SLR Investment Corp. (NASDAQ: SLRC) (the “Company”, “SLRC”,
“we”, “us”, or “our”) today reported net investment income
of $23.4 million, or $0.43 per share, for the third quarter of
2023.
At September 30, 2023, net asset value (NAV) was
$18.06 per share, compared to $17.98 at June 30, 2023.
Beginning with the fourth quarter of 2023, the
Company has returned to making quarterly, rather than monthly,
distributions. On November 7, 2023, the Board declared a quarterly
distribution of $0.41 per share payable on December 28, 2023 to
holders of record as of December 14, 2023. 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,
2023:
Comprehensive Investment Portfolio*
fair value: $3.1 billionNumber of unique issuers: approximately
790Net assets: $985.4 millionNet asset value per share: $18.06Net
debt-to-equity**: 1.21x
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended September 30, 2023:
Investments made during the quarter:
$346.3 millionInvestments prepaid and sold during the quarter:
$306.8 million
Operating Results for the Quarter Ended September 30,
2023:
Net investment income: $23.4
millionNet investment income per share: $0.43 Net realized and
unrealized gain: $3.6 million Net increase in net assets from
operations: $26.9 millionEarnings per share: $0.49
* The Comprehensive Investment Portfolio for the
quarter ended September 30, 2023 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 LLC (“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 loans to KBH and
SLR-EF.
** Please see Liquidity and Capital Resources
below.
*** Comprehensive Portfolio Activity for the
quarter ended September 30, 2023 includes investment activity of
the Commercial Finance Portfolio Companies and SSLP attributable to
the Company.
“We are pleased to report a 16% increase
year-over-year in our net investment income, which once again
exceeded distributions paid during the quarter,” said Michael Gross
and Bruce Spohler, Co-CEOs of SLR Investment Corp. “Our credit
quality remains strong, as evidenced by the increase in net asset
value, stable watchlist, and low non-accruals. Additionally, we
grew our portfolio, investing in loans which we believe will be an
attractive vintage, particularly in sponsor finance.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday,
November 8, 2023. All interested parties may participate in the
conference call by dialing (800) 267-6316 approximately 5-10
minutes prior to the call, international callers should dial (203)
518-9783. Participants should reference SLR Investment Corp. and
Conference ID: SLRC3Q23. A telephone replay will be available until
November 22, 2023 and can be accessed by dialing (800) 934-7836.
International callers should dial (402) 220-6984. 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
Portfolio Activity
During the three months ended September 30,
2023, SLRC had total originations of $346.3 million and repayments
of $306.8 million across the Company’s four investment
strategies:
For the Quarter Ended September 30,
2023($mm) |
Asset Class |
Sponsor Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive Investment Portfolio
Activity |
Originations |
$115.2 |
$84.9 |
$121.7 |
$24.5 |
$346.3 |
Repayments / Amortization |
$34.1 |
$86.7 |
$144.2 |
$41.8 |
$306.8 |
Net Portfolio Activity |
$81.1 |
$(1.8) |
$(22.5) |
$(17.3) |
$ 39.5 |
(1) |
Sponsor Finance refers to cash flow loans to sponsor-owned
companies including cash flow loans held in the SLR Senior Lending
Program LLC attributable to the Company. |
(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
The Comprehensive Investment Portfolio is
diversified across approximately 790 unique issuers operating in
over 110 industries, with an average exposure of $4.0 million or
0.1% per issuer.
At September 30, 2023, 99.2% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans of which 97.8% is held in first lien senior secured loans.
Second lien ABL exposure is 1.2% and second lien cash flow exposure
is 0.2% of the Comprehensive Investment Portfolio at September 30,
2023.
SLRC’s Comprehensive Investment Portfolio
composition by asset class at September 30, 2023 was as
follows:
Comprehensive Investment Portfolio Composition(at
fair value) |
Amount |
Weighted Average Asset Yield(5) |
($mm) |
% |
Senior Secured Investments Cash Flow Loans
(Sponsor Finance)(1) |
$823.9 |
26.5% |
11.8% |
Asset-Based Loans(2) |
$976.0 |
31.4% |
15.3% |
Equipment Financings(3) |
$954.7 |
30.8% |
9.6% |
Life Science Loans |
$326.2 |
10.5% |
13.0% |
Total Senior Secured Investments |
$3,080.8 |
99.2% |
12.3% |
Equity
and Equity-like Securities |
$23.9 |
0.8% |
|
Total Comprehensive Investment Portfolio |
$3,104.7 |
100.0% |
|
Floating Rate Investments(4) |
$2,064.6 |
66.9% |
|
First Lien Senior Secured Loans |
$3,035.2 |
97.8% |
|
Second Lien Senior Secured Cash Flow Loans |
$7.5 |
0.2% |
|
Second Lien Senior SecuredAsset-Based Loans |
$38.1 |
1.2% |
|
(1) |
Includes cash flow loans held in the SSLP attributable to the
Company and excludes the Company’s equity investment in SSLP. |
(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, and excludes the Company’s equity
investments in each of SLR-CS, SLR-BC, and SLR-HC ABL. |
(3) |
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. |
(4) |
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. |
(5) |
The weighted average asset yield
for income producing 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, 2023 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, 2023
against the portfolio as of September 30, 2023, annualized. The
weighted average yield for the KBH equipment leasing portfolio
represents the expected return on equity during 2023. |
SLR Investment Corp.
Portfolio
Asset Quality
As of September 30, 2023, 99.7% of SLRC’s
portfolio was performing on a fair value basis and 99.3% on a cost
basis.
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 September 30, 2023, 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 |
$609.3 |
28.1% |
2 |
$1,547.9 |
71.3% |
3 |
$6.4 |
0.3% |
4 |
$7.5 |
0.3% |
Investment Income Contribution by Asset
Class
Investment Income Contribution by Asset
Class(1)($mm) |
For the QuarterEnded: |
SponsorFinance |
Asset-basedLending |
EquipmentFinance |
Life ScienceFinance |
Total($mm) |
9/30/2023 |
$23.5 |
$14.3 |
$9.7 |
$12.1 |
$59.6 |
% Contribution |
39.3% |
24.0% |
16.4% |
20.3% |
100.0% |
(1) |
Investment Income Contribution by Asset Class includes: interest
income/fees from Sponsor Finance (cash flow) loans on balance sheet
and distributions from SSLP; income/fees from asset-based loans on
balance sheet and distributions from SLR-CS, SLR-BC, SLR-HC ABL;
income/fees from equipment financings and distributions from SLR-EF
and distributions from KBH; and income/fees from life science loans
on balance sheet. |
SLR Senior Lending Program
LLC
As of September 30, 2023, the Company and
Sunstone Senior Credit L.P. had contributed combined equity capital
in the amount of $57.5 million of a total equity commitment of $100
million to SSLP. At September 30, 2023, SSLP had total assets of
$137.4 million consisting of floating rate senior secured loans to
27 different borrowers. During the quarter ended September 30,
2023, SSLP invested $57.5 million in 16 portfolio companies. Based
on transfers made from SLRC’s balance sheet in the fourth quarter
to date, as well as new investment activity, we expect the SSLP to
have substantially increased its investment commitments by December
31, 2023.
SLR Investment Corp.’s Results of
Operations for the Quarter Ended September 30, 2023 compared to the
Quarter Ended September 30, 2022.
Investment Income
For the fiscal quarters ended September 30, 2023
and 2022, gross investment income totaled $59.6 million and $47.6
million, respectively. The increase in gross investment income for
the year over year three-month periods was primarily due to net
growth of the income producing portfolio as well as an increase in
index rates.
Expenses
SLRC’s net expenses totaled $36.3 million and
$27.5 million, respectively, for the three months ended September
30, 2023 and 2022. The increase in expenses from 2022 to 2023 was
primarily due to higher management fees, incentive fees, and
interest expense on a larger portfolio. Additionally, there was an
increase in index rates on borrowings.
Net Investment Income
SLRC’s net investment income totaled $23.4
million and $20.1 million, or $0.43 and $0.37, per average share,
respectively, for the fiscal quarters ended September 30, 2023 and
2022.
Net Realized and Unrealized Gain
(Loss)
Net realized and unrealized gain (loss) for the
fiscal quarters ended September 30, 2023 and 2022 totaled
approximately $3.6 million and ($6.5) million, respectively.
Net Increase in Net Assets Resulting
from Operations
For the three months ended September 30, 2023
and 2022, the Company had a net increase in net assets resulting
from operations of $26.9 million and $13.5 million, respectively.
For the same periods, earnings per average share were $0.49 and
$0.25, respectively.
Liquidity and Capital
Resources
Credit Facilities and Available Capital
At September 30, 2023, the Company had $627.8
million drawn on the $885 million of commitments that the Company
has under its revolving credit facilities, $100 million of term
loans, and $470 million of unsecured notes. At September 30th,
including anticipated available credit facility capacity at the
SSLP and our specialty finance portfolio companies, subject to
borrowing base limits, SLRC had approximately $600 million of
available capital to take advantage of the current attractive
investment environment.
Leverage
On September 30, 2023, the Company’s net
debt-to-equity was 1.21x, within the Company’s target range of 0.9x
to 1.25x. The net leverage is expected to decrease as the Company
completes the ramp of the SSLP.
Unfunded Commitments
At September 30, 2023, excluding commitments to
SLR-CS, SLR-EF, SLR-HC ABL and SSLP, over which the Company
controls such funding, the Company had unfunded commitments of
approximately $296.9 million.
Subsequent Events
Distributions
Beginning with the fourth quarter of 2023, the
Company has returned to making quarterly, rather than monthly,
distributions. On November 7, 2023, the Board declared a quarterly
distribution of $0.41 per share payable on December 28, 2023 to
holders of record as of December 14, 2023. The specific tax
characteristics of the distribution 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, 2023 (unaudited) |
December 31, 2022 |
Assets |
|
|
Investments at fair value: |
|
|
Companies less than 5% owned (cost: $1,305,572 and $1,312,701,
respectively) |
$ |
1,320,729 |
|
$ |
1,289,082 |
|
Companies 5% to 25% owned (cost: $59,983 and $0, respectively) |
|
43,405 |
|
|
— |
|
Companies more than 25% owned (cost: $839,062 and $821,886,
respectively) |
|
806,922 |
|
|
797,594 |
|
Cash |
|
10,266 |
|
|
10,743 |
|
Cash equivalents (cost: $332,557 and $417,590, respectively) |
|
332,557 |
|
|
417,590 |
|
Dividends receivable |
|
10,993 |
|
|
11,192 |
|
Interest receivable |
|
11,828 |
|
|
9,706 |
|
Receivable for investments sold |
|
1,598 |
|
|
1,124 |
|
Prepaid expenses and other assets |
|
788 |
|
|
664 |
|
|
|
|
Total assets |
$ |
2,539,086 |
|
$ |
2,537,695 |
|
|
|
|
Liabilities |
|
|
Debt ($1,197,750 and $1,093,200 face amounts, respectively,
reported net of unamortized debt issuance costs of $5,996 and
$7,202, respectively) |
$ |
1,191,754 |
|
$ |
1,085,998 |
|
Payable for investments and cash equivalents purchased |
|
332,557 |
|
|
417,611 |
|
Distributions payable |
|
— |
|
|
7,481 |
|
Management fee payable |
|
8,051 |
|
|
7,964 |
|
Performance-based incentive fee payable |
|
5,621 |
|
|
5,422 |
|
Interest payable |
|
7,416 |
|
|
7,943 |
|
Administrative services payable |
|
3,678 |
|
|
1,488 |
|
Other liabilities and accrued expenses |
|
4,624 |
|
|
4,057 |
|
|
|
|
Total liabilities |
$ |
1,553,701 |
|
$ |
1,537,964 |
|
|
|
|
Net Assets |
|
|
Common stock, par value $0.01 per share, 200,000,000 and
200,000,000 common shares authorized, respectively, and 54,554,634
and 54,555,380 shares issued and outstanding, respectively |
$ |
546 |
|
$ |
546 |
|
Paid-in capital in excess of par |
|
1,162,559 |
|
|
1,162,569 |
|
Accumulated distributable net loss |
|
(177,720 |
) |
|
(163,384 |
) |
|
|
|
Total net assets |
$ |
985,385 |
|
$ |
999,731 |
|
|
|
|
Net Asset Value Per Share |
$ |
18.06 |
|
$ |
18.33 |
|
|
|
|
SLR INVESTMENT CORP.CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except
share amounts) |
|
|
Three months ended |
|
September 30, 2023 |
September 30, 2022 |
INVESTMENT
INCOME: |
|
|
Interest: |
|
|
Companies less than 5%
owned |
$ |
43,696 |
|
$ |
32,933 |
|
Companies 5% to 25%
owned |
|
816 |
|
|
— |
|
Companies more than 25%
owned |
|
2,879 |
|
|
2,431 |
|
Dividends: |
|
|
Companies more than 25%
owned |
|
11,429 |
|
|
11,969 |
|
Other income: |
|
|
Companies less than 5% owned |
|
735 |
|
|
234 |
|
Companies more than 25% owned |
|
86 |
|
|
— |
|
|
|
|
Total investment income |
|
59,641 |
|
|
47,567 |
|
|
|
|
EXPENSES: |
|
|
Management fees |
$ |
8,051 |
|
$ |
7,890 |
|
Performance-based incentive
fees |
|
5,796 |
|
|
4,965 |
|
Interest and other credit
facility expenses |
|
19,874 |
|
|
12,784 |
|
Administrative services
expense |
|
1,575 |
|
|
1,132 |
|
Other general and administrative
expenses |
|
1,161 |
|
|
935 |
|
|
|
|
Total expenses |
|
36,457 |
|
|
27,706 |
|
|
|
|
Performance-based incentive fees
waived |
|
(175 |
) |
|
(194 |
) |
|
|
|
Net expenses |
|
36,282 |
|
|
27,512 |
|
|
|
|
Net investment income |
$ |
23,359 |
|
$ |
20,055 |
|
|
|
|
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
Net realized loss on investments and cash equivalents (companies
less than 5% owned) |
$ |
(30,951 |
) |
$ |
(37,326 |
) |
|
|
|
Net change in unrealized gain on
investments and cash equivalents: |
|
|
Companies less than 5% owned |
|
33,439 |
|
|
28,783 |
|
Companies 5% to 25% owned |
|
1,065 |
|
|
— |
|
Companies more than 25% owned |
|
35 |
|
|
2,016 |
|
|
|
|
|
|
|
Net change in unrealized gain on investments and cash
equivalents |
|
34,539 |
|
|
30,799 |
|
|
|
|
Net realized and unrealized gain (loss) on investments and cash
equivalents |
|
3,588 |
|
|
(6,527 |
) |
|
|
|
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS |
$ |
26,947 |
|
$ |
13,528 |
|
|
|
|
EARNINGS PER
SHARE |
$ |
0.49 |
|
$ |
0.25 |
|
|
|
|
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: an
increase in the size of SLRC’s income producing comprehensive
portfolio; 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 , 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
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