Solar Capital Ltd. Announces the Expected Monetization of Its Two Largest Legacy Investments; Declares Reduced Quarterly Divi...
July 24 2013 - 7:45AM
Business Wire
Solar Capital Ltd. (NASDAQ:SLRC) (“Solar Capital” or the
“Company”) today announced that DSW Group, Inc. has entered into a
definitive sale agreement. The Company expects to receive
approximately $150 million in gross proceeds for its second lien
loan to DS Waters of America, Inc. and its preferred investments in
DSW Holding Company, LLC (together, “DS Waters”). Additionally, the
Company has received notice that its investment in Midcap Financial
Intermediate Holdings, LLC (“Midcap Financial”) will be redeemed at
a premium to par for gross proceeds of approximately $87 million.
Solar Capital expects estimated total proceeds received from these
monetizations to be approximately $237 million, which it intends to
use to reduce Solar Capital’s outstanding revolving indebtedness,
pending prudent reinvestment.
“We are pleased with the outcome of these two legacy
investments,” said Bruce Spohler, Chief Operating Officer of Solar
Capital. “Our full exit of DS Waters is expected to result in an
internal rate of return, or IRR, of approximately 10.3% since our
initial investment almost six years ago and a 1.5x multiple on our
invested capital. The repayment of our subordinated loan to MidCap
Financial is expected to result in an IRR of approximately 16.5%
since our initial investment three years ago, and will mark the
culmination of another successful underwriting.”1
As a result of these significant monetizations, and pending
re-investment of these proceeds in new portfolio investments, the
Company expects to generate significantly reduced investment income
in the near-term. Accordingly, the Company currently anticipates
net investment income to be in the range of $0.41 to $0.43 per
share for the quarter ended June 30, 2013. Net asset value per
share at June 30, 2013 is also expected to be in the range of
$22.35 to $22.40. In order to better align the quarterly dividend
with expected near-term earnings, the board of directors of Solar
Capital has declared a reduced quarterly dividend of $0.40 per
share, beginning with the Company’s third fiscal quarter ending
September 30, 2013.
“We believe these divestitures meaningfully improve our overall
investment portfolio composition by reducing issuer concentration,
increasing our percentage investment in secured and floating rate
debt securities, and eliminating substantially all of our
payment-in-kind, or PIK, income,” said Michael Gross, Chairman and
CEO of Solar Capital Ltd. “We believe the third fiscal quarter
dividend approximates the run-rate earnings of our portfolio post
these monetizations. We intend to seek to grow our investment
income, and correspondingly our dividend, through the deployment of
our over $500 million of available capital, which includes the
proceeds from these monetizations.”
The DS Waters transaction is subject to customary closing
conditions and is expected to close in the next 90 days. Our Midcap
Financial investment is expected to be repaid in July 2013.
The third quarter dividend will be paid on October 2,
2013 to stockholders of record on September 19, 2013. The
specific tax characteristics will be reported to stockholders on
Form 1099 after the end of the calendar year.
The Company will release its financial results for the quarter
ended June 30, 2013 on Wednesday, July 31, 2013, after the close of
the financial markets, and will host an earnings conference call
and audio webcast at 10:00 a.m. (Eastern Time) on Thursday, August
1, 2013.
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. Solar Capital 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 contain “forward-looking
statements”, which relate to our future operations, future
performance or our financial condition. Forward-looking statements
are not guarantees of future performance, condition or results and
involve a number of risks and uncertainties. Actual results and
outcomes may differ materially from those anticipated in the
forward-looking statements as a result of a variety of factors,
including those described from time to time in our filings with the
Securities and Exchange Commission or factors that are beyond our
control. Solar Capital Ltd. undertakes no obligation to publically
update or revise any forward-looking statements made herein. All
forward-looking statements speak only as of the time of this press
release.
1 The internal rate of return, or IRR, is calculated using the
XIRR function in Excel, based on the actual dates for all cash
outflows and inflows associated with the investment, including cash
interest payments, amendment fees, origination fees, expected
escrow payments, and principal repayments.
Solar Capital Ltd.Richard Pivirotto, 212-994-8543
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