Stellus Private Credit BDC Reports Results for its First Fiscal Quarter Ended March 31, 2024

HOUSTON, May 10, 2024 /PRNewswire/ — Stellus Private Credit BDC (“Stellus PBDC” or the “Company”) today announced financial results for its first fiscal quarter ended March 31, 2024.

Robert T. Ladd, Chief Executive Officer of Stellus PBDC, stated “We are pleased to report strong results in the first quarter in which we generated $0.49 per share of net investment income and increased net asset value. During the quarter, we funded $17 million of investments and received $9 million of repayments, bringing the total portfolio to $216 million at fair value. Following the end of the quarter, on April 3, 2024, we declared our 2024 second 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

March 31, 2024

March 31, 2023

Amount

Per Share

Amount

Per Share

Net investment income

$3.55

$0.49

$2.64

$0.48

Net unrealized gain (loss) included in earnings

0.33

0.04

(0.06)

(0.01)

Benefit for taxes on net unrealized depreciation on investments

0.05

0.01

Net increase in net assets resulting from operations

$3.93

$0.54

$2.58

$0.47

Distributions

(3.61)

(0.50)

(2.31)

(0.42)

Other weighted average share adjustments(1)

0.01

(0.01)

Net asset value

112.2

$15.26

108.0

$14.68

Weighted average shares outstanding

7,227,206

5,501,765

__________________________

(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

March 31, 2024

December 31, 2023

Investments at fair value

$216.3

$208.6

Total assets

$219.0

$211.2

Net assets

$112.2

$108.0

Shares outstanding

7,358,038

7,102,136

Net asset value per share

$15.26

$15.21

Three Months Ended

March 31, 2024

March 31, 2023

New investments

$16.6

$17.1

Repayments of investments

(9.4)

(9.9)

Net activity

$7.2

$7.2

As of

As of

March 31, 2024

December 31, 2023

Number of portfolio company investments

41

39

Number of debt investments

39

37

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

Cash

11.7 %

11.8 %

Payment-in-kind (“PIK”)

0.3 %

0.3 %

Fee amortization

0.4 %

0.4 %

Total

12.4 %

12.5 %

Weighted average yield on total investments (3)

Cash

11.1 %

11.2 %

Payment-in-kind (“PIK”)

0.4 %

0.3 %

Fee amortization

0.4 %

0.4 %

Total

11.9 %

11.9 %

_____________________________

(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 ended March 31, 2024 and 2023 totaled $6.4 million and $4.9 million, respectively, most of which was interest income from portfolio investments.

Gross operating expenses for the three months ended March 31, 2024 and 2023 totaled $4.1 million and $3.3 million, respectively. For the same periods, base management fees totaled $0.8 million and $0.6 million, income incentive fees totaled $0.6 million and $0.5 million, capital gains incentive fees of less than $0.1 million and $0.0 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.1 million and $1.7 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.1 million, other expenses totaled $0.4 million and $0.4 million. For the three months ended March 31, 2024 and 2023, the Company’s investment advisor, Stellus Private BDC Advisor, LLC (the “Advisor”), waived $0.8 million and $0.6 million of management fees (voluntarily waived until October 1, 2024), $0.2 million and $0.2 million of income incentive fees (waived as our shares were not listed on a national exchange), and $0.2 million and $0.2 million of expenses pursuant to expense support and conditional reimbursements from the Advisor for net operating expenses of $2.9 million and $2.3 million, respectively.

For the three months ended March 31, 2024 and 2023, net investment income was $3.6 million and $2.6 million, or $0.49 and $0.48 per common share based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

The Company’s investment portfolio had a net change in unrealized appreciation (depreciation) of $0.3 million and ($0.1) million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, net increase in net assets resulting from operations totaled $3.9 million and $2.6 million, or $0.54 and $0.47 per common share, based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

Liquidity and Capital Resources

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 March 31, 2024 and December 31, 2023, the Company had $105.3 million and $98.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity

The Company invested in the following portfolio companies for the three months ended March 31, 2024:

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               

March 1, 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

New Investment

March 26, 2024

Med Learning Group, LLC

Provider of continuing medical education services

$

3,636,170

Senior Secured – First Lien

$

990,355

Delayed Draw Term Loan Commitment

____________________________

*      Existing portfolio company

The Company realized investments in the following portfolio companies for the three months ended March 31, 2024:

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

Events Subsequent to March 31, 2024

The Company’s management has evaluated subsequent events through May 10, 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 March 31, 2024:

Activity Type

Date

Company Name

Company Description

Investment Amount

Instrument Type

New Investment

April 1, 2024

FairWave Holdings, LLC

Specialty coffee platform

$

3,084,350

Senior Secured – First Lien

$

1,079,522

Delayed Draw Term Loan Commitment

$

462,652

Revolver Commitment

$

115,663

Equity

New Investment

April 11, 2024

WER Holdings, LLC

Regional provider of commercial landscaping
services

$

1,099,727

Senior Secured – First Lien

$

544,419

Delayed Draw Term Loan Commitment

$

163,326

Revolver Commitment

$

73,300

Equity

Add-On Investment               

April 16, 2024

Impact Home Services LLC*

Residential garage door, electrical, and
plumbing services provider

$

5,055

Equity

New Investment

May 10, 2024

Luxium Solutions, LLC

Manufacturer and distributor of high-
performance advanced materials and assemblies

$

3,372,885

Senior Secured – First Lien

$

488,117

Delayed Draw Term Loan Commitment

____________________________

*      Existing portfolio company

Credit Facility

The outstanding balance under the Credit Facility as of May 10, 2024 was $108.3 million.

Distributions Declared

On April 3, 2024, our Board of Directors declared a regular monthly distribution for each of April 2024, May 2024, and June 2024, as follows:

Record

Payment

Amount per

Declared

Date

Date

Share

4/3/2024

4/5/2024

4/30/2024

$

0.1666

4/3/2024

5/1/2024

5/31/2024

$

0.1666

4/3/2024

6/1/2024

6/28/2024

$

0.1666

Sale of Unregistered Securities

Since March 31, 2024, the Company sold 414,531 common shares of beneficial interest at a price of $15.26 per share for aggregate proceeds of $6,325,743, which included $24,257 of organizational expense allocation pursuant to subscription agreements entered into between the Company and investors.

Since March 31, 2024, the Company also issued 11,915 common shares of beneficial interest for aggregate proceeds of $181,535 under the DRIP.

On May 7, 2024, Stellus Private Credit BDC (the “Company”) delivered a capital drawdown notice to its investors relating to the sale of 1,310,616 common shares of beneficial interest (the “Shares”) of the Company for an aggregate offering price of $20,000,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of the Shares. The sale of the Shares is expected to close on or about May 21, 2024.

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 BDC

 

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2024

(unaudited)

December 31, 2023

ASSETS

Non-controlled, non-affiliated investments, at fair value (amortized cost of
$213,929,910 and $206,513,758, respectively)

$

216,314,810

$

208,574,078

Cash and cash equivalents

297,635

593,685

Interest receivable

1,856,236

1,495,581

Expense reimbursement receivable from the Advisor (Note 2)

197,775

126,539

Deferred offering costs

72,876

72,875

Related party receivable

36,625

162,455

Prepaid expenses

132,405

127,019

Receivable for sales and repayments of investments

121,176

71,105

Total Assets

$

219,029,538

$

211,223,337

LIABILITIES

Credit Facilities payable

$

104,425,625

$

97,031,517

Dividends payable

3,551,068

Unearned revenue

784,484

897,538

Income incentive fee payable

407,007

439,854

Capital gains incentive fee payable

299,574

261,684

Interest payable

348,640

367,093

Administrative services payable

118,005

124,958

Income tax payable

149,085

182,489

Deferred tax liability

121,980

167,865

Other accrued expenses and liabilities

127,817

177,249

Total Liabilities

$

106,782,217

$

103,201,315

Commitments and contingencies (Note 7)

Net Assets

$

112,247,321

$

108,022,022

NET ASSETS

Common shares of beneficial interest, par value $0.01 per share (unlimited shares
authorized; 7,358,038 and 7,102,136 issued and outstanding, respectively)

$

73,580

$

71,021

Paid-in capital

108,711,728

104,810,048

Total distributable earnings

3,462,013

3,140,953

Net Assets

$

112,247,321

$

108,022,022

Total Liabilities and Net Assets

$

219,029,538

$

211,223,337

Net Asset Value Per Share

$

15.26

$

15.21

STELLUS PRIVATE CREDIT BDC

 

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended

March 31, 2024

March 31, 2023

INVESTMENT INCOME

Interest income

$

6,309,381

$

4,731,952

Other income

109,596

176,069

Total Investment Income

$

6,418,977

$

4,908,021

OPERATING EXPENSES

Management fees

$

800,654

$

601,839

Income incentive fees

598,401

439,666

Capital gains incentive fee

37,891

Professional fees

196,911

211,808

Organization costs

1,000

Amortization of deferred offering costs

46,728

57,623

Administrative services expenses

121,777

93,760

Trustees’ fees

40,000

40,000

Insurance expense

20,196

20,084

Valuation fees

27,159

17,659

Interest expense and other fees

2,110,119

1,703,503

Income tax expense

21,589

7,835

Other general and administrative expenses

42,933

43,520

Total Operating Expenses

$

4,064,358

$

3,238,297

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

$

(1,197,896)

$

(968,275)

Net Operating Expenses

$

2,866,462

$

2,270,022

Net Investment Income

$

3,552,515

$

2,637,999

Net realized gain on foreign currency translation

$

8,442

$

3,475

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

333,461

(72,026)

Net change in unrealized (depreciation) appreciation on foreign currency translations

(8,881)

6,220

Benefit for taxes on net unrealized loss on investments

45,885

Net Increase in Net Assets Resulting from Operations

$

3,931,422

$

2,575,668

Net Investment Income Per Share – basic and diluted

$

0.49

$

0.48

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

$

0.54

$

0.47

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

7,227,206

5,501,765

Distributions Per Share – basic and diluted

$

0.50

$

0.42

STELLUS PRIVATE CREDIT BDC

 

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

Common Shares of

Beneficial Interest

Total

Number of 

Par

Paid-in 

distributable

shares

value

capital

(loss) gain

Net Assets

Balances at December 31, 2022

5,483,433

$

54,834

$

80,950,845

$

(742,722)

$

80,262,957

Net investment income

2,637,999

2,637,999

Net realized gain on foreign currency translation

3,475

3,475

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

(72,026)

(72,026)

Net change in unrealized appreciation on foreign currency translations

6,220

6,220

Distributions from net investment income

(2,306,409)

(2,306,409)

Issuance of common shares of beneficial interest

349,546

3,496

5,115,958

5,119,454

Balances at March 31, 2023

5,832,979

$

58,330

$

86,066,803

$

(473,463)

$

85,651,670

Balances at December 31, 2023

7,102,136

$

71,021

$

104,810,048

$

3,140,953

$

108,022,022

Net investment income

3,552,515

3,552,515

Net realized gain on foreign currency translation

8,442

8,442

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

333,461

333,461

Net change in unrealized depreciation on foreign currency translations

(8,881)

(8,881)

Benefit for taxes on net unrealized loss on investments

45,885

45,885

Distributions from net investment income

(3,610,362)

(3,610,362)

Issuance of common shares of beneficial interest

255,902

2,559

3,901,680

3,904,239

Balances at March 31, 2024

7,358,038

$

73,580

$

108,711,728

$

3,462,013

$

112,247,321

STELLUS PRIVATE CREDIT BDC

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three Months Ended

March 31, 2024

March 31, 2023

Cash Flows from Operating Activities

Net increase in net assets resulting from operations

$

3,931,422

$

2,575,668

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

Purchases of investments

(16,534,629)

(17,104,559)

Proceeds from sales and repayments of investments

9,368,480

9,823,196

Net change in unrealized (appreciation) depreciation on investments

(333,461)

72,026

Net change in unrealized depreciation (appreciation) foreign currency translations

8,881

(6,220)

Increase in investments due to PIK

(159,943)

Amortization of premium and accretion of discount, net

(140,131)

(106,212)

Deferred tax benefit

(45,885)

Amortization of loan structure fees

94,108

156,894

Amortization of deferred offering costs

46,728

57,623

Changes in other assets and liabilities

Increase in interest receivable

(360,655)

(230,621)

Increase in other receivable

(16,200)

Decrease (increase) in related party receivable

125,830

(49,651)

Increase in expense reimbursements receivable from the Advisor

(71,236)

(198,636)

(Increase) decrease in prepaid expenses

(5,386)

36,509

Increase in related party payable

5,000,000

(Decrease) increase in administrative services payable

(6,953)

74,458

(Decrease) increase in interest payable

(18,453)

105,780

(Decrease) increase in income incentive fees payable

(32,847)

293,110

Increase in capital gains incentive fees payable

37,890

Decrease in unearned revenue

(113,054)

(4,408)

(Decrease) increase in income tax payable

(33,404)

7,835

(Decrease) increase in other accrued expenses and liabilities

(49,432)

67,928

Net Cash (Used) Provided in Operating Activities

$

(4,292,130)

$

554,520

Cash Flows from Financing Activities

Proceeds from issuance of common shares of beneficial interest

$

3,904,239

$

5,119,454

Offering costs paid for common shares of beneficial interest issued

(46,729)

(96,872)

Stockholder distributions paid

(7,161,430)

(1,809,533)

Borrowings under Credit Facilities

20,400,000

49,500,000

Repayments of Credit Facilities

(13,100,000)

(54,115,000)

Financing costs paid on Credit Facilities

(182,195)

Short-term loan repayments

(6,750,000)

Net Cash Provided (Used) by Financing Activities

$

3,996,080

$

(8,334,146)

Net Decrease in Cash and Cash Equivalents

$

(296,050)

$

(7,779,626)

Cash and Cash Equivalents Balance at Beginning of Period

593,685

15,469,823

Cash and Cash Equivalents Balance at End of Period

$

297,635

$

7,690,197

Supplemental and Non-Cash Activities

Cash paid for interest expense

$

2,034,464

$

1,440,829

Income and excise tax paid

54,993

Increase in deferred offering costs

39,249

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

354,239

119,453

(Decrease) increase in dividends payable

(3,551,068)

496,876

SOURCE Stellus Private Credit BDC

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