SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”),
today reported net investment income of $15.0 million, or
$0.36 per share, for the third quarter of 2021.
At September 30, 2021, net asset value (NAV) was
$20.20 per share.
The Board declared a fourth quarter distribution
of $0.41 per share payable on January 5, 2022 to
stockholders of record as of December 16, 2021. The specific
tax characteristics will be reported to stockholders on Form 1099
after the end of the calendar year.
HIGHLIGHTS:
At September 30, 2021:
Comprehensive
Investment portfolio* fair value: $2.01 billion Number of portfolio
companies: >600* Net assets: $853.5 million Net asset value per
share: $20.20 Net debt-to-equity: 0.79x
Comprehensive Investment Portfolio
Activity** for the Quarter Ended September 30, 2021:
Investments made during
the quarter: $358.0 million Investments prepaid and sold during the
quarter: $260.5 million
Operating Results for the Quarter Ended
September 30, 2021:
Net investment income:
$15.0 million Net investment income per share: $0.36 Net realized
and unrealized losses: $1.6 million Net increase in net assets from
operations: $13.4 million Earnings per share: $0.32
* The Comprehensive Investment Portfolio for the
quarter ended September 30, 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.
** Comprehensive Portfolio Activity for the
quarter ended September 30, 2021 includes gross originations
through SLR-CS, SLR-EF and KBH.
“SLRC achieved meaningful portfolio growth
during the third quarter, fueled by an attractive sponsor finance
environment for cash flow senior secured loans across the
healthcare, software and financial services sectors,” said Michael
Gross, Co-CEO of SLR Investment Corp. “As a result of our
portfolio’s strong foundation and sizable investment pipeline, we
expect to achieve further growth in Q4, positioning us for future
increases to investment income.”
“Elevated levels of investment activity across
our investment verticals have continued in the fourth quarter,
driving SLRC’s net leverage to an estimated 0.9x debt-to-equity
based on investments funded through November 1, 2021,” said Bruce
Spohler, Co-CEO of SLR Investment Corp. “We expect that as existing
commitments are funded, SLRC will approach the mid-point of its
target leverage range.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday,
November 4, 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 7479197 when prompted. A telephone
replay will be available until November 18, 2021 and can be
accessed by dialing (855) 859-2056 and using the passcode 7479197.
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 September 30,
2021, SLRC had total originations of $358.0 million and repayments
and amortization of $260.5 million across its five core business
units: cash flow, asset-based, equipment finance, life science
lending, and corporate leasing resulting in net portfolio growth of
$97.5 million to the comprehensive portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended September 30, 2021 was
as follows:
Comprehensive Investment Portfolio Activity
(1) – Q3 2021 (in millions) |
Asset Class |
Cash Flow Loans |
Asset-based Loans /
SLR-CS(2) |
Equipment Financings /
SLR-EF(3) |
Life Science Loans |
Corporate Leasing / KBH(4) |
Total Portfolio
Activity |
Originations |
$140.0 |
$93.5 |
$47.6 |
$20.3 |
$56.6 |
$358.0 |
Repayments / Amortization |
$18.2 |
$75.6 |
$42.0 |
$54.2 |
$70.5 |
$260.5 |
Net Portfolio Activity |
$121.8 |
$17.9 |
$5.6 |
($33.9) |
($13.9) |
$97.5 |
(1) Total Portfolio Activity includes gross
originations/repayments across each business unit.(2) Includes
SLR-CS’ full portfolio and asset-based loans on the Company’s
balance sheet.(3) Includes SLR-EF’s full portfolio and equipment
financings on the Company’s balance sheet.(4) Gross origination and
repayment activity for KBH’s portfolio.
Portfolio Composition
Our Comprehensive Investment Portfolio composition
by business unit at September 30, 2021 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted Average Asset
Yield(5) |
($mm) |
% |
Cash Flow Senior Secured Loans |
$456.4 |
22.7% |
7.9% |
Asset-Based
Senior Secured Loans / SLR-CS1) |
$403.1 |
20.1% |
12.2% |
Equipment
Senior Secured Financings / SLR-EF(2) |
$321.6 |
16.0% |
9.7% |
Life Science
Senior Secured Loans |
$236.2 |
11.8% |
9.6%(6) |
Corporate Leasing / KBH(3) |
$578.3 |
28.8% |
10.2%(7) |
Total Senior Secured Loans |
$1,995.6 |
99.4% |
9.9% |
Equity and Equity-like Securities |
$12.5 |
0.6% |
Total Comprehensive Investment Portfolio |
$2,008.1 |
100% |
Floating Rate Investments(4) |
$1,098.7 |
54.9% |
First Lien Senior Secured Loans |
$1,919.7 |
95.6% |
Second Lien Senior Secured Cash Flow Loans |
$46.3 |
2.3% |
Second Lien Senior Secured Asset-Based Loans |
$29.6 |
1.5% |
(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 the annualized Q3 2021 dividend
yield at cost on SLRC’s equity investment in KBH.
The Comprehensive Investment Portfolio is
diversified across over 600 unique borrowers in over 75 industries
and with an average exposure of $3.3 million, or 0.2% per
issuer.
At September 30, 2021, 99.4% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 95.6% first lien senior secured loans and
approximately 3.8% second lien senior secured loans of which 2.3%
were second lien cash flow loans and 1.5% were second lien
asset-based loans.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.9% at September 30, 2021.
SLR Investment Corp.
Portfolio
Asset Quality
As of September 30, 2021, 98.7% and 98.2% on a
fair value basis and cost basis, respectively, of the Company’s
portfolio was performing.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of September 30, 2021, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$246.7 |
15.2% |
2 |
$1,322.4 |
81.4% |
3 |
$55.4 |
3.4% |
4 |
$0.0 |
0.0% |
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment
Income (1) (in millions) |
For the Quarter Ended: |
Cash Flow Lending |
Asset-based Lending /
SLR-CS |
Equipment Financing / SLR-EF |
Life Science Lending |
Corporate Leasing |
Total |
9/30/2021 |
$6.7 |
$7.4 |
$4.3 |
$8.6 |
$5.2 |
$32.2 |
% Contribution |
21.0% |
22.9% |
13.3% |
26.8% |
16.0% |
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 September 30, 2021 compared to the
Quarter Ended September 30, 2020.
Investment Income
For the fiscal quarters ended September 30, 2021
and 2020, gross investment income totaled $32.2 million and $28.9
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 $17.2 million and $14.6
million, respectively, for the quarters ended September 30, 2021
and 2020. The increase in expenses for the year over year period
was primarily driven by a larger income producing investment
portfolio which resulted in higher management and incentive fees as
well as higher interest costs.
Net Investment Income
The Company’s net investment income totaled $15.0
million and $14.3 million, or $0.36 and $0.34 per average share,
respectively, for the fiscal quarters ended September 30, 2021 and
2020.
Net Realized and Unrealized Gains
(Losses)
Net realized and unrealized gains (losses) for the
fiscal quarters ended September 30, 2021 and 2020 totaled ($1.6)
million and $4.4 million, respectively.
Net Increase in Net Assets Resulting From
Operations
For the quarters ended September 30, 2021 and
2020, the Company had a net increase in net assets resulting from
operations of $13.4 million and $18.6 million, respectively. For
the quarters ended September 30, 2021 and 2020, earnings per
average share were $0.32 and $0.44, respectively.
Liquidity and Capital
Resources
Unsecured Debt
On September 14, 2021, the Company closed a
private offering of $50 million of unsecured notes with a fixed
interest rate of 2.95% and a maturity date of March 14, 2027. At
September 30, 2021, approximately 69% of the Company’s funded debt,
or $496 million, was comprised of fixed rate unsecured notes.
Credit Facilities
At September 30, 2021, the Company had
borrowings of $193.5 million and $28.2 million, respectively, under
its $620 million and $50 million revolving credit facilities. The
$193.5 million drawn on the Company’s $620 million credit facility
is comprised of $118.5 million revolver and $75 million term
loan.
Leverage
On September 30, 2021, the Company’s net
debt-to-equity was 0.79x. 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 September 30, 2021, excluding commitments to
SLR-CS and SLR-EF, the Company had unfunded commitments of
approximately $151.7 million.
Financial Statements and
Tables
SLR
Investment Corp. |
CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES |
(in
thousands, except share amounts) |
|
|
|
|
September 30, 2021 (unaudited) |
December 31, 2020 |
|
|
|
Assets |
|
|
Investments
at fair value: |
|
|
Companies less than 5% owned (cost: $924,613 and $832,507,
respectively) |
$ |
915,687 |
|
$ |
822,298 |
|
Companies more than 25% owned (cost: $717,531 and $724,428,
respectively) |
|
708,862 |
|
|
709,653 |
|
Cash |
|
39,999 |
|
|
8,779 |
|
Cash
equivalents (cost: $419,994 and $379,997, respectively) |
|
419,994 |
|
|
379,997 |
|
Dividends
receivable |
|
9,019 |
|
|
7,927 |
|
Interest
receivable |
|
5,640 |
|
|
6,478 |
|
Receivable
for investments sold |
|
204 |
|
|
255 |
|
Prepaid
expenses and other assets |
|
611 |
|
|
571 |
|
Total assets |
$ |
2,100,016 |
|
$ |
1,935,958 |
|
Liabilities |
|
|
Debt
($717,740 and $677,000 face amounts, respectively, reported net of
unamortized debt issuance costs of $4,414 and $5,549,
respectively.) |
$ |
713,326 |
|
$ |
671,451 |
|
Payable for
investments and cash equivalents purchased |
|
496,798 |
|
|
380,038 |
|
Distributions payable |
|
17,327 |
|
|
17,327 |
|
Management
fee payable |
|
7,142 |
|
|
6,535 |
|
Performance-based incentive fee payable |
|
698 |
|
|
792 |
|
Interest
payable |
|
6,591 |
|
|
3,416 |
|
Administrative services payable |
|
2,152 |
|
|
1,946 |
|
Other
liabilities and accrued expenses |
|
2,492 |
|
|
2,430 |
|
Total liabilities |
$ |
1,246,526 |
|
$ |
1,083,935 |
|
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 |
|
962,481 |
|
|
962,481 |
|
Accumulated
distributable net loss |
|
(109,414 |
) |
|
(110,881 |
) |
Total net assets |
$ |
853,490 |
|
$ |
852,023 |
|
Net
Asset Value Per Share |
$ |
20.20 |
|
$ |
20.16 |
|
|
|
|
SLR
Investment Corp. |
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) |
(in
thousands, except share amounts) |
|
|
|
|
Three months
ended |
|
September 30, 2021 |
September 30, 2020 |
|
|
|
INVESTMENT INCOME: |
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
19,202 |
|
$ |
20,922 |
|
Companies more than 25% owned |
|
2,834 |
|
|
1,355 |
|
Dividends: |
|
|
Companies less than 5% owned |
|
— |
|
|
14 |
|
Companies more than 25% owned |
|
9,078 |
|
|
6,094 |
|
Other
income: |
|
|
Companies less than 5% owned |
|
1,044 |
|
|
462 |
|
Companies more than 25% owned |
|
5 |
|
|
4 |
|
Total investment income |
|
32,163 |
|
|
28,851 |
|
EXPENSES: |
|
|
Management
fees |
$ |
7,142 |
|
$ |
6,176 |
|
Performance-based incentive fees |
|
698 |
|
|
— |
|
Interest and
other credit facility expenses |
|
7,127 |
|
|
6,510 |
|
Administrative services expense |
|
1,435 |
|
|
1,572 |
|
Other
general and administrative expenses |
|
755 |
|
|
326 |
|
Total expenses |
|
17,157 |
|
|
14,584 |
|
Net investment income |
$ |
15,006 |
|
$ |
14,267 |
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH
EQUIVALENTS AND DEBT: |
|
|
Net realized loss on investments and cash equivalents (companies
less than 5% owned) |
$ |
(127 |
) |
$ |
(278 |
) |
|
|
|
Net change
in unrealized gain (loss) on investments, cash equivalents and net
change in unrealized (gain) loss on debt: |
|
|
Companies less than 5% owned |
|
(6,507 |
) |
|
2,903 |
|
Companies more than 25% owned |
|
4,999 |
|
|
3,225 |
|
Debt |
|
— |
|
|
(1,500 |
) |
Net change in unrealized gain (loss) on investments, cash
equivalents and debt |
|
(1,508 |
) |
|
4,628 |
|
Net realized and unrealized gain (loss) on investments, cash
equivalents and debt |
|
(1,635 |
) |
|
4,350 |
|
NET
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
13,371 |
|
$ |
18,617 |
|
EARNINGS PER SHARE |
$ |
0.32 |
|
$ |
0.44 |
|
|
|
|
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.
Contact SLR Investment Corp.
Investor Relations (646) 308-8770
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