Solar Capital reported for Q2-11 Net Investment Income of $21.368 million [$0.5862/share]. The Net Increase in Net Assets Resulting from Operations was $12.384 million [$0.3398/share]. With total investment income of $35.283 million on a portfolio of $1,004.495 million - the quarterly yield was 3.51% and the annualized yield [quarterly yield times 4] was 14.05%. SLRC's net asset value per share was $23.22. As of 06-30-11 SLRC had investments in securities of 37 portfolio companies with approximately $303.4 million [30%] in senior secured, $608.2 million [61%] in subordinated debt and $92.9 million [9%] in equity. The weighted average yield on income producing investments was approximately 14.0% at fair value. The ratio of 'expenses without incentive fees' to average net assets was 4.07% while the ratio of 'incentive fees' to average net assets was 1.19% - resulting in the ratio of 'total expenses' to average net assets of 5.26% [for the six month period ending 6-31-11]. NII to average net assets was 10.92%. Portfolio turnover rate was 22.05%. With a credit facility of $400.356 million [with a base rate plus 3.25% and a commitment fee on unused balances is 0.375%]; and a term loan [at base rate plus 3.25%] of $35.000 million [total debt of $435.356 million] and shares outstanding of 36.448 million, the Debt/share was $11.9445 and the Debt/NAV ratio was 51.44%. With borrowed funds of $435.356 million and interest expenses of $1.895 million, the quarterly cost of those funds was 0.435% and the annualized cost was 1.74%. As of 6-31-11, there were no investments on non-accrual status.SLRC has a forward dividend of $0.60/shareTotal Investment Income $35.283 million [divided by 36.448 million average shares = $0.9680]Interest Expenses = - $1.895 million [- $0.0520/share]Total Investment Expenses = - $13.915 million [- $0.3818/share]Net Investment Income = $21.368 million [$0.5862/share]Realized gain (loss) on investments = - $2.810 million [- $0.0771/share]Realized Earnings = $18.558 million [$0.5092/share]Unrealized appreciation = - $6.174 million [- $0.1694/share]Net Increase in Net Assets Resulting from Operations = $12.384 million [$0.3398/share]Investments at fair value = $1,004.495 millionCash and cash equivalents = $374.450 millionConference Call Notes: SLRC's portfolio is valued at 95.5% of cost. Q2 NII benefited from some [kind of regularly occurring] one time events from structuring fees [re-financings and pre-payment premiums]. SLRC had investments in 37 companies across 24 industries. Credit quality improved at all but one portfolio company [Direct Buy home and office furnishings - and housing doldrums have hurt this company, but they are current on their loans]. Q2 originations had an average yield of 12% and a leverage to EBITDA at 3x. SLRC anticipates higher M&A deal flow and lower redemptions going forward. SLRC also manages 'Solar Senior Capital' - ticker SUNS - market cap $167 million. Q2-11 showed a move to more senior debt. SLRC: That was due to more demand for uni-tranche debt producing more supply. The move was opportunity related. RE-cap and re-fi activity was high in first half. Do you expect that to continue? SLRC: Yes - and M&A activity is increasing. Will economic outlook slow that? SLRC: We have not seen that. There are untapped private equity dollars chasing deals. Do you disclose pre-payment penalties? SLRC: No. But we have had some in every quarter. It is a regular part of our business. Spreads appear to be going down. SLRC: We have done lower yielding deals, but at lower risk and better EBITDA ratios. What is your Fixed to floating rate debt ratio? SLRC: It has not changed much. Floating rate is just under 30% of the portfolio. How much of the credit facility is being used? SLRC: $50 million of the credit facility is being 'used'. [The credit facility is completely borrowed at end of quarter and then quickly repaid once the quarter begins.] Interest rate caps were marked to market and produced derivative losses in Q2-11. The markdown during Q2 was related mostly to the valuation of Direct Buy. If yields continue to compress, will you need to lower the dividend. SLRC: Because we are so un-levered, we do not expect a problem. We actually expect to increase the dividend. At what rate? SLRC: We do not talk about that publicly.
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