Solar Senior Capital Ltd. (NASDAQ:SUNS) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 11:00 am ET


Solar Senior Capital Ltd. (NASDAQ:SUNS) Q3 2019 Earnings Conference Call - Final Transcript


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Michael Gross

host of challenges headlined by trade wars, Brexit and an uncertain political environment.

Capital lending remains competitive, given the persistent supply-demand imbalance fueled by inflows of capital to private credit funds and reduced year-over-year middle market transaction volume. We believe it is paramount to maintain our discipline in cash flow lending in the face of continued aggressive structures, tight pricing and elevated overall risk.

While facing frothy market conditions in cash flow lending, our specialty finance businesses, namely Gemino Healthcare Finance, North Mill Capital and Life Science Lending, which Bruce will talk about later, provide investments with collateral coverage, strong structure protections and low-double-digit asset level yields. These niche businesses have higher barriers to entry, require specific asset class knowledge and underwriting experience, are back-office intensive and are more difficult to scale than cash flow lending. Having specialized and experienced teams across these specialty finance asset vehicles provides a competitive advantage for SUNS, creates a wider organizational -- origination funnel and enhances this flexibility to allocate capital to most attractive risk-reward opportunities.

The asset coverage modification approval last year provides SUNS with additional flexibility and capacity to make controlled equity investments in specialty finance businesses. We continue to actively evaluate additional portfolios of asset-based loans and specialty lending platforms to acquire. Solar Capital Partners, the investment advisor to SUNS, currently has over $6 billion of investable capital, including anticipated leverage across the listed BDCs, private credit funds and separate managed accounts. The increased scale across the platform strategically positions SCP to be a solutions provider with an ability to speak up to $200 million in a given transaction, while maintaining diversified portfolios. The greater hold level across the platform has already resulted in more attractive investment opportunities for SUNS.

At quarter-end, Solar Senior is in a strong liquidity position, with net leverage of 0.8 times debt-to-equity. We intend to move closer to our target leverage range of 1.25 to 1.5 times debt-to-equity by growing our portfolio over time, but only with investments that meet our strict underwriting criteria. When considering the combined credit facilities of SUNS's balance sheet and at a North Mill and Gemino, there's over $150 million of available debt capacity across the SUNS platform subject to borrowing base limitations. We continue to be highly disciplined in deploying our available capital.

At this time, I'll turn the call over to our Chief Financial Officer. Rich Peteka.

Richard Peteka

Thank you Michael. Solar Senior Capital Ltd.'s net asset value at September 30 was $261.6 million or $16.31 per share. This compares to a net asset value of $262.1 million or $16.34 per share at June 30, 2019. Solar Senior's balance sheet investment portfolio at September 30, 2019 had a fair market value of $469.2 million in 50 portfolio companies operating in 19 industries compared to a fair market value of $474.2 million in 50 portfolio companies operating in 22 industries at June 30, 2019.

At September 30, SUNS's net leverage was 0.8 times, similar to the prior quarter. As a reminder,