HOUSTON--(BUSINESS WIRE)--(NYSE:KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter ended February 28, 2014.
- The Company increased its quarterly distribution to $0.51 per share, up 2.0% from the prior quarter
- Net asset value of $31.02 per share at February 28, 2014, up $1.06 per share (3.5%) from November 30, 2013
- Net investment loss of $0.3 million
- Net realized gains of $13.2 million
- Net unrealized gains of $3.4 million
RESULTS OF OPERATIONS – QUARTER ENDED FEBRUARY 28, 2014
Investment income totaled $2.3 million for the quarter and consisted of net dividends and distributions. The Company received $8.3 million of dividends and distributions, of which $6.0 million was treated as a return of capital. The Company received $0.3 million of paid-in-kind dividends, which are not included in investment income, but are reflected as an unrealized gain.
Operating expenses totaled $2.8 million, including $1.8 million of investment management fees (net of fee waiver), $0.6 million of interest expense and $0.4 million of other operating expenses. Interest expense included $0.2 million of amortization of debt offering costs. KA Fund Advisors, LLC, the Company’s investment adviser, agreed to waive 0.25% of its 1.75% management fee for a one-year period effective October 3, 2013.
The Company’s net investment loss totaled $0.3 million and included a current tax benefit of $0.03 million and a deferred tax benefit of $0.2 million.
The Company had net realized gains from investments of $13.2 million after taking into account a current tax expense of $1.2 million and a deferred tax expense of $6.5 million.
The Company had a net increase in unrealized gains of $3.4 million. The net increase consisted of $5.4 million of unrealized gains from investments and a deferred tax expense of $2.0 million.
The Company had an increase in net assets resulting from operations of $16.3 million. This increase was comprised of net investment loss of $0.3 million, net realized gains of $13.2 million and net unrealized gains of $3.4 million, as noted above.
NET ASSET VALUE AS OF FEBRUARY 28, 2014
As of February 28, 2014, the Company’s net asset value was $325.0 million or $31.02 per share.
As of February 28, 2014, the Company had long-term investments of $491.4 million, of which approximately 94% were public MLPs and other public equity securities and 6% was a private MLP. The Company’s long-term investments consisted of 54 portfolio companies.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 2014, the Company had $82.0 million of borrowings under its credit facility (at an interest rate of 1.76%), which represented 39.6% of its borrowing base of $207.0 million. At the same date, the Company’s asset coverage ratio under the Investment Company Act of 1940 was 496%.
On January 28, 2014, the Company renewed its credit facility with a syndicate of lenders. The new credit facility has a three-year commitment, maturing on January 28, 2017, and a total commitment amount of $120.0 million. The interest rate on the facility based on current borrowings and current borrowing base is LIBOR plus 1.60% (prior to the renewal, the interest rate was LIBOR plus 2.00%). If borrowings exceed the borrowing base attributable to “quoted” securities, the interest rate will increase to LIBOR plus 3.00%. The Company pays a fee of 0.30% per annum on any unused amounts of the credit facility (the fee was 0.50% per annum prior to the renewal).
The maximum amount that the Company can borrow under its new credit facility is limited to the lesser of its commitment amount of $120.0 million and its borrowing base. The Company’s borrowing base, subject to certain limitations, is generally calculated by multiplying the fair value of each of the Company’s investments by an advance rate. The total contribution to the Company’s borrowing base from private MLPs is limited to no more than 25% of the total borrowing base, and there is a $12.0 million limit on the borrowing base contribution from any single issuer.
As of April 23, 2014, the Company had $2.6 million of cash and $93.0 million of borrowings under its credit facility (at an interest rate of 1.76%), which represented 43.0% of its borrowing base of $216.2 million . At the same date, the Company’s asset coverage ratio under the Investment Company Act of 1940 was 472%.
On March 27, 2014, the Company declared a distribution of $0.51 per share for the quarter ended February 28, 2014, which was paid on April 25, 2014.
As a result of changes in the portfolio since February 28, 2014, the Company’s guidance is based on its portfolio as of April 23, 2014. The yield information in the table below reflects the distributions paid in the prior quarter, with the exception of Emerge Energy Services LP (“Emerge”), which is based on its first quarter 2014 distribution of $1.13 per unit, and VantaCore Partners LP (“VantaCore”), which is based on distributions of $0.98 million. Distributions from VantaCore are based on the cash distributions the Company expects to receive, on average, over the next four quarters of $0.342 per common unit and preferred A unit and $0.3825 per preferred B unit. The Company’s guidance does not include $0.346 million per quarter of non-cash distributions that the Company expects to receive on VantaCore’s common and preferred A units. The Company’s guidance does not reflect changes in cash distributions made by MLPs since February 28, 2014 (except the distribution from Emerge as noted above).
($ in millions)
|Public MLPs and Other Public Equity||$ 506||5.9%|
|Private MLP (VantaCore)||32||12.3|
|(1)||Average yields include return of capital distributions. Return of capital distributions are reported as a reduction to gross dividends and distributions to arrive at net investment income reported under generally accepted accounting principles.|
|(2)||Average yields for Public MLPs and Other Public Equity are based on the distributions paid during KED’s fiscal first quarter, other than Emerge. Amount invested and average yield for VantaCore are based on February 28, 2014 valuations.|
Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.95 million for the quarter. Other operating expenses are estimated to be approximately $0.33 million per quarter.
Interest Expense – Interest expense is estimated to be $0.425 million for the quarter, based on interest incurred through April 23rd and an estimated average balance of $100 million for the remainder of the quarter.
Based on the foregoing assumptions, the Company expects to generate adjusted net distributable income (“adjusted NDI”) per share of $0.54 to $0.55 in the second quarter of fiscal 2014. The Company’s guidance incorporates a distribution of $1.13 per unit from Emerge, which is KED’s largest portfolio investment. Emerge is a variable rate MLP that pays quarterly distributions based on the amount of cash flow generated in such quarter. The Company’s guidance is based on average quarterly cash distributions from VantaCore over the next twelve months. Actual quarterly distributions received will fluctuate over this time period. As a result, the Company’s quarterly adjusted NDI will vary based on quarterly distributions paid by Emerge and VantaCore.
The Company’s filings with the Securities and Exchange Commission, press releases and other financial information are available on the Company’s website at www.kaynefunds.com.
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 2014
(amounts in 000’s, except share and per share amounts)
|Investments, at fair value:|
|Non-affiliated (Cost — $270,204)||$||362,186|
|Affiliated (Cost — $57,676)||129,228|
|Total investments (Cost — $327,880)||491,414|
|Receivable for securities sold||51|
|Interest, dividends and distributions receivable||104|
|Debt offering costs, prepaid expenses and other assets||1,719|
|Payable for securities purchased||3,584|
|Investment management fee payable||1,779|
|Accrued directors’ fees and expenses||82|
|Accrued expenses and other liabilities||416|
|Current income tax liability||533|
|Deferred income tax liability||82,405|
|NET ASSETS CONSIST OF|
|Common stock, $0.001 par value (200,000,000 shares authorized; 10,479,216 shares issued and outstanding)||$||10|
|Accumulated net investment loss, net of income taxes, less dividends||(61,412||)|
|Accumulated net realized gains on investments, net of income taxes||80,692|
|Net unrealized gains on investments, net of income taxes||102,899|
|NET ASSET VALUE PER SHARE||$||31.02|
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 2014
(amounts in 000’s)
|Dividends and distributions:|
|Total dividends and distributions||8,276|
|Return of capital||(5,949||)|
|Total Investment Income||2,327|
|Investment management fees, before investment management fee waiver||2,075|
|Directors’ fees and expenses||72|
|Total Expenses — before fee waiver and interest expense||2,464|
|Investment management fee waiver||(296||)|
|Interest expense and amortization of offering costs||642|
|Net Investment Loss — Before Income Taxes||(483||)|
|Current income tax benefit||29|
|Deferred income tax benefit||166|
|Net Investment Loss||(288||)|
|REALIZED AND UNREALIZED GAINS (LOSSES)|
|Net Realized Gains|
|Investments — non-affiliated||3,331|
|Investments — affiliated||17,602|
|Current income tax expense||(1,155||)|
|Deferred income tax expense||(6,548||)|
|Net Realized Gains||13,230|
|Net Change in Unrealized Gains|
|Investments — non-affiliated||9,948|
|Investments — affiliated||(4,585||)|
|Deferred income tax expense||(1,974||)|
|Net Change in Unrealized Gains||3,389|
|Net Realized and Unrealized Gains||16,619|
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS||$||16,331|
The Company is a non-diversified, closed-end investment company registered under the Investment Company Act of 1940. The Company's investment objective is to generate both current income and capital appreciation primarily through equity and debt investments. The Company will seek to achieve this objective by investing at least 80% of its total assets in securities of companies that derive the majority of their revenue from activities in the energy industry, including: (a) Midstream Energy Companies, which are businesses that operate assets used to gather, transport, process, treat, terminal and store natural gas, natural gas liquids, propane, crude oil or refined petroleum products; (b) Upstream Energy Companies, which are businesses engaged in the exploration, extraction and production of natural resources, including natural gas, natural gas liquids and crude oil, from onshore and offshore geological reservoirs; and (c) Other Energy Companies, which are businesses engaged in owning, leasing, managing, producing, processing and sale of coal and coal reserves; the marine transportation of crude oil, refined petroleum products, liquefied natural gas, as well as other energy-related natural resources using tank vessels and bulk carriers; and refining, marketing and distributing refined energy products, such as motor gasoline and propane to retail customers and industrial end-users.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements" as defined under the U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Company's historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; energy industry risk; commodity pricing risk; leverage risk; valuation risk; non-diversification risk; interest rate risk; tax risk; and other risks discussed in the Company's filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Company's investment objectives will be attained.