Great Elm Capital Corp. Announces Second Quarter 2020 Financial Results; Begins Portfolio Repositioning; Maintains Liquid Balance Sheet; Grows Net Assets; Board Sets Fourth Quarter 2020 Distribution of $0.083 Per Share Per Month

WALTHAM, Mass., Aug. 07, 2020 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (“we,” “us,” “our” or “GECC”), (NASDAQ: GECC), today announced its financial results for the quarter ended June 30, 2020.

FINANCIAL HIGHLIGHTS

• During the quarter ended June 30, 2020, we began repositioning the portfolio, including intentionally taking actions that depressed net investment income (“NII”) in order to create liquidity
  • Specifically, as the impact of COVID-19 increased volatility in the leveraged credit secondary markets, we proactively monetized investments in anticipation of more attractive redeployment opportunities
  • Toward the end of the quarter ended June 30, 2020 and following quarter end, we redeployed a majority of our cash into new, cash-generative investment opportunities that diversify our holdings
  • As we continue to diversify our holdings, we intend to weight investments in specialty finance businesses, like Prestige Capital Finance, LLC (“Prestige”), whose performance has exceeded internal expectations, more significantly in our future portfolio
• NII for the quarter ended June 30, 2020 was approximately $0.9 million, or $0.09 per share, as compared to NII per share of $2.7 million or $0.26 per share for the quarter ended March 31, 2020
  • The quarter-over-quarter reduction in NII was driven by the monetization of certain income-generating investments as we continued to meaningfully grow our cash balance and the loss of cash and noncash income from investments placed on nonaccrual status during the prior quarter
• Net realized gains for the quarter ended June 30, 2020 were approximately $0.9 million, or $0.09 per share. Net unrealized appreciation from investments for the quarter ended June 30, 2020 was approximately $1.7 million, or $0.16 per share
• As of June 30, 2020, our asset coverage ratio was approximately 144.5%, up from 141.1% as of March 31, 2020, vs. a minimum asset coverage ratio of 150.0% (the “Minimum ACR”)
  • As a result of continuing to report an asset coverage ratio below the Minimum ACR, we are subject to certain limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities
• During the quarter ended June 30, 2020, we repurchased $4.2 million in aggregate principal of our senior notes at a weighted average price of $19.18 per note
• In August 2020, our Board of Directors (the “Board”) set monthly distributions of $0.083 per share for the fourth quarter of 2020
  • The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders; the remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock
• Net assets on June 30, 2020 were approximately $53.2 million as compared to net assets on March 31, 2020 of $50.8 million, a 4.5% increase. NAV per share on June 30, 2020 was $5.10, as compared to NAV per share of $5.05 on March 31, 2020, as our share count increased by approximately 3.6%

“This quarter marked the beginning of GECC’s portfolio repositioning,” remarked Peter A. Reed, GECC’s Chief Executive Officer. “Our net investment income was substantially reduced by, among other drivers, proactive sales of investments to improve our liquidity profile. Since quarter end, we have made meaningful progress redeploying the bulk of our cash balance into high quality, income-generating investments. We remain focused on diversifying our portfolio, maintaining significant liquidity and further strengthening our balance sheet. Our investment in Prestige continues to exceed our expectations and has led to an increased number of opportunities in specialty finance. Going forward, we intend to increase our focus on the specialty finance sector.”

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2020, we held 29 debt investments, totaling approximately $121.0 million and representing 82.7% of the fair market value of our total investments. First lien and/or secured debt investments comprised 98.4% of the fair market value of our debt investments. As of the same date, we held eight equity investments, totaling approximately $25.2 million and representing 17.3% of the fair market value of our total investments.

As of June 30, 2020, the weighted average current yield on our debt portfolio was 10.2%. Floating rate instruments comprised approximately 62.6% of the fair market value of debt investments.

During the quarter ended June 30, 2020, we deployed approximately $15.9 million into nine investments(1), at a weighted average current yield of 12.2% The weighted average price of the debt deployment activity was 92% of par.

During the quarter ended June 30, 2020, we monetized, in part or in full, 17 investments for approximately $37.5 million(2), at a weighted average current yield of 6.5%. The weighted average realized price was 98% of par.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the quarter ended June 30, 2020 was approximately $4.8 million, or $0.47 per share. Total expenses for the quarter ended June 30, 2020 were approximately $3.9 million, or $0.38 per share.

Net realized gains for the quarter ended June 30, 2020 were approximately $0.9 million, or $0.09 per share. Net unrealized appreciation from investments for the quarter ended June 30, 2020 was approximately $1.7 million, or $0.16 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2020, our cash balance was approximately $31.0 million, exclusive of our holdings of United States Treasury Bills. Total debt outstanding as of June 30, 2020 was $119.5 million, comprised of our 6.50% senior notes due September 2022 (NASDAQ: GECCL), our 6.50% senior notes due June 2024 (NASDAQ: GECCN) and our 6.75% senior notes due January 2025 (NASDAQ: GECCM). During the quarter ended June 30, 2020, we repurchased $4.2 million in aggregate principal of our senior notes at a weighted average price of $19.18 per note. Importantly, as of June 30, 2020, we had no secured credit facility, which allows for greater flexibility in the use of our cash and other assets.

As of June 30, 2020, our asset coverage ratio was approximately 144.5%, up from 141.1% as of March 31, 2020. We are subject to a Minimum ACR of 150.0%, per the proposal that was approved at our 2018 Annual Stockholders’ Meeting. As a result of continuing to report an asset coverage ratio below the Minimum ACR during the quarter ended June 30, 2020, we are subject to certain limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities, in each case, in accordance with the Investment Company Act of 1940, as amended, and the indentures governing our outstanding notes, until such time we are above the Minimum ACR.

SELECT SUBSEQUENT ACTIVITY

Distributions

As previously announced, in May 2020, our Board set monthly distributions of $0.083 per share for the third quarter of 2020, through the month ending September 30, 2020. The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders. The remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock, in accordance with applicable law and the indentures governing our outstanding notes.

In August 2020, our Board set monthly distributions of $0.083 per share for the fourth quarter of 2020, through the month ending December 31, 2020. The distributions will be paid in cash or shares of our common stock at the election of shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 10% of the total distributions to be paid to all shareholders. The remainder of the distributions (approximately 90%) will be paid in the form of shares of our common stock, in accordance with applicable law and the indentures governing our outstanding notes.

CONFERENCE CALL AND WEBCAST

Great Elm Capital Corp. will host a conference call and webcast on Monday, August 10, 2020 at 10:00 a.m. Eastern Time to discuss its second quarter financial results. All interested parties are invited to participate in the conference call by dialing +1 (844) 820-8297; international callers should dial +1 (661) 378-9758. Participants should enter the Conference ID 9372556 when asked. For a copy of the slide presentation that will be referenced during the course of our conference call, please visit: http://www.investor.greatelmcc.com/events-and-presentations/presentations

The conference call will be webcast simultaneously at:
https://edge.media-server.com/mmc/p/fzae6hst

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 targets catalyst-driven investments as it seeks to generate attractive, risk-adjusted returns through both current income and capital appreciation.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its portfolio companies. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

This press release does not constitute an offer of any securities for sale.

Endnotes:

(1) This includes new deals, additional fundings (inclusive of those on revolving credit facilities), refinancings and capitalized PIK income. Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.
(2) This includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities). Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.

Media & Investor Contact:

Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com