SLRC - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and thank you for standing by. We welcome to the Solar Capital Earnings Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to turn the conference over to Mr. Michael Gross, Chairman and Chief Executive Officer. Sir. ahead go Please,

Michael Gross

Bruce much, before call morning. forward-looking year for I'm start Chief the by XX, very and covering Operating Capital Peteka, by begin, Richard ended to would Limited's statements. XXXX. our our today here earnings the Officer. joined and our and you Chief Welcome Officer; Rich, good Financial Solar December Spohler, we Thank webcast quarter please and you

Richard Peteka

any number call attention to our Statements release. today's course. property forward-looking call also customary are financial and webcast risks or may Michael. in and later disclosed relate in today's www.solarcapltd.com. strictly financial your at Audio would broadcasts everyone call conference to replay Of statements, or our of that of a future and of the performance of information. forward-looking our statements the regarding unauthorized constitute Ltd. webcast condition like earnings These today is recorded. to are as remind future press will note This available Thanks, being involve Capital form this Please which that not in being I on like made events made website future any are webcast are call uncertainties. our release performance, and condition. and to results guarantees our of that I disclosures call conference they prohibited. Solar would in be press

filings from future number our with factors, materially a a as indicative in past of SEC. Additionally, differ performance described those result not results. the Actual may of results is including of time-to-time

any so Officer, filings, law. at Chairman (XXX) undertakes copies and Executive our to To by to unless I'd Chief SEC XXX-XXXX. call website Ltd. required like statements Gross. to turn no us forward-looking Michael Solar latest time, back call this At duty the our our obtain of to visit or please update Capital do

Michael Gross

three At Solar and all United fundamental net strong On measure XXXX. credit and power, Thank metrics, conditions fourth growth portfolio quality, you, be by performance ongoing had value quarter a performance; corporate in Capital successful economic our pristine performing Rich. credit earnings XXX% we and asset a and which preservation strong year-end earnings fundamental supported stable the continues our States. by to remains and

was loan $X.XX due Our unrealized Solar the process primarily year-end, share. per or quarter year-end, share private prior comps NII quarterly loan of liquid asset losses market $X.XX commercial decline net The X% another a our finance at has XX, X/X the of per the of X.X% the value already the in to the mark $X.XX fourth income spite the approximate $XX.XX share, down with of technical platforms. share volatile per and impacted specialty for recovered distributions and market market quarter loans investment net unrealized the approximate In losses. exceeding Since market consistent leverage performance selloff of December from resulting liquid per NAV quarter. finance in at was valuation to from that delivered GAAP

share annual the Capital's Solar a covered $X.XX distributions For a full year, per of NII of per share. $X.XX comfortably

less power compelling. initiative origination more finance is to were our Solar's platform earnings profile of competitive reflect return into strategies diversify benefits risk Our to farm continues specialty the and the niches

further attractive diversifying strategies. commercial steady our made platform position finance across the progress have We to and portfolio

exposure. total our earnings strategic strategies the lending diversified and XX% initiatives finance representing just of with Solar's portfolio under enhanced power have portfolio Our now of specialty

structure. flow respect year the we of of to lending with improved Following some an signs pipeline positive seeing covenant end market in are cash turmoil, the our upper-middle-market environment

defensive portfolio class underwriting this too origination asset capability advantage specialization of importance maintaining conditions capital the having when to a having trend, is still a with and to a it's improve. available recognized dislocations deep While early of diversified confirm and take we market expertise,

and companies. with us our asset-based finance has adjusted across flow, cash higher finance to specialty returns to capabilities in niches market flow The middle allow origination the commercial built risk comprehensive be businesses ability diversified cash of lending. Solar lending selective financing to solutions provide

We have allocate yields. risk to or capital most and opportunities the attractive flexibility are structures above to chase market reward not forced to investment compromised

cash loans the average risk portfolio differentiated enabled Solar loans In creates and lower on asset-based and lower-yielding mix to fair lower countercyclical in at value long credit a shareholders. progress we addition, weighted significant compromising X a portfolio. important have we made without classes important, protection to investing Equally our yield higher-yielding senior volatility, senior lower dollar-one of we cash barbell correlation, that to pure believe flow a of flow with XXXX, loan compared level strategic approach quality. great asset term maintain has asset believe initiatives secured our to value approximately XX% secured In

of new accelerated of of requirement. respective coverage On of board directors sister shareholders thereby the in the August. October and timing our adoption the XX, The the SUNS, overwhelmingly BDC, modification, company's initially which approved had asset by Solar first approved the requirements, coverage asset in initiative the reduction early was the been

change X.XXx to XXth As We've to increased requirement This of new ratio a and to leverage equity. a target net target to the range covenant. facility cushion result, credit for asset substantial and Solar debt Solar Senior range from X.Xx of - Capital ratio Capital's XXX% on a new to meaningful October net asset and allows the requirements Solar coverage XXX%.

during new addition, facility quarter, increase fourth In we the leverage. amended credit our the to accommodate regulatory to

coverage non-qualified companies to target, acquisitions. and the combined When of us capacity, Capital's investment significant asset further platform, will, new our possible had expand existing to finance want our however, change consolidation Solar lend the in modification new SSLPs specialty ability commercial finance quarter, to with coverage we lending platform. the our The expand by giving third enhance It to leverage freed make strategy. reiterate the capacity. asset XX% SLRC up not will the Importantly, that investment ratio, made flexibility our

is volatility quarter the an of team acquisition in overheated. finance we and valuations were tempered valuations targeting fourth some Though verticals. company specialty during are pipeline. rebuilding Our It these we cautious carefully the new appears actively XXXX, became high as has

flow The Solar investment to enhance portfolio. Life particularly up to believe important, also But for in $XXX withstand diversified businesses. is in Capital smaller upper-middle-market lending Partners, increasing the XXXX cash issue transactions, million lending owned it sponsor decline better and economic a is Solar's given asset-based second we companies focus speak ability peers. resourced of role our are in given advisor provider to to scale the involves who maintaining important as on Sciences SCP's while in Scale the our conservatively solutions with an to a

billion of Capital. sister investable across - XXXX, $X.X investable across BDC credit leverage, and During capital, Senior to including alongside that capital approximately an SLRC SCP Solar Solar Solar funds and X co-investing incremental now billion. $X.X managed separately This our approximately private closed are the accounts platform brings Capital

importantly, additional hold More enhanced possible scale investments. XX% the both benefiting is sizes by the having SCP's new of capacity. in form larger and There already from SLRC are only

provide asset development. both wider we finance seeing result, Bruce additional a will specialty flow a As opportunity base our details set in and this on verticals. cash are important

highlights. track conservative grade an grade to and rating Capital investment Solar strong from provide management underwriting The financial the Services, both Ltd. ratings is record. philosophy further and Investment you sheet. Moody's corporate and will take Fitch which the time and our Financial balance from to investment received call company's Finally, efficiency At Peteka investment Moody's flexibility I November, the SCP's through to important in and Rich Chief turn this over testimony finance Officer,

Richard Peteka

you, Thank Michael.

Capital's September Solar September December $XXX.X This to XX, $XX.XX at XXXX. At per fair had a net value approximately XX, credit portfolio million portfolio borrowing base available subject market the considering Crystal credit $XXX.X the and Solar Capital on from at $X.XX portfolio approximately $XXX.X available debt industries, Capital across XX/XX, December capital balance net market had has At million value non-recourse at XX, capacity X.XXx billion debt billion XXXX compared facilities, $X.XX or compared in combined across asset Solar XXXX, Capital million of XXX growth, of value and NEF, $XX.XX portfolio limits. $XXX sheet to XX, share to Solar XXX fund industries to companies at company's Ltd. When equity. of XXXX. fair with to of outstanding, per from companies leverage XX was XX facilities in or share. investment million

the Going P&L. to

for Below share of Ultimately, months ended September losses XX. increase for company fourth X XXXX. net ended the million and This totaled $X.X the XX, third of December company the million million per the for compared and for unrealized totaling $XX.X had the XX, from XX. $XX.X Expenses the line, a company's the months XX, the totaled X or investment unrealized months quarter the Accordingly, million realized losses $X.XX for million for million months X XX, or XX. per September an X $XX.X or months X of per For compares share resulting the increase average average December December per XX, compared gross months share X ended versus months million months income $X.XX $XX.X operations XXXX. $X.XX the $X.X September ended to This for assets million investment million $XX.X to average X net $XX.X ended totaled million ended $XX.X XXXX, income ended September to ended net versus share the in X realized the December average quarter. or for the $X.X $X.XX for XXXX, XXXX. had net net

share, Officer, the April XX, X, that, directors of I'll Operating per shareholders With recently over Bruce our our to call on Finally, a board on record QX of turn XXXX Spohler. payable Chief XXXX. distribution $X.XX to declared March of

Bruce Spohler

Rich. you, Thank

providing a selloff our just the market. minute to the of to and like Before in liquid take about leverage quarter on portfolio fourth approach our loan an activity, talk in evaluation update light I'd

portfolio this XX% our cash at markdown that most cash flow down flow of and finance our for for XX% leverage valuations remember commercial businesses of simply which mentioned, peer, process Michael comprised up is been middle-market our businesses. Relative are on credit value loans. portfolio's technical Capital is the resulted a metrics analysis top loans. unique to and loans. our combination to of leveraged year-end. not bottom overlay, a technical market with important finance of companies Solar commercial is BDC a in portfolio loan specialty of finance of Valuation of And senior has It's we combination a of peers, middle-market fundamental secured, a the from based both As

to the to a providing been our fair market bottoms our throughout up have and overlay portfolio. our down in analysis right value top approach market with fundamental history, approach valuation technical consistent a we the We believe is for

loan leverage the approximately X/X has today, index fourth quarter of market in As the already of recovered. decline

me turn borrowers than let our X XX overview Now of XXX industries. more our just verticals In investments $X.X billion aggregate, our encompassing over across business portfolio. distinct to an totaled over across

secured we first sponsor senior with investment was commercial year-end, our portfolio higher, amount, portfolio in or efforts companies, Of average in refocused our exposure of par investing lien consisted is per by of X.XX% investments to $X.X loans on loans, roughly were diversified Solar's and platforms. senior loans. an second secured borrower loan second as our XX% declined owned Comprehensive lien second highly well first and investment as in senior over XX% origination our senior repaid comprehensive million finance XX% as Investment just close upper-middle-markets secured cash Year-over-year, was at lien over secured Portfolio. At XX% of this our lien of to loans. lien flow or a

we XXXX. focus have since loan exposure X.X portfolio, flow principally lien have a Given equipment XX% of risk not of rate. at fixed yield year-end. weighted on lower an cash which was loan Nations At have a first our our lien portfolio of floating from short investment and second average year-end, made average XX% Equipment market a The rate loans, life maintaining duration comes years,

and loans of had of quarter $XXX million. Solar secured repayments senior originated the during fourth million $XXX

flow XX% protections, specialty continued finance a risk XX% for the - investments structural are in of Given basis assets, first secured reward in our cash Solar's senior were in loans fourth originations of and quarter our were new lien preference loans. on having

same year, approximately repayments our the under finance originated commercial $X over For the XXXX. had XX% loans the quarter, billion with represented Solar the full Consistent secured for and senior a just full of fourth loans amount. of year

of X representing credit Solar's reflecting weighted the X our year-end, the power on update an rating protection. the reflecting conservative risk XX% investment portfolio the performance provide amount financial at Overall, believe fundamentals. with of to was asset-based like focus based portfolio our very and I'd risk. of flow At credit portfolio's risk or earnings rated on loan the Now of performing rating portfolio scale, was with to our strong the XXX% portfolio. and least underlying the We're average investment and approach of and our investments, portfolio the underwriting pleased assets. focus Over health on our validates remains strategic quality X that was and cash of disciplined of lower and And better, downside on it X our sound, Xx, year-end.

me let investment our on Cash a provide Now brief update flow. verticals.

significant primarily seeing loan more today's in our $XXX portfolio. companies fair EBITDA weighted opportunities, the At reflecting the cash segment investment average frequently and was portfolio the our companies. portfolio ago, protections given portfolio cash leverage covenant approximately million positive loans our market. year-end, our just flow The light an with in borrowers XX basis, and EBITDA issuers continued investors. $XX low found of interest with to a the was portfolio stable which of It cash XX% represents continues our comprehensive XX continued and approximately revenue defaults avoidance over economic flow U.S. digits million. under XX% for again X.XXx. our flow million $XXX driven On cash and favorable year the of is up approximately environment by second credit our loans trailing We're A saying Our invested transactions. This in exposure, of lack single mid-to-high average average million. but weighted in investment or cash flow was for trends often coverage lien reduction were cash no, month value our earnings to and represented change, average of a portfolio. structural our remain was of is Xx Weighted was of across for flow disciplined flow size $XX are significantly

During originated approximately of just the cash quarter, average second and $XX was amortization $XX flow $XXX weighted of due had million repayment fair the cash fourth lien yield portfolios market the off to is partially both our million, of and flow lien positions. we consistent was flow of The the investments LIBOR, portfolio is primarily under in value prior over at investment, repayments due which which to million approximately yields. of the quarter. The roll increase year-over-year second of cash the higher XX%, by loan for carry yield with which in increase our our offset

fourth of structure. the With already and Wireless increased mentioned, capital Solar a the relevance increased was private In addition raised capital provider. a the by to that solutions of scale facilitated approach be has platform KORE to the Michael benefiting scale solution ABRY as great Group's from newly ability quarter, refinance This Partners provider. is example SCP's a SLRC is where

first million this million Solar enhanced term of this million to that commit all-in investment, $XX in an plus loan lien carries to invested which competitive of position. platform SLRC yield our under $XXX approximately just X%. $XXX ability Our hold this and across

quarter, me fourth million had was asset-based In year-end let average our borrowers asset-based and XX% yield totaled And total million. average approximately portfolio turn The is of million of cost At $XX weighted portfolio asset-based invested the our loans of to approximately we over XX.XX%. Now an just representing $XXX new of $XXX in portfolio. size investment approximately $XXX this million. of with at funded XX repayments lending.

fourth quarter. paid consistent brand of Crystal million, the dividend Capital under division the a with quarter Solar asset-based prior $X.X Our

over XXX an portfolio to our NEF, division, finance. issuer asset-based had loan. now equipment funded of equipment finance total with equipment million funded million of under borrowers of At It's just $X a loans. distinct me Let across $XXX year-end, turn per size average

reminder, comprehensive portfolio The a equipment certain which weighted NEF our equipment is our sheet, Solar's financings of held as as year-end on at a for Holdings, XX% XX%. As efficiency represents holds class portfolio. in just well of investments. asset this subsidiary our was included tax average financing in over that NEF's directly purposes cost balance owned XXX% The yielded company business,

Nations During amortization investments of investments and lien approximately loans portfolio mitigated fixed $XX the quarter, had had short of XX% are life approximately however, portfolio relatively the X.X Equipment first new Interest repayments is of periods years. through NEF's approximate an $XX rate. fourth and of million. average million and rate is risk their here, with holding

our from investment finance fourth quarter, comprehensive $X business During totaled the million. just income equipment under

turning Now Sciences. lastly Life to

average year-end borrowers secured approximately represented Life at approximately $XX XX loans in portfolio our across $XXX investment with size Our lien Science XX% senior first just of an under Sciences of portfolio Solar. million at of million. loans totaled Life comprehensive

fourth one fourth secured originated During of repayments like Solar that have quarter, that of $XX.X amortization of speaks million. scale Partners Michael which and the we and investments loans quarter, referenced the I platform. senior to million the the would team this during made $XX increased across highlight to these

sole in through investment the development a average Life how the under our lien Therapeutics. During of of the large was in the in benefiting scale therapeutics This Solar blended cell asset fees of warrants. exit year-end, treatment value. speaks million success was our of development SLRC cash the any balance to over Rubius company. excludes however, given $X billion public or was yield increase XX%. fair $XXX on term nonqualified The fourth is just capacity enhanced biotech realized weighted company XX.X% is of at Partners directly portfolio quarter, red from is and this investor IRR, the Science The is $XX million for focused for which market a cap again Solar on late-stage the company severe sheet, first This loan Rubius diseases. a its with

do include Here in exit realized we warrants. fees

prudent see loans disciplined existing technicals. that the term, improvement historical to the wave a of lending available basis call we At engines given to We pricing and approaching margin While confirm trend. middle-market benefit continue origination supply/demand market leveraged following is and of the remain the dry environment lending. structure, in too it time way the frothy of in cash cash both do, create the equity cash deploying selloff attractive powder, retreat like some diversified turn does the on in flow the early will on and private flow from Longer record middle-market banks quarter, an from fourth continues the to The to for however, lending, of Michael. our to, dynamic flow believe capital. and this leverage leveraged amounts be refinancing I'd we borrowers, back our

Michael Gross

Thank you, Bruce.

a inception nearly protecting shareholder of its each have our and on term the and shareholders. focused maintaining building very strong capital With long with ago, investment Solar XXXX Ltd. The on years XX priorities. had of progress continued by been Capital Capital value, Solar highlighted management decisions alignment our

the developing continue commercial diversified Our established specialty secured middle-market superior term to as SLRC diversified loans portfolio company, long verticals strategy cash firmly solutions to companies. now financed financed a and of to migrating capital senior the across is results. drive structure flow providing

while diversified discipline greater Importantly, to our investment platform the risk returning opportunities, capital origination to flexibility sticking our allocate best cycles. credit across affords to us

first our Today, Science is into we our of asset-based XX% and become flow cash only which move is and more loans, through diversified credit - senior in lien secured has the much cycle, Life the lending deeper portfolio of more more defensive. As strategies. XX% and are our portfolio current majority

less proven greater cash - and protections loans borrowing many through than cycles. be and specialty credit by to provided volatile protection have less are to markets structural finance bases correlated downside flow Our lending market covenants, liquid through historically

like a the element pivot as economic an should cash Meanwhile, add asset-based to and flow our positioned lending opportunities market their verticals shareholders to financed we cyclicality those again, flexibility across attractive absolute meaningfully can in not platform The believe specialty we addition, asset have build I we uniquely direct sponsor successful to mid overwhelming greater more express modified strategy have believe under commercial diversified financed become broaden potentially appreciation lender net In relative coverage the as when the Rather, quarterly businesses stability equity, we X.XXx $X.XXs on and the net loans investment of approved banks would expand are outperform take commercial via dislocation of support adoption on and improve. finance grow, and At ability ratio. market investment dry counter finance execution an result our basis. conditions in differentiated downturn. of flexibility investment our and in The to platform. to market debt a in the is for levered to advantage income our to towards finance investment continue are our We to enhances cycles power of to niche per and change to our an we our of verticals. does share acquire substantial of capabilities. our we range our deploy strategy. additional

steady progress XXXX. growing We investment in expect in comprehensive portfolio our

to a achieving has a per path $X.XX. Solar result, Capital quarterly net rate investment of income As approximately run believe, a share we

earnings fourth our Capital. sister sustainable, for proved our BDC o'clock morning, will our we Senior distribution of evaluate be this of XX and board increasing At quarter results to will call further hosting XXXX shareholders. the Solar earnings directors As increase our

We to provide for meet time. ability questions? Our client's our origination benefits enhance vehicle line thank capital and open this traditional in value your middle-market continues Solar financing the Capital's ability we to our Operator, deal team's you seniors needs this please would flow. of secured continuously proposition to through for

Operator

instructions] first with Casey from the line comes Point. Compass Our of question [Operator Alexander

is now open. line Your

Casey Alexander

great job did your guys You presentation, questions. in most of answering a my

you mentioned of loan the Bruce, bulge from that's opportunity cash and to in of of weaker going bit is Is credits risk to a there also washing this X the further So market or the around X too view is out everything due a just here next one refied? that capital your might an to of that to in loans some and going cause out to are refinanced in need flow not years. in money for kind come looking set might much future. defaults there uptick get is be that little get refinance

Bruce Spohler

and Fortunately us. at flow liens going - not the selectively are What mentioned, lot looking of a evaluating a the investing lien as that new whether we in second at we're we off in should refinancing. Knew that lien know our there well investor we strong the some for the us example is be had there letting on investment. lien. second the doing, so I you company And has cash KORE a great first where portfolio, first where and new anchor and is for their run really as

you tapped here. up these re-financing real that hope, of that structure But so companies market them the are and the window. move look you can covenant buy will whether sooner as that out Because and re-financings than portfolio. just not if as have de-risk that I I many structures later, you our those time allow your question some of So extend access maturities. the think, to will their borrowers, perform to you that on peers be know, light into think But, see capital or them of some is rather

not it. exposed So of that way to ourselves But to advantage positioned to sure. than long-winded quite be saying, you take of we've rather

Casey Alexander

a wasn't done was have looking more comment Solar's guys mean, related good think of And I necessarily I to for I comment you portfolio. job that the general that. of market a

de-risking flow portfolio the back from been that pull standpoint. has of the on market clearly cash Your portion the

general So was more I a for market looking commentary. of

Michael Gross

raised if in to won't to if shouldn't be is will you those eventually continue wrong that think What But obviously will be. environment growth economy many companies I does questions this defaults benign there the credit there goes there what be point, to for to and in your economy direction then happens cash of money available be lot defaults company seeing probably money refinancing. have the I will and we to private think, refinance. will trouble lending modest has dedicated see drive and the really we're Casey, and answer been for

Operator

Ryan from the Lynch our And question next of KBW. comes line with

is line open. Your now

Ryan Lynch

kind - First want cash to the portfolio. focused on question, once flows I mean, of I

guys given that are and going bit. portfolio flow years just that some have or guys terms to market wanted you improving of wondering a to like of the because the size is dynamics Over reduce last probably like lien maybe really actually lending structures then not second showing several you would further do in exposure. intentionally some the the It where shrink portfolio market returning of expect that show your because portfolio you sounds the growth? I'm that little to is stable today, we to cash XXXX, or that probably

Bruce Spohler

Yes, be expected to to stable growing. would I

second There cash that First, continue though, $XXX a we of so are creates our in lien role flow lien, going of of rotation as only little about to out off. to million have is left that second bit a headwind book. some those of

QX dislocates flow of we roll accelerate. grow continued that the it see that see will then our replace expect you but some. in that So or Obviously, to really off, to the market some investing from cash extent could you and trend

Ryan Lynch

rating grade investment the from on Congratulations Moody's.

that you way grade investment ratings X that those build on to But X ratings, does are guys a guys credit market. investment unsecured liability the from grade structure you powerful have guys of the forward? going change the significant capacity having the you facility. looking amount Now still I are know have

that that additional way you forward? guys going build to change of looking with rating, kind structure investment does are liability So the that grade

Michael Gross

the had couple allowed market. grade period tap month convert to grade the debt after that's as that we the is at ratings. public, so use look of effectively And to us unsecured our always start cost investment market private investment time. revolver, know, you still that and us market more do is to we've open as And we as will of the No, and X both to efficiently more

Bruce Spohler

of the basis our as secured, market, on liabilities continues access to from IG the benefit private but well. funded IG Yes, the target public only a market XX/XX be unsecured not to And having we same.

Ryan Lynch

may this million one, is kind for in growth. And in nominal, Meanwhile, a the like your It was there expense $X.X pretty last there pretty technical increase looked model interest then one portfolio about fourth smallish quarter. of was big Rich.

there was in this costs any that I or big was what wondering So just that one-time really increase line drove item quarter?

Richard Peteka

saw think SSLP coming due Yes, II off I Ryan. quarters. sheet to the the sheet SSLP I thanks being balance on you interest instead from Yes, facilities increasing balance is expense and previous of what

Operator

next comes with line of our And the Securities. question Christopher Testa from National

open. is now Your line

Christopher Testa

raise billion. AUM appreciated the the commentary I $X to tune private on the of over

guys kind more you some of on, how relationships. this increased sponsor Just detail and VC out wondering some and possibly provide could enhance if is

Bruce Spohler

it's I relationships, only not product offering. the think enhanced the expanded it's the

capital As both asset it's set. if that and assessment what is Life in happening borrowers' our generally that Science either And And you done with somebody X our or is others expands from you're relevance borrowers comfort really club also our relationships. opportunity given club the increases or loans. the at a what's perspective else upon is from up the cash based Solar X know constrained it these and credit vertical are just flow teamed base perspective,

our to companies hold in because to is we've before large the of know, in as it have what helped $XXX assets. is the by XX% increased the non-qualified in Sciences, in public investing Life terms million that's industry million also assets opportunity now any million same the particularly fact we're million in basket, And are you that set. XX% $XX to been just expanding the size. not seeing think, we're But $XX ability only that underwriting we I $XX

So opened I just opportunity think set. up the it's really

million about so, historically to Sciences, $XXX a million. talked Life for example, of $XXX And going we portfolio

expanded see have we opportunity $XXX to think million they that an set. closer now I upside

Christopher Testa

And the average or cash size borrowers the expect portfolio that stable. flow to impact the all roughly should in of does at we your EBITDA remain

Bruce Spohler

meaningful $XXX up and are where to wheelhouse our Yes, stable. if been EBITDA, member they that's million up think million. the million with X. X to needed. million-$XXX in right that million size you that But that And I million know want to mean, $XXX million average loan get or $XX club loan at a $XXX of it's million to sort $XX $XX that's you when always Xx $XXX around about clubbed we

to for think and less going XXs is that much up XXs people competitive. just I make showing

definitely it is, which us opportunities, we for in have. critical the high filter you us as seeing know given terms of So that is helped more

Christopher Testa

life you the some flow opportunity mentioned terms with in given lending signs the seeing - You of guys cash of that better also are volatility.

both Just see environment would wondering kind able some market provide it guys of more detail creates cash need flow a kind much the if you volatility can to be sustained before be liquid just grow favorable where on more how meaningfully? to of you the we

Michael Gross

it been to up that question market loan dynamic because part flow opposed place taking liquid ebbs funds. just the significant tough lending. locked amount a and raise of capital private also is, the And a flows was to cash purely from suffers It's kind there's capital of to dedicated that's answer, of as into the those

that locked be managers to invested a year So to and the all up have. get mentality investment going X is because that that's X money with period it'll

up I private so to see prop even in think, volatility a And of there's the kind if capital, of public market. lot we do market the

Christopher Testa

as debt as private as flow much to words, cash as it's syndicated lending in other long significant despite any volatility going the recent years? in outstanding, impact it's there's in it market, happened So unlikely

Michael Gross

filter lenders the "Hey, period sponsors feel It to where to so And in comfortable to to the back is. saying, that's going of liquid do the more volatility will what you take want that market market that's if do". it, a really down, the

Bruce Spohler

we none for, us globally. potentially problem growth which everyone on of is their changer, and right. about The feds' game slowing the is brakes saw here putting concerns year. in to the the that's that mean, I softening, this part think due wished economic says I in

increased see and And the have a we're the and that's happen, the periphery you playing distraction. defaults effect so middle-market the in of you that once It that the underwriters people's lending. banks fear in into injects leveraged around portfolios, big managers

really back people because and is can structure I creates even selective think wishing obviously our we're what capital very when that in be there. yet game nothing terms. But you'll that's then change that's very opportunity nervous, as if demand go for. in a they nothing in that's attractive there and that portfolio, so And large But see and the that a see you pull we out part get is

Operator

question next Shane from our comes of And line Richard the with JPMorgan.

Your is now open. line

Richard Shane

picture we a It's been the here. the pronounced - approach portfolio. When down. to I there's at was sensitivity I'd a over drift and sort bigger a of think the of look primarily like ROAs time, to ROEs and asset take stabilized there somewhat attribute I that

X% on invested low a X% ROE. You're sort assets a taking along and ROA of

terms leveraging but strategy, new your and advantage up a competitors to to really should you that these like? of consider be you move are also from guys you capital next new who look well. sort is fact And lot opportunities we in of opportunities the of As that going to their Solar the couple taking pursuing of years? have returns think do the expect the as over are business model you going what What

Michael Gross

a that's So, mouthful.

look strategy of the we with and we get just to that's we building It existing comfortably I what our acquisitions. think engine doing available can have. platform kind the origination at of think, doesn't - today, from from when capital, kind mid-Xs ROE are additional out X-ish our count we we the

in XX of of if the being those based not amount it's Life There to dedicated why you be because flip are kind businesses. it's non-recourse of each lending going done have terms and frankly tomorrow. say, entry I'm those to easy entry in private lending, in and in again going flow it to verticals been a barriers of leasing at That's separate barriers mean, I lending, equipment with team are real XX been we switch this. hire XX of track can't I capitals kind of people XX% a just you raised, for in that of of to there based competitors, as cash have I'm less. your to the look records to our Science be have you mean, non-recourse lending for to In go happen.

Richard Shane

environment very the that - might observation have concern smart advantage expertise that the not that out an in it for of fair versus difference Look, capital several have I you we're play there. smart of guys you worry do a in is amount I that's being think, defined with not the or available niches and years. that

Bruce Spohler

opportunities some to We've smart, think comment. great not I attract have to And the in that in of aggregate because They Michael's don't with not market to not establish versus deploy niches. are capital strategies, can just experience going these capital. operate not phenomenal of barrier their there very big isn't its experience. and that's fortunate there's echoes in again a these Well, easy And a both of - themselves to sector. It's bring high but cap on niches. they're been capital in track it's niches records attract large they're they because smart also that lot they reason teams amount distinct and why

when However, platform, you but across not barriers Solar only they them higher bring bring even aggregate the they entry. to diversification,

lending in so, asset-based our that strategies that are we think, niches. you I And are add know, as time. other sustainable And strategy we these that to very feel is over looking

Operator

of And York Securities. now our Chris JMP a next question from line comes with

open. Your line now is

Chris York

nice less than balance $XX was observe was a Bruce, you over platform. a XX% or sheet. the win on SOI, that little did Rubius I looking which the only to bit So Solar's about million And loan, held talked

managing in flow private then Life of maybe recently credit remind Sciences cash or could tell light credit or this us fee? us closed how given size, and the private today income in So you manager hold income allocations the the Solar is fund even

Bruce Spohler

Sure.

So, quick. real

milestones. Life you loans based tend the on may operating in as financial as recall, trenches be funded to As that Science are well

commitment will drawn be Rubius the So expect million year that so. $XX fully a is over we next or

gave them was initial we However, tranche that the only $XX million.

is commitment, the of the their on holding is Solar the funded that $XX million. but piece not SOI first the portion So

I point the at on on across math is amount example which available committed to mentioned your funded to another the of and our based we vehicles a million the $XXX across flow is SLRC KORE. methodology, funding individual side think, obtained strategies. of cash There million I the capital $XX allocation

as finding of a that's if on around great size, what its have for a million. kind SLRC X% we couldn't we And is $XX million is of high KORE you're Solar, the $XX million would So not position gotten end. target that $XXX that speak

its for Eventually, across to private think as the you thing plus able that's exposure. to scale you should funded, again, And, have the same be loan its add the in the not the look expect XX% Rubius to even loan. of fully would not when I XX% at Rubius platform Solar funds. have if you SLRC when

Chris York

that a in KORE sense. the versus XX% then clarification would about the XX% peers makes for helpful lot Very of similar the those funding. the And It about the SLRC, so. to of with be commitments funded and

Bruce Spohler

Exactly.

Chris York

it a of Then PGi valuation, turning in to other or company another investments couple American was It then but you as downgraded portfolio their mark. Teleconferencing. and terms your move didn't meaningfully marked below that probably its aware, BDCs

your portfolio? comfort valuation and little size to the loan ability maybe in your given about you debt could talk borrower's a So today, in service the the bit

Bruce Spohler

know, Siris we very by you have with. owned PGi relationship non-private Capital, As close can't non-public. I really somebody speak to a is anything -

a at This just concentrated held, to not. have outsized but the people. that not in side. with predominantly market Solar, couple Solar at does other of going is sponsor a X loan across business across have not by the in vehicles of meaningful broadly investment and But access active the We information of that platform, Partners and it's a on positions us have the are X it's what's led or that terms is

or have of to effect to I record at realizations. an at incredible look would think track historically venture our what we provide and analysis and We look that board is say mark. exceeding marks above our our at I obviously we our

that information here it's trust that - market think I us the not. have So, does we

Chris York

cover investment dividend rather Last income release your XXX%. one the net that Michael, XXXX press at a meaningfully the

of about light under important board an think I the to outlook we there. in see earnings especially then increase to this couple needed and with would as in that what update for get have the you of given your just 'XX like do So, last quarters, so talked because maybe a position delivered

Michael Gross

stainable at revaluate of see $X.XX would basis we - to north be us kind before board somewhere it. the like think of I

Operator

question line of the the with West Young And comes Investments. next Family from Jim

Your line open. is now

Jim Young

mentioned clarify negative spend earlier in the of basis. in present just you, quick fourth a impact the on the you from quarter per Just question, call. these, in you that the could a Thank the widening delta share

Bruce Spohler

end since which the the look that lot froing share down it's Yes, X%. year of technicals. one index, that loan a to we at thirds already you the think but technicals, two roughly look I valuation the just market think that come for we the marked at X% attributed think And back as of but toing matrix - lion said of most to, the should there is and you approximates I NAV in

Operator

next our O'Shea from and question you Finian with the line Wells of Thank comes Securities. Fargo

now is line open. You

Finian O'Shea

looking give us the these try I so I will at both technical to up first to like some holdco, remarks, color broader even and could are just these we a big here. quick, impact you it whether energy sync can another equity understand portfolio, is there was widely as I it Crystal looks is you here credit think on the cues mostly but some soon, have call from said Crystal

Michael Gross

to lender year down corresponding come book so similar traded but company actually to Crystal, the fourth and the we committee takes at, we at point. and concern a and outperformed where have particularly Crystal phenomenal back quarter on on-going finance a back the what levels, that the during multiple probably in down when September back company. The had comparable broader look with in then, are it's comps value marked the while this expectations because was companies actually we comps public the at Crystal specially are so it since So and market an

Bruce Spohler

investments, Rug that's that as your some but And market combination business positive developments outperformed. of the by than aircraft investment so offset some underperformance is as well question more that our at have technicals to holds then our and about

it awash, move, across technical is underlying for say would it. performance net the I net, the of speaks of portfolio So accounting and really most

Operator

over And would the call like further turn no Chairman to to there closing you for Gross, Chief and Executive this at back is I Officer, time, Michael questions remarks.

Michael Gross

than other good questions, nothing at point all it. your for this you more you and thank Thank appreciate you time

Operator

a and program you disconnect. thank gentlemen, Everyone today's conference, and all participating may does conclude Ladies great day. you this have in the

SLR Investment (SLRC) 22 Feb 192018 Q4 Earnings call transcript