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BlackRock Kelso Capital Corporation Declares Regular Quarterly Dividend Of $0.26 Per Share, Announces September 30, 2013 Quarterly Financial Results

During the quarter, we also finalized the restructuring of a portfolio company we have been actively engaged in since year end. Details of the transaction are as follows:

  • During July 2013, we restructured our investment in the 16.0% first lien term loan of The Bargain! Shop Holdings Inc. (“TBS”). We completed the purchase of substantially all of TBS assets through a newly-formed entity called Red Apple Stores Inc. (“Red Apple”). The majority of the existing term loan was converted into $20.0 million of a new 16.0% senior secured term loan and the remaining $1.5 million was converted to common equity. Additionally, we contributed $12.0 million to Red Apple in the form of a $5.0 million 18.0% subordinated PIK note and another $7.0 million for a controlling interest in its common equity. The entire investment was valued at par as of September 30, 2013. We also received a $1.3 million capital structuring fee in conjunction with our services performed in structuring the transaction.

At September 30, 2013, our portfolio consisted of 47 portfolio companies and was invested 48% in senior secured loans, 21% in equity investments, 19% in senior secured notes, 11% in unsecured or subordinated debt securities, and 1% in cash and cash equivalents. As compared to the prior quarter, the composition of our portfolio invested in senior secured loans increased 5% while our senior secured notes and cash equivalents components declined 5%. Our average portfolio company investment at amortized cost, excluding investments below $5.0 million, was approximately $21.6 million at September 30, 2013, down from $22.6 million at the prior quarter end.

The weighted average yield of the debt and income producing equity securities in our portfolio at its current cost basis was 11.7% at September 30, 2013 versus 12.1% at the prior quarter end. The weighted average yields on our senior secured loans, and our other debt securities at their current cost basis were 10.9% and 13.2%, respectively, at September 30, 2013. The 40 basis point decline in our total portfolio yield during the current quarter was anticipated as we shifted the composition of our portfolio into slightly lower yielding more senior loans. Yields exclude common equity investments, preferred equity investments with no stated dividend rate, short-term investments and cash and cash equivalents. In certain of our portfolio companies, we hold equity positions ranging from minority interests to majority stakes, which we expect will contribute to our investment returns over time. We are also now better positioned to benefit in a rising rate environment as the percentage of our debt portfolio invested in floating rate securities shifted up 5.9% this quarter to 47.5%.

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