UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): November 3, 2017 (November 2, 2017)
Solar Senior Capital Ltd.
(Exact Name of Registrant as Specified in Charter)
| MARYLAND | 814-00849 | 27-4288022 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 500 PARK AVENUE, NEW YORK, NEW YORK 10022 |
| (Address of Principal Executive Offices) (Zip Code) |
(212) 993-1670
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On November 2, 2017, the registrant issued a press release announcing its financial results for the quarter ended September 30, 2017. The text of the press release is included as Exhibit 99.1 to this Form 8-K. The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits 99.1 Press Release of Solar Senior Capital Ltd. dated November 2, 2017
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Solar Senior Capital Ltd. | ||
| Date: November 3, 2017 | By: | /s/ Richard L. Peteka |
| Richard L. Peteka | ||
| Secretary | ||
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Press Release of Solar Senior Capital Ltd. dated November 2, 2017 |
EXHIBIT 99.1
Solar Senior Capital Ltd. Announces Quarter Ended September 30, 2017 Financial Results; Declares Monthly Distribution of $0.1175 per Share for November 2017
NEW YORK , Nov. 02, 2017 (GLOBE NEWSWIRE) -- Solar Senior Capital Ltd. (the “Company” “Solar Senior” or “SUNS”) (NASDAQ:SUNS), today reported net investment income of $5.7 million, or $0.35 per average share, for the quarter ended September 30, 2017.
At September 30, 2017, the net asset value (NAV) per share was $16.81, an increase of $0.02 per share. At September 30, the fair value of the Company’s Comprehensive Investment Portfolio* was $437.4 million, with 100% of the portfolio performing.
The Company’s Board of Directors declared a monthly distribution for November of $0.1175 per share payable on December 1, 2017 to stockholders of record on November 22, 2017. Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At September 30, 2017:
| Comprehensive Investment Portfolio* fair value: $437.4 million |
| Number of portfolio companies*: 52 |
| Net assets: $269.5 million |
| Net asset value per share: $16.81 |
Portfolio Activity** for the Quarter Ended September 30, 2017
| Investments made during the quarter: $21.7 million |
| Investments prepaid or sold during the quarter: $26.1 million |
Operating Results for the Quarter Ended September 30, 2017
| Net investment income: $5.7 million |
| Net realized and unrealized gain: $0.4 million |
| Net increase in net assets from operations: $6.0 million |
| Net investment income per average share: $0.35 |
* The Comprehensive Investment Portfolio is comprised of Solar Senior Capital Ltd.’s investment portfolio and the senior secured loans held by the First Lien Loan Program (“FLLP”) attributable to the Company and excludes the fair value of the equity interest in FLLP.
** Includes investment activity through FLLP attributable to the Company.
“We are extremely pleased with the credit quality of our diversified, senior secured, floating rate portfolio, which is 100% performing. In today’s heated market, Solar Senior Capital remains highly selective with its new investments and was able to increase the weighted average yield to 8.3% in the quarter without compromising credit quality,” said Michael Gross, Chairman and CEO of Solar Senior Capital Ltd. “The acquisition of North Mill Capital LLC (“North Mill” or “NMC”), a leading commercial finance company that provides asset-backed financings, is a compelling addition of an established business with a management team that has consistently delivered strong performance. This sourcing channel operates in a less competitive market and expands Solar Senior’s ability to originate investments across multiple business lines in order to find attractive senior secured loans while also increasing the earnings power of the Company’s portfolio.”
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 11:00 a.m. (Eastern Time) on Friday, November 3, 2017. 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 94107867 when prompted. A telephone replay will be available until November 17, 2017 and can be accessed by dialing (855) 859-2056 and using the passcode 94107867. 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 three months ended September 30, 2017, Solar Senior Capital had total originations of $21.7 million across 12 portfolio companies, including its ownership of investments made by FLLP. Investments repaid or sold during the quarter ended September 30, 2017 totaled approximately $26.1 million, including repayments within FLLP attributable to the Company.
Portfolio Composition
The composition of our Comprehensive Investment Portfolio at September 30, 2017 was as follows:
| Comprehensive Investment Portfolio Composition (measured at fair value) | Amount ($mm) | % | |
| Senior secured loans | $295.1 | 67.5% | |
| Senior secured loans in FLLP, attributable to the Company | $107.1 | 24.5% | |
| Gemino Healthcare Finance, floating rate senior secured loans | $35.1 | 8.0% | |
| Total Senior Secured Loans | $437.3 | 100.0% | |
| Equity and equity-like securities, excluding Gemino Healthcare Finance and FLLP Membership Interests | $0.1 | >0.0% | |
| Total Comprehensive Investment Portfolio | $437.4 | 100% | |
| Floating Rate Investments and as a % of the income-producing Comprehensive Investment Portfolio | $425.5 | 97.3% | |
The Comprehensive Investment Portfolio is diversified across 52 unique issuers in 23 industries, with an average issuer exposure of $8.4 million, or 1.9% of the portfolio, at September 30, 2017.
SUNS’ Portfolio
Weighted Average Yield
At September 30, 2017, the weighted average yield on our income producing investments, inclusive of our equity interests in Gemino and FLLP, was 8.3%, measured at fair value and at cost, compared to 8.2% measured at fair value and cost at June 30, 2017.
Asset Quality
As of September 30, 2017, 100% of the portfolio was performing.
Gemino Healthcare Finance LLC
At September 30, 2017, Gemino’s $106.5 million funded portfolio consists of senior secured loans from 32 issuers with an average funded exposure of $3.3 million. One hundred percent of Gemino’s investments are floating rate, senior secured cash-pay loans. For the quarter ended September 30, 2017, Gemino made no new investments and had investments repaid of approximately $14.2 million. For the quarter ended September 30, 2017, Gemino distributed $924 thousand to SUNS, consistent with the prior quarter, resulting in an annualized distribution yield, at cost, of approximately 11.25%.
First Lien Loan Program LLC
As of September 30, 2017, the Company and Voya contributed combined equity capital in the amount of $45.2 million of a total commitment of $58.0 million to FLLP. At September 30, 2017, FLLP’s portfolio, at fair value, consisted of $122.4 million of senior secured loans to 25 different borrowers with an average issuer exposure of $4.9 million. During the quarter, FLLP invested $7.2 million across 7 portfolio companies. Investments prepaid and amortization totaled $4.7 million during the same period. At September 30, 2017, the weighted average asset level yield of FLLP’s portfolio was 6.9%, measured at fair value and at cost. As of September 30, 2017, 100% of FLLP’s portfolio was performing.
At September 30, 2017, FLLP had $79.9 million drawn under its $100 million credit facility. For the quarter ended September 30, 2017, FLLP distributed $1.0 million to the Company. The annualized return on average equity for Q3, 2017 was 11.7%.
Recent Event
On October 24, 2017, Solar Senior Capital announced that it acquired 100% of the equity interests of North Mill Capital LLC (“North Mill” or “NMC”). North Mill is a leading asset-based lending (“ABL”) commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries. Solar Senior Capital invested approximately $51 million in this strategy to effect the transaction which closed on October 20, 2017.
Results of Operations for Quarter Ended September 30, 2017 Compared to the Quarter Ended September 30, 2016
Investment Income
For the fiscal quarters ended September 30, 2017 and September 30, 2016, gross investment income totaled $8.0 million and $7.0 million, respectively.
Expenses
Net expenses totaled $2.3 million and $2.5 million, respectively, for the fiscal quarters ended September 30, 2017 and September 30, 2016. For the fiscal quarters ended September 30, 2017 and September 30, 2016, $0.7 million and $0.5 million, respectively, of management and performance-based incentive fees were voluntarily waived by the Company’s investment manager.
Net Investment Income
Net investment income was $5.7 million or $0.35 per average share and $4.5 million and $0.37 per average share for the fiscal quarters ended September 30, 2017 and 2016, respectively.
Net Realized and Unrealized Gain
Net realized and unrealized gains for the fiscal quarters ended September 30, 2017 and 2016 totaled approximately $0.4 million and $0.6 million, respectively.
Net Increase in Net Assets Resulting From Operations
For the fiscal quarters ended September 30, 2017, and September 30, 2016, the Company had a net increase in net assets resulting from operations of $6.0 million and $5.2 million, respectively. For the same periods, earnings per average share were $0.37 and $0.42, respectively.
Liquidity and Capital Resources
At September 30, 2017, the Company had $91.0 million in borrowings outstanding on its $200 million Credit Facility and $109.0 million of unused debt capacity, subject to borrowing base limits.
Portfolio and Asset Quality
The Company puts its largest emphasis on risk control 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, 2017, the composition of the SUNS’ portfolio, on a risk ratings basis, was as follows:
| Internal Performance Rating | Investments at Fair Value | % of Total Portfolio | |
| 1 | $63.8 | 17.3% | |
| 2 | $276.4 | 75.1% | |
| 3 | $27.8 | 7.5% | |
| 4 | $0.1 | <0.1% | |
| SOLAR SENIOR CAPITAL LTD. | |||||||
| CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES | |||||||
| (in thousands, except share amounts) | |||||||
| September 30, 2017 (unaudited) | December 31, 2016 | ||||||
| Assets | |||||||
| Investments at fair value: | |||||||
| Companies less than 5% owned (cost: $299,132 and $295,037, respectively | $ | 293,015 | $ | 289,399 | |||
| Companies 5% to 25% owned (cost: $3,710 and $3,710, respectively) | 2,176 | 1,825 | |||||
| Companies more than 25% owned (cost: $72,398 and $74,026, respectively) | 72,817 | 74,310 | |||||
| Cash | 3,726 | 11,876 | |||||
| Cash equivalents (cost: $124,799 and $139,952, respectively) | 124,799 | 139,952 | |||||
| Dividends receivable | 1,552 | 1,422 | |||||
| Interest receivable | 1,112 | 1,463 | |||||
| Other receivable | 20 | 19 | |||||
| Receivable for investments sold | 808 | 1,450 | |||||
| Prepaid expenses and other assets | 325 | 273 | |||||
| Total assets | $ | 500,350 | $ | 521,989 | |||
| Liabilities | |||||||
| Payable for investments and cash equivalents purchased | $ | 135,943 | $ | 151,312 | |||
| Credit facility payable | 91,000 | 98,300 | |||||
| Distributions payable | 1,884 | 1,883 | |||||
| Management fee payable | 474 | 104 | |||||
| Interest payable | 301 | 241 | |||||
| Administrative services expense payable | 660 | 621 | |||||
| Other liabilities and accrued expenses | 592 | 383 | |||||
| Total liabilities | $ | 230,854 | $ | 252,844 | |||
| Net Assets | |||||||
| Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 16,033,733 and 16,025,011 issued and outstanding, respectively | $ | 160 | $ | 160 | |||
| Paid-in capital in excess of par | 287,666 | 287,515 | |||||
| Distributions in excess of net investment income | (5,342 | ) | (5,342 | ) | |||
| Accumulated net realized loss | (5,756 | ) | (5,949 | ) | |||
| Net unrealized depreciation | (7,232 | ) | (7,239 | ) | |||
| Total net assets | $ | 269,496 | $ | 269,145 | |||
| Net Asset Value Per Share | $ | 16.81 | $ | 16.80 | |||
| SOLAR SENIOR CAPITAL LTD. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||
| (in thousands, except share amounts) | ||||||||
| Three months ended | ||||||||
| September 30, 2017 | September 30, 2016 | |||||||
| INVESTMENT INCOME: | ||||||||
| Interest: | ||||||||
| Companies less than 5% owned | $ | 5,946 | $ | 5,165 | ||||
| Companies 5% to 25% owned | 51 | 51 | ||||||
| Dividends: | ||||||||
| Companies more than 25% owned | 1,924 | 1,767 | ||||||
| Other income: | ||||||||
| Companies less than 5% owned | 25 | 1 | ||||||
| Companies more than 25% owned | 20 | 17 | ||||||
| Total investment income | 7,966 | 7,001 | ||||||
| EXPENSES: | ||||||||
| Management fees | $ | 955 | $ | 852 | ||||
| Performance-based incentive fees | 231 | 636 | ||||||
| Interest and other credit facility expenses | 977 | 870 | ||||||
| Administrative services expense | 372 | 301 | ||||||
| Other general and administrative expenses | 491 | 324 | ||||||
| Total expenses | 3,026 | 2,983 | ||||||
| Management fees waived | (481 | ) | — | |||||
| Performance-based incentive fees waived | (231 | ) | (518 | ) | ||||
| Net expenses | 2,314 | 2,465 | ||||||
| Net investment income | $ | 5,652 | $ | 4,536 | ||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: | ||||||||
| Net realized gain on investments and cash equivalents (companies less than 5% owned) | $ | 52 | $ | 8 | ||||
| Net change in unrealized gain (loss) on investments and cash equivalents: | ||||||||
| Companies less than 5% owned | (457 | ) | 1,170 | |||||
| Companies 5% to 25% owned | 281 | (281 | ) | |||||
| Companies more than 25% owned | 484 | (264 | ) | |||||
| Net change in unrealized gain (loss) on investments and cash equivalents | 308 | 625 | ||||||
| Net realized and unrealized gain (loss) on investments and cash equivalents | 360 | 633 | ||||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 6,012 | $ | 5,169 | ||||
| EARNINGS PER SHARE | $ | 0.37 | $ | 0.42 | ||||
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 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 our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Solar Senior Capital Ltd. undertakes no duty to update any forward-looking statements made herein.
Contact
Investor Relations
(646) 308-8770