Kayne Anderson Energy Development Company Announces Results for the Quarter Ended February 28, 2013
Kayne Anderson Energy Development Company Announces Results for the Quarter Ended February 28, 2013 and Provides an Update on Recent Events
HOUSTON--(BUSINESS WIRE)-- (NYS: KED) Kayne Anderson Energy Development Company (the "Company") today announced its financial results for the quarter ended February 28, 2013 and provided an update on recent events.
Q1 HIGHLIGHTS
The Company increased its quarterly distribution to $0.435 per share, up 1.2% from the prior quarter and up 11.5% from the quarter ended February 29, 2012
Net asset value: $24.88 per share; up $1.14 per share (4.8%) from the prior quarter
Net investment income: $0.1 million
Net realized gains: $2.1 million
Net unrealized gains: $14.1 million
RECENT EVENTS
ProPetro Investment. On March 5, 2013, the Company exchanged all of its equity investment in ProPetro Services, Inc. ("ProPetro") and a portion of its First Lien Term C Loan for a First Lien Term B Loan issued by ProPetro that matures on June 30, 2015 ($9.8 million principal amount). The First Lien Term B Loan pays interest in cash at a rate of 10.00% per annum. The Company's remaining investment in the First Lien Term C Loan was repaid at par value plus accrued interest ($9.8 million in cash proceeds).
Amendment to Credit Facility. On March 11, 2013, the Company amended its senior secured revolving credit facility (the "Credit Facility") to add a new lender to the syndicate and to increase the total commitment amount by $10.0 million to $95.0 million. All other terms of the Credit Facility, including its maturity date of March 30, 2014, remained the same.
Direct Fuels Investment. On March 22, 2013, the Company's largest investment, Direct Fuels Partners, L.P., ("Direct Fuels") announced plans with two other private companies to form a variable-pay MLP called Emerge Energy Services LP ("Emerge"). The two other private companies are involved in fuel wholesaling and transmix processing, and frac sand production. Emerge filed a registration statement with the Securities and Exchange Commission ("SEC") on March 22, 2013 and commenced its initial public offering ("IPO") on April 30, 2013. The Company expects that an IPO of Emerge would result in the Company receiving a combination of cash and Emerge common units. The Emerge common units will be subject to a six month lock-up period after the IPO. Additionally, the Company's Preferred A, B and C Units in Direct Fuels are expected to be redeemed for cash concurrent with the IPO. The Company can provide no assurance as to the final terms, timing or estimated proceeds from Emerge's IPO.
RESULTS OF OPERATIONS - QUARTER ENDED FEBRUARY 28, 2013
Investment income totaled $2.5 million for the quarter and consisted primarily of net dividends and distributions and interest income on the Company's debt investments. The Company received $6.1 million of dividends and distributions, of which $4.7 million was treated as a return of capital during the quarter. Interest income was $1.1 million, of which $0.4 million was paid-in-kind interest from ProPetro. The Company received $0.2 million of paid-in-kind dividends during the quarter, which are not included in investment income, but are reflected as an unrealized gain and $0.7 million of non-cash distributions from VantaCore Partners LP ("VantaCore") that is included in investment income.
Operating expenses totaled $2.4 million, including $1.5 million of investment management fees; $0.6 million of interest expense and $0.3 million of other operating expenses. Interest expense included $0.1 million of amortization of debt issuance costs.
The Company's net investment income totaled $0.1 million and included a current income tax expense of $0.02 million.
The Company had net realized gains from investments of $2.1 million, after taking into account a deferred income tax expense of $0.2 million and a current income tax expense of $1.0 million.
The Company had a net change in unrealized gains of $14.1 million. The net change consisted of $22.3 million of unrealized gains from investments and a deferred income tax expense of $8.2 million.
The Company had an increase in net assets resulting from operations of $16.3 million. This increase was comprised of net investment income of $0.1 million; net realized gains of $2.1 million; and net unrealized gains of $14.1 million, as noted above.
NET ASSET VALUE
As of February 28, 2013, the Company's net asset value was $259.2 million or $24.88 per share.
PORTFOLIO
As of February 28, 2013, the Company had long-term investments of $367.9 million, of which approximately 67% were public MLPs and other public equity securities, 24% were private MLPs and other private equity securities and 9% were debt securities. The Company's long-term investments consisted of 51 portfolio companies.
UPDATES ON PRIVATE PORTFOLIO COMPANIES
Updates on the Company's private portfolio companies are available on the Company's website at www.kaynefunds.com/ked/portfolio-companies/.
LIQUIDITY AND CAPITAL RESOURCES
As of April 25, 2013, the Company had $89.0 million of borrowings under its credit facility (at an interest rate of 2.25%) which represented 50.5% of its borrowing base of $176.4 million (54.8% of its borrowing base attributable to quoted securities). At the same date, the Company's asset coverage ratio under the Investment Company Act of 1940 was 401%. The maximum amount that the Company can borrow under its credit facility is limited to the lesser of the commitment amount of $95.0 million or its borrowing base.
DISTRIBUTION
On March 28, 2013, the Company declared a distribution of $0.435 per share for the quarter ended February 28, 2013, which was paid on April 26, 2013 to stockholders of record on April 19, 2013.
GUIDANCE
As a result of investment activity after February 28, 2013, the Company's guidance is based on its portfolio as of April 25, 2013. The Company estimates its portfolio will generate dividends, distributions, and interest income of approximately $7.25 million in the next quarter. The estimate includes distributions of $0.91 million per quarter from VantaCore, which is based on only the cash distributions the Company expects to receive, on average, over the next four quarters of $0.344 per common unit and per preferred A unit and $0.383 per preferred B unit. The Company's guidance does not include $0.33 million of non-cash distributions that the Company expects to receive on VantaCore's common and preferred A units. The Company's guidance does not include any impact from the Company's investment in Direct Fuels as a result of the proposed IPO of Emerge (outlined in Recent Events above) and does not reflect any changes in cash distributions made by MLPs or changes in interest rates based on the movement in LIBOR rates since April 25, 2013.
Portfolio Category | Amount Invested | Average Annual | ||||||
Private MLPs | $ | 83 | 10.8 | % | ||||
Public MLPs and Other Public Equity | 285 | 6.1 | ||||||
Debt Investments(3)(4) | 27 | 9.6 | ||||||
(1) | Average yields include return of capital distributions. Return of capital distributions are reported as a reduction to gross dividends and distributions to arrive at net investment income reported under generally accepted accounting principles. | |
(2) | Average yields for Public MLPs and Other Public Equity are based on the most recently declared distributions as of April 25, 2013. Amounts invested and average yields for Private MLPs are based on February 28, 2013 valuations. | |
(3) | The average yield includes straight-line amortization of the purchase price discounts/premiums through the expected maturity. | |
(4) | The amount invested includes the Company's $9.8 million debt investment in ProPetro at April 25, 2013. This investment pays cash interest at an annual rate of 10.0%. |
Management Fees and Other Operating Expenses - Management fees are estimated to be approximately $1.75 million per quarter. Other operating expenses are estimated to be approximately $0.37 million per quarter.
Interest Expense - Interest expense is estimated to be approximately $0.50 million per quarter based on $90.0 million borrowed under the Company's credit facility, assuming a 30-day LIBOR rate of 0.20% and a spread of 2.00%.
Based on the foregoing assumptions, the Company is expected to generate net distributable income ("NDI") per share of $0.435 to $0.445 in the second quarter of fiscal 2013. Upon completion of Emerge's IPO, the Company will provide updated NDI guidance.
AVAILABLE INFORMATION
The Company's filings with the Securities and Exchange Commission, press releases and other financial information are available on the Company's website at www.kaynefunds.com.
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY | |||||
ASSETS | |||||
Investments, at fair value: | |||||
Non-affiliated (Cost — $171,616) | $ | 220,185 | |||
Affiliated (Cost — $144,099) | 147,694 | ||||
Total investments (Cost — $315,715) | 367,879 | ||||
Cash | 1,144 | ||||
Interest, dividends and distributions receivable | 383 | ||||
Other receivable | 2,900 | ||||
Debt issuance costs, prepaid expenses and other assets | 731 | ||||
Total Assets | 373,037 | ||||
LIABILITIES | |||||
Payable for securities purchased | 2.300 | ||||
Investment management fee payable | 1,538 | ||||
Accrued directors' fees and expenses | 72 | ||||
Accrued expenses and other liabilities | 628 | ||||
Current income tax liability | 951 | ||||
Deferred income tax liability | 33,306 | ||||
Credit facility | 75,000 | ||||
Total Liabilities | 113,795 | ||||
NET ASSETS | $ | 259,242 | |||
NET ASSETS CONSIST OF | |||||
Common stock, $0.001 par value (200,000,000 shares authorized; 10,418,845 shares issued and outstanding) | $ | 10 | |||
Paid-in capital | 201,259 | ||||
Accumulated net investment loss, net of income taxes, less dividends | (40,445 | ) | |||
Accumulated net realized gains on investments, net of income taxes | 65,729 | ||||
Net unrealized gains on investments, net of income taxes | 32,689 | ||||
NET ASSETS | $ | 259,242 | |||
NET ASSET VALUE PER SHARE | $ | 24.88 | |||
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY | |||||
INVESTMENT INCOME | |||||
Income | |||||
Dividends and distributions: | |||||
Non-affiliated investments | $ | 2,895 | |||
Affiliated investments | 3,158 | ||||
Total dividends and distributions | 6,053 | ||||
Return of capital | (4,674 | ) | |||
Net dividends and distributions | 1,379 | ||||
Interest and other income — non-affiliated investments | 678 | ||||
Interest — affiliated investments | 448 | ||||
Total Investment Income | 2,505 | ||||
Expenses | |||||
Investment management fees | 1,538 | ||||
Professional fees | 114 | ||||
Directors' fees and expenses | 75 | ||||
Insurance | 17 | ||||
Administration fees | 21 | ||||
Other expenses | 103 | ||||
Total Expenses — Before Interest Expense | 1,868 | ||||
Interest expense | 542 | ||||
Total Expenses | 2,410 | ||||
Net Investment Income — Before Income Taxes | 95 | ||||
Current income tax expense | (20 | ) | |||
Deferred income tax expense | (4 | ) | |||
Net Investment Income | 71 | ||||
REALIZED AND UNREALIZED GAINS | |||||
Net Realized Gains | |||||
Investments — non-affiliated | 3,415 | ||||
Current income tax expense | (1,033 | ) | |||
Deferred income tax expense | (224 | ) | |||
Net Realized Gains | 2,158 | ||||
Net Change in Unrealized Gains | |||||
Investments — non-affiliated | 14,674 | ||||
Investments — affiliated | 7,659 | ||||
Deferred income tax expense | (8,219 | ) | |||
Net Change in Unrealized Gains | 14,114 | ||||
Net Realized and Unrealized Gains | 16,272 | ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 16,343 | |||
The Company is a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940. The Company's investment objective is to generate both current income and capital appreciation primarily through equity and debt investments. The Company will seek to achieve this objective by investing at least 80% of its net assets together with the proceeds of any borrowings (its "total assets") in securities of companies that derive the majority of their revenue from activities in the energy industry, including: (a) Midstream Energy Companies, which are businesses that operate assets used to gather, transport, process, treat, terminal and store natural gas, natural gas liquids, propane, crude oil or refined petroleum products; (b) Upstream Energy Companies, which are businesses engaged in the exploration, extraction and production of natural resources, including natural gas, natural gas liquids and crude oil, from onshore and offshore geological reservoirs; and (c) Other Energy Companies, which are businesses engaged in owning, leasing, managing, producing, processing and sale of coal and coal reserves; the marine transportation of crude oil, refined petroleum products, liquefied natural gas, as well as other energy-related natural resources using tank vessels and bulk carriers; and refining, marketing and distributing refined energy products, such as motor gasoline and propane to retail customers and industrial end-users.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements" as defined under the U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Company's historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; energy industry risk; commodity pricing risk; leverage risk; valuation risk; non-diversification risk; interest rate risk; tax risk; and other risks discussed in the Company's filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Company's investment objectives will be attained.
KA Fund Advisors, LLC
Monique Vo, 877-657-3863
http://www.kaynefunds.com/
KEYWORDS: United States North America Texas
INDUSTRY KEYWORDS:
The article Kayne Anderson Energy Development Company Announces Results for the Quarter Ended February 28, 2013 and Provides an Update on Recent Events originally appeared on Fool.com.
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