SLR Senior Investment Corp. Announces Quarter Ended September 30, 2021 Financial Results; Strong Pipeline Expected to Drive Earnings Growth
NEW YORK, Nov. 03, 2021 (GLOBE NEWSWIRE) -- SLR Senior Investment Corp. (NASDAQ:SUNS) (the "Company" "SLR Senior" or "SUNS") today reported net investment income of $3.7 million, or $0.23 per average share, for the quarter ended September 30, 2021.
At September 30, 2021, net asset value (NAV) was $15.73 per share.
The Company's Board of Directors declared a monthly distribution for November 2021 of $0.10 per share payable on December 2, 2021 to stockholders of record on November 18, 2021. Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At September 30, 2021:
Comprehensive Investment portfolio* fair value: $612 million
Number of portfolio companies*: 224
Net assets: $252.4 million
Net asset value per share: $15.73
Net Debt to Equity: 0.55x
Available Capital**: $266 million, subject to borrowing base availability
Comprehensive Portfolio Activity*** for the Quarter Ended September 30, 2021
Investments made during the quarter: $93.1 million
Investments repaid or sold during the quarter: $50.2 million
Operating Results for the Quarter Ended September 30, 2021
Net investment income: $3.7 million
Net investment income per share: $0.23
Net realized and unrealized loss: $1.3 million
Net increase in net assets from operations: $2.5 million
Earnings per share: $0.15
* The Comprehensive Investment Portfolio is comprised of SLR Senior Investment Corp.'s investment portfolio, SLR Healthcare ABL's ("Healthcare ABL") full portfolio and SLR Business Credit's ("Business Credit") full portfolio, and excludes the Company's fair value of its equity interest in Healthcare ABL and Business Credit.
** See Liquidity and Capital Resources
*** Comprehensive Portfolio Activity includes gross originations/repayments through Healthcare ABL and Business Credit.
"We are pleased to report continued growth in our comprehensive portfolio and strong credit quality," said Michael Gross, Co-CEO of SLR Senior Investment Corp. "As a result of our portfolio's solid foundation and sizeable investment pipeline, we expect to achieve portfolio growth in Q4, positioning us for increases in net investment income."
"Our specialty finance businesses had a strong third quarter, as their borrowers' capital needs continue to rebound following the reduction of government stimulus measures. The integration of FastPay, which SLR Business Credit acquired last quarter, is proceeding well and has expanded our origination capabilities," said Bruce Spohler, Co-CEO of SLR Senior Investment Corp. "We expect the significant deal flow generated by our originations team to drive near-term portfolio growth as we fund new investments and previously committed term loans."
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 11:00 a.m. (Eastern Time) on Thursday, November 4, 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 SLR Senior Investment Corp. and the participant passcode of 3667156 when prompted. A telephone replay will be available until November 18, 2021 and can be accessed by dialing (855) 859-2056 and using the passcode 3667156. 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 SLR Senior Investment's website, www.slrseniorinvestmentcorp.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 September 30, 2021, SLR Senior had total originations of $93.1 million and repayments of $50.2 million across the Company's core businesses comprised of senior secured cash flow, traditional asset-based lending, healthcare asset-based lending, and life science finance resulting in net portfolio growth of $42.9 million to the comprehensive portfolio.
The investment activity of our Comprehensive Investment Portfolio for the quarter ended September 30, 2021 was as follows:
| Comprehensive Investment Portfolio Activity(1) Q3 2021 (in millions) | |||||||||
| Asset Classes | Cash Flow Loans | Asset-Based Loans / Business Credit | Asset-Based Healthcare Loans (Healthcare ABL) | Life Science | Total Portfolio Activity | ||||
| Originations | $46.4 | $28.4 | $16.4 | $1.9 | $93.1 | ||||
| Repayments / Amortization | $40.4 | $2.5 | $3.1 | $4.2 | $50.2 | ||||
| Net Portfolio Activity | $6.0 | $25.9 | $13.3 | ($2.3) | $42.9 | ||||
| (1) | Portfolio activity includes gross originations/repayments across each business unit. |
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business unit at September 30, 2021 was as follows:
| Comprehensive Investment Portfolio Composition (at fair value) | Amount | Weighted Average Asset-level Yield | |
| ($mm) | % | ||
| First Lien Senior Secured Loans | |||
| Cash Flow 1st Lien Senior Secured Loans | $249.8 | 40.8% | 6.6%5 |
| Traditional Asset-Based 1st Lien Senior Secured Loans(1) (Business Credit) | $252.8 | 41.3% | 11.3%6 |
| Healthcare Asset-Based 1st Lien Senior Secured Loans(2) (Healthcare ABL) | $86.6 | 14.1% | 11.3%6 |
| Life Science 1st Lien Senior Secured Loans | $22.8 | 3.7% | 9.5%7 |
| Total First Lien Senior Secured Loans | $612.0 | >99.9% | 9.6% |
| Equity and Equity-like Securities(3) | $0.3 | <0.1% | |
| Total Comprehensive Investment Portfolio | $612.3 | 100.0% | |
| Floating Rate Investments(4) | $590.1 | 96.4% | |
| (1) | Includes Business Credit's full portfolio, all of which are 1st lien senior secured loans. |
| (2) | Includes Healthcare ABL's full portfolio, all of which are 1st lien senior secured loans. |
| (3) | Excludes the Company's equity investments in Business Credit and Healthcare ABL, 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 weighted average of each individual loan's yield to maturity based on fair value at September 30, 2021. |
| (6) | Represents total interest and fee income for the three-month period ending on September 30, 2021 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 September 30, 2021 (excluding exit fees or warrants). |
The Comprehensive Investment Portfolio is diversified across 224 unique borrowers in over 100 industries. The average issuer exposure is $2.7 million, or less than 0.5% of the comprehensive portfolio.
As of September 30, 2021, more than 99.9% of the Comprehensive Portfolio was invested in first lien senior secured cash flow and asset-based loans and less than 0.1% is in equity. Over 96% of SUNS' portfolio is floating rate.
The weighted average yield at fair value of all income-producing investments in the Comprehensive Portfolio was 9.6% at September 30, 2021.
SLR Senior Investment Corp. Portfolio
Asset Quality
At September 30, 2021, 97.5% of the Company's portfolio was performing with one investment on non-accrual.
The Company puts its greatest emphasis on risk mitigation and credit performance. On a quarterly basis, or more frequently if deemed necessary, the Company formally rates each portfolio investment on a scale of one to four, with one representing the least amount of risk.
As of September 30, 2021, the composition of our portfolio, on a risk ratings basis, was as follows:
| Internal Investment Rating | Investments at Fair Value ($mm) | % of SUNS Portfolio | ||
| 1 | $62.6 | 16.1% | ||
| 2 | $308.4 | 79.3% | ||
| 3 | $18.0 | 4.6% | ||
| 4 | $0.0 | 0.0% | ||
Investment Income Contribution by Business Unit
| Business Unit Contribution to Gross Investment Income Q3 2021(1) (in millions) | |||||
| For the Quarter Ended: | Cash Flow Lending | Asset-based Lending / Business Credit | Asset-based Healthcare Lending (Healthcare ABL) | Life Science | Total |
| September 30, 2021 | $4.3 | $1.5 | $0.9 | $0.7 | $7.4 |
| % Contribution | 58% | 21% | 12% | 9% | 100% |
| (1) | Investment Income Contribution by Business Unit includes interest income/fees from cash flow and life science loans on balance sheet and distributions from Business Credit and Healthcare ABL. |
SLR Senior Investment Corp.'s Results of Operations for the Quarter Ended September 30, 2021 compared to the Quarter Ended September 30, 2020:
Investment Income
For the quarters ended September 30, 2021 and 2020, gross investment income totaled $7.4 million and $7.9 million, respectively. The decrease in gross investment income for the year over year three month periods was primarily due to a reduction in the size of the income producing portfolio.
Expenses
For the quarters ended September 30, 2021 and 2020, net expenses totaled $3.7 million and $3.1 million, respectively. For the quarters ended September 30, 2021 and 2020, $0.0 million and $0.7 million, respectively, of management and performance-based incentive fees were voluntarily waived by the Company's investment manager. The increase in net expenses year over year is primarily due to the increase in net management fees.
Net Investment Income
The Company's net investment income totaled $3.7 million and $4.8 million, or $0.23 and $0.30 per average share, respectively, for the quarters ended September 30, 2021 and 2020.
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gain (loss) for the quarters ended September 30, 2021 and 2020 totaled ($1.3) million and $3.8 million, respectively.
Net Increase in Net Assets Resulting from Operations
For the quarters ended September 30, 2021 and 2020, the Company had a net increase in net assets resulting from operations of $2.5 million and $8.6 million, respectively. For the quarters ended September 30, 2021 and 2020, earnings per average share were $0.15 and $0.54, respectively.
Liquidity and Capital Resources
Unsecured Debt
At September 30, 2021, approximately 54% of the Company's funded debt, or $85 million, was comprised of unsecured notes.
Credit Facilities and Available Capital
At September 30, 2021, the Company had $72.7 million of borrowings under its $225 million of bank facilities, resulting in a total of $157.7 million of funded debt and $152.3 million of available capital, subject to borrowing base limits. When including undrawn capital on the SLR Business Credit and SLR Healthcare ABL credit facilities, total available capital is $266 million, subject to borrowing base availability, at September 30, 2021.
Leverage
As of September 30, 2021, the Company's net debt to equity ratio was 0.55x. 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 Commitments
As of September 30, 2021, excluding commitments to SLR Healthcare ABL, SLR Senior Investment Corp. had unfunded commitments of approximately $61.7 million, including unfunded revolver commitments of approximately $11.1 million.
Financial Statements and Tables
SLR Senior Investment Corp.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
| September 30, 2021 (unaudited) | December 31, 2020 | ||||||
| Assets | |||||||
| Investments at fair value: | |||||||
| Companies less than 5% owned (cost: $279,708 and $251,163, respectively) | $ | 275,668 | $ | 246,963 | |||
| Companies more than 25% owned (cost: $117,439 and $98,439, respectively) | 113,367 | 93,867 | |||||
| Cash | 19,991 | 3,851 | |||||
| Cash equivalents (cost: $199,997 and $299,998, respectively) | 199,997 | 299,998 | |||||
| Interest receivable | 1,483 | 1,373 | |||||
| Dividends receivable | 1,993 | 1,753 | |||||
| Receivable for investments sold | 31 | — | |||||
| Prepaid expenses and other assets | 318 | 192 | |||||
| Total assets | $ | 612,848 | $ | 647,997 | |||
| Liabilities | |||||||
| Debt ($157,700 and $90,403 face amounts, respectively, reported net of unamortized debt issuance costs of $1,641 and $1,910, respectively.) | $ | 156,059 | $ | 88,493 | |||
| Payable for investments and cash equivalents purchased | 201,591 | 299,998 | |||||
| Distributions payable | — | 1,605 | |||||
| Management fee payable | 1,014 | — | |||||
| Interest payable | 263 | 1,312 | |||||
| Administrative services payable | 799 | 646 | |||||
| Other liabilities and accrued expenses | 713 | 539 | |||||
| Total liabilities | $ | 360,439 | $ | 392,593 | |||
| 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 16,049,034 issued and outstanding, respectively | $ | 160 | $ | 160 | |||
| Paid-in capital in excess of par | 274,205 | 274,205 | |||||
| Accumulated distributable net loss | (21,956 | ) | (18,961 | ) | |||
| Total net assets | $ | 252,409 | $ | 255,404 | |||
| Net Asset Value Per Share | $ | 15.73 | $ | 15.91 | |||
SLR Senior Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
| Three months ended | |||||||
| September 30, 2021 | September 30, 2020 | ||||||
| INVESTMENT INCOME: | |||||||
| Interest: | |||||||
| Companies less than 5% owned | $ | 4,997 | $ | 5,428 | |||
| Dividends: | |||||||
| Companies more than 25% owned | 2,365 | 2,125 | |||||
| Other income: | |||||||
| Companies less than 5% owned | 25 | 315 | |||||
| Total investment income | 7,387 | 7,868 | |||||
| EXPENSES: | |||||||
| Management fees | $ | 1,014 | $ | 1,036 | |||
| Performance-based incentive fees | — | — | |||||
| Interest and other credit facility expenses | 1,838 | 1,927 | |||||
| Administrative services expense | 448 | 370 | |||||
| Other general and administrative expenses | 378 | 442 | |||||
| Total expenses | 3,678 | 3,775 | |||||
| Management fees waived | — | (722 | ) | ||||
| Performance-based incentive fees waived | — | — | |||||
| Net expenses | 3,678 | 3,053 | |||||
| Net investment income | $ | 3,709 | $ | 4,815 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: | |||||||
| Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned) | $ | (10 | ) | $ | 37 | ||
| Net change in unrealized gain (loss) on investments and cash equivalents: | |||||||
| Companies less than 5% owned | (1,747 | ) | 3,794 | ||||
| Companies more than 25% owned | 500 | — | |||||
| Net change in unrealized gain (loss) on Investments and cash equivalents | (1,247 | ) | 3,794 | ||||
| Net realized and unrealized gain (loss) on investments and cash equivalents | (1,257 | ) | 3,831 | ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,452 | $ | 8,646 | |||
| EARNINGS PER SHARE | $ | 0.15 | $ | 0.54 | |||
About SLR Senior Investment Corp.
SLR Senior Investment Corp. 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. SLR Senior Investment Corp. undertakes no duty to update any forward-looking statements made herein.
Contact
Investor Relations
(646) 308-8770
