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Gladstone Capital: Issues Preliminary IIIQ 2021 Metrics

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NEWS

Early

For reasons not entirely clear – but possibly related to a coming debt or equity offering – Gladstone Capital (GLAD)has issued an 8-K with a small number of preliminary metrics regarding its IIIQ 2021 performance:

The Company estimates the net asset value per share of its common stock as of September 30, 2021 to be between $9.22 and $9.30.
  The Company estimates the net investment income per weighted average share of common stock outstanding to be in the range of $0.77 and $0.80 for the year ended September 30, 2021.
  The total amount outstanding under the Company’s credit facility as of September 30, 2021 was approximately $50.5 million.

The information presented above should not be considered a substitute for full audited financial statements for the fiscal year ended September 30, 2021 and should not be regarded as a representation by the Company as to the actual financial results for the fiscal year ended September 30, 2021″.

We’ve already included the NAV Per Share number – using the midpoint – in the BDC: NAV Change Table, which shows an increase of 8.7% over the prior quarter, far and away the highest performance of any BDC that has reported so far.

The Net Investment Income Per Share is way, way above the $0.20 analyst consensus for the IIIQ 2021. The IIQ 2021 actual result was $0.195, equal to its distribution. We assume GLAD has booked some unusual fee or other income that is giving an unexpected boost to earnings.

There were no subsequent events listed in the last 10-Q or any announcement of a portfolio company disposition in these past few weeks to suggest which of many prospective gains might have been “harvested”.

Debt

The outstandings under the revolver have increased substantially since June 30, 2021, from $23mn to the just reported $50.5mn, but well within the $131mn available under the facility.

However, on November 1, GLAD is going to have to come up with nearly $40mn to redeem – three years early – its Baby Bond with the ticker GLADL.

We assume the BDC must be working on issuing new unsecured debt to replace the Baby Bond, which is costing GLAD 5.3750% per annum. Most recently – in December 2020 – the BDC raised $100mn in a privately placed unsecured note offering with a yield of 5.125% and a 5 year maturity. This was followed by an “add-on offering” in March 2021 at an effective yield (because issued at a premium) of 4.288%. Chances are GLAD will be able to borrow at a similar – or lower – yield than in March this time around, and continue to lower its borrowing cost.

Latest Price

GLAD’s stock price opened on Thursday October 28, 2021 at a price of $11.50, slightly below the $12.05 52 week high, set August 18, 2021. GLAD trades at a 25% premium to book but has gone as high as a 41% premium.

Schedule

As the BDC Earnings Calendar shows, GLAD will be reporting its results on November 15, 2021.

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