Solar Capital Ltd. Announces Quarter Ended June 30, 2020 Financial Results; Declares Quarterly Distribution of $0.41 Per Share for Q3, 2020
08/04/20
Reports Net Asset Value Per Share Increase of 4.5%
Net Debt-to-Equity of 0.59x
100% of Portfolio Performing
At
As of
The Board declared a third quarter distribution of $0.41 per share payable on October 2, 2020 to stockholders of record as of September 17, 2020. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS
At
Number of portfolio companies: 183
Net assets:
Net asset value per share:
Net debt-to-equity: 0.59x
Available capital**:
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
** Please see Liquidity and Capital Resources.
*** Includes investment activity through Crystal Financial (including its ownership of its SBIC), and NEF.
“The combination of our specialty finance businesses and focus on first lien senior secured investments in defensive industries has resulted in a diversified portfolio that is 100% performing at
“The conservative management of our assets and liabilities has resulted in a solid portfolio foundation, a stable funding profile, low leverage, strong liquidity, and favorable positioning to make new investments,” said
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) Q2 2020 (in millions) |
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Asset Class | Cash Flow Loans |
Asset-based Loans / Crystal Financial(2) |
Equipment Financings / NEF(3) |
Life Science Loans |
Total Portfolio Activity |
||||
Originations | |||||||||
Repayments / Amortization | |||||||||
Net Portfolio Activity | ( |
( |
( |
$31.0 | ( |
||||
(1) Portfolio activity includes gross originations/repayments across each business unit.
(2) Includes Crystal Financial’s full portfolio (and its ownership of its SBIC) and asset-based loans on the Company’s balance sheet.
(3) Includes NEF’s full portfolio and NEF equipment financings on the Company’s balance sheet.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business unit at
Comprehensive Investment Portfolio Composition (at fair value) |
Amount | Weighted Average Asset Yield |
|||
($mm) | % | ||||
Cash Flow Senior Secured Loans | 19.4% | 8.6%(5) | |||
Asset-Based Senior Secured Loans / Crystal Financial(1) | 37.2% | 10.2%(6) | |||
Equipment Senior Secured Financings / NEF(2) | 22.2% | 10.4%(7) | |||
Life Science Senior Secured Loans | 20.2% | 9.8%(8) | |||
Total Senior Secured Loans | $1,560.3 | 99.0% | 9.9% |
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1.0% | |||||
Total Comprehensive Investment Portfolio | $1,576.3 | 100.0% | |||
Floating Rate Investments(4) | 76.9% | ||||
First Lien Senior Secured Loans | 91.6% | ||||
Second Lien Senior Secured Cash Flow Loans | 3.9% | ||||
Second Lien Senior Secured Asset-Based Loans | 3.6% |
(1) 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.
(2) Includes NEF’s full portfolio and NEF equipment financings on the Company’s balance sheet.
(3) Excludes Crystal and NEF, which distribute quarterly cash dividends to the Company.
(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 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.
(5) Represents the weighted average of each individual loan’s yield to maturity based on fair market value at
(6) Represents the weighted average of each individual loan’s internal rate of return for loans held at Crystal Financial and yield to maturity for loans held by SLRC.
(7) Represents the weighted average of each individual loan’s yield to maturity (excluding residual upside on tax leases). Loans held on SLRC’s balance sheet based on fair value and loans owned within
(8) Represents the weighted average of each individual loan’s yield to maturity based on fair value at
The Comprehensive Investment Portfolio is diversified across approximately 183 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 9.9% 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 ($mm) | % of Total Portfolio | ||
1 | 15.7% |
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2 | 76.9% |
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3 | 7.4% |
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4 | >0.0% |
Investment Income Contribution by Business Unit
Business Unit Contribution to Gross Investment Income Q2 2020 (in millions) |
|||||
For the Period: |
Cash Flow Lending(1) |
Asset-based Lending / Crystal Financial(2) |
Equipment Financing / NEF(3) |
Life Science Lending |
Total |
Q2 2020 | |||||
% Contribution | 24.0% | 31.4% | 16.2% | 28.4% | 100% |
(1) Includes interest income/fees from cash flow loans on balance sheet.
(2) Includes interest income/fees from asset based loans on balance sheet and distributions from Crystal Financial.
(3) Includes interest income/fees from equipment financings on balance sheet and distributions from
Solar Capital Ltd.’s Results of Operations for the Quarter Ended
Investment Income
For the fiscal quarters ended
For the quarter ended
Expenses
Expenses totaled
Net Investment Income
The Company’s net investment income totaled
Net Realized and Unrealized Gain
Net realized and unrealized gains for the fiscal quarters ended
Net Increase in Net Assets Resulting From Operations
For the quarters ended
Liquidity and Capital Resources
Unsecured Debt
At
At
Leverage
On
Unfunded Revolver Commitments
At
Financial Statements and Tables
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
(unaudited) |
December 31, 2019 |
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Assets | |||||||
Investments at fair value: | |||||||
Companies less than 5% owned (cost: |
$ | 866,575 | $ | 970,821 | |||
Companies more than 25% owned (cost: |
493,432 | 524,003 | |||||
Cash | 18,170 | 16,783 | |||||
Cash equivalents (cost: |
549,904 | 419,571 | |||||
Dividends receivable | 6,194 | 10,488 | |||||
Interest receivable | 6,384 | 5,401 | |||||
Receivable for investments sold | 1,651 | 2,207 | |||||
Prepaid expenses and other assets | 764 | 615 | |||||
Total assets | $ | 1,943,074 | $ | 1,949,889 | |||
Liabilities | |||||||
Debt ( |
$ | 512,280 | $ | 587,117 | |||
Payable for investments and cash equivalents purchased | 550,795 | 419,662 | |||||
Distributions payable | 17,327 | 17,327 | |||||
Management fee payable | 5,971 | 6,747 | |||||
Performance-based incentive fee payable | — | 4,281 | |||||
Interest payable | 3,301 | 3,678 | |||||
Administrative services payable | 1,086 | 2,757 | |||||
Other liabilities and accrued expenses | 2,511 | 2,440 | |||||
Total liabilities | $ | 1,093,271 | $ | 1,044,009 | |||
Commitments and contingencies | |||||||
Net Assets | |||||||
Common stock, par value |
$ | 423 | $ | 423 | |||
Paid-in capital in excess of par | 988,792 | 988,792 | |||||
Accumulated distributable net loss | (139,412 | ) | (83,335 | ) | |||
Total net assets | $ | 849,803 | $ | 905,880 | |||
Net Asset Value Per Share | $ | 20.11 | $ | 21.44 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
Three months ended | |||||||
INVESTMENT INCOME: | |||||||
Interest: | |||||||
Companies less than 5% owned | $ | 20,573 | $ | 26,848 | |||
Companies more than 25% owned | 1,339 | 1,342 | |||||
Dividends: | |||||||
Companies less than 5% owned | 10 | 10 | |||||
Companies more than 25% owned | 6,215 | 8,747 | |||||
Other income: | |||||||
Companies less than 5% owned | 485 | 1,731 | |||||
Companies more than 25% owned | 3 | 4 | |||||
Total investment income | $ | 28,625 | $ | 38,682 | |||
EXPENSES: | |||||||
Management fees | $ | 5,971 | $ | 6,727 | |||
Performance-based incentive fees | — | 4,608 | |||||
Interest and other credit facility expenses | 6,623 | 7,101 | |||||
Administrative services expense | 1,148 | 1,293 | |||||
Other general and administrative expenses | 682 | 521 | |||||
Total expenses | 14,424 | 20,250 | |||||
Net investment income | $ | 14,201 | $ | 18,432 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS, DEBT AND UNFUNDED COMMITMENTS: | |||||||
Net realized gain (loss) on investments and cash equivalents: | |||||||
Companies less than 5% owned | $ | (24,794 | ) | $ | 202 | ||
Companies more than 25% owned | — | (98 | ) | ||||
Net realized gain (loss) on investments and cash equivalents | (24,794 | ) | 104 | ||||
Net change in unrealized gain (loss) on investments, cash equivalents and unfunded commitments and net change in unrealized (gain) loss on debt: | |||||||
Companies less than 5% owned | 47,491 | (2,356 | ) | ||||
Companies more than 25% owned | 25,787 | 3,451 | |||||
Debt | (9,000 | ) | — | ||||
Unfunded commitments | 361 | — | |||||
Net change in unrealized gain (loss) on investments, cash equivalents, debt and unfunded commitments | 64,639 | 1,095 | |||||
Net realized and unrealized gain on investments, cash equivalents, debt and unfunded commitments | 39,845 | 1,199 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 54,046 | $ | 19,631 | |||
EARNINGS PER SHARE | $ | 1.28 | $ | 0.46 |
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 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 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.