CM Finance Inc Reports Results for its Fiscal Second Quarter Ended December 31, 2018

NEW YORK, Feb. 06, 2019 (GLOBE NEWSWIRE) — CM Finance Inc (NASDAQ: CMFN) (“CMFN” or “the Company”) announced its financial results for its fiscal second quarter ended December 31, 2018.

HIGHLIGHTS

  • CMFN made investments in nine portfolio companies with a total cost of $50.1mm.  The weighted average yield of debt investments made in the quarter was 10.77% 
  • Eight investments were fully realized, and one investment had a significant partial realization. Realizations during the quarter had a weighted average internal rate of return (“IRR”) of 12.21%
  • The weighted average yield on debt investments, at cost, increased 18 basis points to 11.08% compared to 10.90% as of September 30, 2018
  • Net asset value (“NAV”) per share decreased by 7.41% to $11.49, compared to $12.41 as of September 30, 2018
Portfolio results, as of December 31, 2018:    
Total assets   $302.0mm
Investment portfolio, at fair value   $283.3mm
Net assets   $156.4mm
Weighted average yield on debt investments, at cost   11.08%
Net asset value per share   $11.49
Portfolio activity in the current quarter:    
Number of new investments   14
Total capital invested   $50.1mm
Proceeds from repayments, sales, and amortization   $84.5mm 
Number of portfolio companies, end of period   29
Net investment income (NII)   $3.7mm
Net investment income per share   $0.25
Net decrease in net assets from operations   $9.4mm
Net decrease in net assets from operations per share   $0.69
Quarterly per share distribution paid on October 5, 2018   $0.25

Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said, “While the fair value of the portfolio declined during the quarter, we believe that we take a prudent and conservative approach to both investing and valuing our portfolio and we see significant opportunity as we look forward in 2019.  We have fully written down our positions in Trident USA Health Services, LLC, and have no other positions on non-accrual today.  Our team continues to reposition our portfolio, currently emphasizing senior secured positions, building a diversified, resilient portfolio that will perform throughout the cycle. We are very happy with the progress we have made.”

On February 5, 2019, the Company’s Board of Directors declared a distribution for the quarter ending March 31, 2019 of $0.25 per share, payable on April 4, 2019, to shareholders of record as of March 15, 2019. This represents a 12.5% yield on the Company’s $8.00 share price as of the close on February 5, 2018.  Distributions may include net investment income, capital gains and/or return of capital; however, the Company does not expect the distribution to be comprised of a return of capital. The tax status of distributions will be determined at the end of the taxable year.

Portfolio and Investment Activities

During the quarter, the Company made investments in nine portfolio companies.  These investments totaled $50.1mm at cost and were made at a weighted average yield of 10.77%.  The Company also realized $84.5mm of repayments, sales, and amortization, primarily related to the repayments of American Gaming Systems Inc., Montrose Environmental Group, Inc., FPC Holdings, Inc, and Hostway Corp.  Additionally, we had a partial realization of our investments in U.S. Well Services, LLC, including the full realization of our position in U.S. Well Services, LLC’s revolving credit facility. Realized and unrealized gains and losses accounted for a decrease in the Company’s net investments of approximately $13.1mm, or $0.96 per share.  The total net decrease in net assets resulting from operations for the quarter was $9.4mm, or $0.69 per share. 

As of December 31, 2018, the Company’s investment portfolio consisted of investments in 29 portfolio companies, of which 63.7% were first lien investments, 31.7% were second lien investments, 4.1% were unitranche loans, and 0.5% were in equities, warrants and other positions.  The Company’s debt portfolio consisted of 94.4% floating rate investments and 5.2% fixed rate investments.  As of December 31, 2018, the Company had one investment on non-accrual status, Trident USA Health Services, LLC.

Capital Resources

As of December 31, 2018, the Company had $6.2mm in cash, $6.0mm in restricted cash and $50.0mm of capacity under its revolving credit facility with UBS AG, London Branch.

Share Repurchases

During the quarter, the Company repurchased 30,999 shares of common stock on the open market for $257,336 (including commissions).

Subsequent Events

Subsequent to December 31, 2018 and through February 5, 2019, we invested $23.4 million in new and existing portfolio companies, and received repayment or sales proceeds of $29.0 million

CM Finance Inc and Subsidiaries          
Consolidated Statements of Assets and Liabilities          
               
               
    December 31, 2018       June 30, 2018  
Assets          
Non-controlled, non-affiliated investments, at fair value (amortized cost of $307,290,045 and $ 302,647,282, respectively) $ 283,335,302     $ 293,592,013  
Derivatives, at fair value (cost of $0 and $0, respectively)   94,380       229,918  
Cash   6,197,259       5,620,441  
Cash, restricted   5,981,651       2,706,273  
Receivable for investments sold   397,146       7,751,875  
Interest receivable   3,282,163       4,011,450  
Deferred offering costs   121,922       121,922  
Other receivables   2,515,625       245,550  
Prepaid expenses and other assets   58,954       255,139  
Total Assets $ 301,984,402     $ 314,534,581  
           
Liabilities          
Notes payable:          
Term loan $ 102,000,000     $ 102,000,000  
Revolving credit facility         17,823,000  
Baby bonds payable:   34,500,000        
Deferred debt issuance costs   (2,494,517 )     (1,953,771 )
Notes payable, net   134,005,483       117,869,229  
Payable for investments purchased   2,985,000       12,569,450  
Dividend payable   3,410,713       3,417,848  
Deferred financing costs payable   1,037,000       2,071,167  
Income-based incentive fees payable   1,566,513       2,294,678  
Base management fees payable   1,405,297       1,319,853  
Accrued provision for taxes         2,579,337  
Derivatives, at fair value (cost $0 and $0, respectively)   94,380       229,918  
Interest payable   845,566       303,153  
Directors’ fees payable   93,448       99,296  
Accrued expenses and other liabilities   104,694       257,986  
Total Liabilities   145,548,094       143,011,915  
           
Commitments and Contingencies (Note 6)          
           
Net Assets          
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,613,116 and 13,649,504 shares issued and outstanding, respectively)   13,613       13,649  
Additional paid-in capital   198,392,175       198,700,999  
Accumulated net realized loss   (21,270,472 )     (21,087,280 )
Undistributed (distributions in excess of) net investment income   3,255,732       2,950,567  
Net unrealized depreciation on investments   (23,954,740 )     (9,055,269 )
Total Net Assets   156,436,308       171,522,666  
Total Liabilities and Net Assets $ 301,984,402     $ 314,534,581  
Net Asset Value Per Share $ 11.49     $ 12.57  
           
           
See notes to unaudited consolidated financial statements.
           

CM Finance Inc and Subsidiaries
Consolidated Statements of Operations
                             
  For the three months ended
December 31,

  For the six months ended
December 31,
  2018   2017   2018   2017
Investment Income:                      
Interest income $ 8,481,251     $ 7,538,152   $ 16,136,091     $ 13,964,204  
Payment in-kind interest income   540,308       722,039     953,928       1,014,517  
Dividend income             31,275        
Payment in-kind dividend income         189,583           189,583  
Other fee income   277,365           432,520       9,879  
Total investment income   9,298,924       8,449,774     17,553,814       15,178,183  
                       
Expenses:                      
Interest expense   2,156,537       1,601,261     4,421,394       3,039,090  
Base management fees   1,405,297       1,161,353     2,757,152       2,315,233  
Income-based incentive fees   753,721       921,782     874,042       906,758  
Provision for tax expense   12,946           12,946        
Professional fees   233,528       236,024     466,328       445,064  
Allocation of administrative costs from advisor   341,633       184,561     679,696       311,790  
Amortization of deferred debt issuance costs   195,377       179,514     390,754       304,716  
Insurance expense   84,440       85,225     168,880       205,439  
Directors’ fees   101,250       99,000     202,500       198,667  
Custodian and administrator fees   7,500       113,443     15,000       170,451  
Offering expense   51,750           103,500       186,513  
Other expenses   236,033       180,482     355,214       391,158  
Total expenses   5,580,012       4,762,645     10,447,406       8,474,879  
Waiver of income-based incentive fees             (22,000 )      
Net expenses   5,580,012       4,762,645     10,425,406       8,474,879  
Net investment income   3,718,912       3,687,129     7,128,408       6,703,304  
                       
Net realized and unrealized gain/(loss) on investments:                      
Net realized gain (loss) from investments   75,000           (183,192 )     (7,380,690 )
Net change in unrealized appreciation (depreciation) in value of investments   (13,176,208 )     1,172,018     (14,899,471 )     8,672,249  
Total realized and unrealized gain (loss) on investments   (13,101,208 )     1,172,018     (15,082,663 )     1,291,559  
                       
Net increase (decrease) in net assets resulting from operations                      
  $ (9,382,296 )   $ 4,859,147   $ (7,954,255 )   $ 7,994,863  
Basic and diluted:                      
Net investment income per share $ 0.27     $ 0.27   $ 0.52     $ 0.49  
Earnings per share $ (0.69 )   $ 0.35   $ (0.58 )   $ 0.58  
Weighted average shares of common stock outstanding   13,638,869       13,690,480     13,644,483       13,690,182  
                       
Distributions paid per common share $ 0.25     $ 0.25   $ 0.50     $ 0.50  
                       
                       
See notes to unaudited consolidated financial statements.
                       

About CM Finance Inc

The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940.  The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50mm and earnings before interest, taxes, depreciation and amortization of at least $15mm. The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com.

Forward-Looking Statements

Statements included herein may contain “forward-looking statements,” which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release.

Contacts
CM Finance Inc
Investor Relations
Email: [email protected]
Phone: 212-257-5199