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
|
Date
of report (Date of earliest event reported): October 15,
2009
|
||
|
GSC
Investment Corp.
|
||
|
(Exact
name of registrant
as
specified in charter)
|
||
|
Maryland
|
001-33376
|
20-8700615
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
888
Seventh Ave, New York, NY 10019
|
||
|
(Address
of principal executive offices)
|
||
|
Registrant’s
telephone number, including area code: (212) 884-6200
|
||
|
N/A
|
||
|
(Former
name or former address, if changed since last report)
|
||
|
__________________________
|
||
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):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
|
Item
2.02
|
Results
of Operations and Financial
Condition.
|
On October 15, 2009, we issued a press
release announcing our financial results for the fiscal second quarter ended
August 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.
Exhibit
No. Description
99.1 Press
Release dated October 15, 2009
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.
|
GSC
Investment Corp.
|
||||||
|
Date:
|
October
16, 2009
|
By:
|
/s/
Eric Rubenfeld
|
|||
|
Name:
|
Eric
Rubenfeld
|
|||||
|
Title:
|
Vice
President and Secretary
|
|||||
Exhibit
99.1
 |
Contact: Carl
J. Crosetto
GSC
Group
973-437-1007
Roland
Tomforde
Broadgate
Consultants, LLC
212-232-2222
|
GSC
Investment Corp. Announces Second Quarter 2010 Financial Results
NEW YORK,
October 15, 2009 – GSC Investment Corp. (NYSE:GNV), a business development
company, today announced financial results for the fiscal second quarter ended
August 31, 2009.
Operating
Results
For the
quarter ended August 31, 2009, GSC Investment Corp. reported net investment
income of $1.1 million, or $0.13 per share, and net loss on investments of $17.2
million, or $2.07 per share, resulting in a net decrease in net assets from
operations of $16.2 million, or $1.94 per share. $16.1 million of the net loss
was due to unrealized depreciation. Net asset value was $6.91 per share as of
August 31, 2009 as compared to $8.85 per share as of May 31, 2009.
"The
unrealized depreciation in our portfolio during the second quarter primarily
reflects the combination of adverse credit events with several of our corporate
debt investments and changes in our modeling assumptions regarding default,
recovery and prepayment rates for our CLO investment," said Chief Executive
Officer Seth M. Katzenstein. "While recent signs of stabilization in the credit
markets are encouraging, corporate deficits accumulated during the recent
recession continue to stress our investments. As a result, we expect
that adverse credit events in our portfolio will continue."
Portfolio and Investment
Activity
As of
August 31, 2009, the value of the Company's investment portfolio was $100.0
million, principally invested in 33 portfolio companies and one collateralized
loan obligation fund (“CLO”). The overall portfolio composition consisted of
17.4% first lien term loans, 34.3%
second
lien term loans, 27.1% senior secured notes, 7.7% unsecured notes, 13.3%
subordinated notes of GSCIC CLO and 0.2% equity/limited partnership
interests.
During
the second quarter, GSC Investment Corp. made no investments in new or existing
portfolio companies. For the quarter, the Company had $4.6 million in
aggregate amount of exits and repayments, resulting in net repayments of $4.6
million.
As of
August 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 7.4%, 9.5%, 11.6%, 12.3% and 0.1%,
respectively, which resulted in an aggregate weighted average current yield of
8.2%.
As of
August 31, 2009, 42.7%, or $37.0 million, of the Company's interest-bearing
portfolio was fixed rate debt with a weighted average current coupon of 11.7%
and 57.3%, or $49.7 million, of its interest-bearing portfolio was floating rate
debt with a weighted average current spread of LIBOR plus 6.8%.
Liquidity and Capital
Resources
At August
31, 2009, the Company had $49.6 million in borrowings under its credit facility
and an asset coverage ratio of 216%.
On July
30, 2009, an ongoing borrowing base deficiency in the Company’s credit facility
became an event of default. Adverse credit conditions affecting the Company’s
portfolio investments have continued throughout the second quarter and have
resulted in a $14.5 million deficiency in the Company’s August 31, 2009
borrowing base, which exceeds the Company’s unrestricted cash and cash
equivalents of $6.6 million at August 31, 2009. During the continuance of an
event of default, the lender has the ability to terminate the facility and sell
the underlying collateral necessary to satisfy outstanding borrowings. The
Company and its lender continue to discuss possible solutions to the event of
default and the lender has elected not to accelerate the obligation to date, but
has reserved the right to do so.
2
"The
adverse economic environment that persists in the marketplace continues to have
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 leveraging the experience of our investment adviser GSC Group
and the common ownership of other GSC Group-managed funds.”
The
Company continues to work with the investment banking firm of Stifel Nicolaus
& Company as it actively evaluates strategic alternatives to maximize
long-term shareholder value.
Dividend
The
Company’s Board of Directors has decided not to declare a dividend for the
second quarter of fiscal year 2010.
2010 Second Quarter
Conference Call/Webcast Information
When: Friday, October 16,
2009, 10:00 a.m. Eastern Time (ET)
Call: Interested parties may
participate by dialing (877) 681-3372 (U.S. and Canada) or (719) 325-4923
(outside U.S. and Canada). A replay of the call will be available from 1:00 p.m.
ET on Friday, October 16, 2009 through 11:59 p.m. ET on Wednesday, October 28,
2009 by dialing (888) 203-1112 (U.S. and Canada) or (719) 457-0820 (outside U.S.
and Canada), passcode for both replay numbers: 5269467.
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 Friday, October 16, 2009 through 11:59 p.m. ET,
Wednesday, October 28, 2009.
3
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
|
As
of
|
||||||||
|
August
31, 2009
|
February
28, 2009
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Investments
at fair value
|
||||||||
|
Non-control/non-affiliate
investments (amortized cost of $132,206,257 and $137,020,449,
respectively)
|
$ | 86,689,407 | $ | 96,462,919 | ||||
|
Control
investments (cost of $29,233,097 and $29,905,194,
respectively)
|
13,348,381 | 22,439,029 | ||||||
|
Affiliate
investments (cost of $0 and $0, respectively)
|
318 | 10,527 | ||||||
|
Total
investments at fair value (amortized cost of $161,439,354 and
$166,925,643, respectively)
|
100,038,106 | 118,912,475 | ||||||
|
Cash
and cash equivalents
|
6,643,998 | 6,356,225 | ||||||
|
Cash
and cash equivalents, securitization accounts
|
434,918 | 1,178,201 | ||||||
|
Outstanding
interest rate cap at fair value (cost of $131,000 and $131,000,
respectively)
|
89,347 | 39,513 | ||||||
|
Interest
receivable, net of reserve
|
2,514,815 | 3,087,668 | ||||||
|
Deferred
credit facility financing costs, net
|
- | 529,767 | ||||||
|
Management
fee receivable
|
650,062 | 237,370 | ||||||
|
Other
assets
|
596,870 | 321,260 | ||||||
|
Total
assets
|
$ | 110,968,116 | $ | 130,662,479 | ||||
|
LIABILITIES
|
||||||||
|
Revolving
credit facility
|
$ | 49,580,451 | $ | 58,994,673 | ||||
|
Management
and incentive fees payable
|
3,135,958 | 2,880,667 | ||||||
|
Accounts
payable and accrued expenses
|
547,739 | 700,537 | ||||||
|
Interest
and credit facility fees payable
|
408,695 | 72,825 | ||||||
|
Due
to manager
|
5,942 | - | ||||||
|
Total
liabilities
|
$ | 53,678,785 | $ | 62,648,702 | ||||
|
STOCKHOLDERS'
EQUITY
|
||||||||
|
Common
stock, par value $.0001 per share, 100,000,000 common shares
authorized, 8,291,384 and 8,291,384 common shares issued and
outstanding, respectively
|
829 | 829 | ||||||
|
Capital
in excess of par value
|
116,943,738 | 116,943,738 | ||||||
|
Accumulated
undistributed net investment income
|
9,766,239 | 6,122,492 | ||||||
|
Accumulated
undistributed net realized loss from investments and
derivatives
|
(7,978,576 | ) | (6,948,628 | ) | ||||
|
Net
unrealized depreciation on investments and
derivatives
|
(61,442,899 | ) | (48,104,654 | ) | ||||
|
Total
stockholders' equity
|
57,289,331 | 68,013,777 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 110,968,116 | $ | 130,662,479 | ||||
|
NET
ASSET VALUE PER SHARE
|
$ | 6.91 | $ | 8.20 | ||||
5
GSC
Investment Corp.
Consolidated
Statement of Operations
|
For the three months
ended
August 31
|
For the six months
ended
August 31
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||||
|
INVESTMENT
INCOME
|
||||||||||||||||
|
Interest from
investments
|
||||||||||||||||
|
Non-Control/Non-Affiliate
investments
|
$ | 2,654,665 | $ | 4,144,437 | $ | 5,973,505 | $ | 8,603,561 | ||||||||
|
Control
investments
|
449,485 | 1,111,003 | 1,317,714 | 1,746,389 | ||||||||||||
|
Total interest
income
|
3,104,150 | 5,255,440 | 7,291,219 | 10,349,950 | ||||||||||||
|
Interest from cash and cash
equivalents
|
6,991 | 36,008 | 20,182 | 102,697 | ||||||||||||
|
Management fee
income
|
516,939 | 489,148 | 1,037,931 | 1,011,887 | ||||||||||||
|
Other
income
|
57,278 | 54,279 | 100,412 | 82,494 | ||||||||||||
|
Total investment
income
|
3,685,358 | 5,834,875 | 8,449,744 | 11,547,028 | ||||||||||||
|
EXPENSES
|
||||||||||||||||
|
Interest and credit facility
financing expenses
|
1,405,548 | 623,611 | 2,048,441 | 1,456,809 | ||||||||||||
|
Base management
fees
|
505,314 | 705,532 | 1,053,058 | 1,454,031 | ||||||||||||
|
Professional
fees
|
341,998 | 315,130 | 681,778 | 660,589 | ||||||||||||
|
Administrator
expenses
|
171,861 | 260,946 | 343,722 | 509,344 | ||||||||||||
|
Incentive management
fees
|
- | 407,027 | 322,183 | 747,134 | ||||||||||||
|
Insurance
|
223,459 | 177,162 | 429,476 | 344,648 | ||||||||||||
|
Directors fees and
expenses
|
63,136 | 73,276 | 145,136 | 139,885 | ||||||||||||
|
General &
administrative
|
66,145 | 77,904 | 125,925 | 142,941 | ||||||||||||
|
Expenses before manager expense
waiver and reimbursement
|
2,777,461 | 2,640,588 | 5,149,719 | 5,455,381 | ||||||||||||
|
Expense
reimbursement
|
(171,861 | ) | (260,946 | ) | (343,722 | ) | (559,059 | ) | ||||||||
|
Total expenses net of expense
waiver and reimbursement
|
2,605,600 | 2,379,642 | 4,805,997 | 4,896,322 | ||||||||||||
|
NET INVESTMENT
INCOME
|
1,079,758 | 3,455,233 | 3,643,747 | 6,650,706 | ||||||||||||
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
|
||||||||||||||||
|
Net realized gain/(loss) from
investments
|
(1,024,796 | ) | 173,681 | (1,029,948 | ) | (129,819 | ) | |||||||||
|
Net realized gain from
derivatives
|
- | 14,364 | - | 30,454 | ||||||||||||
|
Net unrealized depreciation on
investments
|
(16,157,371 | ) | (6,194,371 | ) | (13,388,079 | ) | (6,279,188 | ) | ||||||||
|
Net unrealized
appreciation/(depreciation) on derivatives
|
14,147 | (16,328 | ) | 49,834 | (28,326 | ) | ||||||||||
|
Net loss on
investments
|
(17,168,020 | ) | (6,022,654 | ) | (14,368,193 | ) | (6,406,879 | ) | ||||||||
|
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS
|
$ | (16,088,262 | ) | $ | (2,567,421 | ) | $ | (10,724,446 | ) | $ | 243,827 | |||||
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE
|
$ | (1.94 | ) | $ | (0.31 | ) | $ | (1.29 | ) | $ | 0.03 | |||||
|
WEIGHTED AVERAGE COMMON STOCK
OUTSTANDING - BASIC AND DILUTED
|
8,291,384 | 8,291,384 | 8,291,384 | 8,291,384 | ||||||||||||
####
6