MCLEAN, Va., Sept. 21, 2012 /PRNewswire/ -- Gladstone
Investment Corporation (NASDAQ: GAIN) (the "Company") today
announced revisions to its investment objectives and strategies,
that will go into effect on or about January
1, 2013. All of the Company's current portfolio
investments fit within the scope of the revised objectives and
strategies of the Company and no changes will need to be made to
the current portfolio as a result of the revision.
(Logo: http://photos.prnewswire.com/prnh/20101005/GLADSTONEINVESTMENT
)
The revised investment objectives and strategies that were
approved by the board of directors of the Company at a special
meeting of the board of directors held on September 21, 2012 are as follows:
Investment Objectives:
To achieve and grow current income by investing in debt
securities of established businesses that we believe will provide
stable earnings and cash flow to pay expenses, make principal and
interest payments on our outstanding indebtedness and make
distributions to stockholders that grow over time.
To provide our stockholders with long-term capital appreciation
in the value of our assets by investing in equity securities of
established businesses that we believe can grow over time to permit
us to sell our equity investments for capital gains.
Investment Strategy:
Overview
To achieve our objectives, we seek to invest in several
categories of debt and equity securities, with each investment
generally ranging from $5 million to $30
million, although investment size may vary, depending upon
our total assets or available capital at the time of
investment.
In general, our investments in debt securities have a term of no
more than seven years, accrue interest at variable rates (based on
the London Interbank Offered Rate, LIBOR) and, to a lesser extent,
at fixed rates. We seek debt instruments that pay interest monthly
or, at a minimum, quarterly, have a success fee or deferred
interest provision and are primarily interest only with all
principal and any accrued but unpaid interest due at
maturity. Generally, success fees accrue at a set rate and
are contractually due upon a change of control in the
business. Some debt securities have deferred interest whereby
some portion of the interest payment is added to the principal
balance so that the interest is paid, together with the principal,
at maturity. This form of deferred interest is often called "paid
in kind" ("PIK").
Typically, our equity investments consist of common stock,
preferred stock, limited liability company interests, or warrants
to purchase the foregoing. Often, these equity investments
occur in connection with our original investment, recapitalizing a
business, or refinancing existing debt. Although at times we
will enter into co-investment transactions with our sister funds,
including Gladstone Capital Corporation, in relation to one
another, we generally invest a greater portion of our assets in
equity securities while Gladstone Capital generally invests a
greater portion of its assets in debt securities.
Target Portfolio
Our investments typically take the following forms:
Senior Debt Securities: We seek to invest a portion of
our assets in senior debt securities also known as senior loans,
senior term loans, lines of credit and senior notes. Using its
assets as collateral, the borrower typically uses senior debt to
cover a substantial portion of the funding needs of the business.
The senior debt security usually takes the form of first priority
liens on the assets of the business. Senior debt securities
may include our participation and investment in the syndicated loan
market.
Senior Subordinated Debt Securities: We seek to invest a
portion of our assets in senior subordinated debt securities, also
known as senior subordinated loans and senior subordinated notes.
These senior subordinated debts also include second lien notes and
may include participation and investment in syndicated second lien
loans. Additionally, we may receive other yield enhancements in
connection with these senior subordinated debt securities.
Junior Subordinated Debt Securities: We seek to invest a
portion of our assets in junior subordinated debt securities, also
known as subordinated loans, subordinated notes and mezzanine
loans. These junior subordinated debts include second lien notes
and unsecured loans. Additionally, we may receive other yield
enhancements and warrants to buy common and preferred stock or
limited liability interests in connection with these junior
subordinated debt securities.
Preferred and Common Equity: In some cases we will
purchase equity securities which consist of preferred and common
equity or limited liability company interests, or warrants or
options to acquire such securities, and are in combination with our
debt investment in a business. Additionally, we may receive equity
investments derived from restructurings on some of our existing
debt investments. In some cases, we will own a significant portion
of the equity and in other cases we may have voting control of the
businesses in which we invest.
Cash and Cash Equivalents: At times, we may
hold cash or cash equivalents.
Other Investments: Pursuant to the Investment
Company Act of 1940 (the "1940 Act"), we must maintain at least 70%
of assets in qualifying assets, which generally include each of the
asset types listed above. Therefore, the 1940 Act permits us to
invest up to 30% of our assets on other assets.
Portfolio Company Characteristics
We seek to invest in businesses with all or some of the
following characteristics:
Value-and-Income Orientation and Positive Cash
Flow. Our investment philosophy places a premium on
fundamental analysis from an investor's perspective and has a
distinct value-and-income orientation. In seeking value, we focus
on companies in which we can invest at relatively low multiples of
earnings before interest, taxes, depreciation and amortization
("EBITDA"), and that have positive operating cash flow at the time
of investment. In seeking income, we typically invest in companies
that generate relatively stable to growing sales and cash flow to
provide some assurance that they will be able to service their debt
and pay any required distributions on preferred stock. Typically,
we do not expect to invest in start-up companies or companies with
what we believe to be speculative business plans.
Experienced Management. We generally require that the
businesses in which we invest have an experienced management team.
We also require the businesses to have in place proper incentives
to induce management to succeed and act in concert with our
interests as investors, including having significant equity or
other interests in the financial performance of their
companies.
Strong Competitive Position in an Industry. We seek
to invest in businesses that have developed strong market positions
within their respective markets and that we believe are
well-positioned to capitalize on growth opportunities. We seek
businesses that demonstrate significant competitive advantages
versus their competitors, which we believe will help to protect
their market positions and profitability.
Liquidation Value of Assets. The projected liquidation
value of the assets, if any, is an important factor in our
investment analysis in collateralizing our debt securities.
"We believe that the revisions to the investment objectives and
strategies of the Company will allow us greater flexibility in
growing our portfolio and maintaining our commitment of value to
our shareholders," said David
Gladstone, the Company's Chief Executive Officer.
About us: Gladstone Investment Corporation is a publicly
traded business development company that seeks to make debt and
equity investments in small and mid-sized businesses in
the United States in connection
with acquisitions, changes in control and recapitalizations. The
Company has paid 86 consecutive monthly cash distributions on its
common stock, in addition to a bonus dividend paid on its common
stock in March 2012. Information on
the business activities of all the Gladstone funds can be found at
www.gladstonecompanies.com.
For Investor Relations inquiries related to any of the monthly
dividend paying Gladstone funds, please visit
www.gladstone.com.
The statements in this press release regarding the
flexibility of and growth of the Company's portfolio that are not
historical facts are "forward-looking statements." These
forward-looking statements inherently involve certain risks and
uncertainties, although they are based on the Company's current
plans that are believed to be reasonable as of the date of this
press release. Factors that may cause the Company's actual results
to differ from these forward-looking statements include, among
others, the duration and effects of the current economic
instability, the Company's ability to access debt and equity
capital, the Company's ability to identify and make investments
that are consistent with the Company's investment objectives and
those other factors listed under the caption "Risk Factors" in the
Company's registration statement on Form N-2 (File
No. 333-181879), as amended. The risk factors set forth in the
Form N-2 under the caption "Risk Factors" are specifically
incorporated by reference into this press release. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
SOURCE Gladstone Investment Corporation
