Business Development Corporation of America. QUARTERLY REVIEW As of June 30, 2013

Transcription

1 Business Development Corporation of America QUARTERLY REVIEW As of June 30, 2013

2 Business Development Corporation of America QUARTERLY REVIEW In the United States, mid-sized companies account for roughly 40% QUARTERLY REVIEW (AS OF JUNE 30, 2013) (1) of our entire economy. They form the backbone of American business and will ultimately be a catalyst for our country s growth and economic recovery. Business Development Corporation of America ( BDCA ) was constructed to provide capital, primarily in the form of senior secured loans, to these established middle market enterprises in order to position them for growth and greater profitability. In these periodic updates, we intend to furnish regular snapshots of some of the dynamic businesses that BDCA has invested in as well as a summary of the overall investment portfolio to date. As always, we thank you for your support of BDCA. Peter M. Budko, President & Chief Operating Officer DISTRIBUTIONS (2) $0.86/share Annualized Distribution Rate ASSET QUALITY 75.1% Senior Secured Debt 0% Non-Performing Assets PORTFOLIO DIVERSITY 74 Number of Investments 20 Number of Industries ASSETS UNDER MANAGEMENT $600.0 $500.0 $400.0 $300.0 $200.0 $ $ $519.7 (1) The portfolio information detailed in this brochure reflects data that is included in the Company s Form 10-Q as filed with the Securities and Exchange Commission on August 13, 2013, reflecting our quarterly numbers as of June 30, The portfolio snapshot is not a substitute for the review of the prospectus and the financial statements of BDCA, nor does it include information on fees, expenses, and risks of the portfolio. As with any investment, there is no guarantee that BDCA will achieve these results or the stated returns. Past performance does not guarantee future results. (2) Distributions are not guaranteed. $100.0 $0.00 $ 87.1 $ Q 12 3Q 12 4Q 12 1Q 13 2Q 13 SOME OF THE RISK FACTORS associated with an investment in BDCA include, without limitation: (1) Because there is no public trading market for shares of our common stock and we are not obligated to effectuate a liquidity event by a specified date, it will be difficult for you to sell your shares; (2) The amount of any distributions we pay is uncertain. Our distributions to our stockholders may exceed our net investment income, particularly during the period before we have substantially invested the net proceeds from this offering. Therefore, portions of the distributions that we pay may be paid from the net proceeds of our offering, from our borrowings, or from other sources, and may represent a return of capital to you. (3) Our investment adviser, BDCA Adviser, LLC (the Adviser ) and its affiliates face conflicts of interest as a result of compensation arrangements, time constraints and competition for investments; (4) We are a new company and are subject to the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives. FOR ADDITIONAL RISK FACTORS, PLEASE SEE THE BACK OF THIS BROCHURE.

3 COMPANY HIGHLIGHTS U.S. SHIPPING CORPORATION US Shipping is a provider of long-haul marine transportation services between U.S. ports. The Company transports refined petroleum products, petrochemicals and commodity chemical products, principally from the Gulf Coast up to the U.S. East Coast on front haul voyages, and back down the coast on backhauls. US Shipping generates revenue by charging customers for the transportation of their products utilizing the Company s vessels. The Company s customers include large, investment grade oil refiners and chemical producers. US Shipping is a Jones Act compliant shipping company. The Jones Act requires that all vessels transporting cargo between U.S. ports must be: owned and operated by U.S. companies that are controlled and at least 75% owned by U.S. citizens, built at U.S. shipyards, registered under the U.S. flag, and manned by a U.S. crew. Accordingly, only Jones Act product tankers and barges can transport petroleum and chemical products between ports in the U.S. US Shipping operates seven Jones Act vessels including four articulated tug barges, two parcel tankers, and one medium-range product tanker. INVESTMENT SNAPSHOT Date of Initial Investment April 24, 2013 Investment Size $12,000,000 Investment Type 1st Lien Senior Secured Debt Maturity April 24, 2018 Coupon (1) (2) (2 LIBOR %, 1.25% LIBOR Floor Price to Par (3) 99% FLAGSTONE FOODS Flagstone Foods purchases, prepares, packages, distributes and sells over 1,000 branded and private label varieties of trail mixes, dried fruits, snack nuts and other healthful snacks to 50+ major retailers in North America including mass-merchandise, grocer, wholesale club, dollar, convenience, military and other channels. The Company has a blue chip customer list, including Walmart, Costco, Kroger, Walgreens, BJ s and Target and approximately 22% market share overall, holding the #1 position in private label trail mix (56%) and private label dried fruit (29%). Flagstone has strong relationships with its top customers, with business at Walmart dating back over 16 years and including some of Walmart s highest margin private label items such as trail mix. Additionally, the Company has been the go-to supplier for Costco for over 20 years and provides nuts for many of the Kirkland Signature offerings. INVESTMENT SNAPSHOT Date of Initial Investment May 22, 2013 Investment Size $11,000,000 Investment Type 1st Lien Senior Secured Debt Maturity May 15, 2018 Coupon (1) (2) (2) LIBOR %, 2.50% LIBOR Floor Price to Par (3) 99% The investments listed herein are representative of those made by Business Development Corporation of America (the Fund ). No representation is being made that these investments will prove to be successful for the Fund. DEFINITIONS: (1) Coupon refers to the interest rate stated on a bond or loan when it is issued; (2) LIBOR stands for the London Interbank Offering Rate, and is the world s most widely used benchmark for short-term interest rates. LIBOR is fixed on a daily basis by the British Bankers Association; (3) Price to Par is defined as the percentage of the face or notional value of a bond or loan at which that investment is carried or purchased.

4 TENNIS CHANNEL The Tennis Channel was founded in 2003 with the notion that a dedicated sport channel fits well with the cable network philosophy of targeting a niche vertical audience that is passionate about the content, as opposed to traditional broadcast network (CBS, NBC) / general sports cable channel (ESPN) which focus on horizontal reach of how to get as many viewers as possible from a casual audience. The Tennis Channel is 100% dedicated to the sport of tennis, and almost every day of the year there is a tennis tournament being played somewhere with highly ranked players. In August 2006, Tennis Channel was able to obtain cable rights to cover the French Open through 2019 (since extended to 2023) and has also negotiated sub-licensing rights with ESPN to obtain a portion of the Australian Open and US Open, as well as a primetime highlight show with Wimbledon directly. Approximately 75% of the company s revenue comes from monthly fees per subscriber paid by cable companies that broadcast the channel, with the remaining 25% of revenue coming from advertising. INVESTMENT SNAPSHOT Date of Initial Investment May 23, 2013 Investment Size $15,000,000 Investment Type 1st Lien Senior Secured Debt Maturity May 23, 2017 Coupon (1) LIBOR % (2) Price to Par (3) 97%

5 PORTFOLIO AND MARKET HIGHLIGHTS Attractive Lending Environment - According to J.P. Morgan, default rates on loans are currently at historic lows, making it an attractive time to lend money to US corporations. Floating Rate Investments - BDCA seeks to minimize interest rate risk by focusing on floating rate investments that have the potential for increased income as interest rates rise. RECORD LOW AVERAGE DEFAULTS Leveraged Loan Defaults LTM default rate based on par amount INTEREST RATE EXPOSURE Minimize Interest Rate Risk 81% FLOATING RATE 19% FIXED RATE Note: Excludes distressed exchanges. Source: J.P. Morgan; S&P LCD. Principal Preservation - Our continued focus on senior secured lending provides a buffer against market volatility and losses. Attractive Income - BDCA has steadily increased its annualized dividend since January 2012 and currently pays monthly distributions 1 at an $0.86/share annualized rate. (1) Distributions are not guaranteed. EQUITY BEDDING CREATES A BUFFER AGAINST LOSSES Senior Secured Debt Mezzanine ANNUALIZED DISTRIBUTION RATE GROWTH BDCA s annualized dividend has steadily increased $0.87 $0.86 $0.85 $0.84 Equity ANNUALIZED DIVIDEND $0.83 $0.82 $0.81 $0.80 $0.79 $0.78 JAN 12 MAR 12 MAY 12 JUL 12 SEP 12 NOV 12 JAN 13 MAR 13 MAY13 JUL 13

6 Business Development Corporation of America QUARTERLY REVIEW PORTFOLIO DIVERSITY (AS OF JUNE 30, 2013) INDUSTRY DIVERSITY LOAN TYPE DIVERSITY (1) 23.0% 11.0% BANKING, FINANCE, INSURANCE & REAL ESTATE ENERGY: OIL & GAS 78.1% MIDDLE MARKET LOANS 8.8% SERVICES: BUSINESS 4.2% LARGE CORPORATE LOANS 8.3% HEALTHCARE & PHARMACEUTICALS 17.7% OTHER 7.0% HOTEL, GAMING & LEISURE 5.7% 4.6% SERVICES: CONSUMER BEVERAGE, FOOD & TOBACCO SECURITY TYPE DIVERSITY 4.2% 3.9% TELECOMMUNICATIONS MEDIA: ADVERTISING, PRINTING & PUBLISHING 2.4% 3.0% ENVIRONMENTAL INDUSTRIES 1.8% 3.0% FOREST PRODUCTS & PAPER 1.7% MEDIA: BROADCASTING & 2.9% 1.4% SUBSCRIPTION 2.7% HIGH TECH INDUSTRIES 1.4% CONSUMER GOODS: NON-DURABLE CHEMICALS, PLASTICS & RUBBER METALS & MINING AEROSPACE & DEFENSE CAPITAL EQUIPMENT 64% 11% 7% 9% 9% SENIOR SECURED FIRST LIEN DEBT SENIOR SECURED SECOND LIEN DEBT SUBORDINATED DEBT COLLATERALIZED SECURITIES EQUITY/OTHER 2.4% TRANSPORTATION: CARGO 0.8% CONSTRUCTION & BUILDING INVESTOR INQUIRIES For more information on BDCA, please contact your financial professional. We also Invite you to visit our website: BROKER DEALERS For more information on BDCA, please contact: Realty Capital Securities, LLC, Three Copley Place, Suite 3300, Boston, MA (1) Large Corporate Loans are loans to companies with revenues of $1 Billion or greater, whereas Middle Market Loans are loans to companies with revenues between $10 million and $1 billion. Realty Capital Securities, LLC (Member FINRA/SIPC), is the dealer manager for Business Development Corporation of America. Prospective investors should consider the investment objectives, risks, and charges and expenses of Business Development Corporation of America carefully before investing. The Fund s prospectus contains information about these important issues as well as other information about the Fund. A prospectus for the Fund may be obtained by calling or or by visiting our website at Please read the prospectus carefully before investing. Performance data quoted herein represents past performance, and past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. RISK FACTORS continued: (5) We intend to invest primarily in senior secured term loans, second lien loans and mezzanine debt and selected equity investments issued by private companies. For our senior secured and second lien loans, the collateral securing these investments may decrease in value or lose its entire value over time or may fluctuate based on the performance of the portfolio company which may lead to a loss in principal. Mezzanine debt investments are typically unsecured, and investing in mezzanine debt may involve a heightened level of risk, including a loss of principal or the loss of the entire investment; (6) We will be subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments; (7) As a result of the annual distribution requirement to qualify as a regulated investment company ( RIC ) under the Internal Revenue Code, we may need to raise cash or make borrowings to fund new investments. At times, these sources of funding may not be available to us on acceptable terms, if at all; (8) We currently qualify as a RIC, but may fail to do so in the future. Such failure would subject us to U.S. federal income tax on our income, which would have a material adverse effect on our financial performance; (9) The purchase price for our shares will be determined at each closing date. As a result, your purchase price may be higher than the prior closing price per share, and therefore you may receive a smaller number of shares than if you had subscribed at the prior closing price; (10) We will compete for investors with other programs of our sponsor.