Gladstone Capital (US:GLAD)2020-11-11 16:23Financial Data and Key Metrics Changes - Total interest income increased by $300,000 or 2.6% to $11.9 million due to a slight increase in the average balance of interest-bearing investments [24] - Net investment income for the quarter was $6.1 million or $0.195 per share, unchanged from the prior quarter [26] - Net assets from operations were $10.2 million or $0.33 per share for the quarter, compared to $15 million or $0.48 per share for the prior quarter [26] - NAV rose 1.8% from $7.27 per share as of June 30 to $7.40 per share as of September 30 [29] Business Line Data and Key Metrics Changes - Originations for the quarter totaled $22 million, with repayments and proceeds also totaling $22 million, resulting in largely unchanged assets [12] - Total investment income for the quarter increased by $850,000 or 7.2% to $12.6 million, driven by prepayment fees and dividends [25] - The asset mix at the end of the quarter showed first lien loans rose slightly to 49% of cost, while second lien exposure declined to 42% of the portfolio cost [17] Market Data and Key Metrics Changes - The portfolio maintained a low non-performing asset rate of 1.4% despite the impacts of COVID-19 [15] - The company reported that the energy and auto sectors were the most affected by COVID-19, but overall portfolio performance remained strong [16][40] Company Strategy and Development Direction - The company remains optimistic about growth opportunities in the lower middle market and plans to manage leverage around one-to-one debt to equity [20][21] - The focus will continue to be on investing in midsized private businesses with good management, supported by private equity funds [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that most companies have adapted to COVID-19, with minimal impact outside the energy and auto sectors [40] - The company is cautious about potential lasting financial impacts from COVID-19 but is optimistic about the recovery of unrealized depreciation [19][21] Other Important Information - Total assets as of September 30 were $459 million, with liabilities declining to $225 million [27] - The company declared monthly distributions of $0.065 per share for October, November, and December, resulting in an annual rate of $0.78 per share [30] Q&A Session Summary Question: What percentage of the portfolio has high risk related to COVID? - Management indicated that most companies have adapted to COVID-19, with significant impacts primarily in the auto and energy sectors [40] Question: What accounted for the slight decline in the portfolio's average risk rating? - The decline was attributed to the mix of energy and auto credits, which caused some deterioration in underlying numbers [42] Question: What percentage of the portfolio is in liquid syndicated deals? - Approximately 8% to 9% of the portfolio is in liquid syndicated deals [46] Question: What are the limitations on the credit facility? - The reduction in borrowing base was temporary due to minor amendments to portfolio investments [47] Question: What is the current availability under the credit facility? - Current availability is in excess of $46 million [48] Question: How would you characterize the appetite for issuing additional unsecured debt? - Management is evaluating the potential to pursue additional unsecured debt as credit spreads have contracted [52]