Tortoise Capital Resources Corp. Releases Fiscal 2008 Third Quarter Financial Results
FOR IMMEDIATE RELEASE
LEAWOOD, Kan.– Oct. 09, 2008 – Tortoise Capital Resources Corp. (NYSE: TTO) (the company) today announced that it has filed its Form 10-Q for the third quarter ended Aug. 31, 2008.
Recent Highlights
· | Third quarter distribution of $0.2650 per share paid Sept. 02, 2008 (annualized yield of 7.1% based on initial offering price of $15.00 per share and the fifth consecutive distribution increase since the IPO) |
· | Net assets at quarter end of $119.0 million, or $13.38 per share |
· | Received a substantial distribution from LONESTAR Midstream Partners LP and LSMP GP, LP (collectively LONESTAR) related to its sale of assets to Penn Virginia Resource Partners, L.P. (NYSE: PVR) |
· | Millennium Midstream Partners, LP (Millennium) sold its partnership interests to Eagle Rock Energy Partners, L.P. (NASDAQ: EROC) |
Portfolio and Investment Activity
Net assets at Aug. 31, 2008 were $119.0 million or $13.38 per share as compared to $121.5 million or $13.69 per share at May 31, 2008. As of Aug. 31, 2008, the fair value of the company’s investment portfolio (excluding short-term investments) totaled $160.3 million including equity investments of $153.2 million and debt investments of $7.1 million, with 63 percent in midstream and downstream investments, 23 percent in aggregates and coal investments and 14 percent in upstream investments. The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of Aug. 31, 2008 was 8.8 percent.
On Oct. 01, 2008, Millennium sold its partnership interests to EROC for $181 million in cash and approximately four million EROC unregistered common units. In exchange for its Millennium partnership interests, the company received $13.7 million in cash and 373,224 EROC unregistered common units with an aggregate basis of $5.0 million for total proceeds at close of approximately $18.7 million. The company originally invested $17.5 million in Millennium, and had an adjusted cost basis of approximately $15.1 million (after reducing its basis for expected cash distributions received since investment that were treated as return of capital), resulting in a realized gain for book purposes of approximately $3.6 million. For purposes of the capital gain incentive fee, the realized gain will be approximately $1.2 million, which excludes that portion of the fee that would be due as a result of expected cash distributions characterized as return of capital for book purposes. The capital gains incentive fee is accrued during the year as a result of increases or decreases in the fair value of investments and realized gains or losses, but it is only paid annually if there are realization events and if the calculation defined in the Investment Advisory Agreement results in an amount due. In addition, approximately $84,000 in cash and 253,113 units with an aggregate basis of $3.5 million will be held in escrow for 18 months, subject to customary closing adjustments.
On July 17, 2008, LONESTAR closed a transaction with Penn Virginia Resource Partners, L.P. (NYSE: PVR) for the sale of its gas gathering and transportation assets. LONESTAR distributed substantially all of the initial sales proceeds to its limited partners but did not redeem partnership interests. On July 24, 2008, the company received a distribution of $10.5 million in cash, 468,001 newly issued unregistered common units of PVR at an aggregate basis of approximately $10.8 million, and 59,503 unregistered common units of Penn Virginia GP Holdings, L.P. (NYSE: PVG) at an aggregate basis of approximately $1.6 million. The company characterized this distribution as approximately $20.8 million return of capital and approximately $2.1 million as realized gain from the sale of the underlying assets. The realized gain is considered in the calculation of the accrued capital gains incentive fees as reflected in the current financial statements; however, it will not be deemed a realization event for purposes of payment of the capital gains incentive fee until such time as the LONESTAR partnership interests are sold or otherwise disposed. The company expects to receive additional unregistered PVR and PVG units which are held in escrow, due to be released to LONESTAR in the next six to twelve months along with cash distributions received on the escrow units retained by the escrow agent, subject to customary closing adjustments.
Additionally, the company expects a future cash distribution from LONESTAR of approximately $1.0 million payable on December 31, 2009 and two future contingent payments due LONESTAR for which the company’s expected portion would total approximately $9.6 million, payable in cash or common units of PVR (at PVR’s election). The contingent payments are based on the achievement of specific revenue targets by or before June 30, 2013, and no payments are due if these revenue targets are not achieved.
On Aug. 04, 2008, the company invested an additional $1.5 million of equity in Mowood, LLC (Mowood). The investment was used for Mowood’s subsidiary, Timberline Energy, LLC, to complete landfill gas to energy projects in Butler, Neb. and Hernando, Fla. The Butler facility became operational in September. Construction on the Hernando facility is complete and the facility is expected to be operational shortly. With the completion of the Butler and Hernando facilities, Timberline will operate a high Btu facility, a direct use facility and an electricity generation facility — one of each of the three types of landfill gas to energy projects feasible under current technology.
On Aug. 04, 2008, the company invested $9.9 million in VantaCore Partners LP (VantaCore), an existing portfolio company focused on the aggregates industry. VantaCore repaid the company’s $3.75 million term note at a three percent premium to par value. The company reinvested the proceeds from this repayment, and an additional $6.1 million, to purchase 508,430 common units and 199 incentive distribution rights of VantaCore. VantaCore used the proceeds from this investment to partially fund its acquisition of Southern Aggregates LLC, a sand and gravel operation located near Baton Rouge, La. The Southern Aggregates acquisition is the third acquisition for VantaCore, and diversifies VantaCore’s earnings base and geographic footprint to include the Baton Rouge and Lafayette, La. markets.
On Sept. 26, the company invested an additional $0.5 million in Mowood in the form of a promissory note. The note has a variable annual interest rate equal to the one-month LIBOR plus 3.75 percent and matures on Nov. 29, 2008. Mowood plans to use the proceeds for working capital purposes.
As of Aug. 31, 2008, all portfolio companies had a risk profile rating of (1), with the exception of Quest Midstream Partners, L.P. (Quest), High Sierra Energy, LP, and High Sierra Energy GP, LLC (collectively High Sierra), each of which had a rating of (2). Quest is re-negotiating the terms of its credit facility following announcements of an alleged misappropriation of funds by Mr. Jerry Cash, former Chairman and CEO of Quest Resource Corporation, Quest Energy Partners, L.P. and Quest Midstream Partners, L.P. High Sierra Energy, LP also is re-negotiating the terms of its credit facility amidst tight conditions in the credit markets, further complicated by its material aggregate exposure to the SemGroup, L.P. bankruptcy in the form of unsecured trade debts.
“We are pleased to have completed two investments in the third quarter which funded growth in our portfolio companies. Our investment in VantaCore helped to facilitate the acquisition of Southern Aggregates LLC which significantly increases the size and geographic diversification of VantaCore’s operations. Our investment in Mowood will allow its subsidiary, Timberline Energy, LLC, to complete two additional landfill gas to energy projects. The completion of the three initial projects will signal a change in Timberline from a development company to an operating company” said Ed Russell President. “We believe these events, along with the sale of Millennium’s partnership interests to EROC, are positive events for our stockholders and we are pleased to see continued growth in several of our portfolio companies despite recent market turmoil.”
Capital Resources
As of Aug. 31, 2008, the principal balance outstanding on the company’s credit facility was $31.8 million at a rate of 4.24 percent. As of Oct. 8, 2008, the company had $28.8 million of availability under its credit facility; with an outstanding principal balance of $21.2 million at a rate of 4.29 percent.
On Apr. 8, 2008, the company filed an initial shelf registration statement, and on June 19, 2008 filed a pre-effective amendment, with the Securities and Exchange Commission. When effective, the shelf registration will allow the company to prudently raise additional capital when market conditions are acceptable.
Performance Review
The company views distributable cash flow (DCF) as the best indicator of its operating performance and distribution-paying capacity. The Board of Directors determines the amount of distributions paid to stockholders based on DCF which is defined as distributions received from investments less total expenses. DCF for the three months ended Aug. 31, 2008 was approximately $2.5 million, an increase over the prior quarter of approximately $0.1 million.
Distributions
In the third quarter of 2008, the Board of Directors declared a distribution of $0.2650 per share which was paid on Sept. 02, 2008. The distribution represents an annualized yield of 7.1% based upon the initial public offering price of $15.00 per share, and is the fifth consecutive distribution increase since the IPO. The company continues to pursue its investment objective of providing its stockholders with a high level of total return, with an emphasis on distribution growth.
Earnings Call
The company will host a conference call at 4:00 p.m. CDT on Oct. 09, 2008 to discuss its third quarter financial results. Please dial-in approximately five to 10 minutes prior to the scheduled start time.
U.S./Canada: (800) 218-0204
International: (303) 262-2175
The call will also be webcast in a listen-only format. A link to the webcast will be accessible at www.tortoiseadvisors.com.
A replay of the call will be available beginning at 7:00 p.m. CDT on Oct. 09, 2008 and continuing until 11:59 p.m. CDT Oct. 23, 2008, by dialing (303) 590-3000 (U.S./Canada). The replay access code is 11118970#. A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through Oct. 09, 2009.
About Tortoise Capital Resources Corp.
Tortoise Capital Resources invests primarily in privately-held and micro-cap public companies operating in the midstream and downstream segments, and to a lesser extent the upstream segment, of the U.S. energy infrastructure sector. Tortoise Capital Resources seeks to provide stockholders a high level of total return, with an emphasis on distributions and distribution growth.
About Tortoise Capital Advisors, LLC
Tortoise Capital Advisors, LLC, the adviser to Tortoise Capital Resources Corp., is a pioneer in the capital markets for master limited partnership (MLP) investment companies and a leader in closed-end funds and separately managed accounts focused on MLPs in the energy infrastructure sector. As of Sept. 30, 2008, the adviser had approximately $2.2 billion of assets under management.
Safe Harbor Statement
This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.
Contact information
Tortoise Capital Advisors, LLC Pam Kearney, Investor Relations, (866) 362-9331, pkearney@tortoiseadvisors.com
Tortoise Capital Resources Corporation | | | | | | |
STATEMENTS OF ASSETS & LIABILITIES | | | | | | |
| | | | | | | |
| | | | | | | |
| | | August 31, 2008 | | | November 30, 2007 | |
| | | (Unaudited) | | | | |
Assets | | | | | | |
| Investments at fair value, control (cost $29,645,849 and $20,521,816, respectively) | | $ | 32,655,040 | | | $ | 23,292,904 | |
| Investments at fair value, affiliated (cost $72,023,625 and $95,507,198, respectively) | | | 84,914,692 | | | | 98,007,275 | |
| Investments at fair value, non-affiliated (cost $42,777,633 and $31,716,576, respectively) | | | 43,331,758 | | | | 37,336,154 | |
| Total investments (cost $144,447,107 and $147,745,590, respectively) | | | 160,901,490 | | | | 158,636,333 | |
| Income tax receivable | | | 218,935 | | | | 218,935 | |
| Receivable for Adviser expense reimbursement | | | 100,822 | | | | 94,181 | |
| Interest receivable from control investments | | | 72,850 | | | | 68,686 | |
| Dividends and distributions receivable | | | 135,602 | | | | 1,419 | |
| Prepaid expenses and other assets | | | 201,793 | | | | 154,766 | |
| Total assets | | | 161,631,492 | | | | 159,174,320 | |
| | | | | | | | | |
Liabilities | | | | | | | | |
| Base management fees payable to Adviser | | | 604,930 | | | | 565,086 | |
| Accrued capital gain incentive fees payable to Adviser | | | 1,054,745 | | | | 307,611 | |
| Distribution payable to common stockholders | | | 2,356,874 | | | | - | |
| Payable for investments purchased | | | - | | | | 1,235,994 | |
| Accrued expenses and other liabilities | | | 423,402 | | | | 419,744 | |
| Short-term borrowings | | | 31,800,000 | | | | 30,550,000 | |
| Deferred tax liability | | | 6,372,081 | | | | 4,182,919 | |
| Total liabilities | | | 42,612,032 | | | | 37,261,354 | |
| Net assets applicable to common stockholders | | $ | 119,019,460 | | | $ | 121,912,966 | |
| | | | | | | | | |
Net Assets Applicable to Common Stockholders Consist of: | | | | | | | | |
| Warrants, no par value; 945,594 issued and outstanding | | | | | | | | |
| at August 31, 2008 and 945,774 issued and outstanding at | | | | | | | | |
| November 30, 2007 (5,000,000 authorized) | | $ | 1,370,700 | | | $ | 1,370,957 | |
| Capital stock, $0.001 par value; 8,893,866 shares issued and | | | | | | | | |
| outstanding at August 31, 2008 and 8,858,168 issued and outstanding | | | | | |
| at November 30, 2007 (100,000,000 shares authorized) | | | 8,894 | | | | 8,858 | |
| Additional paid-in capital | | | 108,721,336 | | | | 115,186,412 | |
| Accumulated net investment loss, net of deferred tax benefit | | | (2,822,758 | ) | | | (1,565,774 | ) |
| Accumulated realized gain, net of deferred tax expense | | | 1,539,792 | | | | 160,474 | |
| Net unrealized appreciation of investments, net of deferred tax expense | | | 10,201,496 | | | | 6,752,039 | |
| Net assets applicable to common stockholders | | $ | 119,019,460 | | | $ | 121,912,966 | |
| | | | | | | | | |
| Net Asset Value per common share outstanding (net assets applicable | | | | | |
| to common stock, divided by common shares outstanding) | | $ | 13.38 | | | $ | 13.76 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
