consideration, including payment for expenses due under the loan agreement, of $3.0 million. We recognized approximately $1.0 million of gain on the sale.

In February 2017, our loans to RiceBran Technologies Corporation were paid off at par plus accrued interest and fees.

In February 2017, certain assets of Pristine Environments were acquired by our newly-formed, wholly owned subsidiary, PE Facility Solutions LLC. The proceeds of the asset acquisition were used by Pristine Environments to repay all but $0.5 million of our outstanding credit facility.

In March 2017, our holdings in the 12.50% Senior Secured Notes of Optima Specialty Steel were refinanced at par plus accrued interest of approximately $15.3 million following bankruptcy court approval of Optima’s debtor-in-possession financing, resulting in the reversal of the unrealized loss of approximately $1.2 million at December 31, 2016. We received an approximately $12.7 million allocation of such debtor-in-possession facility.

Capitalization:

We are separately announcing today a stock buyback through a self tender offer for shares of our common stock.

CONFERENCE CALL AND WEBCAST

Great Elm Capital Corp. will host a conference call and webcast on Thursday, March 30, 2017 at 10:00 a.m. Eastern Time to discuss its fourth quarter financial results. All interested parties are invited to participate in the conference call by dialing [phone]; international callers should dial [phone]. Participants should enter the Conference ID 97302217 when asked. For a copy of the slide presentation that will be referenced during the course of our conference call, please visit http://www.greatelmcc.com/ under Investor Relations. Additionally, the conference call with be webcast simultaneously at http://edge.media-server.com/m/p/b9prqagg.

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’s investment objective is to generate both current income and capital appreciation, while seeking to protect against risk of permanent capital loss. GECC focuses on special situations and catalyst-driven investments as it seeks attractive risk-adjusted returns.

http://globenewswire.com/news-release/2017/03/30/946677/0/en/Great-Elm-Capital-Corp-Announces-2016-Financial-Results.html

[Enterprising Investor]

Great Elm Capital Corp. Announces Its Intention to Commence a Tender Offer to Purchase up to $10 Million of its Common Stock (3/29/17)

BOSTON, March 29, 2017 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (the “Company” or “GECC”), (NASDAQ:GECC), today announced its intention to commence a modified “Dutch auction” self-tender offer to purchase up to $10,000,000 in cash of its common stock, at a price per share within the range of $11.50 to $12.17, less applicable withholding taxes and without interest (the “tender offer”). The tender offer is expected to commence on or about April 3, 2017. The Nasdaq closing price of GECC’s common stock on March 29, 2017 was $11.02 per share.

This announcement does not contain the full terms and conditions of the tender offer, which will be set forth in an Offer to Purchase, Letter of Transmittal and related documentation that will be distributed to holders of the Company’s shares and filed with the U.S. Securities and Exchange Commission (the “SEC”).

The tender offer is expected to expire May 5, 2017, at 5:00 p.m., New York City time, unless the tender offer is extended or withdrawn by the Company. Tenders of shares must be made prior to the expiration of the tender offer and may be withdrawn at any time prior to the expiration of the tender offer, in each case in accordance with the procedures to be described in the tender offer materials that will be distributed to GECC stockholders. Tendering stockholders will receive distributions with respect to tendered shares where the record date is before the expiration date.

The Company believes that a modified “Dutch auction” tender offer mechanism is a prudent use of the Company’s financial resources and an efficient way to return capital to stockholders who wish to receive cash for all or a portion of their shares.

A modified “Dutch auction” self-tender offer allows stockholders to tender their shares pursuant to (i) “auction tenders,” whereby stockholders indicate at what price within the Company’s specified range (in increments of $0.11 per share) they wish to tender or (ii) “purchase price tenders,” whereby stockholders indicate they are willing to sell their shares to the Company at the purchase price determined in the tender offer. When the tender offer expires, the Company will determine the purchase price, which will be the lowest price per share within the Company’s specified range that will enable the Company to purchase the maximum number of shares properly tendered in the tender offer and not properly withdrawn having an aggregate purchase price not exceeding $10,000,000 (or, if the tender offer is not fully subscribed, all shares properly tendered in the tender offer and not properly withdrawn up to $10,000,000), taking into account the number of shares tendered pursuant to auction tenders and purchase price tenders and the prices specified by stockholders tendering shares pursuant to auction tenders.

Any shares accepted for payment in the tender offer will be purchased at the same purchase price, regardless of whether they were tendered at a lower price. Upon the terms and subject to the conditions of the tender offer, stockholders will receive the purchase price in cash, less any applicable withholding taxes and without interest, for shares properly tendered (and not properly withdrawn) at prices equal to or less than the purchase price. If shares are tendered at prices at or below the purchase price with an aggregate purchase price of more than $10,000,000, tendering stockholders whose shares are tendered at or below the purchase price owning fewer than 100 shares, or “odd lot” holders, will have their shares purchased without proration and all other tendered shares will be purchased on a pro rata basis, subject to the conditional tender provisions which will be described in the Offer to Purchase. Stockholders whose shares are purchased in the tender offer will be paid the purchase price net in cash, less applicable withholding taxes and without interest, promptly after the expiration of the tender offer. All shares tendered at prices above the purchase price will not be purchased and will be returned promptly after the expiration of the tender offer to the tendering stockholders. The Company also reserves the right to purchase up to an additional 2% of its shares outstanding pursuant to and without amending or extending the tender offer.

The Company intends to use a portion of its cash and cash equivalents on hand to fund the buyback of shares in the tender offer. The tender offer will not be conditioned upon obtaining financing or any minimum number of shares being tendered; however, the tender offer will be subject to a number of other terms and conditions, which will be specified in the Offer to Purchase.

The Company’s directors and executive officers have informed the Company of their intention not to tender any shares in the tender offer.

Janney Montgomery Scott LLC (the “Dealer Manager”) will serve as dealer manager for the tender offer. MacKenzie Partners, Inc. (the “Information Agent”) will serve as information agent for the tender offer and American Stock Transfer & Trust Company, LLC (the “Depositary”) will serve as depositary for the tender offer. For more information about the tender offer, please contact MacKenzie Partners, Inc. at [phone] (toll-free).

While the Company’s board of directors authorized the tender offer, it has not made and will not be making, and none of the Company, the Company’s principals, affiliates or subsidiaries, the Dealer Manager, the Information Agent or the Depositary have made, is making or will be making, any recommendation to the Company’s stockholders as to whether to tender or refrain from tendering their shares or as to the price or prices at which stockholders may choose to tender their shares. The Company has not authorized any person to make any such recommendation. Stockholders must make their own decision as to whether to tender their shares and, if so, how many shares to tender and the price or prices at which to tender them. Stockholders are urged to carefully evaluate all of the information in the Offer to Purchase, Letter of Transmittal and related documentation, when available, and to discuss their decision with their tax advisors, financial advisors and/or brokers.

The anticipated tender offer described in this press release has not yet commenced, and while the Company intends to commence the tender offer as soon as reasonably practicable and complete the tender offer, there can be no assurance that the Company will commence or complete the tender offer on the terms described in this press release, or at all. The discussion of the tender offer contained in this press release is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares. If the Company commences the tender offer, the offer to purchase and the solicitation of the Company’s shares will be made only pursuant to the Offer to Purchase, the related Letter of Transmittal, and other related materials mailed or otherwise delivered to stockholders. Stockholders should read those materials and the documents incorporated therein by reference carefully when they become available because they will contain important information, including the full terms and conditions of the tender offer and complete instructions on how to tender shares. The Company will file a Tender Offer Statement on Schedule TO (the “Tender Offer Statement”) with the SEC. The Tender Offer Statement, including the Offer to Purchase, the related Letter of Transmittal and other related materials, will also be available to stockholders at no charge on the SEC’s website at www.sec.gov or from the information agent for the tender offer, MacKenzie Partners, Inc. at their website www.mackenziepartners.com or by calling toll-free at [phone] (bankers and brokers can call collect at [phone]). Stockholders are urged to read those materials carefully prior to making any decisions with respect to the tender offer.

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 has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. GECC’s investment objective is to generate both current income and capital appreciation, while seeking to protect against risk of permanent capital loss. GECC focuses on special situations and catalyst-driven investments as it seeks attractive risk-adjusted returns.

http://globenewswire.com/news-release/2017/03/30/946676/0/en/Great-Elm-Capital-Corp-Announces-Its-Intention-to-Commence-a-Tender-Offer-to-Purchase-up-to-10-Million-of-its-Common-Stock.html

[Enterprising Investor]

Great Elm Capital Corp. To Commence Distributions in January 2017 (12/27/16)

Great Elm Capital Corp. (NASDAQ:GECC) announced today that its board of directors set its regular monthly distribution beginning in January 2017. GECC is a recently formed business development company that completed its merger with Full Circle Capital Corporation (“Full Circle”) on November 3, 2016.

The initial distribution will commence at a 7% annual yield on NAV per share of $14.41, which equates to a monthly distribution of $0.083 per share. In addition to the regular monthly distribution, an incremental distribution of $0.166 per share, representing the estimated net investment income generated from the merger closing through year-end 2016, will be paid to stockholders of record as of December 30, 2016 on January 16, 2017.

Peter A. Reed, the Chief Executive Officer of GECC, has reiterated his and the team’s commitment to grow GECC’s distribution to an annual 9% yield once the portfolio is fully invested. The initial distribution yield of 7% is driven predominantly by a faster than anticipated conversion of the acquired Full Circle portfolio to cash, which Mr. Reed and the team view as a long-term positive for GECC, albeit a short-term hindrance to the generation of net interest income. The team intends to continue to focus GECC’s portfolio in leveraged loans and high yield bonds trading in the secondary market complemented with opportunistic, originated financings.

GECC also filed its opening balance sheet, showing approximately $185 million in net assets and the fair value of the portfolio on November 3, 2016.

Lastly, GECC commenced its previously announced $15 million 10b5-1 plan in November 2016 and through December 23, 2016 successfully purchased an aggregate of over 94,000 shares at an average price of approximately $10.72 per share, which represents 74% of opening NAV per share. “We view the ability to repurchase shares at the steep discount prevailing in the market to be extremely  accretive to NAV and a demonstration of our focus on and commitment to delivering long-term stockholder value,” said Mr. Reed.  

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 has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. GECC’s investment objective is to generate both current income and capital appreciation, while seeking to protect against risk of permanent capital loss.

http://www.nasdaq.com/press-release/great-elm-capital-corp-to-commence-distributions-in-january-2017-20161227-00152