SLR Investment Corp. Announces Quarter Ended March 31, 2022 Financial Results
05/03/22
Acquisition of SUNS Expected to Accelerate Portfolio and NII Growth
Declares Monthly Distribution of
Announces
At
Beginning in
Since the merger with SUNS closed on
HIGHLIGHTS:
At
Comprehensive Investment Portfolio* fair value:
Number of portfolio companies: >600
Net assets:
Net asset value per share:
Net debt-to-equity: 0.98x
Available capital**: approximately
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 loss:
Net increase in net assets from operations:
Earnings per share:
* The Comprehensive Investment Portfolio for the quarter ended
** Please see Liquidity and Capital Resources below.
*** Comprehensive Portfolio Activity for the quarter ended
“Post quarter end, SLRC completed its merger with SUNS. Given the expected benefits of the combination, shareholders of both companies overwhelmingly voted in favor of the transaction,” said
“Since Q3 2021, SLRC has issued
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at
Comprehensive Investment Portfolio
Investment Activity
During the three months ended
The investment activity of our Comprehensive Investment Portfolio for the quarter ended
Comprehensive Investment Portfolio Activity (1) – Q1 2022 (in millions) |
||||||||||||
Asset Class | Cash Flow Loans |
Asset-based Loans / SLR-CS(2) |
Equipment Financings / SLR-EF(3) |
Life Science Loans |
Corporate Leasing(4) |
Total Portfolio Activity |
||||||
Originations | ||||||||||||
Repayments / Amortization |
||||||||||||
Net Portfolio Activity |
($48.8) | $27.8 | ($24.9) | $19.9 | ($4.7) | ($30.7) | ||||||
(1) Total Portfolio Activity includes gross originations/repayments across each business unit.
(2) Includes SLR-CS’s full portfolio and asset-based loans on the Company’s balance sheet.
(3) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet.
(4) Includes gross origination and repayment activity for KBH’s portfolio.
Portfolio Composition
SLRC's Comprehensive Investment Portfolio composition by business unit at
Comprehensive Investment Portfolio Composition (at fair value) |
Amount |
Weighted Average Asset Yield(5) |
||||
($mm) | % | |||||
Cash Flow Senior Secured Loans | 18.3% | 8.2% | ||||
Asset-Based Senior Secured Loans / SLR-CS(1) | 23.0% | 10.9% | ||||
Equipment Senior Secured Financings / SLR-EF(2) | 15.5% | 9.2% | ||||
Life Science Senior Secured Loans | 14.5% | 11.0%(6) | ||||
28.1% | 10.2%(7) | |||||
Total Senior Secured Loans | $2,026.9 | 99.4% | 10.0% | |||
0.6% | ||||||
Total Comprehensive Investment Portfolio | $2,037.9 | 100.0% | ||||
Floating Rate Investments(4) | 54.4% | |||||
First Lien Senior Secured Loans | 95.1% | |||||
Second Lien Senior Secured Cash Flow Loans | 1.4% | |||||
Second Lien Senior Secured Asset-Based Loans | 2.9% | |||||
(1) Includes SLR-CS’ full portfolio and asset-based and lender finance loans on the Company’s balance sheet and excludes the Company’s equity investment in SLR-CS.
(2) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet and excludes the Company’s equity and debt investments in SLR-EF.
(3) Includes KBH’s full portfolio and excludes the Company’s equity and debt investments in KBH.
(4) 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 SLR-EF and leases associated with 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 cash flow, asset-based and life science loans on balance sheet is based on a yield to maturity calculation. The weighted average yield for equipment financing and SLR-CS asset-based loans is calculated based on the expected average life of a loan for each asset class.
(6) The weighted average asset level yield for life science loans exclude the impact of success fees and/or warrants and are calculated on cost basis.
(7) Represents the annualized Q1 2022 dividend yield at cost on SLRC’s equity investment in KBH.
The Comprehensive Investment Portfolio is diversified across over 600 unique borrowers in over 80 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 10.0% at
Pro Forma Portfolio Composition
The table below illustrates SLRC’s Comprehensive Investment Portfolio pro forma for the merger, including the estimated portfolio fair values of SUNS, as of
Pro forma Comprehensive Investment Portfolio Composition (at fair value) |
Amount |
||
($mm) | % | ||
Cash Flow Senior Secured Loans | 23.0% | ||
Asset-Based Senior Secured Loans / SLR-CS(1) | 17.7% | ||
Equipment Senior Secured Financings / SLR-EF(2) | 11.9% | ||
Life Science Senior Secured Loans | 12.7% | ||
21.5% | |||
Traditional Asset-Based Senior Secured Loans(4) | 9.9% | ||
Healthcare Asset-Based Senior Secured Loans(5) | 2.9% | ||
Total Senior Secured Loans | $2,651.0 | 99.6% | |
0.4% | |||
Total Comprehensive Investment Portfolio | $2,662.3 | 100.0% | |
Floating Rate Investments(6) | 64.0% | ||
First Lien Senior Secured Loans | 96.3% | ||
Second Lien Senior Secured Cash Flow Loans | 1.1% | ||
Second Lien Senior Secured Asset-Based Loans | 2.2% |
(1) Includes SLR-CS’ full portfolio and asset-based and lender finance loans on the Company’s balance sheet and excludes the Company’s equity investment in SLR-CS.
(2) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet and excludes the Company’s equity and debt investments in SLR-EF.
(3) Includes KBH’s full portfolio and excludes the Company’s equity and debt investments in KBH.
(4) Includes the full portfolio of SLR Business Credit, all of which are 1st lien senior secured loans.
(5) Includes the full portfolio of SLR Healthcare ABL, all of which are 1st lien senior secured loans.
(6) Floating rate investments calculated as a percent of the Company’s income-producing Comprehensive Investment Portfolio. The majority of fixed rate loans are associated with SLR-EF and leases associated with KBH. Additionally, SLR-EF and KBH seek to match-fund their fixed rate assets with fixed rate liabilities.
Asset Quality
As of
The Company puts its greatest emphasis on risk mitigation and credit performance. On a quarterly basis, or more frequently if deemed necessary, the Company formally rates each portfolio investment on a scale of one to four, with one representing the least amount of risk.
As of
Internal Investment Rating | Investments at Fair Value ($mm) | % of Total Portfolio | ||
1 | 17.0% | |||
2 | 79.2% | |||
3 | 1.2% | |||
4 | 2.6% |
Investment Income Contribution by Business Unit
Business Unit Contribution to Gross Investment Income (1) (in millions) |
|||||||
For the Quarter Ended: |
Cash Flow Lending |
Asset-based Lending / SLR-CS |
Equipment Financing / SLR-EF |
Life Science Lending |
Corporate Leasing |
Total | |
$33.0 | |||||||
% Contribution | 22.3% | 28.9% | 10.1% | 23.2% | 15.5% | 100.0% |
(1) Investment Income Contribution by Business Unit includes interest income/fees from cash flow loans on balance sheet, income/fees from asset-based loans on balance sheet and distributions from SLR-CS, income/fees from equipment financings and distributions from SLR-EF, distributions from KBH, and income/fees from life science loans.
SLR Investment Corp.’s Results of Operations for the Quarter Ended
Investment Income
For the fiscal quarters ended
Expenses
Expenses totaled
Net Investment Income
The Company’s net investment income totaled
Non-GAAP Financial Measures
This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with SLR Investment Corp.’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.
Reconciliation of Non-GAAP Financial Measures | ||
Quarter Ended |
||
GAAP net investment income per share | ||
Plus one-time merger related expenses per share | ||
Adjusted net investment income per share |
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gains (losses) for the fiscal quarters ended
Net Increase in Net Assets Resulting From Operations
For the quarters ended
Liquidity and Capital Resources
Unsecured Debt
On
At
Leverage
On
Unfunded Commitments
At
Recent Developments
Merger
On
Permanent Reduction in Base Management Fee
On
Assumption of SUNS Credit Facility
On
Assumption of SUNS Notes
On
Timing of Distributions
On
Share Repurchase Program
On
Financial Statements and Tables
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
(unaudited) |
2021 |
|||||
Assets | ||||||
Investments at fair value: | ||||||
Companies less than 5% owned (cost: |
$ | 921,831 | $ | 964,379 | ||
Companies more than 25% owned (cost: |
704,642 | 706,203 | ||||
Cash | 9,075 | 2,935 | ||||
Cash equivalents (cost: |
579,829 | 320,000 | ||||
Dividends receivable | 9,001 | 9,028 | ||||
Interest receivable | 7,244 | 6,521 | ||||
Receivable for investments sold | 735 | 1,378 | ||||
Prepaid expenses and other assets | 927 | 567 | ||||
Total assets. | $ | 2,233,284 | $ | 2,011,011 | ||
Liabilities | ||||||
Debt ( |
$ | 808,858 | $ | 812,038 | ||
Payable for investments and cash equivalents purchased | 579,870 | 320,041 | ||||
Distributions payable | ‒ | 17,327 | ||||
Management fee payable | 7,216 | 7,435 | ||||
Performance-based incentive fee payable | ‒ | 1,864 | ||||
Interest payable | 8,062 | 4,492 | ||||
Administrative services expense payable | 520 | 2,689 | ||||
Other liabilities and accrued expenses | 2,341 | 2,844 | ||||
Total liabilities | $ | 1,406,867 | $ | 1,168,730 | ||
Net Assets | ||||||
Common stock, par value |
$ | 423 | $ | 423 | ||
Paid-in capital in excess of par | 936,999 | 936,999 | ||||
Accumulated distributable net loss | (111,005 | ) | (95,141 | ) | ||
Total net assets | $ | 826,417 | $ | 842,281 | ||
Net Asset Value Per Share | $ | 19.56 | $ | 19.93 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
Three months ended | ||||||
INVESTMENT INCOME: | ||||||
Interest: | ||||||
Companies less than 5% owned | $ | 20,662 | $ | 20,832 | ||
Companies more than 25% owned | 2,561 | 2,885 | ||||
Dividends: | ||||||
Companies less than 5% owned | ‒ | 133 | ||||
Companies more than 25% owned | 9,715 | 9,575 | ||||
Other income: | ||||||
Companies less than 5% owned | 63 | 2,462 | ||||
Companies more than 25% owned | 5 | ‒ | ||||
Total investment income | 33,006 | 35,887 | ||||
EXPENSES: | ||||||
Management fees.. | 7,216 | 6,810 | ||||
Performance-based incentive fees | ‒ | 3,867 | ||||
Interest and other credit facility expenses | 8,328 | 7,229 | ||||
Administrative services expense | 1,183 | 1,360 | ||||
Other general and administrative expenses | 2,801 | 1,155 | ||||
Total expenses | 19,528 | 20,421 | ||||
Net investment income | $ | 13,478 | $ | 15,466 | ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: | ||||||
Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned) | $ | 30 | $ | (366) | ||
Net change in unrealized gain (loss) on investments and cash equivalents: | ||||||
Companies less than 5% owned | (13,498) | 6,046 | ||||
Companies more than 25% owned | 1,453 | 364 | ||||
Net change in unrealized gain (loss) on investments and cash equivalents | (12,045) | 6,410 | ||||
Net realized and unrealized gain (loss) on investments and cash equivalents | (12,015) | 6,044 | ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,463 | $ | 21,510 | ||
EARNINGS PER SHARE | $ | 0.04 | $ | 0.51 | ||
About
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 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
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 SUNS and distribution projections; business prospects of SLRC and SUNS and the prospects of their portfolio companies; and the impact of the investments that SLRC and SUNS expect 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) the risk that shareholder litigation in connection with the Merger may result in significant costs of defense and liability; (iv) changes in the economy, financial markets and political environment; (v) risks associated with possible disruption in the operations of SLRC or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic; (vi) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (vii) conditions in SLRC’s operating areas, particularly with respect to business development companies or regulated investment companies; (viii) general considerations associated with the COVID-19 pandemic; and (ix) 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
Contact
Investor Relations
(646) 308-8770
Source: SLR Investment Corp.