SLRC - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the Q2 2019 Solar Capital Ltd. Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to your host, Mr. Michael Gross, Chairman and Co-CEO. ahead. go please Sir,

Michael Gross

and much, for morning. XX, the today Financial our joined very Peteka, and Capital's Capital's, Solar XXXX. to earnings here Chief Co-CEO Spohler, Bruce call quarter by Operating and you Officer; Welcome Richard good Officer. Solar I'm Chief Thank ended June

please Rich, you by the start you before would webcast covering off begin, and statements? forward-looking

Richard Peteka

Michael. Thanks, course. Of

Capital webcast recorded. the everyone I today's call Solar being prohibited. to our property are of strictly This made disclosed are conference are will release. they remind call earnings call form that at And replays available is unauthorized Please being Audio like our today as any that in on www.solarcapltd.com. would webcast later note any be website this press that broadcast Limited. of and in

I'd to events may future your to press call risks statements regarding to performance, forward-looking disclosures today's a of condition. financial customary and or number forward-looking Statements financial constitute are future involve call statements, and and release not These of our results the future conference in guarantees made uncertainties. or relate in our our information. performance or webcast condition also like attention which

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

no by undertakes update call unless visit our any XXX-XXXX. at or to Limited please duty obtain law. SEC To us so Capital copies to website Solar our forward-looking filings, do latest statements required XXX of

Gross. Co-CEO, to like our this call and the I'd back time, At Michael to turn Chairman

Michael Gross

Thank you, Rich.

net history long our share preservation quality, earnings NAV At per share and strong XXX% our the Solar asset XX, second Capital in credit value operating of delivered quarter. per quarter, of $X.XX increased was $XX.XX and the June by continuing from power. performing solid prior our portfolio solid running results

a paid share growth at per Fundamental net albeit $X.XX supported distribution credit investment lower share. income solid prior During performance earnings and Solar of than generated Capital corporate quarter, remains quarters. of levels the per $X.XX continued by

flow elevated transactions to capital cash XXXX to lending lending first face believe market funds to volume middle in market in We Middle the extremely inflows prior discipline competitive of risk. our and flow the maintain is sustained the cash the private of compared it half aggressive vital of year. of remains lower pricing in structures, and credit strict due tight to

provide While namely continue life flow value and in and finance market facing structural Equipment investments generated and have having protections. on specialty collateral and coverage in our both Finance basis. science attractive cash us lending, lending conditions investments that IRRs frothy are absolute niche highly Financial, double-digit with Nations relative businesses Crystal originate businesses These to strong

investments a comprehensive quarter, new of second During we on XX% the originated of in basis, over which were $XXXmillion finance. specialty

of of distributed were repayments $XX across strategies, repayments. our million lending in $XXX net Our portfolio resulting million

across our a a comprehensive At June finance platform transition middle lending senior on diversified niches. our of XX% focused specialty portfolio number successful commercial XX, in finance reflecting investments, to secured was of market over

middle carry higher the our us market, flow these be loans income cash underwriting, we and yields from those specialty cash enables strong in market highly loans flow today's to only more do Not superior finance but in selective credit receive available protections to transactions.

construction take achieve risk having cash of to fair approximately to Solar in flow compression has to Capital a our portfolio spread without continued of less face capital flow Notably, than reflecting for in risk now in borrower’s cyclicals comprehensive portfolio our XX.X% value represents weighted additional loans second lien yield our average second comprehensive flow allowed investing lending, in by at of lien approach the preference as loans sectors cash a volatile X% or portfolio, $X energy. such cash more structure. In or

Solar when approximately under -- fund and capital subject revolving Crystal base included its At credit unused under of Crystal NEF facilities, Financials had $XXX $XXX June million facilities, capacity which borrowing current XX, had over a of including its borrowing limits. unused of to Holding, credit million Capital borrowing the company

We intend our to that with X.XX growing move opportunity underwriting target to as strict portfolio times X.X of closer times range by presents to itself our our market only but criteria. investments leverage the meet

the our with and increased remain another specialty rewards. risk lien finance and enhance tool long-standing environment flow provide well prudent to as loans use simply first platform leverage. We to we in our will investment approach, senior invest with we investment risk emphasis leverage expand capacity secured invest primary offer conservative ability a opportunistically and with finance when continue Consistent management In the the current compelling of the flexibility significant to cash current loans specialty secondary loans. on as to more will view

to At you take call this financial the I’ll to time, turn our Officer, over through Peteka, Financial Chief Rich highlights. the

Richard Peteka

Michael. you, Thank

XX, asset million billion fair portfolio in across of June XX value to in XXXX at Limited or was XX, $X.X XXX net per billion March a March investment or compared industries Solar market XXX fair value a across XX $XX.XX XX. $XXX.X $XXX June market value At of share Solar industries at portfolio sheet XXXX portfolio had to balance companies $X.X compared XXXX. on share at per Capital $XX.XX XX, million Capital’s companies

equity Solar non-recourse Crystal subject of to million $XXX equity credit March available capacity times approximately XX. Solar future to NEF, had $XXX.X combined the million with XX, leverage had Capital fund portfolio from credit times growth, X.XX at to from debt considering $XXX.X to borrowing debt At facilities, and When X.XX million base of debt limits. at net company's June and capital available facilities compared and net to Capital the outstanding

P&L. Turning to the

investment months to million for the $XX.X million $XX.X three Expenses March months ended income For the the three XX, ended three June compared March XX gross totaled ended for XX. million months totaled million XX. $XX.X XXXX three for June ended versus $XX.X the months

share for ended ended XXXX $XX.X months three net per for million the for XX, share company's totaled XXXX. XX, March compared June three per $XX.X for the million months average to $X.XX the average investment $X.XX Accordingly, income

the line, the months versus second resulting three quarter. million and net million share $X.XX XXXX. unrealized first the operations or realized net for had company net June from of gains for realized and Below the company the quarter and of assets Ultimately, $X.X XX, totaling $X.X gains unrealized per ended average million for $XX.X net the increase had

$XX.X $X.XX to the compares of average increase share March months This ended million per three an XX, XXXX. for or

of XX, XXXX. XXXX declared of distribution a Finally, on XXXX our per on to share record recently September shareholders of $X.XX payable QX Board October Directors X,

call that, Operating and with the to Co-CEO over Spohler. turn And our Chief I'll Officer, Bruce

Bruce Spohler

Thank you, Rich.

focus scale portfolio financial of based on our representing of on least rating X the our Overall, risk our the risk downside health the remains protection. XX, average disciplined June At X rating of was investment underwriting to sound, and with weighted amount reflecting our X.X companies portfolio X risk.

of As further indication were the the at second strong our performing our fundamentals quarter. the end portfolio, of underlying of XXX% investments

The billion $X.XX was issuers [ph] is million] XXX Our investment industries. portfolio X.X%. comprehensive or [X.X highly average encompassing across issuer per diversified, XX

senior lien and secured of portfolio first loans loans. second XX% of X.X% secured lien XX.X% consisted comprised our of

exposure X% asset second lien second being our in loans. lien loans base is in of X% under cash Just flow with

more our environment. prudent we in generally continue prioritize risk lien believe than to today's cash reducing to flow second We exposure is carried loans, which

end, our focusing and a able our cash quarter weighted maintain lending. XX.X% despite LIBOR in verticals. around We've commercial niche flow on and finance yields by was At spread yield asset to level been average XX% decrease compression

generally XXX portfolio yields in while repayment these double-digit we’ve activity XXX able were and $XX hand been million. higher million business offer lien originations resulting across second to actively four of investments maintain which to net flow our repayments Notably lines, our Including exposure million yields. decreasing totaled cash

update Now of let our investment an on verticals. me provide each

an secured EBITDA flow upper cash are which stretch business middle companies and first to Our of XX lien investment, market with senior predominately first approximately loans average million. investments

During the loans XX two primarily which credits on we and in we quarter, lien add-ons X repayments originated were experienced million. existing of second million first

our and Alimera Life portfolio our of this Group million exposure generating June lien XX% structures. note, over a participate in reflects XXX investments Of refinancings reduction of million not decision of our of and several The just second XX% representing $XX investment. to on portfolio. the flow existing flow compromise we our cash billion our pricing loan cash in investment our par over due to repaid X.XX IRR XX, was primarily in At for

this expect We second – flow see in lien our investment to year. over a cash book of remainder continued the reduction

over revenue years. June a reflects which of in we've the XX-month our the rate that couple the low average the grew growth issuers weighted last and EBITDA At XX, single-digits slowing of seen of

X.X investment coverage at the times a flow segment, and portfolio the quarter times our For quarter cash down and from leverage was was our X.XX companies slightly first interest to two consistent times. in in

down was from yield the weighted in addition, In X.X% to which quarter XX portfolio on basis cash average points reduction the primarily our the related is LIBOR. first flow

our let XX based million asset-based of of an our we secured million had million. XXX new yield approximately me asset and representing lending average of XX Financial total portfolio senior funded XX% Crystal to quarter, In turn had Now segment. second the portfolio XX.X%. repayments asset-based investments of The was

quarter. quarter a XX.X% Capital equating cost consistent a yield platform dividend to million ABL Solar on X.X a first second the Our the during of with

million. At XX second to X.X turning XXX had XX with NEF’s June over the million. million portfolio quarter Now invested million nation’s borrowers XXX is investment equipment, the and XX NEF average totaled of an invested across repayments portfolio of during

included held this as purposes. subsidiary financing a we use in as sheet equipment on As net directly are in that efficiency balance tax for SLRC business which holdings reminder our our well both wholly-owned

first represented average end. comprehensive the their XXX% The portfolio. was quarter equipment asset XX.X% lien yield on of XX at our and class of that weighted investments at portfolio XX% are financing June

from At portfolio end Now finally, just a our Life XX representing represented XXX of portfolio our provide June an million approximately investment on let update last year. total business. over consisted loans loan with XX% increase of million. average The our of science XX, science me of the life borrowers XX% totaled XX an portfolio.

warrants. team the science fees average of science just and The life portfolio $XX XX or in million net originated of science but success life growth. investments portfolio excludes life on quarter, approximately resulting weighted million this yield X second million XX%, had was the importantly repayments over any new During of

continuation of our than portfolio that have lien in exceeds more and SLRC loan our get NII activity increasing generating returns, attractive increase assets structures finance second reducing as years. risk-adjusted cash the portfolio over exposure, specialty to able that investment our the quarter last where during The more both been flow driving a we are represents investments well distributions. our in as the portfolio conclusion, leverage of In teams second gradual couple

substantial our may deploy Given selectively flexibility market the and compelling capital current market remain we dislocations. opportunities intend to on arise that capitalize preserving environment, from our patient to

Now let me turn the call Michael. to back

Michael Gross

you, Thank Bruce.

Capital are we with positioned. well and quarter with closing, pleased Solar is second In very results

strategy long-term with to record secured the established solid away specialty diversified from flow senior as market cash structure drive businesses. providing is migrating company commercial loans finance solutions of continue across and SLRC superior middle to a results. verticals portfolio the developing finance firmly Our track diversified a capital

greater Importantly, us to investment for force credit our cycles. investment discipline origination diversified risk opportunities return best capital engines retaining and allocate to platform across scale enhanced flexibility

in We a are the in of still preference cash origination selective loan highly opportunity remain maintaining finance or flow interesting environment. investing current specialty seeing to

yield. not comprising of in prudent market remain credit the We credit face in been floppiness have for disciplined quality and

we've Importantly, result reduce through well-positioned verticals exposure able for average while to flow lien second growing XX% actively solid cash yields asset maintain specialty growth. The been our is portfolio finance close weighted investments. level

of us will credit the end shift, conservatism history outperform will our our all shareholders. and for allow cycle to deliver us peer If believe attractive does enable group our returns we to

the credit reminder, year of million investment private across Solar Adviser with commitment equity billion funds bringing including announced all Investment expected Capital a total As Partners leverage. capital $X.X combined in last over fund Solar mandates $XXX late of closing to

to in the up diversified The via for differentiated equity attractive position Solar investment ability across has maintaining verticals. powder greater in SLRC. Capital to in portfolios. have solution increase to $XXX the capacity strategy opportunity At company provider already approximately leveraged given million a scale with dry or transaction a for to the deploy speak platform capacity across X.X whole investment net debt be our to resulted we the platform more up Partners The times

to low path per We investment current quarterly believe target rate share SLRC clear a net at has leverage a to the in high run XXs. income XXs

quarterly Directors As our a increasing earnings our evaluate shareholders. basis, our further on Board increase distribution sustainable of to will

an hosting Senior be o’clock or call results At morning, Limited this XX Solar quarter earnings of for we'll the SUNS. second Capital

the provide to our time. this financing clients' our traditional appreciate Capital's senior team's market flow. and deal of ability see capital to we through this middle origination continuous vehicle needs, secured Solar enhance in proposition We continue benefits ability to Our meet to value your

Operator

from first Instructions] [Operator question Dodd Our Raymond from comes Robert James. line of the

Robert Dodd

bit? you give market believe contingent almost or that’s income more there Michael little where talking out press Just of color condition you I there mean growth comments on - sequential, following balance net to from year-over-year - up Solar contingent environment XXXX. us the say portfolio. a do market are your the that's you the today growing release actually last obviously you in is for on a is the you appropriate positioned Is believe over can improving the that

Michael Gross

the that an bifurcate in following we not continue verticals. yesterday time. of period finance our that extended response a are specially saw growth dislocation we positioned for would we the think the in way. over vehicles, think We extent continued To does I

think flow I modest that in growth think in to really see so market the extent flow accelerated saw our over I cash year growth it’s to of some couple environment segment, chance pick remaining but the up. were the growth see dislocation we during quarters benign continued cash the would the is you a for last that also we

Robert Dodd

And somewhat unrelated that. then to

has of of equity was mean, a asset, XXXX if NEF cost look NEF sheet, quarter generating little little the NEF at balance the it of X%, On it’s dividend or the somewhere on I can that? like some return quarter us -- payments on in first for over about on give the your over position this I going X%. on equity and things reasons again, lower that Obviously resulted the major on is there’s and there is tax color that but invested that more lower return investment within you business

Michael Gross

assets You overhead of to will, you on your NEF all really sheet because characteristics point if NEF at so go to blended our is have equity NEF balance basis cost the balance in sheet, that’s the the it look tax on all on are. a depending either the the where and business

the their balance on very basis ROE but and portfolio - balance-sheet on since down we it’s [indiscernible]. if is on completely So it across on portfolio that’s at the goes basis then look been we the consistent NEF it and goes down a blended reality blended bought a

Operator

line of Chris Our from York next the Securities. question comes JMP from

Chris York

that Rich, quarter income what the large you income drove increase in other do returning? this and how much of consider

Richard Peteka

Chris. Thanks,

our LifeSci also the kind specialty negotiate The the get we we when and other with there the depending all we structure the some income, finance on preferences investments, are have that deals, those, of and fees they're borrower. especially of

portfolio there include and effectively company. sometimes part sometimes fees are there a a upon So that's a penalties, just are there really at particular yield sometimes is the fees that of it’s are that fee event plus amortized; contingent prepayment that

this on that did upon to Life the happen fee deal event time QX, Science contingent quarter, These in an in So business. Science event from a things there that was happen. Life a time was

basis. were I significant, while a from happen is we life this So on seem income would of the that generated quarter. sci the them, quarter regular other more that one technically some event a two the other additional was time for to you have during tell one normal us But of almost time, that they had an day-to-day, did so to there recurring

that the a these portfolio event one that -- was loan that each on to You basis asset going for is event to hitting be frequent as you happen quite so doesn't that that things one-time have company. quarter, know not particular just but class a seem duration,

Bruce Spohler

to as has But this to become the regularly, they amounts do are Richard’s vary Richard’s to point, seasoned, point. but portfolio these fairly we starting see in

Chris York

So expect so potential those should it’s to to touched XX exit grown, quarters the Bruce were large, maybe as we just clear, the two forward and then versus be portfolio comparing it’s fees income go last you seasoned, increase? on other fees

Bruce Spohler

to it will seasoning will year’s pretty out the I given portfolio. quarter-to-quarter, think consistent level of in of course start over vary think time, the level it the I but a

Richard Peteka

of know earnings a in considered its if something it's real-time you Chris into into a keep accreted to mind that an yield an so these on part And income contingent that, the that’s it’s if income. being interest company driven event than would fees basis, that’s going other be fee go

Chris York

Telecom that own talked have before down quarter And with other you I this this values but BDC switching about written know and bit it. still American gears, it’s I little was above investment

the drove So mark quarter to explain what and inputs explain the other may in other us relative your could what write-down you maybe to peers? then factors

Bruce Spohler

Yes, -- investors is investment a by other was large that marks people's I this while XXX are million vast can it the of is address a tranche, or holding -- say of can’t private majority we but so, it. together a group small it effectively I is clubbed

appointment look we trades at for if it So quotes because to this by one, trades don't all. it

these that what information we management valuation say well going reflects dialogue is that as the team and And the would and I constructive very forward with company as we are the best at so to capitalize co-lenders private have how that our and in conversations sponsor been have. feel the to we close look

Chris York

fundamentals So as that you to valuation essentially maybe a the decline in know input? opposed

Bruce Spohler

fundamentals. necessarily the but underperformed wouldn’t and very basis but always a a definitely say there, I We’re near-term crossroads looking at a that has about a feel long-term prospects. decline it's we the there's at on good

Chris York

company. explain to and for maybe continue. I purposes appears efficiency income we guys should And could what's Solar the know that driving income since the situation what the trend you and maybe expect you low but at the dividend lowest NEF tax net that to use was and acquired then you record

Bruce Spohler

it apologize, Michael happens income SOI the have are generated subsidiary been not our that’s been model assets held out more I but mentioned been NEF the for effectively is a we so has and of shrinking. effectively in to we’re the assets all where at balance what whereas put moment we purposes those that dividend ago, growing, take that that you is easy because efficiency but entity sweeping as NEF and on a sheet from blocker more is have look as tax the

in consistent. interest is and what been So assets mix that are rather in it’s just has reflecting total the entity the but income

Michael Gross

we the units for really the contribution in that's of we our release, to press way show So at each the disclosed business and it. look

that QX our both balance NEF So we that $X.X the the dividends has we sheet it shows consistent from was That in gave equity that our pretty from contribution into takes and well the quarter-to-quarter. own been as million. account on number assets

Bruce Spohler

dividend consistent. So consolidated million the down the to X.X from X at rather for business million went but NEF the was X.X number

Chris York

So and million? some some X that is mix That’s from for there that shift business. accounting of income

Bruce Spohler

It assets they're goes where that sheet. the to whether balance subsidiary the or in are on held

again, consistent. what that’s basis we combined consolidated been -- but So has

Chris York

mean, that it's obviously, income, rate to And dividend thing declined sequentially purpose? expect year continue understand reasonable can't a to that to and there's so at bit trying little X then just modeling for so that is I maybe we or run look I with if but see year-over-year, million that then

Bruce Spohler

the of and the interest million so of -- loans our way that’s dividends that’s earnings of consistent run from from we the the to itself. hold it. I continue the think of income think, kind combination on model to the and kind sheet X.X is entity it, Again rate, And need I the balance in which you look

blended earnings. look terms you and interest the If dividend isolated in of the at it’s not base, the

Chris York

kind And both question strategy it on the and of Okay. is -- last advisors.

appraisal you year great. capital Michael raise in looks touched rate So on last

in light acquiring complementary the of at on us So of view you that other and market secondarily investments manager commercial in your you could updater today how on the then or for maybe the many Bruce, can companies? professionals exists opportunities Michael finance update

Bruce Spohler

Sure.

manager. XXX with met and out as So our platform, know Solar, with we've well businesses out SUNS are people today includes as finance across commercial that that the the at you

In of out acquisitions potential the for the seems at moment active opportunity terms be pretty set there. to

successful at well as know you few but both As like incubating everything as we Life we we look have to as acquiring actually and Science acquire team the did businesses platform. with in been very

I we say, and and that’s some add more time we active early you do say we unfold So to of know, been terms are but nice would opportunities going to than platforms. too platforms the to today in how see to some quality existing teams had

Michael Gross

competitive For within in will we SUNS talk acquisition Mill the to for on in [indiscernible] these look about prophecies at, But a us buyer add more and at [indiscernible] we’re example, relatively attractive that and interesting things completed that today. and of call and be just basis. strategic our which subsidiary have North to upcoming are things been buy what’s allow is we to pretty we

Chris York

Yes, then and professionals. investment very kind on helpful just that's of following up

Given business on declining, professionals. basis the portfolio to be present there that any challenges cash does is flow that retain may

war for lenders challenges present business? kind I if there's does a that of and occurring curious just your talent among any think to direct

Bruce Spohler

some think underwriting dedicated a differentiator. I or flow is asset at individual we've as so shop, opposed believe that we find distinct we been across a a a actually creates so and team what these a for verticals the originating the been actually I and people of to invest career that’s our like number members are on think an of across to professionals opportunity to classes, basis cash a being net bit opportunity think adding

Operator

of question line Compass Casey Our next comes from Alexander from Point. the

Casey Alexander

I had of couple a questions.

question, fair difficult significant know, it making push Capital conservative I is Capital target high its appreciate the philosophy investors Solar that standards opened you capacity up your ratio? Solar for the the the in platform that you towards across quality does become leverage to that investing but the kept more portfolio, it that additional think a you

Bruce Spohler

Yes, think it’s interesting an question.

the make challenged Casey that’s madness a is to we of each could handover think each in I think required be sure there's just capital diversified sizing really our capital between we something investment But but we raised. the have and capital that that if be And can and our on. the think was method hold the SLRC. of raising available aggregate in a the first the the were BDCs case I I capital across solutions that platform and been private that in we taking we portfolios to focus so have capital verticals still enough that be there, provider that this and in sizes has that

about additional Science Life you’ve a loans XXX taking real-time SLRC. would would Science would hold you that XXX comfortable So it all that But your were of if not about we the size at Solar comfortable thing June average a come million. to platform, million look you we million in our put portfolio we in question, specific good Solar seen feel we SLRC to across down. At because is example, with to feel the of that's have at but vertical portfolio SLRC have we think XXX give Life and not XX, diversification at

that by larger and at breath we’re $XXX Solar loans Storino go million, million, competing the million has for and sizes Life led platform yet of Anthony enabled Sciences $XX to million take So team still comfortable $XXX holds with. Life million, at the Science out our hold is take the $XX $XX much

Michael Gross

because been lack to capital it size. would able it for not quite stability because way. I’ll situations been transactions of put not giving The be Solar a of the have another additional to participating

Casey Alexander

acquisition an mentioned the at North Financials just ABL platform? North Solar acquisition you was I North that ABL is curious maybe one, for the Mills lender, more an was Second appropriate lender, why Crystal for Mill, Mills Capital and is

Michael Gross

let’s on North touched for Crystal. companies. just bank so before relationship and question, great very a Mill Mill versus North about North is Sure, Mill this talk we but small

working So credit typically receivables. secured they by of provide line capital $X million

but pretty you in risk assets business So are a have against. lower Crystal know lend see you whereas that at flows very cash what lending of to than ABL still low companies and more lender is return Crystal an strong transition with that to business is

you it some flow lower lower and ABL on so, cash be higher traditional senior is how a portfolios. and cash risk And those versus higher stretch lower yield, risk to is basis lien ABL. and lower first a more lien SLRC whereas look first return, yield as SLRC opportunities business risk of doing tends structure flow that’s low SUNS the return, at we SUNS doing thematically stress

at lines acquisition North of a low factoring small lower risk and $XXX,XXX factoring Mill typical well with it profile this was So business credit very return SUNS. the fits in

Operator

question line Oppenheimer. next comes the Our of Chris Kotowski from from

Chris Kotowski

longer in and the you're indicated not run point bucket for specialty XX% - companies? there acquisitions. using which you a And your it it this of kind issue is the structure the XX% finance about are of XX-K actively guess states BDCs philosophically you the just to platform way bucket going question while become It that that you an have what and is other is that still or is it I XX% pursuing does to specialty finance move - in the at keeps of up. in And right that

Michael Gross

colleagues turn comment quick to over make here. my it I’ll me Let then

So consistently are XX time you bucket as churning. life XX% the of of love uses of very We short know about you companies. They is into loans one public if months. life science they them, average the but have remember a large

that So flexibility. which emptying refilling us that's and a bucket of lot gives part a constantly of

assets Crystal as talked would basket structure on basket. think SSLPs we’ve the we not you other point uses if of past would some free just that platform brought consolidate a Crystal know those Crystal as we at that is of I our uses as are nonqualified about in XX% the that the capacity the up

pull turn colleague. to levers of lot a have we it So over my but me to there, let

Bruce Spohler

test traffic. the if not fact companies an do lastly, so And we NEF a bad way see work other we think it’s open actually test. core fill our not that And up asset occurrence what is

but if to it’s XX%, anything be XX point at XX%. we add would and can do forward So % more that to not transaction all At we wanted over do we we that. going go with to not the able factor limiting larger

Chris Kotowski

And then transaction kind I you typically the that life triggered by? what by they I or to Is back science nor or a fees are success are these wanted on mean by the the mentioned milestone of to that triggered - the go just drug approval by side.

Michael Gross

combination the of above. a - It’s all of

tend your in as the control, after success document sell IPO after So even of point repayment that us eight goes variety that we loan business fee the to trigger a a we that success seven, gets our and years separate there basically is the if get the is payment. along fee loan. things is actually document change of loan the That embedded repaid gives a drug approved out

Chris Kotowski

And the where fees, more kind kind on the as have had portfolio these of theoretically build-up in this backlog this now of should success see contingent your and of have you ages over books longer this you’ve it know as and you we where is you companies thing interest? a more time that

Michael Gross

income we any actually is GAAP happens at the credit with take answer The it contingent. the yes, week you for from until a perspective, back over look all can’t

quantify. something there this exists, that backlog theoretical that is So but not we it’s

Chris Kotowski

around the couple volatility a quarters can decide we’ll to trend and more see the that just and what is? And have we then wait and

Michael Gross

just these are to warrants. as fixed be and Yes, structured clear

life science the warrants success often very So fees. have so have either loans they

very So success often as fees. structure we them

Chris Kotowski

used that's on reading your right BDC I no, are finally if it analysts mean look consolidated on look then earnings Am And mean our of business. no manage to sounds the model that's I income at you're at we to me off I the were the press like guess I because page look saying I Page those don’t X of page, that? at release. hear six right us kind you categories how like most doing And you're that of

Michael Gross

Yes.

Operator

[Operator Shane from next Instructions] line Rick question Our the of comes from JPMorgan.

Rick Shane

this about place equipment asset questions Two impact tariffs headwind a is or financing should trade in first any on morning, from business, we that is is tailwind either a prices equipment? impact that it the there think and

Michael Gross

no - activity exposure have really the We trade at most we the in really to Ag recent war meaningful sector. the

we any portfolio So seen and have we not look as across the impact.

Rick Shane

at trading X% NAV. discount about now is question Second to stock

You current and outlook in to have don't least back your your guys Curious authorization stock? portfolio to authorization. have believe in makes at stock include you a back it consider and your past bought whether given then confidence the an I buying sense

Richard Peteka

have it. and we great talked a it’s about Yes, question

look think at little differently. we kind of I it

to with a capital at sitting on of sheet, investor great expectation we We’re kind to asset today of you debt at have We've a X%. if balance blended equity rates. stock target trades look debt a the grade cost we’re here and equity and under capital side of where both

we don't that we be low us cost extremely capital at that lose to of acquisitions. of of want to advantage. potentially won’t helps It’s great and And able cost looking capital deal a

out want kind any where growth that. like make is and our kind And see commitment of so cards of play the we to we before potential

Rick Shane

now to make have risk I bit the The call reducing sense you’re to Are and two have lower months again pieces that I feedback would there? any any the fact given to sensibly is - haven’t if And little your a in does component place back buy of - equity presumably guys bought an in up give understand six it authorization. authorization least laughing and wouldn't the at there and on I'm you asking levering and that capital. stock didn’t why from you back you stock cost

Michael Gross

in genuine a wasn’t to put had book with drove We people it to it know. of the don’t take But - that. a know people see. we’ll yesterday lot put we it have as expect I think but that and day don't we comes of we’ll I and I think place last one pillar then, to but lot other intentions place maybe didn’t in plans buyback a No, have discount,

Operator

Wells comes [Operator line from Securities. Instructions] O'Shea Fargo next of Finian from the Our question

Finian O'Shea

Just first of you that in was question Solar color on Auto give income participate private I a come think portfolio why in as company on Southern the and BDC. the little bit us saw didn't a new financing? to Solar on some Can we refied

Michael Gross

us felt prudent to uses down that of And refinancing conversation about someone exposure. for as number earlier call part XX% talking terms of life basket. with XX% the the to as basket take been was it’s so had of in a more it we sciences we opportunities that attractive for years. more we the in up flexibility maximum goes really it it the Yes, [Sasco]

Finian O'Shea

the their finance as NEF And partially own understanding to lines. broadly G&A expansion specialty of run Crystal and

ROE should comprehensive into may that side? be on of expand can you the partially comprehensively, improved these we fee anticipate somewhat As a off G&A run as

Richard Peteka

Definitely.

not bigger the I And close that you're think that - is different it’s up growth that right. portfolio SG&A and ROE. a absolutely size portfolio whether for see talked drive more easily it’s yes much past to relative one hope internal of drive much deal Crystal in we’ve business will in example them. a about our efforts Crystal volatility with and double will it’s environment we builds and the we your lot could NEF so much that, a or to for go in clearly

Finian O'Shea

final anything then and economics or to question just BDC prior funds, receive the else? does fees any as the And one broker advisor Solar, to allocation or the such other upfront

Michael Gross

or have No, will. never never

Operator

We to have now the Chairman Gross, call Mr. no and further over Co-CEO. questions back at Michael this turn time. will I

Michael Gross

Thank you of who for you. talking with to we on for and the XX you to talking will to forward very much all today questions. us again, And look forward look o'clock great SUNS. participate will your Thank us time your to and

Operator

concludes and conference thank for call. joining Ladies gentlemen us. This you today's

You may now disconnect.

SLR Investment (SLRC) 6 Aug 192019 Q2 Earnings call transcript