Solar Capital Ltd. (the “Company”) (NASDAQ: SLRC), today
reports net investment income for the quarter ended June 30, 2013
of $19.3 million, or $0.43 per average share. At June 30, 2013, net
asset value (NAV) per share was $22.40.
In addition, the Company has amended its $525 million credit
facility to reduce the borrowing rate from LIBOR + 2.50% to LIBOR +
2.25% and extend the final maturity by two years to June, 2018. The
size of the amended facility is $490 million and is expandable up
to $800 million under its accordion feature. The Company has also
extinguished its LIBOR + 2.75% $100 million credit facility
maturing in 2015.
On July 24, the Company’s Board of Directors declared a third
quarter dividend of $0.40 per share payable
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.
Concurrent with the dividend declaration, the Company announced
the expected monetization of its two largest legacy portfolio
companies, DSW Group Inc. and MidCap Financial LLC, with total
gross proceeds expected to be approximately $237 million.
Also today, July 31, 2013, the Company announced a share
repurchase plan to purchase common stock in the open market in an
amount up to $100 million.
HIGHLIGHTS:
At June 30, 2013:
Investment Portfolio:
$1.4 billion Number of Portfolio Companies: 41 Net Assets: $1.0
billion Net Asset Value per share: $22.40
Portfolio Activity for the Quarter Ended
June 30, 2013:
Investments made during
the quarter: $101.3 million Investments prepaid and sold during the
quarter: $72.8 million
Operating Results for the Quarter Ended
June 30, 2013:
Net investment income:
$19.3 million Net realized and unrealized losses: $19.3 million Net
increase (decrease) in net assets from operations: ($0.0) million
Net investment income per share: $0.43
"Post the completion of our announced expected legacy investment
monetizations, we believe that our more diversified portfolio,
comprised of a greater percentage invested in cash-pay, secured,
and floating-rate debt securities, provides an attractive
risk-adjusted return," said Michael Gross, Chairman and CEO of
Solar Capital Ltd. "We intend to seek to grow our investment income
per share by prudently deploying our over $500 million of available
capital into new investments and opportunistic purchases of our
common shares.”
Conference Call and
Webcast
The company will host an earnings conference call and audio
webcast at 10:00 a.m. (Eastern Time) on Thursday, August 1,
2013.
All interested parties may participate in the conference call by
dialing (866) 515-2910 approximately 5-10 minutes prior to the
call. International callers should dial (617) 399-5124.
Participants should reference Solar Capital Ltd. and the
participant passcode of 15328202 when prompted. This conference
call also can be accessed by all interested parties through Solar
Capital’s website, www.solarcapltd.com. Additionally, a replay
dial-in will be available until August 15, 2013 and can
be accessed by dialing (888) 286-8010 and using the passcode
57621904. International callers should dial (617) 801-6888 to
listen to the replay.
Portfolio and Investment
Activity
During the quarter ended June 30, 2013, we invested
$101.3 million across five portfolio companies. Investments
sold and prepaid during the quarter ended June 30, 2013 totaled
$72.8 million.
At June 30, 2013, our portfolio consisted of 41 portfolio
companies and was invested in 24 industries. At the end of this
same period, the fair value weighted average yield on our portfolio
of income-producing investments was 12.1%.
At June 30, 2013, pro forma for the announced expected
monetizations, approximately 98% of the fair value of our portfolio
is performing.
Solar Capital Ltd. and its predecessor companies have invested
approximately $3.1 billion in 90 portfolio companies. Over the same
period, Solar Capital Ltd. has completed transactions with more
than 70 different financial sponsors.
Crystal Capital Financial Holdings
LLC
On December 28, 2012, we completed the acquisition of
Crystal Capital Financial Holdings LLC (“Crystal Financial”), a
commercial finance company focused on providing asset-based and
other secured financing solutions.
As of June 30, 2013, Crystal Financial had 22 funded commitments
to 19 different borrowers with a total par value of approximately
$364.1 million. All loans were floating rate with the largest loan
outstanding totaling $38.0 million. The average exposure per issuer
was $19.2 million and none of the loans were on non-accrual status.
Crystal Financial’s credit facility, which is non-recourse to Solar
Capital Ltd., had approximately $142.8 million of borrowings
outstanding at June 30, 2013. Crystal paid a dividend of $8.3
million to Solar Capital in Q2 reflecting a cash-on-cash,
annualized yield of approximately 12.0%.
Results of Operations for the Three
Months Ended June 30, 2013 compared to the Three Months Ended June
30, 2012.
Investment Income
For the quarters ended June 30, 2013 and 2012, gross investment
income totaled $39.1 million and $34.8 million, respectively. The
increase in gross investment income for the three months ended June
30, 2013 as compared to the three months ended June 30, 2012 was
primarily due to an increase in the average size of the
income-producing portfolio.
Expenses
Operating expenses totaled $19.9 million and $20.4 million,
respectively, for the quarters ended June 30 30, 2013 and 2012.
Net Investment Income
The Company’s net investment income totaled $19.3 million and
$14.4 million, or $0.43 and $0.39 per average share, for the three
months ended June 30, 2013 and 2012, respectively. For the three
month period ended June 30, 2012, net investment income reflected
one-time expenses associated with the establishment of the $525
million credit facility.
Net Realized Loss
Net realized loss for the three months ended June 30, 2013 and
2012 totaled $1.9 million and $19.2 million, respectively. The net
realized loss for the three months ended June 30, 2013 was
primarily related to sales of selected assets. The net realized
loss for the three months ended June 30, 2012 was primarily related
to the recapitalization of our investment in DSW Group, Inc.
partially offset by sales of selected other assets.
Net Change in Unrealized Gain (Loss)
For the three months ended June 30, 2013 and 2012, net change in
unrealized gain (loss) on the Company’s assets and liabilities
totaled ($17.4) million and $20.8 million, respectively. The net
unrealized loss for the three months ended June 30, 2013 was
primarily attributable to the decline in value of two of our
investments. During the three months ended June 30, 2012, the
unrealized gain was primarily attributable to general market
improvements, modest yield tightening and overall positive net
changes in general portfolio company fundamentals.
Net Increase (Decrease) in Net Assets Resulting From
Operations
For the three months ended June 30, 2013 and 2012, the Company
had a net increase (decrease) in net assets resulting from
operations of ($0.0) million and $16.1 million, respectively. For
the three months ended June 30, 2013, basic and diluted losses per
average share were ($0.00). For the three months ended June 30,
2012, basic and diluted earnings per average share were $0.44.
Liquidity and Capital Resources
As of June 30, 2013, the Company had a total of $431.2 million
of unused borrowing capacity under its revolving credit facilities,
subject to borrowing base limits.
Pro forma for the credit facility amendment and extinguishment
of the $100 million credit facility, the Company’s total borrowing
capacity is $665 million, subject to borrowing base limits.
Including the expected $237 million of proceeds from the expected
monetization of the Company’s two largest legacy investments, it
had a total of over $500 million of available capital, subject to
borrowing base limits, available as of June 30, 2013.
Financial Statements and
Tables
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES(in thousands, except
share amounts)
June 30, 2013(unaudited)
December 31,2012
Assets Investments at fair value: Companies
less than 5% owned (cost: $850,659 and $856,134, respectively) $
818,068 $ 831,306 Companies 5% to 25% owned (cost: $174,334 and
$167,564, respectively) 157,829 165,406 Companies more than 25%
owned (cost: $437,850 and $408,373, respectively) 440,702
398,810 Total investments (cost: $1,462,843
and $1,432,071, respectively) 1,416,599 1,395,522 Cash 7,503 14,133
Foreign currency (cost: $529 and $899, respectively) 524 906
Interest and dividends receivable 19,747 15,147 Deferred financing
costs 4,040 4,228 Derivatives 4 17 Receivable for investments sold
2,862 — Prepaid expenses and other assets 808
450
Total assets $ 1,452,087 $ 1,430,403
Liabilities Revolving credit facilities $ 143,792 $
264,452 Unsecured senior notes 100,000 100,000 Senior secured notes
75,000 75,000 Term loan 50,000 50,000 Dividends payable 27,004
23,217 Payable for investments purchased 31,829 21,756 Management
fee payable 7,267 6,612 Performance-based incentive fee payable
4,814 6,050 Interest payable 2,207 2,406 Administrative services
expense payable 1,067 1,058 Other liabilities and accrued expenses
804 1,579
Total liabilities $
443,784 $ 552,130
Net Assets
Common stock, par value $0.01 per share,
200,000,000 and 200,000,000 common shares authorized,
respectively, and 45,006,497 and
38,694,060 shares issued and outstanding, respectively
$ 450 $ 387 Paid-in capital in excess of par 1,126,441 978,279
Distributions in excess of net investment income (13,875 ) (4,662 )
Accumulated net realized loss (56,854 ) (55,631 ) Net unrealized
depreciation (47,859 ) (40,100 )
Total net
assets $ 1,008,303 $ 878,273
Net Asset Value
Per Share $ 22.40 $ 22.70
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)(in thousands, except
share amounts)
Three months endedJune 30, 2013 Three
months endedJune 30, 2012
Six months endedJune 30,
2013
Six months endedJune 30, 2012
INVESTMENT INCOME: Interest and
dividends: Companies more than 25% owned $ 11,354 $ 1,362 $ 21,828
$ 2,444 Companies 5% to 25% owned 1,401 5,652 8,461 5,652 Companies
less than 5% owned 26,390 27,819
54,953 63,046 Total investment
income 39,145 34,833
85,242 71,142
EXPENSES:
Management fees $ 7,267 $ 5,673 $ 14,401 $ 10,951 Performance-based
incentive fees 4,814 3,591 11,194 8,866 Interest and other credit
facility expenses 4,819 9,051 9,642 11,746 Administrative services
expense 1,529 1,128 2,256 1,824 Other general and administrative
expenses 1,460 995
2,974 2,004 Total operating expenses 19,889
20,438 40,467 35,391 Income tax expense — 26
— 283 Total
expenses 19,889 20,464
40,467 35,674 Net investment income $
19,256 $ 14,369 $ 44,775 $
35,468
REALIZED AND UNREALIZED GAIN (LOSS)
ON
INVESTMENTS, FOREIGN CURRENCIES
AND
DERIVATIVES:
Net realized gain (loss) on investments: Companies more than 25%
owned $ — $ (687 ) $ 472 $ 10,315 Companies 5% to 25% owned — — — —
Companies less than 5% owned (1,619 ) (19,635 )
(1,391 ) (20,360 ) Net realized loss on
investments (1,619 ) (20,322 ) (919 ) (10,045 ) Net realized gain
(loss) on foreign currencies and derivatives: (293 )
1,167 (304 ) 841 Total
net realized loss before income taxes (1,912 ) (19,155 ) (1,223 )
(9,204 ) Income tax expense — —
— 785 Net realized loss
(1,912 ) (19,155 ) (1,223 )
(9,989 ) Net change in unrealized gain (loss) on investments
(18,263 ) 19,286 (9,695 ) 38,120
Net change in unrealized gain (loss) on
foreign
currencies and derivatives
906 1,562 1,936
(1,379 ) Net change in unrealized gain (loss)
(17,357 ) 20,848 (7,759 )
36,741
Net realized and unrealized gain (loss)
on
investments, foreign currencies and
derivatives
(19,269 ) 1,693 (8,982 )
26,752
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS
$ (13 ) $ 16,062 $ 35,793 $ 62,220
EARNINGS (LOSS) PER SHARE $ (0.00 ) $ 0.44
$ 0.80 $ 1.70
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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