On August 1, 2024, Great Elm Capital Corp (GECC, Financial) released its 8-K filing for the second quarter ended June 30, 2024. Great Elm Capital Corp is an externally managed, non-diversified closed-end management investment company that seeks to generate current income and capital appreciation through debt and equity investments, including investments in specialty finance businesses.
Performance Overview
Great Elm Capital Corp (GECC, Financial) reported net investment income (NII) of $3.1 million, or $0.32 per share, for the second quarter of 2024, down from $3.2 million, or $0.37 per share, in the previous quarter. This result fell short of the analyst estimate of $0.34 per share. The company's total investment income for the quarter was $9.5 million, slightly below the estimated revenue of $9.68 million.
Financial Achievements and Challenges
During the quarter, GECC raised $12 million of equity at Net Asset Value from Prosper Peak Holdings, LLC, and issued $34.5 million of 8.50% notes due 2029 to enhance liquidity and balance sheet flexibility. Additionally, in July, the company issued $22 million of additional GECCI Notes in a registered direct offering to an institutional investor.
However, the company faced challenges with further write-downs on illiquid assets, adversely impacting the Net Asset Value (NAV) by approximately $0.39 per share. As a result, the NAV decreased to $12.06 per share on June 30, 2024, from $12.57 per share on March 31, 2024.
Income Statement Highlights
| Metric | Q2 2024 | Q1 2024 |
|---|---|---|
| Net Investment Income (NII) Per Share | $0.32 | $0.37 |
| Total Investment Income | $9.5 million | $9.68 million (estimate) |
| Net Realized and Unrealized Losses Per Share | ($0.46) | ($0.42) |
| Net Asset Value (NAV) Per Share | $12.06 | $12.57 |
Balance Sheet and Cash Flow
As of June 30, 2024, GECC held total investments of $297.7 million at fair value, with a weighted average current yield on the debt portfolio of 13.1%. The company's cash and money market securities totaled approximately $3.0 million. Total debt outstanding was $177.6 million, comprising various senior notes with maturities ranging from 2025 to 2029.
Management Commentary
"We are pleased to have raised an additional $34 million of fresh capital in June and July, bringing our total 2024 capital raising activities to over $90 million year-to-date. These capital raises further strengthen our balance sheet and position us well to expand our investment portfolio," said Matt Kaplan, GECC’s Chief Executive Officer. "While there was some residual negative effect on NAV in the quarter, as the same illiquid portfolio company investments placed on non-accrual from the previous quarter experienced further write-downs, we believe the bulk of the impact has now been realized. Our investments in CLOs are also beginning to bear fruit, with our first distribution received in July, enabling us to capitalize on strong yields and boost NII in the second half of the year. We remain well-positioned to grow our platform and cover our dividend."
Dividend and Future Outlook
The Board of Directors approved a quarterly dividend of $0.35 per share for the third quarter of 2024, equating to a 13.0% annualized yield on the company’s closing market price on July 31, 2024, of $10.73. This dividend reflects GECC's commitment to providing consistent returns to its shareholders despite the challenges faced during the quarter.
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Great Elm Capital Corp for further details.
