SLRC - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q4 2020 Solar Capital Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded. to conference like speaker to now Mr. today, would hand over the your I and Co-CEO. Chairman Gross, Michael Please sir. go ahead

Michael Gross

Thank you year very Solar XXXX. Capital much, and good earnings for morning. call the fiscal ended XX, Limited's December Welcome to

name today before we'll by SLR remain Officer; start rebranding the will SLRC. Effective Investment adviser a could today webcast Corp. As we here statements? SLRC change to its Partners of on SRC's the last Co-Chief Solar this our I'm ticker and you covering Spohler, night company Executive to discuss Bruce joined and its Partners, Chief announced the our Financial platform with we please Capital Peteka, Rich by SLR SLR. forward-looking Officer. off Capital call, Rich name changed begin, to

Rich Peteka

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

do in our future those as forward-looking a filings undertakes statements of duty Corp. any differ time-to-time latest results SLR SEC. factors, SEC described number filings, this as law. including call XXX-XXX-XXXX. to of obtain indicative like us Executive required the website is Officer, copies Chairman at not may actual so Co-Chief To Investment Additionally, At to and unless back by a the from return our please performance no to results, our call update of or time, Michael visit of materially result Gross. to I'd our with

Michael Gross

very routine everyone, and none you year thank and every impacted and for liabilities. Good economic literally Solar our Thank fourth pandemic to assets reported ago, a year negatively company's to -- we we that country, loss SLRC of us and and the business XXXX, lives, many result government an social on spite that complete contraction In our of well interactions. extraordinarily long-standing approach business and imagine disciplined year disruption managing quarter of Rich. a challenging reflecting morning community our today. the a eve so functioning the would a and of lives us daily could across performed organization joining when you results are full global severe much A our tragic of in that

employees, of pandemic this XXXX, are providers has cash protection XX, asset-based efforts companies performing. service downside meaningful that non-cyclical segments operating credit markets flow caused. market in and December in to thesis our challenging loans clients, We economic to our despite primarily lien investment personal middle portfolio the grateful quality supports upper their lenders niche XXX% periods. stress hardship loans for The and is At during tireless and first our provide

of to XXXX, up the $XX.XX weather crisis. was the successfully asset Our At at $XX.XX, have portfolio company's from and assets XX, economic resilient December share value and liquidity models net end them our business per third the quarter. enabled

will investments deliver existing Importantly, ultimately underwritten anticipate that returns. their our we

a long-term the via ABL and an know, our Crystal our of to strategy equipment we acquisition strategy the broaden cash leading niche years Kingsbridge investment with As diversify on of to In a initiative eight to acquisition investors lessor essential Financial capabilities Holdings that ago embarked set complementary use we primarily flow to customers. independent QX, of furthered a lending of the are business. diverse investment-grade

sources During our the its for with Kingsbridge of loan understanding developed company. direct the investment provides gained a of origination team. and strong our X-year capabilities in management expands relationship deeper we Kingsbridge successful and business a differentiated growth

of the finance commercial business. acquisition are diversified Kingsbridge a With truly we

September XX% acquisition in billion, the senior XX% During driven investment $X SLRC's Kingsbridge. years. total approximately XX XXXX our value secured of our a the XX% XX of primarily fair of December and to spanning specialty from these business XX finance cycles career These through over fair invested finance just low over businesses value verticals. And cycles. comprehensive At to historically of loans. the in portfolio have up loans throughout Notably of managed fourth quarter was teams by have loss consisted grew at each comprehensive multiple default rates exhibited portfolio XX specialty

company's Investment investment November. the XXXX fourth was per net approximately quarter share up X% was which the of in $X.XX commercial $X.XX generated compared to up the income from third our SLRC investment produced In of Kingsbridge gross closed given share in our investment income from third quarter. per QX, XX% income XXXX, the the from During income, early finance quarter, businesses.

clearly of quarters the We as pre-COVID levels have our SLRC NII leverage. target generate next defined a to few for over approach we path

that flow we the Importantly, company's specialty finance our cash reflect power businesses. continues finance confident the SLRC's of earnings are and benefits platform commercial to multi-strategy combines

flow, XXXX well investment cash pipeline portfolio of opportunities. secured growing from in expect as a as senior finance specialty both growth We

M&A has improving climate and economic up investment and pipeline stabilization markets, of our activity the With picked growing. is

cash SLRC with science platform leasing, corporate provider a positions investment diversified lending finance and lender scale. Our solutions life lending, to finance, spanning equipment venture ABL, as flow borrowers

investment strategy across the attractive to We are capital opportunities. risk-adjusted our a fortunate unique to allocate position be in most to

portfolio. remained Holdings including low SLRC million at company to limits. base Financial, subject XX, available At of approximately capital to Crystal levered Kingsbridge available significant of $XXX had capital X.Xx the have and X.X the borrowing liquidity at range target our relative We NEF available to to December support over debt-to-equity X.XXx. growth our of When

Finally, initiative asset rebranding our we last businesses Equipment on focused our attractive let multiple verticals classes finance exposure lender which and was benefits me of acquisition and have XXXX, with Nations and form on that Finance of platform a Since the development announced commercial with Crystal protection private terms diversified touch our investment in covenants can the This our investors the debt night. in platform with acquisitions rationale of of Financial provide Kingsbridge. carry pricing and coverage. strong that and included of collateral science and life the to building

of expand our lending strategies. to We will continue suite

the a As we To unified highlights. Pateka, take attractive rebranded entities fully of you brand. platform, approach turn reflect to holistic Solar extension of QX through with our to and structure we financial house. I'll financing changing success our SLR our a the our have become this each of health our across with its branded as capital with a and borrower the have result platform our brands SLR across clients providing At CFO shareholders over than time, SLR investments an to rather Rich of call solutions the name the

Rich Peteka

or or of credit from facilities net to market Investment debt Michael. sheet SLRC's combined Bridge, leverage X.XX time When to to with industries value and ratio than fair XX Crystal, At considering fund limits. across had December subject had net per at XXXX September XXX a XXst, credit million base companies value $XX.XX XX, XX, growth, at XXX and compared per on at capacity Kings fair a at SLRC billion capital on-balance to Corp. million asset investment outstanding was Thank in company's $XXX.X share a of SLR compared and And you, debt XXXX. from borrowing available December to $X.XX of portfolio portfolio $XXX.X XXth, million $XXX across Corp.'s in XX share XXXX NEF facilities cash $XX.XX $XXX $X.XX industries, million hand non-request XXXX. at value the available Investment more portfolio had our SLR market December of companies, XX portfolio billion September equity.

three quarter the for September gains $X.X the months three for ended fourth months the months the ended XXst, company ended for compared three increase of of income for million $X.XX ended million for the the in September versus net unrealized XXXX. ended December gross realized average P&L, of and $XX.X XXXX, the million XXst, the to -- net $XX.X months months average third unrealized three three for totaled XXth. XXst, a September had per XXXX months totaled from or million $XX.X million share million XXXX. investment per Moving $X.XX $XX.X December the to and December of XXth. $XX.X XXXX, assets, ended Below net company share to the $X.XX December September versus the a company's three quarter three XXth, compares XXth, the million for million This line, compares gains of million for months sorry investment per September $X.X average XXXX. totaling net resulting or or share net Accordingly, average the $XX.X million $XX.X per ended months the ended XXXX. had for Ultimately, operations net XXst, for $XX.X three or XXXX. share This totaled Expenses realized to XXst $X.XX the income I'm increase

investment addition, track by sheet. both is and underwriting to further conservative Fitch SLRC's provide flexibility and rating corporate important and and year-end efficiency in SLRC's company's The testimony investment-grade balance which Ratings, investment-grade growing the to philosophies ratings management In from Fitch strong post Moody's record. affirmed was

XXXX Directors over distribution XXth, XXXX April on Officer our a $X.XX Finally, recently call record the I'll Bruce to share declared Spohler. our turn on XXXX. shareholders Board Executive Xnd, of And payable with QX, that, March per Co-Chief of to of

Bruce Spohler

Thank morning, everybody. you, Good Rich.

shown First remarkable XXX% portfolio is SLRC's and durability performing has recovery. of and the the and slowdown economic stages throughout current foremost,

and that tremendous a performance of financial Our have the portfolio complement to we is in. invested companies sponsors

loss on thesis our the of of risk SLRC's our finance performance through least the the our collateralized amount loans to cash capital the year-end, exposure addition, verticals. non-cyclical under average risk. our In one the and to risk flow in proportion with to a lien two at rating was, specialty supports lending structure minimizing based significant top investing At of rating allocating by first, industries representing investment one risk of four of of weighted scale portfolio our loans

the at had XXXX. of quarter As X.X%, than entire further back year-end. which investments, portfolio the X% of on of watch-list of indication a resiliency at performing the second peaked And the XXX% portfolio was our was in of less

our year-end portfolio grew Michael largely billion just driven XX comprehensive XX% XXX our by issuers encompassing over quarter As the $X was diversified mentioned, At highly fourth distinct the of acquisition was portfolio in and across industries. Kingsbridge.

over providers was heavily ABL lien Our and largest commercial resulting of to flow cash $XXX as investments. the under exposure this loans. average and growth and cash At $XXX year-end and loans. of second in our Kingsbridge. able $X diversified fourth to with finance when loans, lien X% exposures spread for loans. services, secured second asset on of Portfolio reducing issuer the prior in just as in loans. LIBOR the weighted able of focusing we've well despite was actively markets level the average XX.X% million, to while the flow, XX%, net over first or the Of yield to just asset-based By yield were portfolio the industry secured growth flow marketplace. loan acquisition been our lien the as remaining X.X%. yields our reopened, cash senior quarter. we coinciding weighted niche lending The lien level retail compression X% and At lien XX% were asset decrease to XX% consisted have were being million. been of with maintain quarter, as XX%, XX% senior was well investment close second $X was continued year-end verticals, totaled portfolio compared maintain the towards per million, healthcare the The billion approximately only pharmaceuticals portfolio of Originations second financials, Notably, XXXX repayments approximately comprised

issuers or positioned average are had investment better mid-market of sponsor year-end to with $XX Now of portfolio weighted provide was cash invested of our update XX under downturn. verticals. million. each a portfolio, investment which let million, flow highlights just believe At we $XX average $XXX the over just our over an me EBITDA the of XX% total was approximately These on businesses which an to withstand our million, finance companies commitment upper across

originated $XXX first million and we over repayments of of year, of commitments experienced cash lien $XX loans last flow During million.

existing investments draws came flow cash from incremental mixture delayed of in Our and credits. investments a

of as acquisition non-cyclical financial our to second their of we're healthy in investment. view loan we IRR as the revenues exposure a We expect of to companies revised their a during had Bishop flow quarter of cash we XX% performance. the majority fundings budgets, cost fourth essential reduced during our this Additionally, boost the provide portfolio continuing are committed Of note, a Lifting. all cuts our will over to positive as see have in lines to post-COVID of a portfolio services loan lien rebound portfolio, further unfunded performance. rest providing was on sectors. earned outperforming Substantially, cash our this flow with operating as We the year. our on that in companies Across impact our well repayment

borrowers none portfolio the cash X.X% the of fourth During up quarter X.X%, flow in of defaults. weighted this average experienced quarter. from the was The in the prior portfolio yield

our turn business. to Now ABL let me

to reminder this the as well combination on of totaled quarter. Financial, total loans the was weighted XX invested senior yield vertical our million, representing secured XX.X% $XXX our As It asset loan an $XX XX% of size as million. originated approximately borrowers to portfolio. loans level of with year-end, XX% was senior a average average Crystal The At prior at portfolio secured balance a sheet. is directly compared in

During last new of approximately had just year over ABL and repayments $XXX $XXX we of million investments million. funded

$XXX million X.X% of quarter of an just and ABL one This cost. strongest fourth the $XXX over yield to with division million had a XXXX team, under for $XX SLRC we periods During dividend of our cash originations the million. repayments paid equating with on of

to me let turn Kingsbridge. Now

Kingsbridge we reminder, primarily the lessor is debt independent to a acquire invested management leading with As of in million to use million equipment of Kingsbridge of essential equity team. XX.X% customers. Illinois-based $XXX November, and $XX partnership in of an investment-grade

benefit their team. niche team investor. get leases was has approximately the insight have giving of and lender a underwriting the inception. $X.X and over performing. being disciplines over acquisition million an of XX% know of opportunity of approximately lender borrowers. is exposure investment-grade Kingsbridge their lender our years, which highlights management an leased two the our in the founded business by a per becoming funded finance and into equity Portfolio in of assets management with management to benefits was diversified We us prior then current to through highly $XXX being credit The invested Kingsbridge unique to potentially portfolio Over business, an since strength year-end, gives the XXXX by and team underwritten and $X obligor XXX% portfolio totaled million of Kingsbridge their billion average At businesses

to and first expands SLRC our origination crisis. this the record economic is asset track as We lending Solar not typical of an I'm cash is will of a enhancing duration flow have that permanent investment investment. the a And -- benefit SLRC. overall average the three-year for foray borrowers. continued This strong investment-grade current of to provides and differentiated direct in sources view the of capabilities, health growth transaction sorry our it portfolio through Kingsbridge's a subject Importantly, life into has acquisition

was just partial fourth fourth under including ownership $X During the generated a on our million $XX Kingsbridge Kingsbridge the during loan. interest dividend period, by income quarter, Gross the $X.X paid million million. of quarter for

of yield in approximately $XX of to expect a assets. generate investments our debt XX%, with million and finance will Kingsbridge in specialty other cash produce and income gross our blended consistent XXXX approximately that We continue equity

the Kingsbridge integration still is While well. early, proceeding of exceptionally

let equipment Now me turn to finance.

portfolio $XXX million. had with XXX equipment million. portfolio. million. lien loans and balance was $X income exposure As XXXX, million $XX year In over asset a creating $XXX investment the represents finance borrowers class our sheet just year-end, of of of This this of issuer Last those the NEF In totaled the asset approximately as transactions the of XX%. our team's portfolio from held an average this just was reminder, average equipment well over totaled equipment held our across history. invested our in portfolio an invested - are included in most investment finance business, equipment in unprecedented subsidiary finance strategy challenging pandemic year-end repayments $XX level as just over million the our year with yield directly environment investments on carried finance XX% total Holdings. XXX% at carried At XXXX, a first approximately and over weighted

However, experience this in business. of had years have XX they

government While sectors. the toll, the borrowers transportation-related received majority leisure to entertainment particularly took a assistance, their the and on educational of prolonged leases shutdown

several portfolio. last the reduced we Over quarters, this have

team that of a challenging are we enter believe to we As XXXX, has most finance year. situation the poised equipment this grow and made the

let million. Science At just gross life borrowers $XX year-end, an portfolio The income. represented XX% the approximately of It of turn total Now of segment. with of over portfolio to investment to close $XXX consisted and totaled science investment portfolio XX% the me Life XX the million. the average

yield fewer life $XX fourth We resulting reducing our million exit a portfolio the lenders on had the The science than while During last under in XX%. weighted realized greater had the repayments portfolio. market one we last is life average lower year uncertainties work led average in IRR repayments seen impact $XX duration focusing on borrowers to which have The This and year, had quarter for X.X%. to typically budgets. investments surviving and weighted science team existing of million. with of of originated and just new pandemic costs the on closely approximately led of existing many cash

that our sectors to and quarters. few finance seeing these first In in year represents including volume our the lien cash loans and lending our risk-adjusted last activity. we any investment last accompany specialty opportunities activity defensive rebound Reducing attractive quality loan investment larger sponsor continuation new have over investments excludes have that focusing a conclusion, flow returns. years. activity our on uptick of SLRC's warrants of middle increasing economic typically in the that in driving higher exposure a investments. cash themes reflective success is However portfolio origination investments fees been able lien second our number sponsor in Across assets of the verticals structures tight increased are of and market business, get a flow seen The we are all we than and certainly of

In of great opportunities in from professionals market a origination our environment The to us of grow addition, a opportunity efforts we're across platform. portfolio XXXX. our seeing attractive business larger and the for the pipeline provides development current is

Now the me let call back turn Michael. to

Michael Gross

confident we're you, Bruce. with XXXX how quarters. our ability to weathered Thank over closing, we're and our portfolio to continue in and investment net In grow portfolio our coming income pleased the

collateral million originate We available foundation is terms new and XX% believe expands With is that New to are carry that assets portfolio starting leverage, allocated strong Kingsbridge SLRC pricing and performing engines. attractive strong our over in over XXX% further with Year attractive SLRC of $XXX specialty finance of and capital covenants of of the addition form positioned low a has and to the with investments. coverage. The protection origination we

finance of during transactions portfolio of continuing that sponsor investment efforts. on opportunity will finance last the in borrower to the all across specialty liquidity Investment and capital customized Solar to capital as like go SLRC to companies with year that structure we higher fourth that good was investment business, great o'clock as this for fully with be execute solutions accelerate improved while collaborative our powder and health. to large quarter the one flow with position over support origination in activities of of the certainty company. Sponsor set XXXX participate further a for across a At challenging your all on platform, our now of $X.X comprehensive for scale require unified and the believe SLR our believe remain Senior SUNS, verticals. M&A results is year well commercial growth for to industry which XX each to foundation a of finance, would We under and will We to in can forward a strategy investable hosting the in PE willingness of opportunity morning cash set and Senior underinvested in With the XXXX be initiatives. of across or persist as growth enhance enable us. armed your us expect of significant vertical. we our We We dry is this SLR offer volume us has thank and billion upswing our was each in solution enabled growth financing scale the XXXX. which brand, look SLRC will market capital needs an are and our time capitalize and We patience the call to provides Capital. Our to hope the earnings today previously which you for we'll named you Corp. grow.

to and at deal the morning. to time. proposition questions meet benefits line this flow. provide our this this secured capital needs ability through your would the Operator, Our time open you We clients' origination SLRC's enhance market of middle ability we team's senior our appreciate to and to vehicle see for traditional financing please continues value continue

Operator

Your [Operator the line Johnson Instructions] with KBW. from question first comes Paul of

Paul Johnson

the you very maybe Thanks of know your Good the or could other from Kingsbridge that's behind that your help on me some marks comes for I from what's a your -- I the borrower the understand financing driver just business. just from understand exit I the was of had for demand solar But morning, of help obviously fundamentals anyway, verticals. type us different I that. type imagine of business. of the I to questions. rebranding. Congratulations guys. say exit taking the hoping guess this my

owning? of driver for So, common of assets demand any is the versus those economic type leasing there maybe

Bruce Spohler

sitting This the Thanks Yes. large companies. question. It's agents the Bruce. really is investment-grade for these purchasing at just

of As the you to Cardinal economic climate your with America, know, versus as you just Health drive they're that. buy Bank might and making we cover car. a lease And everyone decisions from a may

And mentioned, very particularly we Michael going is, put an these longer with at new what As off often leases then, find like in they contract. are we're purchasing opening environment duration to say, the this equipment. uncertainty may

the just we existing Let's extend that Kingsbridge. lease with have

driven and So the what's on going at purchases to it's really want economic they company the and leases. environment by optimize in dollars terms how between of CapEx their

Paul Johnson

Okay. the an that That environment see the sense. just makes you about risk-adjusted Could for today? you most today. And in might verticals mentioned portfolio favorable then it's maybe attractive your what market talk opportunities you

Bruce Spohler

Yes.

I never from business a as a returns. has that's particular, That's just as know, not our the high-level think life in as generated has loss. the best just consistently know, team, had that for asset science us, class. you perspective, you risk-adjusted And an

reduction get across to said platform returns. has tend consistent spread Having of LIBOR. felt and marketplace with still strategies broadly the they also and all So the our outsized of that, compression the

So, the recovery we're that think we're front similar that what us. for is pricing felt coming good of returns. in are as experiencing at coming the all finding investment their economic the that we But is out they out hope of have, here relative pandemic opportunities seeing have of actually and -- strategies we all reasons we that on the we're pressure we of portfolio of I strategies historic across look to

the same your science lending so, recovery. out their life need where of are leases, been to to so addition best you and being this you're extend devices deploy many it's picking segment go the prior businesses to And with as coming into the as were enter products. tied across COVID-related the to drugs or out leases companies We're now looking other back way the be to companies how whether activities then going has to shifting that new to And capital to focus in in in in you're looking crisis. into up and developed COVID They're economic Kingsbridge this platform. same question, seeing up thing figure process

of the best strategy We the during ABL for terms lot of companies are more need still where Our assets that expertise. what against projected period in in the for as sector against transition seeing had trying quarter cash assets, originations. that retail are particularly quarter pick see to this out capital like. had fourth a They're and companies And in economic team figure long-standing up the there. flow has in activity look in flows market, then more strong and we're borrowing cash transition

that the we been lending have equity crisis themselves private have resilient alongside mentioned leverage additional and are the sectors in rebounded sponsors that that quickly dollars, to needs As during attracting equity investments. proven year dollars last have which

to get XX over don't always day one, And acquisition tend get drawn doing so, we're acquisitions. They six, nine, fund pipeline. as we mentioned delayed draw but acquisition months undrawn facilities to to add-on fund drawn

strategies I In and all to our just So, thrilled there's of to the segment. one see say no economic opportunity obviously in blessed of them would summary, and changing multiple we climate. advantage that take have

Paul Johnson

that. for Thanks Okay.

then And portfolio, last common one equity equity guess, I your have it's for in a very time. question. position just guys position, it's BDC. ask to a very in Riley realize, it's a the small, for investment long small there been I I why Sounds -- just Financial. hold small a do positive you but B.

Michael Gross

a -- that’s question. That's actually fair

think year. and we'll I upside had just little It's this there. eventually it's a exit sitting

Paul Johnson

questions. my all are Those Thanks. Okay.

Michael Gross

you. Thank

Operator

Schleien And from with Mickey Ladenburg. comes your next question

Mickey Schleien

time in federal I competitive of to help of and demand same the market how year we wanted yield. year, capital for sort all individuals Bruce and question impact world of follow-up understand last investments a us provided landscape. lot loans already more there's lot the provide and the businesses. support morning, lot government your to may on Can support in a with chasing both having you to a Good to at We're And and the looking this a that Michael. where of in have this the strange segments?

Bruce Spohler

a Sure. Mickey. first I'll shot take at that

question. borrowers so great to much a them. a high-class to liquidity bit it's to think It's I of your your that available problem have, point, have a

in existing of have obviously, so obviously It's well. companies of terms benefit. part that, So the performed why portfolio our is portfolios a

look strategy. that opportunity going strategy are set sector benefiting or not we it at by are you They to from barrowers as think that. I plans. at investment-grade look Kingsbridge is ordinary financing, In and the really, CapEx the companies it they're do just does by -- their through high-quality sector general, have

have as These have smaller are impact vast of businesses. businesses, So Many equipment does we're equity private not you an at use It are critical Kingsbridge. doesn't finance the an those at for against them know, vertical. majority. lending equipment owned, really it where impact our

so they eligible. are And

And headwind helped a just under of a its growth. a downsize peak see definitely to $XXX and portfolio our to is that has take of that from so that Having cyclicality. down consciously down to tried it million said but portfolio last for that, it's because year, that we can $XXX bit susceptibility some portfolio, million

less quality So with slightly is looking it. government that the higher grow stimulus. we may benefit shrunk a to from borrowers bit team The purposely actively little

year meaningfully the for quite that to So the $XXX year this The put the in the is million, not grow. it's we the above back $XXX see an budget but million team ended forth to opportunity there has with.

take we raising. on spread there, And And of help that we create government's the and looking that again, issue for But team. will it which retail compression, that the borrowers our see some to team. strong a margin, away a there will businesses, of opportunity do sector the for given for because stay ABL of to always transition, see an from to good It but higher-quality think money. do So I headwinds helped structural not portfolio albeit we'll suit particularly you're in some go that opportunities, headwind grow bit in team to the has little stimulus the companies has all that's access been of again have faces. a that

roughly retail the Our we moment but portfolio capital liquid where quickly, across of working a-third very churns ABL, at assets. have is it

private lending, equity for there. where owned And both venture -- in are in date businesses, and see opportunity qualify both seen not life have generally stimulus or they segments. to we increased and So do cash good clearly, these we still capital activity government lender science flow

Mickey Schleien

I that's a programs balance sheets like helpful. not very really, your write all liquidity place year the ability to ago. of you been about concerned that started private sounds it and detail Bruce. that, in have given for on that But really Thank appreciate and the you're checks. the borrowers' Bruce, equity about

Looking you borrower year, about out concerns any liquidity? into have this do

Bruce Spohler

recurring other to where And saw into repaid flow getting where care locked We've revenues have that of We deferred loans the into year down. or visits. and in all were we health we businesses surgeries get seen really we're don't on in seen businesses the particularly people our were as zero many definitely elective back par better health actually we because able QX, financial health services, earlier our we as summer sectors at had real performance care, business, into rebound operating as the in were got because cash to we lending software. cases in care particularly these

our but if think the good as investments. you're not about you're for to quality to heck after money So bad, segments put owner going it, support sure going your you're

anything substantial get sure adoption. burning that make those has paying been because quick to The liquidity, put very seen sponsors have But little very our companies. our liquidity have investments, if down community of portfolio at they true to our the same And is as life in science We cash commercial it loans still are supportive they VC are up. to those need for business. of

Mickey Schleien

I balance understand, about your the my question and is side last thank sheet. of for that. right-hand Bruce,

You have of unsecured notes. a variety

are been that tremendous you your reduce facility year looking and the unsecured some debt to also there's refinance that Are of credit Some paper. for and potentially kind next balance you of demand of outstanding? due them have

Michael Gross

I the we're margin is think, our look, and balance constantly we at recognize that favorable. really looking obviously sheet

unsecured should So keep unsecured And at. at to some in debt We're big think this fans expect put during it's something stack. our debt and point sheet. balance I that refinancing we for our potentially looking on year we you adding having of place

Mickey Schleien

Those questions this Michael. are Thank that. morning. appreciate all I you, my

Michael Gross

Thank you, Mickey.

Bruce Spohler

Mickey. Thanks,

Mickey Schleien

Thanks.

Operator

next question Casey Alexander Compass your from And with comes Point.

Casey Alexander

the really that the Am Crystal dividend pay. run toggle and go-forward question, million the million $XX kind is your $X together? you a of rate just taken of and This dividends a and upon of that I quarter somewhere on thinking they between maintenance control be in right based comments Kingsbridge Hi. should

Bruce Spohler

let into So, components. take just me those in

evenly a that kind should think there of quarters a early relatively been we Eddy XX%, distributed have steady closer We've you distributed. few – through million three fourth a quarter It but to consistent. for income I of days, is year. although would be $XX business. years is this throughout year's the targeted now. great Kingsbridge a tell one obviously question. number equally lender pretty for Kingsbridge the I is XX% being the Dividend with very

a think will be predictable I rather So dividend. that

historically, fees fees. little of assets more Crystal As volatility or because bit churn short you prepayment quarter-to-quarter a being the duration. had High origination of nature either their has know, generating

$X had in although million we $X earned example quarter, million. fourth For the they distributed

million try roughly quarter, we their traction. a So growth that to see or at $X significant smooth out we dividend significant until

Michael Gross

the Bruce one just Kingsbridge the income of clarification, on expect and a loan a point that of of is combination dividends seen. have out $XX And million we the year interest the we

just So not - it's

Casey Alexander

it I interest That's million income $X.X comes say was to Right. is that of from what loan. going when the just

Michael Gross

Right. Correct. Correct.

Casey Alexander

dividend just suggested. you're the of there Bruce cadence a So kind $XX.X million expecting at that

Michael Gross

Correct. Yes.

Bruce Spohler

Quarterly interest, yes.

Casey Alexander

Yeah.

you. Okay. question. Great. my That was Thank

Michael Gross

you. Thank

Bruce Spohler

Thank you, Casey.

Operator

Raymond Your next question comes Dodd from James. Robert with

Robert Dodd

your year questions. I but fourth the same When reserves And the mean Crystal lease XX% at grew guess dividend -- at cutting mean funnily are lot The was Crystal the obviously, trimming to on-balance look on X. that -- had expectations Crystal? much But can want it at obviously drive might I obviously what's X.X Crystal. yes was of or obviously X. we the the which about What back how stays year-over-year really of whatever at goes I look quarter, it there? optimism flow I dividend income a I to looks that book in at of of cash can this enough, growth year expectations portfolio grow if mean sheet full if But good. your the ago stay I down was just the kind book kind from sheet balance increase. see loan back we book ops to that could a here, a we where at Because get and to at on from or book, so the it net

Bruce Spohler

-- the then allows co-invest pools of the goes to up what scale hold increased how of a across strategies pro Robert, couple or platform. of their the these of most on We've share over the to would and of a take this each and talked market ability we've with I diversified private So that is larger rata go across lot And and years sizes strategy -- the scale last the basically platforms and to all capital strategies. their basis. say take

end. doing $XX $XX of And million been to $XXX Most to average Crystal had $XX in has size, after their for million example, million, size at high on a the bidding things years million of million, the they so an book going that up $XXX million loans weren't $XX of ago. couple loan

for seeing is So them. what that we're is same It's growth with a life science. for driver that

life across for we're business borrowers. size Leaving grow. to at $XXX has thing, taking a But aside, flow speak Solar again, all allowed $XXX size and But to little with share book the on for hold science taking that COVID has the we prospective the that gone down lion's importantly bit. business that. up the loan same were platform the at million where cash routinely average million, seen You've in the them an scale of also investment

an that think book. I its to Crystal dynamic opportunity So for that that's creates a grow

extra sheet up addition at some as well I'm excise put balance In -- they sorry our some on Solar.

where sheet. the well both sheet, deals on on So see balance their parent balance company's as you we as do have some

to I think months. in stick the their of they've knitting couple that's not regrow only some for last XXs to active larger Crystal but on these the and been be is that the to XXs So going opportunity do to in of to deals

you I Rob have another think -- didn't my Robert? opportunity. but

Robert Dodd

Sorry my my I smacked headphones. --

Bruce Spohler

you to an dividend for opportunity it, just also didn't one there's I get other as but NEF is I we Robert ask increase point make well. would its XXXX -- deeper into as think

so another And that's on growth. potential that driver NII

Robert Dodd

income offset, a on sources fees appreciate yield kind life spreads does I can verticals I other and on XX% there's other LIBOR there angle. IRR one has a you like which income. to a obviously get get and exit of Q&A is, If and where degree earlier that for you mean in can fee been or fees right? where it. another verticals sciences, Got on felt obviously the of your of the which because pressure that's potential can X% comments make of

So what verticals your other various that in a kind compressed avenues enhancement with to yield get are there of environment? spread

Michael Gross

different a on couple ways. really you the One if science by impacted So businesses is, me a let as that answer hit nail look our you life of is at not head no relation be is, all Nations has of fixed rate which Kingsbridge Equipment really because is is. used Leasing Neither LIBOR what those LIBOR. where compression called Neither leases. are to spread

have XX do concern truly big -- LIBOR-based there impacted as business well. and but make fees to Crystal returns over XX%. they not the fees a And XX with are the by above issue you've today does the why that is a get So of chunk raised. our amortized we months be because to on period duration loans consistently quicker that's it up tends the

talking it's is there's most floating penalties the flow loans. rate these So very you're and points fees on really limited it difficult one impacted And the prepayment to by that business cash two is the what to are rarely about. there because point

Robert Dodd

you. Thank it. Got

Operator

line JPMorgan. question the next comes from of Melissa your Wedel And with

Melissa Wedel

Good morning, guys.

Bruce Spohler

Hi, Melissa.

Melissa Wedel

of questions. couple follow-ups. my taking for Thanks A

loan might addressed. that my put new have yields a on when of, But, of I questions M&A to percent the on higher the, finer deals cash some you from guess, you to about are point it the just comparing been have look flow yield lot I opportunities X-ish think result the a of -- on already thinking in sort activity currently portfolio? you how investments X% at high

Bruce Spohler

Yes.

drawn be are will which think larger. upper fund EBITDA businesses that Melissa. great to an generally a today larger again takes be EBITDA loan where to our We're mid underwriting I it's even market going question -- acquisition, these

to So fund we're that million are EBITDA million acquisitions. looking additional at to $XX $XXX companies on adding

in So are always first know feel terms like of you capital is we're risk. our that the better equation looking us the as businesses seeing for We now. the right risk about for

yield. spread a think in a a targeting perspective minimum of We're X%. I from

As early know, well. they things you execute get if repaid these

And so the early so income Xs. repaid close mid of accelerating some to fee

bit compression a little So not material. of but

Melissa Wedel

context the of, you sort next actually that the in and repayment but on environment, XXXX? around and in I term also you Okay. Got what sort I course my activity was the guys of of, throughout, it. of which touched guess, repayment expecting appreciate follow-up near are terms

Bruce Spohler

we don't their as expect we're But expecting as see that's companies see get the some the cash I right-size science thematically, you into life repays to accelerate. But recovery. market near-term. streams late in the or if that more near-term. the the I much XXXX to we and would deeper not think businesses So into not clearly sure start flow in get you economic I'm But more think will in XXXX.

Melissa Wedel

Thank Great. so you much.

Bruce Spohler

you, Melissa. Thank

Operator

Finian next with line Fargo. from the of O'Shea Wells question your comes And

Jordan Lawson

least Jordan O'Shea. in balance at to Finian this a questions wanted of asked Lawson I fund see sheet. answered, and at maybe basic calling for Most just actually my to on sheet that's been a but company was your Hi. have Good portfolio quarter look morning. This balance is I new

balance give was gave a I basically in. think will on deciding Crystal that you're versus on of putting or this some maybe sheet how and wondering into loan if part participate the could Crystal? I is that loan there Solar's you you us also half color carrying loan between

Bruce Spohler

Yes.

we're sheet Crystal on position. maintaining diversification. a obviously, hold we're very type touched in stepping back balance of balance our Typically, focused sheet the our of I on X% all As --

the up company. their first of so to and may And Solar on funds, have private parent either balance take a sheet Crystal but to loan excess our some

take again Crystal still diversification we'll X% basis some what Solar. from It's own They -- diversification holding hold have a the we is credit perspective. X.X% consolidated excess at their a management just of which requirements level whole the generally so parent from facility sheet has for our what in with sort have balance apart And -- consolidated company. our separate and is of that position on keep

Jordan Lawson

Okay. one it like because commitment there. Cool. was has That it unfunded looks an interesting just

very I into So didn't That's Thank you. what know helpful. it. was

Bruce Spohler

you. Thank

Operator

now the like Gross, turn Mr. remarks. Co-CEO conference to over back to closing would I Michael for

Michael Gross

is couple willing for one-on-one who morning and you you you of what we're participating your now are talk of more there in this than called insightful in follow-up And thank are your We call to questions. Corp. if always to all time those of SLR as questions. a And minutes. for we'll Bye-bye. Thank Senior more Investment you.

Operator

you call. gentlemen, this today's and does for conference conclude participation. Thank your Ladies

You may now your disconnect lines.

SLR Investment (SLRC) 26 Feb 212020 Q4 Earnings call transcript