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Kayne Anderson Energy Development Company Announces Results For The Quarter Ended May 31, 2012

Business Wire

07/24/12 - 04:01 PM EDT

(NYSE:KED) Kayne Anderson Energy Development Company (the “Company”) today announced its financial results for the quarter ended May 31, 2012.

HIGHLIGHTS

RESULTS OF OPERATIONS – QUARTER ENDED MAY 31, 2012

Investment income totaled $2.5 million for the quarter and consisted primarily of net dividends and distributions and interest income. The Company received $4.9 million of cash dividends and distributions, of which $3.8 million was treated as a return of capital during the period. During the quarter, the Company received $1.5 million of interest income, of which $0.4 million was paid-in-kind interest from ProPetro Services, Inc. (“ProPetro”). The Company also received $0.6 million of paid-in-kind distributions, of which $0.4 million was from VantaCore Partners LP (“VantaCore”). These paid-in-kind distributions are not included in investment income, but are reflected as an unrealized gain.

Operating expenses totaled $2.4 million, including $1.5 million of investment management fees; $0.6 million of interest expense and $0.3 million of other operating expenses. Interest expense included $0.1 million of amortization of debt issuance costs. Investment management fees were equal to an annual rate of 1.75% of average total assets.

The Company’s net investment income totaled $0.04 million and included a deferred income tax expense of $0.03 million.

The Company had net realized gains from investments of $2.9 million, after taking into account a deferred income tax expense of $1.8 million.

The Company had a net change in unrealized losses from investments of $18.2 million. The net change consisted of $28.9 million of unrealized losses and a deferred income tax benefit of $10.7 million.

The Company had a decrease in net assets resulting from operations of $15.3 million. This decrease was comprised of net investment income of $0.04 million; net realized gains of $2.9 million; and net unrealized losses of $18.2 million, as noted above.

NET ASSET VALUE

As of May 31, 2012, the Company’s net asset value was $235.2 million or $22.68 per share. This represents a decrease of $1.86 per share for the quarter.

PORTFOLIO

As of May 31, 2012, the Company had long-term investments of $321.4 million, of which approximately 56% were public MLPs and other public equity securities, 26% were private MLPs and other private equity securities and 18% were debt securities. The Company’s long-term investments consisted of 47 portfolio companies.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2012, the Company had $79.0 million of borrowings under its credit facility (at an interest rate of 2.27%), which represented 63.1% of its borrowing base of $125.2 million (69.7% of its borrowing base attributable to quoted securities). At the same date, the Company’s asset coverage ratio under the Investment Company Act of 1940 was 398%. The maximum amount that the Company can borrow under its credit facility is limited to the lesser of the commitment amount of $85.0 million or its borrowing base. As of July 19, 2012, the Company had $80.0 million borrowed under its credit facility and had $5.4 million in cash. Outstanding borrowings represented 61.1% of the borrowing base of $131.0 million (67.5% of its borrowing base attributable to quoted securities).

DISTRIBUTION

On June 28, 2012, the Company declared a distribution of $0.41 per share for the quarter ended May 31, 2012, which was paid on July 20, 2012 to stockholders of record on July 13, 2012. This distribution represents an increase of 5.1% from the prior quarter’s distribution of $0.39 per share and an increase of 7.9% from the distribution for the quarter ended May 31, 2011.

GUIDANCE

The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $6.9 million in the next quarter. This estimate includes cash distributions of $1.5 million per quarter for Direct Fuels. The estimate also includes distributions of $0.6 million per quarter from VantaCore, which is based on only the cash distribution the Company expects to receive, on average, over the next four quarters of $0.275 per common and preferred A unit. Unlike prior guidance, the Company’s estimate does not include payment-in-kind distributions that the Company expects to receive on VantaCore’s common and preferred A units. The Company’s guidance does not reflect any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since May 31, 2012.

                                     
Portfolio Category          

AmountInvested($ in millions)

      Average AnnualYield (1)(2)  
Private MLPs (3)(4)             $   80           11.0 %    
Public MLPs and Other Public Equity (4)                 176           7.2      
Debt Investments (5)(6)                 58           10.6      
       
(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 most recently declared distributions as of May 31, 2012. Amounts invested for Private MLPs are based on May 31, 2012 valuations.
 
(3) The amount invested excludes the Company’s equity investment in ProPetro (valued at $7.5 million as of May 31, 2012), which does not pay a dividend.
 
(4) Amounts are pro forma for a partial distribution the Company expects to receive related to the $4.8 million incremental investment in VantaCore. The Company made this investment on June 8, 2012 and, as a result, will only receive approximately 25% of the distribution with respect to VantaCore’s second quarter. The investment was funded with proceeds from the sale of public MLPs and other public equity. The amounts in the table above are pro forma for the sale of these public securities.
 
(5) The average yield includes straight-line amortization of the purchase price discounts/premiums through the expected maturity.
 
(6) The amount invested includes the Company’s $12.8 million debt investment in ProPetro. This investment pays paid-in-kind interest at an annual rate of 13.0%.
 

Management Fees and Other Operating Expenses – Management fees are estimated to be approximately $1.44 million per quarter. Other operating expenses are estimated to be approximately $0.40 million per quarter.

Interest Expense – Interest expense is estimated to be approximately $0.46 million per quarter based on $82.5 million borrowed under the Company’s credit facility, assuming a 30-day LIBOR rate of 0.24% and a spread of 2.00%.

Based on the foregoing assumptions, the Company is expected to generate net distributable income (“NDI”) per share of $0.44 to $0.45 in the third quarter of fiscal 2012.

CONFERENCE CALL

The Company will host a conference call at 4 p.m. Central time, on July 24, 2012 to discuss its results. All interested parties are welcome to participate. You can access the conference call by dialing (877) 563-8315 approximately 5-10 minutes prior to the call. International callers should dial (706) 679-4383. All callers should reference "Conference ID # 97250332". For the convenience of the Company’s stockholders, an archived replay of the call will be available on the Company’s website ( www.kaynefunds.com/ked/webcasts-and-presentations/).

AVAILABLE INFORMATION

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

MAY 31, 2012

(amounts in 000’s, except share and per share amounts)

(UNAUDITED)

         
ASSETS
Investments, at fair value:
Non-affiliated (Cost — $184,577) $ 200,760
Affiliated (Cost — $127,567)   120,679  
Total investments (Cost — $312,144) 321,439
Cash 2,024
Income tax receivable 332
Receivable for securities sold 1,178
Interest, dividends and distributions receivable 833
Other receivable 5,030
Debt issuance costs, prepaid expenses and other assets   1,042  
Total Assets   331,878  
LIABILITIES
Credit facility 79,000
Deferred income tax liability 15,397
Payable for securities purchased 157
Investment management fee payable 1,501
Accrued directors’ fees and expenses 72
Accrued expenses and other liabilities   511  
Total Liabilities   96,638  
NET ASSETS $ 235,240  
NET ASSETS CONSIST OF
Common stock, $0.001 par value (200,000,000 shares authorized; 10,372,420 shares issued and outstanding) $ 10
Paid-in capital 200,117
Accumulated net investment loss, net of income taxes, less dividends (28,845 )
Accumulated net realized gains on investments, net of income taxes 58,453
Net unrealized gains on investments, net of income taxes   5,505  
NET ASSETS $ 235,240  
NET ASSET VALUE PER SHARE $ 22.68  
 
 

KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MAY 31, 2012

(amounts in 000’s)

(UNAUDITED)

             
INVESTMENT INCOME
Income
Dividends and Distributions:
Non-affiliated investments $ 2,545
Affiliated investments 2,329
Total dividends and distributions 4,874
Return of capital (3,836)
Net dividends and distributions 1,038
Interest and other income — non-affiliated investments 1,051
Interest — affiliated investments 425
Total investment income 2,514
Expenses
Investment management fees 1,501
Professional fees 134
Directors’ fees and expenses 76
Insurance 26
Administration fees 22
Custodian fees 11
Other expenses 65
Total expenses — before interest expense 1,835
Interest expense 602
Total expenses 2,437
Net Investment Income — Before Income Taxes 77
Deferred income tax expense (33)
Net Investment Income 44
REALIZED AND UNREALIZED GAINS (LOSSES)
Net Realized Gains (Losses)
Investments — non-affiliated 4,676
Investments — affiliated (9)
Deferred income tax expense (1,757)
Net Realized Gains 2,910
Net Change in Unrealized Gains (Losses)
Investments — non-affiliated (22,369)
Investments — affiliated (6,536)
Deferred income tax benefit 10,697
Net Change in Unrealized Losses (18,208)
Net Realized and Unrealized Losses (15,298)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (15,254)
 

The Company is a non-diversified, closed-end investment company that elected to be treated as a business development company 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 net assets together with the proceeds of any borrowings (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.


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