Solar Capital Ltd. (NASDAQ: SLRC) (the 'Company' or 'Solar Capital'), today reported net investment income of $14.3 million, or $0.34 per share, for the third quarter 2020.
At September 30, 2020, net asset value (NAV) was $20.14 per share, a slight increase from June 30, 2020.
As of September 30, 2020, the Company's portfolio was 100% performing.
The Board declared a fourth quarter distribution of $0.41 per share payable on January 5, 2021 to stockholders of record as of December 17, 2020. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At September 30, 2020: Comprehensive Investment portfolio fair value: $1.49 billion
Number of portfolio companies: 174
Net assets: $851.1 million
Net asset value per share: $20.14
Net debt-to-equity: 0.56x
Available capital: $912 million, subject to borrowing base availability
Comprehensive Investment Portfolio Activity for the Quarter Ended September 30, 2020: Investments made during the quarter: $66.4 million
Investments prepaid and sold during the quarter: $159.2 million
Operating Results for the Quarter Ended September 30, 2020:
Net investment income: $14.3 million
Net investment income per share: $0.34
Net realized and unrealized gain: $4.4 million
Net increase in net assets from operations: $18.6 million
Earnings per share: $0.44
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 NEF Holdings, LLC's ('NEF') full portfolio and excludes the fair value of the equity interests in Crystal Financial and NEF.
Includes investment activity through Crystal Financial (including its ownership of its SBIC), and NEF.
'I am pleased to report that our investment portfolio remains 100% performing, and we are confident in our borrowers' ability to continue to weather the current economic challenges. We attribute our strong positioning to our focus on investing in first lien senior secured loans to companies in defensive industries, as well as our efforts to build a commercial finance platform consisting of diverse niche asset based financing strategies. Our specialty finance businesses have demonstrated resiliency during this crisis, and they are currently seeing an increase in new investment opportunities,' said Michael Gross, Co-CEO of Solar Capital.
'With the acquisition of Kingsbridge Holdings, announced today, we expanded our commercial finance platform and suite of financing capabilities. Kingsbridge, a lessor of essential-use equipment to predominantly investment grade counterparties, provides Solar Capital with both an additional asset-based asset class as well as increased exposure to high quality obligors,' said Bruce Spohler, Co-CEO of Solar Capital. 'We expect our debt and equity investments in Kingsbridge to generate approximately $20 million of gross income in 2021.'
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Friday, November 6, 2020. All interested parties may participate in the conference call by dialing (844) 889-7786 approximately 5-10 minutes prior to the call, international callers should dial (661) 378-9930. Participants should reference Solar Capital Ltd. and the participant passcode of 7796857 when prompted. A telephone replay will be available until November 20, 2020 and can be accessed by dialing (855) 859-2056 and using the passcode 7796857. International callers should dial (404) 537-3406. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties through Solar Capital's website, www.solarcapltd.com. To listen to the webcast, please go to the Company's website 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 of the webcast will be available soon after the call.
Comprehensive Investment Portfolio
Investment Activity
During the three months ended September 30, 2020, Solar Capital had total originations of $66.4 million and repayments and amortization of $159.2 million across its four core business units: cash flow, asset-based, equipment finance, and life science lending, resulting in a net portfolio reduction of $92.8 million to the comprehensive portfolio.
Asset Quality
As of September 30, 2020, 100% on a fair value basis and cost basis of the Company's portfolio was performing, with no investments on non-accrual status at quarter end.
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.
Investment Income
For the fiscal quarters ended September 30, 2020 and 2019, gross investment income totaled $28.9 million and $39.7 million, respectively. The decrease in gross investment income for the year over year period was generally due to a decrease in the size of the income-producing portfolio and the decline in the base reference rate.
For the quarter ended September 30, 2020 cash interest and dividends represented over 96% of the Company's $28.9 million Q3 2020 gross investment income.
Expenses
Expenses totaled $14.6 million and $21.3 million, respectively, for the quarters ended September 30, 2020 and 2019. The decrease in expenses for the year over year period was primarily due to lower management and incentive fees resulting from a reduction in portfolio yield on a smaller income producing investment portfolio on average.
Net Investment Income
The Company's net investment income totaled $14.3 million and $18.4 million, or $0.34 and $0.44 per average share, respectively, for the fiscal quarters ended September 30, 2020 and 2019.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gains (losses) for the fiscal quarters ended September 30, 2020 and 2019 totaled $4.4 million and ($4.7) million, respectively.
Net Increase in Net Assets Resulting From Operations
For the quarters ended September 30, 2020 and 2019, the Company had a net increase in net assets resulting from operations of $18.6 million and $13.7 million, respectively. For the quarters ended September 30, 2020 and 2019, earnings per average share were $0.44 and $0.32, respectively.
Liquidity and Capital Resources
Unsecured Debt
At September 30, 2020, approximately 86% of the Company's funded debt, or $446 million, was comprised of fixed rate unsecured notes.
Credit Facilities and Available Capital
At September 30, 2020, the Company had no borrowings under its $545 million and $50 million revolving credit facilities and had approximately $47.5 million in cash on hand. When including undrawn capital on the Crystal and NEF Holdings, LLC non-recourse credit facilities, total available capital is $912 million, subject to borrowing base availability at September 30, 2020.
Leverage
On September 30, 2020, the Company's net debt-to-equity was 0.56x. Pro forma for the Kingsbridge acquisition, the Company's net debt-to-equity was 0.77x at September 30, 2020. Solar Capital's current leverage provides a significant cushion to its regulatory asset coverage limit of 2.0x debt-to-equity as well as its target leverage ratio of 0.9x - 1.25x.
Unfunded Revolver Commitments
At September 30, 2020, Solar Capital had unfunded revolver commitments of approximately $16.5 million that can be fully drawn by the borrowers.
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. 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 the Company's or Kingsbridge's future performance or financial condition. These statements are not guarantees of the Company's or Kingsbridge's 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 the Company's or Kingsbridge's business, portfolio companies and the global economy. Solar Capital and Kingsbridge operate in a very competitive and rapidly changing environment, in which new risks emerge from time to time. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) Kingsbridge's ability to maintain its historical financial performance, (ii) departures of key members of the Kingsbridge management team following closing, and (iii) material adverse changes to the portfolio of assets held by Kingsbridge as of or following the closing. For a more detailed discussion of factors related to Solar Capital's business, see the information under the caption 'Risk Factors' in Solar Capital's most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Solar Capital undertakes no duty to update any forward-looking statements made herein, unless required to do so by applicable law.
Contact:
Tel: (646) 308-8770
SLR INVESTMENT CORP. 
