Solar Senior Capital Ltd. (NASDAQ: SUNS) (the “Company” “Solar
Senior” or “SUNS”) today reported net investment income
of $4.8 million, or $0.30 per average share, for the quarter
ended September 30, 2020.
At September 30, 2020, net asset value (NAV) was
$15.79 per share, an increase of $0.24 per share or 2% from June
30, 2020, driven primarily by unrealized mark-to-market
appreciation. At September 30, 2020, 100% of Solar Senior’s
portfolio was performing.
The Company’s Board of Directors declared a
monthly distribution for November 2020 of $0.10 per share payable
on December 2, 2020 to stockholders of record
on November 19, 2020. Tax characteristics of all distributions
will be reported to shareholders on Form 1099 after the end of the
calendar year.
HIGHLIGHTS:
At September 30, 2020:
Comprehensive
Investment portfolio* fair value: $521.6 million
Number of portfolio
companies*: 206
Net assets: $253.4
million
Net asset value per
share: $15.79
Net Debt to Equity:
0.52x
Available Capital**:
Over $250 million, subject to borrowing base availability
Comprehensive Portfolio Activity*** for
the Quarter Ended September 30, 2020
Investments made during
the quarter: $40.3 million
Investments repaid or
sold during the quarter: $55.8 million
Operating Results for the Quarter Ended
September 30, 2020
Net investment income:
$4.8 million
Net investment income
per share: $0.30
Net realized and
unrealized gain: $3.8 million
Net increase in net
assets from operations: $8.6 million
Earnings per share:
$0.54
* The Comprehensive Investment Portfolio is
comprised of Solar Senior Capital Ltd.’s investment portfolio,
Gemino Healthcare Finance’s (“Gemino”) full portfolio and North
Mill Holdco LLC’s (“North Mill”) full portfolio, and excludes the
Company’s fair value of its equity interest in Gemino and North
Mill.
** See Liquidity and Capital Resources
*** Comprehensive Portfolio Activity includes
gross originations/repayments through Gemino and North Mill.
“SUNS portfolio continued to perform extremely
well in Q3 reflecting our focus on first lien senior secured cash
flow loans and asset-based loans in our niche specialty finance
verticals,” said Michael Gross, Co-CEO of SUNS. “At September 30,
2020, 100% of our investments were performing and their improved
valuations drove a 2% increase in our Net Asset Value per share
over the prior quarter. Our portfolio companies have resilient
business models and access to liquidity that have enabled them to
weather a challenging period.”
“The conservative management of SUNS assets and
liabilities through an extended period of frothy credit markets has
positioned the company with a solid portfolio foundation, a stable
funding profile, low leverage, strong liquidity, and favorable
positioning to make new investments,” said Bruce Spohler, Co-CEO of
SUNS. “We are encouraged by the pickup in M&A activity during
Q3 and the sponsor-led momentum leading into 2021. We expect
portfolio growth in the coming quarters from a growing pipeline of
first lien cash flow and asset-based loan investments.”
Conference Call and Webcast The
Company will host an earnings conference call and audio webcast at
11:30 a.m. (Eastern Time) on Friday, November 6, 2020. All
interested parties may participate in the conference call by
dialing (844) 889-7785 approximately 5-10 minutes prior to the
call, international callers should dial (661) 378-9929.
Participants should reference Solar Senior Capital Ltd. and the
participant passcode of 6735445 when prompted. A telephone replay
will be available until November 20, 2020 and can be accessed by
dialing (855) 859-2056 and using the passcode 6735445.
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 Solar Senior Capital’s
website, www.solarseniorcap.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 quarter ended September 30, 2020,
Solar Senior Capital had total originations of $40.3 million and
repayments of $55.8 million across the Company’s core businesses
comprised of senior secured cash flow, traditional asset-based
lending and healthcare asset-based lending, resulting in a net
portfolio reduction of $15.5 million to the comprehensive
portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended September 30, 2020 was
as follows:
Comprehensive Investment Portfolio
Activity(1) Q3 2020 (in
millions) |
Asset Classes |
Cash Flow Loans |
Asset-Based Loans North
Mill |
Asset-BasedHealthcareLoans Gemino |
Life Science |
Total Portfolio
Activity |
Originations |
$7.0 |
$32.2 |
$0.9 |
$0.2 |
$40.3 |
Repayments / Amortization |
$38.7 |
$11.9 |
$5.2 |
$0.0 |
$55.8 |
Net Portfolio Activity |
$(31.7) |
$20.3 |
$(4.3) |
$0.2 |
$(15.5) |
(1) Portfolio activity includes gross
originations/repayments across each business unit.
Portfolio Composition
Our Comprehensive Investment Portfolio composition
by business unit at September 30, 2020 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
WeightedAverage Asset-level
Yield |
($mm) |
% |
First Lien Senior Secured Loans |
|
|
|
Cash Flow 1st Lien Senior Secured Loans |
$259.8 |
49.8% |
6.5%5 |
Traditional Asset-Based 1st Lien Senior Secured Loans(1) (North
Mill) |
$154.9 |
29.7% |
12.9%6 |
Healthcare Asset-Based 1st Lien Senior Secured Loans(2)
(Gemino) |
$71.1 |
13.6% |
12.5%6 |
Life Science 1st Lien Senior Secured Loans |
$27.7 |
5.3% |
9.3%7 |
Total First Lien Senior Secured Loans |
$513.5 |
98.4% |
|
Cash Flow 2nd Lien Senior Secured Loans |
$8.0 |
1.5% |
7.5%5 |
Total Senior Secured Loans |
$521.5 |
>99.9% |
9.4% |
Equity and Equity-like Securities(3) |
$0.1 |
<0.1% |
|
Total Comprehensive Investment Portfolio |
$521.6 |
100.0% |
|
Floating Rate Investments(4) |
$501.6 |
96.2% |
|
- Includes North Mill’s full portfolio, all of which are 1st lien
senior secured loans.
- Includes Gemino’s full portfolio, all of which are 1st lien
senior secured loans.
- Excludes the Company’s equity investments in North Mill and
Gemino, which distribute quarterly dividends to the Company.
- Floating rate investments calculated as a percent of the
Company’s income-producing Comprehensive Investment Portfolio.
- Represents the yield to maturity based on fair market value at
September 30, 2020.
- Represents total interest and fee income for the three month
period ending on September 30, 2020 against the average portfolio
over the same fiscal period, annualized.
- Represents the weighted average of each individual loan’s yield
to maturity based on fair value at September 30, 2020 (excluding
exit fees or warrants).
The Comprehensive Investment Portfolio is
diversified across approximately 206 unique borrowers in over 120
industries. The average issuer exposure is $2.5 million, or
<0.5% of the comprehensive portfolio.
As of September 30, 2020, 98.4% of the
Comprehensive Portfolio was invested in first lien senior secured
cash flow and asset-based loans and 1.5% in second lien senior
secured cash flow loans, and less than 0.1% is in equity.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.4% at September 30, 2020.
Solar Senior Capital Ltd.
Portfolio
Asset Quality
At September 30, 2020, 100% of the Company’s
portfolio was performing with no investments on non-accrual.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of September 30, 2020, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of SUNS Portfolio |
1 |
$51.2 |
13.2% |
2 |
$319.9 |
82.1% |
3 |
$18.4 |
4.7% |
4 |
$0.0 |
0.0% |
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment
Income Q3 2020(1) (in
millions) |
For the Quarter Ended: |
Cash Flow Lending |
Asset-based Lending
(North Mill) |
Asset-basedHealthcareLending (Gemino) |
Life Science |
Total |
September 30, 2020 |
$5.0 |
$1.3 |
$0.9 |
$0.7 |
$7.9 |
% Contribution |
63.3% |
16.4% |
11.4% |
8.9% |
100.0% |
(1) Investment Income Contribution by
Business Unit includes interest income/fees from cash flow and life
science loans on balance sheet and distributions from North Mill
and Gemino.
Solar Senior Capital Ltd.’s Results of
Operations for the Quarter Ended September 30, 2020 compared to the
Quarter Ended September 30, 2019:
Investment Income
For the quarters ended September 30, 2020 and
2019, gross investment income totaled $7.9 million and $10.4
million, respectively. The decrease in quarterly gross investment
income year over year was primarily due to a reduction in portfolio
yield, mainly as a result of the decrease in LIBOR, on a relatively
smaller income producing investment portfolio on average.
Expenses
Net expenses totaled $3.1 million and $4.7
million, respectively, for the quarters ended September 30, 2020
and 2019. For the quarters ended September 30, 2020 and September
30, 2019, $0.7 million and $0.6 million, respectively, of
management and performance-based incentive fees were voluntarily
waived by the Company’s investment manager. The decrease in net
expenses year over year is primarily due to lower interest expense
due to reductions in LIBOR and an increase in the waiver of
fees.
Net Investment Income
The Company’s net investment income totaled $4.8
million and $5.7 million, or $0.30 and $0.35 per average share,
respectively, for the quarters ended September 30, 2020 and
2019.
Net Realized and Unrealized Gain
(Loss)
Net realized and unrealized gain (loss) for the
quarters ended September 30, 2020 and 2019 totaled $3.8 million and
$(0.5) million, respectively.
Net Increase in Net Assets Resulting from
Operations
For the quarters ended September 30, 2020 and
2019, the Company had a net increase in net assets resulting from
operations of $8.6 million and $5.2 million, respectively. For the
quarters ended September 30, 2020 and 2019, earnings per average
share were $0.54 and $0.32, respectively.
Liquidity and Capital
Resources
Unsecured Debt At September 30, 2020,
approximately 61% of the Company’s funded debt, or $85 million, was
comprised of unsecured notes.
Credit Facilities and Available Capital At
September 30, 2020, the Company had $54.3 million of borrowings
under its $300 million of revolving credit facilities, resulting in
a total of $139.3 million of funded debt and over $250 million of
available capital, subject to borrowing base limits.
Leverage As of September 30, 2020, the Company’s
net debt to equity ratio was 0.52x. The Company’s low 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 1.25–1.50x debt-to-equity.
Unfunded Revolver Commitments As of September 30,
2020, Solar Senior had unfunded revolver commitments of
approximately $4.1 million that can be fully drawn by the
borrowers.
Financial Statements
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
|
September 30, 2020 (unaudited) |
December 31, 2019 |
Assets |
|
|
Investments
at fair value: |
|
|
Companies less than 5% owned (cost: $301,805 and $363,947,
respectively) |
$ |
295,613 |
|
$ |
361,665 |
|
Companies more than 25% owned (cost: $98,439 and $98,439,
respectively) |
|
93,867 |
|
|
98,600 |
|
Cash |
|
6,306 |
|
|
7,054 |
|
Cash
equivalents (cost: $164,987 and $99,898, respectively) |
|
164,987 |
|
|
99,898 |
|
Interest
receivable |
|
1,319 |
|
|
1,933 |
|
Dividends
receivable |
|
1,753 |
|
|
1,893 |
|
Receivable
for investments sold |
|
36 |
|
|
6,667 |
|
Prepaid
expenses and other assets |
|
253 |
|
|
248 |
|
|
|
|
|
|
|
Total assets |
$ |
564,134 |
|
$ |
577,958 |
|
|
|
|
|
|
|
Liabilities |
|
|
Debt
($139,303 and $211,202 face amounts, respectively, reported net of
unamortized debt issuance costs of $2,105 and $1,901,
respectively.) |
$ |
137,198 |
|
$ |
209,301 |
|
Payable for
investments and cash equivalents purchased |
|
170,028 |
|
|
101,811 |
|
Distributions payable |
|
1,605 |
|
|
1,885 |
|
Management
fee payable |
|
314 |
|
|
426 |
|
Interest
payable |
|
524 |
|
|
1,172 |
|
Administrative services payable |
|
566 |
|
|
826 |
|
Other
liabilities and accrued expenses |
|
537 |
|
|
723 |
|
|
|
|
|
|
|
Total liabilities |
$ |
310,772 |
|
$ |
316,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
Common
stock, par value $0.01 per share, 200,000,000 and 200,000,000
common shares authorized, respectively, and 16,049,034 and
16,046,214 issued and outstanding, respectively |
$ |
160 |
|
$ |
160 |
|
Paid-in
capital in excess of par |
|
282,229 |
|
|
282,181 |
|
Accumulated
distributable net loss |
|
(29,027 |
) |
|
(20,527 |
) |
|
|
|
|
|
|
Total net assets |
$ |
253,362 |
|
$ |
261,814 |
|
|
|
|
|
|
|
Net
Asset Value Per Share |
$ |
15.79 |
|
$ |
16.32 |
|
|
|
|
|
|
|
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
|
Three months ended |
|
September 30, 2020 |
|
September 30, 2019 |
INVESTMENT INCOME: |
|
|
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
5,428 |
|
$ |
7,829 |
Companies 5% to 25% owned |
— |
281 |
Dividends: |
|
|
Companies more than 25% owned |
2,125 |
2,265 |
Other
income: |
|
|
Companies less than 5% owned |
315 |
21 |
Companies 5% to 25% owned |
— |
|
|
— |
|
|
|
Total investment income |
7,868 |
|
|
10,396 |
|
|
|
EXPENSES: |
|
|
Management
fees |
$ |
1,036 |
|
$ |
1,223 |
Performance-based incentive fees |
— |
535 |
Interest and
other credit facility expenses |
1,927 |
2,764 |
Administrative services expense |
370 |
405 |
Other
general and administrative expenses |
442 |
|
|
416 |
|
|
|
Total expenses |
3,775 |
|
|
5,343 |
|
|
|
|
Management
fees waived |
(722) |
(67) |
|
Performance-based incentive fees waived |
— |
|
|
(535) |
|
|
|
|
|
Net expenses |
3,053 |
|
|
4,741 |
|
|
|
|
|
Net investment income |
$ |
4,815 |
|
$ |
5,655 |
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH
EQUIVALENTS: |
|
|
Net realized
gain (loss) on investments and cash equivalents: |
|
|
Companies less than 5% owned |
$ |
37 |
|
$ |
(6,973) |
Companies 5% to 25% owned |
— |
|
|
1,979 |
|
|
|
|
Net realized
gain (loss) on investments and cash equivalents. |
37 |
|
|
(4,994) |
|
|
|
|
|
Net change
in unrealized gain (loss) on investments and cash equivalents: |
|
|
|
Companies less than 5% owned |
3,794 |
7,603 |
Companies 5% to 25% owned |
— |
(1,046) |
Companies more than 25% owned |
— |
|
|
(2,050) |
|
|
|
Net change in unrealized gain (loss) on Investments and cash
equivalents |
3,794 |
|
|
4,507 |
|
|
|
|
Net realized and unrealized gain (loss) on investments and cash
equivalents |
3,831 |
|
|
(487) |
|
|
|
NET
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
8,646 |
|
$ |
5,168 |
|
|
|
EARNINGS PER SHARE |
$ |
0.54 |
|
$ |
0.32 |
|
|
|
About Solar Senior Capital
Ltd.
Solar Senior Capital Ltd. 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 primarily in the form of cash flow
first lien senior secured debt instruments and asset-based loans
including senior secured loans collateralized on a first lien basis
primarily by current assets.
Forward-Looking Statements
Statements included herein may constitute
“forward-looking statements,” which relate to future events or our
future performance or financial condition. These statements are not
guarantees of our future performance, financial condition or
results and involve a number of risks and uncertainties, including
the impact of COVID-19 and related changes in base interest rates
and significant market volatility on our business, our portfolio
companies and the global economy. Actual results may differ
materially from those in the forward-looking statements as a result
of a number of factors, including those described from time to time
in our filings with the Securities and Exchange Commission. Solar
Senior Capital Ltd. undertakes no duty to update any
forward-looking statements made herein.
Contact Investor Relations (646)
308-8770
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