Stellus Private Credit BDC Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2023
HOUSTON, March 11, 2024 /PRNewswire/ — Stellus Private Credit BDC (“Stellus PBDC” or the “Company”) today announced financial results for its fourth fiscal quarter and year ended December 31, 2023.
Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated “We are pleased to report strong results in the fourth quarter in which we generated $0.56 per share of net investment income and increased net asset value. During the quarter we made three new investments and received four full repayments, bringing the total portfolio to $209 million at fair value. On January 13, 2024, we declared our 2024 first quarter monthly dividend of $0.50 per share in the aggregate which represents an annualized dividend yield of approximately 13%.”
FINANCIAL HIGHLIGHTS
($ in millions, except data relating to per share amounts and shares outstanding)
Three Months Ended
Three Months Ended
Year Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Amount
Per Share
Amount
Per Share
Amount
Per Share
Amount
Per Share
Net investment income
$3.92
$0.56
$1.88
$0.35
$12.33
$1.96
$4.20
$1.08
Net realized gain on investments
0.70
0.11
—
—
0.70
0.11
—
—
Net unrealized (loss) gain included in earnings
(0.22)
(0.03)
0.30
0.05
2.59
0.41
(0.52)
(0.13)
Provision for taxes on net unrealized appreciation on investments
(0.11)
(0.02)
—
—
(0.17)
(0.03)
—
—
Net increase in net assets resulting from operations
$4.29
$0.62
$2.18
$0.41
15.45
2.46
3.68
0.95
Distributions
(3.55)
(0.51)
(3.51)
(0.66)
(11.77)
(1.88)
(4.28)
(1.11)
Other weighted average share adjustments(1)
—
—
—
—
—
—
—
0.03
Net asset value
108.0
$15.21
80.3
$14.64
108.0
$15.21
80.3
$14.64
Weighted average shares outstanding
6,953,190
5,344,720
6,273,882
3,869,643
(1) Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end.
PORTFOLIO ACTIVITY
($ in millions)
As of
As of
December 31, 2023
December 31, 2022
Investments at fair value
$208.6
$157.5
Total assets
$211.2
$174.4
Net assets
$108.0
$80.3
Shares outstanding
7,102,136
5,483,433
Net asset value per share
$15.21
$14.64
Three Months Ended
Year Ended
December 31, 2023
December 31, 2023
New investments
$20.9
$89.4
Repayments of investments
(24.9)
(42.3)
Net activity
($4.0)
$47.1
As of
As of
December 31, 2023
December 31, 2022
Number of portfolio company investments
39
25
Number of debt investments
37
24
Weight average yield of debt and other income producing investments (2)
Cash
11.8 %
11.0 %
Payment-in-kind (“PIK”)
0.3 %
—
Fee amortization
0.4 %
0.4 %
Total
12.5 %
11.4 %
Weighted average yield on total investments (3)
Cash
11.2 %
10.7 %
Payment-in-kind (“PIK”)
0.3 %
—
Fee amortization
0.4 %
0.4 %
Total
11.9 %
11.1 %
(2) The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expense or any sales load that may be paid by investors.
(3) The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company’s total investments, including non-income producing loans and equity.
Results of Operations
Investment income for the three months and year ended December 31, 2023 totaled $7.1 million and $23.4 million, respectively, most of which was interest income from portfolio investments.
Operating expenses for the three months and year ended December 31, 2023 totaled $3.2 million and $11.0 million, respectively, net of $1.1 million and $4.1 million in expenses reimbursed and fees waived by the Company’s investment advisor, Stellus Private BDC Advisor, LLC (the “Advisor”), respectively. For the same periods, base management fees totaled $0.8 million and $2.8 million (all of which were waived by the Advisor), income incentive fees totaled $0.4 million and $1.4 million (net of $0.2 million and $0.7 million which were waived as our shares were not listed on a national exchange), capital gains incentive fees of less than $0.1 million and $0.3 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.4 million and $8.2 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.4 million, other expenses totaled $0.3 million and $1.3 million, and expense support and conditional reimbursements from the Advisor of ($0.1) and ($0.5), respectively.
For the three months and year ended December 31, 2023, net investment income was $3.9 million and $12.3 million, or $0.56 and $1.96 per common share based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.
The Company’s investment portfolio had a net change in unrealized (depreciation) appreciation of ($0.2) million and $2.6 million for the three months and year ended December 31, 2023, respectively.
For the three months and year ended December 31, 2023, net increase in net assets resulting from operations totaled $4.3 million and $15.5 million, or $0.62 and $2.46 per common share, based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.
Liquidity and Capital Resources
On February 1, 2022, the Company entered into a revolving credit and security agreement with Signature Bank as subsequently amended (the “Commitment Facility”). On March 10, 2023, Signature Bank was placed into receivership by the FDIC and on March 12, 2023, the FDIC created Signature Bridge Bank, N.A. (“Signature Bridge”) to take over the operations of Signature Bank. Signature Bridge serviced the Commitment Facility until October 23, 2023. On October 23, 2023, Goldman Sachs Bank USA (“Goldman Sachs”) became the servicer under the Commitment Facility. The Company’s amended and restated senior secured revolving credit agreement with Goldman Sachs (as amended from time to time) matured on December 31, 2023 and was fully repaid, including all accrued interest, on December 22, 2023.
On September 30, 2022, the Company entered into a senior secured revolving credit agreement with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the “Credit Facility”). The Credit Facility, as amended, provides for borrowings up to a maximum of $150.0 million on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $200.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions. As of December 31, 2023 and December 31, 2022, the Company had $98.0 million and $0.0 million in outstanding borrowings under the Credit Facility.
Recent Portfolio Activity
The Company invested in the following portfolio companies for the three months ended December 31, 2023:
Activity Type
Date
Company Name
Company Description
Investment Amount
Instrument Type
Add-On Investment
October 11, 2023
Impact Home Services LLC*
Residential garage door, electrical, and plumbing services provider
$
243,675
Senior Secured – First Lien
$
7,582
Equity
Add-On Investment
October 16, 2023
Equine Network, LLC*
Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry
$
431,401
Senior Secured – First Lien
Add-On Investment
October 31, 2023
2X LLC*
Provider of outsourced digital B2B marketing-as-a-service
$
659,771
Senior Secured – First Lien
Add-On Investment
November 15, 2023
Monitorus Holding, LLC*
Provider of media monitoring and evaluation services
$
16,225
Unsecured Convertible Bond
Add-On Investment
November 30, 2023
Axis Portable Air, LLC*
Air conditioning, heating, and air quality equipment rental company
$
2,500,000
Delayed Draw Term Loan Commitment
Add-On Investment
December 5, 2023
Amika OpCo LLC*
Branded haircare platform
$
1,152,465
Senior Secured – First Lien
New Investment
December 7, 2023
evolv Consulting, LLC
Digital transformation consulting firm
$
5,156,250
Senior Secured – First Lien
$
1,250,000
Revolver Commitment
$
266,927
Equity
New Investment
December 12, 2023
AdCellerant LLC
Provider of outsourced digital marketing software and services
$
5,719,319
Senior Secured – First Lien
$
802,995
Revolver Commitment
$
437,006
Equity
New Investment
December 21, 2023
Michelli, LLC
Provider of test and measurement services and equipment
$
1,342,685
Senior Secured – First Lien
$
2,983,923
Delayed Draw Term Loan Commitment
$
994,641
Revolver Commitment
$
266,062
Equity
* Existing portfolio company
The Company realized investments in the following portfolio companies for the three months ended December 31, 2023:
Activity Type
Date
Company Name
Company Description
Proceeds Received
Realized Gain
Instrument Type
Full Repayment
November 30, 2023
Axis Portable Air, LLC*
Air conditioning, heating, and air quality equipment rental company
$
1,509,146
$
—
Senior Secured – First Lien
Full Repayment
November 30, 2023
Archer Systems, LLC*
Provider of mass tort settlement administrative solutions
$
7,834,418
$
—
Senior Secured – First Lien
Full Realization
December 21, 2023
International Designs Holdings LLC*
Distributor of design-oriented surfaces, appliances and architectural specialty products
$
1,296,416
$
841,075
Equity
Full Repayment
December 22, 2023
BLP Buyer, Inc.*
Distributor of lifting solutions
$
4,816,367
$
—
Senior Secured – First Lien
$
2,750,450
$
—
Senior Secured – First Lien
$
1,265,924
$
—
Senior Secured – First Lien
$
779,098
$
—
Senior Secured – First Lien
* Existing portfolio company
Events Subsequent to December 31, 2023
The Company’s management has evaluated subsequent events through March 11, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.
Investment Portfolio
The Company invested in the following portfolio companies subsequent to December 31, 2023:
Activity Type
Date
Company Name
Company Description
Investment Amount
Instrument Type
Add-On Investment
January 9, 2024
Morgan Electrical Group Intermediate Holdings, Inc.*
Provider of commercial electrical services
$
12,854
Senior Secured – First Lien
Add-On Investment
January 12, 2024
Impact Home Services LLC*
Residential garage door, electrical, and plumbing services provider
$
28,813
Equity
Add-On Investment
January 31, 2024
Impact Home Services LLC*
Residential garage door, electrical, and plumbing services provider
$
12,637
Equity
Add-On Investment
February 28, 2024
Monitorus Holding, LLC*
Provider of media monitoring and evaluation services
$
38,984
Unsecured Convertible Bond
New Investment
March 11, 2024
Exec Connect Intermediate LLC
Facilitator of executive-level in-person events and remote peer-to-peer industry insights
$
1,746,286
Senior Secured – First Lien
$
254,005
Delayed Draw Term Loan Commitment
$
158,753
Revolver Commitment
$
77,109
Equity
New Investment
March 11, 2024
Titan Meter Bidco Corp.
Provider of liquid metering products and integrated solutions to the energy infrastructure sector
$
7,696,671
Senior Secured – First Lien
$
810,176
Revolver Commitment
$
395,667
Equity
* Existing portfolio company
The Company realized investments in the following portfolio companies subsequent to December 31, 2023:
Activity Type
Date
Company Name
Company Description
Proceeds Received
Instrument Type
Full Repayment
January 8, 2024
Peltram Plumbing Holdings, LLC*
Provider of plumbing solutions.
$
6,818,700
Senior Secured – First Lien
* Existing portfolio company
Credit Facility
The outstanding balance under the Credit Facility as of March 11, 2024 was $103.7 million.
Distributions Declared
On January 13, 2024, our Board of Directors declared a regular monthly distribution for each of January, February, and March 2024, as follows:
Stellus Private Credit BDC
Record
Payment
Amount per
Declared
Date
Date
Share
1/13/2024
1/15/2024
1/31/2024
$
0.1666
1/13/2024
2/1/2024
2/29/2024
$
0.1666
1/13/2024
3/1/2024
3/29/2024
$
0.1666
Sale of Unregistered Securities
Since December 31, 2023, the Company sold 191,580 common shares of beneficial interest at a price of $15.21 per share for aggregate proceeds of $2.9 million, which included less than $0.1 million of Organizational Expense Allocation pursuant to Subscription Agreements entered into between the Company and investors.
Since December 31, 2023, the Company also issued 23,235 common shares of beneficial interest for aggregate proceeds of $0.4 million under the DRIP.
About Stellus Private Credit BDC
The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans and second lien loans, with corresponding equity co-investments. The Company’s investment activities are managed by its investment adviser, Stellus Private BDC Advisor, LLC.
Forward-Looking Statements
Statements included herein may contain “forward-looking statements” which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Contacts
Stellus Private Credit BDC
W. Todd Huskinson, Chief Financial Officer
(713) 292-5414
[email protected]
STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2023
December 31, 2022
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $206,513,758 and $158,022,677, respectively)
$
208,574,078
$
157,504,755
Cash and cash equivalents
593,685
15,469,823
Interest receivable
1,495,581
1,030,274
Expense reimbursement receivable from the Advisor (Note 2)
126,539
165,638
Deferred offering costs
72,875
54,394
Related party receivable
162,455
9,620
Prepaid expenses
127,019
133,004
Receivable for sales and repayments of investments
71,105
26,996
Total Assets
$
211,223,337
$
174,394,504
LIABILITIES
Credit Facilities payable
$
97,031,517
$
79,448,134
Short-term loan payable
—
11,250,000
Dividends payable
3,551,068
1,809,533
Unearned revenue
897,538
539,634
Income incentive fee payable
439,854
328,196
Capital gains incentive fee payable
261,684
—
Interest payable
367,093
563,241
Administrative services payable
124,958
66,064
Income tax payable
182,489
7,471
Deferred tax liability
167,865
—
Other accrued expenses and liabilities
177,249
119,274
Total Liabilities
$
103,201,315
$
94,131,547
Commitments and contingencies (Note 7)
Net Assets
$
108,022,022
$
80,262,957
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 7,102,136 and 5,483,433 issued and outstanding, respectively)
$
71,021
$
54,834
Paid-in capital
104,810,048
80,950,845
Total distributable earnings (loss)
3,140,953
(742,722)
Net Assets
$
108,022,022
$
80,262,957
Total Liabilities and Net Assets
$
211,223,337
$
174,394,504
Net Asset Value Per Share
$
15.21
$
14.64
STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31, 2023
December 31, 2022
December 31, 2021
INVESTMENT INCOME
Interest income
$
22,760,669
$
7,804,783
$
—
Other income
601,776
152,173
—
Total Investment Income
$
23,362,445
$
7,956,956
$
—
OPERATING EXPENSES
Management fees
$
2,833,601
$
1,335,054
$
—
Income incentive fees
2,097,153
686,398
—
Capital gains incentive fee
261,684
—
—
Professional fees
670,800
447,045
70,800
Organization costs
1,000
90,184
416,553
Amortization of deferred offering costs
165,937
240,152
—
Administrative services expenses
417,573
226,489
—
Trustees’ fees
160,000
158,000
42,000
Insurance expense
81,438
82,045
—
Valuation fees
40,324
5,519
—
Interest expense and other fees
8,225,528
2,312,701
—
Income tax expense
44,925
7,471
—
Other general and administrative expenses
142,294
120,343
3,492
Total Operating Expenses
$
15,142,257
$
5,711,401
$
532,845
Expenses reimbursed/fees waived by Investment Advisor (Note 2)
$
(4,101,044)
$
(1,952,196)
$
—
Net Operating Expenses
$
11,041,213
$
3,759,205
$
532,845
Net Investment Income
$
12,321,232
$
4,197,751
$
(532,845)
Net realized gain on non-controlled, non-affiliated investments
$
841,075
$
—
$
—
Net realized gain on foreign currency translation
24,343
1,950
—
Provision for taxes on realized gain on investments
(142,988)
—
—
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments
2,566,523
(538,883)
—
Net change in unrealized appreciation on foreign currency translations
11,719
20,961
—
Provision for taxes on net unrealized gain on investments
(167,865)
—
—
Net Increase (Decrease) in Net Assets Resulting from Operations
$
15,454,039
$
3,681,779
$
(532,845)
Net Investment Income Per Share – basic and diluted
$
1.96
$
1.08
$
N/A
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted
$
2.46
$
0.95
$
N/A
Weighted Average Common Shares of Beneficial Interest Outstanding – basic and diluted
6,273,882
3,869,643
N/A
Distributions Per Share – basic and diluted
$
1.88
$
1.11
$
N/A
STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Common Shares of
Beneficial Interest
Total
Number of
Par
Paid-in
distributable
shares
value
capital
(loss) gain
Net Assets
Balances at December 31, 2020
—
$
—
$
—
$
—
$
—
Net investment loss
—
—
—
(532,845)
(532,845)
Balances at December 31, 2021
—
$
—
$
—
$
(532,845)
$
(532,845)
Net investment income
—
—
—
4,197,751
4,197,751
Net realized gain on foreign currency translation
—
—
—
1,950
1,950
Net change in unrealized depreciation on non-controlled, non-affiliated investments
—
—
—
(538,883)
(538,883)
Net change in unrealized appreciation on foreign currency translations
—
—
—
20,961
20,961
Return of capital and other tax related adjustments
—
—
(388,214)
388,214
—
Distributions from net investment income
—
—
—
(4,279,870)
(4,279,870)
Issuance of common shares of beneficial interest
5,483,433
54,834
81,339,059
—
81,393,893
Balances at December 31, 2022
5,483,433
$
54,834
$
80,950,845
$
(742,722)
$
80,262,957
Net investment income
—
—
—
12,321,232
12,321,232
Net realized gain on non-controlled, non-affiliated investments
—
—
—
841,075
841,075
Net realized gain on foreign currency translation
—
—
—
24,343
24,343
Provision for taxes on realized gain on investments
—
—
—
(142,988)
(142,988)
Net change in unrealized appreciation on non-controlled, non-affiliated investments
—
—
—
2,566,523
2,566,523
Net change in unrealized appreciation on foreign currency translations
—
—
—
11,719
11,719
Provision for taxes on net unrealized gain on investments
—
—
—
(167,865)
(167,865)
Return of capital and other tax related adjustments
—
—
(197,724)
197,724
—
Distributions from net investment income
—
—
—
(11,768,088)
(11,768,088)
Issuance of common shares of beneficial interest
1,618,703
16,187
24,056,927
—
24,073,114
Balances at December 31, 2023
7,102,136
$
71,021
$
104,810,048
$
3,140,953
$
108,022,022
STELLUS PRIVATE CREDIT BDC
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
For the
from Inception
year ended
through
December 31, 2023
December 31, 2022
December 31, 2022
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations
$
15,454,039
$
3,681,779
$
(532,845)
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments
(89,322,601)
(168,326,016)
—
Proceeds from sales and repayments of investments
42,260,585
10,474,408
—
Net change in unrealized (appreciation) depreciation on investments
(2,566,523)
538,883
—
Net change in unrealized appreciation foreign currency translations
(11,719)
(20,961)
—
Increase in investments due to PIK
(129,990)
—
—
Amortization of premium and accretion of discount, net
(502,109)
(198,065)
—
Deferred tax provision
167,865
—
—
Amortization of loan structure fees
586,127
478,626
—
Amortization of deferred offering costs
165,937
240,152
—
Net realized gain on investments
(841,075)
—
—
Changes in other assets and liabilities
Increase in interest receivable
(465,307)
(1,030,274)
—
Increase in deferred offering costs
—
—
(139,570)
Increase in related party receivable
(152,835)
(9,620)
—
Decrease (increase) in expense reimbursements receivable from the Advisor
39,099
(165,638)
—
Decrease (increase) in prepaid expenses
5,985
(39,356)
(93,648)
(Decrease) increase in due to affiliate
—
(460,085)
460,085
Increase in professional fees payable
—
—
263,978
(Decrease) increase in trustees’ fees payable
—
(42,000)
42,000
Increase in administrative services payable
58,894
66,064
—
(Decrease) increase in interest payable
(196,148)
563,241
—
Increase in income incentive fees payable
111,658
328,196
—
Increase in capital gains incentive fees payable
261,684
—
—
Increase in unearned revenue
357,904
539,634
—
Increase in income tax payable
175,018
7,471
—
Increase (decrease) in other accrued expenses and liabilities
57,975
(144,704)
—
Net Cash Used in Operating Activities
$
(34,485,537)
$
(153,518,265)
$
—
Cash Flows from Financing Activities
Proceeds from issuance of common shares of beneficial interest
$
24,073,114
$
81,393,893
$
—
Offering costs paid for common shares of beneficial interest issued
(184,418)
(154,976)
—
Stockholder distributions paid
(10,026,553)
(2,470,337)
—
Borrowings under Credit Facilities
169,750,000
124,762,500
—
Repayments of Credit Facilities
(152,365,000)
(44,147,500)
—
Financing costs paid on Credit Facilities
(387,744)
(1,645,492)
—
Short-term loan borrowings
4,500,000
11,250,000
Short-term loan repayments
(15,750,000)
—
—
Net Cash Provided by Financing Activities
$
19,609,399
$
168,988,088
$
—
Net (Decrease) Increase in Cash and Cash Equivalents
$
(14,876,138)
$
15,469,823
$
—
Cash and Cash Equivalents Balance at Beginning of Period
15,469,823
—
—
Cash and Cash Equivalents Balance at End of Period
$
593,685
$
15,469,823
$
—
Supplemental and Non-Cash Activities
Cash paid for interest expense
$
7,835,549
$
1,270,834
$
—
Income and excise tax paid
12,895
—
—
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan
623,113
43,894
—
Increase in dividends payable
5,360,601
1,809,533
—
View original content to download multimedia:https://www.prnewswire.com/news-releases/stellus-private-credit-bdc-reports-results-for-its-fourth-fiscal-quarter-and-year-ended-december-31-2023-302085817.html
SOURCE Stellus Private Credit BDC
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