SLR SENIOR INVESTMENT CORP. The information contained in this section should be read in conjunction with the Selected Financial and Other Data and our Consolidated Financial Statements and notes thereto appearing elsewhere in this report. Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to:
• our future operating results, including our ability to achieve objectives
as a result of the current COVID-19 pandemic;
• our business prospects and the prospects of our portfolio companies;
• the impact of investments that we expect to make;
• our contractual arrangements and relationships with third parties;
• the dependence of our future success on the general economy and its
impact on the industries in which we invest and the impact of the
COVID-19 pandemic thereon;
• the impact of any protracted decline in the liquidity of credit markets
on our business and the impact of the COVID-19 pandemic thereon;
• the ability of our portfolio companies to achieve their objectives,
including as a result of the current COVID-19 pandemic;
• the valuation of our investments in portfolio companies, particularly
those having no liquid trading market, and the impact of the COVID-19
pandemic thereon;
• market conditions and our ability to access alternative debt markets and
additional debt and equity capital, and the impact of the COVID-19
pandemic thereon;
• our expected financings and investments;
• the adequacy of our cash resources and working capital;
• the timing of cash flows, if any, from the operations of our portfolio
companies and the impact of the COVID-19 pandemic thereon; and
• the ability of our investment adviser to locate suitable investments for
us and to monitor and administer our investments and the impacts of the
COVID-19 pandemic thereon.
• changes in the political conditions and relations between the United
States , Russia , Ukraine and other nations.
These statements are not guarantees of future performance and are subject to
risks, uncertainties, and other factors, some of which are beyond our control
and difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements, including
without limitation:
• an economic downturn, including as a result of the current
COVID-19pandemic, could impair our portfolio companies' ability to
continue to operate, which could lead to the loss of some or all of our
investments in such portfolio companies;
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• a contraction of available credit and/or an inability to access the
equity markets, including as a result of the current COVID-19 pandemic,
could impair our lending and investment activities;
• interest rate volatility could adversely affect our results, particularly
because we use leverage as part of our investment strategy;
• currency fluctuations could adversely affect the results of our
investments in foreign companies, particularly to the extent that we
receive payments denominated in foreign currency rather than U.S.
dollars;
• the ability of the parties to consummate the Mergers on the expected
timeline, or at all;
• the ability to realize the anticipated benefits of the Mergers;
• the effects of disruption on our business from the proposed Mergers;
• the combined company's plans, expectations, objectives and intentions as
a result of the Mergers;
• any potential termination of the Merger Agreement;
• the actions of our stockholders or the stockholders of SLRC with respect
to the proposals submitted for their approval in connection with the
Mergers; and
• the risks, uncertainties and other factors we identify in Item 1A. - Risk
Factors contained in this Annual Report on Form 10-K for the year ended
December 31, 2021 and in our other filings with the SEC .
We generally use words such as "anticipates," "believes," "expects," "intends"
and similar expressions to identify forward-looking statements. Our actual
results could differ materially from those projected in the forward-looking
statements for any reason, including any factors set forth in "Risk Factors" and
elsewhere in this report.
We have based the forward-looking statements included in this report on
information available to us on the date of this report, and we assume no
obligation to update any such forward-looking statements. Although we undertake
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 we may make directly to you or through
reports that we in the future may file with the SEC , including any annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K.
Overview
SLR Senior Investment Corp. ("SLR Senior", the "Company", "we" or "our"), a
Maryland corporation formed in December 2010 , is a closed-end, externally
managed, non-diversified management investment company that has elected to be
regulated as a business development company ("BDC") under the Investment Company
Act of 1940, as amended (the "1940 Act"). Furthermore, as the Company is an
investment company, it continues to apply the guidance in the Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 946. In addition, for tax purposes, the Company has elected to be treated,
and intend to qualify annually, as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
On February 24, 2011 , we priced our initial public offering, selling 9.0 million
shares, including the underwriters' over-allotment, raising approximately
$168 million in net proceeds. Concurrent with this offering, Solar Senior
Capital Investors LLC , an entity controlled by Michael S. Gross , our Chairman,
Co-Chief Executive Officer and President, and Bruce Spohler , our Co-Chief
Executive Officer and Chief Operating Officer, purchased an additional 500,000
shares through a concurrent private placement, raising another $10 million .
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We invest primarily in privately heldU.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. We define "middle market" to refer to companies with annual revenues between$50 million and$1 billion . Our investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve our investment objective by directly and indirectly investing in senior loans, including first lien and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which we refer to collectively as "senior loans." We may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of our net assets (including the amount of any borrowings for investment purposes) will be invested directly and indirectly in senior loans. Senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate, primarily LIBOR, plus a premium. Senior loans in which we invest are typically made toU.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions. Senior loans typically are rated below investment grade. Securities rated below investment grade are often referred to as "leveraged loans," "high yield" or "junk" securities, and may be considered "high risk" compared to debt instruments that are rated investment grade. In addition, some of our debt investments are not scheduled to fully amortize over their stated terms, which could cause us to suffer losses if the respective issuer of such debt investment is unable to refinance or repay their remaining indebtedness at maturity. While the Company does not typically seek to invest in traditional equity securities as part of its investment objective, the Company may occasionally acquire some equity securities in connection with senior loan investments and in certain other unique circumstances, such as the Company's equity investments in SLR Healthcare ABL ("SLR Healthcare ") and SLR Business Credit. We invest in senior loans made primarily to private, leveraged middle-market companies with approximately$20 million to$100 million of earnings before income taxes, depreciation and amortization ("EBITDA"). Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our direct investments in individual securities will generally range between$5 million and$30 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or strategic initiatives. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These opportunistic investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside ofthe United States . We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act. Our investment activities are managed bySLR Capital Partners, LLC ("SLR Capital Partners " or "Investment Adviser") and supervised by the Board, a majority of whom are non-interested, as such term is defined in the 1940 Act.SLR Capital Management, LLC ("SLR Capital Management " or "Administrator") provides the administrative services necessary for us to operate. As ofDecember 31, 2021 , the Investment Adviser has directly invested approximately$12.5 billion in more than 450 different portfolio companies since 2006. Over the same period, the Investment Adviser completed transactions with over 200 different financial sponsors.
Merger Agreement
OnDecember 1, 2021 , we entered into the Merger Agreement, which provides that, subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into us, with us continuing as the surviving company and as SLRC's wholly-owned subsidiary and, immediately thereafter, we will merge with and into SLRC, with SLRC continuing as the surviving company. Both the Board and SLRC's board of directors, including all of the respective independent directors, in each case, on the recommendation of a special committee comprised solely of the independent directors of us or SLRC, as applicable, have approved the Merger Agreement and the transactions contemplated thereby. At the effective time of the Merger ("Effective Time"), each share of our common stock issued and outstanding immediately prior to the Effective Time (other than shares owned by SLRC or any of its controlled 79
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subsidiaries (the "Cancelled Shares")) will be converted into the right to receive a number of shares of SLRC's common stock equal to the Exchange Ratio (as defined below) (cash may be paid in lieu of fractional shares).
As of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time (such date, the "Determination Date"), each of us and SLRC will deliver to the other a calculation of its NAV as of such date, in each case using a pre-agreed set of assumptions, methodologies and adjustments. We refer to such calculation with respect to us as the "Closing SUNS Net Asset Value" and with respect to SLRC as the "Closing SLRC Net Asset Value". Based on such calculations, the parties will calculate the "SUNS Per Share NAV", which will be equal to (i) the Closing SUNS Net Asset Value divided by (ii) the number of shares of our common stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the "SLRC Per Share NAV", which will be equal to (A) the Closing SLRC Net Asset Value divided by (B) the number of shares of SLRC Common Stock issued and outstanding as of the Determination Date. The "Exchange Ratio" will be equal to the quotient (rounded to four decimal places) of (i) the SUNS Per Share NAV divided by (ii) the SLRC Per Share NAV. We and SLRC will update and redeliver the Closing SUNS Net Asset Value or the Closing SLRC Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time. The Merger Agreement contains customary representations and warranties by each of us,SLRC and SLR Capital Partners . The Merger Agreement also contains customary covenants, including, among others, covenants relating to the operation of each of our and SLRC's businesses during the period prior to the closing of the Mergers. Consummation of the Mergers, which is currently anticipated to occur during the first half of calendar year 2022, is subject to certain closing conditions, including requisite approvals of our and SLRC's stockholders and certain other closing conditions. The Merger Agreement also contains certain termination rights in favor of us and SLRC, including if the Mergers are not completed on or beforeDecember 1, 2022 or if the requisite approvals of our or SLRC's stockholders are not obtained. The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring us may be required to pay SLRC a termination fee of approximately$7.6 million . The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring SLRC may be required to pay to us a termination fee of approximately$25.6 million . The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is incorporated by reference as Exhibit 2.1 to this Annual Report on Form 10-K and incorporated by reference herein. The representations, warranties, covenants and agreements contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement (except as may be expressly set forth in the Merger Agreement); may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders should not rely on such representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Merger Agreement or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties to the Merger Agreement. 80
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Recent Developments
On
On
On
The global outbreak of the COVID-19 pandemic, and the related effect on theU.S. and global economies, has continued to have adverse consequences for the business operations of some of the Company's portfolio companies and, as a result, has had adverse effects on the Company's operations. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, including the Company, remain uncertain. The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Company's investments and negatively impact the Company's performance.
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than "qualifying assets" specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in "eligible portfolio companies." The definition of "eligible portfolio company" includes certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than$250 million .
Revenue
We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmarkLondon interbank offered rate ("LIBOR"), commercial paper rate, or the prime rate. Interest on our debt investments is generally payable monthly or quarterly but may be bi-monthly or semi-annually. In addition, our investments may provide payment-in-kind ("PIK") income. Such amounts of accrued PIK income are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc.
Expenses
All investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for bySLR Capital Partners . We bear all other costs and expenses of our operations and transactions, including (without limitation): • the cost of our organization and public offerings; • the cost of calculating our net asset value, including the cost of any third-party valuation services; • the cost of effecting sales and repurchases of our shares and other securities; 81
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Table of Contents • interest payable on debt, if any, to finance our investments;
• fees payable to third parties relating to, or associated with, making
investments, including fees and expenses associated with performing due
diligence reviews of prospective investments and advisory fees;
• transfer agent and custodial fees;
• fees and expenses associated with marketing efforts;
• federal and state registration fees, any stock exchange listing fees;
• federal, state and local taxes;
• independent directors' fees and expenses;
• brokerage commissions;
• fidelity bond, directors and officers errors and omissions liability
insurance and other insurance premiums;
• direct costs and expenses of administration, including printing, mailing,
long distance telephone and staff;
• fees and expenses associated with independent audits and outside legal
costs;
• costs associated with our reporting and compliance obligations under the
1940 Act and applicable federal and state securities laws; and
• all other expenses incurred by either
connection with administering our business, including payments under the
Administration Agreement that will be based upon our allocable portion of
overhead and other expenses incurred by
performing its obligations under the Administration Agreement, including
rent, the fees and expenses associated with performing compliance
functions, and our allocable portion of the costs of compensation and
related expenses of our chief compliance officer and our chief financial
officer and their respective staffs.
We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.
Portfolio and Investment Activity
During our fiscal year endedDecember 31, 2021 , we invested approximately$192 million across 38 portfolio companies through a combination of primary and secondary market purchases. This compares to investing approximately$71 million in 23 portfolio companies for the fiscal year endedDecember 31, 2020 . Investments sold or prepaid during the fiscal year endedDecember 31, 2021 totaled approximately$129 million versus approximately$186 million for the fiscal year endedDecember 31, 2020 . AtDecember 31, 2021 , our portfolio consisted of 50 portfolio companies and was invested 71.2% directly in senior secured loans and 28.8% in common equity/equity interests/warrants (of which 8.9% is SLR Healthcare ABL and 19.8% is SLR Business Credit, through which the Company indirectly invests in senior secured loans), in each case, measured at fair value versus 44 portfolio companies invested 72.4% directly in senior secured loans and 27.6% in common equity/equity interests/warrants (of which 10.4% is SLR Healthcare ABL and 17.2% is SLR Business Credit) atDecember 31, 2020 . 82
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AtDecember 31, 2021 , 96.5% or$388.7 million of our income producing investment portfolio* was floating rate and 3.5% or$14.2 million was fixed rate, measured at fair value. AtDecember 31, 2020 , 96.0% or$327.2 million of our income producing investment portfolio* was floating rate and 4.0% or$13.5 million was fixed rate, measured at fair value. Since the initial public offering of SLR Senior onFebruary 24, 2011 and throughDecember 31, 2021 , invested capital totaled over$1.9 billion in over 175 portfolio companies. Over the same period, SLR Senior completed transactions with more than 75 different financial sponsors.
* We have included SLR Healthcare ABL and SLR Business Credit within our income
producing investment portfolio.
SLR Healthcare ABL
We acquired an equity interest inGemino Healthcare Finance LLC ("Gemino") onSeptember 30, 2013 . EffectiveFebruary 25, 2021 , Gemino and its related companies is doing business as SLR Healthcare ABL.SLR Healthcare is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment inSLR Healthcare was$32.8 million . The management team ofSLR Healthcare co-invested in the transaction and continues to leadSLR Healthcare . As ofDecember 31, 2021 ,SLR Healthcare's management team and SLR Senior own approximately 7% and 93% of the equity inSLR Healthcare , respectively. Concurrent with the closing of the transaction,SLR Healthcare entered into a new, four-year, non-recourse,$100.0 million credit facility with non-affiliates, which was expandable to$150.0 million under its accordion feature. EffectiveMarch 31, 2014 , the credit facility was expanded to$105.0 million and again onJune 27, 2014 to$110.0 million . OnMay 27, 2016 ,SLR Healthcare entered into a new$125.0 million credit facility which replaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an accordion feature increase to$200.0 million and had a maturity date ofMay 27, 2020 . OnJune 28, 2019 , this$125.0 million facility was amended, extending the maturity date toJune 28, 2023 .SLR Healthcare currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As ofDecember 31, 2021 , the portfolio totaled approximately$183.5 million of commitments with a total net investment in loans of$81.6 million on total assets of$91.3 million . As ofDecember 31, 2020 , the portfolio totaled approximately$218.0 million of commitments with a total net investment in loans of$39.3 million on total assets of$58.9 million . AtDecember 31, 2021 , the portfolio consisted of 36 issuers with an average balance of approximately$2.3 million versus 37 issuers with an average balance of approximately$1.1 million atDecember 31, 2020 . All of the commitments inSLR Healthcare's portfolio are floating-rate, senior-secured, cash-pay loans.SLR Healthcare's credit facility, which is non-recourse to us, had approximately$60.0 million and$25.0 million of borrowings outstanding atDecember 31, 2021 andDecember 31, 2020 , respectively. For the years endedDecember 31, 2021 and 2020,SLR Healthcare had net income of$0.7 million and$4.3 million , respectively, on gross income of$10.1 million and$10.4 million , respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations inSLR Healthcare's funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee thatSLR Healthcare will be able to maintain consistent dividend payments to us.SLR Healthcare's consolidated financial statements for the fiscal years endedDecember 31, 2021 andDecember 31, 2020 are attached as an exhibit to this annual report on Form 10-K.
SLR Business Credit
We acquired 100% of the equity interests ofNorth Mill Capital LLC ("NMC") onOctober 20, 2017 . NMC is a leading asset-backed lending commercial finance company that provides senior secured asset-backed financings toU.S. based small-to-medium-sizedbusinesses primarily in the manufacturing, services and distribution industries. 83
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We invested approximately$51 million to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC toESP SSC Corporation . Immediately thereafter, the Company andESP SSC Corporation contributed their equity interests to North Mill. OnMay 1, 2018 , North Mill merged with and into NMC, with NMC being the surviving company. The Company andESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. OnJune 28, 2019 ,North Mill Holdco, LLC ("NM Holdco"), a newly formed entity andESP SSC Corporation acquired 100% of Summit Financial Resources, aSalt Lake City -based provider of asset-backed financing to small and medium-sized businesses. As part of this transaction, the Company's 99% interest in the equity of NMC was contributed toNM Holdco . This approximately$15.5 million transaction was financed with borrowings on NMC's credit facility. EffectiveFebruary 25, 2021 , NMC and its related companies are doing business as SLR Business Credit. OnJune 3, 2021 , NMC acquired 100% ofFast Pay Partners LLC , aLos Angeles -based provider of asset-backed financing to digital media companies. The transaction purchase price of$66.7 million was financed with equity from us of$19.0 million and borrowings on NMC's credit facility of$47.7 million . SLR Business Credit currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As ofDecember 31, 2021 , the portfolio totaled approximately$513.9 million of commitments, of which$248.7 million were funded, on total assets of$290.8 million . As ofDecember 31, 2020 , the portfolio totaled approximately$387.2 million of commitments, of which$148.7 million were funded, on total assets of$177.7 million . AtDecember 31, 2021 , the portfolio consisted of 125 issuers with an average balance of approximately$2.0 million versus 126 issuers with an average balance of approximately$1.2 million atDecember 31, 2020 . NMC has a senior credit facility with a bank lending group for$225.0 million which expires onNovember 13, 2024 . Borrowings are secured by substantially all of NMC's assets. NMC's credit facility, which is non-recourse to us, had approximately$183.3 million and$111.1 million of borrowings outstanding atDecember 31, 2021 andDecember 31, 2020 , respectively. For the years endedDecember 31, 2021 andDecember 31, 2020 , SLR Business Credit had net income of$7.3 million and$4.5 million , respectively on gross income of$24.0 million and$19.7 million , respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in SLR Business Credit's funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that SLR Business Credit will be able to maintain consistent dividend payments to us. SLR Business Credit's consolidated financial statements for the fiscal years endedDecember 31, 2021 and 2020 are attached as an exhibit to this annual report on Form 10-K.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported.
Valuation of Portfolio Investments
We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail in Note 2(b) to the Company's Consolidated Financial Statements.
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.
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Revenue Recognition
The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management's judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or applied to principal depending upon management's judgment. Some of our investments may have contractual PIK income. PIK income is computed at the contractual rate, as applicable, and is accrued and reflected as a receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK income. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are capitalized and amortized into income using the effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned. The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK income has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK income also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for these fees. For the fiscal years endedDecember 31, 2021 , 2020 and 2019, capitalized PIK income totaled$0.2 million ,$0.4 million and$0.7 million , respectively.
Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss
We generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investments are calculated by using the specific identification method.
Income Taxes
SLR Senior, aU.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. In order to qualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by 85
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the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a nondeductible 4%U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues an estimated excise tax, if any, on estimated excess taxable income.
Recent Accounting Pronouncements
InMarch 2020 , the FASB issued Accounting Standards Update No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as ofMarch 12, 2020 throughDecember 31, 2022 . The Company is evaluating the potential impact that the adoption of this guidance will have on the Company's financial statements. RESULTS OF OPERATIONS Results comparisons are for the fiscal years endedDecember 31, 2021 andDecember 31, 2020 . Results for the fiscal year endedDecember 31, 2019 can be found in Item 7 of the Company's report on Form 10-K filed onFebruary 24, 2021 , which is incorporated by reference herein.
Investment Income
For the fiscal years endedDecember 31, 2021 and 2020, gross investment income totaled$29.3 million and$31.8 million , respectively. The decrease in gross investment income year over year was primarily due to a slightly lower average portfolio yield on a smaller, on average, income producing investment portfolio.
Expenses
Net expenses totaled$15.0 million and$11.4 million , respectively, for the fiscal years endedDecember 31, 2021 and 2020, of which$3.9 million and$4.2 million , respectively, were gross base management fees and gross performance-based incentive fees, and$6.9 million and$7.9 million , respectively, were interest and other credit facility expenses. Over the same periods,$0 and$3.7 million of base management fees were waived and$0 and$0.1 million of performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled$4.2 million and$3.1 million , respectively, for the fiscal years endedDecember 31, 2021 and 2020. Expenses generally consist of management fees, performance-based incentive fees, administrative services expenses, insurance, legal expenses, directors' expenses, audit and tax expenses, transfer agent fees and expenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The increase in net expenses year over year is primarily due to higher management fees from a decrease in the waivers of fees as well as higher general and administrative expenses resulting from$0.7 million of expenses related to the potential merger with SLR Investment Corp. Net Investment Income The Company's net investment income totaled$14.3 million or$0.89 per average share and$20.4 million or$1.27 per average share, for the fiscal years endedDecember 31, 2021 and 2020, respectively.
Net Realized Gain (Loss)
The Company had investment sales and prepayments totaling approximately
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the fiscal year endedDecember 31, 2021 were primarily related to the sale of select assets. Net realized gains for the fiscal year endedDecember 31, 2020 were primarily related to the sale of select assets.
Net Change in Unrealized Loss
For the fiscal years endedDecember 31, 2021 and 2020, the net change in unrealized loss on the Company's investments totaled$2.7 million and$6.7 million , respectively. Net unrealized loss for the fiscal year endedDecember 31, 2021 is primarily due to depreciation on our investments inAmerican Teleconferencing Services, Ltd. ,PPT Management Holdings, LLC , andLogix Holding Company, LLC , among others, partially offset by appreciation on our investments in SLR Business Credit,Composite Technology Acquisition Corp. and SLR Healthcare ABL, among others. Net unrealized loss for the fiscal year endedDecember 31, 2020 is primarily due to depreciation on our investments inNorth Mill Holdco LLC ,Gemino Healthcare Finance, LLC ,Composite Technology Acquisition Corp. ,SHO Holdings I Corporation andDISA Holdings Acquisition Subsidiary Corp. , among others, partially offset by appreciation on our investments inAegis Toxicology Sciences Corporation ,Confie Seguros Holding II Co. andGalway Partners Holdings, LLC , among others.
Net Increase in Net Assets From Operations
For the fiscal years endedDecember 31, 2021 and 2020, the Company had a net increase in net assets resulting from operations of$11.5 million and$13.9 million , respectively. For the fiscal years endedDecember 31, 2021 and 2020, earnings per average share were$0.72 and$0.87 , respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources are generally available through its revolving credit facilities, unsecured notes and through periodic follow-on equity offerings, as well as from cash flows from operations, investment sales and pre-payments of investments. AtDecember 31, 2021 , the Company had$161.5 million in borrowings outstanding on its credit facilities and$148.5 million of unused capacity, subject to borrowing base limits. OnMarch 31, 2020 , the Company closed a private offering of$85,000 of senior unsecured notes due 2025 (the "2025 Unsecured Notes") with a fixed interest rate of 3.90% and a maturity date ofMarch 31, 2025 . Interest on the 2025 Unsecured Notes is due semi-annually onMarch 31 andSeptember 30 . The 2025 Unsecured Notes were issued in a private placement only to qualified institutional buyers. OnJune 1, 2018 , the$200 million senior secured revolving credit facility with our wholly-owned subsidiarySUNS SPV LLC as borrower andCitibank, N.A . acting as administrative agent (the "Credit Facility") was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. OnJuly 13, 2018 , commitments to the Credit Facility, as amended, were increased from$200 million to$225 million by utilizing the accordion feature. InSeptember 2016 , the Company closed a follow-on public equity offering of 4.5 million shares of common stock at$16.76 per share raising approximately$75.0 million in net proceeds. In the future, if the merger with SLR Investment Corp. does not close, the Company may raise additional equity or debt capital, among other considerations. The primary uses of funds will be investments in portfolio companies, reductions in debt outstanding and other general corporate purposes. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.
Cash Equivalents
We deem certainU.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or 87
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near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchaseU.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held approximately$160 million of cash equivalents as ofDecember 31, 2021 .
Debt
Unsecured Notes
OnMarch 31, 2020 , the Company closed a private offering of$85 million of the 2025 Unsecured Notes with a fixed interest rate of 3.90% and a maturity date ofMarch 31, 2025 . Interest on the 2025 Unsecured Notes is due semi-annually onMarch 31 andSeptember 30 . The 2025 Unsecured Notes were issued in a private placement only to qualified institutional buyers.
Revolving Loan Facilities
OnAugust 26, 2011 , the Company established our wholly-owned subsidiary,SUNS SPV LLC (the "SUNS SPV") which entered into the Credit Facility withCitigroup Global Markets Inc. acting as administrative agent. OnJanuary 10, 2017 , commitments to the Credit Facility, as amended, were increased from$175 million to$200 million by utilizing the accordion feature. The commitment can also be expanded up to$600 million . The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date isJune 1, 2026 . The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, SLR Senior and SUNS SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended onNovember 7, 2012 ,June 30, 2014 andMay 29, 2015 to extend maturities and add greater investment flexibility, among other changes. OnJune 1, 2018 , the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. OnJuly 13, 2018 , commitments to the Credit Facility, as amended, were increased from$200 million to$225 million by utilizing the accordion feature. OnJune 7, 2021 , the Credit Facility maturity date was extended toJune 1, 2026 and was amended to add greater investment flexibility, among other changes. As ofDecember 31, 2021 , there were$76.5 million of borrowings outstanding under the Credit Facility. OnMay 31, 2019 , the Company as transferor and FLLP 2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the$75 million FLLP Facility withWells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature onMay 31, 2024 . The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.15-2.25%. The Company and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. OnMay 11, 2021 , the maximum facility amount was reduced from$75.0 million to$11.3 million and the reinvestment period was terminated. OnSeptember 30, 2021 , the FLLP Facility was repaid and terminated.
At
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Contractual Obligations
Payments due by
Period as of
(dollars in millions)
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
Revolving credit facilities (1) $ 76.5 $ - $ - $ 76.5 $ -
Unsecured senior notes 85.0 - - 85.0 -
(1) At
capacity under our revolving credit facilities, subject to borrowing base
limits.
Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to whichSLR Capital Partners has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to whichSLR Capital Management has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrator's overhead in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Either party may terminate each of the Advisory Agreement and Administration Agreement without penalty upon 60 days' written notice to the other. See note 3 to our Consolidated Financial Statements.
Information about our senior securities is shown in the following table as of the year endedDecember 31, 2021 and each year endedDecember 31 since the Company commenced operations, unless otherwise noted. The "-" indicates information which theSEC expressly does not require to be disclosed for certain types of senior securities. Involuntary Asset Liquidating Average Total Amount Coverage Preference Market Value Class and Year Outstanding(1) Per Unit(2) Per Unit(3) Per Unit(4) Credit Facility Fiscal 2021 $ 76,500$ 1,200 $ - N/A Fiscal 2020 - - - N/A Fiscal 2019 157,600 1,671 - N/A Fiscal 2018 119,200 1,770 - N/A Fiscal 2017 124,200 3,175 - N/A Fiscal 2016 98,300 3,738 - N/A Fiscal 2015 116,200 2,621 - N/A Fiscal 2014 143,200 2,421 - N/A Fiscal 2013 61,400 4,388 - N/A Fiscal 2012 39,100 5,453 - N/A Fiscal 2011 8,600 21,051 - N/A 89
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Involuntary
Asset Liquidating Average
Total Amount Coverage Preference Market Value
Class and Year Outstanding(1) Per Unit(2) Per Unit(3) Per Unit(4)
FLLP Facility
Fiscal 2021 - - - N/A
Fiscal 2020 5,403 229 - N/A
Fiscal 2019 53,602 569 - N/A
Fiscal 2018 51,371 762 - N/A
2025 Unsecured Notes
Fiscal 2021 85,000 1,334 - N/A
Fiscal 2020 85,000 3,596 - N/A
Total Senior Securities
Fiscal 2021 $ 161,500 $ 2,534 $ - N/A
Fiscal 2020 90,403 3,825 - N/A
Fiscal 2019 211,202 2,240 - N/A
Fiscal 2018 170,571 2,532 - N/A
Fiscal 2017 124,200 3,175 - N/A
Fiscal 2016 98,300 3,738 - N/A
Fiscal 2015 116,200 2,621 - N/A
Fiscal 2014 143,200 2,421 - N/A
Fiscal 2013 61,400 4,388 - N/A
Fiscal 2012 39,100 5,453 - N/A
Fiscal 2011 8,600 21,051 - N/A
(1) Total amount of each class of senior securities outstanding (in thousands) at
the end of the period presented.
(2) The asset coverage ratio for a class of senior securities representing
indebtedness is calculated as our consolidated total assets, less all
liabilities and indebtedness not represented by senior securities, divided by
senior securities representing indebtedness. This asset coverage ratio is
multiplied by one thousand to determine the Asset Coverage Per Unit. In order
to determine the specific Asset Coverage Per Unit for each class of debt, the
total Asset Coverage Per Unit was divided based on the amount outstanding at
the end of the period for each. As of
253.4%.
(3) The amount to which such class of senior security would be entitled upon the
involuntary liquidation of the issuer in preference to any security junior to
it.
(4) Not applicable, we do not have senior securities that are registered for
public trading.
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The following is a schedule of financial highlights for the respective years:
Year ended Year ended Year ended Year ended Year ended
December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013 December 31, 2012 Per Share Data: (a) Net asset value, beginning of year $ 16.33 $ 17.65 $ 18.04 $ 18.33 $ 18.15 Net investment income 1.42 1.33 1.20 1.17 1.31 Net realized and unrealized gain (loss) 0.50 (1.24 ) (0.18 ) (0.07 ) 0.15 Net increase in net assets resulting from operations 1.92 0.09 1.02 1.10 1.46 Distributions to stockholders (see note 9a): From net investment income (1.42 ) (1.41 ) (1.29 ) (1.20 ) (1.24 ) From net realized gains - - - - (0.05 ) From return of capital - - (0.12 ) (0.22 ) - Anti-dilution - - - 0.05 - Offering costs and other (0.03 ) - - (0.02 ) 0.01 Net asset value, end of year $ 16.80 $ 16.33 $ 17.65 $ 18.04 $ 18.33 Per share market value, end of year $ 16.44 $ 14.90 $ 14.97 $ 18.22 $ 18.66 Total Return(b) 20.70 % 8.90 % (10.47 %) 5.39 % 27.65 % Net assets, end of year $ 269,145 $ 188,304 $ 203,519 $ 208,017 $ 174,103 Shares outstanding, end of year 16,025,011 11,533,315 11,533,315 11,529,303 9,500,100 Ratios to average net assets: Net investment income 8.68 % 7.63 % 6.69 % 6.46 % 7.14 % Operating expenses 2.65 %* 2.92 %* 2.50 %* 2.46 % 3.20 % Interest and other credit facility expenses** 1.56 % 2.08 % 1.52 % 0.62 % 1.40 % Total expenses 4.21 %* 5.00 %* 4.02 %* 3.08 % 4.60 % Average debt outstanding $ 109,938 $ 136,900 $ 72,132 $ 41,261 $ 41,439 Portfolio turnover ratio 38.4 % 34.0 % 47.5 % 56.8 % 74.5 %
(a) Calculated using the average shares outstanding method.
(b) Total return is based on the change in market price per share during the year
and takes into account any distributions, if any, reinvested in accordance
with the dividend reinvestment plan. Total return does not include a sales
load.
* The ratio of operating expenses to average net assets and the ratio of total
expenses to average net assets is shown net of a voluntary incentive fee
waiver (see note 3).
For the year endedDecember 31, 2016 , the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.60% and 5.15%, respectively, without the voluntary management and incentive fee waivers. For the year endedDecember 31, 2015 , the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.29% and 5.37%, respectively, without the voluntary management and incentive fee waivers. For the year endedDecember 31, 2014 , the ratios of operating expenses to average net assets and total expenses to average net assets would be 2.61% and 4.13%, respectively, without the voluntary management and incentive fee waivers. ** Ratios shown without the non-recurring costs associated with the amendments
of the Credit Facility would be 1.56%, 1.67%, 1.05%, 0.62% and 0.85%,
respectively, for the years ended
2012.
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Off-Balance Sheet Arrangements
From time-to-time and in the normal course of business, the Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments. These unfunded capital commitments always take into account the Company's liquidity and cash available for investment, prudent portfolio management of issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments atDecember 31, 2021 andDecember 31, 2020 , respectively: December 31, 2021 December 31, 2020 (in millions) Arcutis Biotherpeutics, Inc $ 6.7 $ -CC SAG Holdings Corp. (Spectrum Automotive) 6.2 - NAC Holdings Corp 5.1 - Glooko, Inc 4.7 - Vessco Midco Holdings, LLC 4.6 - BridgeBio Pharma, Inc 4.0 - Plastics Management, LLC 3.5 - Tilley Chemical Buyer, Inc 2.3 - Maurices, Inc 2.2 - Ivy Fertility Services, LLC 1.5 - Drilling Info Holdings, Inc. 1.4 1.0 SLR Healthcare ABL* 1.4 1.4 RQM+ Corp 1.3 - Composite Technology Acquisition Corp. 1.3 1.3 RxSense Holdings LLC. 1.3 1.2 Erie Construction Mid-west, LLC 1.2 - TAUC Management, LLC 1.2 - GSM Acquisition Corp 0.9 - High Street Buyer, Inc 0.8 - SOC Telemed, Inc 0.7 - Foundation Consumer Brands, LLC 0.7 - BayMark Health Services, Inc 0.7 - Pinnacle Treatment Centers, Inc. 0.4 0.4 Ultimate Baked Goods Midco, LLC 0.3 - Neuronetics, Inc. 0.3 1.0 SunMed Group Holdings, LLC 0.3 - World Insurance Associates, LLC. 0.3 1.1 American Teleconferencing Services, Ltd 0.3 - All State Ag Parts, LLC 0.3 -ENS Holdings III Corp. & ES OpcoUSA LLC 0.2 0.6 Smile Doctors LLC - 8.7 RSC Acquisition, Inc - 3.0 Higginbotham Insurance Agency, Inc. - 1.4 Worldwide Facilities, LLC. - 1.3 Kindred Biosciences, Inc - 1.1 Trinity Partners, LLC. - 0.7 Sentry Data Systems, Inc. - 0.5 AQA Acquisition Holding, Inc. - 0.1 Total Commitments $ 56.1 $ 24.8
* The Company controls the funding of the SLR Healthcare ABL commitment and may
cancel it at its discretion.
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The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company's achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As ofDecember 31, 2021 andDecember 31, 2020 , the Company had sufficient cash available and/or liquid securities available to fund its commitments and had reviewed them for any appropriate fair value adjustment. In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.
Distributions
The following table reflects the cash distributions per share on our common
stock for the two most recent fiscal years and the current fiscal year to date:
Date Declared Record Date Payment Date Amount
Fiscal 2022
March 1, 2022 March 18, 2022 April 1, 2022 $ 0.10
February 3, 2022 February 17, 2022 March 1, 2022 0.10
January 5, 2022 January 20, 2022 February 2, 2022 0.10
YTD Total (2022) $ 0.30
Fiscal 2021
December 1, 2021 December 16, 2021 January 5, 2022 $ 0.10
November 3, 2021 November 18, 2021 December 2, 2021 0.10
October 6, 2021 October 21, 2021 November 3, 2021 0.10
September 9, 2021 September 23, 2021 October 1, 2021 0.10
August 3, 2021 August 19, 2021 September 3, 2021 0.10
July 7, 2021 July 22, 2021 August 3, 2021 0.10
June 4, 2021 June 23, 2021 July 2, 2021 0.10
May 5, 2021 May 20, 2021 June 2, 2021 0.10
April 6, 2021 April 21, 2021 April 30, 2021 0.10
February 24, 2021 March 18, 2021 April 2, 2021 0.10
February 3,2021 February 18, 2021 March 2, 2021 0.10
January 8, 2021 January 25, 2021 February 2, 2021 0.10
Total (2021) $ 1.20
Fiscal 2022
March 1, 2022 March 18, 2022 April 1, 2022 $ 0.10
February 3, 2022 February 17, 2022 March 1, 2022 0.10
January 5, 2022 January 20, 2022 February 2, 2022 0.10
YTD Total (2022) $ 0.30
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Date Declared Record Date Payment Date Amount
Fiscal 2020
December 8, 2020 December 22, 2020 January 5, 2021 $ 0.10
November 5, 2020 November 19, 2020 December 2, 2020 0.10
October 6, 2020 October 22, 2020 October 30, 2020 0.10
September 9, 2020 September 24, 2020 October 2, 2020 0.10
August 4, 2020 August 20, 2020 September 2, 2020 0.10
July 7, 2020 July 22, 2020 July 31, 2020 0.10
June 4, 2020 June 18, 2020 July 1, 2020 0.10
May 7, 2020 May 22, 2020 June 2, 2020 0.10
February 20, 2020 March 19, 2020 April 3, 2020 0.1175
February 4,2020 February 20, 2020 February 28, 2020 0.1175
January 8, 2020 January 23, 2020 January 31, 2020 0.1175
Total (2020) $ 1.27
Tax characteristics of all distributions will be reported to stockholders on
Form 1099 after the end of the calendar year. Future distributions, if any, will
be determined by our Board. We expect that our distributions to stockholders
will generally be from accumulated net investment income, from net realized
capital gains or non-taxable return of capital, if any, as applicable.
We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain
our RIC status, we must distribute at least 90% of our ordinary income and
realized net short-term capital gains in excess of realized net long-term
capital losses, if any, out of the assets legally available for distribution. In
addition, although we currently intend to distribute realized net capital gains
(i.e., net long-term capital gains in excess of short-term capital losses), if
any, at least annually, out of the assets legally available for such
distributions, we may in the future decide to retain such capital gains for
investment.
We maintain an "opt out" dividend reinvestment plan for our common stockholders.
As a result, if we declare a distribution, then stockholders' cash distributions
will be automatically reinvested in additional shares of our common stock,
unless they specifically "opt out" of the dividend reinvestment plan so as to
receive cash distributions.
We may not be able to achieve operating results that will allow us to make
distributions at a specific level or to increase the amount of these
distributions from time to time. In addition, due to the asset coverage test
applicable to us as a business development company, we may in the future be
limited in our ability to make distributions. Also, our revolving credit
facility may limit our ability to declare distributions if we default under
certain provisions. If we do not distribute a certain percentage of our income
annually, we will suffer adverse tax consequences, including possible loss of
the tax benefits available to us as a regulated investment company. In addition,
in accordance with GAAP and tax regulations, we include in income certain
amounts that we have not yet received in cash, such as contractual
payment-in-kind income, which represents contractual interest added to the loan
balance that becomes due at the end of the loan term, or the accrual of original
issue or market discount. Since we may recognize income before or without
receiving cash representing such income, we may have difficulty meeting the
requirement to distribute at least 90% of our investment company taxable income
to obtain tax benefits as a regulated investment company.
With respect to the distributions to stockholders, income from origination,
structuring, closing and certain other upfront fees associated with investments
in portfolio companies are treated as taxable income and accordingly,
distributed to stockholders. For the fiscal years ended December 31, 2021 and
December 31, 2020 , 0.0% and 18.4% of distributions were funded from the waiver
of management and/or incentive fees.
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Related Parties
We have entered into a number of business relationships with affiliated or related parties, including the following:
• We have entered into the Advisory Agreement with
board member, are managing members and senior investment professionals
of, and have financial and controlling interests in, the Investment
Adviser. In addition,
and Secretary serves as the Chief Financial Officer for
Partners.
• The Administrator provides us with the office facilities andadministrative services necessary to conduct day-to-day operations
pursuant to our Administration Agreement. We reimburse the Administrator
for the allocable portion of overhead and other expenses incurred by it
in performing its obligations under the Administration Agreement,
including rent, the fees and expenses associated with performingcompliance functions, and the compensation of our chief compliance
officer, our chief financial officer and their respective staffs.
• We have entered into a license agreement with the Investment Adviser,pursuant to which the Investment Adviser has granted us a non-exclusive,
royalty-free license to use the licensed marks "Solar" and "SLR".
The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Investment Adviser presently serves as investment adviser to SLR Investment Corp., a publicly traded BDC, which focuses on investing in senior secured loans, and to a lesser extent unsecured loans and equity securities, as well asSCP Private Income BDC LLC , an unlisted BDC that focuses primarily in senior secured loans, including asset-based loans and first lien loans and SLR HC BDC LLC, an unlisted BDC whose principal focus is to invest directly and indirectly in senior secured loans and other debt instruments typically to middle market companies within the healthcare industry. In addition,Michael S. Gross , our Chairman, Co-Chief Executive Officer and President,Bruce Spohler , our Co-Chief Executive Officer and Chief Operating Officer, andRichard L. Peteka , our Chief Financial Officer, serve in similar capacities for SLR Investment Corp.,SCP Private Credit Income BDC LLC and SLR HC BDC LLC. The Investment Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of theSEC and its staff, and consistent with the Investment Adviser's allocation procedures. OnJune 13, 2017 , the Adviser received an exemptive order that permits the Company to participate in negotiated co-investment transactions with certain affiliates, in a manner consistent with the Company's investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to various conditions (the "Order"). If the Company is unable to rely on the Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity's investment strategy, on an alternating basis. Although the Adviser's investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, the Company and its stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of the Adviser.
Related party transactions may occur among
In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and theMaryland General Corporation Law. 95
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