SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”)
today reported net investment income of $14.9 million, or
$0.35 per share, for the fourth quarter of 2021. For the fiscal
year ended December 31, 2021, the Company reported net investment
income of $60.9 million, or $1.44 per share.
At December 31, 2021, net asset value (NAV) was
$19.93 per share.
The Company’s Board of Directors declared a
first quarter 2022 distribution of $0.41 per share,
payable on April 1, 2022 to stockholders of record
on March 18, 2022. The specific tax characteristics of the
distribution will be reported to stockholders on Form 1099 after
the end of the calendar year.
HIGHLIGHTS:
At December 31, 2021:
Comprehensive Investment Portfolio*
fair value: $2.1 billionNumber of unique issuers: ~600Net assets:
$842.3 millionNet asset value per share: $19.93Net debt-to-equity:
0.97xAvailable capital**: $679 million, subject to borrowing base
availability
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended December 31, 2021:
Investments made during the quarter:
$339.9 millionInvestments prepaid and sold during the quarter:
$261.5 million
Comprehensive Investment Portfolio Activity*** for the
Year Ended December 31, 2021:
Investments made during the year:
$1.1 billionInvestments prepaid and sold during the year: $1.1
billion
Operating Results for the Quarter Ended December 31,
2021:
Net investment income: $14.9
millionNet investment income per share: $0.35Net realized and
unrealized loss: $8.8 million Net increase in net assets from
operations: $6.1 millionEarnings per share: $0.14
Operating Results for the Year Ended December 31,
2021:
Net investment income: $60.9
millionNet investment income per share: $1.44Net realized and
unrealized loss: $1.4 million Net increase in net assets from
operations: $59.6 millionEarnings per share: $1.41
* The Comprehensive Investment Portfolio for the
quarter and year ended December 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
below.
*** Comprehensive Portfolio Activity for the
quarter and year ended December 31, 2021 includes gross
originations through SLR-CS, SLR-EF and KBH.
“During 2021, SLR Investment
Corp. originated $1.1 billion of investments across our
strategies, our most active year on record. Additionally,
commitments to delayed draw term loan facilities will further
support portfolio growth alongside new originations in 2022,” said
Michael Gross, Co-CEO of SLR Investment Corp. “We expect earnings
in 2022 to benefit from the increased size of SLRC’s income
producing portfolio.”
“In 2021 we undertook an initiative to further optimize our
fundings. We issued $185 million of notes at a blended rate of 3.2%
across two private offerings and reduced the pricing of the
Company’s revolving credit facility,” said Bruce Spohler, Co-CEO of
SLR Investment Corp. “With our upcoming 4.6% note maturity this
May, our lowered cost of financing is expected to be accretive to
our net interest margin and earnings.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday,
March 2, 2022. 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 2355469 when prompted. A telephone
replay will be available until March 16, 2022 and can be accessed
by dialing (855) 859-2056 and using the passcode 2355469.
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 Corp.’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 December 31, 2021,
SLRC had total originations of $339.9 million and repayments of
$261.5 million across the Company’s five core business units: cash
flow, asset-based, life science lending, equipment finance, and
corporate leasing.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended December 31, 2021 was as
follows:
Comprehensive Investment Portfolio Activity
(1) – Q4 2021(in millions) |
Asset Class |
CashFlowLoans |
Asset-basedLoans /
SLR-CS(2) |
EquipmentFinancings /
SLR-EF(3) |
Life Science Loans |
CorporateLeasing(4) |
TotalPortfolioActivity |
Originations |
$55.8 |
$104.6 |
$58.5 |
$66.0 |
$55.0 |
$339.9 |
Repayments /Amortization |
$61.9 |
$68.8 |
$44.1 |
$31.4 |
$55.3 |
$261.5 |
Net PortfolioActivity |
($6.1) |
$35.8 |
$14.4 |
$34.6 |
($0.3) |
$78.4 |
(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) Includes gross origination and
repayment activity for KBH’s portfolio.
During the year ended December 31, 2021, SLRC
had originations of $1.09 billion and repayments of $1.06 billion.
Net originations of asset-based lending / specialty finance
businesses were ($132.8) million while net originations of cash
flow loans were $162.7 million. Approximately 73.4% of originations
in 2021 were in asset-based loans and specialty finance businesses
and approximately 26.6% were in cash flow senior secured loans.
Total Portfolio Activity
(1) –
For the Year Ended 2021(in millions) |
AssetClasses |
CashFlowLoans |
Asset-basedLoans
/SLR-CS(2) |
EquipmentFinancings
/SLR-EF(3) |
Life ScienceLoans |
CorporateLeasing(4) |
TotalPortfolioActivity |
Originations |
$288.8 |
$257.3 |
$159.7 |
$122.0 |
$258.2 |
$1,086.0 |
Repayments /Amortization |
$126.1 |
$343.9 |
$146.0 |
$180.5 |
$259.6 |
$1,056.1 |
Net PortfolioActivity |
$162.7 |
($86.6) |
$13.7 |
($58.5) |
($1.4) |
$29.9 |
(1) Total
Portfolio Activity includes gross originations/repayments across
each business unit.
(2) Includes SLR-CS’ full portfolio and
asset-based loans on the Company’s balance sheet.
(3) Includes SLR-EF’s full portfolio and
equipment financings on the Company’s balance sheet.
(4) Includes gross origination and
repayment activity for KBH’s full portfolio.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business
unit at December 31, 2021 was as follows:
Comprehensive Investment Portfolio Composition(at
fair value) |
Amount |
WeightedAverageAsset
Yield(5) |
($mm) |
% |
Cash Flow Senior Secured Loans |
$440.0 |
21.2% |
|
8.1% |
Asset-Based Senior Secured
Loans / SLR-CS1) |
$439.7 |
21.1% |
|
11.5% |
Equipment Senior Secured
Financings / SLR-EF(2) |
$336.1 |
16.2% |
|
9.5% |
Life Science Senior Secured
Loans |
$272.5 |
13.1% |
|
10.9%(6) |
Corporate Leasing / KBH(3) |
$578.0 |
27.8% |
|
10.2%(7) |
Total Senior Secured Loans |
$2,066.3 |
99.4% |
|
10.0% |
Equity
and Equity-like Securities |
$12.3 |
0.6% |
|
|
Total Comprehensive Investment Portfolio |
$2,078.6 |
100% |
|
|
Floating Rate Investments(4) |
$1,121.5 |
54.1% |
|
|
First Lien Senior Secured Loans |
$1,958.7 |
94.2% |
|
|
Second Lien Senior Secured Cash Flow Loans |
$48.7 |
2.4% |
|
|
Second Lien Senior Secured Asset-Based Loans |
$58.9 |
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) The weighted average asset level yield for
Life Science loans is calculated on cost and excludes the impact of
success fees and/or warrants.(7) Represents the annualized Q4
2021 dividend yield at cost on SLRC's equity investment in KBH.
The Comprehensive Investment Portfolio is
diversified across approximately 600 unique issuers across
approximately 80 industries, with an average exposure of $3.5
million or 0.2% per issuer.
At December 31, 2021, 99.4% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans of which 94.8% is held in first lien senior secured loans and
5.2% is held in senior secured second lien loans. Second lien cash
flow exposure is 2.4% of the Comprehensive Investment Portfolio at
December 31, 2021, with the remainder in second lien asset-based
loans.
SLR Investment Corp.
Portfolio
Asset Quality
As of December 31, 2021, 99.5% of SLRC’s
portfolio was performing at fair market value.
The Company puts its largest emphasis on risk
control and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of December 31, 2021, the composition of our portfolio, on a
risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$311.3 |
18.6% |
2 |
$1,315.1 |
78.7% |
3 |
$31.1 |
1.9% |
4 |
$13.1 |
0.8% |
SLR Investment Corp.’s Results of Operations for the
Fiscal Year Ended December 31, 2021 compared to the Fiscal Year
Ended December 31, 2020.
Investment Income
For the fiscal years ended December 31, 2021 and 2020, gross
investment income totaled $139.4 million and $121.7 million,
respectively.
Investment Income Contribution by Business
Unit
|
Business Unit Contribution to Gross Investment
Income (1)(in millions) |
For the YearEnded: |
Cash FlowLending |
Asset-basedLending
/SLR-CS |
EquipmentFinancing / SLR-EF |
Life ScienceLending |
CorporateLeasing |
Total |
12/31/2021 |
$32.8 |
$32.8 |
$16.3 |
$37.7 |
$19.8 |
$139.4 |
% Contribution |
23.5% |
23.5% |
11.7% |
27.1% |
14.2% |
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.
Expenses
Expenses totaled $78.4 million and $62.5
million, respectively, for the fiscal years ended December 31, 2021
and 2020. The increase in expenses from 2020 to 2021 was primarily
driven by a larger income producing investment portfolio, which
resulted in higher management and incentive fees as well as higher
interest costs. During the fourth quarter, SLRC incurred $0.9
million of one-time expenses related to the upcoming proposed
merger with SLR Senior Investment Corp.
Net Investment Income
SLRC’s net investment income totaled $60.9 million and $59.2
million, or $1.44 and $1.40, per average share, respectively, for
the fiscal years ended December 31, 2021 and 2020.
Net Realized and Unrealized Loss
Net realized and unrealized loss for the fiscal
years ended December 31, 2021 and 2020 totaled approximately $1.4
million and $43.8 million, respectively.
Net Increase in Net Assets Resulting From
Operations
For the fiscal years ended December 31, 2021 and
2020, SLRC had a net increase in net assets resulting from
operations of $59.6 million and $15.5 million, respectively. For
the fiscal years ended December 31, 2021 and 2020, earnings per
average share were $1.41 and $0.37, respectively.
Liquidity and Capital Resources
Unsecured Debt
At December 31, 2021, approximately 61% of the
Company’s funded debt, or $496 million, was comprised of fixed rate
unsecured notes.
Credit Facilities and Available Capital
At December 31, 2021, the Company had $323
million drawn on its $700 million revolving credit facility and had
approximately $2.9 million in cash on hand.
Leverage
On December 31, 2021, the Company’s net
debt-to-equity was 0.97x. SLRC’s current leverage provides a
significant cushion to its regulatory asset coverage limit of 2.0x
debt-to-equity and is in line with its target leverage ratio of
0.9x – 1.25x.
Unfunded Commitments
At December 31, 2021, excluding commitments to
SLR-CS and SLR-EF, the Company had unfunded commitments of
approximately $177.5 million.
Merger Agreement
On December 1, 2021, we entered into a merger agreement, which
provides that, subject to the conditions set forth in the merger
agreement SLRC will merge with and into SLR Senior Investment Cop.
(“SUNS”), with SLRC continuing as the surviving company. Both
SLRC’s and SUNS’ board of directors, including all of the
respective independent directors, in each case, on the
recommendation of a special committee comprised solely of the
independent directors of SLRC and SUNS, as applicable, have
approved the merger agreement and the transactions contemplated
thereby.
Consummation of the mergers, which is currently anticipated to
occur during the first half of calendar year 2022, is subject to
certain closing conditions, including requisite approvals of SLRC’s
and SUNS’ stockholders and certain other closing conditions.
Recent Developments
Unsecured Note Offering
On January 6, 2022, SLRC closed a private offering of $135
million of the 2027 Series F Unsecured Notes with a fixed interest
rate of 3.33% and a maturity date of January 6, 2027. Interest on
the 2027 Series F Unsecured Notes is due semi-annually on January 6
and July 6. The 2027 Series F Unsecured Notes were issued in a
private placement only to qualified institutional buyers.
Financial Statements and Tables
SLR INVESTMENT
CORP.CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES (in thousands, except share
amounts)
|
December 31, 2021 |
|
December 31, 2020 |
Assets |
|
|
Investments at fair value: |
|
|
Companies less than 5% owned (cost: $985,088 and $832,507,
respectively) |
$ |
964,379 |
|
$ |
822,298 |
|
Companies more than 25% owned (cost: $711,865 and $724,428,
respectively) |
|
706,203 |
|
|
709,653 |
|
Cash |
|
2,935 |
|
|
8,779 |
|
Cash equivalents (cost: $320,000
and $379,997, respectively) |
|
320,000 |
|
|
379,997 |
|
Dividends receivable |
|
9,028 |
|
|
7,927 |
|
Interest receivable |
|
6,521 |
|
|
6,478 |
|
Receivable for investments
sold |
|
1,378 |
|
|
255 |
|
Prepaid expenses and other
assets |
|
567 |
|
|
571 |
|
|
|
|
Total assets. |
$ |
2,011,011 |
|
$ |
1,935,958 |
|
|
|
|
Liabilities |
|
|
Debt ($818,500 and $677,000 face
amounts, respectively, reported net of unamortized debt issuance
costs of $6,462 and $5,549, respectively |
$ |
812,038 |
|
$ |
671,451 |
|
Payable for investments and cash
equivalents purchased |
|
320,041 |
|
|
380,038 |
|
Distributions payable |
|
17,327 |
|
|
17,327 |
|
Management fee payable |
|
7,435 |
|
|
6,535 |
|
Performance-based incentive fee
payable |
|
1,864 |
|
|
792 |
|
Interest payable |
|
4,492 |
|
|
3,416 |
|
Administrative services expense
payable |
|
2,689 |
|
|
1,946 |
|
Other liabilities and accrued
expenses |
|
2,844 |
|
|
2,430 |
|
Total liabilities |
$ |
1,168,730 |
|
$ |
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 |
|
936,999 |
|
|
962,481 |
|
Accumulated distributable net
loss |
|
(95,141) |
|
|
(110,881) |
|
|
|
|
Total net assets |
$ |
842,281 |
|
$ |
852,023 |
|
|
|
|
Net Asset Value Per
Share |
$ |
19.93 |
|
$ |
20.16 |
|
|
|
|
SLR INVESTMENT
CORP.CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except share
amounts)
|
|
|
|
Year ended December 31, |
|
|
2021 |
|
|
2020 |
|
INVESTMENT
INCOME: |
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
86,122 |
|
$ |
84,143 |
|
Companies more than 25% owned |
|
11,354 |
|
|
8,861 |
|
Dividends: |
|
|
Companies less than 5% owned |
|
133 |
|
|
50 |
|
Companies more than 25% owned |
|
37,564 |
|
|
26,794 |
|
Other income: |
|
|
Companies less than 5% owned |
|
4,157 |
|
|
1,885 |
|
Companies more than 25% owned |
|
24 |
|
|
12 |
|
|
|
|
Total investment income |
|
139,354 |
|
|
121,745 |
|
|
|
|
EXPENSES: |
|
|
Management fees |
|
28,277 |
|
|
24,951 |
|
Performance-based incentive
fees |
|
10,309 |
|
|
2,272 |
|
Interest and other credit
facility expenses |
|
29,876 |
|
|
27,156 |
|
Administrative services
expense |
|
5,575 |
|
|
5,215 |
|
Other general and administrative
expenses |
|
4,390 |
|
|
2,936 |
|
Total expenses |
|
78,427 |
|
|
62,530 |
|
Net investment income |
$ |
60,927 |
|
$ |
59,215 |
|
|
|
|
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
Net realized gain (loss) on investments and cash equivalents
(companies less than 5% owned) |
$ |
26 |
|
$ |
(26,638) |
|
Net change in unrealized gain
(loss) on investments and cash equivalents: |
|
|
Companies less than 5% owned |
|
(10,500) |
|
|
8,970 |
|
Companies more than 25% owned |
|
9,113 |
|
|
(26,096) |
|
Net change in unrealized loss |
|
(1,387) |
|
|
(17,126) |
|
Net realized and unrealized loss on investments and cash
equivalents |
|
(1,361) |
|
|
(43,764) |
|
|
|
|
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
59,566 |
|
$ |
15,451 |
|
|
|
|
EARNINGS PER
SHARE |
$ |
1.41 |
|
$ |
0.37 |
|
|
|
|
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
Some of the statements in this press release constitute
forward-looking statements because they relate to future events,
future performance or financial condition or the two-step merger of
SUNS with and into SLRC (the “Mergers”). The forward-looking
statements may include statements as to: future operating results
of SLRC and SUNS and distribution projections; business prospects
of SLRC and SUNS and the prospects of their portfolio companies;
and the impact of the investments that SLRC and SUNS expect to
make. In addition, words such as “anticipate,” “believe,” “expect,”
“seek,” “plan,” “should,” “estimate,” “project” and “intend”
indicate forward-looking statements, although not all
forward-looking statements include these words. The forward-looking
statements contained in this press release involve risks and
uncertainties. Certain factors could cause actual results and
conditions to differ materially from those projected, including the
uncertainties associated with (i) the timing or likelihood of the
Mergers closing; (ii) the expected synergies and savings associated
with the Mergers; (iii) the ability to realize the anticipated
benefits of the Mergers, including the expected elimination of
certain expenses and costs due to the Mergers; (iv) the percentage
of SLRC and SUNS stockholders voting in favor of the proposals
submitted for their approval; (v) the possibility that competing
offers or acquisition proposals will be made; (vi) the possibility
that any or all of the various conditions to the consummation of
the Mergers may not be satisfied or waived; (vii) risks related to
diverting management’s attention from ongoing business operations;
(viii) the risk that stockholder litigation in connection with the
Mergers may result in significant costs of defense and liability;
(ix) changes in the economy, financial markets and political
environment, (x) risks associated with possible disruption in the
operations of SUNS and SLRC or the economy generally due to
terrorism, natural disasters or the COVID-19 pandemic; (xi) future
changes in laws or regulations (including the interpretation of
these laws and regulations by regulatory authorities); (xii)
conditions in SLRC’s and SUNS’s operating areas, particularly with
respect to business development companies or regulated investment
companies; (xiii) general considerations associated with the
COVID-19 pandemic; and (xiv) other considerations that may be
disclosed from time to time in SLRC’s and SUNS’s publicly
disseminated documents and filings. SLRC has based the
forward-looking statements included in this press release on
information available to it on the date of this press release, and
SLRC assumes no obligation to update any such forward-looking
statements. Although SLRC undertakes no obligation to revise or
update any forward-looking statements, whether as a result of new
information, future events or otherwise, you are advised to consult
any additional disclosures that it may make directly to you or
through reports that SLRC in the future may file with the
Securities and Exchange Commission, including annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K.
ContactSLR Investment Corp.Investor
Relations(646) 308-8770
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