Solar Capital’s Board Approves Reduced Asset Coverage Requirement; Provides Flexibility to Expand Specialty Finance Platfor...
August 06 2018 - 4:16PM
Solar Capital Ltd. (NASDAQ:SLRC) (the “Company” or “Solar
Capital”), an externally managed business development company
(“BDC”), today announced that effective August 2, 2018, its Board
of Directors (the ”Board”), including all Independent Directors,
and based on the recommendation of its investment advisor, Solar
Capital Partners (“SCP”), approved the reduction in the asset
coverage requirement under of the Investment Company Act of 1940 as
allowed under the Small Business Credit Availability Act (“SBCAA”).
As a result, effective August 2, 2019, the Company’s asset coverage
requirements will be reduced from 200% to 150%. The Company will
target a range of 0.90x to 1.25x debt-to-equity, operating at a
substantial cushion to the regulatory limit.
In order to potentially accelerate the adoption,
the Board authorized the submission of a proposal for voting
shareholders to approve the application of the modified asset
coverage requirements set forth in revised Section 61(a)(2) of the
Investment Company Act of 1940, as modified by the SBCAA. If the
Company’s voting shareholders approve the proposal by the required
majority of votes at its 2018 Annual Meeting of Shareholders, the
150% asset coverage ratio will become effective on the day after
such approval.
Solar Capital’s Board approved the reduction of
the asset coverage requirement following the Company’s analysis of
how the increased leverage flexibility could affect the Company’s
strategic priorities and positive long-term value creation for
shareholders, as well as an assessment of the associated risks and
how they can be managed or mitigated. Importantly, the Board also
approved an amendment to the Investment Advisory Agreement reducing
the Investment Advisor’s annual base management fee to 1.00% on
assets financed using leverage over 1.0x debt-to-equity.
“The asset coverage modification will not result
in changes to our investment strategy and enhances the Company’s
ability to expand its specialty finance platform,” said Michael
Gross, Chairman and CEO. “Together with the management fee
reduction, the Company has the potential to generate increased
returns for shareholders. Notably, the Company already has
sufficient capital to operate within the new target debt-to-equity
range without having to raise additional debt or equity.”
“We have positioned Solar Capital as a
diversified niche specialty finance company. The reduced asset
coverage provides us flexibility to grow our senior secured first
lien cash flow lending business and expand our commercial finance
platform. Collapsing the Senior Secured Unitranche Loan Programs
(“SSLP” and “SSLP II”) on balance sheet will increase transparency
and simplicity and create investment capacity for non-qualifying
assets to expand our specialty finance verticals,” said Bruce
Spohler, Chief Operating Officer. “In summary, the asset coverage
modification enables us to do more of what we’ve been doing:
investing in first lien senior secured cash flow and asset-based
loans.”
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. A
specialty finance company with expertise in several niche markets,
the Company primarily invests directly and indirectly in leveraged,
U.S. middle market companies in the form of cash flow senior
secured loans including first lien and second lien debt instruments
and asset-based loans including senior secured loans collateralized
on a first lien basis primarily by current assets.
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, unless required
to do so by applicable law.
ContactSolar Capital Ltd.Investor
Relations(646) 308-8770
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