Stellus Private Credit BDC Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2023

HOUSTON, March 11, 2024 /PRNewswire/ — Stellus Private Credit BDC (“Stellus PBDC” or the “Company”) today announced financial results for its fourth fiscal quarter and year ended December 31, 2023.

Robert T. Ladd, Chief Executive Officer of Stellus Private Credit BDC, stated “We are pleased to report strong results in the fourth quarter in which we generated $0.56 per share of net investment income and increased net asset value. During the quarter we made three new investments and received four full repayments, bringing the total portfolio to $209 million at fair value. On January 13, 2024, we declared our 2024 first quarter monthly dividend of $0.50 per share in the aggregate which represents an annualized dividend yield of approximately 13%.”

FINANCIAL HIGHLIGHTS

($ in millions, except data relating to per share amounts and shares outstanding)

Three Months Ended

Three Months Ended

Year Ended

Year Ended

December 31, 2023

December 31, 2022

December 31, 2023

December 31, 2022

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

Net investment income

$3.92

$0.56

$1.88

$0.35

$12.33

$1.96

$4.20

$1.08

Net realized gain on investments

0.70

0.11

0.70

0.11

Net unrealized (loss) gain included in earnings

(0.22)

(0.03)

0.30

0.05

2.59

0.41

(0.52)

(0.13)

Provision for taxes on net unrealized appreciation on investments

(0.11)

(0.02)

(0.17)

(0.03)

Net increase in net assets resulting from operations

$4.29

$0.62

$2.18

$0.41

15.45

2.46

3.68

0.95

Distributions

(3.55)

(0.51)

(3.51)

(0.66)

(11.77)

(1.88)

(4.28)

(1.11)

Other weighted average share adjustments(1)

0.03

Net asset value

108.0

$15.21

80.3

$14.64

108.0

$15.21

80.3

$14.64

Weighted average shares outstanding

6,953,190

5,344,720

6,273,882

3,869,643

(1) Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end. 

PORTFOLIO ACTIVITY

($ in millions)

As of

As of

December 31, 2023

December 31, 2022

Investments at fair value

$208.6

$157.5

Total assets

$211.2

$174.4

Net assets

$108.0

$80.3

Shares outstanding

7,102,136

5,483,433

Net asset value per share

$15.21

$14.64

Three Months Ended

Year Ended

December 31, 2023

December 31, 2023

New investments

$20.9

$89.4

Repayments of investments

(24.9)

(42.3)

Net activity

($4.0)

$47.1

As of

As of

December 31, 2023

December 31, 2022

Number of portfolio company investments

39

25

Number of debt investments

37

24

Weight average yield of debt and other income producing investments (2)

Cash

11.8 %

11.0 %

Payment-in-kind (“PIK”)

0.3 %

Fee amortization

0.4 %

0.4 %

Total

12.5 %

11.4 %

Weighted average yield on total investments (3)

Cash

11.2 %

10.7 %

Payment-in-kind (“PIK”)

0.3 %

Fee amortization

0.4 %

0.4 %

Total

11.9 %

11.1 %

(2) The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expense or any sales load that may be paid by investors.

(3) The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company’s total investments, including non-income producing loans and equity.

Results of Operations

Investment income for the three months and year ended December 31, 2023 totaled $7.1 million and $23.4 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months and year ended December 31, 2023 totaled $3.2 million and $11.0 million, respectively, net of $1.1 million and $4.1 million in expenses reimbursed and fees waived by the Company’s investment advisor, Stellus Private BDC Advisor, LLC (the “Advisor”), respectively. For the same periods, base management fees totaled $0.8 million and $2.8 million (all of which were waived by the Advisor), income incentive fees totaled $0.4 million and $1.4 million (net of $0.2 million and $0.7 million which were waived as our shares were not listed on a national exchange), capital gains incentive fees of less than $0.1 million and $0.3 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.4 million and $8.2 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.4 million, other expenses totaled $0.3 million and $1.3 million, and expense support and conditional reimbursements from the Advisor of ($0.1) and ($0.5), respectively.

For the three months and year ended December 31, 2023, net investment income was $3.9 million and $12.3 million, or $0.56 and $1.96 per common share based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.

The Company’s investment portfolio had a net change in unrealized (depreciation) appreciation of ($0.2) million and $2.6 million for the three months and year ended December 31, 2023, respectively.

For the three months and year ended December 31, 2023, net increase in net assets resulting from operations totaled $4.3 million and $15.5 million, or $0.62 and $2.46 per common share, based on weighted average common shares outstanding of 6,953,190 and 6,273,882, respectively.

Liquidity and Capital Resources

On February 1, 2022, the Company entered into a revolving credit and security agreement with Signature Bank as subsequently amended (the “Commitment Facility”). On March 10, 2023, Signature Bank was placed into receivership by the FDIC and on March 12, 2023, the FDIC created Signature Bridge Bank, N.A. (“Signature Bridge”) to take over the operations of Signature Bank. Signature Bridge serviced the Commitment Facility until October 23, 2023.  On October 23, 2023,  Goldman Sachs Bank USA (“Goldman Sachs”) became the servicer under the Commitment Facility. The Company’s amended and restated senior secured revolving credit agreement with Goldman Sachs (as amended from time to time) matured on December 31, 2023 and was fully repaid, including all accrued interest, on December 22, 2023.

On September 30, 2022, the Company entered into a senior secured revolving credit agreement with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the “Credit Facility”). The Credit Facility, as amended, provides for borrowings up to a maximum of $150.0 million on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $200.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions. As of December 31, 2023 and December 31, 2022, the Company had $98.0 million and $0.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity

The Company invested in the following portfolio companies for the three months ended December 31, 2023:

Activity Type

Date

Company Name

Company Description

Investment Amount

 Instrument Type

Add-On Investment

October 11, 2023

Impact Home Services LLC*

Residential garage door, electrical, and plumbing services provider

$

243,675

Senior Secured – First Lien

$

7,582

Equity

Add-On Investment

October 16, 2023

Equine Network, LLC*

Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry

$

431,401

Senior Secured – First Lien

Add-On Investment

October 31, 2023

2X LLC*

Provider of outsourced digital B2B marketing-as-a-service

$

659,771

Senior Secured – First Lien

Add-On Investment

November 15, 2023

Monitorus Holding, LLC*

Provider of media monitoring and evaluation services

$

16,225

Unsecured Convertible Bond

Add-On Investment

November 30, 2023

Axis Portable Air, LLC*

Air conditioning, heating, and air quality equipment rental company

$

2,500,000

Delayed Draw Term Loan Commitment

Add-On Investment

December 5, 2023

Amika OpCo LLC*

Branded haircare platform

$

1,152,465

Senior Secured – First Lien

New Investment

December 7, 2023

evolv Consulting, LLC

Digital transformation consulting firm

$

5,156,250

Senior Secured – First Lien

$

1,250,000

Revolver Commitment

$

266,927

Equity

New Investment

December 12, 2023

AdCellerant LLC

Provider of outsourced digital marketing software and services

$

5,719,319

Senior Secured – First Lien

$

802,995

Revolver Commitment

$

437,006

Equity

New Investment

December 21, 2023

Michelli, LLC

Provider of test and measurement services and equipment

$

1,342,685

Senior Secured – First Lien

$

2,983,923

Delayed Draw Term Loan Commitment

$

994,641

Revolver Commitment

$

266,062

Equity

* Existing portfolio company

The Company realized investments in the following portfolio companies for the three months ended December 31, 2023:

Activity Type

Date

Company Name

Company Description

Proceeds Received

Realized Gain

 Instrument Type

Full Repayment

November 30, 2023

Axis Portable Air, LLC*

Air conditioning, heating, and air quality equipment rental company

$

1,509,146

$

Senior Secured – First Lien

Full Repayment

November 30, 2023

Archer Systems, LLC*

Provider of mass tort settlement administrative solutions

$

7,834,418

$

Senior Secured – First Lien

Full Realization

December 21, 2023

International Designs Holdings LLC*

Distributor of design-oriented surfaces, appliances and architectural specialty products

$

1,296,416

$

841,075

Equity

Full Repayment

December 22, 2023

BLP Buyer, Inc.*

Distributor of lifting solutions

$

4,816,367

$

Senior Secured – First Lien

$

2,750,450

$

Senior Secured – First Lien

$

1,265,924

$

Senior Secured – First Lien

$

779,098

$

Senior Secured – First Lien

* Existing portfolio company

Events Subsequent to December 31, 2023

The Company’s management has evaluated subsequent events through March 11, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.

Investment Portfolio

The Company invested in the following portfolio companies subsequent to December 31, 2023:

Activity Type

Date

Company Name

Company Description

Investment Amount

Instrument Type

Add-On Investment

January 9, 2024

Morgan Electrical Group Intermediate Holdings, Inc.*

Provider of commercial electrical services

$

12,854

Senior Secured – First Lien

Add-On Investment

January 12, 2024

Impact Home Services LLC*

Residential garage door, electrical, and plumbing services provider

$

28,813

Equity

Add-On Investment               

January 31, 2024

Impact Home Services LLC*

Residential garage door, electrical, and plumbing services provider

$

12,637

Equity

Add-On Investment               

February 28, 2024

Monitorus Holding, LLC*

Provider of media monitoring and evaluation services

$

38,984

Unsecured Convertible Bond

New Investment

March 11, 2024

Exec Connect Intermediate LLC

Facilitator of executive-level in-person events and remote peer-to-peer industry insights

$

1,746,286

Senior Secured – First Lien

$

254,005

Delayed Draw Term Loan Commitment

$

158,753

Revolver Commitment

$

77,109

Equity

New Investment

March 11, 2024

Titan Meter Bidco Corp.

Provider of liquid metering products and integrated solutions to the energy infrastructure sector

$

7,696,671

Senior Secured – First Lien

$

810,176

Revolver Commitment

$

395,667

Equity

* Existing portfolio company

The Company realized investments in the following portfolio companies subsequent to December 31, 2023:

Activity Type

Date

Company Name

Company Description

Proceeds Received

 Instrument Type

Full Repayment

January 8, 2024

Peltram Plumbing Holdings, LLC*

Provider of plumbing solutions.

$

6,818,700

Senior Secured – First Lien

* Existing portfolio company

Credit Facility

The outstanding balance under the Credit Facility as of March 11, 2024 was $103.7 million.

Distributions Declared

On January 13, 2024, our Board of Directors declared a regular monthly distribution for each of January, February, and March 2024, as follows:

Stellus Private Credit BDC

Record

Payment

Amount per

Declared

Date

Date

Share

1/13/2024

1/15/2024

1/31/2024

$

0.1666

1/13/2024

2/1/2024

2/29/2024

$

0.1666

1/13/2024

3/1/2024

3/29/2024

$

0.1666

Sale of Unregistered Securities

Since December 31, 2023, the Company sold 191,580 common shares of beneficial interest at a price of $15.21 per share for aggregate proceeds of $2.9 million, which included less than $0.1 million of Organizational Expense Allocation pursuant to Subscription Agreements entered into between the Company and investors.

Since December 31, 2023, the Company also issued 23,235 common shares of beneficial interest for aggregate proceeds of $0.4 million under the DRIP.

About Stellus Private Credit BDC

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans and second lien loans, with corresponding equity co-investments. The Company’s investment activities are managed by its investment adviser, Stellus Private BDC Advisor, LLC.

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 including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Contacts

Stellus Private Credit BDC
W. Todd Huskinson, Chief Financial Officer
(713) 292-5414
[email protected]

STELLUS PRIVATE CREDIT BDCCONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2023

December 31, 2022

ASSETS

Non-controlled, non-affiliated investments, at fair value (amortized cost of $206,513,758 and $158,022,677, respectively)

$

208,574,078

$

157,504,755

Cash and cash equivalents

593,685

15,469,823

Interest receivable

1,495,581

1,030,274

Expense reimbursement receivable from the Advisor (Note 2)

126,539

165,638

Deferred offering costs

72,875

54,394

Related party receivable

162,455

9,620

Prepaid expenses

127,019

133,004

Receivable for sales and repayments of investments

71,105

26,996

Total Assets

$

211,223,337

$

174,394,504

LIABILITIES

Credit Facilities payable

$

97,031,517

$

79,448,134

Short-term loan payable

11,250,000

Dividends payable

3,551,068

1,809,533

Unearned revenue

897,538

539,634

Income incentive fee payable

439,854

328,196

Capital gains incentive fee payable

261,684

Interest payable

367,093

563,241

Administrative services payable

124,958

66,064

Income tax payable

182,489

7,471

Deferred tax liability

167,865

Other accrued expenses and liabilities

177,249

119,274

Total Liabilities

$

103,201,315

$

94,131,547

Commitments and contingencies (Note 7)

Net Assets

$

108,022,022

$

80,262,957

NET ASSETS

Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 7,102,136 and 5,483,433 issued and outstanding, respectively)

$

71,021

$

54,834

Paid-in capital

104,810,048

80,950,845

Total distributable earnings (loss)

3,140,953

(742,722)

Net Assets

$

108,022,022

$

80,262,957

Total Liabilities and Net Assets

$

211,223,337

$

174,394,504

Net Asset Value Per Share

$

15.21

$

14.64

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended

December 31, 2023

December 31, 2022

December 31, 2021

INVESTMENT INCOME

Interest income

$

22,760,669

$

7,804,783

$

Other income

601,776

152,173

Total Investment Income

$

23,362,445

$

7,956,956

$

OPERATING EXPENSES

Management fees

$

2,833,601

$

1,335,054

$

Income incentive fees

2,097,153

686,398

Capital gains incentive fee

261,684

Professional fees

670,800

447,045

70,800

Organization costs

1,000

90,184

416,553

Amortization of deferred offering costs

165,937

240,152

Administrative services expenses

417,573

226,489

Trustees’ fees

160,000

158,000

42,000

Insurance expense

81,438

82,045

Valuation fees

40,324

5,519

Interest expense and other fees

8,225,528

2,312,701

Income tax expense

44,925

7,471

Other general and administrative expenses

142,294

120,343

3,492

Total Operating Expenses

$

15,142,257

$

5,711,401

$

532,845

Expenses reimbursed/fees waived by Investment Advisor (Note 2)

$

(4,101,044)

$

(1,952,196)

$

Net Operating Expenses

$

11,041,213

$

3,759,205

$

532,845

Net Investment Income

$

12,321,232

$

4,197,751

$

(532,845)

Net realized gain on non-controlled, non-affiliated investments

$

841,075

$

$

Net realized gain on foreign currency translation

24,343

1,950

Provision for taxes on realized gain on investments

(142,988)

Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments

2,566,523

(538,883)

Net change in unrealized appreciation on foreign currency translations

11,719

20,961

Provision for taxes on net unrealized gain on investments

(167,865)

Net Increase (Decrease) in Net Assets Resulting from Operations

$

15,454,039

$

3,681,779

$

(532,845)

Net Investment Income Per Share – basic and diluted

$

1.96

$

1.08

$

N/A

Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted

$

2.46

$

0.95

$

N/A

Weighted Average Common Shares of Beneficial Interest Outstanding – basic and diluted

6,273,882

3,869,643

N/A

Distributions Per Share – basic and diluted

$

1.88

$

1.11

$

N/A

STELLUS PRIVATE CREDIT BDCCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

Common Shares of

Beneficial Interest

Total

Number of 

Par

Paid-in 

distributable

shares

value

capital

(loss) gain

Net Assets

Balances at December 31, 2020

$

$

$

$

Net investment loss

(532,845)

(532,845)

Balances at December 31, 2021

$

$

$

(532,845)

$

(532,845)

Net investment income

4,197,751

4,197,751

Net realized gain on foreign currency translation

1,950

1,950

Net change in unrealized depreciation on non-controlled, non-affiliated investments

(538,883)

(538,883)

Net change in unrealized appreciation on foreign currency translations

20,961

20,961

Return of capital and other tax related adjustments

(388,214)

388,214

Distributions from net investment income

(4,279,870)

(4,279,870)

Issuance of common shares of beneficial interest

5,483,433

54,834

81,339,059

81,393,893

Balances at December 31, 2022

5,483,433

$

54,834

$

80,950,845

$

(742,722)

$

80,262,957

Net investment income

12,321,232

12,321,232

Net realized gain on non-controlled, non-affiliated investments

841,075

841,075

Net realized gain on foreign currency translation

24,343

24,343

Provision for taxes on realized gain on investments

(142,988)

(142,988)

Net change in unrealized appreciation on non-controlled, non-affiliated investments

2,566,523

2,566,523

Net change in unrealized appreciation on foreign currency translations

11,719

11,719

Provision for taxes on net unrealized gain on investments

(167,865)

(167,865)

Return of capital and other tax related adjustments

(197,724)

197,724

Distributions from net investment income

(11,768,088)

(11,768,088)

Issuance of common shares of beneficial interest

1,618,703

16,187

24,056,927

24,073,114

Balances at December 31, 2023

7,102,136

$

71,021

$

104,810,048

$

3,140,953

$

108,022,022

STELLUS PRIVATE CREDIT BDCCONSOLIDATED STATEMENTS OF CASH FLOWS

For the period

For the

from Inception

year ended

through

December 31, 2023

December 31, 2022

December 31, 2022

Cash Flows from Operating Activities

Net increase (decrease) in net assets resulting from operations

$

15,454,039

$

3,681,779

$

(532,845)

Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:

Purchases of investments

(89,322,601)

(168,326,016)

Proceeds from sales and repayments of investments

42,260,585

10,474,408

Net change in unrealized (appreciation) depreciation on investments

(2,566,523)

538,883

Net change in unrealized appreciation foreign currency translations

(11,719)

(20,961)

Increase in investments due to PIK

(129,990)

Amortization of premium and accretion of discount, net

(502,109)

(198,065)

Deferred tax provision

167,865

Amortization of loan structure fees

586,127

478,626

Amortization of deferred offering costs

165,937

240,152

Net realized gain on investments

(841,075)

Changes in other assets and liabilities

Increase in interest receivable

(465,307)

(1,030,274)

Increase in deferred offering costs

(139,570)

Increase in related party receivable

(152,835)

(9,620)

Decrease (increase) in expense reimbursements receivable from the Advisor

39,099

(165,638)

Decrease (increase) in prepaid expenses

5,985

(39,356)

(93,648)

(Decrease) increase in due to affiliate

(460,085)

460,085

Increase in professional fees payable

263,978

(Decrease) increase in trustees’ fees payable

(42,000)

42,000

Increase in administrative services payable

58,894

66,064

(Decrease) increase in interest payable

(196,148)

563,241

Increase in income incentive fees payable

111,658

328,196

Increase in capital gains incentive fees payable

261,684

Increase in unearned revenue

357,904

539,634

Increase in income tax payable

175,018

7,471

Increase (decrease) in other accrued expenses and liabilities

57,975

(144,704)

Net Cash Used in Operating Activities

$

(34,485,537)

$

(153,518,265)

$

Cash Flows from Financing Activities

Proceeds from issuance of common shares of beneficial interest

$

24,073,114

$

81,393,893

$

Offering costs paid for common shares of beneficial interest issued

(184,418)

(154,976)

Stockholder distributions paid

(10,026,553)

(2,470,337)

Borrowings under Credit Facilities

169,750,000

124,762,500

Repayments of Credit Facilities

(152,365,000)

(44,147,500)

Financing costs paid on Credit Facilities

(387,744)

(1,645,492)

Short-term loan borrowings

4,500,000

11,250,000

Short-term loan repayments

(15,750,000)

Net Cash Provided by Financing Activities

$

19,609,399

$

168,988,088

$

Net (Decrease) Increase in Cash and Cash Equivalents

$

(14,876,138)

$

15,469,823

$

Cash and Cash Equivalents Balance at Beginning of Period

15,469,823

Cash and Cash Equivalents Balance at End of Period

$

593,685

$

15,469,823

$

Supplemental and Non-Cash Activities

Cash paid for interest expense

$

7,835,549

$

1,270,834

$

Income and excise tax paid

12,895

Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan

623,113

43,894

Increase in dividends payable

5,360,601

1,809,533

SOURCE Stellus Private Credit BDC

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