CM Finance Inc Announces Financial Results for the Fiscal Third Quarter Ended March 31, 2014

NEW YORK--()--CM Finance Inc (Nasdaq: CMFN) (“CMFN” or “the Company”) today announced financial results for its fiscal third quarter ended March 31, 2014. The Company reported net investment income of $1.8 million, or $0.13 per share, for the period from February 6, 2014 through March 31, 2014, and including net realized and unrealized gains of $0.3 million, earnings of $2.1 million, or $0.15 per share, for the same period. At March 31, 2014, net asset value (NAV) per share was $14.63.

On May 14, 2014, the Company’s Board of Directors declared a second calendar quarter dividend of $.3375 per share payable on July 1, 2014 to shareholders of record as of June 16, 2014.

On February 5, 2014, CM Finance LLC merged with and into the Company, with the Company as the surviving entity. Through this merger, the Company assumed the business activities of CM Finance LLC. On February 11, 2014, the Company announced that it closed its initial public offering of 7,666,666 shares at an offering price of $15.00 per share with net proceeds of approximately $111.5 million. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. The Company has consolidated its investments in CM Finance SPV, Ltd, a special purpose vehicle that is used to warehouse certain investments, in accordance with its consolidation policy.

Except as otherwise specified, references to "we," "us," and "our" refer to CM Finance LLC and its consolidated subsidiary for the periods prior to the merger, and refer to CM Finance Inc and its consolidated subsidiary for the periods after the merger.

Highlights

     
Portfolio results, as of March 31, 2014
Total Assets $ 318.9 mm
Investment portfolio, at fair value $ 227.0 mm
Net Assets $ 199.9 mm
Weighted Average yield on debt investments 10.17%
Net Asset Value per share $ 14.63
 
Portfolio activity in the current quarter
Number of new investments 9
Total capital invested $ 77.6 mm
Proceeds from repayments, sales, and amortization $ 56.2 mm
Number of portfolio companies, end of period 19
 
Net investment income $ 1.8 mm
Net investment income per share $ 0.13
Net increase in net assets from operations $ 2.1 mm
Net increase in net assets from operations per share $ 0.15
Dividend declared per share (paid March 31, 2014) $ 0.1812
 

Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said, “The first three months of the year presented a challenging environment for lenders. We remain committed to our disciplined underwriting standards and we were pleased to have strong originations in the quarter. Since our initial public offering in February, we have grown the portfolio to $227 million of investments, and we are pleased with the continued flow of high quality opportunities we have seen thus far in the fourth fiscal quarter.”

Portfolio and Investment Activities

During the quarter, we continued to grow and diversify our investment portfolio. We added nine new investments in the fiscal third quarter, which totaled approximately $77.6 million, and realized $56.2 million of repayments, sales proceeds, and amortization. Growth in net investments was approximately $23.3 million (at fair value). Our new investments during the quarter averaged $8.6 million, and had an average yield of 9.32% as of March 31, 2014. Of our nine investments in the fiscal third quarter, three were to new portfolio companies.

As of March 31, 2014, our investment portfolio consisted of investments in 19 portfolio companies with a fair value of $227.0 million, of which 36.0% were first lien investments, 46.2% were second lien investments, 10.9% were senior secured notes, 6.5% were unsecured notes, and 0.4% were warrant positions. The weighted average yield on our debt investments was approximately 10.17% at March 31, 2014. Our average portfolio company investment at fair value was approximately $11.9 million, and we had no nonperforming loans in the portfolio.

Capital Resources

As of March 31, 2014, we had $52.4 million of cash and $35.7 million in restricted cash and our net assets totaled $199.9 million.

 
CM Finance Inc and subsidiary
Consolidated Statements of Assets and Liabilities
 
 
March 31, 2014
Assets (Unaudited)
 
Non-controlled, non-affiliated investments, at fair value (amortized cost of $225,165,720) $ 226,968,690
Derivatives, at fair value (cost $0) 921,338
Cash 52,409,756
Cash, restricted 35,700,397
Due from broker 90,823
Interest receivable 1,820,308
Deferred debt issuance costs 640,228
Prepaid expenses and other assets   384,987  
Total Assets $ 318,936,527  
 
Liabilities
Notes payable:
Term loan $ 76,500,000
Revolving credit facility 35,020,623
Payable for investments purchased 4,975,000
Distributions payable 616,399
Directors' fees payable 125,000
Derivatives, at fair value (cost $0 and $0, respectively) 921,338
Interest payable 177,046
Accrued expenses and other liabilities   664,458  
Total Liabilities 118,999,864

 

Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,666,666 shares issued and outstanding) 13,667
Additional paid-in capital 198,720,187
Accumulated net realized gain 107,709
Distributions in excess of net investment income (707,870 )
Net unrealized appreciation on investments   1,802,970  
Total Net Assets   199,936,663  
Total Liabilities and Net Assets $ 318,936,527  
 
Net Asset Value Per Share $ 14.63
 
 
CM Finance Inc and subsidiary
Consolidated Statements of Operations (Unaudited)
 
 

For the three
months ended

Investment Income: March 31, 2014
Interest income $ 4,908,129
Payment in-kind interest income 412,587
Other fee income   213,382  
Total investment income 5,534,098
 
Expenses:
Base management fees 455,934

Performance-based incentive fees

-
Custodian and administrator fees 56,433
Directors' fees 125,000
Professional fees 178,013
Interest expense 662,838
Amortization of deferred debt issuance costs 180,120
Other expenses   180,183  
Total expenses 1,838,521
Waiver of base management fees from Investment Manager   (455,934 )
Net expenses   1,382,587  
Net investment income (1)   4,151,511  
 
Net realized and unrealized gains (losses) on investment transactions:
Net realized gains (losses) on investments attributable to CM Finance LLC 122,682
Net realized gains (losses) on investments attributable to CM Finance Inc 107,709
Net change in unrealized appreciation (depreciation) on investments attributable to CM Finance LLC 1,128,765
Net change in unrealized appreciation (depreciation) on investments attributable to CM Finance Inc   186,834  
Net realized and unrealized gains (losses)   1,545,990  
Net increase in net assets resulting from operations $ 5,697,501  
 
Net increase in net assets resulting from operations attributable to CM Finance LLC $ 3,633,977  
 
Net increase in net assets resulting from operations attributable to CM Finance Inc $ 2,063,524  
 
CM Finance Inc:
Basic and diluted:
Net investment income per share $ 0.13
Earnings per share $ 0.15
Weighted Average Shares of Common Stock Outstanding 13,666,666
 
Dividends declared per common share $ 0.1812  
 
(1) Net investment income attribution:

For the three
months ended

March 31, 2014

Net investment income attributable to CM Finance LLC $ 2,382,530  
 
Net investment income attributable to CM Finance Inc $ 1,768,981  
 

About CM Finance Inc

The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50 million and earnings before interest, taxes, depreciation and amortization of at least $20 million. The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com.

Forward-Looking Statements

Statements included herein may contain “forward-looking statements,” which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release.

Contacts

CM Finance Inc
Michael C. Mauer, 212-257-5199
Chief Executive Officer
mm@cmfn-inc.com

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Contacts

CM Finance Inc
Michael C. Mauer, 212-257-5199
Chief Executive Officer
mm@cmfn-inc.com