SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”),
today reported net investment income of $20 million, or $0.37
per share, for the third fiscal quarter of 2022 compared to net
investment income of $20 million, or $0.37 per share, in Q2, 2022.
At September 30, 2022, net asset value (NAV) was
$18.37 per share compared to $18.53 per share at June 30, 2022.
For the quarter ended September 30, 2022, the
Company paid monthly distributions totaling $0.41 per share.
On November 2, 2022, the Company’s Board of
Directors (the “Board”) declared a monthly distribution of
$0.136667 per share payable on December 1, 2022 to
stockholders of record as of November 17, 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 September 30, 2022: Comprehensive Investment
Portfolio* fair value: $2.9 billionNumber of portfolio companies:
>785Net assets: $1.0 billionNet asset value per share: $18.37Net
debt-to-equity: 1.14x
Comprehensive Investment Portfolio Activity** for the
Quarter Ended September 30, 2022:
Investments made during the quarter: $393.9 million Investments
prepaid and sold during the quarter: $159.0 million
Operating Results for the Quarter Ended September 30,
2022:
Net investment income: $20.1 millionNet investment income per
share: $0.37Net realized and unrealized loss: $6.5 millionNet
increase in net assets from operations: $13.5 millionEarnings per
share: $0.25
* The Comprehensive Investment Portfolio for the
quarter ended September 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.
** Comprehensive Investment Portfolio Activity for the quarter
ended September 30, 2022 includes the gross originations through
the Company’s Commercial Finance Portfolio
Companies.
“The combination of portfolio growth, merger
synergies, and the increase in yields will drive solid growth to
our net investment income and we therefore expect to cover our
distribution for Q4,” said Michael Gross, Co-CEO of SLR Investment
Corp. “SLRC is on an accelerated path to covering its distributions
sooner than we had projected at the time of the merger with SUNS
earlier this year.”
“The current private credit investment
environment is more attractive than we have seen in several years,”
said Bruce Spohler, Co-CEO of SLR Investment Corp. “Our investment
strategies focused on first lien cash flow and specialty finance
loans are well-positioned to thrive in the current market.”
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 3, 2022. All interested parties may participate in the
conference call by dialing (800) 225-9448 approximately 5-10
minutes prior to the call, international callers should dial (203)
518-9708. Participants should reference SLR Investment Corp. and
Conference ID: SLRC3Q22. A telephone replay will be available until
November 17, 2022 and can be accessed by dialing (800) 753-5479.
International callers should dial (402) 220-2675.
This conference call will also be broadcast live
over the Internet and can be accessed by all interested parties
from the Event Calendar within the “Investors” tab of SLR
Investment Corp.’s website, www.slrinvestmentcorp.com. Please
register online prior to the start of the call. For those who are
not able to listen to the broadcast live, a replay of the webcast
will be available soon after the call.
Comprehensive Investment
Portfolio
Investment Activity
During the three months ended September 30,
2022, SLRC had total originations of $393.9 million and repayments
and amortization of $159.0 million across its four core asset
classes: sponsor finance, asset-based lending, equipment finance,
and life science finance resulting in net originations of $234.9
million to the Comprehensive Investment Portfolio.
The investment activity of our Comprehensive
Investment Portfolio by asset class for the quarter ended September
30, 2022 was as follows:
Asset Class |
Sponsor
Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive Investment Portfolio
Activity |
Originations |
|
102.4 |
$132.3 |
$111.6 |
$47.6 |
$393.9 |
Repayments /Amortization |
$34.0 |
$19.5 |
$100.8 |
$4.7 |
$159.0 |
Net PortfolioActivity |
$68.4 |
$112.8 |
$10.8 |
$42.9 |
$234.9 |
(1) Sponsor Finance refers to cash flow loans
to sponsor-owned companies. (2) Includes SLR-CS,
SLR-BC and SLR-HC ABL’s full portfolios, as well as asset-based
loans on the Company’s balance sheet. (3) Includes
SLR-EF’s full portfolio and equipment financings on the Company’s
balance sheet and Kingsbridge Holdings’ (KBH) full portfolio.
Portfolio Composition
SLRC’s Comprehensive Investment Portfolio composition by asset
class at September 30, 2022 was as follows:
Comprehensive Investment Portfolio
Composition |
Amount |
Weighted Average Asset |
(at fair value) |
($mm) |
% |
Yield(4) |
Senior Secured Investments |
|
|
|
Cash Flow Loans (Sponsor Finance) |
$701.2 |
23.9% |
9.6% |
Asset-Based Loans(1) |
$966.5 |
33.0% |
12.3% |
Equipment Financings(2) |
$907.5 |
31.0% |
11.4% |
Life Science Loans |
$349.7 |
11.9% |
11.3% |
Total Senior Secured Investments |
$2,924.9 |
99.8% |
11.3% |
Equity
and Equity-like Securities |
$5.4 |
0.2% |
|
Total Comprehensive Investment Portfolio |
$2,930.3 |
100.0% |
|
Floating Rate Investments(3) |
$1,946.6 |
66.7% |
|
First Lien Senior Secured Loans |
$2,859.0 |
97.6% |
|
Second Lien Senior Secured Cash Flow Loans |
$6.5 |
0.2% |
|
Second Lien Senior SecuredAsset-Based Loans |
$59.5 |
2.0% |
|
(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
investments. 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
September 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 September 30, 2022 against the portfolio as of
September 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 785 unique borrowers in over 100 industries
and with an average exposure of $3.7 million.
At September 30, 2022, 99.8% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans, comprised of 97.6% first lien senior secured loans and
approximately 2.2% second lien senior secured loans, of which 0.2%
were second lien cash flow loans and 2.0% were second lien
asset-based loans.
The weighted average yield at fair value of the
income-producing investments in the Comprehensive Investment
Portfolio was 11.3% at September 30, 2022, compared to 9.6% at June
30, 2022.
SLR Investment Corp. Portfolio
Asset Quality
As of September 30, 2022, on a fair value basis,
99.6% of the Company’s portfolio was performing.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of September 30, 2022, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$482.9 |
22.4% |
2 |
$1,637.8 |
76.0% |
3 |
$26.9 |
1.2% |
4 |
$7.7 |
0.4% |
Investment Income Contribution by Asset
Class(1)
For the QuarterEnded: |
SponsorFinance |
Asset-basedFinance |
EquipmentFinance |
Life ScienceFinance |
Total($mm) |
9/30/2022 |
16.1 |
12.8 |
9.2 |
9.5 |
47.6 |
% Contribution |
33.9 |
26.9 |
19.3 |
19.9 |
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 September 30, 2022 compared to the Quarter Ended
September 30, 2021.
Investment Income
For the fiscal quarters ended September 30, 2022
and 2021, gross investment income totaled $47.6 million and $32.2
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, coupled
with organic growth, as well as due to an increase in LIBOR and
SOFR.
Expenses
Net expenses totaled $27.5 million and $17.2
million, respectively, for the fiscal quarters ended September 30,
2022 and 2021. The increase in expenses for the year over year
period was primarily due to higher interest expense associated with
an increase in borrowings to fund new investments as well as the
increase in LIBOR and SOFR.
Net Investment Income
The Company’s net investment income totaled $20.1 million and
$15.0 million, or $0.37 and $0.36 per average share, respectively,
for the fiscal quarters ended September 30, 2022 and 2021.
Net Realized and Unrealized Loss
Net realized and unrealized losses for the fiscal quarters ended
September 30, 2022 and 2021 totaled $6.5 million and $1.6 million,
respectively.
Net Increase in Net Assets Resulting from
Operations
For the quarters ended September 30, 2022 and
2021, the Company had a net increase in net assets resulting from
operations of $13.5 million and $13.4 million, respectively. For
the quarters ended September 30, 2022 and 2021, earnings per
average share were $0.25 and $0.32, respectively.
Liquidity and Capital Resources
Credit Facilities and Available Capital
At September 30, 2022, the Company had $490.2
million drawn on its $825 million revolving credit facilities, $100
million of term loans and $566 million of unsecured senior
notes.
Leverage
On September 30, 2022, the Company’s net
debt-to-equity was 1.14x. 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.
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 September 30, 2022,
no repurchases have taken place.
Subsequent Events
Joint Venture Agreement
On October 12, 2022, the Company entered into a
joint venture agreement with SunStone Senior Credit L.P. (the
“Investor”) to create SLR Senior Lending Program LLC (“SSLP”). The
joint venture is expected to invest primarily in senior secured
cash flow loans. The Company and the Investor each have made
initial equity commitments of $50.0 million resulting in a total
equity commitment of $100 million. SSLP is in the process of
securing third party financing to allow the joint venture to
utilize leverage. The Company and the Investor expect to begin
funding SSLP with investments prior to the end of 2022. Investment
decisions and all material decisions in respect of SSLP must be
approved by representatives of the Company and the Investor.
Distributions
On October 5, 2022, our Board declared a monthly
distribution of $0.136667 per share payable on November 2, 2022 to
holders of record as of October 20, 2022.
On November 2, 2022, the Company’s Board of
Directors (the “Board”) declared a monthly distribution of
$0.136667 per share payable on December 1, 2022 to
stockholders of record as of November 17, 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)
|
September 30, 2022 (unaudited) |
|
December 31, 2021 |
Assets |
|
|
|
|
|
|
|
Investments at fair value: |
|
|
|
|
|
|
|
Companies less than 5% owned (cost: $1,386,014 and $985,088,
respectively) |
$ |
1,368,827 |
|
|
$ |
964,379 |
|
Companies more than 25% owned (cost: $812,800 and $711,865,
respectively) |
|
786,534 |
|
|
|
706,203 |
|
Cash |
|
7,983 |
|
|
|
2,935 |
|
Cash equivalents (cost: $268,931
and $320,000, respectively) |
|
268,931 |
|
|
|
320,000 |
|
Dividends receivable |
|
11,542 |
|
|
|
9,028 |
|
Interest receivable |
|
9,456 |
|
|
|
6,521 |
|
Receivable for investments
sold |
|
1,276 |
|
|
|
1,378 |
|
Prepaid expenses and other
assets |
|
886 |
|
|
|
567 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
2,455,435 |
|
|
$ |
2,011,011 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Debt ($1,156,200 and $818,500
face amounts, respectively, reported net of unamortized debt
issuance costs/market discount of $7,909 and $6,462,
respectively) |
$ |
1,148,291 |
|
|
$ |
812,038 |
|
Payable for investments and cash
equivalents purchased |
|
268,952 |
|
|
|
320,041 |
|
Distributions payable |
|
7,486 |
|
|
|
17,327 |
|
Management fee payable |
|
7,890 |
|
|
|
7,435 |
|
Performance-based incentive fee
payable |
|
4,771 |
|
|
|
1,864 |
|
Interest payable |
|
7,083 |
|
|
|
4,492 |
|
Administrative services
payable |
|
1,293 |
|
|
|
2,689 |
|
Other liabilities and accrued
expenses |
|
3,444 |
|
|
|
2,844 |
|
|
|
|
|
|
|
|
|
Total liabilities |
$ |
1,449,210 |
|
|
$ |
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 |
|
(158,036 |
) |
|
|
(95,141 |
) |
|
|
|
|
|
|
|
|
Total net assets |
$ |
1,006,225 |
|
|
$ |
842,281 |
|
|
|
|
|
|
|
|
|
Net Asset Value Per
Share |
$ |
18.37 |
|
|
$ |
19.93 |
|
|
|
|
|
|
|
|
|
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(in thousands, except share
amounts)
|
Three months ended |
|
September 30, 2022 |
|
September 30, 2021 |
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
Companies less than 5% owned |
$ |
32,933 |
|
|
$ |
19,202 |
|
Companies more than 25% owned |
|
2,431 |
|
|
|
2,834 |
|
Dividends: |
|
|
|
|
|
|
|
Companies more than 25% owned |
|
11,969 |
|
|
|
9,078 |
|
Other income: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
234 |
|
|
|
1,044 |
|
Companies more than 25% owned |
|
— |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
Total investment income |
|
47,567 |
|
|
|
32,163 |
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
Management fees |
$ |
7,890 |
|
|
$ |
7,142 |
|
Performance-based incentive
fees |
|
4,965 |
|
|
|
698 |
|
Interest and other credit
facility expenses |
|
12,784 |
|
|
|
7,127 |
|
Administrative services
expense |
|
1,132 |
|
|
|
1,435 |
|
Other general and administrative
expenses |
|
935 |
|
|
|
755 |
|
|
|
|
|
|
|
|
|
Total expenses |
|
27,706 |
|
|
|
17,157 |
|
|
|
|
|
|
|
|
|
Performance-based incentive fees
waived |
|
(194 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Net expenses |
|
27,512 |
|
|
|
17,157 |
|
|
|
|
|
|
|
|
|
Net investment income |
$ |
20,055 |
|
|
$ |
15,006 |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
Net realized loss on investments and cash equivalents (companies
less than 5% owned) |
$ |
(37,326 |
) |
|
$ |
(127 |
) |
|
|
|
|
|
|
|
|
Net change in unrealized gain
(loss) on investments and cash equivalents: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
28,783 |
|
|
|
(6,507 |
) |
Companies more than 25% owned |
|
2,016 |
|
|
|
4,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on investments and cash
equivalents |
|
30,799 |
|
|
|
(1,508 |
) |
|
|
|
|
|
|
|
|
Net realized and unrealized loss on investments and cash
equivalents |
|
(6,527 |
) |
|
|
(1,635 |
) |
|
|
|
|
|
|
|
|
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
13,528 |
|
|
$ |
13,371 |
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE |
$ |
0.25 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
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 in leveraged, U.S. upper middle market
companies in the form of cash flow, asset-based, and life sciences
senior secured loans.
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
Relations(646) 308-8770
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