Tortoise Capital Resources Corp. Releases Fiscal 2009 First Quarter Financial Results

FOR IMMEDIATE RELEASE

LEAWOOD, Kan.– Apr. 08, 2009 – Tortoise Capital Resources Corp. (NYSE: TTO) (the company) today announced that it has filed its Form 10-Q for the first quarter ended Feb. 28, 2009.

Recent Highlights

·  
Net assets of $77.7 million or $8.67 per share as of Feb. 28, 2009
·  
Total assets of $103.5 million as of Feb. 28, 2009
·  
Distributable cash flow of $2.2 million for the fiscal quarter ended Feb. 28, 2009
·  
First quarter 2009 distribution of $0.23 per share paid Mar. 02, 2009
·  
Credit facility balance reduced to $19.3 million as of Apr. 8, 2009

Investment Review

As of Feb. 28, 2009, the fair value of the company’s investment portfolio (excluding short-term investments) totaled $91.0 million, including equity investments of $82.2 million and debt investments of $8.8 million. The portfolio consists of 57 percent midstream and downstream investments, 12 percent upstream investments, and 31 percent in aggregates and coal.  The weighted average yield-to-cost on the investment portfolio (excluding short-term investments) as of Feb. 28, 2009 was 7.8 percent.

In December 2008, the company invested $515,000 in Mowood, LLC in the form of a promissory note with a fixed annual interest rate of 9 percent.  The proceeds were used by Mowood for working capital purposes.  Subsequent to this transaction, the company entered into an agreement with Mowood to amend and combine the existing subordinated debt and multiple promissory notes into a single new promissory note with a principal balance of $8.8 million.  The new note has an annual interest rate of 9 percent and a maturity date of Dec. 31, 2009.  Due to the start-up nature of Timberline (subsidiary of Mowood), it was deemed prudent to reduce the interest rate charged on Mowood’s debt and distributions on invested equity to 9 percent to provide Mowood more operational flexibility and capital for growth.  The company owns virtually all of the equity of Mowood.

Net Asset Value

At Feb. 28, 2009, the company’s net asset value was $8.67 per share compared to $9.96 per share at Nov. 30, 2008.  Total assets decreased from $112.3 million as of Nov. 30, 2008 to $103.5 million as of Feb. 28, 2009.  Presently, the total cost basis of the company’s investments exceeds the fair value reflected on the Statement of Assets and Liabilities as shown below.  That, combined with operating losses, results in a deferred tax asset of $9.3 million (net of a $4.0 million valuation allowance), or approximately $1.04 per share.  The company does not include the deferred tax asset in the calculation of its management fee.

Quest Midstream Partners, L.P. (Quest) continues to face challenges as a result of the alleged misappropriation of funds by Jerry Cash, former CEO and Chairman of Quest, Quest Resource Corporation (NASDAQ: QRCP), and Quest Energy Partners, L.P. (NASDAQ: QELP).  Quest suspended distributions to its common unit holders during the company’s fourth quarter of  2008, and accordingly, was assigned a rating of two as of Nov. 30, 2008.  During the company’s fiscal quarter ended Feb. 28, 2009, Quest again did not pay a distribution to its common unit holders.  Further, Quest anticipates a reduction in its gathering rate beginning in 2010, therefore, the company does not expect to receive any distributions from Quest in 2009.  The fair value for Quest has declined substantially this quarter, from $14.5 million at Nov. 30, 2008 to $6.5 million at Feb. 28, 2009; a decrease to net asset value of approximately $0.89 before deferred taxes.   Due to the suspended cash distributions and the likelihood that the investment will not provide a full repayment of the amount invested, the company has downgraded Quest to a rating of three as of Feb. 28, 2009.

Leverage

On March 20, 2009, the company entered into a 90-day extension of its amended credit facility. Terms of the extension provide for a secured revolving credit facility of up to $25 million. The credit agreement, as extended, terminates on June 20, 2009. The amended credit facility includes a provision requiring the company to apply 100% of the proceeds from any private investment liquidation and 50% of the proceeds from the sale of any publicly traded portfolio assets to the outstanding balance of the facility.  In addition, each prepayment of principal of the loans under the amended credit facility will permanently reduce the maximum amount of the loans under the amended credit facility to an amount equal to the outstanding principal balance of the loans under the amended credit facility immediately following the prepayment.

During the extension, outstanding balances generally will accrue interest at a variable rate equal to the greater of (i) the one-month LIBOR plus 3.00 percent or (ii) 5.50 percent, with a fee of 0.50 percent on any unused balance of the facility.  The expiring facility provided up to $50 million in credit availability, with outstanding balances generally accruing interest at a variable rate equal to one-month LIBOR plus 1.75 percent and a fee of 0.375 percent on any unused balance. U.S. Bank, N.A. remains a lender and the lending syndicate agent.  The Company anticipates arranging a more permanent lending arrangement in the near-term.

Performance Review and Outlook

The company views distributable cash flow (DCF) as the best indicator of its core financial performance. The company determines the amount of distributions paid to stockholders based on DCF which is defined as distributions received from investments less total expenses.  DCF for the fiscal quarter ended Feb. 28, 2009 was approximately $2.2 million as shown below.  The company does not include in distributable cash flow the value of distributions received from portfolio companies which are paid-in-kind as a result of credit constraints, market dislocation or other similar issues. The company’s reduction in outstanding leverage has improved its asset coverage ratio but the smaller asset base will likely reduce future distributable cash flow available to stockholders.

Earnings Call

The company will host a conference call at 4 p.m. CST on Wednesday, Apr. 08, 2009 to discuss its financial results for the fiscal quarter ended Feb. 28, 2009. Please dial-in approximately five to 10 minutes prior to the scheduled start time.

U.S./Canada: (800) 635-0541

International:  (303) 262-2053

The call will also be webcast in a listen-only format. A link to the webcast will be accessible at www.tortoiseadvisors.com.

A replay of the call will be available beginning at 7:00 p.m. CST on Apr. 08, 2009 and continuing until 11:59 p.m. CST Apr. 22, 2009, by dialing (800) 405-2236 (U.S./Canada).  The replay access code is 11129239#.  A replay of the webcast will also be available on the company's Web site at www.tortoiseadvisors.com through Apr. 08, 2010.
 
About Tortoise Capital Resources Corp.
Tortoise Capital Resources invests primarily in privately-held and micro-cap public companies operating in the midstream and downstream segments, and to a lesser extent the upstream segment, of the U.S. energy infrastructure sector. Tortoise Capital Resources seeks to provide stockholders a high level of total return, with an emphasis on distributions and distribution growth.

About Tortoise Capital Advisors
Tortoise Capital Advisors, LLC is a pioneer in capital markets for master limited partnership (MLP) investment companies and a leader in closed-end funds and separately managed accounts focused on MLPs in the energy sector. As of Mar. 31, 2009, the adviser had approximately $1.7 billion of assets under management. For more information, visit our Web site at www.tortoiseadvisors.com.

Safe Harbor Statement
This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

Forward-Looking Statement
This press release contains certain statements that may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Although the company and Tortoise Capital Advisors believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the company’s reports that are filed with the Securities and Exchange Commission. You should not place undue reliance on theseforward-looking statements, which speak only as of the date of this press release. Other than as required by law, the company and Tortoise Capital Advisors do not assume a duty to update this forward-looking statement.  Any distribution paid in the future to our stockholders will depend on the actual performance of the company’s investments, its costs of leverage and other operating expenses and will be subject to the approval of the company’s Board and compliance with asset coverage requirements of the Investment Company Act of 1940 and the leverage covenants.

Contact information:
Tortoise Capital Advisors, LLC
Pam Kearney, Investor Relations, (866) 362-9331, pkearney@tortoiseadvisors.com


Tortoise Capital Resources Corporation
            
STATEMENTS OF ASSETS & LIABILITIES
            
             
             
   
February 28, 2009
    
November 30, 2008
  
   
(Unaudited)
        
Assets
            
Investments at fair value, control (cost $30,359,254 and $30,418,802, respectively)
   $
30,281,442
     $
30,213,280
  
Investments at fair value, affiliated (cost $55,569,162 and $56,662,500, respectively)
    
38,645,539
      
48,016,925
  
Investments at fair value, non-affiliated (cost $51,692,248 and $49,760,304, respectively)
    
25,069,249
      
27,921,025
  
Total investments (cost $137,620,664 and $136,841,606, respectively)
    
93,996,230
      
106,151,230
  
Income tax receivable
    
-
      
212,054
  
Receivable for Adviser expense reimbursement
    
65,461
      
88,925
  
Interest receivable from control investments
    
61,600
      
76,609
  
Dividends receivable
    
345
      
696
  
Deferred tax asset, net
    
9,277,868
      
5,683,747
  
Prepaid expenses and other assets
    
116,539
      
107,796
  
Total assets
    
103,518,043
      
112,321,057
  
                 
Liabilities
                
Base management fees payable to Adviser
    
392,769
      
533,552
  
Distribution payable to common stockholders
    
2,061,294
      
-
  
Accrued expenses and other liabilities
    
271,888
      
362,205
  
Short-term borrowings
    
23,100,000
      
22,200,000
  
Total liabilities
    
25,825,951
      
23,095,757
  
Net assets applicable to common stockholders
   $
77,692,092
     $
89,225,300
  
                 
Net Assets Applicable to Common Stockholders Consist of:
                
Warrants, no par value; 945,594 issued and outstanding
                
at February 28, 2009 and November 30, 2008
                
(5,000,000 authorized)
   $
1,370,700
     $
1,370,700
  
Capital stock, $0.001 par value; 8,962,147 shares issued and
                
outstanding at February 28, 2009 and November 30, 2008
                
(100,000,000 shares authorized)
    
8,962
      
8,962
  
Additional paid-in capital
    
104,807,839
      
106,869,132
  
Accumulated net investment loss, net of income taxes
     (2,277,610 )     (2,544,267 )
Accumulated realized gain, net of income taxes
    
6,001,931
      
6,364,262
  
Net unrealized depreciation of investments, net of income taxes
     (32,219,730 )     (22,843,489 )
Net assets applicable to common stockholders
   $
77,692,092
     $
89,225,300
  
                 
Net Asset Value per common share outstanding (net assets applicable
          
to common stock, divided by common shares outstanding)
   $
8.67
     $
9.96
  
                 


             
   
For the three months ended
    
For the three months ended
  
Distributable Cash Flow
  
February 28, 2009
    
February 29, 2008
  
             
Total from Investments
            
Distributions from investments
   $
2,691,635
     $
2,620,715
  
Distributions paid in stock (1)
    
-
      
453,520
  
Interest income from investments
    
201,598
      
313,409
  
Dividends from money market mutual funds
    
725
      
2,310
  
Other income
    
15,000
      
28,987
  
Total from Investments
    
2,908,958
      
3,418,941
  
                 
Operating Expenses Before Leverage Costs
                
Advisory fees (net of expense reimbursement by Adviser)
    
327,308
      
493,606
  
Other operating expenses (excluding capital gain incentive fees)
    
217,582
      
250,281
  
Total Operating Expenses
    
544,890
      
743,887
  
Distributable cash flow before leverage costs
    
2,364,068
      
2,675,054
  
Leverage Costs
    
171,116
      
497,904
  
Distributable Cash Flow
   $
2,192,952
     $
2,177,150
  
                 
Distributions paid on common stock
   $
2,061,294
     $
2,214,587
  
                 
Payout percentage for period (2)
     94 %     102 %
                 
                 
DCF/GAAP Reconciliation
                
Distributable Cash Flow
   $
2,192,952
     $
2,177,150
  
Adjustments to reconcile to Net Investment Income, before Income Taxes
                
Distributions paid in stock (1)
    
28,136
       (453,520 )
Return of capital on distributions received from equity investments
     (1,853,248 )     (1,859,741 )
Capital gain incentive fees
    
-
      
279,665
  
Net Investment Income, before Income Taxes
   $
367,840
     $
143,554
  
                 
                 
                 
(1) The only distributions paid in stock for the three months ended February 28, 2009 were from Abraxas Energy Partners, L.P. which were paid
  
  in stock as a result of credit constraints and therefore were not included in DCF. Distributions paid in stock for the three months ended
  
  February 29, 2008 represent paid-in-kind distributions from LONESTAR Midstream Partners, LP
          
(2) Distributions paid as a percentage of Distributable Cash Flow.
                

 
Tortoise Capital Resources Corporation
              
STATEMENTS OF OPERATIONS (Unaudited)
            
                         
               
For the three months
ended February 28, 2009
For the three months ended February 29, 2008
  
Investment Income
              
Distributions from investments
              
 Control investments
   $
579,215
    $
                   282,904
  
 Affiliated investments
    
829,338
    
                   1,649,888
  
 Non-affiliated investments
    
1,311,218
    
                      687,923
  
   Total distributions from investments
    
2,719,771
    
                   2,620,715
  
   Less return of capital on distributions
    
(1,853,248
 )  
                 (1,859,741
 )
            Net distributions from investments
    
866,523
    
                      760,974
  
Interest income from control investments
  
201,598
    
                      313,409
  
Dividends from money market mutual funds
  
725
    
                          2,310
  
Fee income
      
15,000
    
                                 -
  
Other income
      
-
    
                        28,987
  
 Total Investment Income
    
1,083,846
    
                   1,105,680
  
                         
Operating Expenses
              
Base management fees
    
392,769
    
                      585,253
  
Capital gain incentive fees (Note 4)
    
-
    
                    (279,665
 )
Professional fees
    
129,092
    
                      151,751
  
Administrator fees
    
18,329
    
                        27,150
  
Directors' fees
    
21,657
    
                        22,663
  
Reports to stockholders
    
15,073
    
                        12,915
  
Fund accounting fees
    
8,005
    
                          8,488
  
Registration fees
    
7,719
    
                          7,376
  
Custodian fees and expenses
    
3,087
    
                          4,685
  
Stock transfer agent fees
    
3,181
    
                          3,366
  
Other expenses
    
11,439
    
                        11,887
  
 Total Operating Expenses
    
610,351
    
                      555,869
  
Interest expense
    
171,116
    
                      497,904
  
 Total Expenses
    
781,467
    
                   1,053,773
  
Less expense reimbursement by Adviser
  
(65,461
 )  
                      (91,647
 )
 Net Expenses
    
716,006
    
                      962,126
  
Net Investment Income, before Income Taxes
  
367,840
    
                      143,554
  
     Deferred tax expense
    
(101,183
 )  
                      (54,551
 )
Net Investment Income
    
266,657
    
                        89,003
  
                         
Realized and Unrealized Gain (Loss) on Investments
          
Net realized loss on investments, before income taxes
(499,818
 )  
                                 -
  
  Deferred tax benefit
    
137,487
    
                                 -
  
   Net realized loss on investments
    
(362,331
 )  
                                 -
  
Net unrealized appreciation of control investments
127,710
    
                   1,260,500
  
Net unrealized depreciation of affiliated investments
(8,278,048
 )  
                    (306,374
 )
Net unrealized depreciation of non-affiliated investments
(4,783,720
 )  
                 (4,401,833
 )
 Net unrealized depreciation, before income taxes
(12,934,058
 )  
                 (3,447,707
 )
  Deferred tax benefit
    
3,557,817
    
                   1,310,129
  
   Net unrealized depreciation of investments
(9,376,241
 )  
                 (2,137,578
 )
Net Realized and Unrealized Loss on Investments
(9,738,572
 )  
                 (2,137,578
 )
                         
Net Decrease in Net Assets Applicable to Common Stockholders
        
   Resulting from Operations
   $
(9,471,915
 )  $
              (2,048,575
 )
                         
Net Decrease in Net Assets Applicable to Common Stockholders
        
Resulting from Operations Per Common Share:
            
 Basic and Diluted
   $
(1.06
 )  $
                       (0.23
 ) 
                         
Weighted Average Shares of Common Stock Outstanding:
          
 Basic and Diluted
    
8,962,147
    
8,858,212