Solar Capital Ltd. Announces Quarter Ended September 30, 2018 Financial Results; Net Investment Income Per Share of $0.44; Declares Quarterly Distribution of $0.41 Per Share for Q4, 2018
11/05/18
At
The Board declared a fourth quarter distribution of $0.41 per share payable
HIGHLIGHTS:
At
Comprehensive Investment portfolio* fair value:
Number of portfolio companies: 230
Net assets:
Net asset value per share:
Comprehensive Investment Portfolio Activity** for the Quarter Ended
Investments made during the quarter:
Investments prepaid and sold during the quarter:
Operating Results for the Quarter Ended
Net investment income:
Net investment income per share:
Net realized and unrealized gain:
Net increase in net assets from operations:
Earnings per share:
* The Comprehensive Investment Portfolio is comprised of Solar Capital Ltd.’s investment portfolio, Crystal Financial’s full portfolio (including its ownership of its SBIC), and
** Includes investment activity through Crystal Financial and NEF, as well as the investment activity attributable to the Company through SSLP and SSLP II prior to their consolidation.
“We are pleased with our third quarter's results, as well as the strong foundation we’ve built,” said
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Tuesday, November 6, 2018. All interested parties may participate in the conference call by dialing (844) 889-7786 approximately 5-10 minutes prior to the call, international callers should dial (661) 378-9930. Participants should reference
Comprehensive Investment Portfolio
Investment Activity
During the three months ended
Comprehensive Investment Portfolio Activity(1) Q3 2018 (in millions) |
|||||||||||||
Asset Class | Cash Flow Loans |
Asset-based Loans / Crystal Financial(2) |
Equipment Financings / NEF(3) |
Life Science Loans |
Total Portfolio Activity |
||||||||
Q3 2018 Originations | $45.4 | $63.1 | $61.5 | $32.8 | $202.8 | ||||||||
Q3 2018 Repayments / Amortization |
$165.2 | $40.3 | $44.0 | $34.2 | $283.7 | ||||||||
Net Portfolio Activity | ($119.8) | $22.8 | $17.5 | ($1.4) | ($80.9) | ||||||||
- Portfolio activity includes gross originations/repayments across each business unit, including investment activity attributable to the Company through SSLP and SSLP II prior to their consolidation.
- Includes Crystal Financial’s full portfolio (and its ownership of its SBIC) and asset-based loans on the Company’s balance sheet.
- Includes NEF’s full portfolio and NEF equipment financings on the Company’s balance sheet.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business unit at
Comprehensive Investment Portfolio Composition (at fair value) |
Amount | Weighted Average Asset Yield |
|||
($mm) | % | ||||
Cash Flow Senior Secured Loans | $499.4 | 29.4% | 9.8%(5) | ||
Asset-Based Senior Secured Loans / Crystal Financial(1) | $588.8 | 34.6% | 12.3%(6) | ||
Equipment Senior Secured Financings / NEF(2) | $376.3 | 22.2% | 11.2%(7) | ||
Life Science Senior Secured Loans | $204.8 | 12.0% | 11.6%(8) | ||
Total Senior Secured Loans | $1,669.3 | 98.2% | 11.2% | ||
Equity and Equity-like Securities(3) | $29.8 | 1.8% | |||
Total Comprehensive Investment Portfolio | $1,699.1 | 100% | |||
Floating Rate Investments(4) | $1,254.5 | 74.7% | |||
First Lien Senior Secured Loans | $1,418.9 | 83.5% | |||
Second Lien Senior Secured Loans | $250.4 | 14.7% |
- Includes Crystal Financial’s full portfolio, including the Company’s pro rata ownership of Crystal’s SBIC, and asset-based loans on the Company’s balance sheet.
- Includes NEF’s full portfolio and NEF equipment financings on the Company’s balance sheet.
- Excludes Crystal and NEF, which distribute quarterly cash dividends to the Company.
- Floating rate investments calculated as a percent of the Company’s income-producing Comprehensive Investment Portfolio. The majority of fixed rate loans are associated with NEF and are short in duration with average hold periods of 2.5 years. Additionally, NEF seeks to match-fund its fixed rate assets with fixed rate liabilities.
- Represents the weighted average of each individual loan’s yield to maturity based on fair market value at
September 30, 2018 . - Represents the weighted average of each individual loan’s underwritten yield to expected repayment date, which is based on a historical average realized investment duration.
- Represents the weighted average of each individual loan’s yield to maturity (excluding residual upside on tax leases).
- Represents the weighted average of each individual loan’s yield to maturity based on fair value at
September 30, 2018 (excluding exit fees or warrants).
The Comprehensive Investment Portfolio is diversified across approximately 230 unique issuers across approximately 92 industries and with an average exposure of
At
The weighted average yield at fair value of all income-producing investments in the Comprehensive Portfolio was 11.2% at
Asset Quality
As of
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
Internal Investment Rating | Investments at Fair Value | % of Total Portfolio | ||
1 | $144.5 | 10.2% | ||
2 | $1,221.5 | 86.6% | ||
3 | $43.9 | 3.1% | ||
4 | $0.9 | 0.1% |
Investment Income Contribution by Business Unit
Business Unit Contribution to Gross Investment Income Q3 2018 (in millions) |
|||||||||||||||
For the Period: |
Cash Flow Lending(1) |
Asset-based Lending / Crystal Financial(2) |
Equipment Financing / NEF(3) |
Life Science Lending |
Total | ||||||||||
Q3 2018 | $13.6 | $10.1 | $5.5 | $7.9 | $37.1 | ||||||||||
% Contribution | 36.7% | 27.2% | 14.9% | 21.2% | 100% | ||||||||||
- Includes interest income/fees from cash flow loans on balance sheet and distributions from SSLP and SSLP II prior to their consolidation.
- Includes interest income/fees from asset based loans on balance sheet and distributions from Crystal Financial.
- Includes interest income/fees from equipment financings on balance sheet and distributions from
NEF Holdings .
Solar Capital Ltd.’s Results of Operations for the Quarter Ended
Investment Income
For the fiscal quarters ended
Expenses
Net expenses totaled
Net Investment Income
The Company’s net investment income totaled
Net Realized and Unrealized Gain / (Loss)
Net realized and unrealized losses for the fiscal quarters ended
Net Increase in Net Assets Resulting From Operations
For the fiscal quarters ended
On
On
Liquidity and Capital Resources
As of
When including
Subsequent Event
The Small Business Credit Availability Act permits BDCs to reduce the required minimum asset coverage ratio applicable to a BDC from 200% to 150%, subject to certain requirements therein. At the Company’s Annual Stockholder Meeting held on
Financial Statements and Tables
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
September 30, 2018 (unaudited) |
December 31, 2017 |
||||||
Assets | |||||||
Investments at fair value: | |||||||
Companies less than 5% owned (cost: $894,050 and $835,041, respectively) | $ | 893,481 | $ | 834,410 | |||
Companies more than 25% owned (cost: $499,089 and $609,226, respectively) | 517,299 | 626,760 | |||||
Cash | 10,182 | 5,963 | |||||
Cash equivalents (cost: $199,806 and $144,826, respectively) | 199,806 | 144,826 | |||||
Receivable for investments sold | 25,864 | 6,160 | |||||
Dividends receivable | 9,745 | 15,013 | |||||
Interest receivable | 8,134 | 7,336 | |||||
Other receivable | — | 58 | |||||
Prepaid expenses and other assets | 781 | 1,039 | |||||
Total assets | $ | 1,665,292 | $ | 1,641,565 | |||
Liabilities | |||||||
Revolving credit facility | $ | 114,000 | $ | 245,600 | |||
Unsecured senior notes due 2022 | 150,000 | 150,000 | |||||
Unsecured tranche c senior notes due 2022 ($21,000 and $21,000 face amounts, respectively, reported net of unamortized debt issuance costs of $274 and $316, respectively.) |
20,726 | 20,684 | |||||
Unsecured senior notes due 2023 ($75,000 and $75,000 face amounts, respectively, reported net of unamortized debt issuance costs of $1,537 and $1,813, respectively.) |
73,463 | 73,187 | |||||
Term loans | 50,000 | 50,000 | |||||
SSLP 2016-1, LLC revolving credit facility | 22,998 | — | |||||
SSLP II 2016-1, LLC revolving credit facility | 26,168 | — | |||||
NEFPASS SPV LLC credit facility ($30,000 and $0 face amounts, respectively, reported net of unamortized debt issuance costs of $1,129 and $0, respectively.) |
28,871 | — | |||||
Payable for investments and cash equivalents purchased | 210,221 | 145,118 | |||||
Distributions payable | 18,007 | 16,904 | |||||
Management fee payable | 6,399 | 7,373 | |||||
Performance-based incentive fee payable | 4,604 | 4,660 | |||||
Interest payable | 6,768 | 2,485 | |||||
Administrative services expense payable | 2,067 | 2,756 | |||||
Other liabilities and accrued expenses | 3,408 | 1,193 | |||||
Total liabilities | $ | 737,700 | $ | 719,960 | |||
Net Assets | |||||||
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,260,826 and 42,260,826 shares issued and outstanding, respectively |
$ | 423 | $ | 423 | |||
Paid-in capital in excess of par | 991,340 | 991,340 | |||||
Distributions in excess of net investment income | (8,862 | ) | (13,319 | ) | |||
Accumulated net realized loss | (72,505 | ) | (73,742 | ) | |||
Net unrealized appreciation | 17,196 | 16,903 | |||||
Total net assets | $ | 927,592 | $ | 921,605 | |||
Net Asset Value Per Share | $ | 21.95 | $ | 21.81 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
Three months ended | ||||||||
September 30, 2018 | September 30, 2017 |
|||||||
INVESTMENT INCOME: | ||||||||
Interest: | ||||||||
Companies less than 5% owned | $ | 21,859 | $ | 21,465 | ||||
Companies more than 25% owned | 884 | 293 | ||||||
Dividends: | ||||||||
Companies less than 5% owned | 12 | 5 | ||||||
Companies more than 25% owned | 14,255 | 13,726 | ||||||
Other income: | ||||||||
Companies less than 5% owned | 83 | 264 | ||||||
Companies more than 25% owned | 49 | 394 | ||||||
Total investment income | 37,142 | 36,147 | ||||||
EXPENSES: | ||||||||
Management fees | $ | 6,399 | $ | 6,751 | ||||
Performance-based incentive fees | 4,604 | 4,329 | ||||||
Interest and other credit facility expenses | 5,521 | 5,348 | ||||||
Administrative services expense | 1,459 | 1,346 | ||||||
Other general and administrative expenses | 743 | 1,058 | ||||||
Total expenses | 18,726 | 18,832 | ||||||
Net investment income | $ | 18,416 | $ | 17,315 | ||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND FOREIGN CURRENCIES: |
||||||||
Net realized gain (loss) on investments and cash equivalents: | ||||||||
Companies less than 5% owned | $ | 687 | $ | (28 | ) | |||
Companies 5% to 25% owned | (7 | ) | (8,515 | ) | ||||
Companies more than 25% owned | — | — | ||||||
Net realized gain (loss) on investments and cash equivalents | 680 | (8,543 | ) | |||||
Net realized gain (loss) on foreign currencies | — | 2 | ||||||
Net realized gain (loss) | 680 | (8,541 | ) | |||||
Net change in unrealized gain (loss) on investments and cash equivalents: | ||||||||
Companies less than 5% owned | 530 | 1,061 | ||||||
Companies 5% to 25% owned | — | 8,511 | ||||||
Companies more than 25% owned | (1,496 | ) | (1,182 | ) | ||||
Net change in unrealized gain (loss) on investments and cash equivalents |
(966 | ) | 8,390 | |||||
Net change in unrealized loss on foreign currencies | — | (1 | ) | |||||
Net change in unrealized gain (loss) | (966 | ) | 8,389 | |||||
Net realized and unrealized gain (loss) on investments, cash equivalents and foreign currencies |
(286 | ) | (152 | ) | ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 18,130 | $ | 17,163 | ||||
EARNINGS PER SHARE | $ | 0.43 | $ | 0.41 | ||||
About
Solar 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 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
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 future performance, conditions or results and involve a number of risks and uncertainties. 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 Capital Ltd. undertakes no duty to update any forward-looking statements made herein, unless required to do so by applicable law.
Contact
Investor Relations
(646) 308-8770
Source: Solar Capital Ltd.