Full Circle Capital expands origination platform, ends Q2 with assets totaling $104 million

By Lisa Kerner

Charlotte, N.C., Feb. 11 - Full Circle Capital Corp.'s second-quarter fiscal 2014 net investment income exceeded distributions on a 53% increase in net investment income over the prior sequential quarter, according to chairman and co-chief executive officer John Stuart.

Full Circle received $19.7 million in repayments and realizations from five portfolio companies during the quarter, driving fee income to $1.2 million and total net investment income to $1.9 million.

The company ended the period with debt investments of $75.9 million in 18 portfolio companies, which represented a 12.48% weighted average interest rate.

At Dec. 31, 90% of portfolio company investments were first-lien senior secured loans.

"We continue to build out our origination platform to include a broader set of investment options while staying within our credit parameters," said Stuart during the company's earnings conference call.

"While our focus remains on lower middle-market direct origination, we are also employing an opportunistic approach to our investment program, as seen in the recent secondary purchases to exploit market inefficiencies, as well as, in certain cases, through structuring our credit investments with a greater degree of equity upside," he said.

During the quarter, Full Circle originated $5 million in one new loan facility.

Full Circle had total assets of $104 million at Dec. 31, including cash of $900,000, according to chief financial officer Mike Sell.

Post-quarter transactions

Subsequent to quarter-end, the company completed a follow-on public offering of 1.65 million shares of its common stock for gross proceeds of about $11.8 million.

On Jan. 27, the underwriters exercised in full their option to purchase 242,300 additional shares, resulting in an additional $1.7 million in gross proceeds.

Also in January, Full Circle received gross proceeds of $7,664,074 relating to the full repayment of its senior secured credit facility and the senior secured revolving loan with Global Energy Efficiency Holdings, Inc.

Full Circle invested $500,000 in warrants on Jan. 21 as part of a $30 million senior secured convertible note purchase agreement with Advanced Cannabis Solutions, Inc. When funded, the notes will bear interest at a fixed rate of 12% per annum and have a final maturity of Jan. 21, 2020.

The company had been considering "multiple ways to participate in the cannabis space," said co-CEO and president Gregg Felton.

And, also in January, Full Circle purchased roughly $7.5 million par amount of a $256.3 million senior secured credit facility to PEAKS Trust 2009-1, a special purpose entity holding student loans, for approximately $6 million.

On Feb. 5, Full Circle's board declared monthly distributions for the fourth quarter of fiscal 2014 that equate to $0.804 annualized distribution rate, or a current annualized yield of 10.88%.

The company has broadened its origination strategy to include transactions structured as convertible debt as well as secondary purchases at a discount to par value, said Felton.

"We are actively growing an attractive pipeline of transactions and are well positioned to execute given our current liquidity," he said.

Financial highlights

For the three months ended Dec. 31, total investment income was $4 million, an increase of 29% from the prior-year period.

Net investment income was $1.9 million, or $0.25 per share, compared to $1.5 million, or $0.22 per share, for the three months ended Dec. 31, 2012.

Full Circle is a Rye Brook, N.Y., closed-end investment company.

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