Solar Senior Capital Ltd. (NASDAQ: SUNS) (the “Company” “Solar
Senior” or “SUNS”) today reported net investment income
of $4.8 million, or $0.30 per average share, for the quarter
ended December 31, 2020. For fiscal year 2020, net investment
income was $20.4 million, or $1.27 per average share.
At December 31, 2020, net asset value (NAV) was
$15.91 per share, an increase of $0.12 per share from September 30,
2020, driven primarily by unrealized mark-to-market appreciation.
At December 31, 2020, 100% of Solar Senior’s portfolio was
performing.
The Company’s Board of Directors declared a
monthly distribution for March 2021 of $0.10 per share payable
on April 2, 2021 to stockholders of record on March
18, 2021. Tax characteristics of all distributions will be reported
to shareholders on Form 1099 after the end of the calendar
year.
HIGHLIGHTS:
At December 31, 2020:
Comprehensive Investment portfolio* fair value: $461.0
million
Number of unique issuers*:
205
Net assets: $255.4
million
Net asset value per share: $15.91
Net Debt to Equity: 0.34x
Available Capital**: Over $290 million, subject to borrowing
base availability
Comprehensive Portfolio Activity*** for
the Quarter Ended December 31, 2020
Investments made during the quarter: $35.4 million
Investments repaid or sold during the quarter: $98.6 million
Comprehensive Portfolio Activity*** for
the Year Ended December 31, 2020
Investments made during the year: $166.6 million
Investments prepaid or sold during the year: $370.9 million
Operating Results for the Quarter Ended
December 31, 2020
Net investment income: $4.8 million
Net investment income per share: $0.30
Net realized and unrealized gain: $2.0 million
Net increase in net assets from operations: $6.9 million
Earnings per share: $0.43
Operating Results for the Year Ended
December 31, 2020
Net investment income: $20.4 million
Net investment income per share: $1.27
Net realized and unrealized loss: $6.5 million
Net increase in net assets from operations: $13.9 million
Earnings per share: $0.87
* The Comprehensive Investment Portfolio is
comprised of Solar Senior Capital Ltd.’s investment portfolio,
Gemino Healthcare Finance’s (“Gemino”) full portfolio and North
Mill Holdco LLC’s (“North Mill”) full portfolio, and excludes the
Company’s fair value of its equity interest in Gemino and North
Mill.
** See Liquidity and Capital Resources
*** Comprehensive Portfolio Activity includes
gross originations/repayments through Gemino and North Mill.
“The Company’s portfolio remained 100%
performing through 2020, reflecting our focus on first lien senior
secured cash flow and asset-based loans in our niche specialty
finance verticals,” said Michael Gross, Co-CEO of SUNS. “The
resiliency of our portfolio companies and their continued access to
liquidity, as well as improved market technicals, drove the
increase in our Net Asset Value per share since March 2020.”
“The conservative management of SUNS’ assets and
liabilities through an extended period of frothy credit markets has
positioned the company with a solid portfolio, a stable funding
profile, low leverage, strong liquidity, and favorable positioning
to make new investments,” said Bruce Spohler, Co-CEO of SUNS.
“We’re encouraged by the recent pickup in M&A and refinancings
in our sponsor finance business, as well as the increase in
activity in our asset-based loan strategies. Last year, the strong
fundamental performance our portfolio companies, coupled with the
Federal government’s liquidity support programs, enabled an
outsized portion of them to repay their loans to SUNS. Currently,
we are seeing a strong pipeline of first lien cash flow and
asset-based loan investment opportunities that will enable us to
re-ramp our portfolio.”
Conference Call and Webcast The
Company will host an earnings conference call and audio webcast at
11:00 a.m. (Eastern Time) on Thursday, February 25, 2021. All
interested parties may participate in the conference call by
dialing (844) 889-7785 approximately 5-10 minutes prior to the
call, international callers should dial (661) 378-9929.
Participants should reference Solar Senior Capital Ltd. and the
participant passcode of 1664706 when prompted. A telephone replay
will be available until March 11, 2021 and can be accessed by
dialing (855) 859-2056 and using the passcode 1664706.
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 Senior Capital’s
website, www.solarseniorcap.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 quarter ended December 31, 2020,
Solar Senior Capital had total originations of $35.4 million and
repayments of $98.6 million across the Company’s core businesses
comprised of senior secured cash flow, traditional asset-based
lending and healthcare asset-based lending, resulting in a net
portfolio reduction of $63.2 million to the comprehensive
portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the quarter ended December 31, 2020 was as
follows:
Comprehensive Investment Portfolio
Activity(1) Q4 2020 (in
millions) |
Asset Classes |
Cash Flow Loans |
Asset-Based Loans North
Mill |
Asset-Based Healthcare Loans Gemino |
Life Science |
Total Portfolio Activity |
Originations |
$19.2 |
$8.3 |
$7.9 |
$0.0 |
$35.4 |
Repayments / Amortization |
$70.5 |
$14.5 |
$13.6 |
$0.0 |
$98.6 |
Net Portfolio Activity |
$(51.3) |
$(6.2) |
$(5.7) |
$0.0 |
$(63.2) |
(1) Portfolio activity includes gross
originations/repayments across each business unit.
During the year ended December 31, 2020, Solar
Senior Capital had total originations of $166.6 million and
repayments of $370.9 million across the Company’s core businesses
comprised of senior secured cash flow, traditional asset-based
lending and healthcare asset-based lending, resulting in net
portfolio reduction of $204.3 million in the comprehensive
portfolio.
The investment activity of our Comprehensive
Investment Portfolio for the year ended December 31, 2020 was as
follows:
Total Portfolio Activity – Year Ended 2020(1) (in
millions) |
Asset Classes |
Cash Flow Loans |
Asset-based Loans North
Mill |
Asset-based Healthcare Loans Gemino |
Life Science |
Total Portfolio Activity |
Originations |
$63.0 |
$71.2 |
$24.6 |
$7.8 |
$166.6 |
Repayments / Amortization |
$182.7 |
$93.7 |
$91.0 |
$3.5 |
$370.9 |
Net Portfolio Activity |
$(119.7) |
$(22.5) |
$(66.4) |
$4.3 |
$(204.3) |
(1) Portfolio activity includes gross
originations/repayments across each business unit.
Portfolio Composition
Our Comprehensive Investment Portfolio composition
by business unit at December 31, 2020 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted
Average Asset-level Yield |
($mm) |
% |
First Lien Senior Secured Loans |
|
|
|
Cash Flow
1st Lien Senior Secured Loans |
$218.7 |
47.4% |
6.7%5 |
Traditional
Asset-Based 1st Lien Senior Secured Loans(1) (North Mill) |
$148.7 |
32.3% |
12.7%6 |
Healthcare
Asset-Based 1st Lien Senior Secured Loans(2) (Gemino) |
$65.3 |
14.2% |
12.4%6 |
Life Science 1st Lien Senior Secured Loans |
$28.2 |
6.1% |
9.3%7 |
Total First Lien Senior Secured Loans |
$460.9 |
100.0% |
|
Cash Flow 2nd Lien Senior Secured Loans |
$0.0 |
0.0% |
n/a |
Total Senior Secured Loans |
$460.9 |
100.0% |
9.6% |
Equity and Equity-like Securities(3) |
$0.1 |
<0.1% |
|
Total Comprehensive Investment Portfolio |
$461.0 |
100.0% |
|
Floating Rate Investments(4) |
$449.0 |
97.4% |
|
(1) Includes North Mill’s full portfolio, all of which are 1st
lien senior secured loans.
(2) Includes Gemino’s full portfolio, all of which are 1st lien
senior secured loans.
(3) Excludes the Company’s equity investments in North Mill and
Gemino, which distribute quarterly dividends to the Company.
(4) Floating rate investments calculated as a percent of the
Company’s income-producing Comprehensive Investment Portfolio.
(5) Represents the yield to maturity based on fair market value
at December 31, 2020.
(6) Represents total interest and fee income for the three month
period ending on December 31, 2020 against the average portfolio
over the same fiscal period, annualized.
(7) Represents the weighted average of each individual loan’s
yield to maturity based on fair value at December 31, 2020
(excluding exit fees or warrants).
The Comprehensive Investment Portfolio is
diversified across approximately 205 unique borrowers in over 120
industries. The average issuer exposure is $2.3 million, or
<0.5% of the comprehensive portfolio.
As of December 31, 2020, more than 99.9% of the
Comprehensive Portfolio was invested in first lien senior secured
cash flow and asset-based loans and 0% in second lien senior
secured cash flow loans, and less than 0.1% is in equity.
The weighted average yield at fair value of all
income-producing investments in the Comprehensive Portfolio was
9.6% at December 31, 2020.
Solar Senior Capital Ltd.
Portfolio
Asset Quality
At December 31, 2020, 100% of the Company’s
portfolio was performing with no investments on non-accrual.
The Company puts its greatest emphasis on risk
mitigation and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of December 31, 2020, the composition of our
portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of SUNS Portfolio |
1 |
$41.9 |
12.3% |
2 |
$290.8 |
85.3% |
3 |
$8.1 |
2.4% |
4 |
$0.0 |
0.0% |
Solar Senior Capital Ltd.’s Results of
Operations for the Year Ended December 31, 2020 compared to the
Year Ended December 31, 2019:
Investment Income
For the years ended December 31, 2020 and 2019,
gross investment income totaled $31.8 million and $40.1 million,
respectively. The decrease in gross investment income from fiscal
year 2019 to fiscal year 2020 was primarily due to a reduction in
portfolio yield, mainly as a result of the approximately 160 basis
point decrease in average LIBOR year over year, on a smaller income
producing portfolio on average.
Investment Income Contribution by Business
Unit
Business Unit Contribution to Gross Investment
Income(1) (in millions) |
For the Year Ended: |
Cash Flow Lending |
Asset-based Lending (North
Mill) |
Asset-based Healthcare Lending (Gemino) |
Life Science |
Total |
12/31/2020 |
$4.4 |
$1.3 |
$0.9 |
$0.7 |
$7.3 |
% Contribution |
61.6% |
17.3% |
11.8% |
9.3% |
100.0% |
(1) Investment Income Contribution by
Business Unit includes interest income/fees from cash flow and life
science loans on balance sheet and distributions from North Mill
and Gemino.
Expenses
Net expenses totaled $11.4 million and $17.5
million, respectively, for the fiscal years ended December 31, 2020
and 2019. Over the same periods, $0.1 million and $1.5 million of
performance-based incentive fees and $3.7 million and $1.3 million
of base management fees, were voluntarily waived by the Company’s
investment manager.
Net Investment Income
Net investment income totaled $20.4 million and
$22.6 million, or $1.27 and $1.41 per average share, respectively,
for the fiscal years ended December 31, 2020 and 2019.
Net Realized and Unrealized Gain
(Loss)
Net realized and unrealized gain (loss) for the
fiscal years ended December 31, 2020 and 2019 totaled approximately
$(6.5) million and $0.3 million, respectively.
Net Increase in Net Assets Resulting from
Operations
For the fiscal years ended December 31, 2020 and
2019, the Company had a net increase in net assets resulting from
operations of $13.9 million and $22.9 million, respectively. For
the fiscal years ended December 31, 2020 and 2019, earnings per
average share were $0.87 and $1.43, respectively.
Liquidity and Capital
Resources
Unsecured Debt At December 31, 2020, approximately
94% of the Company’s funded debt, or $85 million, was comprised of
unsecured notes.
Credit Facilities and Available Capital At
December 31, 2020, the Company had $5.4 million of borrowings under
its $300 million of revolving credit facilities, resulting in a
total of $90.4 million of funded debt and over $290 million of
available capital, subject to borrowing base limits.
Leverage As of December 31, 2020, the Company’s
net debt to equity ratio was 0.34x. The Company’s low 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 1.25–1.50x debt-to-equity.
Unfunded Revolver Commitments As of December 31,
2020, Solar Senior had unfunded revolver commitments of
approximately $5.2 million that can be fully drawn by the
borrowers.
Financial Statements and
Tables
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES (in thousands, except share
amounts)
|
December 31, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
|
|
|
|
Investments
at fair value: |
|
|
|
|
|
|
|
Companies less than 5% owned (cost: $251,163 and $363,947,
respectively) |
$ |
246,963 |
|
|
$ |
361,665 |
|
Companies more than 25% owned (cost: $98,439 and $98,439,
respectively) |
|
93,867 |
|
|
|
98,600 |
|
Cash |
|
3,851 |
|
|
|
7,054 |
|
Cash
equivalents (cost: $299,998 and $99,898, respectively) |
|
299,998 |
|
|
|
99,898 |
|
Interest
receivable |
|
1,373 |
|
|
|
1,933 |
|
Dividends
receivable |
|
1,753 |
|
|
|
1,893 |
|
Receivable
for investments sold |
|
— |
|
|
|
6,667 |
|
Prepaid
expenses and other assets |
|
192 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
647,997 |
|
|
$ |
577,958 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Debt
($90,403 and $211,202 face amounts, respectively, reported net of
unamortized debt issuance costs of $1,910 and $1,901,
respectively.) |
$ |
88,493 |
|
|
$ |
209,301 |
|
Payable for
investments and cash equivalents purchased |
|
299,998 |
|
|
|
101,811 |
|
Distributions payable |
|
1,605 |
|
|
|
1,885 |
|
Management
fee payable |
|
— |
|
|
|
426 |
|
Interest
payable |
|
1,312 |
|
|
|
1,172 |
|
Administrative services payable |
|
646 |
|
|
|
826 |
|
Other
liabilities and accrued expenses |
|
539 |
|
|
|
723 |
|
|
|
|
|
|
|
|
|
Total liabilities |
$ |
392,593 |
|
|
$ |
316,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
|
Common
stock, par value $0.01 per share, 200,000,000 and 200,000,000
common shares authorized, respectively, and 16,049,034 and
16,046,214 issued and outstanding, respectively |
$ |
160 |
|
|
$ |
160 |
|
Paid-in
capital in excess of par |
|
274,205 |
|
|
|
282,181 |
|
Accumulated
distributable net loss |
|
(18,961 |
) |
|
|
(20,527 |
) |
|
|
|
|
|
|
|
|
Total net assets |
$ |
255,404 |
|
|
$ |
261,814 |
|
|
|
|
|
|
|
|
|
Net
Asset Value Per Share |
$ |
15.91 |
|
|
$ |
16.32 |
|
SOLAR SENIOR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except share
amounts)
|
Year ended December 31, |
|
2020 |
|
2019 |
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
Companies less than 5% owned |
$ |
22,830 |
|
|
$ |
30,496 |
|
Companies 5% to 25% owned |
|
— |
|
|
|
386 |
|
Dividends: |
|
|
|
|
|
|
|
Companies more than 25% owned |
|
8,500 |
|
|
|
9,060 |
|
Other income: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
474 |
|
|
|
122 |
|
Companies 5% to 25% owned |
|
— |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
Total investment income |
|
31,804 |
|
|
|
40,091 |
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
Management fees |
$ |
4,119 |
|
|
$ |
4,799 |
|
Performance-based incentive fees |
|
95 |
|
|
|
1,484 |
|
Interest and other credit facility expenses |
|
7,898 |
|
|
|
10,738 |
|
Administrative services expense |
|
1,575 |
|
|
|
1,575 |
|
Other general and administrative expenses |
|
1,485 |
|
|
|
1,667 |
|
|
|
|
|
|
|
|
|
Total expenses |
|
15,172 |
|
|
|
20,263 |
|
|
|
|
|
|
|
|
|
Management fees waived |
|
(3,655 |
) |
|
|
(1,317 |
) |
Performance-based incentive fees waived |
|
(95 |
) |
|
|
(1,476 |
) |
|
|
|
|
|
|
|
|
Net expenses |
|
11,422 |
|
|
|
17,470 |
|
|
|
|
|
|
|
|
|
Net investment income |
$ |
20,382 |
|
|
$ |
22,621 |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH
EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments and cash equivalents: |
|
|
|
|
|
|
|
Companies less than 5% owned |
$ |
193 |
|
|
$ |
(6,741 |
) |
Companies 5% to 25% owned |
|
— |
|
|
|
1,979 |
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments and cash equivalents |
|
193 |
|
|
|
(4,762 |
) |
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on investments and cash
equivalents: |
|
|
|
|
|
|
|
Companies less than 5% owned |
|
(1,918 |
) |
|
|
4,861 |
|
Companies 5% to 25% owned |
|
— |
|
|
|
1,174 |
|
Companies more than 25% owned |
|
(4,733 |
) |
|
|
(950 |
) |
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on investments and cash
equivalents |
|
(6,651 |
) |
|
|
5,085 |
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on investments and cash
equivalents |
|
(6,458 |
) |
|
|
323 |
|
|
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS |
$ |
13,924 |
|
|
$ |
22,944 |
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE |
$ |
0.87 |
|
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
About Solar Senior Capital
Ltd.
Solar Senior 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 primarily in the form of cash flow
first lien senior secured debt instruments and asset-based loans
including senior secured loans collateralized on a first lien basis
primarily by current assets.
Forward-Looking Statements
Statements included herein may constitute
“forward-looking statements,” which relate to future events or our
future performance or financial condition. These statements are not
guarantees of our future performance, financial condition or
results and involve a number of risks and uncertainties, including
the impact of COVID-19 and related changes in base interest rates
and significant market volatility on our business, our portfolio
companies and the global economy. Actual results may differ
materially from those in the forward-looking statements as a result
of a number of factors, including those described from time to time
in our filings with the Securities and Exchange Commission. Solar
Senior Capital Ltd. undertakes no duty to update any
forward-looking statements made herein.
Contact Investor Relations (646)
308-8770
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