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Gladstone Capital Corp. Reports Operating Results (10-Q)

February 03, 2009 | About:
10qk

Gladstone Capital Corp. (GLAD) filed Quarterly Report for the period ended 2008-12-31.

Gladstone Capital Corporation is a specialty finance company that invests in debt securities consisting primarily of senior term loans senior subordinated loans and junior subordinated loans in small and medium sized companies. The Company target small and medium sized private businesses that meet some or all of our criteria including the potential for growth adequate assets for loan collateral experienced management teams with significant ownership interest in the business adequate capitalization profitable operations based on cash flow substantial ownership by a buyout fund or a venture capital fund and potential opportunities for us to realize appreciation and gain liquidity in our equity position. Gladstone Capital Corp. has a market cap of $170.39 million; its shares were traded at around $10.28 with a P/E ratio of 6.9 and P/S ratio of 3.73. The dividend yield of Gladstone Capital Corp. stocks is 20.79%. Gladstone Capital Corp. had an annual average earning growth of 10.9% over the past 5 years.

Highlight of Business Operations:

During the three months ended December 31, 2008, we extended $8.7 million of investments to existing portfolio companies through revolver draws or the additions of new term notes. During the three months ended December 31, 2008, 2 borrowers made payments in full ahead of contractual maturity of $7.0 million, we sold one syndicated loan of $2.2 million, and we experienced contractual amortization, revolver repayments and some principal payments received ahead of schedule of $7.9 million, for total principal repayments of $17.1 million. Since our initial public offering in August 2001, we have made 254 different loans to, or investments in,

Interest income from our investments in debt securities of private companies was $11,681 for the three months ended December 31, 2008, as compared to $11,139 for the three months ended December 31, 2007. The level of interest income from investments is directly related to the balance, at cost, of the interest-bearing investment portfolio outstanding during the period multiplied by the weighted average yield. The weighted average yield varies from period to period based on the current stated interest rate on interest-bearing investments and the amounts of loans for which interest is not accruing. Interest income from our investments increased $542, or 4.9%, during the three months ended December 31, 2008 compared to the prior year period. This increase was based on the overall growth in the cost basis of our investments, offset by the decrease in the weighted average yield on our portfolio. The cost basis of our interest bearing investment portfolio was approximately $442.6 million for the three months ended December 31, 2008 as compared to $386.9 million for the three months ended December 31, 2007. In contrast, the annualized weighted average yield on our portfolio was 9.8% for the three months ended December 31, 2008 as compared to 11.0% for the three months ended December 31, 2007. The decrease in the annualized weighted average yield primarily resulted from a reduction in the average LIBOR from the prior year, as well as three investments being on non-accrual during the three months ended December 31, 2008 (Greatwide, LYP Holdings, and U.S. Healthcare) whereas two investments were on non-accrual during the three months ended December 31, 2007 (LYP Holdings and U.S. Healthcare).

Interest income from Non-Control/Non-Affiliate investments was $11,661 for the three months ended December 31, 2008, as compared to $11,125 for the comparable prior year period. This increase resulted from an overall increase in the aggregate Non-Control/Non-Affiliate investments held at December 31, 2008 compared to the prior year period, offset by a decrease in LIBOR due to the instability and tightening of the credit markets. The success fees earned during the three months ended December 31, 2008 and 2007 were $0 and $346, respectively. The success fee earned during the three months ended December 31, 2007 resulted from a refinancing by Westlake Hardware, Inc.

Amortization of deferred financing fees, in connection with our line of credit, was $719 for the three months ended December 31, 2008, as compared to $74 for the three months ended December 31, 2007. The increase is due to the amortization of additional fees incurred with our line of credit. In February 2008, we increased the DB Facility from $220 million to $250 million and in April 2008, increased the DB Facility to $300 million and added Branch Banking and Trust Company (BB&T) as a committed lender. In June 2008, we renewed the DB Facility. The fees incurred for the above amendments are recorded in deferred financing fees on our consolidated statement of assets and liabilities, and amortized over the life of the DB Facility.

Overall, we realized a net decrease in net assets resulting from operations of $(9,103) for the three months ended December 31, 2008. Based on a weighted-average of 21,087,574 basic and diluted shares outstanding, our net decrease in net assets from operations per weighted-average common share for the three months ended December 31, 2008 was $(0.43), basic and diluted. For the three months ended December 31, 2007, we realized a net increase in net assets resulting from operations of $1,900. Based on a weighted-average of 16,953,703 basic and diluted shares outstanding, our net increase in net assets from operations per weighted-average common share for the three months ended December 31, 2007 was $0.11 basic and diluted.

During the three months ended December 31, 2007, we extended, directly or through participations, $58.0 million of loan originations to 5 new portfolio companies and $15.3 million of investments to existing portfolio companies through revolver draws or the additions of new term notes, for total new investments of $73.3 million.

Read the The complete Report

Rating: 3.2/5 (5 votes)

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