Stellus Private Credit BDC Reports Results for its First Fiscal Quarter Ended March 31, 2024

HOUSTON, May 10, 2024 /PRNewswire/ -- Stellus Private Credit BDC ("Stellus PBDC" or the "Company") today announced financial results for its first fiscal quarter ended March 31, 2024.

Robert T. Ladd, Chief Executive Officer of Stellus PBDC, stated "We are pleased to report strong results in the first quarter in which we generated $0.49 per share of net investment income and increased net asset value. During the quarter, we funded $17 million of investments and received $9 million of repayments, bringing the total portfolio to $216 million at fair value. Following the end of the quarter, on April 3, 2024, we declared our 2024 second quarter monthly dividend of $0.50 per share in the aggregate which represents an annualized dividend yield of approximately 13%."

FINANCIAL HIGHLIGHTS
($ in millions, except data relating to per share amounts and shares outstanding)
		Three Months Ended
		March 31, 2024			March 31, 2023
		Amount	Per Share		Amount	Per Share
Net investment income		$3.55	$0.49		$2.64	$0.48
Net unrealized gain (loss) included in earnings		0.33	0.04		(0.06)	(0.01)
Benefit for taxes on net unrealized depreciation on investments		0.05	0.01		-	-
Net increase in net assets resulting from operations		$3.93	$0.54		$2.58	$0.47
Distributions		(3.61)	(0.50)		(2.31)	(0.42)
Other weighted average share adjustments(1)		-	0.01		-	(0.01)
Net asset value		112.2	$15.26		108.0	$14.68
Weighted average shares outstanding			7,227,206			5,501,765

__________________________
(1)	Includes the impact of different share amounts as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period end.

PORTFOLIO ACTIVITY
($ in millions)
		As of		As of
		March 31, 2024		December 31, 2023
Investments at fair value		$216.3		$208.6
Total assets		$219.0		$211.2
Net assets		$112.2		$108.0
Shares outstanding		7,358,038		7,102,136
Net asset value per share		$15.26		$15.21
		Three Months Ended
		March 31, 2024		March 31, 2023
New investments		$16.6		$17.1
Repayments of investments		(9.4)		(9.9)
Net activity		$7.2		$7.2
		As of		As of
		March 31, 2024		December 31, 2023
Number of portfolio company investments		41		39
Number of debt investments		39		37
Weight average yield of debt and other income producing investments (2)
Cash		11.7 %		11.8 %
Payment-in-kind ("PIK")		0.3 %		0.3 %
Fee amortization		0.4 %		0.4 %
Total		12.4 %		12.5 %
Weighted average yield on total investments (3)
Cash		11.1 %		11.2 %
Payment-in-kind ("PIK")		0.4 %		0.3 %
Fee amortization		0.4 %		0.4 %
Total		11.9 %		11.9 %

_____________________________
(2)	The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expense or any sales load that may be paid by investors.
(3)	The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company's total investments, including non-income producing loans and equity.

Results of Operations

Investment income for the three months ended March 31, 2024 and 2023 totaled $6.4 million and $4.9 million, respectively, most of which was interest income from portfolio investments.

Gross operating expenses for the three months ended March 31, 2024 and 2023 totaled $4.1 million and $3.3 million, respectively. For the same periods, base management fees totaled $0.8 million and $0.6 million, income incentive fees totaled $0.6 million and $0.5 million, capital gains incentive fees of less than $0.1 million and $0.0 million, which are not currently payable, fees and expenses related to our borrowings totaled $2.1 million and $1.7 million, respectively (including interest and amortization of deferred financing costs), administrative expenses totaled $0.1 million and $0.1 million, other expenses totaled $0.4 million and $0.4 million. For the three months ended March 31, 2024 and 2023, the Company's investment advisor, Stellus Private BDC Advisor, LLC (the "Advisor"), waived $0.8 million and $0.6 million of management fees (voluntarily waived until October 1, 2024), $0.2 million and $0.2 million of income incentive fees (waived as our shares were not listed on a national exchange), and $0.2 million and $0.2 million of expenses pursuant to expense support and conditional reimbursements from the Advisor for net operating expenses of $2.9 million and $2.3 million, respectively.

For the three months ended March 31, 2024 and 2023, net investment income was $3.6 million and $2.6 million, or $0.49 and $0.48 per common share based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

The Company's investment portfolio had a net change in unrealized appreciation (depreciation) of $0.3 million and ($0.1) million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, net increase in net assets resulting from operations totaled $3.9 million and $2.6 million, or $0.54 and $0.47 per common share, based on weighted average common shares outstanding of 7,227,206 and 5,501,765, respectively.

Liquidity and Capital Resources

On September 30, 2022, the Company entered into a senior secured revolving credit agreement with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the "Credit Facility"). The Credit Facility, as amended, provides for borrowings up to a maximum of $150.0 million on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $200.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions. As of March 31, 2024 and December 31, 2023, the Company had $105.3 million and $98.0 million in outstanding borrowings under the Credit Facility.

Recent Portfolio Activity

The Company invested in the following portfolio companies for the three months ended March 31, 2024:

Activity Type		Date		Company Name		Company Description		Investment Amount			Instrument Type
Add-On Investment		January 9, 2024		Morgan Electrical Group Intermediate Holdings, Inc.*		Provider of commercial electrical services		$	12,854		Senior Secured?-?First Lien
Add-On Investment		January 12, 2024		Impact Home Services LLC*		Residential garage door, electrical, and plumbing services provider		$	28,813		Equity
Add-On Investment		January 31, 2024		Impact Home Services LLC*		Residential garage door, electrical, and plumbing services provider		$	12,637		Equity
Add-On Investment		March 1, 2024		Monitorus Holding, LLC*		Provider of media monitoring and evaluation services		$	38,984		Unsecured Convertible Bond
New Investment		March 11, 2024		Exec Connect Intermediate LLC		Facilitator of executive-level in-person events and remote peer-to-peer industry insights		$	1,746,286		Senior Secured?-?First Lien
								$	254,005		Delayed Draw Term Loan Commitment
								$	158,753		Revolver Commitment
								$	77,109		Equity
New Investment		March 11, 2024		Titan Meter Bidco Corp.		Provider of liquid metering products and integrated solutions to the energy infrastructure sector		$	7,696,671		Senior Secured?-?First Lien
								$	810,176		Revolver Commitment
								$	395,667		Equity
New Investment		March 26, 2024		Med Learning Group, LLC		Provider of continuing medical education services		$	3,636,170		Senior Secured?-?First Lien
								$	990,355		Delayed Draw Term Loan Commitment
____________________________
* Existing portfolio company

The Company realized investments in the following portfolio companies for the three months ended March 31, 2024:

Activity Type		Date		Company Name		Company Description		Proceeds Received			Instrument Type
Full Repayment		January 8, 2024		Peltram Plumbing Holdings, LLC*		Provider of plumbing solutions.		$	6,818,700		Senior Secured?-?First Lien
____________________________
* Existing portfolio company

Events Subsequent to March 31, 2024

The Company's management has evaluated subsequent events through May 10, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.

Investment Portfolio

The Company invested in the following portfolio companies subsequent to March 31, 2024:

Activity Type		Date		Company Name		Company Description		Investment Amount			Instrument Type
New Investment		April 1, 2024		FairWave Holdings, LLC		Specialty coffee platform		$	3,084,350		Senior Secured?-?First Lien
								$	1,079,522		Delayed Draw Term Loan Commitment
								$	462,652		Revolver Commitment
								$	115,663		Equity
New Investment		April 11, 2024		WER Holdings, LLC		Regional provider of commercial landscaping services		$	1,099,727		Senior Secured?-?First Lien
								$	544,419		Delayed Draw Term Loan Commitment
								$	163,326		Revolver Commitment
								$	73,300		Equity
Add-On Investment		April 16, 2024		Impact Home Services LLC*		Residential garage door, electrical, and plumbing services provider		$	5,055		Equity
New Investment		May 10, 2024		Luxium Solutions, LLC		Manufacturer and distributor of high- performance advanced materials and assemblies		$	3,372,885		Senior Secured?-?First Lien
								$	488,117		Delayed Draw Term Loan Commitment
____________________________
* Existing portfolio company

Credit Facility

The outstanding balance under the Credit Facility as of May 10, 2024 was $108.3 million.

Distributions Declared

On April 3, 2024, our Board of Directors declared a regular monthly distribution for each of April 2024, May 2024, and June 2024, as follows:

		Record		Payment		Amount per
Declared		Date		Date		Share
4/3/2024		4/5/2024		4/30/2024		$	0.1666
4/3/2024		5/1/2024		5/31/2024		$	0.1666
4/3/2024		6/1/2024		6/28/2024		$	0.1666

Sale of Unregistered Securities

Since March 31, 2024, the Company sold 414,531 common shares of beneficial interest at a price of $15.26 per share for aggregate proceeds of $6,325,743, which included $24,257 of organizational expense allocation pursuant to subscription agreements entered into between the Company and investors.

Since March 31, 2024, the Company also issued 11,915 common shares of beneficial interest for aggregate proceeds of $181,535 under the DRIP.

On May 7, 2024, Stellus Private Credit BDC (the "Company") delivered a capital drawdown notice to its investors relating to the sale of 1,310,616 common shares of beneficial interest (the "Shares") of the Company for an aggregate offering price of $20,000,000. No underwriting discounts or commissions have been or will be paid in connection with the sale of the Shares. The sale of the Shares is expected to close on or about May 21, 2024.

About Stellus Private Credit BDC

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans and second lien loans, with corresponding equity co-investments. The Company's investment activities are managed by its investment adviser, Stellus Private BDC Advisor, LLC.

Forward-Looking Statements

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Contacts

Stellus Private Credit BDC
[email protected]

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
		March 31, 2024
		(unaudited)			December 31, 2023
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $213,929,910 and $206,513,758, respectively)		$	216,314,810		$	208,574,078
Cash and cash equivalents			297,635			593,685
Interest receivable			1,856,236			1,495,581
Expense reimbursement receivable from the Advisor (Note 2)			197,775			126,539
Deferred offering costs			72,876			72,875
Related party receivable			36,625			162,455
Prepaid expenses			132,405			127,019
Receivable for sales and repayments of investments			121,176			71,105
Total Assets		$	219,029,538		$	211,223,337
LIABILITIES
Credit Facilities payable		$	104,425,625		$	97,031,517
Dividends payable			-			3,551,068
Unearned revenue			784,484			897,538
Income incentive fee payable			407,007			439,854
Capital gains incentive fee payable			299,574			261,684
Interest payable			348,640			367,093
Administrative services payable			118,005			124,958
Income tax payable			149,085			182,489
Deferred tax liability			121,980			167,865
Other accrued expenses and liabilities			127,817			177,249
Total Liabilities		$	106,782,217		$	103,201,315
Commitments and contingencies (Note 7)
Net Assets		$	112,247,321		$	108,022,022
NET ASSETS
Common shares of beneficial interest, par value $0.01 per share (unlimited shares authorized; 7,358,038 and 7,102,136 issued and outstanding, respectively)		$	73,580		$	71,021
Paid-in capital			108,711,728			104,810,048
Total distributable earnings			3,462,013			3,140,953
Net Assets		$	112,247,321		$	108,022,022
Total Liabilities and Net Assets		$	219,029,538		$	211,223,337
Net Asset Value Per Share		$	15.26		$	15.21

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
		Three Months Ended
		March 31, 2024			March 31, 2023
INVESTMENT INCOME
Interest income		$	6,309,381		$	4,731,952
Other income			109,596			176,069
Total Investment Income		$	6,418,977		$	4,908,021
OPERATING EXPENSES
Management fees		$	800,654		$	601,839
Income incentive fees			598,401			439,666
Capital gains incentive fee			37,891			-
Professional fees			196,911			211,808
Organization costs			-			1,000
Amortization of deferred offering costs			46,728			57,623
Administrative services expenses			121,777			93,760
Trustees' fees			40,000			40,000
Insurance expense			20,196			20,084
Valuation fees			27,159			17,659
Interest expense and other fees			2,110,119			1,703,503
Income tax expense			21,589			7,835
Other general and administrative expenses			42,933			43,520
Total Operating Expenses		$	4,064,358		$	3,238,297
Expenses reimbursed/fees waived by Investment Advisor (Note 2)		$	(1,197,896)		$	(968,275)
Net Operating Expenses		$	2,866,462		$	2,270,022
Net Investment Income		$	3,552,515		$	2,637,999
Net realized gain on foreign currency translation		$	8,442		$	3,475
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments			333,461			(72,026)
Net change in unrealized (depreciation) appreciation on foreign currency translations			(8,881)			6,220
Benefit for taxes on net unrealized loss on investments			45,885			-
Net Increase in Net Assets Resulting from Operations		$	3,931,422		$	2,575,668
Net Investment Income Per Share?-?basic and diluted		$	0.49		$	0.48
Net Increase in Net Assets Resulting from Operations Per Share?-?basic and diluted		$	0.54		$	0.47
Weighted Average Common Shares of Beneficial Interest Outstanding?-?basic and diluted			7,227,206			5,501,765
Distributions Per Share?-?basic and diluted		$	0.50		$	0.42

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
		Common Shares of
		Beneficial Interest								Total
		Number of		Par			Paid-in			distributable
		shares		value			capital			(loss) gain			Net Assets
Balances at December 31, 2022		5,483,433		$	54,834		$	80,950,845		$	(742,722)		$	80,262,957
Net investment income		-			-			-			2,637,999			2,637,999
Net realized gain on foreign currency translation		-			-			-			3,475			3,475
Net change in unrealized depreciation on non-controlled, non-affiliated investments		-			-			-			(72,026)			(72,026)
Net change in unrealized appreciation on foreign currency translations		-			-			-			6,220			6,220
Distributions from net investment income		-			-			-			(2,306,409)			(2,306,409)
Issuance of common shares of beneficial interest		349,546			3,496			5,115,958			-			5,119,454
Balances at March 31, 2023		5,832,979		$	58,330		$	86,066,803		$	(473,463)		$	85,651,670
Balances at December 31, 2023		7,102,136		$	71,021		$	104,810,048		$	3,140,953		$	108,022,022
Net investment income		-			-			-			3,552,515			3,552,515
Net realized gain on foreign currency translation		-			-			-			8,442			8,442
Net change in unrealized appreciation on non-controlled, non-affiliated investments		-			-			-			333,461			333,461
Net change in unrealized depreciation on foreign currency translations		-			-			-			(8,881)			(8,881)
Benefit for taxes on net unrealized loss on investments		-			-			-			45,885			45,885
Distributions from net investment income		-			-			-			(3,610,362)			(3,610,362)
Issuance of common shares of beneficial interest		255,902			2,559			3,901,680			-			3,904,239
Balances at March 31, 2024		7,358,038		$	73,580		$	108,711,728		$	3,462,013		$	112,247,321

STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	Three Months Ended
	March 31, 2024			March 31, 2023
Cash Flows from Operating Activities
Net increase in net assets resulting from operations	$	3,931,422		$	2,575,668
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(16,534,629)			(17,104,559)
Proceeds from sales and repayments of investments		9,368,480			9,823,196
Net change in unrealized (appreciation) depreciation on investments		(333,461)			72,026
Net change in unrealized depreciation (appreciation) foreign currency translations		8,881			(6,220)
Increase in investments due to PIK		(159,943)			-
Amortization of premium and accretion of discount, net		(140,131)			(106,212)
Deferred tax benefit		(45,885)			-
Amortization of loan structure fees		94,108			156,894
Amortization of deferred offering costs		46,728			57,623
Changes in other assets and liabilities
Increase in interest receivable		(360,655)			(230,621)
Increase in other receivable		-			(16,200)
Decrease (increase) in related party receivable		125,830			(49,651)
Increase in expense reimbursements receivable from the Advisor		(71,236)			(198,636)
(Increase) decrease in prepaid expenses		(5,386)			36,509
Increase in related party payable		-			5,000,000
(Decrease) increase in administrative services payable		(6,953)			74,458
(Decrease) increase in interest payable		(18,453)			105,780
(Decrease) increase in income incentive fees payable		(32,847)			293,110
Increase in capital gains incentive fees payable		37,890			-
Decrease in unearned revenue		(113,054)			(4,408)
(Decrease) increase in income tax payable		(33,404)			7,835
(Decrease) increase in other accrued expenses and liabilities		(49,432)			67,928
Net Cash (Used) Provided in Operating Activities	$	(4,292,130)		$	554,520
Cash Flows from Financing Activities
Proceeds from issuance of common shares of beneficial interest	$	3,904,239		$	5,119,454
Offering costs paid for common shares of beneficial interest issued		(46,729)			(96,872)
Stockholder distributions paid		(7,161,430)			(1,809,533)
Borrowings under Credit Facilities		20,400,000			49,500,000
Repayments of Credit Facilities		(13,100,000)			(54,115,000)
Financing costs paid on Credit Facilities		-			(182,195)
Short-term loan repayments		-			(6,750,000)
Net Cash Provided (Used) by Financing Activities	$	3,996,080		$	(8,334,146)
Net Decrease in Cash and Cash Equivalents	$	(296,050)		$	(7,779,626)
Cash and Cash Equivalents Balance at Beginning of Period		593,685			15,469,823
Cash and Cash Equivalents Balance at End of Period	$	297,635		$	7,690,197
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	2,034,464		$	1,440,829
Income and excise tax paid		54,993			-
Increase in deferred offering costs		-			39,249
Value of common shares of beneficial interest issued pursuant to Dividend Reinvestment Plan		354,239			119,453
(Decrease) increase in dividends payable		(3,551,068)			496,876

SOURCE Stellus Private Credit BDC