OFS Capital(US:OFS)2022-11-04 12:01Financial Performance - As of September 30, 2022, the net asset value (NAV) per common share decreased by 6.8% to $13.58 from $14.57 at June 30, 2022, primarily due to net losses of $13.9 million, or $1.04 per common share [140]. - Total investment income for the quarter ended September 30, 2022, increased by $2.9 million to $13.4 million, driven by a $2.2 million increase in interest income and a $0.5 million increase in fee income [141]. - Net investment income for the quarter ended September 30, 2022 was $4.372 million, a decrease from $6.248 million in the prior quarter [184]. - The company experienced net losses of $13.9 million in the third quarter of 2022, primarily due to unrealized depreciation of $13.5 million on debt and equity investments [197]. - For the nine months ended September 30, 2022, total investment income was $34.7 million, an increase of $2.3 million compared to the same period in the prior year [188]. Investment Portfolio - As of September 30, 2022, the loan portfolio comprised 94% floating rate loans and 99% senior secured loans at fair value, with $22.3 million funded in loans during the quarter [143]. - The fair value of the debt investment portfolio totaled $331.6 million across 57 portfolio companies, with 99% being senior secured loans [161]. - The common equity investment in Pfanstiehl Holdings, Inc. accounted for 15.9% of the total portfolio at fair value, increasing by $16.5 million during the nine months ended September 30, 2022 [172]. - The total unfunded commitments to portfolio companies were $38.3 million as of September 30, 2022 [161]. - During the nine months ended September 30, 2022, net purchases and originations of portfolio investments totaled $29.5 million [215]. Debt and Financing - The weighted-average debt interest costs increased to 5.1% from 4.3% in the previous quarter, mainly due to SOFR rate increases [142]. - The company had an unused commitment of $33.5 million under the PWB Credit Facility and $28.6 million under the BNP Facility as of September 30, 2022 [211]. - The BNP Facility allows borrowings up to $150.0 million, with $121.4 million drawn as of September 30, 2022, and an effective interest rate of 5.86% [227]. - The company had $180.0 million in Unsecured Notes as of September 30, 2022, which are subordinated to secured indebtedness [225]. - The maximum availability of the PWB Credit Facility was increased from $25.0 million to $35.0 million, with a maturity date extended to February 28, 2024 [223]. Market Conditions and Risks - The company is subject to financial market risks due to ongoing geopolitical events and the COVID-19 pandemic, which have introduced significant volatility [246]. - Inflation is showing signs of acceleration in the U.S. and globally, likely affecting the profit margins of the company's portfolio companies [253]. - Persistent inflationary pressures may lead to tighter monetary policy, affecting the company's operational environment [253]. - Changes in interest rates may affect both the cost of funding and the valuation of the company's investment portfolio [249]. - The fair value of the company's investments may fluctuate significantly due to the lack of readily available market values, impacting potential liquidation outcomes [247]. Operational Highlights - A distribution of $0.30 per share was declared for the fourth quarter of 2022, payable on December 30, 2022 [148]. - The company plans to selectively deploy capital in new investment opportunities despite the challenging environment [147]. - The company plans to focus on first lien senior secured loans to larger borrowers to improve its overall risk profile [219]. - The company expects to fund growth through current borrowings, follow-on equity offerings, and issuances of senior securities [230]. - The company repurchased 28,335 shares of common stock for $0.2 million under the Stock Repurchase Program during the nine months ended September 30, 2022 [235].