Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q4 2016 Earnings Presentation
31 slides from Great Elm Capital's earnings presentation, Mar 30, 2017
Slide 1: Investor Presentation – Quarter Ended December 31, 2016
Great Elm Capital Corp. (NASDAQ: GECC) Investor Presentation – Quarter Ended December 31, 2016 March 29, 2017 © 2017 Great Elm Capital Corp. Exhibit 99.2
Slide 2: Disclaimer
© 2017 Great Elm Capital Corp. Disclaimer Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe,” “expect
Slide 3: About The Company, Team & Approach
© 2017 Great Elm Capital Corp. About The Company, Team & Approach
Slide 4: Organizational Chart
15% Organizational Chart Great Elm Capital Management, Inc. (“GECM”) Ownership Management Agreement (NASDAQ: GEC) (NASDAQ: GECC) Great Elm Capital Management, Inc. (“GECM”) is the external manager of Great Elm Capital Corp., a publicly traded BDC with approximately $173.0 million in net assets as of
Slide 5: About GECC
© 2017 Great Elm Capital Corp. About GECC GECC Investment Objective Investment Strategy Externally managed special situations-focused BDC Common stock trades as “GECC” and baby bonds as “FULLL” $0.083 per share monthly distribution Seek to generate attractive risk-adjusted returns with both capital
Slide 6: Experienced Management Team
Experienced Management Team 100+ Years of cumulative investment experience Nine Seasoned investment professionals $17 billion Aggregate credit investments across 550+ issuers over 14+ years under MAST Hiring of MAST Capital Management, LLC (“MAST”) team enabled Great Elm to be ready to invest capita
Slide 7: GECM’s Team
GECM’s Team Investment professionals are sector-focused and search for attractive risk-adjusted opportunities throughout the capital structure, with an emphasis on leveraged issuers Operations, finance, compliance and investor relations professionals share knowledge and experience and are cross-trai
Slide 8: GECM’s Investment Focus
GECM’s Investment Focus With GECM’s depth of experience in middle-market investing, GECC is pursuing a BDC strategy with a greater focus on investing in secondary market and special situations opportunities, which the team believes will result in the potential for capital appreciation beyond interes
Slide 9: GECM’s Investment Philosophy & Approach
GECM’s Investment Philosophy & Approach © 2017 Great Elm Capital Corp. Capitalize on secondary market disruption Focus on downside protection Special situations analysis Legal analysis of investment documents Concentration in best ideas
Slide 10: GECM’s Underwriting Philosophy
GECM’s Underwriting Philosophy In implementing the investment strategy, GECM seeks to: Preserve capital Identify the margin of safety Concentrate in the team’s best ideas Invest with an edge by seeking investments where GECM’s view is differentiated from the market’s and mispricing provides risk-adj
Slide 11: Financial & Portfolio Review
© 2017 Great Elm Capital Corp. Financial & Portfolio Review
Slide 12: Financial & Portfolio Highlights
© 2017 Great Elm Capital Corp. Financial & Portfolio Highlights Q4 / 2016 1 11/3/2016 EPS ($1.39) N/A Net Investment Income (“NII”) Per Share $0.00 N/A NII Per Share Excluding One-Time Merger / Formation Costs $0.28 N/A Net Realized Gains Per Share $0.02 N/A Net Unrealized Losses Per Share ($1.05) N
Slide 13: Financial Review
© 2017 Great Elm Capital Corp. Financial Review Total investment income for the period ended December 31, 2016 was approximately $5.8 million, or $0.45 per share Total net expenses for the period ended December 31, 2016 was approximately $5.8 million, or $0.45 per share Included in this quarter’s op
Slide 14: Financial Review
© 2017 Great Elm Capital Corp. Financial Review In thousands Per Share 2 Total Investment Income $ 5,831 $ 0.45 Interest Income 3 5,313 0.41 Other Income 518 0.04 Net Operating Expenses 5,826 0.45 Management Fee 392 0.03 Incentive Fee 863 0.07 Total Advisory Fees 1,255 0.10 Total Costs Incurred Unde
Slide 15: Portfolio Highlights
© 2017 Great Elm Capital Corp. Portfolio Highlights 12.76% Weighted average current yield on portfolio; 91.8% of the portfolio invested in 1st lien and/or senior secured instruments 51% Of NAV invested in our largest five positions, consistent with our view that portfolio concentration leads to inve
Slide 16: Portfolio Overview as of December 31, 2016
© 2017 Great Elm Capital Corp. Portfolio Overview as of December 31, 2016 21 Debt Investments $154.2 million Fair Value Invested in Debt Instruments 38% in Floating Rate Instruments 12.76% Weighted Average Current Yield 99.7% Of Invested Capital in Debt Instruments (91.8% in first lien / senior secu
Slide 17: Q4 Portfolio Activity
© 2017 Great Elm Capital Corp. Q4 Portfolio Activity $42.5 million Capital deployed into eight companies (three new, five existing) with a weighted average price of $0.9255 and a weighted average current yield of 12.18% 4 $41.7 million Monetized (in part or full) 16 investments, including the comple
Slide 18: Portfolio Breakdown by Asset Type and Interest Rate Type
© 2017 Great Elm Capital Corp. Portfolio Breakdown by Asset Type and Interest Rate Type Portfolio by Asset Type Portfolio by Interest Rate Type (6) Rounds to less than 0.05%. 6 Weighted average fixed rate coupon of 10.85%
Slide 19: Portfolio Breakdown by Industry
© 2017 Great Elm Capital Corp. Portfolio Breakdown by Industry
Slide 20: Avanti Communications Group plc
© 2017 Great Elm Capital Corp. Avanti Communications Group plc On January 27, 2017, Avanti Communications Group plc (“Avanti”) announced the completion of its previously announced refinancing, with the settlement of its: (1) consent solicitation to permit, among other things, the incurrence of up to
Slide 21: Avanti concentration and special situations NII potential
Our portfolio is more concentrated in Avanti than our go-forward portfolio strategy. While we intend to manage the portfolio in a more concentrated fashion compared to other BDCs, we do not expect to have position sizes approaching 25% in a single issuer going forward However, Avanti is illustrative
Slide 22: Capital Activity
© 2017 Great Elm Capital Corp. Capital Activity
Slide 23: Distribution Policy & Declared Distributions
© 2017 Great Elm Capital Corp. Distribution Policy & Declared Distributions On December 27, 2016, we announced our distribution policy, setting our base distribution rate at $0.083 per share per month, which is currently well-covered by NII. Excluding one-time merger and formation transaction-relate
Slide 24: Stock Buyback Program
© 2017 Great Elm Capital Corp. Stock Buyback Program Post the closing of the merger in November 2016, we commenced our stock buyback program, executed through a 10b5-1 plan, to repurchase shares whenever they trade below 90% of the last published NAV Our Board of Directors approved $15 million for t
Slide 25: Planned $10 Million Tender Offer
We intend to commence a tender offer for $10 million (approximately 7% of our market capitalization) of our common stock Our stockholders may: Agree to accept the price determined in the tender offer Specify the price at which they are willing to sell shares back to us Maximum = $12.17 per share (90
Slide 26: Resale Registration Statement
© 2017 Great Elm Capital Corp. Resale Registration Statement We are filing a Form N-2 to register the shares that were issued to GEC and the MAST Funds in the private placement contemplated by the June 2016 Subscription Agreement We contractually agreed to register these shares no later than Q1 2017
Slide 27: Appendix
© 2017 Great Elm Capital Corp. Appendix
Slide 28: The Merger
The Merger © 2017 Great Elm Capital Corp. On June 23, 2016, Full Circle Capital Corp. (“Full Circle”) announced its intent to merge with and into Great Elm Capital Corp. (“GECC”), a newly formed entity, formed by funds (the “MAST Funds”) managed by MAST Capital Management, LLC (“MAST Capital”) and G
Slide 29: November 3, 2016 Balance Sheet
November 3, 2016 Balance Sheet (in thousands, except per share amount) © 2017 Great Elm Capital Corp.
Slide 30: Stockholder-Friendly Investment Management Fee Schedule
Stockholder-Friendly Investment Management Fee Schedule © 2017 Great Elm Capital Corp. Industry Standard GECC Management Fee 1.50% - 2.00% of average gross assets 1.50% of average gross assets, excluding cash and cash equivalents Income Incentive Fee Hurdle 1.75% - 2.00% quarterly return on NAV 1.75
Slide 31: Contact Information
Contact Information © 2017 Great Elm Capital Corp. Investor Relations Meaghan K. Mahoney Senior Vice President 200 Clarendon Street, 51st Floor Boston, MA 02116 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com