Great Elm Capital Corp. Q2 FY2024 earnings call

• Capital raises: In June, raised $12 million in equity at net asset value from Prosper Peak Holdings in SPV, and in July, issued $22 million of GECCI notes. Secured over $90 million of fresh capital this year.
• Portfolio enhancements: Expansion into CLO products with a JV that started receiving distributions in July, expecting CLO JV to be a source of increasing income with potential returns ranging from mid-teens to low 20%.
• Second quarter performance: NAV reduction due to illiquid Level 3 investments on nonaccrual in two portfolio companies, but bulk of impacts realized. NII per share declined sequentially due to cash drag and timing of cash flows.
• Specialty finance: GESF had improved performance in two of its three platform companies in Q2, pipelines robust in Q3, focus on closing new deals and streamlining operations.

In the second quarter, Great Elm Capital Corp. (GECC) had a NAV of $12.06 per share on June 30 compared to $12.57 on March 31. NII for the quarter was $3.1 million or $0.32 per share. Net assets as of June 30, 2024, rose to $126 million from $119 million on March 31. The portfolio composition changed with first lien loans and CLOs making up 60% of the portfolio in Q2 2024, up from 44% first lien loans with no CLO exposure in the previous year. Nonaccruals at quarter end totaled $9.4 million or approximately 3% of portfolio fair value, but pro forma nonaccruals were $1.3 million of fair value.

• Expect NII in the second half of the year to surpass that of the first half.
• Aim to refinance baby bonds maturing in 2025 by the end of 2024.
• Board authorized a $0.35 per share cash distribution for the quarter ending September 30, 2024, with an 11.6% annualized dividend yield on June 30 NAV.

• Macro environment volatility with uncertainty surrounding the timing of rate cuts and a turbulent election year.
• Impact of nonaccrual investments on NAV in the previous quarter.

Q: No questions at this time A: