Capital Southwest Writes $391.0 Million Of New Loans In Its Biggest Quarter, But Per-Share Earnings Fall
The Dallas lender's portfolio reached $2.4 billion while net income per share fell to $0.33 from $0.46 a year earlier.
Capital Southwest, a Dallas business development company that lends to middle market businesses, originated $391.0 million in new commitments in the quarter ended September 30, which CEO Michael Sarner called the largest origination quarter in its history. Net income per basic share still fell to $0.33 from $0.46 a year earlier, the company said Monday.
Lending up, bottom line down
Total investment income reached $67.2 million, against $61.0 million in the prior quarter, on a larger base of invested assets. Pre-tax net investment income was $37.2 million, or $0.58 per share, up from $35.0 million the quarter before.
The net increase in net assets from operations was $21.4 million, down from $24.7 million in the prior quarter. Net realized and unrealized losses on investments were $13.4 million, including $14.6 million of depreciation on the credit portfolio, partly offset by $1.7 million of appreciation on equity holdings.
Net asset value per share edged up to $16.64 from $16.61, which the company attributed mainly to selling stock at a premium to NAV, partly offset by the investment losses.
What the company lends
Capital Southwest is an internally managed lender that provides debt and equity financing to lower middle market companies, mostly through first lien loans. The new commitments covered 14 new portfolio companies ($327.1 million) and add-ons at 16 existing ones ($63.9 million). It also committed $25 million to Desert Star, a new joint venture with Trinity Capital that gives it exposure to technology lending.
The total portfolio stood at $2.4 billion at fair value. Loans on non-accrual, meaning not paying interest as scheduled, had a fair value of $34.8 million, or 1.4% of the portfolio, and a cost basis of $85.5 million.
Bonds, stock and a bigger credit line
The company funded the growth with a $350 million issue of 6.750% notes due 2031 in September, used to pay down its corporate credit facility. It also sold stock through its at-the-market program, raising about $67.0 million at a weighted-average $24.50 a share.
The bank facility grew to $595 million from $510 million, with maturity pushed to September 2031. The regulatory debt-to-equity ratio ended the quarter at 1.00 to 1. The Small Business Administration also approved raising one subsidiary's leverage commitment to $250 million from $175 million.
The board kept its $0.58 regular dividend and $0.06 supplemental dividend for the December quarter. Management holds its earnings call Tuesday at 11:00 a.m. Eastern.
The quarterly 10-Q report, which carries the fuller detail, is still to be filed with the SEC.
Sources
- 8-K Filing — CAPITAL SOUTHWEST CORP (CSWC) — SEC EDGAR
- Exhibit q22027earningsrelease.htm — CAPITAL SOUTHWEST CORP 8-K exhibit — SEC EDGAR
- Exhibit q22027earningspresentati.htm — CAPITAL SOUTHWEST CORP 8-K exhibit — SEC EDGAR
- Capital Southwest (CSWC) Q3 earnings report preview: what to look for — Yahoo Finance
- Capital Southwest Announces Financial Results for Second — globenewswire.com
