PennantPark Floating Rate Capital .(US:PFLT)2022-02-09 21:05Investment Strategy - PennantPark Floating Rate Capital Ltd. primarily invests in Floating Rate Loans to U.S. middle-market companies, defined as those with annual revenues between $50 million and $1 billion [173]. - The company expects at least 80% of its managed assets to be invested in Floating Rate Loans, with first lien secured debt representing at least 65% of the overall portfolio [176]. - As of December 31, 2021, 99.9% of the debt portfolio consisted of variable-rate investments, which are typically based on a floating interest rate index such as LIBOR [184]. - The company generated revenue primarily from interest income on debt securities and capital gains, with interest generally payable quarterly or semiannually [190]. Financial Performance - Investment income for the three months ended December 31, 2021, was $26.3 million, an increase from $20.7 million in the same period of 2020, primarily due to portfolio growth [223]. - Total expenses for the three months ended December 31, 2021, were $13.6 million, up from $10.6 million in the same period of 2020, driven by increased performance-based incentive fees and debt-related expenses [224]. - Net investment income for the three months ended December 31, 2021, was $12.7 million or $0.33 per share, compared to $10.1 million or $0.26 per share in the same period of 2020 [225]. - The net increase in net assets resulting from operations for the three months ended December 31, 2021, was $14.4 million or $0.37 per share, down from $26.1 million or $0.67 per share in the same period of 2020 [229]. - Total investment income for the three months ended December 31, 2021, was $11,821,705, compared to $6,903,323 for the same period in 2020, representing a 71.5% increase [269]. - Net investment income for the three months ended December 31, 2021, was $4,504,759, up from $1,937,481 in the prior year [269]. Portfolio Composition - As of December 31, 2021, the company's portfolio totaled $1,179.8 million, consisting of $1,024.8 million in first lien secured debt, $4.4 million in second lien secured debt, and $150.5 million in preferred and common equity [194]. - The overall portfolio consisted of 115 companies with an average investment size of $10.3 million [194]. - The company had three portfolio companies on non-accrual as of December 31, 2021, representing 2.9% of the overall portfolio on a cost basis [194]. - The company had three portfolio companies on non-accrual status as of December 31, 2021, with potential for additional companies to be affected by the ongoing COVID-19 pandemic [182]. Debt and Financing - The annualized weighted average cost of debt for the three months ended December 31, 2021, was 3.6%, compared to 3.3% for the same period in 2020 [232]. - The Credit Facility had a weighted average interest rate of 2.4% as of December 31, 2021, compared to 2.3% as of September 30, 2021 [234]. - The company issued $138.6 million of 2023 Notes with an interest rate of 4.3% per year, increased from 3.8% due to a downgrade in March 2020 [240]. - The company plans to continue using debt capital and proceeds from public and private offerings to finance its investment objectives [177]. - The company has the ability to raise equity or debt capital through various means, including registered offerings and private offerings of securities [251]. Market Conditions and Risks - The transition from LIBOR to the Secured Overnight Financing Rate (SOFR) is ongoing, with uncertainties regarding its impact on the company's financial condition and results of operations [186]. - The company anticipates that the ongoing COVID-19 pandemic may adversely affect certain sectors of the global economy, impacting its portfolio companies and overall performance [181]. - The company has implemented a business continuity planning strategy to safeguard employee health and ensure operational continuity amid the pandemic [185]. Asset Coverage and Equity - As of December 31, 2021, the asset coverage ratio was 165%, down from 175% as of September 30, 2021 [183]. - Members' equity increased to $55,017,233 as of December 31, 2021, from $51,264,131 as of September 30, 2021 [267]. - The company declared distributions of $0.285 per share for total distributions of $11.1 million during the three months ended December 31, 2021 [273]. - The company intends to continue making monthly distributions to stockholders, subject to board approval [274]. Cash and Liquidity - As of December 31, 2021, the company had cash equivalents of $61.3 million available for investing and general corporate purposes [252]. - The company’s operating activities used cash of $82.4 million for the three months ended December 31, 2021, while financing activities provided cash of $93.2 million [253]. - Cash and cash equivalents as of December 31, 2021, were $35,582,572, an increase from $28,373,541 as of September 30, 2021 [267].