Sunrise Realty Trust, Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 Solar Senior Capital Ltd. Earnings Conference Call. . I would now like to hand the conference over to your speaker today, Mr. Michael Gross, Chairman and Co-CEO. Thank you. Please go ahead.

[Michael Gross:]

Thank you and good morning. Welcome to Solar Senior Capital Ltd.'s earnings call for the fiscal year ended December 31, 2020. As we will discuss on this call, last night we announced the rebranding of the Solar platform to SLR. Effective today with SUNS changes name to SLR Senior Investment Corp. and SUNS Advisor changes name to SLR Capital Partners. The company's ticker will remain SUNS. I'm joined here today by Bruce Spohler, our Co-Chief Executive Officer; and Rich Peteka, our Chief Financial Officer. Rich, would you please start off by covering the webcast and forward-looking statements?

[Richard Peteka:]

Sure. Of course, Michael. Thank you. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Senior Investment Corp. and that any unauthorized broadcast in any form are strictly prohibited. This conference call is being webcast from the Investors tab on our website at www.slrseniorinvestmentcorp.com. Audio replays of this call will be made available later today as disclosed in our press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking information. Statements made in today's conference call and webcast may constitute forward-looking statements, which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance, financial condition, or results and involve a number of risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our portfolio companies, and the global economy. Additionally, past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC. SLR Senior Investment Corp. undertakes no duty to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our new website or call us at 212-993-1670. At this time, I'd like to turn the call back to our Co-Chief Executive Officer, Michael Gross.

[Michael Gross:]

Thank you, Rich. I'm pleased to report that SLR Senior Investment Corp.'s portfolio remained 100% performing throughout the entire year. The strong performance supports our investment thesis that asset-based loans in niche markets and first lien cash flow loans to upper middle market companies provide meaningful downside protection during challenging economic periods. Our portfolio company's resilient business models, strong management teams and financial sponsors have enabled them to successfully weather the crisis. We attribute our healthy portfolio to our disciplined underwriting, the deep experience of our investment teams and SUNS' diversified platform across cash flow, asset-based lending, and life science verticals. We are pleased with SUNS' performance during 2020 and are extremely grateful to our employees, clients, lenders, and service providers for their tireless efforts despite the stress and personal hardship this pandemic has caused.

[Richard Peteka:]

Thank you, Michael. SUNS' net asset value at December 31 was $255.4 million or $15.91 per share. This compares to a net asset value of $253.4 million or $15.79 per share at September 30, 2020. SUNS' balance sheet investment portfolio at December 31, 2020, at a fair market value of $340.8 million in 44 portfolio companies operating in 19 industries compared to a fair market value of $389.5 million in 44 portfolio companies operating in 19 industries at September 30, 2020. Turning to our funding profile and leverage. SUNS continues to have a very strong balance sheet, which we believe is serving us well in the current downturn. At December 31, 2020, SUNS had $90.4 million of debt outstanding and net leverage of only 0.34x debt-to-equity, down from 0.52x in the prior quarter. SUNS also had no near-term debt maturities, having already termed out both its primary $225 million credit facility and the secondary $75 million credit facility to 2023 and 2024 respectively.

[Bruce Spohler:]

Thank you, Rich. First and foremost, SUNS' portfolio has remained 100% performing throughout the current economic slowdown and the early stages of the recovery. Our performance is a testament to the financial sponsors, management teams, and portfolio companies that we've invested in. In addition, SUNS' performance supports our underwriting thesis of minimizing the risk of loss by investing at the top of the capital structure in first lien cash flow loans to noncyclical industries and allocating a significant portion of our portfolio to collateralize loans through our specialty finance lending verticals.

[Michael Gross:]

Thank you, Bruce. At this time, let me offer a few concluding remarks. From inception, we have endeavored to make the right decisions to preserve and enhance long-term shareholder value. Our priority has always been to create and maintain a portfolio that can generate steady income for our shareholders and protect our capital. Throughout 2020, we remain disciplined in the face of significant spread compression, higher leverage and loose structures, all of which have elevated the risk of principal loss in middle-market leveraged loans. We believe by building a defensive portfolio across cash flow and specialty finance first lien senior secured loans as well as operating well under our target fund leverage and preserving liquidity, we took the appropriate steps to navigate successfully through a difficult 2020. Throughout, we have maintained alignment through our ownership of SUNS stock alongside our fellow shareholders. With over $440 million of available capital and a strong foundation given our defensive comprehensive portfolio and relatively low leverage, we believe the company is positioned to originate attractive new investments. Our patience and willingness to be underinvested, provides us with a foundation to be opportunistic. With over $7.5 billion of investable capital across the platform, SLR's scale will enable SUNS to participate in high volume of larger transactions throughout 2021, accelerating the growth of its portfolio. Given the magnitude of the economic disruption and expected uneven recovery, we believe that the improved investment opportunity set will persist for a number of quarters as companies require financing solutions for liquidity, working capital and growth initiatives. Sponsor activity is definitely on the upswing and the PE industry is armed with significant dry powder. We believe SUNS is in a great position to capitalize on this opportunity. Additionally, we look forward to continuing to execute our commercial finance strategy now under one unified brand, SLR. We hope and wish that all of you are in good health and would like to thank you for your time today and your support of your company. Operator, if there's any questions, please open up the line.

[Operator:]

[Michael Gross:]

So, operator, looks like we have no questions. So in conclusion, I'd just like to thank everybody for their attention this morning. And of course, if people do have questions, please feel free to reach out to us directly. Take care, everybody.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.