OFS Credit Company Announces Financial Results for the Third Fiscal Quarter 2024
THIRD QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
$3.9 million $0.24 $4.5 million $0.28 -
Core net investment income (“Core NII”)1 of
$7.6 million $0.47 $8.4 million $0.53 $9.6 million $9.7 million -
Net asset value (“NAV”) per common share of
$7.24 $0.10 $7.34 $0.31 5$0.24 -
During the fiscal quarter ended July 31, 2024, the earned income yield of our investment portfolio based on average amortized cost was
13.71% .
OTHER RECENT EVENTS
-
As previously announced, on August 1, 2024, our board of directors (the “Board”) declared monthly cash distributions of
$0.11 59.5% increase from the prior monthly distribution amount of$0.10 5
SELECTED FINANCIAL HIGHLIGHTS |
||||||||
(in millions, except per share data) (unaudited) |
||||||||
|
As of July 31, 2024 |
As of April 30, 2024 |
||||||
Investment portfolio, at fair value |
$ |
161.1 |
|
$ |
164.6 |
|
||
NAV per common share |
|
7.24 |
|
|
7.34 |
|
||
|
For the Fiscal Quarter Ended |
|||||||
(Per common share) |
July 31, 2024 |
April 30, 2024 |
||||||
Net investment income |
$ |
0.24 |
|
$ |
0.28 |
|
||
Net realized loss on investments |
|
(0.37 |
) |
|
(0.12 |
) |
||
Net unrealized appreciation (depreciation) on investments |
|
0.35 |
|
|
(0.20 |
) |
||
Net earnings (loss) |
$ |
0.22 |
|
$ |
(0.04 |
) |
||
|
|
|
||||||
Reconciliation of Core NII — Non-GAAP1 |
|
|
||||||
Net investment income |
$ |
0.24 |
|
$ |
0.28 |
|
||
CLO equity adjustments |
|
0.23 |
|
|
0.25 |
|
||
Core NII |
$ |
0.47 |
|
$ |
0.53 |
|
||
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 are pleased to announce another quarter of strong recurring waterfall payments from our CLO equity investments,” said Bilal Rashid, Chief Executive Officer. “We believe our balance sheet remains strong and well positioned with an asset coverage ratio comfortably below regulatory requirements. We believe our fixed-rate preferred stock financing, at below current market rates with a weighted average stated rate of
PORTFOLIO AND INVESTMENT ACTIVITIES
As of July 31, 2024, the total fair value of our investment portfolio was
Portfolio Overview ($ in millions) |
|
As of July 31, 2024 |
|
As of April 30, 2024 |
||||
Investment portfolio, at fair value |
|
$ |
161.1 |
|
|
$ |
164.6 |
|
Total number of issuers |
|
|
72 |
|
|
|
76 |
|
Weighted-average effective yield3 |
|
|
12.71 |
% |
|
|
12.83 |
% |
2 Calculated as CLO equity cash distributions received during the quarter, excluding distributions on CLO equity investments that have been optionally redeemed, divided by average CLO equity investments at amortized cost. |
||||||||
3 Based on amortized cost at period end; excludes discount accretion on CLO debt investments. |
||||||||
|
|
For the Fiscal Quarter Ended |
||||||
Portfolio Purchase Activity ($ in millions) |
|
July 31, 2024 |
|
April 30, 2024 |
||||
CLO equity investments |
|
$ |
8.8 |
|
|
$ |
11.2 |
|
CLO debt investments |
|
|
— |
|
|
|
— |
|
Other CLO equity-related investments |
|
|
0.2 |
|
|
|
0.4 |
|
Loan accumulation facility investments |
|
|
3.1 |
|
|
|
4.3 |
|
Total investments |
|
$ |
12.1 |
|
|
$ |
15.9 |
|
Weighted-average effective yield - period end |
|
|
20.03 |
% |
|
|
17.83 |
% |
|
|
As of July 31, 2024 |
||||||
Portfolio Composition ($ in millions) |
|
Amortized Cost |
|
Fair Value |
||||
CLO equity investments |
|
$ |
170.1 |
|
|
$ |
122.6 |
|
CLO debt investments |
|
|
32.8 |
|
|
|
34.7 |
|
Loan accumulation facility investments |
|
|
2.5 |
|
|
|
2.5 |
|
Other CLO equity-related investments |
|
|
1.1 |
|
|
|
1.3 |
|
Total investments |
|
$ |
206.5 |
|
|
$ |
161.1 |
|
RESULTS OF OPERATIONS
Interest Income
During the fiscal quarter ended July 31, 2024, interest income decreased by
Expenses
During the fiscal quarter ended July 31, 2024, total expenses remained stable at
Net Realized and Unrealized Gain (Loss) on Investments
During the fiscal quarter ended July 31, 2024, net loss on investments of
DISTRIBUTIONS
Fourth Quarter 2024 Common Stock Distributions
The following schedule applies to distributions for common stockholders of record on the close of business of each specific record date:
Month |
|
Record Date |
|
Payment Date |
|
Cash Distribution Per Share |
August 2024 |
|
August 20, 2024 |
|
August 30, 2024 |
|
|
September 2024 |
|
September 20, 2024 |
|
September 30, 2024 |
|
|
October 2024 |
|
October 21, 2024 |
|
October 31, 2024 |
|
|
Dividend Reinvestment Plan (“DRIP”) – DRIP Shares Issued at
Our DRIP offers our common stockholders the right to receive a
Common stockholders that are interested in participating in our DRIP should contact their broker or financial intermediary.
Additional information about our DRIP and how to participate can be found at https://ir.ofscreditcompany.com/shareholder-services/dividend-reinvestment-plan. We make our website content available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this press release.
Preferred Stock Distributions
The following schedule applies to distributions for preferred stockholders of record on the close of business of each specific record date:
Preferred Stock Series |
Month |
Record Date |
Payment Date |
Cash Distribution Per Share |
|
August 2024 |
August 20, 2024 |
August 30, 2024 |
|
|
September 2024 |
September 20, 2024 |
September 30, 2024 |
|
|
October 2024 |
October 21, 2024 |
October 31, 2024 |
|
|
November 2024 |
November 19, 2024 |
November 29, 2024 |
|
|
December 2024 |
December 20, 2024 |
December 31, 2024 |
|
|
January 2025 |
January 21, 2025 |
January 31, 2025 |
|
|
|
|
|
|
|
August 2024 |
August 20, 2024 |
August 30, 2024 |
|
|
September 2024 |
September 20, 2024 |
September 30, 2024 |
|
|
October 2024 |
October 21, 2024 |
October 31, 2024 |
|
|
November 2024 |
November 19, 2024 |
November 29, 2024 |
|
|
December 2024 |
December 20, 2024 |
December 31, 2024 |
|
|
January 2025 |
January 21, 2025 |
January 31, 2025 |
|
|
|
|
|
|
|
August 2024 |
August 20, 2024 |
August 30, 2024 |
|
|
September 2024 |
September 20, 2024 |
September 30, 2024 |
|
|
October 2024 |
October 21, 2024 |
October 31, 2024 |
|
|
November 2024 |
November 19, 2024 |
November 29, 2024 |
|
|
December 2024 |
December 20, 2024 |
December 31, 2024 |
|
|
January 2025 |
January 21, 2025 |
January 31, 2025 |
|
OFS Credit Company, Inc. Statement of Assets and Liabilities (Unaudited) |
||||
|
|
As of July 31, 2024 |
||
Assets: |
|
|
||
Investments, at fair value (amortized cost of |
|
$ |
161,112,008 |
|
Cash and cash equivalents |
|
|
22,007,239 |
|
Interest receivable |
|
|
192,698 |
|
Other assets |
|
|
674,370 |
|
Total assets |
|
|
183,986,315 |
|
|
|
|
||
Liabilities: |
|
|
||
Preferred stock (net of deferred issuance costs of |
|
|
60,088,407 |
|
Payable to adviser and affiliates |
|
|
2,372,229 |
|
Other liabilities |
|
|
517,000 |
|
Total liabilities |
|
|
62,977,636 |
|
|
|
|
||
Net assets |
|
$ |
121,008,679 |
|
|
|
|
||
Net assets consist of: |
|
|
||
Common stock, par value of |
|
$ |
16,719 |
|
Paid-in capital in excess of par |
|
|
168,862,318 |
|
Total accumulated losses |
|
|
(47,870,358 |
) |
Total net assets |
|
$ |
121,008,679 |
|
|
|
|
||
Net asset value per common share |
|
$ |
7.24 |
|
OFS Credit Company, Inc. Statements of Operations (Unaudited) |
|||||||
|
Three Months Ended |
|
Nine Months Ended |
||||
|
July 31, 2024 |
|
July 31, 2024 |
||||
Investment income: |
|
|
|
||||
Interest income |
$ |
7,451,266 |
|
|
$ |
23,963,937 |
|
|
|
|
|
||||
Operating expenses: |
|
|
|
||||
Interest expense |
|
963,162 |
|
|
|
2,906,172 |
|
Incentive fees |
|
964,744 |
|
|
|
3,238,103 |
|
Base management fees |
|
804,026 |
|
|
|
2,405,415 |
|
Administration fees |
|
400,316 |
|
|
|
1,016,634 |
|
Professional fees |
|
258,279 |
|
|
|
767,743 |
|
Excise tax provision |
|
— |
|
|
|
35,000 |
|
Other expenses |
|
201,762 |
|
|
|
642,459 |
|
Total operating expenses |
|
3,592,289 |
|
|
|
11,011,526 |
|
|
|
|
|
||||
Net investment income |
|
3,858,977 |
|
|
|
12,952,411 |
|
|
|
|
|
||||
Net realized and unrealized gain (loss) on investments: |
|
|
|
||||
Net realized loss on investments |
|
(5,938,328 |
) |
|
|
(9,686,876 |
) |
Net change in unrealized appreciation on investments |
|
5,514,518 |
|
|
|
6,459,602 |
|
Net loss on investments |
|
(423,810 |
) |
|
|
(3,227,274 |
) |
|
|
|
|
||||
Net increase in net assets resulting from operations |
$ |
3,435,167 |
|
|
$ |
9,725,137 |
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
16,211,566 |
|
|
|
16,037,061 |
|
About OFS Credit Company, Inc.
OFS Credit is a non-diversified, externally managed closed-end management investment company. The Company’s primary investment objective is to generate current income, with a secondary objective to generate capital appreciation, which we seek to achieve primarily through investment in CLO equity and debt securities. The Company’s investment activities are managed by OFS Capital Management, LLC, an investment adviser registered under the Investment Advisers Act of 19404, as amended, and headquartered in
4 Registration does not imply a certain level of skill or training |
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 remains strong and is well positioned with an asset coverage ratio below regulatory requirements; management’s belief that the Company’s fixed-rate preferred stock financing affords the Company operational flexibility to create stockholder value in this interest rate environment; 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 elevated interest and inflation rates, the ongoing war between
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 if similar terms are used 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 estimated effective yield, at current amortized cost, to the expected redemption of the security utilizing assumed cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an estimated 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 income recognized via the estimated 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”). Therefore, management believes that Core NII may provide a useful indicator of distributable operating income, as this reflects a measure of potential cash availability, net of operating expenses, that could be utilized to cover distributions to common stockholders. We note that this non-GAAP measure has no bearing on the tax character of the common stock distributions made during the period, and future distributions are not guaranteed. A portion of current and future common stock distributions may consist of a return of capital for tax purposes. The actual tax character of our earnings cannot be finally determined until our tax return is prepared after the close of our taxable year.
The following table provides a reconciliation of GAAP NII to Core NII for the fiscal quarters ended July 31, 2024 and April 30, 2024 (unaudited):
|
|
For the Fiscal Quarter Ended
|
|
For the Fiscal Quarter Ended
|
||||||||
|
|
Amount |
|
Per Common
|
|
Amount |
|
Per Common
|
||||
Net investment income |
|
$ |
3,858,977 |
|
$ |
0.24 |
|
$ |
4,503,076 |
|
$ |
0.28 |
CLO equity adjustments |
|
|
3,711,202 |
|
|
0.23 |
|
|
3,914,723 |
|
|
0.25 |
Core NII |
|
$ |
7,570,179 |
|
$ |
0.47 |
|
$ |
8,417,799 |
|
$ |
0.53 |
OFS® and OFS Credit® are registered trademarks of Orchard First Source Asset Management, LLC
OFS Capital Management™ is a trademark of Orchard First Source Asset Management, LLC.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240913498050/en/
INVESTOR RELATIONS:
OFS Credit Company, Inc.
Steve Altebrando
847-734-2085
investorrelations@ofscreditcompany.com
Source: OFS Credit Company, Inc.
