NEW YORK, Oct. 15 /PRNewswire-FirstCall/ -- GSC Investment Corp. , a business development company, today announced financial results for the fiscal second quarter ended August 31, 2009.
Operating Results
For the quarter ended August 31, 2009, GSC Investment Corp. reported net investment income of $1.1 million, or $0.13 per share, and net loss on investments of $17.2 million, or $2.07 per share, resulting in a net decrease in net assets from operations of $16.2 million, or $1.94 per share. $16.1 million of the net loss was due to unrealized depreciation. Net asset value was $6.91 per share as of August 31, 2009 as compared to $8.85 per share as of May 31, 2009.
"The unrealized depreciation in our portfolio during the second quarter primarily reflects the combination of adverse credit events with several of our corporate debt investments and changes in our modeling assumptions regarding default, recovery and prepayment rates for our CLO investment," said Chief Executive Officer Seth M. Katzenstein. "While recent signs of stabilization in the credit markets are encouraging, corporate deficits accumulated during the recent recession continue to stress our investments. As a result, we expect that adverse credit events in our portfolio will continue."
Portfolio and Investment Activity
As of August 31, 2009, the value of the Company's investment portfolio was $100.0 million, principally invested in 33 portfolio companies and one collateralized loan obligation fund ("CLO"). The overall portfolio composition consisted of 17.4% first lien term loans, 34.3% second lien term loans, 27.1% senior secured notes, 7.7% unsecured notes, 13.3% subordinated notes of GSCIC CLO and 0.2% equity/limited partnership interests.
During the second quarter, GSC Investment Corp. made no investments in new or existing portfolio companies. For the quarter, the Company had $4.6 million in aggregate amount of exits and repayments, resulting in net repayments of $4.6 million.
As of August 31, 2009, the weighted average current yield on the Company's first lien term loans, second lien term loans, senior secured notes, unsecured notes and the GSCIC CLO subordinated notes were 7.4%, 9.5%, 11.6%, 12.3% and 0.1%, respectively, which resulted in an aggregate weighted average current yield of 8.2%.
As of August 31, 2009, 42.7%, or $37.0 million, of the Company's interest-bearing portfolio was fixed rate debt with a weighted average current coupon of 11.7% and 57.3%, or $49.7 million, of its interest-bearing portfolio was floating rate debt with a weighted average current spread of LIBOR plus 6.8%.
Liquidity and Capital Resources
At August 31, 2009, the Company had $49.6 million in borrowings under its credit facility and an asset coverage ratio of 216%.
On July 30, 2009, an ongoing borrowing base deficiency in the Company's credit facility became an event of default. Adverse credit conditions affecting the Company's portfolio investments have continued throughout the second quarter and have resulted in a $14.5 million deficiency in the Company's August 31, 2009 borrowing base, which exceeds the Company's unrestricted cash and cash equivalents of $6.6 million at August 31, 2009. During the continuance of an event of default, the lender has the ability to terminate the facility and sell the underlying collateral necessary to satisfy outstanding borrowings. The Company and its lender continue to discuss possible solutions to the event of default and the lender has elected not to accelerate the obligation to date, but has reserved the right to do so.
"The adverse economic environment that persists in the marketplace continues to have a negative effect on several of our portfolio companies. Some portfolio companies have experienced worse than expected declines in operating performance, while others have been unable to refinance maturing debt," said Mr. Katzenstein. "We believe that the best way to maximize the value of underperforming and stressed investments is to actively manage them through the workout process leveraging the experience of our investment adviser GSC Group and the common ownership of other GSC Group-managed funds."
The Company continues to work with the investment banking firm of Stifel Nicolaus & Company as it actively evaluates strategic alternatives to maximize long-term shareholder value.
Dividend
The Company's Board of Directors has decided not to declare a dividend for the second quarter of fiscal year 2010.
2010 Second Quarter Conference Call/Webcast Information When: Friday, October 16, 2009, 10:00 a.m. Eastern Time (ET)
Call: Interested parties may participate by dialing (877) 681-3372 (U.S. and Canada) or (719) 325-4923 (outside U.S. and Canada). A replay of the call will be available from 1:00 p.m. ET on Friday, October 16, 2009 through 11:59 p.m. ET on Wednesday, October 28, 2009 by dialing (888) 203-1112 (U.S. and Canada) or (719) 457-0820 (outside U.S. and Canada), passcode for both replay numbers: 5269467.
Webcast: Interested parties may also access a simultaneous webcast of the call by going to http://ir.gscinvestmentcorp.com/events.cfm. A replay of the webcast will be available from 1:00 p.m. ET on Friday, October 16, 2009 through 11:59 p.m. ET, Wednesday, October 28, 2009.
About GSC Investment Corp.
GSC Investment Corp. is a specialty finance company that invests primarily in leveraged loans and mezzanine debt issued by U.S. middle-market companies, high yield bonds and collateralized loan obligations. It has elected to be treated as a business development company under the Investment Company Act of 1940. The Company may also opportunistically invest in distressed debt, debt issued by non-middle market companies, and equity securities issued by middle and non-middle market companies. The Company draws upon the support and investment advice of its external manager, GSC Group, an alternative asset investment manager that focuses on complex, credit-driven strategies. GSC Investment Corp. is traded on the New York Stock Exchange under the symbol "GNV."
Contact: Carl J. Crosetto GSC Group 973-437-1007 GSC Investment Corp. Consolidated Balance Sheets As of -------- August 31, 2009 February 28, 2009 --------------- ----------------- (unaudited) ASSETS Investments at fair value Non-control/non-affiliate investments (amortized cost of $132,206,257 and $137,020,449, respectively) $86,689,407 $96,462,919 Control investments (cost of $29,233,097 and $29,905,194, respectively) 13,348,381 22,439,029 Affiliate investments (cost of $0 and $0, respectively) 318 10,527 --------------- ----------------- Total investments at fair value (amortized cost of $161,439,354 and $166,925,643, respectively) 100,038,106 118,912,475 Cash and cash equivalents 6,643,998 6,356,225 Cash and cash equivalents, securitization accounts 434,918 1,178,201 Outstanding interest rate cap at fair value (cost of $131,000 and $131,000, respectively) 89,347 39,513 Interest receivable, net of reserve 2,514,815 3,087,668 Deferred credit facility financing costs, net - 529,767 Management fee receivable 650,062 237,370 Other assets 596,870 321,260 --------------- ----------------- Total assets $110,968,116 $130,662,479 ================ ================= LIABILITIES Revolving credit facility $49,580,451 $58,994,673 Management and incentive fees payable 3,135,958 2,880,667 Accounts payable and accrued expenses 547,739 700,537 Interest and credit facility fees payable 408,695 72,825 Due to manager 5,942 - --------------- ----------------- Total liabilities $53,678,785 $62,648,702 ================ ================= STOCKHOLDERS' EQUITY Common stock, par value $.0001 per share, 100,000,000 common shares authorized, 8,291,384 and 8,291,384 common shares issued and outstanding, respectively 829 829 Capital in excess of par value 116,943,738 116,943,738 Accumulated undistributed net investment income 9,766,239 6,122,492 Accumulated undistributed net realized loss from investments and derivatives (7,978,576) (6,948,628) Net unrealized depreciation on investments and derivatives (61,442,899) (48,104,654) --------------- ----------------- Total stockholders' equity 57,289,331 68,013,777 --------------- ----------------- Total liabilities and stockholders' equity $110,968,116 $130,662,479 ================ ================= NET ASSET VALUE PER SHARE $6.91 $8.20 --------------- ----------------- GSC Investment Corp. Consolidated Statement of Operations For the three For the six months ended months ended August 31 August 31 ------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ---- (unaudited) (unaudited) (unaudited) (unaudited) INVESTMENT INCOME Interest from investments Non-Control/Non- Affiliate investments $2,654,665 $4,144,437 $5,973,505 $8,603,561 Control investments 449,485 1,111,003 1,317,714 1,746,389 ----------- --------- ---------- --------- Total interest income 3,104,150 5,255,440 7,291,219 10,349,950 Interest from cash and cash equivalents 6,991 36,008 20,182 102,697 Management fee income 516,939 489,148 1,037,931 1,011,887 Other income 57,278 54,279 100,412 82,494 ----------- --------- ---------- --------- Total investment income 3,685,358 5,834,875 8,449,744 11,547,028 ----------- --------- ---------- --------- EXPENSES Interest and credit facility financing expenses 1,405,548 623,611 2,048,441 1,456,809 Base management fees 505,314 705,532 1,053,058 1,454,031 Professional fees 341,998 315,130 681,778 660,589 Administrator expenses 171,861 260,946 343,722 509,344 Incentive management fees - 407,027 322,183 747,134 Insurance 223,459 177,162 429,476 344,648 Directors fees and expenses 63,136 73,276 145,136 139,885 General & administrative 66,145 77,904 125,925 142,941 -------- --------- ---------- --------- Expenses before manager expense waiver and reimbursement 2,777,461 2,640,588 5,149,719 5,455,381 ----------- --------- ---------- --------- Expense reimbursement (171,861) (260,946) (343,722) (559,059) ----------- --------- ---------- --------- Total expenses net of expense waiver and reimbursement 2,605,600 2,379,642 4,805,997 4,896,322 ----------- --------- ---------- --------- NET INVESTMENT INCOME 1,079,758 3,455,233 3,643,747 6,650,706 ----------- --------- ---------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain/(loss) from investments (1,024,796) 173,681 (1,029,948) (129,819) Net realized gain from derivatives - 14,364 - 30,454 Net unrealized depreciation on investments (16,157,371) (6,194,371) (13,388,079) (6,279,188) Net unrealized appreciation/ (depreciation) on derivatives 14,147 (16,328) 49,834 (28,326) ----------- --------- ---------- --------- Net loss on investments (17,168,020) (6,022,654) (14,368,193) (6,406,879) ----------- --------- ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(16,088,262) $(2,567,421)$(10,724,446) $243,827 ============ =========== ============ ======== WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE $(1.94) $(0.31) $(1.29) $0.03 WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED 8,291,384 8,291,384 8,291,384 8,291,384
GSC Investment Corp.
CONTACT: Carl J. Crosetto of GSC Group, +1-973-437-1007; or Roland
Tomforde of Broadgate Consultants, LLC, +1-212-232-2222
Web Site: http://ir.gscinvestmentcorp.com/events.cfm
