BlackRock Kelso Capital Corporation Declares Regular Third Quarter Dividend of $0.43 per Share, Announces June 30, 2008 Quarterly Financial Results and Share Repurchase Plan.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- BlackRock BlackRock Inc. (NYSE: BLK) is a major American investment management firm. As of September 30, 2007, BlackRock’s assets under management totaled $1.3 trillion[2] across fixed income, liquidity, equity, alternative investment and real estate strategies. Kelso Capital Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BKCC BKCC BlackRock Kelso Capital Corporation (stock symbol) ) ("BlackRock Kelso Capital" or the "Company") announced today that its Board of Directors has declared a third quarter dividend of $0.43 per share payable on September 30, 2008 to stockholders of record as of September 15, 2008. BlackRock Kelso Capital also announced financial results for the quarter ended June 30, 2008. HIGHLIGHTS: [TABLE OMITTED] Portfolio and Investment Activity During the three months ended June 30, 2008, we invested $80.0 million across 2 new and 3 existing portfolio companies. This compares to investing $297.2 million across 10 new and 5 existing portfolio companies for the three months ended June 30, 2007. Additionally, we received proceeds from sales/repayments of principal of approximately $23.5 million during the three months ended June 30, 2008, versus $166.5 million for the three months ended June 30, 2007. At June 30, 2008, our net portfolio consisted of 64 portfolio companies and was invested 60% in senior secured loans, 31% in unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. or subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". securities, 5% in senior secured notes, 4% in equity investments and less than 1% in cash, cash equivalents and foreign currency. This compares to 69% in senior secured loans, 21% in unsecured or subordinated debt securities, 3% in senior secured notes, 6% in equity investments and less than 1% in cash, cash equivalents and foreign currency at June 30, 2007. Our average portfolio company investment by value was approximately $18.0 million at June 30, 2008, versus $18.3 million at June 30, 2007. As of June 30, 2008, approximately $26.2 million par amount of loans were on non-accrual status. Our weighted average yield on invested capital was 11.3% at June 30, 2008 and 12.5% at June 30, 2007, respectively. The weighted average yields on our senior secured loans and other debt securities were 10.3% and 12.8%, respectively, at June 30, 2008, versus 12.2% and 13.4% at June 30, 2007. Yields on invested capital exclude common equity investments, preferred equity investments with no stated dividend rate, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments, cash, cash equivalents and foreign currency. We continue to have substantial capital resources available to fund additional investments. At June 30, 2008, we had $61.0 million available under our amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and restated senior secured, multi-currency credit facility. Since our inception of operations in July 2005, we have invested in excess of $1.7 billion across more than 105 portfolio companies in transactions involving more than 65 financial sponsors. Results of Operations Results comparisons are for the three and six months ended June 30, 2008 and 2007. Investment Income Investment income totaled $34.9 million and $70.6 million, respectively, for the three and six months ended June 30, 2008, compared to $33.2 million and $58.3 million for the three and six months ended June 30, 2007. The increase in investment income for the three and six months ended June 30, 2008 reflects the growth of our portfolio as a result of the deployment of debt capital under our credit facility and equity capital from our initial public offering in July 2007. Many of our floating rate debt investments bear interest based on the London Interbank Offered Rate London Interbank Offered Rate A short-term interest rate often quoted as a 1,3,6-month rate for U.S.dollars. (LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). ). For the 2008 periods, investment income increased despite lower prevailing levels of LIBOR compared to the prior periods, as fixed rate instruments as a percentage of our debt investments increased to 52% at June 30, 2008 from 36% at June 30, 2007. Origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real , closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Expenses Net expenses for the three and six months ended June 30, 2008 were $11.6 million and $24.1 million, respectively, versus $15.8 million and $26.9 million for the three and six months ended June 30, 2007. Of these totals, for the three and six months ended June 30, 2008, $4.3 million and $9.5 million, respectively, were interest and other credit facility expenses, versus $5.4 million and $9.1 million for the three and six months ended June 30, 2007. In addition, $5.8 million and $9.5 million of performance-based incentive fees were included in these totals for the three and six months ended June 30, 2007, respectively. There were no incentive fees for the three and six months ended June 30, 2008. Expenses net of performance-based incentive fees and interest and other credit facility expenses for the three and six months ended June 30, 2008 were $7.3 million and $14.6 million, respectively, versus $5.7 million and $10.3 million for the three and six months ended June 30, 2007. Net expenses for the three and six months ended June 30, 2007 were net of base management fee waivers of $1.1 million and $2.1 million, respectively, which terminated upon the completion of our IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. in 2007. These net expenses consist of base management fees (net of waivers), administrative services expenses, professional fees, director fees, investment advisor Investment Advisor 1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and expenses, insurance expenses, amortization of debt issuance costs and miscellaneous other expenses. The increase in expenses was driven primarily by an increase in base management fees resulting from the growth of our portfolio and an increase in other general and administrative expenses. Net Investment Income Net investment income totaled $23.3 million and $46.5 million, or $0.44 per share and $0.88 per share, respectively, for the three and six months ended June 30, 2008. For the three and six months ended June 30, 2007, net investment income totaled $17.4 million and $31.4 million, or $0.42 per share and $0.79 per share, respectively. Net Realized Gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. (Losses) Total net realized gains (losses) for the three and six months ended June 30, 2008 were ($1.5) million and ($1.3) million, respectively, compared to $0.5 million and $0.3 million for the three and six months ended June 30, 2007. The losses are primarily a result of forward currency contracts used to hedge our investments denominated in foreign currencies. Net Unrealized Depreciation For the three and six months ended June 30, 2008, the net change in unrealized depreciation on the Company's investments and foreign currency translation was ($9.9) million and ($72.8) million, respectively, versus ($5.2) million and ($2.0) million for the three and six months ended June 30, 2007. Net unrealized depreciation was ($130.3) million at June 30, 2008 and ($0.6) million at June 30, 2007. The net change in unrealized depreciation was primarily a result of declines in market quotations for the quoted investments in our portfolio, as well as reductions in the valuations of several unquoted investments, including Tygem Holdings, Inc. We believe the declines in valuations of our investments are due primarily to instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability of the credit markets and changes in the current interest rate environment. The unrealized depreciation on investments does not have an impact on our current ability to pay distributions to stockholders. Net Change in Net Assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. from Operations For the three and six months ended June 30, 2008, the net change in net assets from operations was $11.9 million and ($27.6) million, or $0.22 per share and ($0.52) per share, respectively, compared to $12.6 million and $29.7 million, or $0.31 per share and $0.75 per share, for the three and six months ended June 30, 2007. Liquidity and Capital Resources At June 30, 2008, we had $484 million in borrowings outstanding and $61 million available for use under our $545 million credit facility, which matures in December 2010. On January 14, 2008, we filed a Form N-2 registration statement with the SEC that would permit us, after it is declared effective by the SEC, to offer, from time to time, up to $1 billion of our common stock, preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , debt securities, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities and subscription rights. In the future, we may raise additional equity or debt capital in the public or private markets or may securitize Securitize The practice of a company selling accounts receivables or other debts owed to it. The third party that buys the debt assumes ownership of it and the responsibility for collecting the debts, and keeps the repayments when made. a portion of our investments. The primary use of such funds is expected to be investments in portfolio companies, cash distributions to common stockholders and for other general corporate purposes. Dividends Dividends paid to stockholders for the three and six months ended June 30, 2008 totaled $22.9 million, or $0.43 per share, and $45.6 million, or $0.86 per share, respectively. For the three and six months ended June 30, 2007, dividends paid totaled $16.8 million, or $0.42 per share, and $33.2 million, or $0.84 per share, respectively. Tax characteristics of all dividends will be reported to stockholders on Form 1099 after the end of the calendar year. We maintain an "opt out" dividend reinvestment plan Dividend Reinvestment Plan (DRP) Plan which provides for automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. for our common stockholders. As a result, if we declare a dividend, stockholders' cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash dividends. Dividends reinvested pursuant to our dividend reinvestment plan totaled $17.2 million for the six months ended June 30, 2008, versus $48.8 million for the six months ended June 30, 2007. Pursuant to our dividend reinvestment plan, the dividend reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. price for the dividend paid to stockholders on June 30, 2008 was 95% of the closing market price of our common stock on that date, or $8.987 per common share, which was less than our net asset value. Reinvestment at this price resulted in dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of our net asset value of approximately $0.09 per share at June 30, 2008. We have elected to be taxed as a regulated investment company Regulated investment company An investment company allowed to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders so that it is taxed only at the personal level, and double taxation is avoided. under Subchapter M Subchapter M An IRS regulation dealing with investment companies and real estate investment trusts that avoid double taxation by distributing interest, dividends, and capital gains directly to shareholders, who are taxed individually. of the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. . To maintain our status as a regulated investment company, we must distribute annually to our stockholders at least 90% of our investment company taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. and at least 98% of our income (both ordinary income and net capital gains) to avoid an excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. . We intend to make distributions to our stockholders on a quarterly basis of substantially all of our taxable net investment income. We also intend to make distributions of net realized capital gains, if any, at least annually. We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a business development company under the Investment Company Act of 1940 and due to provisions in our credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure stockholders that they will receive dividends and distributions at any particular level or at all. With respect to the dividends paid to stockholders, income we receive from origination, structuring, closing, commitment and other upfront fees associated with investments in portfolio companies is treated as taxable income and accordingly, distributed to stockholders. For the three and six months ended June 30, 2008, these fees totaled $1.7 million and $2.6 million, respectively. For the three and six months ended June 30, 2007, such fees totaled $2.5 million and $3.8 million, respectively. Share Repurchase Plan share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and BlackRock Kelso Capital also announced that its Board of Directors has approved a share repurchase plan. Under this plan, the Company may repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to 2.5% of its outstanding shares of common stock from time to time in open market or privately negotiated transactions. The repurchase program does not obligate obligate /ob·li·gate/ (ob´li-gat) pertaining to or characterized by the ability to survive only in a particular environment or to assume only a particular role, as an obligate anaerobe. the Company to acquire any specific number of shares and may be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time. The Company intends to fund the repurchases with available cash. The repurchase plan is expected to be in effect through the earlier of June 30, 2009 or until the approved number of shares have been repurchased. Conference Call BlackRock Kelso Capital will host a web cast/teleconference call at 5:00 p.m. (Eastern Time) on Thursday, August 7, 2008 to discuss its second quarter 2008 financial results. All interested parties are welcome to participate. You can access the teleconference by dialing, from the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , (800) 374-0176, or from outside the United States, (706) 679-3431, shortly before 5:00 p.m. and referencing the BlackRock Kelso Capital Corporation Conference Call (ID Number 57348765). A live, listen-only web cast will also be available via the investor relations Investor relations The process by which the corporation communicates with its investors. section of www.blackrockkelso.com. Both the teleconference and web cast will be available for replay by 8:00 p.m. on Thursday, August 7, 2008 and ending at midnight on Thursday, August 14, 2008. To access the replay of the teleconference, callers from the United States should dial (800) 642-1687 and callers from outside the United States should dial (706) 645-9291 and enter the Conference ID Number 57348765. To access the web cast, please visit the investor relations section of www.blackrockkelso.com. [TABLE OMITTED] [TABLE OMITTED] * Certain amounts have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current period's presentation. About BlackRock Kelso Capital Corporation BlackRock Kelso Capital Corporation is a business development company formed in early 2005 by its management team, BlackRock, Inc. and principals of Kelso & Company, to provide debt and equity capital to middle-market companies. The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release, and other statements that BlackRock Kelso Capital may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and , with respect to BlackRock Kelso Capital's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions. The information contained on our website is not a part of this press release. BlackRock Kelso Capital cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock Kelso Capital assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In addition to factors previously disclosed in BlackRock Kelso Capital's Securities and Exchange Commission ("SEC") reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) our future operating results; (2) our business prospects and the prospects of our portfolio companies; (3) the impact of investments that we expect to make; (4) our contractual arrangements and relationships with third parties; (5) the dependence of our future success on the general economy and its impact on the industries in which we invest; (6) the ability of our portfolio companies to achieve their objectives; (7) our expected financings and investments; (8) the adequacy of our cash resources and working capital; (9) the timing of cash flows, if any, from the operations of our portfolio companies; (10) the ability of the Advisor to locate suitable investments for us and to monitor and administer our investments; (11) the ability of the Advisor to attract and retain highly talented professionals; (12) fluctuations in foreign currency exchange rates; and (13) the impact of changes to tax legislation and, generally, our tax position. BlackRock Kelso Capital's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2007 filed with the SEC identifies additional factors that can affect forward-looking statements. Available Information BlackRock Kelso Capital's filings with the SEC, press releases, earnings releases and other financial information are available on its website at www.blackrockkelso.com |
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