Solar Capital Ltd. (NASDAQ: SLRC) (the “Company” or “Solar
Capital”), today reported net investment income of $18.5
million, or $0.44 per share, for the first quarter 2019.
At March 31, 2019, net asset value (NAV) was
$21.93 per share, an increase from $21.75 the prior quarter. In
addition, the Company’s portfolio was 100% performing at March 31,
2019.
The Board declared a second quarter distribution
of $0.41 per share payable on July 2, 2019 to
stockholders of record as of June 20, 2019. The specific tax
characteristics will be reported to stockholders on Form 1099 after
the end of the calendar year.
HIGHLIGHTS:
At March 31, 2019:
- Comprehensive Investment Portfolio* fair value: $1.8
billion
- Number of portfolio companies: 226
- Net assets: $926.7 million
- Net asset value per share: $21.93
Comprehensive Investment Portfolio Activity** for the
Quarter Ended March 31, 2019:
- Investments made during the quarter: $193.9 million
- Investments prepaid and sold during the quarter: $122.0
million
Operating Results for the Quarter Ended March 31,
2019:
- Net investment income: $18.5 million
- Net investment income per share: $0.44
- Net realized and unrealized gain: $6.4 million
- Net increase in net assets from operations: $24.8 million
- Earnings per share: $0.59
* The Comprehensive Investment Portfolio is
comprised of Solar Capital Ltd.’s investment portfolio, Crystal
Financial’s full portfolio (including its ownership of its SBIC),
and NEF Holdings, LLC’s (“NEF”) full portfolio and excludes the
fair value of the equity interests in Crystal Financial and
NEF.
** Includes investment activity through Crystal Financial
(including its ownership of its SBIC) and NEF.
“We are pleased with our first quarter’s results, as well as the
Company’s strong foundation,” said Michael Gross, Chairman and CEO
of Solar Capital Ltd. “Our portfolio is one hundred percent
performing, and our NII per share continued to exceed
distributions. At March 31, 2019, approximately 75% of the
Company’s assets were investments in Solar Capital’s commercial
finance verticals, reflecting our successful transition to a
diversified specialty finance business focused on senior secured
lending across a number of middle market lending niches. With our
available credit and capacity to expand our asset-based loan
portfolio, Solar Capital is positioned for net investment income
growth in 2019.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern
Time) on Tuesday, May 7, 2019. All interested parties may
participate in the conference call by dialing (844) 889-7786
approximately 5-10 minutes prior to the call, international callers
should dial (661) 378-9930. Participants should
reference Solar Capital Ltd. and the participant passcode
of 6191296 when prompted. A telephone replay will be available
until May 21, 2019 and can be accessed by dialing (855)
859-2056 and using the passcode 6191296. International callers
should dial (404) 537-3406. This conference call will also be
broadcast live over the Internet and can be accessed by all
interested parties through Solar Capital’s
website, www.solarcapltd.com. To listen to the webcast, please
go to the Company's website prior to the start of the call to
register and download any necessary audio software. For those who
are not able to listen to the live broadcast, a replay of the
webcast will be available soon after the call.
Comprehensive Investment
Portfolio
Investment Activity
During the three months ended March 31, 2019,
Solar Capital had total originations of $193.9 million and
repayments of $122.0 million across its four core business units:
cash flow, asset-based, equipment finance, and life science
lending.
Comprehensive Investment Portfolio
Activity(1) Q1 2019 (in millions) |
Asset
Class |
Cash
Flow Loans |
Asset-based Loans / Crystal Financial(2) |
Equipment Financings / NEF(3) |
Life
Science Loans |
TotalPortfolio Activity |
Originations |
$8.3 |
$71.0 |
$38.7 |
$75.9 |
$193.9 |
|
|
|
|
|
|
Repayments / Amortization |
$27.8 |
$36.7 |
$21.6 |
$35.9 |
$122.0 |
Net Portfolio Activity |
($19.5) |
$34.3 |
$17.1 |
$40.0 |
$71.9 |
|
|
|
|
|
|
- Portfolio activity includes gross originations/repayments
across each business unit.
- Includes Crystal Financial’s full portfolio (and its ownership
of its SBIC) and asset-based loans on the Company’s balance
sheet.
- Includes NEF’s full portfolio and NEF equipment financings on
the Company’s balance sheet.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business
unit at March 31, 2019 was as follows:
Comprehensive Investment Portfolio Composition
(at fair value) |
Amount |
Weighted Average Asset Yield |
($mm) |
% |
Cash Flow Senior Secured Loans |
$424.8 |
23.8% |
|
9.9%(5) |
Asset-Based Senior Secured Loans / Crystal
Financial(1) |
$640.7 |
35.9% |
|
11.7%(6) |
Equipment Senior Secured Financings / NEF(2) |
$398.2 |
22.3% |
|
10.2%(7) |
Life Science Senior
Secured Loans |
$293.2 |
16.4% |
|
11.5%(8) |
Total Senior Secured Loans |
$1,756.9 |
98.4% |
|
10.9% |
Equity and Equity-like
Securities(3) |
$29.2 |
1.6% |
|
|
Total
Comprehensive Investment Portfolio |
$1,786.1 |
100% |
|
|
Floating Rate
Investments(4) |
$1,335.5 |
75.7% |
|
|
First Lien Senior Secured
Loans |
$1,562.1 |
87.5% |
|
|
Second Lien Senior
Secured Loans |
$194.8 |
10.9% |
|
|
- Includes Crystal Financial’s full portfolio, including the
Company’s pro rata ownership of Crystal’s SBIC, and asset-based
loans on the Company’s balance sheet.
- Includes NEF’s full portfolio and NEF equipment financings on
the Company’s balance sheet.
- Excludes Crystal and NEF, which distribute quarterly cash
dividends to the Company.
- Floating rate investments calculated as a percent of the
Company’s income-producing Comprehensive Investment Portfolio. The
majority of fixed rate loans are associated with NEF and are short
in duration with average hold periods of 2.5 years. Additionally,
NEF seeks to match-fund its fixed rate assets with fixed rate
liabilities.
- Represents the weighted average of each individual loan’s yield
to maturity based on fair market value at March 31, 2019.
- Represents the weighted average of each individual loan’s
underwritten yield to expected repayment date, which is based on a
historical average realized investment duration.
- Represents the weighted average of each individual loan’s yield
to maturity (excluding residual upside on tax leases).
- Represents the weighted average of each individual loan’s yield
to maturity based on fair value at March 31, 2019 (excluding exit
fees or warrants).
The Comprehensive Investment Portfolio is
diversified across approximately 226 unique issuers across
approximately 93 industries and with an average exposure of $7.9
million or 0.4% per issuer.
At March 31, 2019, 98.4% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 87.5% first lien senior secured loans and
approximately 10.9% second lien senior secured loans.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
10.9% at March 31, 2019.
Solar Capital Ltd.
Portfolio
Asset Quality
As of March 31, 2019, 100% of the Company’s
portfolio was performing.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of March 31, 2019, the composition of our
portfolio, on a risk ratings basis, was as follows:
|
|
|
Internal Investment Rating |
Investments at Fair Value |
% of Total Portfolio |
1 |
$163.1 |
10.9% |
2 |
$1,275.4 |
85.0% |
3 |
$61.6 |
4.1% |
4 |
$0.6 |
0.0% |
|
|
|
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment Income
Q1 2019(in millions) |
For
thePeriod: |
Cash Flow
Lending(1) |
Asset-based
Lending / Crystal Financial(2) |
Equipment
Financing / NEF(3) |
Life Science
Lending |
Total |
Q1 2019 |
$12.2 |
$12.3 |
$5.6 |
$9.2 |
$39.3 |
%
Contribution |
31.1% |
31.2% |
14.2% |
23.5% |
100% |
|
|
|
|
|
|
- Includes interest income/fees from cash flow loans on balance
sheet.
- Includes interest income/fees from asset based loans on balance
sheet and distributions from Crystal Financial.
- Includes interest income/fees from equipment financings on
balance sheet and distributions from NEF Holdings.
Solar Capital Ltd.’s Results of Operations for the
Quarter Ended March 31, 2019 compared to the Quarter Ended March
31, 2018.
Investment Income
For the fiscal quarters ended March 31, 2019 and
2018, gross investment income totaled $39.3 million and $39.0
million, respectively. The increase in gross investment income from
Q1 2018 to Q1 2019 was primarily due to an increase in the average
size of the income-producing investment portfolio.
Expenses
Net expenses totaled $20.8 million and $20.1
million, respectively, for the fiscal quarters ended March 31, 2019
and 2018.
Net Investment Income
The Company’s net investment income totaled $18.5 million and
$18.9 million, or $0.44 and $0.45 per average share, respectively,
for the fiscal quarters ended March 31, 2019 and 2018.
Net Realized and Unrealized Gain
Net realized and unrealized gains for the fiscal
quarters ended March 31, 2019 and 2018 totaled approximately $6.4
million and $1.2 million, respectively.
Net Increase in Net Assets Resulting From
Operations
For the fiscal quarters ended March 31, 2019 and
2018, the Company had a net increase in net assets resulting from
operations of $24.8 million and $20.0 million, respectively. For
the fiscal quarters ended March 31, 2019 and 2018, earnings per
average share were $0.59 and $0.47, respectively.
Liquidity and Capital Resources
As of March 31, 2019 the Company had a total of
$430.2 million of unused borrowing capacity under the Company’s
credit facilities, subject to borrowing base limits.
When including Crystal Financial and NEF
Holdings, the Company had a total of approximately $546 million of
unused borrowing capacity under its revolving credit facilities,
subject to borrowing base limits.
Financial Statements and Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
March 31, 2019 (unaudited) |
December 31, 2018 |
Assets |
|
|
Investments at fair
value: |
|
|
Companies less than 5%
owned (cost: $983,114 and $948,478, respectively) |
$ |
979,273 |
|
|
$ |
944,597 |
|
Companies
more than 25% owned (cost: $503,898 and $500,792,
respectively) |
|
521,451 |
|
|
|
511,483 |
|
Cash |
|
9,242 |
|
|
|
7,570 |
|
Cash equivalents (cost:
$249,523 and $199,646, respectively) |
|
249,523 |
|
|
|
199,646 |
|
Dividends receivable |
|
9,917 |
|
|
|
9,065 |
|
Interest receivable |
|
8,421 |
|
|
|
7,619 |
|
Receivable for investments
sold |
|
27,663 |
|
|
|
2,073 |
|
Other receivable |
|
823 |
|
|
|
593 |
|
Prepaid expenses and other
assets |
|
917 |
|
|
|
783 |
|
|
|
|
|
|
|
Total assets |
$ |
1,807,230 |
|
|
$ |
1,683,429 |
|
|
|
|
Liabilities |
|
|
Debt ($595,785 and
$476,185 face amounts, respectively, reported net of unamortized
debt issuance costs of $2,514 and $2,647, respectively) |
$ |
593,271 |
|
|
$ |
473,538 |
|
Payable for investments
and cash equivalents purchased |
|
249,523 |
|
|
|
251,391 |
|
Distributions payable |
|
17,327 |
|
|
|
17,327 |
|
Management fee
payable |
|
6,562 |
|
|
|
6,504 |
|
Performance-based
incentive fee payable |
|
4,616 |
|
|
|
4,613 |
|
Interest payable |
|
5,407 |
|
|
|
4,714 |
|
Administrative services
expense payable |
|
323 |
|
|
|
2,716 |
|
Other liabilities and
accrued expenses |
|
3,525 |
|
|
|
3,455 |
|
|
|
|
Total liabilities |
$ |
880,554 |
|
|
$ |
764,258 |
|
|
|
|
|
|
|
Net
Assets |
|
|
Common stock, par value
$0.01 per share, 200,000,000 and 200,000,000 common shares
authorized, respectively, and 42,260,826 and 42,260,826 shares
issued and outstanding, respectively |
$ |
423 |
|
|
$ |
423 |
|
Paid-in capital in excess
of par |
|
992,438 |
|
|
|
992,438 |
|
Accumulated distributable
net loss |
|
(66,185) |
|
|
|
(73,690) |
|
|
|
|
Total net assets |
$ |
926,676 |
|
|
$ |
919,171 |
|
|
|
|
Net Asset Value
Per Share |
$ |
21.93 |
|
|
$ |
21.75 |
|
|
|
|
|
|
|
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except share amounts)
|
|
|
|
Three months ended |
|
March 31, 2019 |
March 31, 2018 |
INVESTMENT
INCOME: |
|
|
Interest: |
|
|
Companies less than 5%
owned |
$ |
28,143 |
|
|
$ |
24,181 |
|
Companies
more than 25% owned |
|
1,063 |
|
|
|
285 |
|
Dividends: |
|
|
Companies
less than 5% owned |
|
3 |
|
|
|
6 |
|
Companies
more than 25% owned |
|
9,952 |
|
|
|
14,363 |
|
Other income: |
|
|
Companies
less than 5% owned |
|
93 |
|
|
|
62 |
|
Companies
more than 25% owned |
|
5 |
|
|
|
63 |
|
|
|
|
Total
investment income |
|
39,259 |
|
|
|
38,960 |
|
|
|
|
|
|
|
EXPENSES: |
|
|
Management fees |
$ |
6,562 |
|
|
$ |
6,473 |
|
Performance-based
incentive fees |
|
4,616 |
|
|
|
4,714 |
|
Interest and other credit
facility expenses |
|
7,328 |
|
|
|
5,909 |
|
Administrative services
expense |
|
1,368 |
|
|
|
1,286 |
|
Other general and
administrative expenses |
|
921 |
|
|
|
1,721 |
|
|
|
|
Total
expenses |
|
20,795 |
|
|
|
20,103 |
|
|
|
|
Net
investment income |
$ |
18,464 |
|
|
$ |
18,857 |
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
Net realized gain (loss)
on investments and cash equivalents: |
|
|
Companies
less than 5% owned |
$ |
29 |
|
|
$ |
197 |
|
Companies 5%
to 25% owned |
|
— |
|
|
|
175 |
|
Companies
more than 25% owned |
|
(563) |
|
|
|
(5) |
|
|
|
|
Net realized
gain (loss) on investments and cash equivalents |
|
(534) |
|
|
|
367 |
|
|
|
|
Net change in unrealized
gain (loss) on investments and cash equivalents: |
|
|
Companies
less than 5% owned |
|
39 |
|
|
|
2,648 |
|
Companies
more than 25% owned |
|
6,863 |
|
|
|
(1,824) |
|
|
|
|
|
|
|
|
|
|
Net change
in unrealized gain on investments and cash equivalents |
|
6,902 |
|
|
|
824 |
|
|
|
|
Net realized
and unrealized gain on investments and cash equivalents |
|
6,368 |
|
|
|
1,191 |
|
|
|
|
|
|
|
NET INCREASE IN
NET ASSETS RESULTING FROM OPERATIONS |
$ |
24,832 |
|
|
$ |
20,048 |
|
|
|
|
EARNINGS PER
SHARE |
$ |
0.59 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
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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