SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”),
today reported net investment income of $15.5 million, or
$0.37 per share, for the first quarter 2021.
At March 31, 2021, net asset value (NAV) was
$20.26 per share, an increase of $0.10 per share from December 31,
2020.
As of March 31, 2021, the Company’s portfolio
was 100% performing.
The Board declared a second quarter distribution
of $0.41 per share payable on July 2, 2021 to
stockholders of record as of June 23, 2021. The specific tax
characteristics will be reported to stockholders on Form 1099 after
the end of the calendar year.
HIGHLIGHTS:
At March 31, 2021:
|
|
Comprehensive Investment portfolio* fair value: $2.02
billion |
|
|
Number of portfolio companies: >600 |
|
|
Net assets: $856.2 million |
|
|
Net asset value per share: $20.26 |
|
|
Net debt-to-equity: 0.82x |
|
|
Available capital**: $683 million, subject to borrowing base
availability |
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended March 31, 2021:
|
|
Investments made during the quarter: $214.9 million |
|
|
Investments prepaid and sold during the quarter: $232.6
million |
Operating Results for the Quarter Ended March 31,
2021:
|
|
Net investment income: $15.5 million |
|
|
Net investment income per share: $0.37 |
|
|
Net realized and unrealized gain: $6.0 million |
|
|
Net increase in net assets from operations: $21.5 million |
|
|
Earnings per share: $0.51 |
* The Comprehensive Investment Portfolio for the
quarter ended March 31, 2021 is comprised of SLRC’s investment
portfolio, SLR Credit Solutions’ (“SLR-CS”) full portfolio, SLR
Equipment Finance’s (“SLR-EF”) full portfolio and Kingsbridge
Holdings, LLC’s (“KBH”) full portfolio, and excludes the Company’s
fair value of the equity interests in SLR-CS, SLR-EF and KBH and
also excludes SLRC’s loan to KBH.
** Please see Liquidity and Capital
Resources.
*** Comprehensive Portfolio Activity for the quarter ended March
31, 2021 includes gross originations through SLR-CS, SLR-EF and
KBH.
“During the first quarter of 2021, SLRC drove a
14% increase in gross investment income and an approximately 4%
increase in net investment income per share. Continued pristine
credit quality resulted in further improvement in valuations and an
increase in net asset value per share,” said Michael Gross, Co-CEO
of SLR Investment Corp. “With multiple investment strategies and
substantial available capital at our disposal, modest net growth
across these verticals can have a meaningful impact on our
earnings.”
“We are pleased with the performance of
Kingsbridge Holdings following our acquisition late last year. The
integration has been seamless and origination volume is strong,”
said Bruce Spohler, Co-CEO of SLR Investment Corp. “The addition of
a long duration portfolio generating steady income combined with an
increased opportunity set across our other investment verticals
positions us for portfolio growth in 2021.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday,
May 6, 2021. 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 SLR Investment Corp. and
the participant passcode of 2971629 when prompted. A telephone
replay will be available until May 20, 2021 and can be accessed by
dialing (855) 859-2056 and using the passcode 2971629.
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 SLR Investment’s
website, www.slrinvestmentcorp.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, 2021,
SLRC had total originations of $214.9 million and repayments and
amortization of $232.6 million across its five core business units:
cash flow, asset-based, equipment finance, life science lending,
and corporate leasing resulting in a net portfolio reduction of
$17.7 million to the comprehensive portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended March 31, 2021 was as
follows:
Comprehensive Investment Portfolio Activity
(1) – Q1 2021(in millions) |
Asset Class |
Cash FlowLoans |
Asset-basedLoans /
SLR-CS(2) |
EquipmentFinancings /
SLR-EF(3) |
Life Science Loans |
Corporate Leasing(4) |
TotalPortfolioActivity |
Originations |
$45.0 |
$31.9 |
$29.9 |
$30.1 |
$78.0 |
$214.9 |
Repayments /Amortization |
$5.3 |
$99.8 |
$28.7 |
$30.4 |
$68.4 |
$232.6 |
Net PortfolioActivity |
$39.7 |
($67.9) |
$1.2 |
($0.3) |
$9.6 |
($17.7) |
(1) |
|
Total Portfolio Activity includes gross originations/repayments
across each business unit. |
(2) |
|
Includes SLR-CS’ full portfolio and asset-based loans on the
Company’s balance sheet. |
(3) |
|
Includes SLR-EF’s full portfolio and equipment financings on
the Company’s balance sheet. |
(4) |
|
Gross origination and repayment activity for KBH’s
portfolio. |
|
|
|
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business
unit at March 31, 2021 was as follows:
Comprehensive Investment Portfolio Composition(at
fair value) |
Amount |
Weighted AverageAsset
Yield(5) |
($mm) |
% |
Cash Flow Senior Secured Loans |
$326.3 |
16.1% |
8.6% |
|
Asset-Based Senior Secured
Loans / SLR-CS1) |
$441.5 |
21.8% |
10.5% |
|
Equipment Senior Secured
Financings / SLR-EF(2) |
$321.2 |
15.9% |
10.1% |
|
Life Science Senior Secured
Loans |
$331.5 |
16.4% |
9.1%(6) |
|
Corporate Leasing / KBH(3) |
$588.9 |
29.1% |
10.0% est(7) |
|
Total Senior Secured Loans |
$2,009.4 |
99.3% |
9.8% |
|
Equity
and Equity-like Securities |
$14.5 |
0.7% |
|
Total Comprehensive Investment Portfolio |
$2,023.9 |
100% |
|
Floating Rate Investments(4) |
$1,102.4 |
54.7% |
|
First Lien Senior Secured Loans |
$1,910.2 |
94.4% |
|
Second Lien Senior Secured Cash Flow Loans |
$43.3 |
2.1% |
|
Second
Lien Senior Secured Asset-Based Loans |
$55.9 |
2.8% |
|
|
|
|
|
(1) |
|
Includes SLR-CS’ full portfolio and asset-based and lender finance
loans on the Company’s balance sheet and excludes the Company’s
equity investment in SLR-CS. |
(2) |
|
Includes SLR-EF’s full portfolio and equipment financings on the
Company’s balance sheet and excludes the Company’s equity
investments in SLR-EF. |
(3) |
|
Includes KBH’s full portfolio and excludes the Company’s equity and
debt investments in KBH. |
(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 SLR-EF and leases
associated with KBH. Additionally, SLR-EF and KBH seek to
match-fund their fixed rate assets with fixed rate
liabilities. |
(5) |
|
The weighted average asset yield for cash flow, asset-based and
life science loans on balance sheet is based on a yield to maturity
calculation. The weighted average yield for equipment financing and
SLR-CS asset-based loans is calculated based on the expected
average life of a loan for each asset class. |
(6) |
|
Life Science yields exclude the impact of success fees and/or
warrants. |
(7) |
|
Represents expected return on equity during 2021. |
|
|
|
The Comprehensive Investment Portfolio is diversified across
over 600 unique borrowers in over 80 industries and with an average
exposure of $3.2 million, or 0.2% per issuer.
At March 31, 2021, 99.3% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 94.4% first lien senior secured loans and
approximately 4.9% second lien senior secured loans of which 2.1%
were second lien cash flow loans and 2.8% were second lien
asset-based loans.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.8% at March 31, 2021.
SLR Investment Corp.
Portfolio
Asset Quality
As of March 31, 2021, 100% on a fair value basis
and cost basis of the Company’s portfolio was performing, with no
investments on non-accrual status at quarter end.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of March 31, 2021, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$235.4 |
14.9% |
2 |
$1,295.6 |
82.3% |
3 |
$43.6 |
2.8% |
4 |
$0.0 |
0.0% |
Investment Income Contribution by Business
Unit
|
Business Unit Contribution to Gross Investment
Income (1)(in millions) |
For the QuarterEnded: |
Cash FlowLending |
Asset-basedLending
/SLR-CS |
EquipmentFinancing / SLR-EF |
Life ScienceLending |
Corporate Leasing |
Total |
3/31/2021 |
$6.7 |
$9.4 |
$4.1 |
$11.3 |
$4.4 |
$35.9 |
% Contribution |
18.8% |
26.2% |
11.3% |
31.5% |
12.2% |
100.0% |
(1) |
|
Investment Income Contribution by Business Unit includes interest
income/fees from cash flow loans on balance sheet, income/fees from
asset-based loans on balance sheet and distributions from SLR-CS,
income/fees from equipment financings and distributions from
SLR-EF, distributions from KBH, and income/fees from life science
loans. |
|
|
|
SLR Investment Corp.’s Results of Operations for the
Quarter Ended March 31, 2021 compared to the Quarter Ended March
31, 2020.
Investment Income
For the fiscal quarters ended March 31, 2021 and
2020, gross investment income totaled $35.9 million and $32.9
million, respectively. The increase in gross investment income for
the year over year three month periods was primarily due to growth
in the income producing portfolio.
Expenses
Expenses totaled $20.4 million and $17.1
million, respectively, for the quarters ended March 31, 2021 and
2020. The increase in expenses for the year over year period was
primarily due to higher management and incentive fees resulting
from a larger income producing investment portfolio on average.
Net Investment Income
The Company’s net investment income totaled $15.5 million and
$15.9 million, or $0.37 and $0.38 per average share, respectively,
for the fiscal quarters ended March 31, 2021 and 2020.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gains (losses) for the fiscal
quarters ended March 31, 2021 and 2020 totaled $6.0 million and
($91.3) million, respectively.
Net Increase (Decrease) in Net Assets Resulting From
Operations
For the quarters ended March 31, 2021 and 2020,
the Company had a net increase (decrease) in net assets resulting
from operations of $21.5 million and ($75.5) million, respectively.
For the quarters ended March 31, 2021 and 2020, earnings (loss) per
average share were $0.51 and ($1.79), respectively.
Liquidity and Capital Resources
Unsecured Debt
At March 31, 2021, approximately 63% of the
Company’s funded debt, or $446 million, was comprised of fixed rate
unsecured notes.
Credit Facilities and Available Capital
At March 31, 2021, the Company had borrowings of
$235 million and $30 million, respectively, under its $620 million
and $50 million revolving credit facilities. The $235 million drawn
on the Company’s $620 million credit facility is comprised of $160
million revolver and $75 million term loan. When including undrawn
capital on the SLR-CS, SLR-EF, and KBH non-recourse credit
facilities, total available capital is $683 million, subject to
borrowing base availability at March 31, 2021.
Leverage
On March 31, 2021, the Company’s net
debt-to-equity was 0.82x. SLRC’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 Commitments
At March 31, 2021, excluding commitments to
SLR-CS and SLR-EF, the Company had unfunded commitments of
approximately $73.8 million, including $14.0 million of revolver
commitments.
Financial Statements and
Tables
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
March 31,
2021 (unaudited) |
|
|
December 31, 2020 |
|
|
|
|
|
Assets |
|
|
Investments at fair value: |
|
|
Companies less than 5% owned (cost: $869,229 and $832,507,
respectively) |
$ |
865,066 |
|
|
$ |
822,298 |
|
Companies more than 25% owned (cost: $723,909 and $724,428,
respectively) |
|
709,498 |
|
|
|
709,653 |
|
Cash |
|
7,762 |
|
|
|
8,779 |
|
Cash equivalents (cost: $350,000 and $379,997, respectively |
|
350,000 |
|
|
|
379,997 |
|
Dividends receivable |
|
9,508 |
|
|
|
7,927 |
|
Interest receivable |
|
6,875 |
|
|
|
6,478 |
|
Receivable for investments sold |
|
956 |
|
|
|
255 |
|
Prepaid expenses and other assets |
|
752 |
|
|
|
571 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,950,417 |
|
|
$ |
1,935,958 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
Debt ($711,000 and $677,000 face amounts, respectively, reported
net of unamortized debt issuance costs of $5,155 and $5,549,
respectively) |
$ |
705,845 |
|
|
$ |
671,451 |
|
Payable for investments and cash equivalents purchased |
|
350,041 |
|
|
|
380,038 |
|
Distributions payable |
|
17,327 |
|
|
|
17,327 |
|
Management fee payable |
|
6,810 |
|
|
|
6,535 |
|
Performance-based incentive fee payable |
|
3,867 |
|
|
|
792 |
|
Interest payable |
|
6,723 |
|
|
|
3,416 |
|
Administrative services payable |
|
995 |
|
|
|
1,946 |
|
Other liabilities and accrued expenses |
|
2,603 |
|
|
|
2,430 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
$ |
1,094,211 |
|
|
$ |
1,083,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
962,481 |
|
|
|
962,481 |
|
Accumulated distributable net loss |
|
(106,698 |
) |
|
|
(110,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total net assets |
$ |
856,206 |
|
|
$ |
852,023 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value Per Share |
$ |
20.26 |
|
|
$ |
20.16 |
|
|
|
|
|
|
|
|
|
|
|
|
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(in thousands, except share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
INCOME: |
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
20,832 |
|
|
$ |
24,834 |
|
Companies more than 25% owned |
|
2,885 |
|
|
|
1,356 |
|
Dividends: |
|
|
Companies less than 5% owned |
|
133 |
|
|
|
13 |
|
Companies more than 25% owned |
|
9,575 |
|
|
|
6,468 |
|
Other income: |
|
|
Companies less than 5% owned |
|
2,462 |
|
|
|
228 |
|
Companies more than 25% owned |
|
— |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income |
|
35,887 |
|
|
|
32,904 |
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
Management fees |
$ |
6,810 |
|
|
$ |
6,269 |
|
Performance-based incentive
fees |
|
3,867 |
|
|
|
1,480 |
|
Interest and other credit
facility expenses |
|
7,229 |
|
|
|
7,040 |
|
Administrative services
expense |
|
1,360 |
|
|
|
1,147 |
|
Other general and administrative
expenses |
|
1,155 |
|
|
|
1,115 |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
20,421 |
|
|
|
17,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
$ |
15,466 |
|
|
$ |
15,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
$ |
(366 |
) |
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
6,046 |
|
|
|
(47,415 |
) |
Companies more than 25% owned |
|
364 |
|
|
|
(55,074 |
) |
Debt |
|
— |
|
|
|
11,500 |
|
Unfunded commitments |
|
— |
|
|
|
(361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on investments, cash
equivalents, debt and unfunded commitments |
|
6,410 |
|
|
|
(91,350 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on investments, cash
equivalents, debt and unfunded commitments |
|
6,044 |
|
|
|
(91,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
21,510 |
|
|
$ |
(75,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER
SHARE |
$ |
0.51 |
|
|
$ |
(1.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
About SLR Investment Corp.
SLR Investment Corp. 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. SLR
Investment Corp. undertakes no duty to update any forward-looking
statements made herein, unless required to do so by applicable
law.
ContactSLR Investment Corp.Investor
Relations(646) 308-8770
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