CM Finance Inc Reports Results for its Fiscal Second Quarter Ended December 31, 2018

NEW YORK, Feb. 06, 2019 (GLOBE NEWSWIRE) — CM Finance Inc (NASDAQ: CMFN) (“CMFN” or “the Company”) announced its financial results for its fiscal second quarter ended December 31, 2018.

HIGHLIGHTS

• CMFN made investments in nine portfolio companies with a total cost of $50.1mm.  The weighted average yield of debt investments made in the quarter was 10.77% 
• Eight investments were fully realized, and one investment had a significant partial realization. Realizations during the quarter had a weighted average internal rate of return (“IRR”) of 12.21%
• The weighted average yield on debt investments, at cost, increased 18 basis points to 11.08% compared to 10.90% as of September 30, 2018
• Net asset value (“NAV”) per share decreased by 7.41% to $11.49, compared to $12.41 as of September 30, 2018

Portfolio results, as of December 31, 2018:
Total assets		$302.0mm
Investment portfolio, at fair value		$283.3mm
Net assets		$156.4mm
Weighted average yield on debt investments, at cost		11.08%
Net asset value per share		$11.49
Portfolio activity in the current quarter:
Number of new investments		14
Total capital invested		$50.1mm
Proceeds from repayments, sales, and amortization		$84.5mm
Number of portfolio companies, end of period		29
Net investment income (NII)		$3.7mm
Net investment income per share		$0.25
Net decrease in net assets from operations		$9.4mm
Net decrease in net assets from operations per share		$0.69
Quarterly per share distribution paid on October 5, 2018		$0.25

Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said, “While the fair value of the portfolio declined during the quarter, we believe that we take a prudent and conservative approach to both investing and valuing our portfolio and we see significant opportunity as we look forward in 2019.  We have fully written down our positions in Trident USA Health Services, LLC, and have no other positions on non-accrual today.  Our team continues to reposition our portfolio, currently emphasizing senior secured positions, building a diversified, resilient portfolio that will perform throughout the cycle. We are very happy with the progress we have made.”

On February 5, 2019, the Company’s Board of Directors declared a distribution for the quarter ending March 31, 2019 of $0.25 per share, payable on April 4, 2019, to shareholders of record as of March 15, 2019. This represents a 12.5% yield on the Company’s $8.00 share price as of the close on February 5, 2018.  Distributions may include net investment income, capital gains and/or return of capital; however, the Company does not expect the distribution to be comprised of a return of capital. The tax status of distributions will be determined at the end of the taxable year.

Portfolio and Investment Activities

During the quarter, the Company made investments in nine portfolio companies.  These investments totaled $50.1mm at cost and were made at a weighted average yield of 10.77%.  The Company also realized $84.5mm of repayments, sales, and amortization, primarily related to the repayments of American Gaming Systems Inc., Montrose Environmental Group, Inc., FPC Holdings, Inc, and Hostway Corp.  Additionally, we had a partial realization of our investments in U.S. Well Services, LLC, including the full realization of our position in U.S. Well Services, LLC’s revolving credit facility. Realized and unrealized gains and losses accounted for a decrease in the Company’s net investments of approximately $13.1mm, or $0.96 per share.  The total net decrease in net assets resulting from operations for the quarter was $9.4mm, or $0.69 per share. 

As of December 31, 2018, the Company’s investment portfolio consisted of investments in 29 portfolio companies, of which 63.7% were first lien investments, 31.7% were second lien investments, 4.1% were unitranche loans, and 0.5% were in equities, warrants and other positions.  The Company’s debt portfolio consisted of 94.4% floating rate investments and 5.2% fixed rate investments.  As of December 31, 2018, the Company had one investment on non-accrual status, Trident USA Health Services, LLC.

Capital Resources

As of December 31, 2018, the Company had $6.2mm in cash, $6.0mm in restricted cash and $50.0mm of capacity under its revolving credit facility with UBS AG, London Branch.

Share Repurchases

During the quarter, the Company repurchased 30,999 shares of common stock on the open market for $257,336 (including commissions).

Subsequent Events

Subsequent to December 31, 2018 and through February 5, 2019, we invested $23.4 million in new and existing portfolio companies, and received repayment or sales proceeds of $29.0 million

CM Finance Inc and Subsidiaries
Consolidated Statements of Assets and Liabilities
		December 31, 2018				June 30, 2018
Assets
Non-controlled, non-affiliated investments, at fair value (amortized cost of $307,290,045 and $ 302,647,282, respectively)	$	283,335,302			$	293,592,013
Derivatives, at fair value (cost of $0 and $0, respectively)		94,380				229,918
Cash		6,197,259				5,620,441
Cash, restricted		5,981,651				2,706,273
Receivable for investments sold		397,146				7,751,875
Interest receivable		3,282,163				4,011,450
Deferred offering costs		121,922				121,922
Other receivables		2,515,625				245,550
Prepaid expenses and other assets		58,954				255,139
Total Assets	$	301,984,402			$	314,534,581
Liabilities
Notes payable:
Term loan	$	102,000,000			$	102,000,000
Revolving credit facility		–				17,823,000
Baby bonds payable:		34,500,000				–
Deferred debt issuance costs		(2,494,517	)			(1,953,771	)
Notes payable, net		134,005,483				117,869,229
Payable for investments purchased		2,985,000				12,569,450
Dividend payable		3,410,713				3,417,848
Deferred financing costs payable		1,037,000				2,071,167
Income-based incentive fees payable		1,566,513				2,294,678
Base management fees payable		1,405,297				1,319,853
Accrued provision for taxes		–				2,579,337
Derivatives, at fair value (cost $0 and $0, respectively)		94,380				229,918
Interest payable		845,566				303,153
Directors’ fees payable		93,448				99,296
Accrued expenses and other liabilities		104,694				257,986
Total Liabilities		145,548,094				143,011,915
Commitments and Contingencies (Note 6)
Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,613,116 and 13,649,504 shares issued and outstanding, respectively)		13,613				13,649
Additional paid-in capital		198,392,175				198,700,999
Accumulated net realized loss		(21,270,472	)			(21,087,280	)
Undistributed (distributions in excess of) net investment income		3,255,732				2,950,567
Net unrealized depreciation on investments		(23,954,740	)			(9,055,269	)
Total Net Assets		156,436,308				171,522,666
Total Liabilities and Net Assets	$	301,984,402			$	314,534,581
Net Asset Value Per Share	$	11.49			$	12.57
See notes to unaudited consolidated financial statements.

CM Finance Inc and Subsidiaries
Consolidated Statements of Operations
	For the three months ended December 31,							For the six months ended December 31,
	2018				2017			2018				2017
Investment Income:
Interest income	$	8,481,251			$	7,538,152		$	16,136,091			$	13,964,204
Payment in-kind interest income		540,308				722,039			953,928				1,014,517
Dividend income		–				–			31,275				–
Payment in-kind dividend income		–				189,583			–				189,583
Other fee income		277,365				–			432,520				9,879
Total investment income		9,298,924				8,449,774			17,553,814				15,178,183
Expenses:
Interest expense		2,156,537				1,601,261			4,421,394				3,039,090
Base management fees		1,405,297				1,161,353			2,757,152				2,315,233
Income-based incentive fees		753,721				921,782			874,042				906,758
Provision for tax expense		12,946				–			12,946				–
Professional fees		233,528				236,024			466,328				445,064
Allocation of administrative costs from advisor		341,633				184,561			679,696				311,790
Amortization of deferred debt issuance costs		195,377				179,514			390,754				304,716
Insurance expense		84,440				85,225			168,880				205,439
Directors’ fees		101,250				99,000			202,500				198,667
Custodian and administrator fees		7,500				113,443			15,000				170,451
Offering expense		51,750				–			103,500				186,513
Other expenses		236,033				180,482			355,214				391,158
Total expenses		5,580,012				4,762,645			10,447,406				8,474,879
Waiver of income-based incentive fees		–				–			(22,000	)			–
Net expenses		5,580,012				4,762,645			10,425,406				8,474,879
Net investment income		3,718,912				3,687,129			7,128,408				6,703,304
Net realized and unrealized gain/(loss) on investments:
Net realized gain (loss) from investments		75,000				–			(183,192	)			(7,380,690	)
Net change in unrealized appreciation (depreciation) in value of investments		(13,176,208	)			1,172,018			(14,899,471	)			8,672,249
Total realized and unrealized gain (loss) on investments		(13,101,208	)			1,172,018			(15,082,663	)			1,291,559
Net increase (decrease) in net assets resulting from operations
	$	(9,382,296	)		$	4,859,147		$	(7,954,255	)		$	7,994,863
Basic and diluted:
Net investment income per share	$	0.27			$	0.27		$	0.52			$	0.49
Earnings per share	$	(0.69	)		$	0.35		$	(0.58	)		$	0.58
Weighted average shares of common stock outstanding		13,638,869				13,690,480			13,644,483				13,690,182
Distributions paid per common share	$	0.25			$	0.25		$	0.50			$	0.50
See notes to unaudited consolidated financial statements.

About CM Finance Inc

The Company is an externally-managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940.  The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company seeks to invest primarily in middle-market companies that have annual revenues of at least $50mm and earnings before interest, taxes, depreciation and amortization of at least $15mm. The Company’s investment activities are managed by its investment adviser, CM Investment Partners LLC. To learn more about CM Finance Inc, please visit www.cmfn-inc.com.

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. The Company undertakes no duty to update any forward-looking statement made herein except as required by law. All forward-looking statements speak only as of the date of this press release.

Contacts
CM Finance Inc
Investor Relations
Email: [email protected]
Phone: 212-257-5199