Financial Performance - As of September 30, 2023, the net asset value (NAV) per common share decreased to $12.74 from $12.94 at June 30, 2023, primarily due to unrealized depreciation on investments of $0.26 per common share[140]. - For the quarter ended September 30, 2023, total investment income increased to $14.7 million from $14.5 million in the prior quarter, driven by a $0.2 million increase in interest income[141]. - The net investment income for the three months ended September 30, 2023, was $5.390 million, an increase from $5.123 million in the previous quarter[174]. - The company recognized a net loss on investments of $3.4 million for the quarter, primarily due to net unrealized depreciation of $3.5 million on debt and equity investments[143]. - The company experienced a net loss on investments of $3.395 million for the three months ended September 30, 2023, compared to a loss of $7.087 million in the previous quarter[174]. - During the nine months ended September 30, 2023, the portfolio experienced net losses of $11.6 million, primarily due to net unrealized depreciation of $6.7 million on common equity investments[189]. - Adjusted Net Investment Income for the three months ended September 30, 2023, was $5.390 million, or $0.40 per share[195]. Investment Portfolio - As of September 30, 2023, the fair value of the debt investment portfolio totaled $279.2 million across 43 portfolio companies, with approximately 99% being senior secured loans[154]. - The total portfolio company investments amounted to $373.958 million at fair value as of September 30, 2023, compared to $412.058 million as of December 31, 2022[162]. - The ten largest investments accounted for 49.6% of the total portfolio at fair value, with Pfanstiehl Holdings, Inc. being the largest equity investment valued at $77.1 million[156]. - Approximately 99% of the loan portfolio and 61% of the total portfolio consisted of senior secured loans based on fair value as of September 30, 2023[162]. - The three largest industries by fair value in the portfolio were Manufacturing (28.1%), Health Care and Social Assistance (19.3%), and Wholesale Trade (14.0%), totaling 61.4% of the portfolio[163]. Debt and Financing - The weighted-average debt interest costs increased to 6.1% compared to 6.0% for the quarter ended June 30, 2023, due to rising costs on the BNP Facility from SOFR rate increases[142]. - The company had an unused commitment of $25.0 million under the PWB Credit Facility and $58.9 million under the BNP Facility as of September 30, 2023[197]. - The effective interest rate on the PWB Credit Facility was 8.80% as of September 30, 2023, with an unused commitment of $25.0 million[212]. - The BNP Facility had $91.1 million drawn as of September 30, 2023, with an effective interest rate of 8.67%[218][220]. - The company has $31.9 million of outstanding SBA debentures maturing in 2025, with a fair value of the SBIC I LP investment portfolio at $143.3 million[230]. Asset Coverage and Compliance - As of September 30, 2023, the asset coverage ratio was 163%, exceeding the minimum requirement of 150% under the 1940 Act[145]. - The minimum required asset coverage ratio was decreased from 200% to 150% effective May 3, 2019[224]. - The aggregate amount outstanding of senior securities issued was $303.0 million, with an asset coverage ratio of 163%[226]. Cash and Liquidity - As of September 30, 2023, the company held cash of $15.9 million, including $8.4 million held by SBIC I LP and $4.0 million held by OFSCC-FS[196]. - The company continues to monitor liquidity risks associated with potential bank failures and maintains cash balances with U.S. Bank N.A and Citibank N.A[228]. - As of September 30, 2023, the approximate dollar value of shares remaining that may be purchased under the Stock Repurchase Program was $9.6 million[225]. Operational Metrics - Operating expenses for the three months ended September 30, 2023, totaled $9.261 million, a decrease from $9.403 million in the prior quarter[179]. - Interest expense for the three months ended September 30, 2023, decreased by $0.1 million compared to the prior quarter, primarily due to a reduction in the average outstanding debt balance[180]. - Total fee income decreased by $0.1 million compared to the prior quarter due to no syndication fees recognized during the current quarter[177]. Future Outlook - The company plans to fund growth through current borrowings, follow-on equity offerings, and issuances of senior securities[221]. - The company expects potential challenges in extending the PWB Credit Facility due to the merger between Banc of California and Pacific Western Bank[214]. - Interest rate sensitivity analysis indicates that a 100 basis point increase in interest rates could result in a net change of $1.702 million in earnings[242].
OFS Capital(OFS) - 2023 Q3 - Quarterly Report