SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”),
today reported net investment income of $20.3 million, or
$0.37 per share, for the second fiscal quarter of 2022 compared to
net investment income, pre-merger related expenses, of $14.8
million, or $0.35 per share, in Q1, 2022. The Company completed its
acquisition of SLR Senior Investment Corp. (“SUNS”) on April 1,
2022.
At June 30, 2022, net asset value (NAV) was
$18.53 per share compared to $19.56 per share at March 31, 2022.
Approximately one-third of the decline in NAV is the result of
merger accounting of the purchase price discount.
In April 2022, after the closing of the merger
with SUNS, SLRC modified the frequency of its distributions from
quarterly to monthly. For the quarter ended June 30, 2022, the
Company paid monthly distributions totaling $0.41 per share.
On August 2, 2022, the Company’s Board of
Directors (the “Board”) declared a monthly distribution of
$0.136667 per share payable on September 1, 2022 to
stockholders of record as of August 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 June 30, 2022: |
Comprehensive Investment Portfolio* fair value: $2.7 billionNumber
of portfolio companies: >780Net assets: $1.0 billionNet asset
value per share: $18.53Net debt-to-equity: 0.96xAvailable
capital**: approximately $850 million, subject to borrowing base
availability |
|
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended June 30, 2022: |
Investments made during the quarter: $274.8 millionInvestments
prepaid and sold during the quarter: $199.3 million |
|
Operating Results for the Quarter Ended June 30,
2022: |
Net investment income: $20.3 millionNet investment income per
share: $0.37Net realized and unrealized loss: $35.9 millionNet
decrease in net assets from operations: $15.6 millionLoss per
share: $0.29 |
* The Comprehensive Investment Portfolio for the quarter ended
June 30, 2022 is comprised of SLRC’s investment portfolio and the
full portfolios of SLR Credit Solutions (“SLR-CS”), SLR Equipment
Finance (“SLR-EF”), Kingsbridge Holdings, LLC (“KBH”), SLR Business
Credit (“SLR-BC”) and SLR Healthcare ABL (“SLR-HC ABL”) owned by
the Company (collectively, the Company’s “Commercial Finance
Portfolio Companies”), and excludes the Company’s fair value of the
equity interests in the Commercial Finance Portfolio Companies and
the Company’s loans to SLR-EF and KBH.
** Please see Liquidity and Capital Resources
below.
*** Comprehensive Investment Portfolio Activity for the quarter
ended June 30, 2022 includes the gross originations through the
Company’s Commercial Finance Portfolio Companies and excludes the
$624.3 million fair value of the Comprehensive Investment Portfolio
acquired in the acquisition of SUNS.
“The realization of merger synergies, the
permanent reduction of the annual base management fee, the
announced share repurchase plan, and the increase in yields are
expected to accelerate growth in SLRC’s net investment income and
ROE. Additionally, our $566 million of unsecured fixed rate debt
limits the impact of rising rates on our borrowing cost,” said
Michael Gross, Co-CEO of SLR Investment Corp. “As a result, we
expect our quarterly NII to fully cover our distributions sooner
than we had projected at the time of the merger announcement.”
“We have over $800 million of available capital
to invest and the current market dislocation creates the
opportunity to grow our portfolio with investments across our asset
classes at higher yields and better terms,” said Bruce Spohler,
Co-CEO of SLR Investment Corp. “Our diversified investment
strategies focused on senior secured first lien lending are well
positioned to thrive in the current volatile market
environment.”
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 3, 2022. All interested parties may participate in the
conference call by dialing (800) 245-3047 approximately 5-10
minutes prior to the call, international callers should dial +1
(785) 424-1699. Participants should reference SLR Investment Corp.
and Conference ID: SLRC2Q22. A telephone replay will be available
until August 17, 2022 and can be accessed by dialing (800)
839-9374. International callers should dial +1 (402) 220 6087. 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 June 30, 2022,
SLRC had total originations of $274.8 million excluding the
acquisition of the SUNS portfolio and repayments and amortization
of $199.3 million across its four core asset classes: sponsor
finance, asset-based lending, equipment finance, and life science
finance resulting in net originations of $75.5 million to the
Comprehensive Investment Portfolio.
The investment activity of our Comprehensive
Investment Portfolio by asset class for the quarter ended June 30,
2022 was as follows:
Asset Class |
Sponsor
Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive Investment Portfolio
Activity |
Originations(4) |
$ |
71.9 |
$ |
98.1 |
$ |
101.2 |
$ |
3.6 |
|
$ |
274.8 |
Repayments / Amortization |
$ |
10.4 |
$ |
52.3 |
$ |
90.7 |
$ |
45.9 |
|
$ |
199.3 |
Net Portfolio Activity |
$ |
61.5 |
$ |
45.8 |
$ |
10.5 |
$ |
(42.3 |
) |
$ |
75.5 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Sponsor Finance refers to cash flow loans to sponsor-owned
companies.(2) Includes SLR-CS, SLR-BC and SLR-HC ABL’s full
portfolios, as well as 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 and Kingsbridge Holdings’ (KBH) full
portfolio.(4) Total Originations does not include the $624.3
million fair value of the Comprehensive Investment Portfolio
acquired in the acquisition of SUNS.
Portfolio Composition
SLRC’s Comprehensive Investment Portfolio composition by asset
class at June 30, 2022 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted Average Asset Yield(4) |
($mm) |
% |
Senior
Secured Investments Cash Flow Loans (Sponsor Finance) |
$ |
646.5 |
23.9 |
% |
8.1 |
% |
Asset-Based Loans(1) |
$ |
857.6 |
31.8 |
% |
10.4 |
% |
Equipment Financings(2) |
$ |
896.5 |
33.2 |
% |
9.8 |
% |
Life Science Loans |
$ |
293.7 |
10.9 |
% |
10.4 |
% |
Total Senior
Secured Investments |
$ |
2,694.3 |
99.8 |
% |
9.6 |
% |
Equity and Equity-like
Securities |
$ |
5.5 |
0.2 |
% |
|
Total Comprehensive Investment Portfolio |
$ |
2,699.8 |
100.0 |
% |
|
Floating Rate
Investments(3) |
$ |
1,744.6 |
64.6 |
% |
|
First Lien Senior
Secured Loans |
$ |
2,624.8 |
97.2 |
% |
|
Second Lien Senior
Secured Cash Flow Loans |
$ |
10.0 |
0.4 |
% |
|
Second Lien Senior
Secured Asset-Based Loans |
$ |
59.5 |
2.2 |
% |
|
|
|
|
|
|
|
(1) Includes SLR-CS, SLR-BC, and SLR-HC ABL’s full portfolios,
as well as asset-based loans on the Company’s balance sheet, and
excludes the Company’s equity investments in each of SLR-CS,
SLR-BC, and SLR-HC ABL.(2) Includes SLR-EF’s full portfolio and
equipment financings on the Company’s balance sheet and Kingsbridge
Holdings’ (KBH) full portfolio. Excludes the Company’s equity and
debt investments in each of SLR-EF and KBH.(3) Floating rate
investments are 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 held by
KBH. Additionally, SLR-EF and KBH seek to match-fund their fixed
rate assets with fixed rate liabilities.(4) 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
yield calculation of Life Science loans excludes the impact of
success fees and/or warrants. The weighted average yield for
on-balance sheet equipment financings is calculated based on the
expected average life of the loan. The weighted average asset yield
for SLR-CS asset-based loans is an Internal Rate of Return
calculated using actual cash flows received and the expected
terminal value. The weighted average asset yield for SLR-BC and
SLR-HC ABL represents total interest and fee income for the
three-month period ending on June 30, 2022 against the average
portfolio over the same fiscal period, annualized. The weighted
average asset yield for SLR-EF represents total interest and fee
income for the three-month period ending on June 30, 2022 against
the portfolio as of June 30, 2022, annualized. The weighted average
yield for the KBH equipment leasing portfolio represents the
expected return on equity during 2022.
The Comprehensive Investment Portfolio is
diversified across over 780 unique borrowers in over 100 industries
and with an average exposure of $3.5 million, or 0.1% per
issuer.
At June 30, 2022, 99.8% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 97.2% first lien senior secured loans and
approximately 2.6% second lien senior secured loans, of which 0.4%
were second lien cash flow loans and 2.2% were second lien
asset-based loans.
The weighted average yield at fair value of the
income-producing investments in the Comprehensive Investment
Portfolio was 9.6% at June 30, 2022.
SLR Investment Corp. Portfolio
Asset Quality
As of June 30, 2022, on a fair value basis,
99.4% of the Company’s portfolio was performing.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of June 30, 2022, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$374.6 |
18.8% |
2 |
$1,580.9 |
79.3% |
3 |
$26.9 |
1.3% |
4 |
$11.3 |
0.6% |
Investment Income Contribution by Asset
Class(1)
For the QuarterEnded: |
SponsorFinance |
Asset-basedFinance |
EquipmentFinance |
Life ScienceFinance |
Total($mm) |
6/30/2022 |
$ |
12.0 |
|
$ |
11.2 |
|
$ |
8.7 |
|
$ |
10.9 |
|
$ |
42.8 |
|
% Contribution |
|
28.0 |
% |
|
26.1 |
% |
|
20.3 |
% |
|
25.6 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Investment Income Contribution by Asset Class includes:
interest income/fees from Sponsor Finance (cash flow) loans on
balance sheet; income/fees from Asset-based loans on balance sheet
and distributions from SLR-CS, SLR-BC and SLR-HC ABL; income/fees
from equipment financings on balance sheet and distributions from
SLR-EF and distributions from KBH; and income/fees from life
science loans on balance sheet.
SLR Investment Corp.’s Results of Operations for the
Quarter Ended June 30, 2022 compared to the Quarter Ended June 30,
2021.
Investment Income
For the fiscal quarters ended June 30, 2022 and
2021, gross investment income totaled $42.8 million and $35.6
million, respectively. The increase in gross investment income for
the year over year three month periods was primarily due to a
larger portfolio size as a result of the merger with SUNS, as well
as due to an increase in LIBOR and SOFR.
Expenses
Net expenses totaled $22.5 million and $20.1
million, respectively, for the fiscal quarters ended June 30, 2022
and 2021. The increase in expenses for the year over year period
was primarily due to higher interest expense associated with the
increase in LIBOR and SOFR.
Net Investment Income
The Company’s net investment income totaled $20.3 million and
$15.5 million, or $0.37 and $0.37 per average share, respectively,
for the fiscal quarters ended June 30, 2022 and 2021.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gains (losses) for the fiscal
quarters ended June 30, 2022 and 2021 totaled ($35.9) million and
$3.0 million, respectively.
Net Increase (Decrease) in Net Assets Resulting From
Operations
For the quarters ended June 30, 2022 and 2021,
the Company had a net increase (decrease) in net assets resulting
from operations of $(15.6) million and $18.6 million, respectively.
For the quarters ended June 30, 2022 and 2021, earnings (loss) per
average share were $(0.29) and $0.44, respectively.
Liquidity and Capital Resources
Unsecured Notes Repayment
On May 8, 2022, the Company repaid in full at
maturity the $150.0 million of 2022 Unsecured 5-year Notes which
was issued at a blended rate of approximately 4.5%.
Credit Facilities and Available Capital
With the closing of the merger, the Company
assumed SUNS’ $225 million SPV revolver credit facility and $85
million of senior unsecured notes. At June 30, 2022, the Company
had $340.6 million drawn on its $825 million revolving credit
facilities, $100 million of term loans and $566 million of
unsecured senior notes.
Including $28.9 million of cash on hand and
credit facility capacity at SLRC and its Commercial Finance
Portfolio Companies, the Company had access to approximately $850
million of available capital, subject to borrowing base
limitations.
Leverage
On June 30, 2022, the Company’s net
debt-to-equity was 0.96x. 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 June 30, 2022, excluding commitments to
SLR-CS, SLR-HC ABL, and SLR-EF, the Company had unfunded
commitments of $317.2 million, including $35.1 million of revolver
commitments.
Share Repurchase Program
On May 3, 2022, SLRC’s Board authorized the
Company to adopt a program for the purpose of repurchasing up to
$50 million of SLRC’s outstanding shares of common stock. Under the
repurchase program, the Company may, but is not obligated to,
repurchase shares of SLRC’s outstanding common stock in the open
market from time to time provided the Company’s compliance with its
code of ethics and the guidelines specified in Rule 10b-18 of the
Securities Exchange Act of 1934, as amended, including certain
price, market volume and timing constraints. In addition, any
repurchases will be conducted in accordance with the Investment
Company Act of 1940, as amended. Unless amended or extended by our
Board, the repurchase program is expected to be in place until the
earlier of May 1, 2023 or until $50 million of our outstanding
shares of common stock have been repurchased. The timing and number
of shares to be repurchased will depend on a number of factors,
including market conditions. There are no assurances that the
Company will engage in any repurchases. As of June 30, 2022, no
repurchases have taken place.
Subsequent Events
Distributions
On July 6, 2022, the Company’s Board declared a
monthly distribution of $0.136667 per share payable on August
2, 2022 to stockholders of record as of July 21,
2022.
On August 2, 2022, the Company’s Board declared
a monthly distribution of $0.136667 per share payable on
September 1, 2022 to stockholders of record as of August
18, 2022.
The specific tax characteristics of the
distributions will be reported to stockholders on Form 1099 after
the end of the calendar year.
Financial Statements and
Tables
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
June 30, 2022 (unaudited) |
|
December 31,2021 |
Assets |
|
|
|
|
|
|
|
Investments at fair value: |
|
|
|
|
|
|
|
Companies less than 5% owned (cost: $1,248,727 and $985,088,
respectively) |
$ |
1,197,877 |
|
|
$ |
964,379 |
|
Companies more than 25% owned (cost: $819,161 and $711,865,
respectively) |
|
795,833 |
|
|
|
706,203 |
|
Cash |
|
28,885 |
|
|
|
2,935 |
|
Cash
equivalents (cost: $348,892 and $320,000, respectively) |
|
348,819 |
|
|
|
320,000 |
|
Dividends receivable |
|
10,643 |
|
|
|
9,028 |
|
Interest
receivable |
|
8,384 |
|
|
|
6,521 |
|
Receivable for investments sold |
|
1,085 |
|
|
|
1,378 |
|
Prepaid
expenses and other assets |
|
927 |
|
|
|
567 |
|
Total assets |
$ |
2,392,453 |
|
|
$ |
2,011,011 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Debt
($1,006,600 and $818,500 face amounts, respectively, reported net
of unamortized debt issuance costs/market discount of $8,519 and
$6,462, respectively.) |
$ |
998,081 |
|
|
$ |
812,038 |
|
Payable
for investments and cash equivalents purchased |
|
348,912 |
|
|
|
320,041 |
|
Distributions payable |
|
7,486 |
|
|
|
17,327 |
|
Management fee payable |
|
6,916 |
|
|
|
7,435 |
|
Performance-based incentive fee payable |
|
3,376 |
|
|
|
1,864 |
|
Interest
payable |
|
7,110 |
|
|
|
4,492 |
|
Administrative services payable |
|
956 |
|
|
|
2,689 |
|
Other
liabilities and accrued expenses |
|
4,463 |
|
|
|
2,844 |
|
Total liabilities |
$ |
1,377,300 |
|
|
$ |
1,168,730 |
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
|
Common
stock, par value $0.01 per share, 200,000,000 and 200,000,000
common shares authorized, respectively, and 54,772,651 and
42,260,826 shares issued and outstanding, respectively |
$ |
548 |
|
|
$ |
423 |
|
Paid-in
capital in excess of par |
|
1,163,713 |
|
|
|
936,999 |
|
Accumulated distributable net loss |
|
(149,108 |
) |
|
|
(95,141 |
) |
Total net assets |
$ |
1,015,153 |
|
|
$ |
842,281 |
|
Net Asset Value Per Share |
$ |
18.53 |
|
|
$ |
19.93 |
|
|
|
|
|
|
|
|
|
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(in thousands, except share
amounts)
|
Three months ended |
|
June 30, 2022 |
|
June 30, 2021 |
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
Companies less than 5% owned |
$ |
28,855 |
|
|
$ |
22,483 |
|
Companies more than 25% owned |
|
1,922 |
|
|
|
2,886 |
|
Dividends: |
|
|
|
|
|
|
|
Companies more than 25% owned |
|
11,083 |
|
|
|
9,832 |
|
Other income: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
925 |
|
|
|
356 |
|
Companies more than 25% owned |
|
(5 |
) |
|
|
15 |
|
Total investment income |
|
42,780 |
|
|
|
35,572 |
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
Management fees |
$ |
6,913 |
|
|
$ |
6,890 |
|
Performance-based incentive
fees |
|
4,734 |
|
|
|
3,879 |
|
Interest and other credit
facility expenses |
|
10,352 |
|
|
|
7,146 |
|
Administrative services
expense |
|
1,369 |
|
|
|
1,375 |
|
Other general and administrative
expenses |
|
476 |
|
|
|
763 |
|
Total expenses |
|
23,844 |
|
|
|
20,053 |
|
Performance-based incentive fees
waived |
|
(1,358 |
) |
|
|
— |
|
Net expenses |
|
22,486 |
|
|
|
20,053 |
|
Net investment income |
$ |
20,294 |
|
|
$ |
15,519 |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
Net realized gain (loss) on investments and cash equivalents
(companies less than 5% owned) |
$ |
(105 |
) |
|
$ |
561 |
|
Net change in unrealized gain
(loss) on investments and cash equivalents: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
(11,764 |
) |
|
|
1,745 |
|
Companies more than 25% owned |
|
(24,071 |
) |
|
|
742 |
|
Net change in unrealized gain (loss) on investments and cash
equivalents |
|
(35,835 |
) |
|
|
2,487 |
|
Net realized and unrealized gain (loss) on investments and cash
equivalents |
|
(35,940 |
) |
|
|
3,048 |
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
(15,646 |
) |
|
$ |
18,567 |
|
EARNINGS (LOSS) PER
SHARE |
$ |
(0.29 |
) |
|
$ |
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
Some of the statements in this press release
constitute forward-looking statements because they relate to future
events, future performance or financial condition. The
forward-looking statements may include statements as to: future
operating results of SLRC and distribution projections; business
prospects of SLRC and the prospects of its portfolio companies; and
the impact of the investments that SLRC expects 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 expected synergies and savings associated
with the two-step merger of SUNS with and into SLRC (the “Merger”);
(ii) the ability to realize the anticipated benefits of the Merger,
including the expected elimination of certain expenses and costs
due to the Merger; (iii) changes in the economy, financial markets
and political environment; (iv) risks associated with possible
disruption in the operations of SLRC or the economy generally due
to terrorism, natural disasters or the COVID-19 pandemic; (v)
future changes in laws or regulations (including the interpretation
of these laws and regulations by regulatory authorities); (vi)
conditions in SLRC’s operating areas, particularly with respect to
business development companies or regulated investment companies;
(vii) general considerations associated with the COVID-19 pandemic;
and (viii) other considerations that may be disclosed from time to
time in SLRC’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
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