Solar Senior Capital Ltd. (NASDAQ: SUNS) (the “Company” “Solar
Senior” or “SUNS”), today reported net investment income
of $5.7 million, or $0.35 per average share, for the quarter
ended March 31, 2020.
At March 31, 2020, net asset value (NAV) was
$14.59 per share, a decline of approximately 10.6% from year end
2019 driven primarily by unrealized mark-to-market depreciation. At
March 31, 2020, 100% of Solar Senior’s portfolio was
performing.
The Company’s Board of Directors declared a
monthly distribution for May of $0.10 per share payable
on June 2, 2020 to stockholders of record on May 22,
2020. Tax characteristics of all distributions will be reported to
shareholders on Form 1099 after the end of the calendar year.
Solar Senior will be hosting an earnings
conference call and audio webcast at 11:30 a.m.
(Eastern Time) on Friday, May 8, 2020. See below for more
details.
HIGHLIGHTS:
At March 31, 2020:
Comprehensive Investment portfolio* fair value: $624.6
million
Number of portfolio companies*:
234
Net assets: $234.1
million
Net asset value per share: $14.59
Net Leverage: 0.69x
Available Capital**: ~$220 million
Comprehensive Portfolio Activity*** for the Quarter
Ended March 31, 2020
Investments made during the quarter: $67.6 million
Investments prepaid or sold during the quarter: $88.0
million
Operating Results for the Quarter Ended March 31,
2020
Net investment income: $5.7 million
Net investment income per share: $0.35
Net realized and unrealized loss: $27.7 million
Net decrease in net assets from operations: $22.1
million
Loss per share: $1.37
* The Comprehensive Investment Portfolio is
comprised of Solar Senior Capital Ltd.’s investment portfolio,
Gemino Healthcare Finance’s (“Gemino”) full portfolio and North
Mill Holdco LLC’s (“North Mill”) full portfolio, and excludes the
Company’s fair value of its equity interest in Gemino and North
Mill.
** See Liquidity and Capital Resources
*** Comprehensive Portfolio Activity includes gross
originations/repayments through Gemino and North Mill.
“SUNS entered this unprecedented health crisis in a position of
strength with a defensive portfolio, stable funding, low leverage,
and significant available capital,” said Michael Gross, Co-CEO of
Solar Senior Capital.
“We have been prudent and have created the flexibility and
resources to successfully navigate the current crisis,” said Bruce
Spohler, Co-CEO of Solar Senior Capital. “Our team’s experience and
ability to provide financing solutions across cash flow and ABL
opportunities positions us for what we expect to be an attractive
investment environment.”
***NEW TIME*** - Conference Call and
WebcastThe Company will host an earnings conference call
and audio webcast at 11:30 a.m. (Eastern Time) on Friday, May 8,
2020. All interested parties may participate in the conference call
by dialing (844) 889-7785 approximately 5-10 minutes prior to the
call, international callers should dial (661) 378-9929.
Participants should reference Solar Senior Capital Ltd. and the
participant passcode of 4056756 when prompted. A telephone replay
will be available until May 22, 2020 and can be accessed by dialing
(855) 859-2056 and using the passcode 4056756. International
callers should dial (404) 537-3406. This conference call will also
be broadcast live over the Internet and can be accessed by all
interested parties through Solar Senior Capital’s website,
www.solarseniorcap.com. To listen to the webcast, please go to the
Company's website prior to the start of the call to register and
download any necessary audio software. For those who are not able
to listen to the live broadcast, a replay of the webcast will be
available soon after the call.
Comprehensive Investment Portfolio
Investment Activity
During the quarter ended March 31, 2020, Solar
Senior Capital had total originations of $67.6 million and
repayments of $88.0 million across the Company’s core businesses
comprised of senior secured cash flow, traditional asset-based
lending and healthcare asset-based lending, resulting in a net
portfolio reduction of $20.4 million to the comprehensive
portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended March 31, 2020 was as
follows:
Comprehensive Investment Portfolio
Activity(1)Q1 2020(in millions) |
Asset Classes |
Cash Flow Loans |
Asset-based LoansNorth Mill |
Asset-based Healthcare Loans Gemino |
LifeScience |
TotalPortfolio Activity |
Originations |
$32.9 |
|
$16.3 |
$15.8 |
$2.6 |
|
$67.6 |
|
Repayments / Amortization |
$69.6(2) |
|
$4.9 |
$10.0 |
$3.5 |
|
$88.0 |
|
Net Portfolio Activity |
$(36.7) |
|
$11.4 |
$5.8 |
$(0.9) |
|
$(20.4) |
|
- Portfolio activity includes gross originations/repayments
across each business unit.
- Includes realization of an equity position related to a debt
investment.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business
unit at March 31, 2020 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted
Average Asset-level Yield |
($mm) |
% |
First Lien Senior Secured Loans |
|
|
|
Cash Flow 1st Lien Senior Secured Loans |
$274.5 |
44.0% |
|
8.1%5 |
|
Traditional Asset-Based 1st Lien Senior Secured Loans(1)
(North Mill) |
$182.5 |
29.2% |
|
12.5%6 |
|
Healthcare
Asset-Based 1st Lien Senior Secured Loans(2) (Gemino) |
$137.5 |
22.0% |
|
9.5%6 |
|
Life Science 1st Lien
Senior Secured Loans |
$22.4 |
3.6% |
|
9.8%7 |
|
Total First Lien Senior Secured Loans |
$616.9 |
98.8% |
|
|
Cash Flow 2nd Lien
Senior Secured Loans |
$7.4 |
1.2% |
|
9.2%5 |
|
Total Senior Secured Loans |
$624.3 |
>99.9% |
|
9.8% |
|
Equity and Equity-like
Securities(3) |
$0.3 |
<0.1% |
|
|
Total
Comprehensive Investment Portfolio |
$624.6 |
100% |
|
|
Floating Rate Investments(4) |
$604.6 |
96.8% |
|
|
- Includes North Mill’s full portfolio, all of which are 1st lien
senior secured loans.
- Includes Gemino’s full portfolio, all of which are 1st lien
senior secured loans.
- Excludes the Company’s equity investments in North Mill and
Gemino, which distribute quarterly dividends to the Company.
- Floating rate investments calculated as a percent of the
Company’s income-producing Comprehensive Investment Portfolio.
- Represents the yield to maturity based on fair market value at
March 31, 2020.
- Represents total interest and fee income for the three month
period ending on March 31, 2020 against the average portfolio over
the same fiscal period, annualized.
- Represents the weighted average of each individual loan’s yield
to maturity based on fair value at March 31, 2020 (excluding exit
fees or warrants).
The Comprehensive Investment Portfolio is
diversified across approximately 234 unique borrowers in over 130
industries and with an average issuer exposure of $2.7 million, or
0.4% of the comprehensive portfolio.
As of March 31, 2020, 98.8% of the Comprehensive
Portfolio was invested in first lien senior secured cash flow and
asset-based loans and 1.2% in second lien senior secured cash flow
loans, and less than 0.1% is in equity.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.8% at March 31, 2020.
Solar Senior Capital Ltd. Portfolio
Asset Quality
At March 31, 2020, 100% of the Company’s
portfolio was performing with no investments on non-accrual.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of March 31, 2020, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of SUNS Portfolio |
1 |
$10.8 |
2.7% |
|
2 |
$355.9 |
90.0% |
|
3 |
$29.1 |
7.3% |
|
4 |
$0.0 |
0.0% |
|
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment
IncomeQ1 2020(1)(in millions) |
For the Quarter Ended: |
Cash Flow Lending |
Asset-based Lending(North
Mill) |
Asset-based Healthcare Lending (Gemino) |
LifeScience |
Total |
March 31, 2020 |
$5.8 |
|
$1.3 |
|
|
$0.9 |
|
$0.8 |
|
$8.8 |
|
% Contribution |
|
66.3% |
|
|
14.3% |
|
|
9.9% |
|
|
9.5% |
|
|
100.0% |
|
(1) Investment Income
Contribution by Business Unit includes interest income/fees from
cash flow and life science loans on balance sheet and distributions
from North Mill and Gemino.
Solar Senior Capital Ltd.’s Results of Operations for
the Quarter Ended March 31, 2020 compared to the Quarter Ended
March 31, 2019:
Investment Income
For the fiscal quarters ended March 31, 2020 and
2019, gross investment income totaled $8.8 million and $10.2
million, respectively. The decrease in gross investment income year
over year was primarily due to yield compression.
Expenses
Expenses totaled $3.1 million and $4.6 million,
respectively, for the fiscal quarters ended March 31, 2020 and
2019. For the fiscal quarters ended March 31, 2020 and March 31,
2019, $1.0 million and $0.5 million, respectively, of management
and performance-based incentive fees were voluntarily waived by the
Company’s investment manager. The decrease in net expenses year
over year is primarily due to lower interest expense due to
reductions in LIBOR and an increase in the waivers of
fees.
Net Investment Income
The Company’s net investment income totaled $5.7
million and $5.7 million, or $0.35 and $0.35 per average share,
respectively, for the quarters ended March 31, 2020 and 2019.
As of March 31, 2020, Solar Senior Capital had
only one loan with a PIK component to its interest rate. Cash
interest and dividends represented over 99.9% of the Company’s $8.8
million Q1 2020 gross investment income.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gain (loss) for the
quarters ended March 31, 2020 and 2019 totaled approximately
$(27.7) million and $1.7 million, respectively.
Net Increase (Decrease) in Net Assets Resulting From
Operations
For the fiscal quarters ended March 31, 2020 and
2019, the Company had a net increase (decrease) in net assets
resulting from operations of $(22.1) million and $7.4 million,
respectively. For the fiscal quarters ended March 31, 2020 and
2019, earnings (loss) per average share were $(1.37) and $0.46,
respectively.
Liquidity and Capital Resources
Unsecured Debt
As of March 31, 2020, Solar Senior issued $85
million of 3.90% senior unsecured notes due March 31, 2025.
Proceeds from the issuance were initially used to reduce borrowings
under the Company’s revolving credit facilities before funding
additional investments and general corporate purposes.
At March 31, 2020, approximately 50% of the
Company’s funded debt was comprised of unsecured term notes.
Credit Facilities and Available CapitalAt March
31, 2020, the Company had $89.4 million of borrowings under its
$300 million of revolving credit facilities, resulting in
approximately $220 million of available capital including cash.
LeverageAs of March 31, 2020, the Company’s leverage is 0.69x.
Solar Senior’s low leverage provides a significant cushion to
covenant levels and the regulatory limit of 2:1 total
debt-to-equity.
Unfunded CommitmentsAs of March 31, 2020, Solar Senior had
unfunded commitments of approximately $17.1 million. The unfunded
commitments largely consist of contingent delayed draw term loan
commitments related mostly to add-on acquisition financing in our
cash flow lending business, as well as incremental financing
commitments to life science companies tied to capital or operating
thresholds or benchmarks. Delayed draw term commitments are also
typically subject to leverage covenants that prevent portfolio
companies from calling additional debt without a viable and
oftentimes preconditioned business purpose. Importantly, as of
March 31, 2020 only $4.6 million of the Company’s unfunded
commitments are for revolvers that can be fully drawn by the
borrowers, resulting in de minimis unconditioned funding
commitments.
Financial Statements and Tables
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
March 31, 2020 (unaudited) |
|
|
December 31, 2019 |
Assets |
|
|
|
|
|
Investments at fair value: |
|
|
Companies less than 5% owned (cost: $327,117 and $363,947,
respectively) |
$ |
304,532 |
|
|
$ |
361,665 |
|
Companies more than 25% owned (cost: $98,439 and
$98,439,respectively) |
|
91,267 |
|
|
|
98,600 |
|
Cash |
|
11,231 |
|
|
|
7,054 |
|
Cash equivalents (cost: $89,997
and $99,898, respectively) |
|
89,988 |
|
|
|
99,898 |
|
Interest receivable |
|
1,144 |
|
|
|
1,933 |
|
Dividends receivable |
|
1,753 |
|
|
|
1,893 |
|
Receivable for investments
sold |
|
31 |
|
|
|
6,667 |
|
Prepaid expenses and other
assets |
|
381 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
500,327 |
|
|
$ |
577,958 |
|
|
|
|
|
|
|
Liabilities |
|
|
Debt ($174,403 and $211,202 face
amounts, respectively, reported net of unamortized debt issuance
costs of $2,348 and $1,901, respectively |
$ |
172,055 |
|
|
$ |
209,301 |
|
Payable for investments and cash
equivalents purchased |
|
89,997 |
|
|
|
101,811 |
|
Distributions payable |
|
1,886 |
|
|
|
1,885 |
|
Management fee payable |
|
140 |
|
|
|
426 |
|
Interest payable |
|
945 |
|
|
|
1,172 |
|
Administrative services
payable |
|
195 |
|
|
|
826 |
|
Other liabilities and accrued
expenses |
|
969 |
|
|
|
723 |
|
|
|
|
|
|
|
Total liabilities . |
$ |
266,187 |
|
|
$ |
316,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
Common stock, par value $0.01 per
share, 200,000,000 and 200,000,000 common shares authorized,
respectively, and 16,049,034 and 16,046,214 issued and outstanding,
respectively |
$ |
160 |
|
|
$ |
160 |
|
Paid-in capital in excess of
par |
|
282,229 |
|
|
|
282,181 |
|
Accumulated distributable net
loss |
|
(48,249 |
) |
|
|
(20,527 |
) |
|
|
|
|
|
|
Total net assets |
$ |
234,140 |
|
|
$ |
261,814 |
|
|
|
|
|
|
|
Net Asset Value Per Share |
$ |
14.59 |
|
|
$ |
16.32 |
|
|
|
|
|
|
|
|
|
|
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except share amounts)
|
|
|
|
Three months ended |
|
March 31, 2020 |
|
March 31, 2019 |
INVESTMENT
INCOME: |
|
|
|
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
6,623 |
|
|
$ |
7,814 |
|
Companies 5% to 25% owned |
|
— |
|
|
|
85 |
|
Dividends: |
|
|
Companies more than 25% owned |
|
2,125 |
|
|
|
2,265 |
|
Other income: |
|
|
Companies less than 5% owned |
|
27 |
|
|
|
70 |
|
|
|
|
|
|
|
Total investment income |
|
8,775 |
|
|
|
10,234 |
|
|
|
|
|
|
|
EXPENSES: |
|
|
Management fees |
$ |
1,104 |
|
|
$ |
1,156 |
|
Performance-based incentive
fees |
|
56 |
|
|
|
544 |
|
Interest and other credit
facility expenses |
|
2,071 |
|
|
|
2,685 |
|
Administrative services
expense |
|
367 |
|
|
|
396 |
|
Other general and administrative
expenses |
|
540 |
|
|
|
335 |
|
|
|
|
|
|
|
Total expenses |
|
4,138 |
|
|
|
5,116 |
|
Management fees waived |
|
(964 |
) |
|
|
— |
|
Performance-based incentive fees
waived |
|
(56 |
) |
|
|
(536 |
) |
|
|
|
|
|
|
Net expenses |
|
3,118 |
|
|
|
4,580 |
|
|
|
|
|
|
|
Net investment income |
$ |
5,657 |
|
|
$ |
5,654 |
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH
EQUIVALENTS AND UNFUNDED COMMITMENTS: |
|
|
Net realized gain on investments
and cash equivalents (companies less than 5% owned) |
$ |
119 |
|
|
$ |
105 |
|
|
|
|
|
|
|
Net change in unrealized gain
(loss) on investments, cash equivalents and unfunded
commitments: |
|
|
Companies less than 5%
owned |
|
(20,508 |
) |
|
|
(1,203 |
) |
Companies 5% to 25%
owned |
|
— |
|
|
|
280 |
|
Companies more than 25%
owned |
|
(7,333 |
) |
|
|
2,550 |
|
|
|
|
|
|
|
|
|
|
Net change in
unrealized gain (loss) on investments, cash
equivalents and unfunded commitments |
|
(27,841 |
) |
|
|
1,627 |
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on investments, cash
equivalents and unfunded commitments |
|
(27,722 |
) |
|
|
1,732 |
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS |
$ |
(22,065 |
) |
|
$ |
7,386 |
|
|
|
|
|
|
|
EARNINGS (LOSS) PER
SHARE |
$ |
(1.37 |
) |
|
$ |
0.46 |
|
|
|
|
|
|
|
About Solar Senior Capital Ltd.
Solar Senior Capital Ltd. is a closed-end
investment company that has elected to be treated as a business
development company under the Investment Company Act of 1940. A
specialty finance company with expertise in several niche markets,
the Company primarily invests directly and indirectly in leveraged,
U. S. middle market companies primarily in the form of cash flow
first lien senior secured debt instruments and asset-based loans
including senior secured loans collateralized on a first lien basis
primarily by current assets.
Forward-Looking Statements
Statements included herein may constitute
“forward-looking statements,” which relate to future events or our
future performance or financial condition. These statements are not
guarantees of our future performance, financial condition or
results and involve a number of risks and uncertainties, including
the impact of COVID-19 and related changes in base interest rates
and significant market volatility on our business, our portfolio
companies and the global economy. 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 our filings with the Securities and Exchange Commission. Solar
Senior Capital Ltd. undertakes no duty to update any
forward-looking statements made herein.
ContactInvestor Relations(646) 308-8770
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