SUNS - Earnings call transcript Q4 2021 | Sunrise Realty Trust, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Q4 2021 SLR Senior Investment Corp. 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. advised conference be being Please Instructions] that is today's recorded. [Operator to I Mr. conference would Instructions] hand now today, [Operator speaker like the your over to Gross, and Michael Chairman Co-CEO. floor yours. the Sir, is

Michael Gross

much covering Officer. the fiscal Peteka, Officer; by ended SLR start very webcast Thank today Welcome joined XXXX. and Rich, our year forward-looking statements? please good our by off earnings for Corp.'s Richard Bruce December to Spohler, you would and call you Senior and the I'm Investment Financial here XXst, Chief morning. Executive Co-Chief

Richard Peteka

or results. our no Of impacts to today's the This uncertainties, events To indicative filings, course. unauthorized so not Actual SLR Senior the to on or visit with and share and associated Co-CEO, among statements, XXX-XXX-XXXX. forward-looking please which Comments www.slrseniorinvestmentcorp.com. and Investors back SEC information dividends and information. time, on their dividends any Investment guarantee forward-looking disclosures future the are the things, distributions with to I'd our timing investors, our like from are made likelihood condition Past Investment unless being the statements merger, to of be current relate website. our include respect reflecting future forward. statements corporate thereof, which may future interest SLR today's those this call conference today's realize us involve and the and update with tab note Thanks timing time-to-time filings and benefits everyone latest the financial attention on call this future operating Michael. our as of reminder, any made Senior disclosed Senior Investors call call in their will I'd our a information. views payment on like of Board amount our The of webcast prohibited. the obtain like release. the constitute the do risks website media website statements Please purchase forward-looking Chairman note may funds. or to Investment of to our an determined amount later number duty solicitation any amount material encourages of that synergies COVID-XX. differ a nothing the of other offer merger, they call by including recorded. broadcast to others of or to I results is forward-looking to undertakes webcast the our and results of to being remind will call to or in that the section closing, described result condition. past replay Senior our results be Investment the the law. performance of that are the materially going expected merger performance anticipated that a in this the release of today uses SEC. SLR dividends distributions and conference at savings performance the and call are to, property and should any Corp. respective ability financial SLR not SLR review providing would of of payment, note and our that to timing by or Corp.'s copies Michael and form from of including as performance, These also in offer and an or a webcast they required press as others a your announce future number press Corp. at financial the future any a available not from strictly At specifically of the is and of Please guarantees Statements in of are Directors. A turn call company constitutes factors, in sell website Gross. to Investors any Corp. Also customary call

Michael Gross

SLR Thank fundamentals. portfolio Corp.'s you and very benefited much, expansion Rich. fourth Senior quarter strong results Investment from both

a a its record and pace. SUNS was to stimulus is $X.XX activity $XXX U.S. a to at share equity Elevated for continued record continues at the investments, private For per asset for for activity, the grow related the favorable December opportunity across cash steady per the M&A merger government presented XX, million a net year, measures economy fourth SUNS income of quarter the Throughout for occur taper $X.XX. One-time investment capital per to share. value verticals. expenses company. rate the deal sponsor-driven quarter, NII by investment share Net XXXX originated approximately new $XX.XX the and and increasing backdrop ended set ABL deploy was of which reduced and flow

capital. as into end was transactions, our our to we lien of large approximately XX.X% loans positioned XXXX. to Thus by an future and invested quarter, seen SUNS market middle our of SLR's no debt-to-equity lows. loan XX, one which During first debt-to-equity the scale effects fair supply year-end, SUNS of which of portfolio, cash flow investment on At new in upper progress and SUNS' the additional quality quarters. our verticals. to of scale the $XX subsidiaries platform. portfolio value, believe were originated strong, SUNS Many our the protect account net the X.XX consisted of with have on best SLR's comprehensive of portfolio consequences our in the fourth companies, sectors, only Ukraine inflation we to large portfolio of and companies XX% non-accrual. December allows loans defensive X.XX over from expect investments million, resulting committed are times far, times of Due $XX made million investment which company's subsidiaries rising finance been to At the at in participate at have on the middle Overall, its significant was investments fund disruptions focus was of which tied are portfolio in in takes possible in compared pandemic increase operations U.S. its The primarily to chain companies represents the economic Russian net from economy. remains we market on impact and credit upper our rebuilding muted. invasion specialty portfolio

over closely support to available of the however, economic of $XXX monitoring future are, this million crisis. growth. capital SUNS's evolving We impacts earnings

our has very is across attractive. our business and pipeline climate Importantly, the economic verticals improved considerably

in We lien continue as investment expect growth well from coming to first asset based portfolio quarters as the cash opportunities. flow,

entered share amount SUNS which growth sense of an to per have strategic SLRC both the BDC, as on for As We shareholders makes currently transaction December, SUNS of the number In for the we create SUNS for few and The Directors with will stockholders receiving received special independent a announced a BDCs, and in only unanimously cash reasons, recommendation the stockholder of SLRC approval a annum. long-term company, shareholders. conditions. approved merger, committees SUNS SLRC in are believe an its distributions highlight merge the to and paid distributions transaction. of now. of I'll consisting of opportunities the closing with agreement the immediate in increase Board $X.XX dividend shareholders per and surviving sister directors, have customary SUNS company value the

merger is in in several combined the to XX, and per each the equate capitalization total gives enhance Based per of based and of exchange share access annum trading SLRC, share and company's larger liquidity, stockholder. of of SUNS on garner greater into the XXXX markets. distributions is estimated market additional provide ratio benefits. company investor a net investments $X.X assets, cash have on the approximately to debt exchanged For expected it will greater $X.X cash current for institutional research equity that provide announcement, coverage $X.XX SUNS interest and provided the should The company distributions exchanging billion which would that shares of December SLRC's scale combined to billion

Additionally, assets the larger SUNS opportunities opportunity reduction base assets. commercial expand that SLR permanent place. profit adviser The to greater of purchases. closing, fee investment of Upon increase point as fee as from will from additional the to basis well X.XX% on annual X% in voluntary in management has SLRC include -- asset for and on the finance diversification gross SLRC, to both management will remain X.X% XXX% SLRC's and net the assets exceed Partners, -- scale investments XX a Capital the down base SLR contractual for gross to to portfolio total set step agreed

savings, incentive expected investment growth. higher a While fees base higher time, to yielding assets. SUNS' significantly drive will and invest have we company fees, will to cost opportunity savings pay debt and pay resulting combined exposure reduced of net higher a fee Over a base they expect management and management larger should could that more income financing in efficient stockholders from interest combination

on and Importantly, would should able allow base it or faster a fourth per CFO, basis the a turn net anticipated grow combined quarter to take to potentially Rich company SLRC that this SUNS to back is income our net scale and to highlights. share. over Peteka, investment At the capital income be to through either generate larger higher I'll than call the time, standalone financial you investment

Richard Peteka

you, in of had SLR XX share asset to market $XX.XX to million XX asset $XXX.X Thank at investment per million balance a of market industries Michael. share. portfolio portfolio Senior XX, $XX.XX in Corp.'s in industries Senior's million XX. XXXX This million XX value portfolio companies net companies sheet $XXX.X value or at September per fair XX $XXX.X a value at XXXX. value of December compared in compares was XX, XX Investment SLR fair $XXX.X September operating December a operating at or net

$XX the In of December commitments, as of has revolvers XXXX, XXth, approximately excluding loan million. unfunded company addition,

million of to was in SLR outstanding, Turning to and of up the and facilities debt SLR At net Credit, as December of fixed September XXst, of Senior $XXX XXXX. ratio December SUNS fund net non-recourse times X.X% SUNS of approximately SUNS' a times, limits. XXXX, has funding million $XXX.X X.XX portfolio including XXXX credit At XX% approximately debt unsecured growth ABL the total borrowing its rate with at XX% X.XX Healthcare XXth, notes. subject at Business XXst, debt debt-to-equity base form profile December XXst, SLR to had and from of leverage. When

losses $X.X the the ended XXth, note of were ended Accordingly, XXXX reminder, million December realized totaled the average the of perspective, net compared three XXXX. a investment per the investment million December X.X -- one-time a quarter the share. Expenses compared from and to months approximately would XXXX. million XXst, to XXXX the three realized quarter net net This resulting Below XXXX assets $X.X a September December months income increase X.XX resulting ended operations From unrealized as three for ended merger-related SLR compares from for December share the ended a Senior's $X.XX income XXX,XXX expenses fiscal gross is P&L or quarter million XXX for net target losses leverage $X.X net Senior $X.X December line, share months to for debt-to-equity. fourth operations for As million SLR the XXXX the $X.X XXXX. XXst, net three quarter months for XXth, three of and fourth September per or XXst, income million three ended average included to had $X.XX unrealized SLR million or for was share Senior Net times per months net for ended Expenses $X.XX September $X.X ended that $X.X September merger-related months XXXX. months expenses. $X.X compared per or XXst, for average September for the reduced XXth. in the XXst, million of of ended months million the net per per XXth, compared for $X.X increase also three share million ratio $X.XX current in ended assets times had $X.XX to average the $X.X of three by for share to -- I XXth. investment

Bruce combined XXXX payable April been Board this of proposed Lastly, monthly per on our rather company's Spohler. record be historic for distribution has $X.XX XXXX declared Co-CEO, Investment of Directors declaring call the over the Corp. the practice closing time, stockholders quarterly Xst, March Board XXXX. Upon of distribution XXth, a of March share like will at Directors on our to the merger, to monthly SLR of I'd turn to At than

Bruce Spohler

Thank you, Rich.

representing XX% of industry The $XXX year-end, asset The repayments us one million totaled lending Across invested was Including the for focus borrowers Approximately to and full SUNS cash our the risk million the XX% million second and year-end, of in the $XXX were of our flow flow of one the average At across was investment XXX% for minimis science life to continue issuer comprehensive lines, SUNS' in four or to middle based XXX risk to at of portfolio, commercial $X continue as originations was provider the exposures allocated act strategies XX% four $XX portfolio asset market X.X% yields of rating SUNS' businesses. were growth. strategies, equity. $XX remained and At our on scale, asset fourth solutions portfolio. the portfolio. our the exposure XXXX risk. We approximately was multiple yield totaled cash on loan XX% enables It the to encompassing to was and based than attractive de able diversified services, financial remaining business Originations loans. portfolio invested combination across a first providers per and of of the maintain with consisted and asset verticals, lien of weighted rating largest companies these portfolio quarter avenues less first we've X.X%. X.X activity level lien least offers be to lien to at By loans close million. our average having insurance. highly year-end. healthcare At both in base average the investment lending and no million. been portfolio industries. expanding year amount weighted with diversified, amount XXX portfolio level year-end, finance

XXXX. $XX these its support covenants. loan further that should Additionally, credits continue to million with growth establish to delayed We commitments draw grow SUNS has for term opportunity delayed draw financial prudent unfunded existing and offer into of which year-end, at believe transactions SUNS investment

on provide with I'll me let cash an verticals. flow. of investment each start Now, update our

XX% segment just of portfolio. was $XXX comprehensive Our flow portfolio in cash the approximately over million or

We across have invested over with $X of an average million. just borrowers, investment XX

our mid-market. finance flow our strong The As yield I mentioned, a EBITDA over Average XXX% borrowers upper million, first the was cash of investments. this weighted in $XXX portfolio is companies reflecting portfolio for for average to was larger lien X.X%. preference this just over

fourth flow repayments the quarter, million. cash originated we over just just million During $XX had and of of loans $XX over

For the sponsor investments. that picked volumes of higher cash We're up $XXX full of encouraged year, with we in significantly flow million originated XXXX, activity M&A.

continue in year, which We mid-market additional upper invest expect to to this we will companies. that believe cash momentum resilient attractive, flow provide opportunities

lending Now, let our businesses. me turn based to asset

and who traditional lend in typically have making As a loans financing. reminder, access to These more companies companies commercial that receivable. bank small portfolio SUNS finance to specialize accounts limited asset-backed U.S. mid-sized by collateralized first owns two lien, companies,

these Credit's Last Credit's over portfolio XX% just Credit. million has asset The integration driven quarter. rates The at factoring investment of capabilities. was just on utilization or our digital The $XXX new remains Credit's was existing yield borrowers for Business towards gone fourth strengthened have pipeline pre-COVID with investment proving a the to acquired platform. both FastPay with as first year-end, portfolio origination facilities, media back is XXX extremely Credit an portfolio over weighted have rates consisted levels. well by on FastPay, to strong increase Credit's Business comprehensive Utilization summer, $X average as Business opportunities. Business of million. Business continued Business of improved over facilities capital XX% working of average well, The of

$X.XX fourth a a Business cash of quarter. which from XX% Credit up the quarter, paid the dividend For SUNS represented third to million, increase

total XX% of performing portfolio weighted Now to payment fourth let was The $X.X was just was an asset million. of the during no XX The loans me It under Healthcare of defaults borrowers our approximately XX% COVID. level with commencement quarter. touch of year-end, on average remains representing investment funded since had at million and the ABL. $XX at portfolio XXX% comprised average SUNS. has yield Portfolio

fourth investments. and balances new this funded of During they to of the million the which over Credit, funded $XX Similar programs, on stimulus $XX facilities. to just ABL loans, just our their Healthcare year significantly funded quarter, million for reduce under borrowers Business by impacted was enable

borrowers pre-COVID to off, programs to begun down increased and at draw outstandings our have under these ABL tapered levels. As our have has facilities Healthcare

with dividend the the the prior cash of consistent paid For a $XXX,XXX, quarter, fourth company quarter.

an me The weighted year-end, cost, At the vertical. million nine on yield life and let different science our across which fees portfolio provide Finally, was XX% warrants. totaled this success approximately update excludes at $XX average on portfolio borrowers.

loans. loans increase, portfolio, of science gross more year. Overall, we Capital enables provide our SUNS is expect to activity advantage well-positioned investment SUNS income SUNS the finance more year. which in powder our science we an believe diversified to they continues larger, life dry life SUNS platform and While and take established robust businesses both to origination set to for represent benefit invest structured across commercial cash each significant will opportunity improving that set X% and flow this opportunity additional of The solutions, economy SLR Partners' of generated verticals. of asset through a XX% based

in expect XXXX. to to portfolio SUNS Given grow continue pipeline, our we this current

to me Michael. Now, call back turn let the

Michael Gross

seeks been construct a while for capital. has portfolio shareholders, protecting you, our generate income Thank priority Bruce. Since that steady our inception, to to always

in disciplined which and have risk lending the cash full With extended loose leverage structures, rebound an over the tight the environment, period. of market middle increased swing, pricing flow economic face of in elevated remain and a all we rebuild in

we As positioned cash lien across a and loans first by manage specialty risk downside preserve and senior flow portfolio defensively, diversifying result, have liquidity. finance secured our SUNS to

million supportive middle our leverage fund positioned SUNS' of strong investment lending and portfolio the direct the our opportunities. low a the and and Elevated backdrop verticals. With all-time lenders capitalize economy capital attractive levels financial to in the market continue commercial of portfolio increase working deploying of on is actively dry broader we're alternative seeing deal to highs, businesses growth portfolio grow investment business on their the significant capital is level of the seek evaluate finance platforms. multiples a sponsors continue $XXX finance SUNS' available and defensive leverage, niche look capitalize and given believe and attractive While recovery record out capital equity to investment a remain of continue across in tuck-in continue we levels the we businesses, strong to economic near should initiatives. for opportunities companies foundation specialty in and as our of midst set opportunities activity powder to smaller over to opportunities finance

expected our the SUNS of As shareholder strong portfolios. our to scale, value healthy and Both comments, and two from we for share. of in merge and both integration companies of the that the ability merger. excellent through that believe increase which and given bodes the Co-CEOs the believe I the ease in credit balance greater quality, deliver merger of companies mentioned in portfolio investment of is focus sheets believe today, We directors have resulting adviser's I and to this increased their knowledge investment business net independent per the shape well overlap SLRC time opportune benefits will synergies is and now and opening proposed the Bruce as income capital preservation

proxy encourage submit for questions. to We time, site, for Once the at to the provided be by the control to shareholders. www.proxyvote.com typing the merger. details your our Additional that voting your the like mailed open merger line for found Operator, support support. vote. the we'd the We going and materials you can of on merger you to by in issuance can also number was in up appreciate the this

Michael Gross

Bye-bye. Well, and all we appreciate this your morning, a of great you day. participated have who time,

Operator

conference Thank all today's concludes call. participating. you for This

pleasant may day. You and now a disconnect have

Sunrise Realty Trust (SUNS) 2 Mar 222021 Q4 Earnings call transcript