UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: March 12, 2014
(Date of earliest event reported)
Garrison Capital Inc.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 814-00878 | 90-0900145 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
1290 Avenue of the Americas, Suite 914 New York, New York |
10104 |
| (Address of Principal Executive Offices) | (Zip Code) |
(212) 372-9590
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On March 12, 2014, Garrison Capital Inc. (the “Company”) issued a press release announcing its financial results for the fourth fiscal quarter ended December 31, 2013. A copy of this press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Forward-Looking Statements
This Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, may contain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts
included in this Current Report on Form 8-K may constitute forward-looking statements and are not guarantees of future performance
or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking
statements as a result of a number of factors, including those described from time to time in filings 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 Current Report on Form 8-K.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99.1 | Press release of Garrison Capital Inc., dated as of March 12, 2014 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Garrison Capital Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GARRISON CAPITAL INC. | ||
| Date: March 12, 2014 | By: | /s/ Brian Chase |
| Name: | Brian Chase | |
| Title: | Chief Financial Officer | |
Garrison Capital Inc. Declares First Quarter Distribution of $0.35 Per Share and Announces Fourth Quarter Financial Results and Earnings Call
NEW YORK, NEW YORK – March 12, 2014 – Garrison Capital Inc., a business development company (NASDAQ: GARS), today announced its financial results for the fourth fiscal quarter ended December 31, 2013.
References to “we,” “us,” “our” and “Garrison Capital” refer to Garrison Capital Inc. and its consolidated subsidiaries.
Fourth Quarter 2013 Highlights
| × | Net increase in net assets resulting from operations for the quarter ended December 31, 2013 was $6.7 million, or $0.40 per share; |
| × | Net investment income of $5.3 million or $0.32 per share; |
| × | Net realized losses of $(0.7) million or $(0.04) per share; |
| × | Net change in unrealized appreciation of investments of $2.1 million or $0.12 per share; and |
| × | Our board of directors declared a first quarter distribution of $0.35 per share, payable on March 28, 2014 to stockholders of record as of March 21, 2014. |
Consolidated Results of Operations
Consolidated operating results for the three months ended December 31, 2013 and September 30, 2013 are as follows:
| Three
Months Ended December 31, 2013 | Three
Months Ended September 30, 2013 | |||||||
| Dollar amounts in thousands, except per share data | (Unaudited) | (Unaudited) | ||||||
| Net investment income | $ | 5,334 | $ | 5,914 | ||||
| Total investment income | $ | 11,382 | $ | 9,338 | ||||
| Net Expenses | $ | 6,048 | $ | 3,423 | ||||
| Net realized gain on investments | $ | (729 | ) | $ | (5,690 | ) | ||
| Net change in unrealized appreciation on investments | $ | 2,067 | $ | 6,529 | ||||
| Net investment income per share | $ | 0.32 | $ | 0.35 | ||||
| Net realized gain on investments per share | $ | (0.04 | ) | $ | (0.34 | ) | ||
| Net earnings per share | $ | 0.40 | $ | 0.39 | ||||
Total investment income for the three months ended December 31, 2013 was $11.4 million and net investment income was $5.3 million. Total expenses net of fee waivers for the three months ended December 31, 2013 were $6.0 million.
We realized a net loss on investments of $(0.7) million and net unrealized appreciation on investments of $2.1 million. Net realized losses for the three months ended December 31, 2013 was driven primarily by $(1.4) million of realized losses incurred as a result of the sale of one portfolio investment, which was written down prior to the pricing of our initial public offering (“IPO”), which was partially offset by realized gains of $0.7 million resulting from the sale of six portfolio investments, the early full repayment of seven portfolio investments and other partial repayments.
The net change in unrealized appreciation for the three months ended December 31, 2013 was driven primarily by the reversal of prior period unrealized depreciation in the amount of $1.6 million as a result of the sale of one portfolio investment. The remaining net change in unrealized appreciation on investments is due to the increase in the market value of the remaining portfolio in the amount of $1.2 million, which was offset by the reversal of prior period unrealized appreciation of $(0.7) million.
Portfolio and Investment Activities
For the three months ended December 31, 2013, we executed originations or purchases of investments and draws on previously unfunded revolvers in the amount of $92.3 million, $80.3 million of which was in our core portfolio which we define as those investments that generally yield 9.0% or greater.
For the three months ended December 31, 2013, we originated, purchased or made follow-on investments in our core portfolio totaling $82.4 million of par which represents an average new loan size of $10.3 million with a weighted average yield of 11.1%. Of the total additions to our core portfolio, three totaling $24.8 million of par (cost of $24.3 million) represent originated assets, three totaling $26.1 million (cost of $25.5 million) represent club deals and two totaling $9.2 million (cost of $8.3 million) represent loans purchased in the secondary market. Follow-on investments consist of the upsize to two of our existing originations in the amount of $8.4 million (cost of $8.4 million), $5.0 million (cost of $4.9 million) represents an upsize to one of our existing purchased loans and $8.9 million (cost of $8.9 million) in consumer loans with projected unlevered returns (net of estimated credit losses) of approximately 11.0%. Early full repayments of two investments in our core portfolio totaled $16.9 million and partial repayments totaled $8.7 million.
For the three months ended December 31, 2013, in our transitory portfolio, which we have defined as those investments below the low end of our core portfolio yield target of 9.0%, we purchased six new investments totaling $9.1 million of par (cost of $9.1 million) and added $2.9 million of par (cost of $2.9 million) to existing investments which represent an average new loan size of $2.0 million with a weighted average yield of 6.0%. Early full repayments on seven loans totaling par of $34.5 million, sales of six loans totaling par of $13.7 million and partial repayments totaling par of $4.1 million in our transitory portfolio resulted in $(0.7) million in net realized losses for the period. Realized losses in the amount of $(1.4) million resulted from one investment that was written down prior to the IPO and was offset by $0.7 million of realized gains on the remaining portfolio.
Core investments as a percentage of our overall portfolio increased to 68.0% in the fourth quarter of 2013 from 57.2% in the third quarter of 2013.
From January 1, 2014 through March 11, 2014 we originated one new investment, one club deal and closed additional consumer loan purchases for a total increase to par in our core portfolio of $30.7 million with a weighted average yield of 11.4%. From January 1, 2014 through March 11, 2014 repayments in our core portfolio consisted of the early full repayment of two investments and partial repayments for a total of $9.5 million of par with a weighted average yield of 11.5%.
From January 1, 2014 through March 11, 2014 repayments in our transitory portfolio consisted of the early full repayment of four investments and partial repayments for a total of $16.0 million of par with a weighted average yield of 7.1%.
The below table shows select information of our portfolio as of December 31, 2013.
| Summary of Portfolio Characteristics (dollar amounts in millions) | December 31, 2013 | |||
| Total Market Value | $ | 429.1 | ||
| Number of portfolio companies | 70 | |||
| Average investment size (1) | $ | 5.0 | ||
| Weighted average yield (2) | 9.8 | % | ||
| Weighted average price (1) | 99.2 | |||
| First lien | 88.1 | % | ||
| Second lien | 4.3 | % | ||
| Mezzanine | 1.7 | % | ||
| Consumer loans | 3.9 | % | ||
| Equity | 2.0 | % | ||
| Core | 68.0 | % | ||
| Transitory | 32.0 | % | ||
| Originated (3) | 32.3 | % | ||
| Club (4) | 15.8 | % | ||
| Purchased | 51.9 | % | ||
| Fixed (1) | 5.0 | % | ||
| Floating (1) | 95.0 | % | ||
| Performing (1) | 100.0 | % | ||
| Non-performing(1) | 0.0 | % | ||
| Weighted average debt / EBITDA (1) (2) | 3.6 | x | ||
| Weighted average risk rating | 2.21 | |||
| (1) | Excludes consumer loans and equity investments |
| (2) | Excludes investments with a risk rating of 4, unfunded revolvers and equity investments |
| (3) | Originated positions include investments where we have sourced and led the execution of the deal |
| (4) | Club positions include investments where we provide direct lending to a borrower with one or two other lenders but did not lead the deal |
Liquidity and Capital Resources
As of December 31, 2013, we had cash and cash equivalents of $13.7 million and cash and cash equivalents, restricted of $28.0 million.
On December 6, 2013, our wholly-owned subsidiary, GLC Trust 2013-2, closed on a $10.0 million revolving facility with Capital One Bank, NA. The revolving facility includes an accordion feature that permits GLC Trust 2013-2 to increase the total commitment up to $15.0 million under the terms of the loan agreement. GLC Trust 2013-2 exercised this option on December 20, 2013.
In addition, our transitory portfolio consists of approximately thirty three portfolio companies with a total par value of $139.7 million ($127.4 million of par pro forma for repayments from January 1, 2014 through March 11, 2014) and a fair value of $137.5 million. We intend to migrate out of these assets over time into those meeting our core portfolio yield which we define as those investments that generally yield 9.0% or greater. We view these investments as an additional source of liquidity to meet our investment objectives.
Distributions
On March 11, 2014, our board of directors approved a distribution in the amount of $5.9 million, or $0.35 a share, which will be paid on March 28, 2014 to stockholders of record as of March 21, 2014.
Distributions are paid from taxable earnings and may include return of capital and/or capital gains. The specific tax characteristics of the distributions have been reported to stockholders on Form 1099-DIV for the tax year ended December 31, 2013.
The following table reflects the cash distributions, including dividends and returns of capital per share that we have declared on our common stock for the fiscal year ended December 31, 2013.
| Record Dates | Payment Date | Dividends and Distributions Declared | ||||||
| Fiscal year ended December 31, 2013 | ||||||||
| December 13, 2013(1) | December 27, 2013 | $ | 0.35 | |||||
| September 12, 2013(1) | September 26, 2013 | $ | 0.35 | |||||
| June 13, 2013(1) | June 27, 2013 | $ | 0.35 | |||||
| February 25, 2013(2) | March 13, 2013 | $ | 0.23 | |||||
| Total | $ | 1.28 | ||||||
(1) Includes a return of capital for tax purposes of approximately $0.08.
(2) Does not include any return of capital for tax purposes.
For the three months ended December 31, 2013, our Investment Adviser agreed to waive that portion of its income-based incentive fee, if any, necessary for the Company’s net investment income per share plus net realized gain (loss) per share (excluding any portion of realized gains (losses) that are associated with the reversal of any portion of unrealized appreciation/depreciation attributable to periods prior to April 1, 2013) for the three months ended December 31, 2013 to equal $0.35 per share, net of fee waivers.
For the six months ending June 30, 2014, our Investment Adviser has agreed to waive that portion of its income based incentive fee, if any, necessary for the Company’s net investment income per share plus net realized gain (loss) per share (excluding any portion of realized gains (losses) that are associated with the reversal of any portion of unrealized appreciation/depreciation attributable to periods prior to April 1, 2013) for the six months ending June 30, 2014 to equal $0.70 per share, net of fee waivers.
Earnings Conference Call
We will hold a conference call at 10:00 a.m. (Eastern Time) on Thursday, March 13, 2014 to discuss our quarterly financial results. All interested parties are welcome to participate. For the Fourth Quarter December 31, 2013 Earnings Presentation that we intend to refer to on the earnings conference call, please visit the Investor Relations link on the homepage of our website (www.garrisoncapitalbdc.com) and click on the Fourth Quarter December 31, 2013 Earnings Presentation under Upcoming Events.
The conference call can be accessed at the following dial-in number: (888) 588-0798. International callers can access the conference call by dialing (706) 634-6548. All participants will need to enter the Conference ID 89837285. All participants are asked to dial-in to the conference call 10-15 minutes prior to the call so that name and company information can be collected.
An archived replay of the call will be available within two hours after the call until 11:00 p.m. (Eastern Time) on April 13, 2014. To hear the replay, please dial (855) 859-2056. International dialers, please dial (404) 537-3406. For all replays, please enter the Conference ID 89837285.
ABOUT GARRISON CAPITAL INC.
Garrison Capital Inc. is a business development company that primarily invests in loans to U.S. based middle-market companies. The company’s investment activities are managed by its investment adviser, Garrison Capital Advisers LLC, an affiliate of Garrison Investment Group LP (“Garrison Investment Group”). For more information go to http://www.garrisoncapitalbdc.com.
ABOUT GARRISON INVESTMENT GROUP
Garrison Investment Group is an alternative investment and asset management firm founded in March 2007 by Steven Stuart and Joseph Tansey. Garrison Investment Group invests opportunistically in the debt of middle-market companies, primarily in the areas of corporate finance, real estate finance and structured finance. For more information go to http://www.garrisoninv.com.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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 risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings 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.
Contact:
Garrison Capital Inc.
Brian Chase
www.garrisoncapitalbdc.com
| (212) 372-9590 |