SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2017
(in thousands, except share amounts)
Note 15. Senior Secured Unitranche Loan Program LLC
On September 2, 2014, the Company entered into a limited liability company agreement with an affiliate (the Investor) of a
fund managed by Pacific Investment Management Company LLC (PIMCO) to
co-invest
in middle market senior secured unitranche loans sourced by the same origination platform used by the Company. Initial
funding commitments to the unitranche strategy total $600,000, consisting of direct equity investments and
co-investment
commitments as described below. The joint venture vehicle known as the SSLP is
structured as an unconsolidated Delaware limited liability company. The Company and the Investor initially made equity commitments to the SSLP of $300,000 and $43,250, respectively. All portfolio decisions and generally all other decisions in
respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and PIMCO (with approval from a representative of each required).
On October 15, 2015, the Company entered into an amended and restated limited liability company agreement for its SSLP to add Voya
Investment Management LLC (Voya), part of Voya Financial, Inc. (NYSE: VOYA), as a partner in SSLP in place of the investor that was previously the Companys partner in SSLP, though this investor may still
co-invest
up to $300,000 of equity in unitranche loans alongside SSLP. This joint venture is expected to invest primarily in senior secured loans, including unitranche loans, primarily to middle market companies
predominantly owned by private equity sponsors or entrepreneurs, consistent with the Companys core origination and underwriting mandate. In addition to the Companys prior equity commitment of $300,000 to SSLP, Voya has made an initial
equity commitment of $25,000 to SSLP, with the ability to upsize.
On November 2, 2015, the Company assigned $125,000 of its $300,000
commitment to SSLP to Senior Secured Unitranche Loan Program II LLC (SSLP II), a Delaware limited liability company.
On
November 25, 2015, SSLP commenced operations. On June 30, 2016, SSLP as transferor and SSLP
2016-1,
LLC, a newly formed wholly owned subsidiary of SSLP, as borrower entered into a $200,000 senior
secured revolving credit facility (the SSLP Facility) with Wells Fargo Bank, NA acting as administrative agent. Solar Capital Ltd. acts as servicer under the SSLP Facility. The SSLP Facility is scheduled to mature on June 30, 2021.
The SSLP Facility generally bears interest at a rate of LIBOR plus 2.50%. SSLP and SSLP
2016-1,
LLC, as applicable, have made certain customary representations and warranties, and are required to comply with
various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The SSLP Facility also includes usual and customary events of default for credit facilities of this nature.
There were $74,248 and $67,148 of borrowings outstanding as of December 31, 2017 and December 31, 2016, respectively. As of December 31, 2017 and December 31, 2016, the Company and Voya had contributed combined equity capital in
the amount of $102,533 and $116,433, respectively. Of the $102,533 of contributed equity capital at December 31, 2017, the Company contributed $29,884 in the form of investments and $59,832 in the form of cash and Voya contributed $12,817 in
the form of cash. As of December 31, 2017, the Company and Voyas remaining commitments to SSLP totaled $85,284 and $12,183, respectively. The Company, along with Voya, controls the funding of SSLP and SSLP may not call the unfunded
commitments without approval of both the Company and Voya.
As of December 31, 2017 and December 31, 2016, SSLP had total assets
of $179,241 and $184,816, respectively. For the same periods, SSLPs portfolio consisted of floating rate senior secured loans to 10 and 11 different borrowers, respectively. For the year ended December 31, 2017, SSLP invested $31,509 in 5
portfolio companies. Investments prepaid totaled $37,556 for the year ended December 31, 2017. For the year ended December 31, 2016, SSLP invested $89,421 in 8 portfolio companies. Investments prepaid totaled $1,183 for the
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