Solar Capital Ltd. (NASDAQ: SLRC), today reported earnings
of $23.3 million, or $0.60 per share for the quarter ended
December 31, 2012 and $115.8 million, or $3.11 per share,
for the fiscal year ended December 31, 2012. Net investment income
was $24.2 million, or $0.63 per share, for the fourth quarter
and $81.9 million, or $2.20 per share, for the fiscal
year. Excluding non-recurring expenses of $7.3 million relating to
the Company’s new $525 million credit facility and $75 million
senior secured notes issuance, net investment income for the fiscal
year would have been $87.8 million, or $2.36 per share. Net asset
value (NAV) per share of $22.70 at December 31, 2012, unchanged
during the quarter, increased from $22.02 at December 31,
2011.
The Company also announced that its Board of Directors has
declared a quarterly dividend of $0.60 per share
for its first fiscal quarter of 2013, which will be payable
on April 2, 2013 to stockholders of record on March
21, 2013. The Company expects the dividend to be paid from taxable
earnings with specific tax characteristics reported to stockholders
after the end of the 2013 calendar year.
HIGHLIGHTS:
At December 31, 2012: Investment Portfolio: $1.4 billion Number of
Portfolio Companies: 40 Net Assets: $878.3 million Net Asset Value
per share: $22.70 Portfolio Activity for the Quarter Ended
December 31, 2012: Investments made during the quarter: $329.8
million Investments repaid and sold during the quarter: $112.1
million Portfolio Activity for the Fiscal Year Ended
December 31, 2012: Investments made during the year: $611.6 million
Investments repaid and sold during the year: $325.2 million
Operating Results for the Quarter Ended December 31, 2012: Net
investment income: $24.2 million Net realized and unrealized
losses: $0.9 million Net increase in net assets from operations:
$23.3 million Net investment income per share: $0.63
Operating Results for the Fiscal Year Ended December 31, 2012: Net
investment income: $81.9 million Net realized and unrealized gains:
$33.8 million Net increase in net assets from operations: $115.8
million Net investment income per share: $2.20
“During 2012, we took advantage of the heated conditions in the
capital markets to reset our capital structure, and we remained
conservative on the investment side. We believe this approach
should fortify long-term shareholder value,” said Michael Gross,
Chairman & CEO of Solar Capital Ltd. “The strategic investment
in the portfolio company, Crystal Financial, provides us with a new
source of investment income from an asset that carries a highly
attractive and diversified senior secured risk-return profile. Post
the funding of Crystal Financial and our equity raise in January,
we have over $400 million of credit capacity to deploy in
attractive investment opportunities.”
Conference Call and
Webcast
The company will host an earnings conference call and audio
webcast at 10:00 a.m. (Eastern Time) on Tuesday, February 26,
2013.
All interested parties may participate in the conference call by
dialing (866) 713-8562 approximately 5-10 minutes prior to the
call, international callers should dial (617) 597-5310.
Participants should reference Solar Capital Ltd. and the
participant passcode of 91957415 when prompted. Following the call
you may access a replay of the event via audio webcast. This
conference call will be broadcast live over the Internet and can be
accessed by all interested parties through Solar Capital’s website,
www.solarcapltd.com. To listen to the live call, please go to the
Company's website at least 15 minutes 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
will be available shortly after the call on the Solar Capital
website. Additionally, a replay dial-in will be available until
March 12, 2013 and can be accessed by dialing (888) 286-8010 and
using the passcode 10043476. International callers should dial
(617) 801-6888.
Portfolio and Investment
Activity
During the year ended December 31, 2012, we originated
approximately $496.8 million of investments in 9 new portfolio
companies, and approximately $114.8 million was invested in 8
existing portfolio companies. Investments sold or prepaid during
the fiscal year ended December 31, 2012 totaled $325.2
million.
At December 31, 2012, our portfolio consisted of 40 portfolio
companies and was invested 33.7% in senior secured loans, 19.7% in
Crystal Financial, 32.0% in subordinated debt, 10.9% in preferred
equity and 3.7% in non-Crystal Financial common equity and
warrants, measured at fair value. Considering Crystal Financial’s
underlying portfolio, approximately 57% of the total fair value is
invested in secured assets.
The weighted average yield on our combined debt and preferred
investment portfolio at fair value was 14.2% at December 31,
2012.
On a cost basis, 39.6% or $532.7 million of our income-producing
investment portfolio is held in floating rate securities and 60.4%
or $811.3 million are fixed rate securities. Considering Crystal
Financial’s underlying portfolio, our floating rate exposure is
approximately 45%.
Our adviser Solar Capital Partners has invested approximately
$3.4 billion in more than 120 different portfolio companies since
it was founded in 2006. Over the same period, Solar Capital
Partners completed transactions with more than 90 different
financial sponsors.
Recent Portfolio
Developments
On December 28, 2012, we invested $275 million to acquire
substantially all of the outstanding equity of Crystal Financial, a
commercial finance company focused on providing asset-based and
other secured financing solutions. At the time of closing, Crystal
Financial had 25 loans outstanding to 22 different borrowers. All
loans were floating rate with the largest loan outstanding totaling
$40.3 million. The average loan size was $18.1 million and none of
the loans were on non-accrual status. Crystal Financial’s $250
million credit facility, which is non-recourse to Solar Capital,
had approximately $143 million of borrowings outstanding at
December 28, 2012, and the company had approximately $130 million
of capital available to invest.
Results of Operations for the Twelve
Months Ended December 31, 2012 compared to the Twelve Months Ended
December 31, 2011.
Investment Income
For the fiscal years ended December 31, 2012 and 2011, gross
investment income totaled $153.3 million and $138.9 million,
respectively. The increase in gross investment income for the
fiscal year was primarily due to an increase in the average size of
the income-producing portfolio as compared to the previous fiscal
year.
Expenses
Net expenses totaled $71.3 million and $57.0 million,
respectively, for the fiscal years ended December 31, 2012 and
2011. The increase in net expenses from 2011 to 2012 was primarily
due to an increase in interest and other debt related expenses,
including $7.3 million of expenses related to the replacement of
our existing revolving credit facility with a new and expanded
credit facility and expenses related to issuing our senior secured
notes during 2012.
Net Investment Income
The Company’s net investment income totaled $81.9 million and
$81.9 million, or $2.20 and $2.25 on a per average share basis,
respectively, for the fiscal years ended December 31, 2012 and
2011.
Net Realized Gains (Losses) on Investments, Foreign
Currencies and Derivatives
The Company had investment sales and prepayments totaling
approximately $325.2 million and $338.1 million, respectively, for
the fiscal years ended December 31, 2012 and 2011. Net realized
losses for the fiscal years ended December 31, 2012 and 2011 were
$32.5 million and $2.4 million, respectively. Net realized losses
incurred during 2012 were primarily related to the restructuring of
our investment in DSW Group, Inc. which reversed out previously
recognized unrealized depreciation as well as the realization of
previously recognized unrealized foreign exchange losses on our GBP
denominated investment in Weetabix that was repaid in full at par
during the fiscal year. As our foreign exchange risk is generally
hedged, foreign currency gains were realized in prior periods.
Net Unrealized Appreciation (Depreciation) on Investments,
Foreign Currencies and Derivatives
For the fiscal years ended December 31, 2012 and 2011, the net
change in unrealized appreciation (depreciation) on the Company’s
investments, derivatives and foreign currencies totaled $66.4
million and ($18.2) million, respectively. For the fiscal year
ended December 31, 2012, net appreciation was driven by general
market improvements, modest yield tightening as well as the
reversal of unrealized depreciation on our investment in DSW Group,
Inc. in connection with our investment having been restructured
during fiscal 2012.
Net Increase (Decrease) in Net Assets Resulting From
Operations
For the fiscal years ended December 31, 2012 and 2011, the
Company had a net increase in net assets resulting from operations
of $115.8 million and $61.3 million, respectively. For the years
ended December 31, 2012 and 2011, earnings per average share were
$3.11 and $1.68, respectively.
Liquidity and Capital Resources
On November 16, 2012, we issued $100 million in aggregate
principal amount of 6.75% unsecured senior notes due 2042 for net
proceeds of $96.9 million.
As of December 31, 2012, we had a total of $310.5 million
of unused borrowing capacity under our revolving credit facilities,
subject to borrowing base limits.
On January 11, 2013, the Company closed on a follow-on public
equity offering of 6.3 million shares of common stock at $24.40 per
share raising approximately $146.9 million in net proceeds.
Financial Statements and
Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in
thousands, except share amounts) December
31, December 31, 2012 2011 Assets
Investments at fair value: Companies less than 5% owned (cost:
$856,134 and $1,062,844, respectively) $ 831,306 $ 955,769
Companies 5% to 25% owned (cost: $167,564 and $41,819,
respectively) 165,406 35,820 Companies more than 25% owned (cost:
$408,373 and $47,910, respectively) 398,810
53,454 Total investments (cost: $1,432,071 and
$1,152,573, respectively) 1,395,522 1,045,043 Cash and cash
equivalents 15,039 11,787 Interest and dividends receivable 15,147
9,763 Deferred offering costs 450 469 Deferred financing costs
4,228 3,635 Derivatives 17 649 Fee revenue receivable — 4,379
Receivable for investments sold — 3,225 Prepaid expenses and other
receivables — 481 Total assets
1,430,403 1,079,431
Liabilities Revolving credit facilities 264,452 201,355
Unsecured senior notes 100,000 — Senior secured notes 6 75,000 —
Term loan 50,000 35,000 Dividends payable 23,217 — Payable for
investments purchased 21,756 22,443 Investment advisory and
management fee payable 6,612 5,277 Performance-based incentive fee
payable 6,050 5,203 Interest payable 2,406 1,063 Administrative
services fee payable 1,058 1,069 Deferred fee revenue — 318 Other
accrued expenses and payables 1,579 1,762
Total liabilities 552,130
273,490
Net Assets Common stock, par value
$0.01 per share 38,694,060 and 36,608,038 shares issued and
outstanding, respectively, 200,000,000 shares authorized 387 366
Paid-in capital in excess of par 978,279 928,180 Undistributed net
investment income — 2,245 Distributions in excess net investment
income (4,662 ) — Accumulated net realized losses (55,631 ) (18,379
) Net unrealized depreciation (40,100 ) (106,471 )
Total net assets $ 878,273 $ 805,941
Net Asset Value Per Share $ 22.70 $ 22.02
SOLAR CAPITAL LTD. CONSOLIDATED STATEMENTS
OF OPERATIONS (unaudited) (in thousands, except share
amounts) Year ended Year ended Year
ended December 31, 2012 December 31, 2011
December 31, 2010 INVESTMENT INCOME: Interest and
dividends: Companies more than 25% owned $ 6,174 $ 6,963 $ 670
Companies 5% to 25% owned 20,176 — 7,673 Companies less than 5%
owned 126,903 131,937 116,298
Total investment income 153,253 138,900
124,641
EXPENSES: Investment
advisory and management fees 23,647 20,596 18,296 Performance-based
incentive fee 20,481 20,476 17,305 Interest and other credit
facility expenses 11,777 9,212 14,276 Administrative services fee
3,294 1,638 1,294 Other general and administrative expenses
4,535 4,326 3,930 Total
operating expenses 63,734 56,248
55,101 Net investment income before debt issuance and
related expenses and income tax expense 89,519 82,652 69,540 Debt
issuance and related expenses 7,303 — — Income tax expense
289 748 328 Net
investment income 81,927 81,904
69,212
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCIES AND DERIVATIVES:
Net realized gain (loss) on investments: Companies more than 25%
owned $ 11,299 $ — $ — Companies 5% to 25% owned — 784 16,397
Companies less than 5% owned (36,864 ) 3,092
(55,762 ) Net realized gain (loss) on investments (25,565 )
3,876 (39,365 ) Net realized gain (loss) on foreign currencies and
derivatives: (6,972 ) (6,038 ) 397
Total net realized loss before income taxes (32,537 ) (2,162 )
(38,968 ) Income tax expense — 231
— Net realized loss (32,537 ) (2,393 )
(38,968 ) Net change in unrealized gain (loss) on
investments 70,981 (20,190 ) 113,508 Net change in unrealized gain
(loss) on foreign currencies & derivatives (4,610 )
1,994 (1,867 ) Net change in unrealized
gain (loss) 66,371 (18,196 ) 111,641
Net realized and unrealized gain (loss) on
investments, foreign currencies and derivatives 33,834
(20,589 ) 72,673
NET INCREASE
IN NET ASSETS RESULTING FROM OPERATIONS $ 115,761 $
61,315 $ 141,885
Earnings per share
$ 3.11 $
1.68 $ 4.27
About Solar Capital Ltd.
Solar 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. The Company invests primarily in
leveraged, middle market companies in the form of senior secured
loans, mezzanine loans, and equity securities.
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 future performance, conditions 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 our filings with the Securities and Exchange Commission. Solar
Capital Ltd. undertakes no duty to update any forward-looking
statements made herein.
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