NEW YORK, Aug. 6, 2014 (GLOBE NEWSWIRE) -- KCAP Financial, Inc. (Nasdaq:KCAP) announces its second quarter 2014 financial results.

Financial Highlights

• Net investment income for the second quarter ended June 30, 2014 was approximately $8.0 million, or $0.24 per basic share, compared with approximately $6.6 million, or $0.20 per basic share in the quarter ended June 30, 2013.
• KCAP Financial, Inc. declared a second quarter shareholder distribution of $0.25 per share.
• At June 30, 2014, the fair value of KCAP's investments totaled approximately $437 million.
• Net asset value per share of $7.67 as of June 30, 2014, compared with $7.51 at December 31, 2013.

Dayl Pearson, President and Chief Executive Officer of KCAP Financial, Inc., noted, "We are pleased with the continued development of both our direct lending and asset management businesses in the second quarter. While new deal activity moderated compared to the first quarter, we have a healthy pipeline and have continued to sustain positive momentum. In addition, our asset management business continued to add new assets under management with the closing of Catamaran CLO 2014-1 in the second quarter."

Operating Results

For the three months ended June 30, 2014, we reported total investment income of approximately $13.2 million, compared to approximately $11.2 million in the same period last year, an increase of 18%. Investment income from debt securities increased 73% to approximately $5.2 million from approximately $3.0 million in second quarter 2013. Distributions from investments in CLO fund securities in the second quarter of 2014 were consistent with the second quarter of 2013 at $4.9 million in each period, and distributions from our Asset Manager Affiliates in the second quarter of 2014 decreased to approximately $3 million from approximately $3.3 million in 2013.

For the three months ended June 30, 2014, total expenses were higher by approximately $525,000 as compared to the same period in 2013, primarily attributable to the increase in interest expense related to the higher average outstanding principal balance on our borrowings.

Net investment income for the second quarter of 2014 and 2013 was approximately $8.0 million and $6.6 million, or $0.24 per basic share and $0.20 per basic share, respectively. Net realized and unrealized appreciation on investments for the three months ended June 30, 2014 was approximately $4.2 million, as compared to approximately $1.9 million for the same period in 2013.

Portfolio and Investment Activity

The fair value of our portfolio was approximately $437 million as of June 30, 2014. The composition of our investment portfolio at June 30, 2014 and December 31, 2013 at cost and fair value was as follows:

	June 30, 2014 (unaudited)			December 31, 2013
Security Type	Cost	Fair Value	%¹	Cost	Fair Value	%¹
Money Market Accounts²	$ 5,610,941	$ 5,610,941	2	$ 7,112,949	$ 7,112,949	3
Senior Secured Loan	159,600,198	153,304,076	60	175,021,272	168,188,453	67
Junior Secured Loan	47,500,076	45,264,099	18	50,831,407	48,443,384	19
Senior Unsecured Loan	27,013,567	27,013,567	10	23,000,000	23,000,000	9
First Lien Bond	2,952,225	2,398,500	1	2,948,332	2,546,400	2
Senior Subordinated Bond	4,272,110	4,293,098	2	1,037,707	1,051,540	--
Senior Unsecured Bond	10,946,659	11,433,738	4	10,855,804	11,381,100	5
Senior Secured Bond	1,517,375	1,605,000	1	1,519,072	1,619,550	1
CLO Fund Securities	113,748,903	91,730,898	35	101,696,950	79,452,220	32
Equity Securities	16,289,233	8,758,971	3	18,755,684	11,006,398	4
Preferred	10,104,717	10,711,000	4	10,000,000	10,600,000	4
Asset Manager Affiliates	83,924,720	75,302,000	29	83,378,741	76,148,000	30
Total	$ 483,480,724	$ 437,425,888	169%	$ 486,157,918	$ 440,549,994	176%
¹     Calculated as a percentage of Net Asset Value.
²     Includes restricted cash held under employee benefit plans.

Liquidity and Capital Resources

At June 30, 2014, we had unrestricted cash and money market balances of approximately $7.9 million, total assets of approximately $458.6 million and stockholders' equity of approximately $258.5 million. Our net asset value per common share was $7.67. As of June 30, 2014, we had $195.7 million (par value) of borrowings outstanding ($192.8 million net of discount) with a weighted average interest rate of approximately 5.1%.

Subject to prevailing market conditions, we intend to grow our portfolio of assets by raising additional capital, including through the prudent use of leverage available to us. 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 investment income generated by our investment portfolio. We announced a regular quarterly distribution of $0.25 per share for the quarter ended June 30, 2014. The record date for this distribution was July 3, 2014 and the distribution was paid on July 25, 2014. An estimate of the tax attributes of distributions made on a quarterly basis may not be representative of the actual tax attributes of distributions for a full year. Tax characteristics of all distributions will be 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. For more information regarding our distributions, please refer to our 2013 annual financial report. 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 Wednesday, August 6, 2014 at 4:00 pm Eastern Daylight Time to discuss our second quarter 2014 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 Daylight Time for approximately 90 days. 

A replay of this conference call will be available from 7:00 p.m. on August 6, 2014 until 11:59 p.m. on August 13, 2014. The dial in number for the replay is (855) 859-2056 and the conference ID is 83302124.

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.

The KCAP Financial, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3121

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 June 30, 2014	As of December 31, 2013
		(unaudited)
ASSETS
Investments at fair value:
Money market accounts (cost: 2014 - $5,610,941; 2013 - $7,112,949)		$ 5,610,941	$ 7,112,949
Debt securities (cost: 2014 -- $263,906,927; 2013 -- $275,213,594)		256,023,078	266,830,427
CLO Fund securities managed by affiliates (cost: 2014 -- $101,293,076; 2013 -- $88,979,585)		87,549,239	75,100,306
CLO Fund securities managed by non-affiliates (cost: 2014 -- $12,455,827; 2013 -- $12,717,365)		4,181,659	4,351,914
Equity securities (cost: 2014 -- $16,289,233; 2013 -- $18,755,684)		8,758,971	11,006,398
Asset Manager Affiliates (cost: 2014 -- $83,924,720; 2013 -- $83,378,741)		75,302,000	76,148,000
Total Investments at Fair Value (cost: 2014 -- $483,480,724; 2013 -- $486,157,918)		437,425,888	440,549,994
Cash		2,310,589	3,433,675
Restricted cash		4,777,960	4,078,939
Interest receivable		2,040,077	2,032,559
Receivable for open trades		2,943,835	—
Due from affiliates		3,218,927	3,125,259
Other assets		5,853,972	5,951,962
Total Assets		$ 458,571,248	$ 459,172,388
LIABILITIES
Convertible Notes		$ 49,008,000	$ 49,008,000
7.375% Notes Due 2019		41,400,000	41,400,000
Notes issued by KCAP Senior Funding I, LLC (net of discount: 2014 -- $2,847,139; 2013 -- $3,065,627)		102,402,861	102,184,373
Payable for open trades		3,940,000	3,980,000
Accounts payable and accrued expenses		3,306,332	3,897,291
Shareholder distribution payable		—	8,333,031
Total Liabilities		200,057,193	208,802,695
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 33,725,223 and 33,332,123 common shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		337,252	333,472
Capital in excess of par value		371,640,022	370,929,615
Accumulated undistributed (excess distribution) net investment income		1,530,282	(6,102,017)
Accumulated net realized losses		(68,417,904)	(68,662,689)
Net unrealized depreciation on investments		(46,575,597)	(46,128,688)
Total Stockholders' Equity		258,514,055	250,369,693
Total Liabilities and Stockholders' Equity		$ 458,571,248	$ 459,172,388
NET ASSET VALUE PER COMMON SHARE		$ 7.67	$ 7.51

KCAP FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
			Three Months Ended		Six Months Ended
			June 30,		June 30,
			2014	2013	2014	2013
Investment Income:
Interest from investments in debt securities			$ 5,173,514	$ 2,997,246	$ 10,420,750	$ 5,475,265
Interest from cash and time deposits			724	3,026	1,510	7,738
Distributions from investments in CLO Fund securities managed by affiliates			4,451,626	4,557,531	9,087,864	10,038,183
Distributions from investments in CLO Fund securities managed by non-affiliates			464,734	323,790	740,304	747,664
Distributions from Asset Manager Affiliates			3,000,000	3,300,000	6,000,000	6,300,000
Capital structuring service fees			125,116	52,753	352,199	59,326
Total investment income			13,215,714	11,234,346	26,602,627	22,628,176
Expenses:
Interest and amortization of debt issuance costs			2,893,806	2,250,063	5,883,972	4,510,309
Compensation			1,227,651	1,110,409	2,490,088	2,020,122
Professional fees			545,913	652,644	1,217,123	1,294,971
Insurance			111,507	126,632	247,467	255,348
Administrative and other			399,315	513,085	867,597	1,019,556
Total expenses			5,178,192	4,652,833	10,706,247	9,100,306
Net Investment Income			8,037,522	6,581,513	15,896,380	13,527,870
Realized And Unrealized Gains (Losses) On Investments:
Net realized (losses) gains from investment transactions			(64,797)	(1,562,529)	244,785	(1,645,466)
Net change in unrealized (depreciation) appreciation on:
Debt securities			1,102,632	124,466	499,319	2,410,992
Equity securities			546,686	1,064,379	219,023	998,942
CLO Fund securities managed by affiliates			1,015,474	(3,768,238)	135,445	(8,347,397)
CLO Fund securities managed by non-affiliates			388,145	(820,826)	91,283	(1,188,235)
Asset Manager Affiliates investments			1,227,000	6,910,060	(1,391,979)	9,985,399
Total net change in unrealized appreciation (depreciation)			4,279,937	3,509,841	(446,909)	3,859,701
Net realized and unrealized appreciation (depreciation) on investments			4,215,140	1,947,312	(202,124)	2,214,235
Net Increase In Stockholders' Equity Resulting From Operations			$ 12,252,662	$ 8,528,825	$ 15,694,256	$ 15,742,105
Net Increase In Stockholders' Equity Resulting from Operations per Common Share:
Basic:			$ 0.37	$ 0.26	$ 0.47	$ 0.51
Diluted:			$ 0.34	$ 0.25	$ 0.45	$ 0.48
Net Investment Income Per Common Share:
Basic:			$ 0.24	$ 0.20	$ 0.48	$ 0.43
Diluted:			$ 0.24	$ 0.20	$ 0.46	$ 0.42
Weighted Average Shares of Common Stock Outstanding—Basic			33,405,189	33,040,155	33,371,764	31,163,596
Weighted Average Shares of Common Stock Outstanding—Diluted			39,723,264	39,395,124	39,689,884	38,022,742

KCAP-G

CONTACT: Jamie Lillisjlillis@soleburyir.com

         (203) 428-3223



         KCAP Financial, Inc.Denise Rodriguez, Investor Relations

         (212) 455-8300

         info@kcapfinancial.com

Source: KCAP Financial, Inc.

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