UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 5, 2015
SOLAR CAPITAL LTD.
(Exact name of registrant as specified in its charter)
| Maryland | 814-00754 | 26-1381340 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
500 Park Avenue
New York, NY 10022
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (212) 993-1670
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition |
On May 5, 2015 the registrant issued a press release announcing its financial results for the quarter ended March 31, 2015. The text of the press release is included as Exhibit 99.1 to this Form 8-K.
The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Not applicable. |
| (b) | Not applicable. |
| (c) | Not applicable. |
| (d) | Exhibits. |
| Exhibit No. |
Description | |
| 99.1 | Press release, dated May 5, 2015 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 5, 2015 | SOLAR CAPITAL LTD. | |||||
| By: | /s/ Richard L. Peteka | |||||
| Richard L. Peteka | ||||||
| Chief Financial Officer | ||||||
Exhibit 99.1
Solar Capital Ltd. Announces Quarter Ended March 31, 2015 Financial Results; Declares Quarterly Distribution of $0.40 per Share for Q2
NEW YORK—(BUSINESS WIRE)—May 5, 2015— Solar Capital Ltd. (NASDAQ: SLRC), today reported net investment income of $14.4 million, or $0.34 per share, for the quarter ended March 31, 2015. Earnings are $10.9 million, or $0.26 per share, for the first fiscal quarter. Net asset value (NAV) per share was $21.91 at March 31, 2015.
Solar Capital Ltd. (the “Company”) also announced that its Board of Directors has declared a quarterly distribution of $0.40 per share payable on July 1, 2015 to stockholders of record on June 25, 2015. Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At March 31, 2015:
Investment portfolio fair value: $1.04 billion
Number of portfolio companies: 42
Net assets: $930.5 million
Net asset value per share: $21.91
Portfolio Activity for the Quarter Ended March 31, 2015
Investments made during the quarter: $30.2 million
Investments prepaid or sold during the quarter: $6.3 million
Operating Results for the Quarter Ended March 31, 2015
Net investment income: $14.4 million
Net realized and unrealized loss: $3.5 million
Net increase in net assets from operations: $10.9 million
Net investment income per share: $0.34
“During a quarter of muted new issue activity, we succeeded in maintaining our portfolio size, and we’re pleased with its strong credit performance. We have made strategic enhancements to our origination and unitranche underwriting capabilities for our core US middle market business and diversified our sourcing opportunities through our life science lending initiative and asset based lending at Crystal Financial,” said Michael Gross, Chairman and CEO of Solar Capital Ltd. “With our low leverage, significant available capital and expected reduced repayments, we anticipate continued portfolio growth in Q2 and over the remainder of 2015. Importantly, we have the capital to grow our net investment income significantly without having to issue new equity.”
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday, May 6, 2015. All interested parties may participate in the conference call by dialing (866) 953-6857 approximately 5-10 minutes prior to the call, international callers should dial (617) 399-3481. Participants should reference Solar Capital Ltd. and the participant passcode of 88096317 when prompted. Following the call you may access a replay of the event via audio webcast. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through the Solar Capital Ltd. website, www.solarcap.com. To listen to the live call, please go to the Company’s website
at least 15 minutes 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 will be available shortly after the call on the Solar Capital Ltd. website. Additionally, a replay dial-in will be available until May 20, 2015 and can be accessed by dialing (888) 286-8010 and using the passcode 40553409. International callers should dial (617) 801-6888.
Portfolio and Investment Activity
During the three months ended March 31, 2015, we invested approximately $30 million across 5 portfolio companies. Investments sold or prepaid during the quarter ended March 31, 2015 totaled approximately $6 million.
At March 31, 2015, our portfolio consisted of 42 portfolio companies and was invested 59.7% in senior secured loans excluding Crystal Financial LLC (“Crystal Financial”), 28.9% in Crystal Financial whose portfolio is 100% comprised of senior secured loans, 7.0% in subordinated debt, 2.1% in preferred equity and 2.3% in common equity and warrants excluding Crystal Financial, measured at fair value.
Crystal Financial’s $486 million funded portfolio consists of senior secured loans from 25 issuers with an average exposure of approximately $19 million. All of the commitments from Crystal Financial are floating-rate, senior-secured loans. During the quarter ended March 31, 2015, Crystal Financial funded new loans totaling $40 million and had approximately $30 million of exits.
The fair value weighted average yield on our portfolio of income-producing investments was 10.0% at March 31, 2015.
At March 31, 2015, 87.1% or $884.5 million of our income-producing investment portfolio* was floating rate and 12.9% or $130.7 million of our income producing-portfolio was fixed rate, measured at fair value.
From inception in 2006 through March 31, 2015, Solar Capital Ltd. and its predecessor companies have invested approximately $3.9 billion in 124 portfolio companies. Over the same period, Solar Capital Ltd. completed transactions with more than 85 different financial sponsors.
| * | We have included Crystal Financial as 100% floating rate. |
Results of Operations for the Three Months Ended March 31, 2015 compared to the Three Months Ended March 31, 2014
Investment Income
For the fiscal quarters ended March 31, 2015 and March 31, 2014, gross investment income totaled $25.6 million and $32.6 million, respectively. The decrease in gross investment income year over year was primarily due to a reduction in income from call premiums received as well as portfolio yield compression.
Expenses
Expenses totaled $11.2 million and $15.2 million, respectively, for the three months ended March 31, 2015 and March 31, 2014. The decrease in expenses year over year was primarily due to a decrease in performance-based incentive fees on lower net investment income, as well as decreases in administrative and other general and administrative expenses.
Net Investment Income
The Company’s net investment income totaled $14.4 million or $0.34 per average share and $17.4 million or $0.40 per average share, respectively, for the three months ended March 31, 2015 and March 31, 2014, respectively.
Net Realized and Unrealized Losses
Net realized and unrealized loss for the fiscal quarters ended March 31, 2015 and March 31, 2014 totaled approximately $3.5 million and $3.7 million, respectively.
Net Increase in Net Assets Resulting From Operations
For the three months ended March 31, 2015 and March 31, 2014, the Company had a net increase in net assets resulting from operations of $10.9 million and $13.8 million, respectively. For the same periods, earnings per average share were $0.26 and $0.31, respectively.
Liquidity and Capital Resources
At March 31, 2015, the Company had $105 million of cash and a total of $490 million of unused borrowing capacity under the Credit Facility, subject to effective borrowing base limits.
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
| March 31, 2015 (unaudited) |
December 31, 2014 |
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| Assets |
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| Investments at fair value: |
||||||||
| Companies less than 5% owned (cost: $681,057 and $659,552, respectively) |
$ | 674,179 | $ | 652,288 | ||||
| Companies 5% to 25% owned (cost: $8,511 and $8,511, respectively) |
3,612 | 4,646 | ||||||
| Companies more than 25% owned (cost: $337,816 and $339,380, respectively) |
365,256 | 363,804 | ||||||
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| Total investments (cost: $1,027,384 and $1,007,443, respectively) |
1,043,047 | 1,020,738 | ||||||
| Cash |
104,244 | 145,075 | ||||||
| Cash equivalents |
490,045 | 490,000 | ||||||
| Foreign currency (cost: $444 and $275, respectively) |
407 | 265 | ||||||
| Interest receivable |
7,268 | 4,549 | ||||||
| Dividends receivable |
8,254 | 8,258 | ||||||
| Deferred financing costs |
3,254 | 3,263 | ||||||
| Receivable for investments sold |
14,393 | 13,138 | ||||||
| Prepaid expenses and other assets |
1,494 | 1,048 | ||||||
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| Total assets |
$ | 1,672,406 | $ | 1,686,334 | ||||
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| Liabilities |
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| Revolving credit facilities |
$ | — | $ | — | ||||
| Unsecured senior notes |
100,000 | 100,000 | ||||||
| Senior secured notes |
75,000 | 75,000 | ||||||
| Term loan |
50,000 | 50,000 | ||||||
| Distributions payable |
16,986 | 16,986 | ||||||
| Payable for investments and cash equivalents purchased |
490,045 | 492,475 | ||||||
| Management fee payable |
5,865 | 6,109 | ||||||
| Performance-based incentive fee payable |
— | 4,198 | ||||||
| Administrative services expense payable |
278 | 2,427 | ||||||
| Interest payable |
2,590 | 1,504 | ||||||
| Other liabilities and accrued expenses |
1,161 | 1,067 | ||||||
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| Total liabilities |
$ | 741,925 | $ | 749,766 | ||||
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| Net Assets |
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| Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,465,162 and 42,465,162 shares issued and outstanding, respectively |
$ | 425 | $ | 425 | ||||
| Paid-in capital in excess of par |
991,963 | 991,963 | ||||||
| Distributions in excess of net investment income |
(11,195 | ) | (8,599 | ) | ||||
| Accumulated net realized loss |
(66,338 | ) | (60,506 | ) | ||||
| Net unrealized appreciation |
15,626 | 13,285 | ||||||
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|
|||||
| Total net assets |
$ | 930,481 | $ | 936,568 | ||||
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| Net Asset Value Per Share |
$ | 21.91 | $ | 22.05 | ||||
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
| Three months ended | ||||||||
| March 31, 2015 | March 31, 2014 | |||||||
| INVESTMENT INCOME: |
||||||||
| Interest: |
||||||||
| Companies less than 5% owned |
$ | 16,323 | $ | 22,947 | ||||
| Companies 5% to 25% owned |
— | 235 | ||||||
| Companies more than 25% owned |
700 | 960 | ||||||
| Dividends: |
||||||||
| Companies more than 25% owned |
8,477 | 8,416 | ||||||
| Other income: |
||||||||
| Companies less than 5% owned |
125 | 68 | ||||||
| Companies more than 25% owned |
5 | 4 | ||||||
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|
|
|||||
| Total investment income |
25,630 | 32,630 | ||||||
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| EXPENSES: |
||||||||
| Management fees |
$ | 5,865 | $ | 6,210 | ||||
| Performance-based incentive fees |
— | 3,213 | ||||||
| Interest and other credit facility expenses |
3,601 | 3,592 | ||||||
| Administrative services expense |
1,039 | 1,169 | ||||||
| Other general and administrative expenses |
735 | 1,022 | ||||||
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| Total expenses |
11,240 | 15,206 | ||||||
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| Net investment income |
$ | 14,390 | $ | 17,424 | ||||
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| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND FOREIGN CURRENCIES: |
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| Net realized gain (loss) on investments and cash equivalents: |
||||||||
| Companies less than 5% owned |
$ | (4,779 | ) | $ | 8 | |||
| Companies 5% to 25% owned |
(1,050 | ) | 928 | |||||
| Companies more than 25% owned |
— | (25,310 | ) | |||||
|
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|
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|
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| Net realized loss on investments and cash equivalents |
(5,829 | ) | (24,374 | ) | ||||
| Net realized loss on foreign currencies: |
(3 | ) | (1,979 | ) | ||||
|
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| Net realized loss |
(5,832 | ) | (26,353 | ) | ||||
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| Net change in unrealized gain (loss) on investments and cash equivalents |
2,368 | 20,782 | ||||||
| Net change in unrealized gain (loss) on foreign currencies |
(27 | ) | 1,897 | |||||
|
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| Net change in unrealized gain |
2,341 | 22,679 | ||||||
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| Net realized and unrealized gain (loss) on investments, cash equivalents and foreign currencies |
(3,491 | ) | (3,674 | ) | ||||
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| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 10,899 | $ | 13,750 | ||||
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| EARNINGS PER SHARE |
$ | 0.26 | $ | 0.31 | ||||
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About Solar Capital Ltd.
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. The Company invests primarily in leveraged, middle market companies in the form of senior secured loans including first lien, unitranche, and second lien debt instruments.
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, condition 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.
Contact
Solar Capital Ltd.
Investor Relations
Richard Pivirotto
(646) 308-8770