SLR Investment (US:SLRC)2019-11-05 22:13Financial Data and Key Metrics Changes - As of September 30, 2019, the company's net asset value was $21.90 per share, a slight decrease from $21.98 per share at June 30, 2019 [12] - The net investment income for the third quarter was $18.4 million or $0.44 per share, unchanged from the previous quarter [14] - The company reported a net increase in net assets resulting from operations of $13.7 million or $0.32 per share for the third quarter, compared to an increase of $19.6 million or $0.46 per share for the second quarter [15] Business Line Data and Key Metrics Changes - The company originated $256 million in new investments during the third quarter, with 86% in specialty finance verticals [8] - Repayments totaled $196 million, resulting in $60 million of net portfolio growth [22] - The weighted average yield of the comprehensive portfolio was approximately 10.7% at fair value [9] Market Data and Key Metrics Changes - The company faced a competitive cash flow lending environment due to increased capital inflows to private credit funds and reduced middle-market transaction volumes [7] - Approximately 98.4% of the portfolio consisted of senior secured loans, with 89% being first lien loans [20] Company Strategy and Development Direction - The company aims to maintain discipline in cash flow lending while focusing on specialty finance businesses that provide strong collateral coverage [8] - The strategy includes a gradual increase in portfolio leverage while remaining selective in cash flow investments [10][36] - The company is positioned to capitalize on compelling opportunities arising from market dislocations [34] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic environment has changed significantly, with recession concerns and uncertainties impacting the market [6] - The company remains highly selective in cash flow investing while maintaining a preference for specialty finance loans [38] - Management expressed confidence in the portfolio's resilience and ability to deliver attractive returns for shareholders [39] Other Important Information - The company declared a Q4 2019 distribution of $0.41 per share, payable on January 3, 2020 [16] - The weighted average investment risk rating of the portfolio was 1.9, indicating strong credit quality [18] Q&A Session Summary Question: Implications of IHS on the portfolio - Management indicated that IHS's situation is company-specific and does not reflect broader issues within the healthcare investments [45] Question: Current leverage rate and opportunities - The current leverage is 0.61, with a target range of 0.9 to 1.25, and management sees potential for organic growth to reach the lower end of the target [49][54] Question: Repeat lending opportunities - Most repeat opportunities are found in the cash flow business, particularly as sponsors add on to existing facilities [51] Question: Impact of cash flow lending strategy on sponsor relationships - Management believes that maintaining a selective approach does not negatively impact relationships with sponsors, who continue to engage based on strong track records [72] Question: Trends in cash flow lending market - Management noted an increase in inquiries from sponsors seeking more structured deals, indicating a potential shift in the market [78]