Stellus Capital Investment Corporation (NYSE:SCM) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 11:00 am ET

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Stellus Capital Investment Corporation (NYSE:SCM) Q2 2020 Earnings Conference Call - Final Transcript

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Executive
W. Todd Huskinson

rates in our portfolio have LIBOR floors, which are approximately 1.2% on average. As a reminder, we announced in April that we would shift from monthly to quarterly distributions to have better visibility into the income for the quarter, our capital position and to better match the dividend with cash income.

Net asset value increased by $35 million or $1.79 per share to $260 million or $13.34 per share, due primarily to unrealized gains resulting from the tightening of market spreads.

With that, I'll turn it back over to Rob.

Executive
Robert Ladd

Okay. Thank you, Todd. I'd like to cover the following areas now, first, liquidity; then portfolio and asset quality; and finally, the outlook.

With respect to the portfolio, as I mentioned earlier, we remain in regular contact with our portfolio companies and sponsors, addressing their liquidity position, expected covenant compliance, the health of their workforce and customers and the current and expected impact of the pandemic on their operations and industries. I'm pleased to report that our portfolio companies' operations are stable and managing well in the current environment.

In the early part of the quarter, we did see an increase in revolver and delayed draw term loan funding requests from portfolio companies, which has since subsided and many have repaid. During the quarter, we funded $6.6 million of such loans and received repayments on these investments of $6.8 million over the same period. As of today, our remaining unfunded commitments are $30.7 million and we have cash and revolver capacity of $48 million, excluding cash and debenture availability at our SBIC subsidiaries.

And next, our overall asset quality is stable at a two out of five rating on our investment rating system, or on plan, if you will. 91% of our portfolio is rated two or better or on plan, that 9% is marked at a category of three or below. In total, we have loans to five portfolio companies on non-accrual status, which comprised 1.8% of fair value of the total loan portfolio. And no loans have been added to non-accrual status since April 1st.

We ended the quarter with an investment portfolio at fair value of $640.7 million in 65 portfolio companies, which is up from $609.5 million at March 31st, due primarily to the unrealized gains, as Todd mentioned earlier. During the second quarter, we did not make any investments in new portfolio companies. However, we are now beginning to see interesting opportunities. And since quarter-end, we made one investment in a new portfolio Company totaling $7.1 million, with one additional new investment and follow-on of approximately $10 million that's likely over the next week or so. These companies are SBIC qualifying and therefore are being funded with SBIC capital. We continue to make good diversification, with the largest industry sector at 15% of the total at fair value at June 30. The average investment per company is $9.9 million and the largest investment is $21.4 million, both at fair value. And finally, 60 out of