Patriot Capital Funding Inc. (PCAP, Financial) filed Quarterly Report for the period ended 2009-03-31.
Patriot Capital Funding Inc. is a specialty finance company providing customized financing solutions to private equity sponsors focused on making investments in small- and mid-sized companies. Patriot Capital Funding typically invests in companies with annual revenues between $10 million and $100 million and which operate in diverse industry sectors. Investments usually take the form of senior secured loans junior secured loans and subordinated debt investments - sometimes containing equity components. Patriot Capital Funding Inc. has a market cap of $43.4 million; its shares were traded at around $2.07 with a P/E ratio of 1.7 and P/S ratio of 1. The dividend yield of Patriot Capital Funding Inc. stocks is 48.3%.
Total investment income for the three months ended March 31, 2009 and 2008, was $8.5 million and $11.2 million, respectively. For the three months ended March 31, 2009, this amount consisted of interest income of $19,000 from cash and cash equivalents, $8.3 million of interest and dividend income from portfolio investments (which included $1.1 million in payment-in-kind or PIK interest and dividends), $167,000 in fee income and $9,000 in other investment income. For the three months ended March 31, 2008, this amount consisted of interest income of $53,000 from cash and cash equivalents, $11.0 million of interest and dividend income from portfolio investments (which included $1.5 million in payment-in-kind or PIK interest and dividends), $214,000 in fee income and $40,000 in other investment income.
Expenses for the three months ended March 31, 2009 and 2008, were $3.4 million and $4.5 million, respectively. Expenses decreased for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 by approximately $1.1 million, primarily as a result of lower compensation expense which decreased by $577,000, lower interest expense which decreased by $473,000, and lower general and administrative expenses which decreased by $58,000, offset by higher professional fees of $66,000. The lower compensation expense was principally attributable to the elimination of bonus accruals given the impact of the current market environment on our financial performance, reduction of employee headcount during the fourth quarter of 2008 and the first quarter of 2009, partially offset by an increase in non-cash stock award compensation of $18,000 due to the granting of additional stock options in 2008 and restricted stock awards in August 2008 and March 2009, and an increase in base salary for three of our executive officers. The decrease in interest expense was attributable to a decrease in market interest rates during the first quarter of 2009 and a decrease in weighted average borrowings outstanding, which were approximately $151.2 million during the three months ended March 31, 2009, as compared to $152.7 million during the three months ended March 31, 2008. Such borrowings historically were used primarily to fund investments. The decrease in general and administrative expenses is primarily the result of reduced travel and investor relations expenses. The increase in professional fees expense is primarily due to additional legal fees we incurred in 2009.
Net realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated cost. During the three months ended March 31, 2009, we realized a loss of $11.6 million due to the permanent impairment of loans to one of our portfolio companies. During the three months ended March 31, 2008, we sold one investment in which we realized a loss of $90,000.
Net unrealized appreciation (depreciation) on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. During the three months ended March 31, 2009 and 2008, we recorded net unrealized depreciation of $4.2 million and $9.9 million, respectively, on our investments. The unrealized depreciation in 2009 is net of an adjustment to reverse unrealized depreciation due to the permanent impairment of loans to one of our portfolio companies in connection with which we recognized a realized loss of $11.6 million. For 2009, our net unrealized depreciation consists of the following: approximately $417,000 of unrealized depreciation resulted from the decrease in quoted market prices on our syndicated loan portfolio as a result of the disruption in the credit markets for broadly syndicated loans; approximately $4.5 million resulted from a decline in the financial performance of our portfolio companies; offset by approximately $770,000 of unrealized appreciation which resulted from SFAS No. 157.
Net unrealized appreciation (depreciation) on interest rate swaps represents the change in value of the swap agreements. For the three months ended March 31, 2009 and 2008, we recorded unrealized appreciation (depreciation) of approximately $183,000 and ($753,000), respectively, on our interest rate swap agreements. The 2008 unrealized depreciation in the value of our interest rate swap agreements resulted from the volatility and corresponding reduction in variable interest rates during the period.
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Patriot Capital Funding Inc. is a specialty finance company providing customized financing solutions to private equity sponsors focused on making investments in small- and mid-sized companies. Patriot Capital Funding typically invests in companies with annual revenues between $10 million and $100 million and which operate in diverse industry sectors. Investments usually take the form of senior secured loans junior secured loans and subordinated debt investments - sometimes containing equity components. Patriot Capital Funding Inc. has a market cap of $43.4 million; its shares were traded at around $2.07 with a P/E ratio of 1.7 and P/S ratio of 1. The dividend yield of Patriot Capital Funding Inc. stocks is 48.3%.
Highlight of Business Operations:
For the three months ended March 31, 2009 and year ended December 31, 2008, the weighted average yield on all of our outstanding debt investments was approximately 10.9% and 12.1%, respectively. The weighted average fair value balance of our debt investment portfolio during the three months ended March 31, 2009 was $308.4 million, down from $333.2 million during the fourth quarter of 2008. Yields are computed using actual interest income earned for the year (annualized for the three months ended March 31, 2009), including amortization of loan fees and original issue discount, divided by the weighted average fair value of debt investments. As of March 31, 2009 and December 31, 2008, $117.9 million and $123.5 million, respectively, of our portfolio investments at fair value were at fixed interest rates, which represented approximately 39% and 38%, respectively, of our total portfolio of investments at fair value. We generally structure our subordinated debt investments at fixed rates while many of our senior secured and junior secured loans are, and will be, at variable rates.Total investment income for the three months ended March 31, 2009 and 2008, was $8.5 million and $11.2 million, respectively. For the three months ended March 31, 2009, this amount consisted of interest income of $19,000 from cash and cash equivalents, $8.3 million of interest and dividend income from portfolio investments (which included $1.1 million in payment-in-kind or PIK interest and dividends), $167,000 in fee income and $9,000 in other investment income. For the three months ended March 31, 2008, this amount consisted of interest income of $53,000 from cash and cash equivalents, $11.0 million of interest and dividend income from portfolio investments (which included $1.5 million in payment-in-kind or PIK interest and dividends), $214,000 in fee income and $40,000 in other investment income.
Expenses for the three months ended March 31, 2009 and 2008, were $3.4 million and $4.5 million, respectively. Expenses decreased for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 by approximately $1.1 million, primarily as a result of lower compensation expense which decreased by $577,000, lower interest expense which decreased by $473,000, and lower general and administrative expenses which decreased by $58,000, offset by higher professional fees of $66,000. The lower compensation expense was principally attributable to the elimination of bonus accruals given the impact of the current market environment on our financial performance, reduction of employee headcount during the fourth quarter of 2008 and the first quarter of 2009, partially offset by an increase in non-cash stock award compensation of $18,000 due to the granting of additional stock options in 2008 and restricted stock awards in August 2008 and March 2009, and an increase in base salary for three of our executive officers. The decrease in interest expense was attributable to a decrease in market interest rates during the first quarter of 2009 and a decrease in weighted average borrowings outstanding, which were approximately $151.2 million during the three months ended March 31, 2009, as compared to $152.7 million during the three months ended March 31, 2008. Such borrowings historically were used primarily to fund investments. The decrease in general and administrative expenses is primarily the result of reduced travel and investor relations expenses. The increase in professional fees expense is primarily due to additional legal fees we incurred in 2009.
Net realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated cost. During the three months ended March 31, 2009, we realized a loss of $11.6 million due to the permanent impairment of loans to one of our portfolio companies. During the three months ended March 31, 2008, we sold one investment in which we realized a loss of $90,000.
Net unrealized appreciation (depreciation) on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. During the three months ended March 31, 2009 and 2008, we recorded net unrealized depreciation of $4.2 million and $9.9 million, respectively, on our investments. The unrealized depreciation in 2009 is net of an adjustment to reverse unrealized depreciation due to the permanent impairment of loans to one of our portfolio companies in connection with which we recognized a realized loss of $11.6 million. For 2009, our net unrealized depreciation consists of the following: approximately $417,000 of unrealized depreciation resulted from the decrease in quoted market prices on our syndicated loan portfolio as a result of the disruption in the credit markets for broadly syndicated loans; approximately $4.5 million resulted from a decline in the financial performance of our portfolio companies; offset by approximately $770,000 of unrealized appreciation which resulted from SFAS No. 157.
Net unrealized appreciation (depreciation) on interest rate swaps represents the change in value of the swap agreements. For the three months ended March 31, 2009 and 2008, we recorded unrealized appreciation (depreciation) of approximately $183,000 and ($753,000), respectively, on our interest rate swap agreements. The 2008 unrealized depreciation in the value of our interest rate swap agreements resulted from the volatility and corresponding reduction in variable interest rates during the period.
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