Sirrom Capital Corporation Announces That It Expects Pre-tax Operating Income Per Share to Meet Consensus Analyst Estimate of $0.33 Per Share for Quarter Ended June 30, 1998
Business Wire - July 09, 1998 16:23
NASHVILLE, Tenn.--(BUSINESS WIRE)--July 9, 1998--Sirrom Capital Corporation ("SCC" or the "Company") (NYSE: SIR) today announced that it expects pre-tax operating income per share to meet the consensus analyst estimate of $0.33 per share for the quarter ended June 30, 1998.
The Company anticipates that the net increase in shareholders' equity resulting from operations for the second quarter will be lower than pre-tax operating income per share due to realized loss on investments of approximately $6 million and change in unrealized depreciation of approximately $4 million to $5 million. The realized loss and change in unrealized depreciation are primarily attributable to loans made to two borrowers whose operations were consolidated during 1998 as part of a restructuring strategy that the Company now believes is not likely to result in full repayment of the outstanding loans to those borrowers. In prior quarters, the Company had recorded approximately $7.2 million of unrealized depreciation against these loans and investments and for the second quarter expects to record an additional $8 million of unrealized depreciation and take an $8.9 million realized loss against these loans and investments. In addition, the down grading of one of these loans from a grade 4 loan (a loan that involves a borrower that is performing marginally below expectations and evidences short-term negative trends) to a grade 5 loan (a loan that is in default and not accruing interest, but that the Company believes is capable of returning to an acceptable level of risk) partially contributed to the increase in the aggregate principal balance of loans on the Company's Credit Watch List (loans graded 5 and 6), which loans are expected to represent approximately 10% of the total loan portfolio at June 30, 1998. Despite the additions to the Credit Watch List, the aggregate balance of these loans as a percentage of SCC's total loan portfolio remains in what the Company believes to be the normal range contemplated by its business model. In addition, the aggregate principal balance of grade 4, 5 and 6 loans is expected to be approximately 16.5% at June 30, 1998, which is unchanged from March 31, 1998, and down from approximately 19% at June 30, 1997. SCC does not anticipate the non-accrual of interest on these loans to have a material impact on earnings during the third quarter of 1998.
"We are pleased with our second quarter pre-tax operating income and remain confident our business model will continue to prove itself," stated George M. Miller, II, President and CEO of SCC. "Including the realized losses taken this quarter SCC's cumulative realized gains have exceeded cumulative realized losses by approximately $16 million and we believe that the potential gains to be realized from our warrant portfolio will continue to exceed the realized losses from our loan portfolio over time," Mr. Miller added.
Statements in this news release are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which are outside the control of the Company, such as the risk of loans to and investments in small private companies, the illiquidity of the Company's portfolio investments, the risk of borrower payment default, the risk of loan losses exceeding fair value estimates and other risks set forth in detail in the Company's most recent registration statement on Form N-2 and other Securities and Exchange Commission filings. |
