NEW YORK, March 08, 2017 (GLOBE NEWSWIRE) -- KCAP Financial, Inc. (Nasdaq:KCAP) announces its full year 2016 financial results.

Financial Highlights

• Net investment income for the year ended December 31, 2016 was approximately $18.5 million, or $0.50 per basic share, compared with $24.2 million, or $0.65 per basic share in 2015.
  
  
• KCAP Financial, Inc. declared a fourth quarter shareholder distribution of $0.12 per share.
  
  

• At December 31, 2016, the fair value of KCAP's investments totaled approximately $366.5 million.
   
• Net asset value per share of $5.24 as of December 31, 2016, compared with $5.82 at December 31, 2015.
  
  Dayl Pearson, President and Chief Executive Officer of KCAP Financial, Inc., noted, "After significant repayments in the first three quarters of 2016, we had a strong fourth quarter of originations and still ended the year with additional dry powder. We were also pleased to close our latest CLO in December."

Operating Results

For the year ended December 31, 2016, we reported total investment income of approximately $36.2 million as compared to approximately $45.5 million in the prior year, a decrease of 20%. Investment income from debt securities decreased 14% to approximately $20.8 million from approximately $24.1 million. Investment income from investments in CLO fund securities in 2016 decreased 15% to $13.3 million from $15.7 million in 2015, and dividends from our Asset Manager Affiliates decreased 74% from $5.3 million to $1.4 million.

For the year ended December 31, 2016, total expenses were lower by approximately $3.6 million as compared to the same period in 2015, primarily attributable to a decrease in interest expense related to the lower average outstanding principal balance on our borrowings during 2016.

Net investment income for the years ended 2016 and 2015 was approximately $18.5 million and $24.2 million, or $0.50 and $0.65 per share, respectively. Net realized and unrealized depreciation on investments for the year ended 2016 was approximately $19.4 million, as compared to net realized and unrealized depreciation on investments of $42.4 million for the same period in 2015.

Portfolio and Investment Activity

The fair value of our portfolio was approximately $366.5 million as of December 31, 2016. The composition of our investment portfolio at December 31, 2016 and December 31, 2015, at cost and fair value, was as follows:

		December 31, 2016									December 31, 2015
Security Type		Cost/Amortized Cost			Fair Value			%¹			Cost/Amortized Cost			Fair Value			%¹
Money Market Accounts²		$	28,699,269		$	28,699,269		8	%		$	2,129,381		$	2,129,381		1	%
Senior Secured Loan			207,701,078			200,322,152		55				203,819,074			194,123,223		46
Junior Secured Loan			37,251,776			35,444,440		10				40,221,557			37,591,900		9
Senior Unsecured Loan			-			-		-				23,000,000			23,000,000		6
First Lien Bond			3,060,919			1,089,338		-				3,000,000			2,216,700		1
Senior Subordinated Bond			-			-		-				4,466,793			4,615,569		1
Senior Unsecured Bond			-			-		-				11,879,187			10,551,724		3
Senior Secured Bond			1,506,461			1,487,400		-				1,510,560			1,503,755		-
CLO Fund Securities			76,851,317			54,174,350		15				83,214,947			55,872,382		14
Equity Securities			10,389,007			5,056,355		1				10,467,787			9,548,488		2
Preferred Securities			-			-		-				10,411,673			11,036,373		3
Asset Manager Affiliates³			55,341,230			40,198,000		11				56,591,230			57,381,000		14
Total		$	420,801,057		$	366,471,304		100	%		$	450,712,189		$	409,570,495		100	%
¹  Represents percentage of total portfolio at fair value.
²  Includes restricted cash held under employee benefit plans.
³  Represents the equity investment in the Asset Manager Affiliates.

Liquidity and Capital Resources

At December 31, 2016, we had unrestricted cash and money market balances of approximately $30.0 million, total assets of approximately $381.4 million and stockholders' equity of approximately $194.9 million. Our net asset value per common share was $5.24. As of December 31, 2016, we had $180.9 million of borrowings outstanding ($175.6 million net of discount) with a weighted average interest rate of approximately 3.9%.

Generally we would look to grow our portfolio of assets by raising additional capital, including through the prudent use of leverage available to us. However, we may face difficulty in obtaining a new debt and equity financing as a result of current market conditions, and because our common stock has traded at a price below our current net asset value per share. As a result, we may seek to enter into new agreements with other lenders or into other financing arrangements as market conditions permit. Such financing arrangements may include a new secured and/or unsecured credit facility or the issuance of unsecured debt or preferred stock.

Distributions

Generally, we seek to fund distributions to shareholders from current distributable earnings, primarily from net interest and dividend income generated by our investment portfolio and any distributions from our Asset Manager Affiliates (Trimaran Advisors and Katonah Debt Advisors). However, a portion of distributions paid to shareholders may be a return of capital. We announced a regular quarterly distribution of $0.12 per share for the quarter ended December 31, 2016. The record date for this distribution was January 6, 2017 and the distribution was paid on January 27, 2017. Tax characteristics of all distributions paid by us in 2016 have been reported to stockholders on Form 1099-DIV after the end of the calendar year.

We have adopted a dividend reinvestment plan that provides for reinvestment of distributions in shares of our common stock, unless a stockholder elects to receive cash. As a result, if we declare a cash distribution, shareholders who have not "opted out" of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving cash. Please contact your broker or other financial intermediary for more information regarding the dividend reinvestment plan.

Conference Call and Webcast

We will hold a conference call on Thursday, March 9, 2017 at 9:00 a.m. Eastern Time to discuss our full year 2016 financial results. Shareholders, prospective shareholders and analysts are welcome to listen to the call or attend the webcast.

The conference call dial-in number is (866) 757-5630. No password is required. A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company's website www.kcapfinancial.com in the Investor Relations section under Events. The online archive of the webcast will be available after 7:00 p.m. Eastern Time for approximately 90 days.

A replay of this conference call will be available from 12:00 p.m. on March 9, 2017 until 12:00 p.m. Eastern Time on March 16, 2017.  The dial in number for the replay is 855-859-2056 and the conference ID is 81098779.

About KCAP Financial, Inc.

KCAP Financial, Inc. is a publicly traded, internally managed business development company. The Company's middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. The Company's wholly owned portfolio companies, Trimaran Advisors, L.L.C. and Katonah Debt Advisors, L.L.C. , manage collateralized debt obligation funds that invest in broadly syndicated corporate term loans, high-yield bonds and other credit instruments.

Forward Looking Statements

This press release contains forward-looking statements. The matters discussed in this press release that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as "may,'' "will,'' "should,'' "expects,'' "plans,'' "anticipates,'' "could,'' "intends,'' "target,'' "projects,'' "contemplates,'' "believes,'' "estimates,'' "predicts,'' "potential'' or "continue'' or the negative of these terms or other similar words. Further information about factors that could affect our financial and other results is included in our filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

KCAP FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
			As of December 31, 2016				As of December 31, 2015
ASSETS
Investments at fair value:
	Money market accounts (cost: 2016 - $28,699,269; 2015 - $2,129,381)		$	28,699,269			$	2,129,381
	Debt securities (amortized cost: 2016 - $249,520,234; 2015 - $298,308,845)			238,343,330				284,639,244
	CLO Fund Securities managed by affiliates (amortized cost: 2016 - $71,734,809; 2015 - $77,764,568)			51,908,784				53,557,570
	CLO Fund Securities managed by non-affiliates (amortized cost: 2016 - $5,116,508; 2015 - $5,450,379)			2,265,566				2,314,812
	Equity securities (cost: 2016 - $10,389,007; 2015 - $10,467,786)			5,056,355				9,548,488
	Asset Manager Affiliates (cost: 2016 - $55,341,230; 2015 - $56,591,230)			40,198,000				57,381,000
Total Investments at Fair Value (cost: 2016 - $420,801,057; 2015 - $450,712,189)				366,471,304				409,570,495
Cash				1,307,257				-
Restricted cash				8,528,298				7,138,272
Interest receivable				1,033,917				1,812,624
Receivable for open trades				2,950,658				—
Due from affiliates				612,854				2,117,095
Other assets				467,695				566,211
Total Assets			$	381,371,983			$	421,204,697
LIABILITIES
Notes issued by KCAP Senior Funding I, LLC (net of discount and offering costs of: 2016 - $2,286,425 and $2,459,156, respectively; 2015 - $2,907,595 and $3,126,009, respectively)			$	142,604,419			$	141,316,396
7.375% Notes Due 2019 (net of offering costs of: 2016 - $550,774; 2015 - $890,344)				32,980,151				40,509,656
Convertible Notes (net of offering costs of: 2015 - $21,291)				—				19,277,709
Payable for open trades				7,884,943				—
Accounts payable and accrued expenses				2,047,405				2,218,065
Accrued interest payable				930,086				1,228,068
Due to affiliates				54				554,333
Total Liabilities				186,447,058				205,104,227
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 37,282,296 issued, and 37,178,294 outstanding at December 31, 2016, and 37,136,353 issued, and 37,100,005 outstanding at December 31, 2015				371,783				371,000
Capital in excess of par value				353,404,155				361,962,511
Excess distribution of net investment income				(14,630,319	)			(21,638,184	)
Accumulated net realized losses				(88,491,896	)			(82,054,107	)
Net unrealized depreciation on investments				(55,728,798	)			(42,540,750	)
Total Stockholders' Equity				194,924,925				216,100,470
Total Liabilities and Stockholders' Equity			$	381,371,983			$	421,204,697
NET ASSET VALUE PER COMMON SHARE			$	5.24			$	5.82

KCAP FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
				For the Years Ended December 31,
				2016					2015					2014
Investment Income:
	Interest from investments in debt securities			$	20,828,916				$	24,101,257				$	21,386,432
	Interest from cash and time deposits				29,383					10,239					3,452
	Investment income on CLO Fund Securities managed by affiliates				12,642,625					14,691,428					12,367,581
	Investment income on CLO Fund Securities managed by non-affiliates				630,647					1,008,634					1,045,225
	Dividends from Asset Manager Affiliates				1,400,000					5,348,554					5,467,914
	Capital structuring service fees				668,527					366,859					934,871
		Total investment income			36,200,098					45,526,971					41,205,475
Expenses:
	Interest and amortization of debt issuance costs				9,110,603					11,727,880					11,538,179
	Compensation				4,103,558					3,843,799					4,951,745
	Professional fees				2,391,038					3,520,461					2,614,479
	Insurance				412,764					433,561					471,276
	Administrative and other				1,692,140					1,818,480					1,509,228
		Total expenses			17,710,103					21,344,181					21,084,907
Net Investment Income					18,489,995					24,182,790					20,120,568
Realized And Unrealized Gains (Losses) On Investments:
	Net realized losses from investment transactions				(6,167,467	)				(6,202,289	)				(10,384,415	)
	Net change in unrealized (depreciation) appreciation on:
		Debt securities			2,492,707					(10,748,262	)				5,641,403
		Equity securities			(4,413,354	)				(210,167	)				7,040,155
		CLO Fund Securities managed by affiliates			4,380,974					(12,990,404	)				(11,584,257	)
		CLO Fund Securities managed by non-affiliates			284,625					(977,483	)				2,884,109
		Asset Manager Affiliates investments			(15,933,000	)				(11,243,554	)				2,064,107
	Total net (depreciation) appreciation from investment transactions				(13,188,048	)				(36,169,870	)				6,045,517
	Net realized and unrealized loss on investments				(19,355,515	)				(42,372,159	)				(4,338,898	)
	Realized losses on extinguishments of debt				(174,211	)				(445,189	)				(748,076	)
Net (Decrease) Increase In Stockholders' Equity Resulting From Operations				$	(1,039,731	)			$	(18,634,558	)			$	15,033,594
	Net (Decrease) Increase in Stockholders' Equity Resulting from Operations per Common Share:
	Basic:			$	(0.03	)			$	(0.50	)			$	0.44
	Diluted:			$	(0.03	)			$	(0.50	)			$	0.43
	Net Investment Income Per Common Share:
	Basic:			$	0.50				$	0.65				$	0.59
	Diluted:			$	0.50				$	0.65				$	0.58
	Weighted Average Shares of Common Stock Outstanding—Basic				37,149,663					36,964,444					34,248,346
	Weighted Average Shares of Common Stock Outstanding—Diluted				37,149,663					36,964,444					34,259,977

KCAP-G

CONTACT:

Ted Gilpin

gilpin@kcapinc.com

(212) 455-8300

Source: KCAP Financial, Inc.

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