FOR IMMEDIATE RELEASE
August 16, 1999
POINT WEST CAPITAL CORPORATION
ANNOUNCES SECOND QUARTER RESULTS
AND FINANCIAL CONDITION
SAN FRANCISCO-(August 16, 1999) Point West Capital Corporation (Nasdaq
Symbol: PWCC) today reported the following:
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------------- ------------------ ------------------- -------------------
Net income (loss) $ 1,758 $ (85) $ 1,258 $ (165)
------------------- ------------------ ------------------- -------------------
Comprehensive income -- net
unrealized investment gains
(losses) $ (6,427) $ (483) $ 15,161 $ (81)
------------------- ------------------ ------------------- -------------------
Total comprehensive income (loss) $ (4,669) $ (569) $ 16,419 $ (245)
------------------- ------------------ ------------------- -------------------
Basic earnings
(loss) per share $ 0.53 (1) $ (0.03)(2) $ 0.38(3) $ (0.05)(2)
------------------- ------------------ ------------------- -------------------
<FN>
(1) Based on 3,341,635 weighted average shares of common stock outstanding.
(2) Based on 3,253,324 weighted average shares of common stock outstanding.
(3) Based on 3,307,820 weighted average shares of common stock outstanding.
</FN>
The Company's results of operations for the three and six months ended
June 30, 1999 are not comparable to those for the three and six months ended
June 30, 1998, partially because of the establishment of two new businesses
(Fourteen Hill Capital, L.P. and Allegiance Capital, LLC) in the second half of
1997, which generated substantially more activity in the first half of 1999
compared to the first half of 1998. In addition, prior to the third quarter of
1998, all losses associated with Dignity Partners Funding Corp. I ("DPFC"), a
wholly owned special purpose finance subsidiary of the Company, were
charged against a reserve which was originally established in 1996 for the
estimated loss of Point West's equity interest in DPFC. During the third quarter
of 1998 the reserve was fully depleted. In the first half of 1998, the $1.9
million loss realized by DPFC was charged against the reserve and, therefore,
was not reflected in net loss. In the first half of 1999, the $2.1 million loss
realized by DPFC was reflected in net income. At June 30, 1999, DPFC's
accumulated deficit was $3.8 million. Any future losses associated with DPFC
will increase the amount of the deficit. Upon the retirement of the securitized
notes issued by DPFC, the Company will recognize a gain in an amount
approximately equal to any accumulated deficit (less any tax effect for debt
forgiveness) reflected at that time on DPFC's balance sheet.
At June 30, 1999, Fourteen Hill Capital had loans outstanding in the
aggregate principal amount of $619,000, non-marketable securities carried at a
cost of $1.4 million and marketable securities carried at $25.3 million. Any
unrealized gains or losses on marketable securities, net of applicable taxes,
are reflected as "Accumulated Comprehensive Income -- Net Unrealized Investment
Gains (Losses)" in stockholders' equity. At June 30, 1999 and December 31, 1998
the accumulated unrealized gains (losses) were $15.0 million and ($189,000),
respectively. This substantial increase, as well as the related increase in
"Total Comprehensive Income" for the six months ended June 30, 1999, is
primarily the result of one portfolio company, FlashNet Coummunications, Inc.,
completing an initial public offering in the first quarter of 1999 and the
Company's holdings in FlashNet becoming marketable securities. Any actual gains
or losses will be recognized on the income statement, if ever, upon sale of the
marketable securities. Fourteen Hill recognized a net gain of $4.8
million and $5.4 million in the three and six months ended June 30, 1999,
respectively, primarily in connection with the sale of one of its investments.
Allegiance had twelve loans outstanding at June 30, 1999 in the
aggregate principal amount of $18.9 million. All loans bear a fixed interest
rate, which on a dollar weighted basis was 9.5%.
Under Allegiance's current financing facility, any revolving
certificates ($15.3 million at June 30, 1999) must be repaid by September 15,
1999. The current financing facility also contemplates the issuance of term
certificates to repay the revolving certificates, provided approximately $30
million of loans are outstanding at September 15, 1999. If the term certificates
are not issued, Allegiance will be required to find alternative sources of
repaying the revolving certificates.
Allegiance and its lenders have reached an agreement in principle to
extend the financing through April 15, 2000. Although no assurance can be given
that such extension will ultimately be put in place, if the extension is
consummated Allegiance would be permitted to borrow up to $30 million on a
revolving basis through March 31, 2000 on terms substantially similar to those
of the current revolving certificates. In addition, up to $60 million of term
financing will be provided (less any term financing provided under the current
arrangement) through April 15, 2000, on terms substantially similar to the
current term certificates, but at an increased weighted average spread of
approximately 0.5%.
The plaintiffs and defendants have reached an agreement in principle
providing for a settlement of the federal class action and state alleged class
action lawsuits filed against Point West and its directors pursuant to which all
claims against all defendants would
be dismissed. The agreement provides for the payment of $3.15 million. Under the
terms of the Company's D&O insurance policy, the Company's insurer is obligated
to pay 70% of the settlement amount. Any settlement would be subject to court
approval. No assurance can be given that a definitive settlement agreement will
be reached, or, if reached, will be approved by the Court. In the event a
settlement is not effected, the Company and each of the remaining defendants
intend to continue to defend vigorously the actions.
As a result of having reached a settlement agreement in principle, the
Company recorded an accrued litigation settlement liability of $3.15 million and
an accounts receivable from the insurance company of $2.2 million, and the
remaining amount of $945,000 was expensed in the second quarter of 1999 in the
Consolidated Statements of Operations and Comprehensive Income (Loss).
The following is summary balance sheet information as of June 30,
1999:
Cash and cash equivalents..................................$10,236,549
Restricted cash (1).........................................$2,264,707
Investment securities......................................$25,335,422
Loans receivable, net of unearned income of
$321,646 and net of an allowance on loan
losses of $95,000 .....................................$19,075,250
Purchased life insurance policies..........................$32,560,408
Non-marketable securities...................................$3,074,168
Total assets...............................................$95,902,295
Accrued litigation settlement...............................$3,150,000
Revolving certificates.....................................$15,300,794
Long term notes payable....................................$38,528,914
Debentures..................................................$3,000,000
Deferred income taxes.......................................$3,263,992
Total liabilities..........................................$64,062,960
Accumulated comprehensive income --
net unrealized investment gains.......................$14,972,174
Retained deficit..........................................$(10,389,407)
Total stockholders' equity.................................$31,839,335
(1) $2.0 million of restricted cash is pledged by the Company's wholly owned
financing subsidiary, Dignity Partners Funding Corp. I, to secure the repayment
of long term notes payable.
(KEYWORD CALIFORNIA AND INDUSTRY KEYWORD: SPECIALTY FINANCE EARNINGS).
CONTACTS: POINT WEST CAPITAL CORPORATION, SAN FRANCISCO.
Alan B. Perper, 415/394-9467