Solar Capital Ltd. (the “Company”) (NASDAQ:SLRC), today
announces net investment income for the quarter ended September 30,
2013 of $21.6 million, or $0.48 per average share. Excluding
non-recurring expenses associated with an amendment to the
Company’s credit facility and extinguishment of another revolving
credit facility, net investment income would have been $23.7
million or $0.53 per share for the quarter ended September 30,
2013. At September 30, 2013, net asset value (NAV) per share was
$22.25.
During the quarter, the Company amended its credit facility
reducing the borrowing rate from LIBOR + 2.50% to LIBOR + 2.25% and
extending 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.
In July, the Company announced that its Board of Directors
authorized a share repurchase program of the Company's common stock
with an authorized limit of up to $100 million until expiration on
January 31, 2014. During the quarter, the Company repurchased $15.8
million of its common stock at an average price of $21.99 per share
representing a 1.2% discount to the NAV per share at September 30,
2013. Under the current program, there is a maximum of $84.2
million available for future purchases at September 30, 2013.
On October 30, the Company’s Board of Directors also declared a
fourth quarter dividend of $0.40 per share payable
on January 3, 2014 to stockholders of record
on December 19, 2013. The specific tax characteristics will be
reported to stockholders on Form 1099 after the end of the calendar
year.
HIGHLIGHTS:
At September 30, 2013:
Investment Portfolio: $1.1 billionNumber of
Portfolio Companies: 40Net Assets: $1.0 billionNet Asset Value per
share: $22.25
Portfolio Activity for the Quarter Ended September 30,
2013:
Investments made during the quarter: $66.3
millionInvestments prepaid and sold during the quarter: $349.8
million
Operating Results for the Quarter Ended September 30,
2013:
Net investment income: $21.6 millionNet
realized and unrealized losses: $11.1 millionNet increase in net
assets from operations: $10.6 millionNet investment income per
share: $0.48
“We are pleased with the underlying performance and credit
quality of our investment portfolio,” said Michael Gross, Chairman
and CEO of Solar Capital Ltd. “With the portfolio composition at
its highest level of senior secured and floating rate investments
and following the exit from our two largest investments, we believe
the current portfolio is more diversified and defensively
positioned to preserve shareholder value while delivering strong
risk-adjusted returns. Our objective is to grow our investment
income per share by prudently deploying our over $500 million of
available capital into new investments combined with 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, October 31,
2013.
All interested parties may participate in the conference call by
dialing (877) 546-5020 approximately 5-10 minutes prior to the
call. International callers should dial (857) 244-7552.
Participants should reference Solar Capital Ltd. and the
participant passcode of 60189667 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 November 14, 2013 and can
be accessed by dialing (888) 286-8010 and using the passcode
97302291. International callers should dial (617) 801-6888 to
listen to the replay.
Portfolio and Investment
Activity
During the quarter ended September 30, 2013, we invested
$66.3 million across five portfolio companies. Investments
sold and prepaid during the quarter ended September 30, 2013
totaled $349.8 million.
At September 30, 2013, our portfolio consisted of 40 portfolio
companies and was invested across 24 industries. The fair value
weighted average yield on our portfolio of income-producing
investments was 11.6%.
At September 30, 2013, approximately 98% of the fair value of
our portfolio is performing.
Solar Capital Ltd. and its predecessor companies have invested
approximately $3.2 billion in 93 portfolio companies. Over the same
period, Solar Capital Ltd. has completed transactions with more
than 75 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 September 30, 2013, Crystal Financial had 23 funded
commitments to 19 different borrowers with a total par value of
approximately $351.5 million. All loans were floating rate with the
largest loan outstanding totaling $34.1 million. The average
exposure per issuer was $18.5 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 $87.0 million
of borrowings outstanding at September 30, 2013. Crystal paid a
dividend of $7.8 million to Solar Capital in Q3 reflecting a
cash-on-cash, annualized yield of approximately 11.3%.
Results of Operations for the Three and
Nine Months Ended September 30, 2013 compared to the Three and Nine
Months Ended September 30, 2012.
Investment Income
For the three and nine months ended September 30, 2013,
gross investment income totaled $43.0 million and $128.2 million,
respectively. For the three and nine months ended September 30,
2012 gross investment income totaled $40.6 million and $111.8
million, respectively. The increase in gross investment income from
the three and nine months ended September 30, 2012 as compared to
the three and nine months ended September 30, 2013 was primarily
due to an increase in the receipt of prepayment fees and
accelerated amortization of upfront fees resulting from higher
portfolio repayments and an increase in the average size of the
income-producing portfolio in the comparable period, partially
offset by a lower weighted average portfolio yield.
Expenses
Expenses totaled $21.4 million and $61.8 million, respectively,
for the three and nine months ended September 30, 2013. For the
three and nine months ended September 30, 2012, expenses totaled
$18.4 million and $54.1 million. The increase in expenses from the
three month period ended September 30, 2012 compared to the three
month period ended September 30, 2013 was primarily due to $2.6
million of expenses resulting from the amendment of our Credit
Facility and extinguishment of a revolving credit facility. For the
comparative nine month periods, the increase in expenses was
primarily due to growth in the average size of our portfolio of
assets.
Net Investment Income
The Company’s net investment income totaled $21.6 million and
$66.4 million or $0.48 and $1.49 per average share, for the three
and nine months ended September 30, 2013, respectively. Excluding
non-recurring expenses associated with the amendment to the
Company’s credit facility and extinguishment of another revolving
credit facility, net investment income was $23.7 million or $0.53
per share for the quarter ended September 30, 2013. The Company’s
net investment income totaled $22.3 million and $57.7 million or
$0.60 and $1.57 per average share, for the three and nine months
ended September 30, 2012, respectively.
Net Realized Gain (Loss)
Net realized loss for the three and nine months ended
September 30, 2013 totaled $15.7 million and $16.9 million,
respectively. Net realized gain (loss) for the three and nine
months ended September 30, 2012 totaled $0.4 million and
($9.6) million, respectively.
Net Change in Unrealized Gain (Loss)
For the three and nine months ended September 30, 2013, net
change in unrealized gain (loss) on the Company’s assets and
liabilities totaled $4.6 million and ($3.2) million, respectively.
For the three and nine months ended September 30, 2012, net
change in unrealized gain on the Company’s assets and liabilities
totaled $7.6 million and $44.4 million, respectively.
Net Increase in Net Assets Resulting From Operations
For the three and nine months ended September 30, 2013, the
Company had a net increase in net assets resulting from operations
of $10.6 million and $46.4 million, respectively. For the three and
nine months ended September 30, 2012, the Company had a net
increase in net assets resulting from operations of $30.2 million
and $92.5 million, respectively. For the three and nine months
ended September 30, 2013, basic and diluted earnings per
average share were $0.24 and $1.04, respectively. For the three and
nine months ended September 30, 2012, basic and diluted
earnings per average share were $0.82 and $2.52, respectively.
Liquidity and Capital Resources
In July 2013, the Company amended its senior secured credit
facility (the “Credit Facility”), composed of $440 million of
revolving credit and a $50 million term loan. At September 30,
2013, total outstanding borrowings under the Credit Facility were
$50 million. The Company has approximately $524 million of
available capital for new investments including approximately $84
million of cash and $440 million of unused credit capacity subject
to borrowing base limitations.
Financial Statements and
Tables
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES(in thousands, except
share amounts)
September 30,
2013(unaudited)
December 31, 2012 Assets Investments at fair value:
Companies less than 5% owned (cost: $729,479 and $856,134,
respectively) $ 689,547 $ 831,306 Companies 5% to 25% owned (cost:
$8,403 and $167,564, respectively) 8,403 165,406 Companies more
than 25% owned (cost: $435,814 and $408,373, respectively)
435,406 398,810 Total investments
(cost: $1,173,696 and $1,432,071, respectively) 1,133,356 1,395,522
Cash 83,341 14,133 Foreign currency (cost: $689 and $899,
respectively) 703 906 Interest and dividends receivable 18,411
15,147 Deferred financing costs 3,309 4,228 Derivatives — 17
Receivable for investments sold 15,969 — Prepaid expenses and other
assets 699 450
Total
assets $ 1,255,788 $ 1,430,403
Liabilities Revolving credit facilities $ — $ 264,452
Unsecured senior notes 100,000 100,000 Senior secured notes 75,000
75,000 Term loan 50,000 50,000 Dividends payable 17,762 23,217
Payable for investments purchased 9,775 21,756 Management fee
payable 6,613 6,612 Performance-based incentive fee payable 5,407
6,050 Interest payable 2,590 2,406 Administrative services expense
payable 1,450 1,058 Payable for common shares repurchased 277 —
Other liabilities and accrued expenses 783
1,579
Total liabilities $ 269,657 $
552,130
Net Assets
Common stock, par value $0.01 per share,
200,000,000 and 200,000,000 common shares
authorized, respectively, and 44,323,582
and 38,694,060 shares issued and outstanding, respectively
$ 443 $ 387 Paid-in capital in excess of par 1,111,468 978,279
Distributions in excess of net investment income (10,009 ) (4,662 )
Accumulated net realized loss (72,507 ) (55,631 ) Net unrealized
depreciation (43,264 ) (40,100 )
Total net
assets $ 986,131 $ 878,273
Net Asset
Value Per Share $ 22.25 $ 22.70
SOLAR CAPITAL LTD.CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)(in thousands, except
share amounts)
Three months ended Nine months ended September 30,
2013 September 30, 2012 September 30, 2013
September 30, 2012 Interest and dividends: Companies more
than 25% owned $ 11,669 $ 804 $ 33,497 $ 3,248 Companies 5% to 25%
owned 3,189 13,460 11,650 19,112 Companies less than 5% owned
28,128 26,382 83,081
89,428 Total investment income 42,986
40,646 128,228 111,788
EXPENSES: Management fees $ 6,613 $ 6,083 $
21,014 $ 17,034 Performance-based incentive fees 5,407 5,565 16,601
14,431 Interest and other credit facility expenses 6,755 3,475
16,397 15,221 Administrative services expense 1,196 1,194 3,452
3,018 Other general and administrative expenses 1,387
2,011 4,361 4,015
Total operating expenses 21,358 18,328 61,825 53,719 Income tax
expense — 60 — 343
Total expenses 21,358 18,388
61,825 54,062 Net
investment income $ 21,628 $ 22,258 $ 66,403 $
57,726
REALIZED AND UNREALIZED GAIN (LOSS)
ONINVESTMENTS, FOREIGN CURRENCIES AND
DERIVATIVES:
Net realized gain (loss) on investments: Companies more than 25%
owned $ — $ 687 $ 472 $ 11,002 Companies 5% to 25% owned (17,728 )
— (17,728 ) — Companies less than 5% owned 2,185
(256 ) 794 (20,616 ) Net
realized gain (loss) on investments (15,543 ) 431 (16,462 ) (9,614
)
Net realized loss on foreign currencies
and derivatives:
(110 ) (860 ) (414 ) (19 ) Total
net realized loss before income taxes (15,653 ) (429 ) (16,876 )
(9,633 ) Income tax expense — (785 ) —
— Net realized gain (loss)
(15,653 ) 356 (16,876 ) (9,633 )
Net change in unrealized gain (loss) on investments 5,904 6,869
(3,791 ) 44,989
Net change in unrealized gain (loss) on
foreign currencies and derivatives
(1,309 ) 760 627 (619 )
Net change in unrealized gain (loss) 4,595
7,629 (3,164 ) 44,370
Net realized and unrealized gain (loss)
oninvestments, foreign currencies and derivatives
(11,058 ) 7,985 (20,040 ) 34,737
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
$ 10,570 $ 30,243 $ 46,363 $ 92,463
EARNINGS PER SHARE $ 0.24 $ 0.82 $ 1.04
$ 2.52
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.
Solar Capital Ltd.Investor Relations646-308-8770
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