Equus Announces First Quarter Net Asset Value
13 May 2020 - 8:29AM
Equus Total Return, Inc. (NYSE: EQS) (the “Fund”
or “Equus”) reports net assets as of March 31, 2020, of $38.9
million, a decrease of approximately $7.1 million since December
31, 2019. Net asset value per share decreased to $2.88 as of
March 31, 2020 from $3.40 as of December 31, 2019.
Comparative data is summarized below (in thousands, except
per share amounts):
As of the Quarter Ended |
3/31/2020 |
12/31/2019 |
9/30/2019 |
6/30/2019 |
3/31/2019 |
|
|
|
|
|
|
Net assets |
$38,895 |
$45,989 |
$49,024 |
$47,933 |
$46,552 |
Shares outstanding |
13,518 |
13,518 |
13,518 |
13,518 |
13,518 |
Net assets per share |
$2.88 |
$3.40 |
$3.63 |
$3.55 |
$3.44 |
The following were the portfolio companies that
experienced significant developments during the first quarter of
2020:
- Decrease in the Value of
Equus Energy. A pricing dispute between the Russian
Federation and Saudi Arabia during the first quarter of 2020,
together with global crude supply imbalances, demand decreases, and
adverse economic effects arising from the onset of the coronavirus
led to crude prices falling to 18-year lows in mid-March
2020. As a result, the value of this investment decreased
from $8.0 million at December 31, 2019 to $4.5 million at March 31,
2020. The Fund received advice and assistance from a
third-party valuation firm to support its determination of the fair
value of this investment (see A Note About the Coronavirus and
Other Events below).
- Decrease in the Value of
MVC Capital Shares. Largely due to adverse economic
effects resulting from the onset of the coronavirus during the
first quarter of 2020, the trading price of MVC Capital, Inc.’s
(“MVC”) common stock decreased from $9.17 per share on December 31,
2019 to $4.37 per share as of March 31, 2020. The Fund
received 10,235 MVC shares as stock dividends during the quarter,
resulting in a total of 574,147 MVC shares held at March 31,
2020. The fair value of this holding decreased from $5.2
million at December 31, 2019 to $2.5 million as of March 31, 2020.
Although the trading price of MVC’s shares has increased
markedly since the end of the first quarter of 2020, the continued
economic dislocation caused by the coronavirus may also continue to
have a materially negative impact on the value of this investment
during the second quarter of 2020 and beyond (see A Note About the
Coronavirus and Other Events below).
- No Change in the Value of
PalletOne. Equus holds an 18.7% fully-diluted share
interest in PalletOne, Inc. (“PalletOne”) one of the nation’s
largest wooden pallet manufacturers and a major supplier of treated
lumber in the southeastern United States. During the first
quarter of 2020 and the trailing twelve months ending March 31,
2020, PalletOne experienced exceptionally strong operational
results and saw improvements in most areas of its business,
notwithstanding the economic downturn that began during the first
quarter of 2020. The Fund received advice and assistance from
a third-party valuation firm to support its determination of the
fair value of this investment. Notwithstanding the strong
operational results of PalletOne, it remains uncertain as to the
extent that the general economic contraction caused by the
coronavirus may have on the business of PalletOne in subsequent
quarters in 2020 (see A Note About the Coronavirus and Other Events
below).
A Note About The Coronavirus and Other
Events
The Impact of the Coronavirus Generally.
In 2019, SARS-CoV-2, a highly contagious pathogen which causes
COVID-19, coronavirus disease, or simply, the ‘coronavirus’, arose
in Wuhan Province, China. The coronavirus has had a substantial
detrimental impact on markets and economic forecasts for
governments and businesses worldwide. During the first
quarter of 2020, national, state, and local governments across the
United States implemented significant travel, movement, and
assembly restrictions, as well as restrictions on the movement of
goods, all of which have had, and are expected to continue to have,
a material adverse impact upon consumer and business demand.
Recently, certain states have begun to ease such
restrictions, but such efforts may not be sufficient to stimulate
the resumption of economic activity at levels that existed prior to
the onset of the coronavirus. Moreover, the easing of such
restrictions is expected to result in an increased number of
coronavirus infections, which in turn may cause states to delay or
even reverse allowances for movement and assembly, any of which
would protract the economic effects of the coronavirus. If
the coronavirus continues to spread, or if the economic disruption
caused thus far by the coronavirus continues, our operations and
financial condition could be materially adversely affected.
Impact of the Coronavirus on Our Operations. The
highly contagious nature of the coronavirus has caused numerous
private and public organizations to substantially alter the way in
which they operate. Many such organizations have, to the extent
possible, required employees to work remotely to reduce
opportunities for contagion. We have also taken steps to minimize
the exposure of our employees and service providers by requiring
all such persons to work from a remote location. We utilize a
cloud-based storage and retrieval system for our records and can
communicate electronically or by telephone with third parties such
as our financial institutions, legal and accounting advisors, and
our portfolio companies. However, government directives on social
distancing and shelter-in-place mandates have rendered us unable to
travel to attend board meetings, negotiations, and other functions
which are endemic to the interpersonal nature of private equity
investing. Should these disruptions and restrictions on travel
continue as a result of the coronavirus, we cannot, therefore,
assure you that our operations will not be materially adversely
affected thereby.
Impact of the Coronavirus on Our Portfolio
Companies. As noted above, certain of our portfolio companies
have been affected by various force majeure events that include the
global outbreak of the coronavirus. These events have had,
and may continue to have, a material adverse impact on our
portfolio companies’ supply chains, limit access to key commodities
or technologies, otherwise impact their customers, manufacturers or
suppliers or otherwise cause material disruptions to their industry
or the industries they serve. In the case of the coronavirus, such
a force majeure event has had, and may continue to have, a broader
negative impact on the world economy and international business
activity generally. A protracted negative impact to one or
more of our portfolio companies as a result of the coronavirus
could have a material adverse effects on our business, financial
condition and results of operations.
Impact of Geopolitical Events and the
Coronavirus on the Oil and Gas Sector. The substantial recent
downturn in world markets has been prominent in the oil and gas
sector, with crude prices falling to 18-year lows in mid-March
2020. The collapse in prices was the result of a price war
between the Russian Federation and Saudi Arabia and a massive drop
in forecasted demand as a consequence of the coronavirus. Should
prices not recover to sustainable levels, a number of smaller oil
and gas firms that have incurred leverage could experience severe
economic challenges, including insolvency and bankruptcy.
Other firms, such as Equus Energy, could see future capital
expenditures to generate additional reserves from existing mineral
interests postponed indefinitely, which could have a material
adverse effect upon the operations and financial condition of Equus
Energy.
About Equus
The Fund is a business development company that
trades as a closed-end fund on the New York Stock Exchange under
the symbol "EQS". Additional information on the Fund may be
obtained from the Fund’s website at www.equuscap.com.
This press release may contain certain
forward-looking statements regarding future circumstances. These
forward-looking statements are based upon the Fund’s current
expectations and assumptions and are subject to various risks and
uncertainties that could cause actual results to differ materially
from those contemplated in such forward-looking statements
including, in particular, the performance of the Fund, including
our ability to achieve our expected financial and business
objectives, and the other risks and uncertainties described in the
Fund’s filings with the SEC. Actual results, events, and
performance may differ. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
to the date hereof. Except as required by law, the Fund undertakes
no obligation to release publicly any revisions to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The inclusion of any statement in this
release does not constitute an admission by the Fund or any other
person that the events or circumstances described in such
statements are material.
Contact:
Patricia Baronowski Pristine Advisers, LLC (631) 756-2486
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