Horizon Technology Finance Provides Operational and First Quarter 2020 Portfolio Update
"During the first quarter, we originated
COVID-19's Preliminary Effects
Horizon's foremost priority is to ensure the health and well-being of its team. To that end, as the COVID-19 pandemic situation unfolded in March, Horizon promptly activated its business continuity plans, and its team is working remotely, with operations continuing uninterrupted. As a result, Horizon is closely monitoring its current portfolio companies while continuing to source new venture debt investments.
- Conservative Leverage / Strengthened Balance Sheet – Horizon proactively strengthened its balance sheet in 2019, prior to the COVID-19 pandemic, which allowed Horizon to lower its cost of capital, increase its liquidity and maintain leverage at the lower end of its targeted 80 to 120% range.
- Liquidity – as of
March 31, 2020, the Company had $51.6 millionin available liquidity, consisting of $38.8 millionin cash and money market funds, and $12.8 millionin funds available under existing credit facility commitments. There was $45.0 millionin outstanding principal balance under the $125.0 millionrevolving credit facility.
- Leverage – as of
December 31, 2019, the Company's debt to equity leverage ratio was 84% and its asset coverage ratio for borrowed amounts was 219%.
- Securitization – Horizon issued
$100 millionof asset-backed notes in 2019, which bear interest at a fixed interest rate of 4.21% per annum. The securitization effectively freed up capacity under the revolving credit facility and reduced Horizon's cost of capital.
- ATM – Under its previously established at-the-market sales program, during the first quarter ended
March 31, 2020and prior to the COVID-19-related volatility in the market, the Company sold 1,285,410 shares of common stock at an average price of $12.81and received net proceeds of approximately $16.2 million.
- Distributions – The Company previously declared monthly distributions of
$0.10per share payable in each of April, May and June 2020, as well as a special distribution of $0.05per share payable April 15, 2020and maintained undistributed spillover income of $0.42per share as of December 31, 2019. Spillover income includes any ordinary income and net capital gains from the preceding tax years that were not distributed during such tax years.
- Proactive Portfolio Management and Diverse Portfolio – Horizon has a diversified portfolio of development stage companies in the technology, life science and healthcare information and services industries. Horizon has always engaged with all of its venture debt portfolio companies on a regular and "as needed" basis. While development stage companies historically have been less susceptible to economic downturns than traditional middle market companies, the impact of the current financial disruption and economic contraction may affect capital raising for development stage companies.
- Venture Debt Snapshot – The market volatility caused by the COVID-19 pandemic is ongoing and Horizon continues to closely monitor the economic environment. In the life sciences, technology, and healthcare information and services sectors in which Horizon typically invests, there also remain significant opportunities for investment despite the market dislocation. Accordingly, Horizon continues to source new portfolio investments in the market while remaining vigilant in maintaining its prudent underwriting criteria.
"We will continue to closely monitor the evolving economic landscape as it relates to our portfolio companies. At the same time, we will seek opportunities for companies to utilize our venture debt solutions," said
First Quarter 2020 Portfolio Update
Horizon funded six loans during the first quarter of 2020 totaling
$20.0 millionto a new portfolio company, Castle Creek Biosciences, Inc., which develops and commercializes gene therapies for patients with rare and serious genetic diseases. $15.0 millionto a new portfolio company, an innovator in digital health and remote patient monitoring, focusing on providing cardiac monitors. $10.0 millionto a new portfolio company, an online program management partner dedicated to creating global access to high-quality online education. $4.0 millionto an existing portfolio company, CSA Medical, Inc., a developer of novel, patent-protected cryotherapy medical devices. $1.1 millionto an existing portfolio company, Betabrand Corporation, a crowdfunded online clothing community that designs, manufactures, and consistently releases new products. $0.4 millionto an existing portfolio company focused on the late-stage development and commercialization of drugs to treat cardiovascular diseases.
Horizon experienced liquidity events from five portfolio companies in the first quarter of 2020, including principal prepayments of
- In January,
Sys-Tech Solutions, Inc.("Sys-Tech") closed a sale transaction from which Horizon received proceeds of $2.3 millionin connection with the termination of Horizon's warrants in Sys-Tech.
- In January, Horizon sold its equity in Palatin Technologies, Inc. ("Palatin"). Horizon continues to hold warrants in Palatin.
- In February, Horizon received proceeds of
$0.4 millionupon the sale of its equity and exercise and sale of its warrants in Revance Therapeutics, Inc.
- In February,
Bridge2 Solutions, LLC("Bridge2") paid the outstanding principal balance of $14.5 millionon its venture loan, plus interest and end-of-term payment. Horizon also received proceeds of approximately $2.8 millionin connection with the termination of Horizon's warrants in Bridge2.
- In March,
Verve Wireless, Inc.prepaid its outstanding principal balance of $1.9 millionon its venture loan, plus interest, end-of-term payment, prepayment fee and additional fees.
Joint Venture Activity
During the first quarter of 2020, Bridge2 prepaid its outstanding principal balance of
Principal Payments Received
During the first quarter of 2020, Horizon received regularly scheduled principal payments on investments totaling
During the first quarter ended
Capital Markets Activity – Warrant and Equity Portfolio
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Horizon's filings with the