SLR Investment Corp. Issues Letter to Stakeholders
March 20 2023 - 4:01PM
SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”)
announces today that it has issued an open letter to its
stakeholders regarding a business update amid the aftermath of the
Silicon Valley Bank (“SVB”) and Signature Bank (“SBNY”) issues.
The full text of the letter follows:
March 20, 2023
Dear Valued Stakeholder,
In light of the recent issues at Silicon Valley
Bank and Signature Bank, we would like to provide our stakeholders
with an update on our business. SLR Investment Corp. currently
believes the issues at SVB and SBNY will not have a significant
impact to its operations following the Company’s thorough review.
Consistent with our commitment to transparency, we are sharing with
this letter our assessment of the impact on SLRC of the FDIC’s
decision to place Silicon Valley Bank and Signature Bank under
receivership. We have concluded that these bank issues should not
have a material adverse effect on the financial performance,
portfolio credit quality, or liquidity position of the Company.
Outlined below are the key takeaways from the Company’s analysis of
the Company’s risk exposures related to SVB and SBNY, which was
conducted in collaboration with its investment advisor, SLR Capital
Partners, LLC (“SLR”).
SLRC Has No Material Direct Financial
and Operational Exposure to SVB or SBNY
- SLRC does not hold any cash or cash
equivalents with SVB or SBNY.
- The Company has not had any lending relationship with SVB, and
at December 31, 2022, the Company had approximately $13 million of
unfunded exposure to SBNY, representing less than 1.0% of the
Company’s $1.5 billion of total credit facilities and unsecured
debt outstanding.
SLRC’s Balance Sheet Remains
Strong
- The Company continues to have a
strong balance sheet, with ample liquidity and capital
availability.
- SLRC’s net leverage ratio of 1.08x
at December 31, 2022 is well within its target leverage range of
0.9x – 1.25x.
- SLRC has no debt maturities until
the end of 2024, resulting in a liability structure not subject to
near-term refinancing risk.
- SLRC’s leverage profile is in a
strong position to weather a rising rate environment with 50% of
SLRC’s $1.1 billion of borrowings at December 31, 2022 comprised of
senior unsecured fixed rate notes at a weighted average annual
interest rate of 3.9%.
SLRC Does Not Have Material Portfolio
Company Exposure to SVB or SBNY
- SLR has been in active dialogue
with SLRC’s portfolio companies and their private equity and
venture capital partners.
- Based on these ongoing discussions,
SLR is not aware of any SLRC borrowers that have faced material
issues to date as a result of the bank issues.
- Based on our review to date, SLRC’s
strategies have no material exposure to SVB or SBNY.
- SVB was an active bank participant
in the life science industry. Following an extensive review and
consultations with our venture capital partners, SLR has concluded
that only one of SLRC’s life science portfolio companies,
representing less than 0.2% of the fair value of SLRC’s portfolio,
holds a significant portion of their cash at SVB. In light of the
FDIC’s commitment to guarantee deposits, we believe there is no
material risk from the SVB closure to this portfolio company.
- Based on information SLRC received
from its portfolio companies to date, SLR does not believe there
are any SLRC portfolio companies with undrawn loan facilities where
SVB or SBNY is the lender.
SLR Believes that the Company’s
Portfolio is Positioned Well for Economic Disruption That May
Result from the Bank Issues
- With 78% of SLRC’s Comprehensive
Investment Portfolio1 invested in specialty finance assets, which
have borrowing bases supporting the first lien loans and full
covenant structures, SLRC is defensively positioned for a volatile
economic period.
- Additionally, 98.6% of SLRC’s
Comprehensive Investment Portfolio at December 31, 2022 was
invested in first lien senior secured loans. Of the 1.2% of SLRC’s
portfolio which is allocated to second lien loans, only 0.2% is
invested in second lien cash flow loans and 1.0% is allocated to
second lien asset-based loans with defined borrowing bases. The
first lien on assets provides greater protection of principal than
second lien and subordinated loans.
- As of December 31, 2022, SLRC had
over $650 million in available capital to take advantage of the
current investment environment.
SLRC’s Investment Advisor, SLR Capital
Partners, LLC Intends to Be Opportunistic During the Resulting
Market Volatility
- All of SLR’s investment strategies
have significant available capital to deploy. Specifically, SLR’s
Life Science Team continues to actively seek attractive late-stage
life science companies.
- With its recently announced $3.8
billion of additional investable capital, including anticipated
leverage, SLR believes it is positioned well across its niche
private credit strategies to assist fundamentally strong middle
market companies through the current challenging financing
environment on terms that can provide attractive risk-adjusted
returns to its investors. The incremental capital expands SLR’s
total platform scale and creates a larger opportunity set for SLRC
to co-invest alongside other investment vehicles advised by
SLR.
- SLR believes that its available
capital and platform scale will be deemed particularly valuable by
borrowers, sponsors, and venture capital firms in the current
economic climate.
Sincerely,
Michael Gross & Bruce Spohler, Co-Chief
Executive Officers of SLR Investment Corp. and Co-founders of SLR
Capital Partners, LLC
About SLR Investment Corp.
SLR Investment Corp. is a closed-end investment
company that has elected to be regulated 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: the market
environment and its impact on the business prospects of SLRC and
the prospects of SLRC’s portfolio companies; prospects for
additional portfolio growth of SLRC; and the impact on the
performance of SLRC from the investments that SLRC has made and
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) changes in the
economy, financial markets and political environment, including the
impacts of inflation and rising interest rates; (ii) risks
associated with possible disruption in the operations of SLRC or
the economy generally due to terrorism, war or other geopolitical
conflicts (including the current conflict between Russia and
Ukraine), natural disasters or pandemics; (iii) future changes in
laws or regulations (including the interpretation of these laws and
regulations by regulatory authorities); (iv) conditions in SLRC’s
operating areas, particularly with respect to business development
companies or regulated investment companies; and (v) 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
1 The Comprehensive Investment Portfolio is comprised of SLRC’s
investment portfolio and SLR Credit Solutions’ (“SLR-CS”) full
portfolio, SLR Equipment Finance’s (“SLR-EF”) full portfolio,
Kingsbridge Holdings, LLC’s (“KBH”) full portfolio, SLR Business
Credit’s (“SLR-BC”) full portfolio, SLR Healthcare ABL’s (“SLR-HC
ABL”) full portfolio owned by the Company (collectively, the
Company’s “Commercial Finance Portfolio Companies”), and the senior
secured loans held by the SLR Senior Lending Program (“SSLP”)
attributable to the Company, and excludes the Company’s fair value
of the equity interests in SSLP and the Commercial Finance
Portfolio Companies and also excludes SLRC’s loan to KBH.
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