UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
To Section 13 Or 15(d) of The Securities Exchange Act of 1934
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Date
of report (Date of earliest event reported): July 13,
2009
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GSC
Investment Corp.
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(Exact
name of registrant
as
specified in charter)
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Maryland
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001-33376
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20-8700615
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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888
Seventh Ave, New York, NY 10019
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(Address
of principal executive offices)
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Registrant’s
telephone number, including area code: (212) 884-6200
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N/A
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(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02 Results
of Operations and Financial Condition.
On July 13, 2009, we issued a press
release announcing our financial results for the fiscal first quarter ended May
31, 2009. A copy of the press release, together with the related financial
schedules, are attached hereto as Exhibit 99.1, the text of which are
incorporated by reference herein. This press release, together with
the related financial schedules, are not to be deemed “filed” for purposes of
Section 18 of the Exchange Act of 1934, as amended (the “Exchange Act”), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing, or to form a part of our public disclosure in the
United States or otherwise.
Item
9.01 Financial Statements and Exhibits.
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Exhibit
No.
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Description
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99.1
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Press
Release dated July 13, 2009
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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GSC
Investment Corp.
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Date:
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July
13, 2009
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By:
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/s/
David L. Goret
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Name:
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David
L. Goret
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Title:
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Vice
President and Secretary
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EXHIBIT
INDEX
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Exhibit
No.
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Description
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99.1
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Press
Release dated July 13, 2009
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Exhibit
99.1
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Contact: Carl
J. Crosetto
GSC
Group
973-437-1007
Roland
Tomforde
Broadgate
Consultants, LLC
212-232-2222
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GSC
Investment Corp. Announces First Quarter 2010 Financial Results
__________________________________________
NEW YORK,
July 13, 2009 – GSC Investment Corp. (NYSE:GNV), a business development company,
today announced financial results for the fiscal first quarter ended May 31,
2009.
Operating
Results
For the
quarter ended May 31, 2009, GSC Investment Corp. reported net investment income
of $2.6 million, or $0.31 per share, and net unrealized appreciation on its
investment portfolio of $2.8 million, or $0.34 per share, resulting in a net
increase in net assets from operations of $5.4 million, or $0.65 per share.
There were no material realized gains or losses on investments during the
quarter. Net asset value was $8.85 per share as of May 31, 2009 as compared to
$8.20 per share as of February 28, 2009.
"The
unrealized appreciation in our portfolio during the first quarter is a welcome
occurrence and reflects some stabilization in the credit markets after a period
of unprecedented volatility," said Chief Executive Officer Seth M.
Katzenstein. "While we are encouraged by the rebound in the credit
markets, the effects of the recession are still working their way through our
portfolio companies, and we expect that adverse credit events in our portfolio
companies will continue to occur. Accordingly, we continue to stand by our
conservative strategy of investing at high-attachment points in the capital
structure and will continue to preserve capital and reduce debt in order to
maximize long-term shareholder value."
Portfolio and Investment
Activity
As of May
31, 2009, the value of the Company's investment portfolio was $121.2 million,
principally invested in 35 portfolio companies and one collateralized loan
obligation fund (“CLO”). The overall portfolio composition consisted of 16.3%
first lien term loans, 33.7% second lien term loans, 23.6% senior secured notes,
10.5% unsecured notes, 15.8% subordinated notes of GSCIC CLO and 0.1%
equity/limited partnership interests.
During
the first quarter, GSC Investment Corp. made no investments in new or existing
portfolio companies. For the quarter, the Company had $0.3 million in
aggregate amount of exits and repayments, resulting in net repayments of $0.3
million.
As of May
31, 2009, the weighted average current yield on the Company's first lien term
loans, second lien term loans, senior secured notes, unsecured notes and the
GSCIC CLO subordinated notes were 7.7%, 9.3%, 11.6%, 12.3% and 11.2%,
respectively, which resulted in an aggregate weighted average current yield of
10.3%.
As of May
31, 2009, 42.6%, or $43.4 million, of the Company's interest-bearing portfolio
was fixed rate debt with a weighted average current coupon of 11.7% and 57.4%,
or $58.6 million, of its interest-bearing portfolio was floating rate debt with
a weighted average current spread of LIBOR plus 6.4%.
Liquidity and Capital
Resources
In
January 2009, the Company’s revolving credit facility began a two-year
amortization period during which all payments of principal on, and sale proceeds
from, the collateral (substantially all of the Company’s portfolio, excluding
its CLO investment) are used to repay outstanding borrowings. At May 31, 2009,
the Company had $57.8 million in borrowings under the facility and an asset
coverage ratio of 227%.
Following
the end of the first quarter, several portfolio investments were either
downgraded or experienced adverse events that resulted in a $17.4 million
deficiency in the Company’s June 30, 2009 borrowing base, which exceeds the
Company’s unrestricted cash and cash equivalents of $10.3 million at May 31,
2009. If the Company is unsuccessful in obtaining a waiver and the borrowing
base deficiency continues for 30 days, an event of
2
default
will occur and the lender will have the option to terminate the facility and
sell the underlying collateral. "We are currently engaged in constructive
discussions with our lender regarding a waiver of the borrowing base
deficiency," said Mr. Katzenstein. "We have historically been able to work
constructively with our lender, but these discussions are ongoing.”
"The
adverse economic environment and tight credit market have had a negative effect
on several of our portfolio companies. Some portfolio companies have experienced
worse than expected declines in operating performance, while others have been
unable to refinance maturing debt,” said Mr. Katzenstein. "We believe that the
best way to maximize the value of underperforming and stressed investments is to
actively manage them through the workout process. Our investment adviser, GSC
Group, has significant experience in workouts of middle market companies. In
many cases, other GSC Group-managed funds also own these investments, and we
believe that GSC Group will be able to leverage both its expertise and these
combined ownership positions to positively influence the workout
process.”
As the
Company announced in connection with its fiscal year 2009 earnings, it has
retained the investment banking firm of Stifel, Nicolaus & Company to help
identify and evaluate strategic and financing opportunities. This Company is
actively considering and evaluating opportunities to maximize long-term
shareholder value.
Dividend
Consistent
with the Company’s strategy of preserving capital and reducing debt, the
Company’s Board of Directors has decided not to declare a dividend for the first
quarter of fiscal year 2010. The Board will consider declaring a
dividend at its next regularly scheduled meeting in October, 2009.
2010 First Quarter
Conference Call/Webcast Information
When: Tuesday, July 14, 2009,
10:00 a.m. Eastern Time (ET)
3
Call: Interested parties may
participate by dialing (888) 312-9865 (U.S. and Canada) or (719) 325-2499
(outside U.S. and Canada).
A replay
of the call will be available from 1:00 p.m. ET on Tuesday, July 14, 2009
through 11:59 p.m. ET on Monday, July 27, 2009 by dialing (888) 203-1112 (U.S.
and Canada) or (719) 457-0820 (outside U.S. and Canada), passcode for both
replay numbers: 3510417.
Webcast: Interested parties
may also access a simultaneous webcast of the call by going to
http://ir.gscinvestmentcorp.com/events.cfm. A replay of the webcast will be
available from 1:00 p.m. ET on Tuesday, July 14, 2009 through 11:59 p.m. ET,
Monday, July 27, 2009.
About GSC Investment
Corp.
GSC
Investment Corp. is a specialty finance company that invests primarily in
leveraged loans and mezzanine debt issued by U.S. middle-market companies, high
yield bonds and collateralized loan obligations. It has elected to be treated as
a business development company under the Investment Company Act of 1940. The
Company may also opportunistically invest in distressed debt, debt issued by
non-middle market companies, and equity securities issued by middle and
non-middle market companies. The Company draws upon the support and investment
advice of its external manager, GSC Group, an alternative asset investment
manager that focuses on complex, credit-driven strategies. GSC Investment Corp.
is traded on the New York Stock Exchange under the symbol "GNV."
4
GSC Investment
Corp.
Consolidated Balance
Sheets
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As of
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May 31,
2009
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February 28,
2009
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(unaudited)
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ASSETS
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Investments at fair
value
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Non-control/non-affiliate
investments (amortized cost of $137,234,017 and $137,020,449,
respectively)
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$ | 101,983,348 | $ | 96,462,919 | ||||
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Control investments (cost of
$29,233,097 and $29,905,194, respectively)
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19,235,848 | 22,439,029 | ||||||
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Affiliate investments (cost of $0
and $0, respectively)
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4,043 | 10,527 | ||||||
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Total investments at fair value
(amortized cost of $166,467,114 and $166,925,643,
respectively)
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121,223,239 | 118,912,475 | ||||||
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Cash and cash
equivalents
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8,544,000 | 6,356,225 | ||||||
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Cash and cash equivalents,
securitization accounts
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2,028,951 | 1,178,201 | ||||||
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Outstanding interest rate cap at
fair value (cost of $131,000 and $131,000,
respectively)
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75,200 | 39,513 | ||||||
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Interest receivable, net of
reserve
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3,067,955 | 3,087,668 | ||||||
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Deferred credit facility financing
costs, net
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483,447 | 529,767 | ||||||
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Management fee
receivable
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237,306 | 237,370 | ||||||
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Other
assets
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140,992 | 321,260 | ||||||
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Total
assets
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$ | 135,801,090 | $ | 130,662,479 | ||||
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LIABILITIES
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Revolving credit
facility
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$ | 57,755,257 | $ | 58,994,673 | ||||
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Management and incentive fees
payable
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3,750,594 | 2,880,667 | ||||||
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Accounts payable and accrued
expenses
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690,646 | 700,537 | ||||||
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Interest and credit facility fees
payable
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227,000 | 72,825 | ||||||
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Total
liabilities
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$ | 62,423,497 | $ | 62,648,702 | ||||
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STOCKHOLDERS'
EQUITY
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Common stock, par value $.0001 per
share, 100,000,000 common shares
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authorized, 8,291,384 and
8,291,384 common shares issued and outstanding,
respectively
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829 | 829 | ||||||
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Capital in excess of par
value
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116,943,738 | 116,943,738 | ||||||
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Accumulated undistributed net
investment income
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8,686,481 | 6,122,492 | ||||||
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Accumulated undistributed net
realized loss from investments and derivatives
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(6,953,780 | ) | (6,948,628 | ) | ||||
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Net unrealized depreciation on
investments and derivatives
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(45,299,675 | ) | (48,104,654 | ) | ||||
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Total stockholders'
equity
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73,377,593 | 68,013,777 | ||||||
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Total liabilities and
stockholders' equity
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$ | 135,801,090 | $ | 130,662,479 | ||||
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NET ASSET VALUE PER
SHARE
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$ | 8.85 | $ | 8.20 | ||||
5
GSC Investment Corp.
Consolidated Statement of
Operations
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For the three months
ended
May 31,
2009
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For the three months
ended
May 31,
2008
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(unaudited)
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(unaudited)
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INVESTMENT
INCOME
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Interest from
investments
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Non-Control/Non-Affiliate
investments
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$ | 3,318,840 | $ | 4,459,124 | ||||
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Control
investments
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868,229 | 635,386 | ||||||
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Total
interest income
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4,187,069 | 5,094,510 | ||||||
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Interest from cash and cash
equivalents
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13,191 | 66,689 | ||||||
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Management fee
income
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520,992 | 522,739 | ||||||
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Other
income
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43,134 | 31,423 | ||||||
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Total investment
income
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4,764,386 | 5,715,361 | ||||||
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EXPENSES
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Interest and credit facility
financing expenses
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642,893 | 833,198 | ||||||
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Base management
fees
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547,744 | 748,499 | ||||||
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Professional
fees
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339,780 | 345,459 | ||||||
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Administrator
expenses
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171,861 | 248,398 | ||||||
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Incentive management
fees
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322,183 | 340,107 | ||||||
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Insurance
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206,017 | 167,486 | ||||||
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Directors fees and
expenses
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82,000 | 66,609 | ||||||
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General &
administrative
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59,780 | 65,037 | ||||||
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Other
expense
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- | 3,208 | ||||||
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Expenses before expense waiver and
reimbursement
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2,372,258 | 2,818,001 | ||||||
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Expense
reimbursement
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(171,861 | ) | (298,113 | ) | ||||
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Total expenses net of expense
waiver and reimbursement
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2,200,397 | 2,519,888 | ||||||
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NET INVESTMENT
INCOME
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2,563,989 | 3,195,473 | ||||||
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
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Net realized loss from
investments
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(5,152 | ) | (287,410 | ) | ||||
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Net unrealized
appreciation/(depreciation) on investments
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2,769,292 | (84,817 | ) | |||||
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Net unrealized
appreciation/(depreciation) on derivatives
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35,687 | (11,998 | ) | |||||
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Net gain/(loss) on
investments
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2,799,827 | (384,225 | ) | |||||
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
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$ | 5,363,816 | $ | 2,811,248 | ||||
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WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS PER COMMON SHARE
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$ | 0.65 | $ | 0.34 | ||||
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WEIGHTED AVERAGE COMMON STOCK
OUTSTANDING - BASIC AND DILUTED
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8,291,384 | 8,291,384 | ||||||
####
6