Solar Capital Ltd. (NASDAQ: SLRC) (the “Company” or “Solar
Capital”), today reported net investment income of $14.2
million, or $0.34 per share, for the second quarter 2020.
At June 30, 2020, net asset value (NAV) was
$20.11 per share, an increase of 4.5% from March 31, 2020.
As of June 30, 2020, the Company’s portfolio was
100% performing.
The Board declared a third quarter distribution
of $0.41 per share payable on October 2, 2020 to
stockholders of record as of September 17, 2020. The specific
tax characteristics will be reported to stockholders on Form 1099
after the end of the calendar year.
HIGHLIGHTS
At June 30, 2020:
Comprehensive Investment portfolio*
fair value: $1.58 billionNumber of portfolio companies: 183Net
assets: $849.8 millionNet asset value per share: $20.11Net
debt-to-equity: 0.59xAvailable capital**: $815 million, subject to
borrowing base availability
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended June 30, 2020:
Investments made during the quarter:
$103.2 million Investments prepaid and sold during the quarter:
$118.4 million
Operating Results for the Quarter Ended June 30,
2020:
Net investment income: $14.2
millionNet investment income per share: $0.34Net realized and
unrealized gain: $39.8 millionNet increase in net assets from
operations: $54.0 millionEarnings per share: $1.28
* 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.
** Please see Liquidity and Capital
Resources.
*** Includes investment activity through Crystal
Financial (including its ownership of its SBIC), and NEF.
“The combination of our specialty finance
businesses and focus on first lien senior secured investments
in defensive industries has resulted in a diversified
portfolio that is 100% performing at June 30, 2020. We
believe we are well positioned to weather the current crisis,”
said Michael Gross, Co-CEO of Solar Capital. “At quarter end, over
80% of our comprehensive portfolio was invested in loans in our
asset-based and specialty finance strategies with collateral
support which should provide meaningful downside protection.”
“The conservative management of our assets and
liabilities has resulted in a solid portfolio foundation, a stable
funding profile, low leverage, strong liquidity, and favorable
positioning to make new investments,” said Bruce Spohler, Co-CEO of
Solar Capital. “Our pipeline of investments as well as new
specialty finance platform acquisition opportunities is expanding.
Together with our significant available capital, we expect to grow
our net investment income in the coming quarters.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday,
August 5, 2020. 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 6667784 when prompted. A telephone replay
will be available until August 19, 2020 and can be accessed by
dialing (855) 859-2056 and using the passcode 6667784.
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 June 30, 2020,
Solar Capital had total originations of $103.2 million and
repayments and amortization of $118.4 million across its four core
business units: cash flow, asset-based, equipment finance, and life
science lending, resulting in a net portfolio reduction of $15.2
million to the comprehensive portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended June 30, 2020 was as
follows:
Comprehensive Investment Portfolio Activity(1)
Q2 2020 (in millions) |
Asset Class |
Cash Flow Loans |
Asset-based Loans / Crystal Financial(2) |
Equipment Financings / NEF(3) |
Life Science Loans |
TotalPortfolio Activity |
Originations |
$6.3 |
$56.6 |
$7.8 |
$32.5 |
$103.2 |
Repayments / Amortization |
$7.4 |
$91.9 |
$17.6 |
$1.5 |
$118.4 |
Net Portfolio Activity |
($1.1) |
($35.3) |
($9.8) |
$31.0 |
($15.2) |
|
|
|
|
|
|
(1) Portfolio activity includes gross
originations/repayments across each business unit.(2) Includes
Crystal Financial’s full portfolio (and its ownership of its SBIC)
and asset-based loans on the Company’s balance sheet.(3) Includes
NEF’s full portfolio and NEF equipment financings on the Company’s
balance sheet.
Portfolio Composition
Our Comprehensive Investment Portfolio
composition by business unit at June 30, 2020 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted Average Asset Yield |
($mm) |
% |
Cash Flow
Senior Secured Loans |
$305.5 |
19.4% |
8.6%(5) |
Asset-Based Senior Secured Loans / Crystal Financial(1) |
$586.9 |
37.2% |
10.2%(6) |
Equipment Senior Secured Financings / NEF(2) |
$349.9 |
22.2% |
10.4%(7) |
Life Science Senior
Secured Loans |
$318.0 |
20.2% |
9.8%(8) |
Total Senior
Secured Loans |
$1,560.3 |
99.0% |
9.9% |
Equity and Equity-like
Securities(3) |
$16.0 |
1.0% |
|
Total
Comprehensive Investment Portfolio |
$1,576.3 |
100.0% |
|
Floating Rate
Investments(4) |
$1,205.4 |
76.9% |
|
First Lien Senior
Secured Loans |
$1,443.2 |
91.6% |
|
Second Lien Senior
Secured Cash Flow Loans |
$61.0 |
3.9% |
|
Second Lien Senior
Secured Asset-Based Loans |
$56.0 |
3.6% |
|
(1) 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.(2) Includes NEF’s full
portfolio and NEF equipment financings on the Company’s balance
sheet.(3) Excludes Crystal and NEF, which distribute quarterly cash
dividends to the Company.(4) 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.(5) Represents the
weighted average of each individual loan’s yield to maturity based
on fair market value at June 30, 2020.(6) Represents the weighted
average of each individual loan’s internal rate of return for loans
held at Crystal Financial and yield to maturity for loans held by
SLRC.(7) Represents the weighted average of each individual loan’s
yield to maturity (excluding residual upside on tax leases). Loans
held on SLRC’s balance sheet based on fair value and loans owned
within NEF Holdings based on par.(8) Represents the weighted
average of each individual loan’s yield to maturity based on fair
value at June 30, 2020 (excluding exit fees and warrants).
The Comprehensive Investment Portfolio is
diversified across approximately 183 unique borrowers in over 80
industries and with an average exposure of $8.6 million, or 0.5%
per issuer.
At June 30, 2020, 99.0% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 91.6% first lien senior secured loans and
approximately 7.5% second lien senior secured loans of which 3.9%
were second lien cash flow loans and 3.6% were second lien
asset-based loans.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.9% at June 30, 2020.
Solar Capital Ltd.
Portfolio
Asset Quality
As of June 30, 2020, 100% on a fair value basis
and cost basis of the Company’s portfolio was performing, with no
investments on non-accrual status at quarter end.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of June 30, 2020, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$213.0 |
15.7% |
2 |
$1,045.2 |
76.9% |
3 |
$101.0 |
7.4% |
4 |
$0.8 |
>0.0% |
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment Income Q2
2020(in millions) |
For thePeriod: |
Cash Flow Lending(1) |
Asset-based Lending / Crystal Financial(2) |
Equipment Financing / NEF(3) |
Life Science Lending |
Total |
Q2
2020 |
$6.9 |
$9.0 |
$4.6 |
$8.1 |
$28.6 |
% Contribution |
24.0% |
31.4% |
16.2% |
28.4% |
100% |
|
|
|
|
|
|
(1) Includes interest income/fees from cash flow loans on
balance sheet.(2) Includes interest income/fees from asset based
loans on balance sheet and distributions from Crystal Financial.(3)
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 June 30, 2020 compared to the
Quarter Ended June 30, 2019.
Investment Income
For the fiscal quarters ended June 30, 2020 and
2019, gross investment income totaled $28.6 million and $38.7
million, respectively. The decrease in gross investment income for
the year over year period was generally due to a decrease in the
size of the income-producing portfolio and the decline in the base
reference rate.
For the quarter ended June 30, 2020 cash
interest and dividends represented over 95% of the Company’s $28.6
million Q2 2020 gross investment income.
Expenses
Expenses totaled $14.4 million and $20.3
million, respectively, for the quarters ended June 30, 2020 and
2019. The decrease in expenses for the year over year period was
primarily due to lower management and incentive fees resulting from
a reduction in portfolio yield on a smaller income producing
investment portfolio on average.
Net Investment Income
The Company’s net investment income totaled
$14.2 million and $18.4 million, or $0.34 and $0.44 per average
share, respectively, for the fiscal quarters ended June 30, 2020
and 2019.
Net Realized and Unrealized Gain
Net realized and unrealized gains for the fiscal quarters ended
June 30, 2020 and 2019 totaled $39.8 million and $1.2 million,
respectively.
Net Increase in Net Assets Resulting From
Operations
For the quarters ended June 30, 2020 and 2019,
the Company had a net increase in net assets resulting from
operations of $54.0 million and $19.6 million, respectively. For
the quarters ended June 30, 2020 and 2019, earnings per average
share were $1.28 and $0.46, respectively.
Liquidity and Capital
Resources
Unsecured DebtAt June 30, 2020, approximately
86% of the Company’s funded debt, or $446 million, was comprised of
fixed rate unsecured notes.
Credit Facilities and Available Capital
At June 30, 2020, the Company had no borrowings
under its $545 million and $50 million revolving credit facilities
and had approximately $18 million in cash on hand. When including
undrawn capital on the Crystal and NEF Holdings, LLC non-recourse
credit facilities, total available capital is $815 million, subject
to borrowing base availability at June 30, 2020.
Leverage
On June 30, 2020, the Company’s net
debt-to-equity was 0.59x. Solar Capital’s current leverage provides
a significant cushion to its regulatory asset coverage limit of
2.0x debt-to-equity as well as its target leverage ratio of 0.9x –
1.25x.
Unfunded Revolver CommitmentsAt June 30, 2020,
Solar Capital had unfunded revolver commitments of approximately
$17 million that can be fully drawn by the borrowers.
Financial Statements and
Tables
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
June 30, 2020(unaudited) |
|
December 31, 2019 |
Assets |
|
|
|
|
|
|
|
Investments at fair
value: |
|
|
|
|
|
|
|
Companies less than 5% owned (cost: $885,242 and $989,564,
respectively) |
$ |
866,575 |
|
|
$ |
970,821 |
|
Companies more than 25% owned (cost: $511,835 and $513,119,
respectively) |
|
493,432 |
|
|
|
524,003 |
|
Cash |
|
18,170 |
|
|
|
16,783 |
|
Cash equivalents (cost:
$549,904 and $419,571, respectively) |
|
549,904 |
|
|
|
419,571 |
|
Dividends receivable |
|
6,194 |
|
|
|
10,488 |
|
Interest receivable |
|
6,384 |
|
|
|
5,401 |
|
Receivable for investments
sold |
|
1,651 |
|
|
|
2,207 |
|
Prepaid expenses and other
assets |
|
764 |
|
|
|
615 |
|
|
|
|
Total assets |
$ |
1,943,074 |
|
|
$ |
1,949,889 |
|
|
|
|
Liabilities |
|
|
Debt ($521,000 and $593,900
face amounts, respectively, reported net of unamortized debt
issuance costs of $6,220 and $6,783, respectively.) |
$ |
512,280 |
|
|
$ |
587,117 |
|
Payable for investments and
cash equivalents purchased |
|
550,795 |
|
|
|
419,662 |
|
Distributions payable |
|
17,327 |
|
|
|
17,327 |
|
Management fee payable |
|
5,971 |
|
|
|
6,747 |
|
Performance-based incentive
fee payable |
|
— |
|
|
|
4,281 |
|
Interest payable |
|
3,301 |
|
|
|
3,678 |
|
Administrative services
payable |
|
1,086 |
|
|
|
2,757 |
|
Other liabilities and accrued
expenses |
|
2,511 |
|
|
|
2,440 |
|
|
|
|
Total liabilities |
$ |
1,093,271 |
|
|
$ |
1,044,009 |
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
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 |
|
988,792 |
|
|
|
988,792 |
|
Accumulated distributable net
loss |
|
(139,412 |
) |
|
|
(83,335 |
) |
|
|
|
Total net assets |
$ |
849,803 |
|
|
$ |
905,880 |
|
|
|
|
Net Asset Value Per
Share |
$ |
20.11 |
|
|
$ |
21.44 |
|
|
|
|
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(in thousands, except share
amounts)
|
Three months ended |
|
June 30, 2020 |
|
|
June 30, 2019 |
|
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
Companies less than 5% owned |
$ |
20,573 |
|
|
$ |
26,848 |
|
Companies more than 25% owned |
|
1,339 |
|
|
|
1,342 |
|
Dividends: |
|
|
Companies less than 5% owned |
|
10 |
|
|
|
10 |
|
Companies more than 25% owned |
|
6,215 |
|
|
|
8,747 |
|
Other income: |
|
|
Companies less than 5% owned |
|
485 |
|
|
|
1,731 |
|
Companies more than 25% owned |
|
3 |
|
|
|
4 |
|
|
|
|
Total investment income |
$ |
28,625 |
|
|
$ |
38,682 |
|
|
|
|
EXPENSES: |
|
|
Management fees |
$ |
5,971 |
|
|
$ |
6,727 |
|
Performance-based incentive
fees |
|
— |
|
|
|
4,608 |
|
Interest and other credit
facility expenses |
|
6,623 |
|
|
|
7,101 |
|
Administrative services
expense |
|
1,148 |
|
|
|
1,293 |
|
Other general and
administrative expenses |
|
682 |
|
|
|
521 |
|
Total expenses |
|
14,424 |
|
|
|
20,250 |
|
|
|
|
Net investment income |
$ |
14,201 |
|
|
$ |
18,432 |
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH
EQUIVALENTS, DEBT AND UNFUNDED COMMITMENTS: |
|
|
Net realized gain (loss) on
investments and cash equivalents: |
|
|
Companies less than 5% owned |
$ |
(24,794 |
) |
|
$ |
202 |
|
Companies more than 25% owned |
|
— |
|
|
|
(98 |
) |
|
|
|
Net realized gain (loss) on investments and cash equivalents |
|
(24,794 |
) |
|
|
104 |
|
|
|
|
Net change in unrealized gain
(loss) on investments, cash equivalents and unfunded commitments
and net change in unrealized (gain) loss on debt: |
|
|
Companies less than 5% owned |
|
47,491 |
|
|
|
(2,356 |
) |
Companies more than 25% owned |
|
25,787 |
|
|
|
3,451 |
|
Debt |
|
(9,000 |
) |
|
|
— |
|
Unfunded commitments |
|
361 |
|
|
|
— |
|
|
|
|
Net change in unrealized gain (loss) on investments, cash
equivalents, debt and unfunded commitments |
|
64,639 |
|
|
|
1,095 |
|
|
|
|
Net realized and unrealized
gain on investments, cash equivalents, debt and unfunded
commitments |
|
39,845 |
|
|
|
1,199 |
|
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
54,046 |
|
|
$ |
19,631 |
|
|
|
|
EARNINGS PER
SHARE |
$ |
1.28 |
|
|
$ |
0.46 |
|
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 our future performance, financial condition or
results and involve a number of risks and uncertainties, including
the impact of COVID-19 and related changes in base interest rates
and significant market volatility on our business, our portfolio
companies and the global economy. 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
SLR Investment (NASDAQ:SLRC)
Historical Stock Chart
From Jun 2024 to Jul 2024
SLR Investment (NASDAQ:SLRC)
Historical Stock Chart
From Jul 2023 to Jul 2024