HIGHLIGHTS
Quarter Ended March 31, 2008
($ in millions, except per share amounts)
Investment portfolio $ 335.9
Net assets $ 216.3
Net asset value per share $ 10.26
Amount drawn under credit facility (excluding
temporary draw) $ 114.5
Investment portfolio composition and yield:
Subordinated debt, second lien secured debt, and
equity $ 201.8
First lien secured debt $ 134.1
Weighted average yield on debt 9.2%
Weighted average yield on subordinated and second
lien secured debt 11.7%
Weighted average yield on first lien secured debt 5.3%
Operating Results:
Net investment income $ 4.4
Net investment income per share $ 0.21
Dividends to stockholders per share $ 0.22
Portfolio Activity:
Purchases of long term investments $ 31.5
Sales and repayments of long term investments $ 0.9
Number of new portfolio companies invested 2
Number of portfolio companies at end of period 40
CONFERENCE CALL AT 10:00 A.M. ET ON MAY 9, 2008
PennantPark Investment Corporation, (the "Company") will host a conference
call at 10:00 a.m. (Eastern Time) on Friday, May 9, 2008 to discuss the
quarterly results. All interested parties are welcome to participate. You
may access the conference call by dialing (866) 225-6564 approximately 5-10
minutes prior to the call. International callers should dial
(416) 641-6136. All callers should reference "PennantPark Investment
Corporation." An archived replay of the call will be available through May
23, 2008 by calling (800) 408-3053. International callers please dial (416)
695-5800. For all replays, please reference conference ID #3260084.
PORTFOLIO AND INVESTMENT ACTIVITY
On March 31, 2008, our portfolio consisted of $92.6 million of subordinated
debt, $100.6 million of second lien secured debt, $8.6 million of equity
investments and $134.1 million of senior secured loans. Our core assets,
which include subordinated debt, second lien secured debt and equity
investments, totaled $201.8 million and consisted of investments in 14
different companies with an average investment size of $14.4 million per
company and a weighted average yield of 11.7 % on the debt investments. On
March 31, 2008, our senior secured loan portfolio totaled $134.1 million
and consisted of 28 different companies (including two companies also in
our core portfolio) with an average investment size of $4.8 million, and a
weighted average yield of 5.3%. The overall portfolio had a weighted
average yield on debt investments of 9.2%. Due to continued erosion in
quoted prices of leveraged finance instruments, the portfolio had
unrealized depreciation of $77.7 million at quarter-end. On March 31, 2008,
our portfolio consisted of 40 companies and was invested 28% in
subordinated debt, 30% in second lien secured debt, 2% in equity
investments and 40% in senior secured loans.
For the three months ended March 31, 2008, we invested $31.5 million in two
new companies with an average yield of 14.4% on the debt investments. Sales
and repayments of long-term investments for the three months ended March
31, 2008 totaled $0.9 million. For the six months ended March 31, 2008, we
invested $102.5 million across five new and two existing portfolio
companies with an average yield of 13.3% on the debt investments. Sales and
repayments of long-term investments for the six months ended March 31, 2008
totaled $5.2 million.
"Because we have the capital resources to make long term investment
decisions based on fundamental value, PennantPark is uniquely positioned to
take advantage of the market correction," said Arthur Penn, Chairman and
Chief Executive Officer. "The investments we are making in this market
environment have lower leverage, higher yields and better covenants than we
have seen in years."
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three and six months
ended March 31, 2008.
Investment Income
Investment income was $9.7 million and $18.7 million, respectively, for the
three and six months ended March 31, 2008. Investment income was primarily
attributed to interest income from debt investments. Origination and
commitment fees associated with investments in portfolio companies are
accreted into interest income over the respective terms of the applicable
loans, and are accelerated into interest income upon exit, if applicable.
Expenses
Net expenses totaled $5.3 million and $9.5 million, respectively, for the
three and six months ended March 31, 2008. Of these totals, $1.7 million
and $2.8 million were attributable to credit facility related expenses, and
$1.1 million and $2.4 million to general and administrative expenses,
respectively, for the three and six months ended March 31, 2008. Net base
management fee totaled $1.5 million and $2.9 million, and performance-based
incentive fee totaled $1.0 million and $1.4 million, respectively, for the
same periods.
Net Investment Income
Net investment income totaled $4.4 million and $9.2 million or $0.21 and
$0.44 per share, respectively, for the three and six months ended March 31,
2008.
Net Realized Loss
Sales and repayments of long-term investments totaled $0.9 million and $5.2
million, respectively, for the three and six months ended March 31, 2008,
and net realized losses totaled approximately $8,500 and $219,000,
respectively, for the same periods.
Net Unrealized Depreciation on Investments and Cash Equivalents
The Company's investments and cash equivalents had a net increase in
depreciation of $37.8 million and $53.8 million, respectively, for the
three and six months ended March 31, 2008. On March 31, 2008, net
unrealized depreciation on investments and cash equivalents totaled $77.7
million, primarily due to the continued downturn in the leveraged finance
credit market which began during the second half of 2007.
Net Decrease in Net Assets From Operations
Net decrease in net assets resulting from operations totaled $33.3 million
and $44.9 million, or $1.58 and $2.13 per share, respectively, for the
three and six months ended March 31, 2008.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources are generated primarily
through its senior secured, multi-currency, $300 million, five-year
revolving credit facility maturing in June 2012 as well as from cash flows
from operations, investment sales and prepayments, and income earned from
investments and cash equivalents. On March 31, 2008, the Company had
$194.5 million in borrowings outstanding; including $80.0 million of
temporary draws invested in cash equivalents. Our operating activities
resulted in a net use of cash of $98.9 million and $351.9 million,
respectively, for the three and six months ended March 31, 2008, and our
financing activities resulted in a net inflow of cash of $98.3 million and
$175.2 million, respectively, for the same periods, primarily from net
borrowings under our credit facility.
DIVIDENDS
Dividends paid to stockholders totaled $4.6 million and $9.3 million, or
$0.22 and $0.44 per share, respectively, for the three and six months ended
March 31, 2008. Tax characteristics of all dividends will be reported to
stockholders on form 1099-DIV after the end of the calendar year.
PENNANTPARK INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
March 31, September 30,
2008 2007
(Unaudited)
------------- -------------
Assets
Investments, at fair value (cost--
$413,632,567 and $314,881,870
respectively)(1) $ 335,883,881 $ 291,016,608
Cash equivalents (cost--$81,249,903 and
$258,016,351 respectively) 81,249,903 257,959,635
Interest receivable 5,070,891 4,517,850
Prepaid expenses and other assets 1,494,991 1,513,583
------------- -------------
Total assets 423,699,666 555,007,676
------------- -------------
Liabilities
Payable for cash equivalents purchased - 252,759,931
Payable for investments purchased 8,620,000 16,583,921
Unfunded investments 2,607,264 3,989,948
Credit facility payable 194,500,000 10,000,000
Interest payable 765,233 170,989
Accrued other expenses 949,664 1,109,793
------------- -------------
Total liabilities 207,442,161 284,614,582
------------- -------------
Net Assets
Common stock, par value $.001 per share,
100,000,000 shares authorized and 21,068,772
shares issued and outstanding 21,069 21,069
Paid-in capital in excess of par 294,586,604 294,586,604
Distributions in excess of net investment
income (286,276) (196,769)
Accumulated net realized loss (315,206) (95,832)
Net unrealized depreciation on investments
and cash equivalents (77,748,686) (23,921,978)
------------- -------------
Total net assets $ 216,257,505 $ 270,393,094
------------- -------------
Total liabilities and net assets $ 423,699,666 $ 555,007,676
------------- -------------
Net asset value per share $ 10.26 $ 12.83
============= =============
(1) None of our portfolio companies are controlled by, or affiliated with,
PennantPark Investment Corporation as defined by the Investment Company
Act of 1940, as amended.
PENNANTPARK INVESTMENT CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Period from
January 11,
2007
Three months (inception) Six months
ended through ended
March 31, March 31, March 31,
2008 2007 2008
Investment income:
Interest $ 9,678,012 $ 772,983 $ 18,661,648
Other 35,910 - 55,882
------------- ------------- -------------
Total investment income 9,713,922 772,983 18,717,530
------------- ------------- -------------
Expenses:
Base management fee 1,725,466 - 3,365,841
Performance-based
incentive fee 1,000,725 - 1,448,107
Interest and other credit
facility expenses 1,669,296 740,975 2,766,403
Administrative services
expenses 548,631 - 1,212,321
Professional fees 227,571 - 522,411
Directors' fees 116,257 - 272,015
Organizational expenses - 283,228 -
Insurance 89,813 - 180,593
Other general and
administrative expenses 102,973 - 189,817
------------- ------------- -------------
Expenses before base
management fee waiver 5,480,732 1,024,203 9,957,508
------------- ------------- -------------
Base management fee waiver (215,684) - (420,731)
------------- ------------- -------------
Net expenses 5,265,048 1,024,203 9,536,777
------------- ------------- -------------
Net investment income
(loss) 4,448,874 (251,220) 9,180,753
------------- ------------- -------------
Realized and unrealized loss
on investments and cash
equivalents:
Net realized loss on
investments and cash
equivalents (8,483) 19,375 (219,374)
Change in net unrealized
depreciation on
investments and cash
equivalents (37,769,064) (1,701) (53,826,708)
------------- ------------- -------------
Net realized and
unrealized loss from
investments and cash
equivalents (37,777,547) 17,764 (54,046,082)
------------- ------------- -------------
Net decrease in net assets
resulting from operations $ (33,328,673) $ (233,546) $ (44,865,329)
============= ============= =============
Loss per common share $ (1.58) $ (2.92) $ (2.13)
============= ============= =============
ABOUT PENNANTPARK INVESTMENT CORPORATION
PennantPark Investment Corporation is a business development company which
principally invests in U.S. middle-market private companies in the form of
mezzanine debt, senior secured loans and equity investments. From time to
time, we may also invest in public companies whose securities are thinly
traded. PennantPark Investment Corporation is managed by PennantPark
Investment Advisers, LLC.
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this press
release are 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.
We may use words such as "anticipates," "believes," "expects," "intends,"
"will," "should," "may" and similar expressions to identify forward-looking
statements. Such statements are based on currently available operating,
financial and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially from our
historical experience and our present expectations. Undue reliance should
not be placed on such forward-looking statements as such statements speak
only as of the date on which they are made. We do not undertake to update
our forward-looking statements unless required by law.
Contact Information: Contact: Aviv Efrat PennantPark Investment Corporation (212) 905-1000 Or visit us on the web at: www.pennantpark.com