MCG Capital Corporation (MCGC) Q1 2010 Earnings Call Transcript May 4, 2010 10:00 am ET Executives Steven Tunney – President and CEO Tod Reichert – SVP and Corporate Secretary Steve Bacica – CFO Analysts Troy Ward – Stifel Nicolaus Vernon Plack – BB&T Capital Markets David Chiaverini – BMO Capital Markets Gregg Hillman – First Wilshire Rick Fearon – Accretive Capital Presentation Operator
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Also, during this call, management will be referring to a non-GAAP financial measure, DNOI. This measure is not prepared in accordance with U.S. Generally Accepted Accounting Principles. You can find a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measures and other related information in MCG's first quarter 2010 earnings release and in the Investor Relations section of our website at www.mcgcapital.com under the heading Financial Information, Non-GAAP Financial Measures.With that, I'll turn the call over to our President and CEO, Steve Tunney. Steven Tunney Thank you, Tod. And again, welcome, everyone. First, before we begin the call in earnest, as many of you know, an activist hedge fund has launched a proxy fight to unseat two of our directors. Their rhetoric has been inflammatory, includes a number of things that we do not believe to be true, and does not recognize the tremendous accomplishments that the company has achieved over the last 16 months or the 800% increase in our share price since the beginning of 2009. However, the focus of this call is to update you on the results for the first quarter and on the significant progress we've made in executing on our strategic plan to increase our share price relative to our net asset value and delivering long-term value to all of our stockholders. We won't be discussing or taking questions on this call about the proxy contest. Hopefully, by now you've had a chance to review the earnings release, which was issued today. We are extremely pleased to announce that we will be paying a dividend of $0.11 per share based on the first quarter's results. Further, we are encouraged that our portfolio has become increasingly stable over the past four quarters and that our net asset value has increased to $8.16 per share as of March 31, 2010.
During the quarter, we have remained disciplined and focused on our strategy of monetizing low-yielding investments, building liquidity, originating new investments, and reducing our leverage. In that regard, we successfully monetized four additional portfolio investments during the first quarter, totaling $26 million which were completed at 102.8% of their most recently reported fair values.Subsequent to quarter-end, we also announced that Jet Broadband Holdings, LLC had signed a definitive agreement to sell all of its assets. This transaction is expected to close in August of 2010 with expected proceeds to MCG of $49.7 million. We also closed on three new deals totaling $29 million during the quarter and one new deal totaling $10 million after quarter-end. We also paid down $23 million of outstanding debt obligations after year-end, which, when added to the $103.8 million of debt paid down under our SunTrust Warehouse unsecured revolver and our unsecured notes during 2009, brings our total debt paydowns to approximately $126.8 million in the last five quarters. We also repurchased $8 million of our outstanding CLO debt securities at 55% of par, resulting in a $3.6 million gain which will be recognized in the second quarter of 2010. And we also increased our asset coverage ratio to 222% as of quarter-end and 224% as of April 29, 2010. Since we began our monetization initiatives in July of 2008, we have completed or announced $335.7 million of investment monetizations, $324.1 million of which have been completed at 100.3% of their most recently reported fair values and one of which was completed at 42.3% of its most recently reported fair value. We are also excited about being back in the origination business after a long hiatus. As I mentioned on our last call, we began calling on private equity firms and reinserting ourselves into the deal flow last November. As previously mentioned, by quarter-end, we had funded three new deals totaling $29 million. We expect to gather momentum in the coming quarters and that our origination pacing will continue to increase. Read the rest of this transcript for free on seekingalpha.com