Great Elm Corporation: IIQ 2020 Results – First Look
Judging from the IIQ 2020 results, matters are getting dire at GECC, and management is taking evasive action. This quarter we learned that the BDC is “repositioning” itself, which involves selling off most of its existing traded bond and loan portfolio. Instead, GECC wants to focus more on investing/owning specialty finance businesses like portfolio investment Prestige Capital Finance LLC. The result is that GECC is “intentionally taking actions that depressed net investment income (“NII”) in order to create liquidity“. Net Investment Income Per Share has dropped to $0.09 from $0.26 a quarter before, a (65%) drop in the quarter. NAV Per Share increased slightly to $5.10 from $5.05, but the FMV of the portfolio is only 82.7% of cost. We count 6 portfolio companies on non accrual out of 24. Furthermore, GECC remains under the well known BDC asset coverage limit of 150%, which results “in limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities, in each case, in accordance with the Investment Company Act of 1940“. For the moment, the BDC continues to pay a $0.25 quarterly dividend but 90% of that is in additional stock and that might drop in 2021 as earnings come down. The only bright spot – because necessity is the mother of invention – is that liquidity is in good shape thanks to GECC selling off many of its assets. As of June 30, 2020 – and after retiring a smidgeon of its unsecured notes – the BDC has $31.0mn in cash and no secured debt to contend with. We’re going to learn more on the Monday August 10 conference call. At this stage, though, GECC’s Long Term Outlook remains POOR.
For all the First Look reviews of IIQ 2020 BDC results, check out the BDC Data Table. We are constantly adding new updates as results come in and we undertake an initial survey. Besides these reports, we are also filling in NAV Per Share and investment portfolio size data to compare with prior periods; adding company or BDC Credit Reporter generated data on underperforming companies and assets and affirming or amending our earlier assessments of every BDC’s Liquidity, Credit, Dividend and Long Term Outlook.Already a Member? Log In
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