Item 8. Financial Statements and Supplementary Data
Item 8.
Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Managements Report on Internal Control Over Financial
Reporting
100
Report of Independent Registered Public Accounting Firm
101
Consolidated Statements of Assets and Liabilities as of December
31, 2021 and 2020
104
Consolidated Statements of Operations for the years ended December
31, 2021, 2020 and 2019
105
Consolidated Statements of Changes in Net Assets for the years ended December 31,
2021, 2020 and 2019
106
Consolidated Statements of Cash Flows for the years ended December
31, 2021, 2020 and 2019
107
Consolidated Schedules of Investments as of December
31, 2021 and December 31, 2020
108
Notes to Consolidated Financial Statements
124
99
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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for
performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over financial reporting includes those policies and procedures
that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the consolidated financial statements.
Management performed an assessment of the effectiveness of the Companys internal control over financial reporting as of
December 31, 2021 based upon criteria in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management
determined that the Companys internal control over financial reporting was effective as of December 31, 2021 based on the criteria on Internal Control Integrated Framework (2013) issued by COSO.
The effectiveness of the Companys internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP,
an independent registered public accounting firm, as stated in their report which appears herein.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
SLR Investment Corp.
(formerly, Solar Capital Ltd.):
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of SLR Investment
Corp. (and subsidiaries) (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2021, and
the related notes (collectively, the consolidated financial statements). We also have audited the Companys internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Companys management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
managements report on internal control over financial reporting. Our responsibility is to express an opinion on the Companys consolidated financial statements and an opinion on the Companys internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 and 2020, by correspondence with the custodian, portfolio companies or
agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
101
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Definition and Limitations of Internal Control Over Financial Reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter
communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair value of investments and certain financial liabilities
As described in Notes 2 and 6 to the consolidated financial statements, the Company measures its investments at fair value and has made an
irrevocable election to apply the fair value option of accounting to certain financial liabilities. Investments and certain financial liabilities are valued using a market approach, an income approach, or both approaches, as applicable. In
determining the fair value of investments and financial liabilities whose market quotations are not readily available, the Company makes subjective judgments and estimates using unobservable inputs. As of December 31, 2021, the fair value of
such investments and financial liabilities was $1.7 billion and $150 million, respectively.
We identified the assessment of the
fair value of investments and certain financial liabilities with no readily determinable market value as a critical audit matter. A high degree of auditor judgment was required to assess the Companys fair value assumptions. Specifically,
subjective auditor judgment was required to assess the (1) credit risk associated with the borrower and its ability to make interest and principal payments for debt investments, (2) selection of comparable companies and the financial
performance multiples of such comparable companies used in the market approach for equity investments and (3) market yields of comparable companies of similar credit risk used in the income approach for financial liabilities. Additionally, the
involvement of valuation professionals with specialized skills and knowledge was required to assist in evaluating the Companys fair value estimates.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of certain internal controls over the Companys process to measure the fair value of investments and certain financial liabilities, including controls related to the development of the above assumptions. For recently purchased
investments we evaluated changes in the borrowers assessed credit risk and market yields from the purchase date to year end. We evaluated the Companys ability to estimate fair value by comparing dispositions to the Companys most recent
fair value
102
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estimate prior to the disposition. We also involved valuation professionals with specialized skills and knowledge, who for a selection of investments and financial liabilities developed estimates
of fair value by assessing available market information using market yields of comparable companies of similar credit risk, for debt investments and financial liabilities fair valued using an income approach, and financial performance multiples of
comparable companies, for equity investments fair valued using a market approach, and compared the results to the Companys fair value estimates.
/s/ KPMG LLP
We have served as the
Companys auditor since 2007.
New York, New York
March 1, 2022
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SLR INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
December 31,
2021
December 31,
2020
Assets
Investments at fair value:
Companies less than 5% owned (cost: $985,088 and $832,507, respectively)
$
964,379
$
822,298
Companies more than 25% owned (cost: $711,865 and $724,428, respectively)
706,203
709,653
Cash
2,935
8,779
Cash equivalents (cost: $320,000 and $379,997, respectively)
320,000
379,997
Dividends receivable
9,028
7,927
Interest receivable
6,521
6,478
Receivable for investments sold
1,378
255
Prepaid expenses and other assets
567
571
Total assets
$
2,011,011
$
1,935,958
Liabilities
Debt ($818,500 and $677,000 face amounts, respectively, reported net of unamortized debt issuance
costs of $6,462 and $5,549, respectively. See notes 6 and 7)
$
812,038
$
671,451
Payable for investments and cash equivalents purchased
320,041
380,038
Distributions payable
17,327
17,327
Management fee payable (see note 3)
7,435
6,535
Performance-based incentive fee payable (see note 3)
1,864
792
Interest payable (see note 7)
4,492
3,416
Administrative services payable (see note 3)
2,689
1,946
Other liabilities and accrued expenses
2,844
2,430
Total liabilities
$
1,168,730
$
1,083,935
Commitments and contingencies (see note 11)
Net Assets
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized,
respectively, and 42,260,826 and 42,260,826 shares issued and outstanding, respectively
$
423
$
423
Paid-in capital in excess of par (see note 2f)
936,999
962,481
Accumulated distributable net loss (see note 2f)
(95,141
)
(110,881
)
Total net assets
$
842,281
$
852,023
Net Asset Value Per Share
$
19.93
$
20.16
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
Year ended December 31,
2021
2020
2019
INVESTMENT INCOME:
Interest:
Companies less than 5% owned
$
86,122
$
84,143
$
106,099
Companies more than 25% owned
11,354
8,861
5,429
Dividends:
Companies less than 5% owned
133
50
56
Companies more than 25% owned
37,564
26,794
39,382
Other income:
Companies less than 5% owned
4,157
1,885
3,727
Companies more than 25% owned
24
12
18
Total investment income
139,354
121,745
154,711
EXPENSES:
Management fees (see note 3)
28,277
24,951
26,774
Performance-based incentive fees (see note 3)
10,309
2,272
18,111
Interest and other credit facility expenses (see note 7)
29,876
27,156
28,901
Administrative services expense (see note 3)
5,575
5,215
5,265
Other general and administrative expenses
4,390
2,936
3,215
Total expenses
78,427
62,530
82,266
Net investment income
$
60,927
$
59,215
$
72,445
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:
Net realized gain (loss) on investments and cash equivalents:
Companies less than 5% owned
$
26
$
(26,638
)
$
754
Companies more than 25% owned
(661
)
Net realized gain (loss) on investments and cash equivalents
26
(26,638
)
93
Net realized loss on extinguishment of debt:
(1,853
)
Net realized gain (loss)
26
(26,638
)
(1,760
)
Net change in unrealized gain (loss) on investments and cash equivalents:
Companies less than 5% owned
(10,500
)
8,970
(14,861
)
Companies more than 25% owned
9,113
(26,096
)
192
Net change in unrealized loss
(1,387
)
(17,126
)
(14,669
)
Net realized and unrealized loss on investments and cash equivalents
(1,361
)
(43,764
)
(16,429
)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$
59,566
$
15,451
$
56,016
EARNINGS PER SHARE (see note 5)
$
1.41
$
0.37
$
1.33
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share amounts)
Year ended December 31,
2021
2020
2019
Increase (decrease) in net assets resulting from operations:
Net investment income
$
60,927
$
59,215
$
72,445
Net realized gain (loss)
26
(26,638
)
(1,760
)
Net change in unrealized loss
(1,387
)
(17,126
)
(14,669
)
Net increase in net assets resulting from operations
59,566
15,451
56,016
Distributions to stockholders (see note 8a):
From net investment income
(41,221
)
(48,795
)
(65,715
)
From return of capital
(28,087
)
(20,513
)
(3,592
)
Net distributions to stockholders
(69,308
)
(69,308
)
(69,307
)
Capital transactions (see note 13):
Net increase in net assets resulting from capital transactions
Total decrease in net assets
(9,742
)
(53,857
)
(13,291
)
Net assets at beginning of year
852,023
905,880
919,171
Net assets at end of year
$
842,281
$
852,023
$
905,880
Capital share activity (see note 13):
Net increase from capital share activity
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
2021
2020
2019
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations
$
59,566
$
15,451
$
56,016
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by (used in) operating activities:
Net realized (gain) loss on investments and cash equivalents
(26
)
26,638
(93
)
Net realized loss on extinguishment of debt
1,853
Net change in unrealized loss on investments
1,387
17,126
14,669
(Increase) decrease in operating assets:
Purchase of investments
(596,256
)
(426,897
)
(403,693
)
Proceeds from disposition of investments
468,532
357,632
360,014
Net accretion of discount on investments
(6,087
)
(7,581
)
(9,242
)
Capitalization of
payment-in-kind income
(7,592
)
(5,384
)
(1,071
)
Collections of
payment-in-kind income
1,411
1,339
672
Receivable for investments sold
(1,123
)
1,952
(134
)
Interest receivable
(43
)
(1,077
)
2,218
Dividends receivable
(1,101
)
2,561
(1,423
)
Other receivables
593
Prepaid expenses and other assets
4
44
168
Increase (decrease) in operating liabilities:
Payable for investments and cash equivalents purchased
(59,997
)
(39,624
)
168,271
Management fee payable
900
(212
)
243
Performance-based incentive fee payable
1,072
(3,489
)
(332
)
Administrative services expense payable
743
(811
)
41
Interest payable
1,076
(262
)
(1,036
)
Other liabilities and accrued expenses
414
(10
)
(1,015
)
Deferred financing costs
2,019
1,234
969
Net Cash Provided by (Used in) Operating Activities
(135,101
)
(61,370
)
187,688
Cash Flows from Financing Activities:
Cash distributions paid
(69,308
)
(69,308
)
(69,307
)
Proceeds from issuance of unsecured debt
49,936
197,957
Proceeds from secured borrowings
812,132
337,000
967,385
Repayments of secured borrowings
(723,500
)
(253,900
)
(1,054,585
)
Net Cash Provided by Financing Activities
69,260
13,792
41,450
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(65,841
)
(47,578
)
229,138
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
388,776
436,354
207,216
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
322,935
$
388,776
$
436,354
Supplemental disclosure of cash flow information:
Cash paid for interest
$
28,800
$
27,418
$
29,937
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2021
(in thousands, except share/unit amounts)
Description
Industry
Spread
Above
Index (7)
LIBOR Floor
Interest
Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Senior Secured Loans 111.5%
First Lien Bank Debt/Senior Secured Loans
Aegis Toxicology Sciences Corporation
Health Care Providers & Services
L+550
1.00
%
6.50
%
5/7/2018
5/9/2025
$
12,402
$
12,283
$
12,402
Alteon Health, LLC
Health Care Providers & Services
L+650
1.00
%
7.50
%
9/14/2018
9/1/2023
14,117
14,079
14,117
American Teleconferencing Services, Ltd.**
Communications Equipment
L+650
1.00
%
7.50
%
5/5/2016
9/9/2021
24,822
24,453
3,345
American Teleconferencing Services, Ltd.**
Communications Equipment
L+650
1.00
%
7.50
%
9/17/2021
3/31/2022
4,576
4,508
4,576
AmeriMark Intermediate Holdings, LLC(14)
Internet & Catalog Retail
L+600
1.00
%
7.00
%
7/28/2021
10/15/2026
25,226
24,739
24,721
Atria Wealth Solutions, Inc
Diversified Financial Services
L+600
1.00
%
7.00
%
9/14/2018
11/30/2022
6,345
6,329
6,345
Basic Fun, Inc.
Specialty Retail
L+550
1.00
%
6.50
%
10/30/2020
10/30/2023
2,902
2,871
2,902
CC SAG Holdings Corp. (Spectrum Automotive)
Diversified Consumer Services
L+575
0.75
%
6.50
%
6/29/2021
6/29/2028
12,168
11,995
12,168
Community Brands ParentCo, LLC (f/k/a Ministry Brands)
Software
L+400
1.00
%
5.00
%
7/30/2021
12/2/2022
34,901
34,538
34,901
Enhanced Permanent Capital, LLC(3)
Capital Markets
L+700
1.00
%
8.00
%
12/29/2020
12/29/2025
26,061
25,418
26,061
Foundation Consumer Brands, LLC
Personal Products
L+638
1.00
%
7.38
%
2/12/2021
2/12/2027
33,367
32,633
33,367
iCIMS, Inc.
Software
L+650
1.00
%
7.50
%
9/7/2018
9/12/2024
19,341
19,120
19,341
Inszone Mid, LLC
Insurance
L+575
1.00
%
6.75
%
9/28/2021
6/30/2026
11,141
11,035
11,086
Ivy Fertility Services, LLC
Health Care Providers & Services
L+625
1.00
%
7.25
%
12/22/2021
2/25/2026
21,677
21,299
21,298
Kid Distro Holdings, LLC (Distro Kid)
Software
L+600
1.00
%
7.00
%
9/24/2021
10/1/2027
29,743
29,168
29,148
Kingsbridge Holdings, LLC(2)
Multi-Sector Holdings
L+700
1.00
%
8.00
%
12/21/2018
12/21/2024
80,000
79,713
80,000
KORE Wireless Group, Inc.(3)
Wireless Telecommunication Services
L+550
5.72
%
12/21/2018
12/21/2024
36,470
36,062
36,470
Logix Holding Company, LLC
Communications Equipment
L+575
1.00
%
6.75
%
9/14/2018
12/22/2024
7,400
7,359
7,178
Maurices, Incorporated
Specialty Retail
L+675
1.00
%
7.75
%
8/27/2021
6/1/2024
5,135
5,044
5,135
MMIT Holdings, LLC
IT Services
L+625
1.00
%
7.25
%
9/21/2021
9/15/2027
31,026
30,541
31,026
NAC Holdings Corporation (Jaguar)
Insurance
L+525
1.00
%
6.25
%
7/30/2021
9/28/2024
15,924
15,730
15,844
One Touch Direct, LLC
Commercial Services & Supplies
P+75
4.00
%
4/3/2020
9/30/2022
274
274
274
PhyNet Dermatology LLC
Health Care Providers & Services
L+600 (17)
1.00
%
7.00
%
9/5/2018
8/16/2024
14,589
14,529
14,589
Pinnacle Treatment Centers, Inc.
Health Care Providers & Services
L+575
1.00
%
6.75
%
1/22/2020
12/31/2022
11,996
11,953
11,996
PPT Management Holdings, LLC
Health Care Providers & Services
L+800 (15)
1.00
%
9.00
%
9/14/2018
12/16/2022
21,120
21,086
18,374
RQM+ Corp.
Life Sciences Tools & Services
L+575
1.00
%
6.75
%
8/20/2021
8/12/2026
16,504
16,349
16,462
Stryten Energy LLC
Auto Parts & Equipment
L+800
1.00
%
9.00
%
8/11/2021
10/12/2026
26,184
25,676
25,923
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Description
Industry
Spread
Above
Index (7)
LIBOR Floor
Interest
Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
SunMed Group Holdings, LLC
Health Care Equipment & Supplies
L+575
0.75
%
6.50
%
6/16/2021
6/16/2028
$
18,536
$
18,232
$
18,351
Ultimate Baked Goods Midco LLC (Rise Baking)
Packaged Foods & Meats
L+625
1.00
%
7.25
%
8/12/2021
8/13/2027
19,381
18,920
18,896
USR Parent, Inc. (Staples)
Specialty Retail
L+884
1.00
%
9.84
%
6/3/2020
9/12/2022
3,275
3,275
3,275
Total First Lien Bank Debt/Senior Secured Loans
$
579,211
$
559,571
Second Lien Asset-Based Senior Secured Loans
ACRES Commercial Mortgage, LLC
Diversified Financial Services
L+705
1.00
%
8.05
%
12/24/2021
8/21/2028
29,925
$
29,328
$
29,326
Varilease Finance, Inc.
Multi-Sector Holdings
L+750
1.00
%
8.50
%
8/22/2014
11/15/2025
29,563
29,467
29,563
Total Second Lien Asset-Based Senior Secured Loans
$
58,795
$
58,889
Second Lien Bank Debt/Senior Secured Loans
PhyMed Management LLC
Health Care Providers & Services
L+1500 (16)
1.00
%
16.00
%
12/18/2015
9/30/2022
37,819
$
37,757
$
36,874
Rug Doctor LLC (2)
Diversified Consumer Services
L+975 (11)
1.50
%
11.25
%
12/23/2013
5/16/2023
11,828
11,819
11,829
Total Second Lien Bank Debt/Senior Secured Loans
$
49,576
$
48,703
First Lien Life Science Senior Secured Loans
Alimera Sciences, Inc.
Pharmaceuticals
L+765
1.78
%
9.43
%
12/31/2019
7/1/2024
20,074
$
20,512
$
20,475
Arcutis Biotherapeutics, Inc.(3)
Pharamceuticals
L+745
0.10
%
7.55
%
12/22/2021
1/1/2027
21,735
21,645
21,637
Ardelyx, Inc.
Pharmaceuticals
L+745
0.25
%
7.70
%
5/10/2018
11/1/2022
14,972
16,198
16,170
Axcella Health Inc.
Pharmaceuticals
L+860
0.10
%
8.70
%
9/2/2021
9/1/2026
9,278
9,318
9,302
BridgeBio Pharma, Inc.(3)
Biotechnology
9.00
%
11/17/2021
11/17/2026
34,574
34,082
34,055
Centrexion Therapeutics, Inc.
Pharmaceuticals
L+725
2.45
%
9.70
%
6/28/2019
1/1/2024
16,400
16,693
16,728
Cerapedics, Inc.
Health Care Equipment & Supplies
L+695
2.50
%
9.45
%
3/22/2019
3/1/2025
26,861
27,518
27,465
Delphinus Medical Technologies, Inc.
Health Care Equipment & Supplies
L+850
1.00
%
9.50
%
8/18/2017
6/1/2022
1,089
1,414
1,405
Glooko, Inc.
Health Care Technology
L+790
0.10
%
8.00
%
9/30/2021
10/1/2026
8,364
8,339
8,322
Neuronetics, Inc.
Health Care Equipment & Supplies
L+765
1.66
%
9.31
%
3/2/2020
2/28/2025
15,613
15,874
15,878
OmniGuide Holdings, Inc. (13)
Health Care Equipment & Supplies
L+1405
0.10
%
14.15
%
7/30/2018
7/1/2023
18,879
17,845
18,958
Rezolute, Inc
Biotechnology
L+875
0.12
%
8.87
%
4/14/2021
4/1/2026
5,675
5,663
5,661
Rubius Therapeutics, Inc. (3)
Pharmaceuticals
L+550
2.10
%
7.60
%
12/21/2018
6/1/2026
40,291
41,103
41,097
scPharmaceuticals, Inc.
Pharmaceuticals
L+795
2.23
%
10.18
%
9/17/2019
9/17/2023
4,098
4,165
4,160
SOC Telemed, Inc.
Health Care Providers & Services
L+747
0.13
%
7.60
%
3/26/2021
4/1/2026
31,137
31,211
31,214
Total First Lien Life Science Senior Secured Loans
$
271,580
$
272,527
Total Senior Secured Loans
$
959,162
$
939,690
See notes to consolidated financial statements.
109
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Description
Industry
Interest Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Equipment Financing 32.5%
Aero Operating LLC (10)
Commercial Services & Supplies
8.47-9.64%
2/12/2021
3/1/2025-12/1/2026
$
3,103
$
3,100
$
3,100
Air Methods Corporation (10)
Airlines
7.08-7.13%
11/3/2021
11/3/2026-11/23/2026
4,063
4,145
4,063
AmeraMex International, Inc. (10)
Commercial Services & Supplies
10.00%
3/29/2019
3/28/2022
3,149
3,148
3,180
Blackhawk Mining, LLC (10)
Oil, Gas & Consumable Fuels
10.97-11.16%
2/16/2018
3/1/2022-11/1/2022
1,642
1,615
1,636
Boart Longyear Company (10)
Metals & Mining
9.06-10.44%
5/28/2020
7/1/2024-1/1/2026
5,374
5,374
5,374
Capital City Jet Center, Inc. (10)
Airlines
10.00%
4/4/2018
10/4/2023-6/22/26
3,102
3,102
3,053
Champion Air, LLC (10)
Airlines
10.00%
3/19/2018
1/1/2023
1,685
1,685
1,685
Clubcorp Holdings, Inc. (10)
Hotels, Restaurants & Leisure
8.87-9.41%
5/27/2021
6/1/2025-1/1/2027
4,326
4,326
4,326
Dongwon Autopart Technology Inc. (10)
Auto Components
7.96%
2/2/2021
1/1/2026
2,347
2,382
2,347
EasyPak, LLC (10)
Containers & Packaging
9.01%
1/6/2021
1/1/2024
616
616
616
Environmental Protection & Improvement Company, LLC (10)
Road & Rail
8.25%
9/30/2020
10/1/2027
5,921
5,959
5,921
Equipment Operating Leases, LLC (2)(12)
Multi-Sector Holdings
7.53-8.37%
4/27/2018
8/1/2022-4/27/2025
19,671
19,671
18,939
First American Commercial Bancorp, Inc. (10)
Diversified Financial Services
7.50%
10/28/2021
11/1/2026
2,487
2,492
2,487
First National Capital, LLC (10)
Diversified Financial Services
9.00%
11/5/2021
8/1/2026
8,681
8,681
8,681
Freightsol LLC (10)
Road & Rail
12.51-12.89%
4/9/2019
11/1/2023
1,364
1,381
1,364
Garda CL Technical Services, Inc. (10)
Commercial Services & Supplies
8.30-8.77%
3/22/2018
6/5/2023-10/5/2023
1,245
1,245
1,242
Georgia Jet, Inc. (10)
Airlines
8.00%
12/4/2017
1/4/2024
795
795
795
GMT Corporation (10)
Machinery
10.71%
10/23/2018
10/1/2025
5,476
5,484
5,476
Haljoe Coaches USA, LLC (10)
Road & Rail
8.53%
7/31/2017
7/1/2024
1,061
1,061
915
Hawkeye Contracting Company, LLC (10)
Construction & Engineering
10.50%
10/8/2021
11/1/2025
1,252
1,252
1,252
HTI Logistics Corporation (10)
Commercial Services & Supplies
9.69-9.94%
11/15/2018
5/1/2024-9/1/2025
414
414
404
International Automotive Components Group, North America, Inc. (10)
Auto Components
7.95%
6/23/2021
6/23/2025
8,184
8,250
8,184
Kool Pak, LLC (10)
Road & Rail
8.58%
2/5/2018
3/1/2024
345
345
345
Loyer Capital LLC (2)(12)
Multi-Sector Holdings
8.73-11.52%
5/16/2019
5/16/24-9/25/24
11,000
11,000
10,725
Lux Credit Consultants,
LLC (10)
Road & Rail
8.28-9.65%
6/17/2021
12/1/2024-12/1/2025
9,343
9,343
9,343
Lux Vending, LLC (10)
Consumer Finance
12.46-13.26%
8/20/2021
8/20/2024-10/1/2024
2,526
2,583
2,526
Mountain Air Helicopters,
Inc. (10)
Commercial Services & Supplies
10.00%
7/31/2017
2/28/2025
479
476
479
See notes to consolidated financial statements.
110
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Description
Industry
Interest Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Rane Light Metal Castings Inc. (10)
Machinery
10.00%
6/1/2020
7/1/2024
$
253
$
253
$
253
Rango, Inc. (10)
Commercial Services & Supplies
9.33-9.79%
9/24/2019
4/1/2023-11/1/2024
3,615
3,656
3,547
Rossco Crane & Rigging, Inc. (10)
Commercial Services & Supplies
11.53%
8/25/2017
9/1/2022
126
126
126
Royal Coach Lines, Inc.(10)
Road & Rail
9.56%
11/21/2019
8/1/2025
1,041
1,041
950
Royal Express Inc. (10)
Road & Rail
9.53%
1/17/2019
2/1/2024
683
690
683
Sidelines Tree Service LLC (10)
Diversified Consumer Services
10.25%
7/31/2017
10/1/2022
46
46
45
South Texas Oilfield Solutions, LLC (10)
Energy Equipment & Services
12.52-13.76%
3/29/2018
9/1/2022-7/1/2023
1,363
1,363
1,338
ST Coaches, LLC (10)
Road & Rail
8.22-8.58%
7/31/2017
10/1/2022-1/25/2025
1,951
1,951
1,839
Stafford Logistics,
Inc. (10)
Commercial Services & Supplies
12.62%
9/11/2019
2/15/2026
7,094
7,094
7,094
Star Coaches Inc. (10)
Road & Rail
8.42%
3/9/2018
4/1/2025
3,401
3,401
2,916
Sturgeon Services International Inc. (10)
Energy Equipment & Services
18.38%
7/31/2017
2/28/2022
132
132
125
Superior Transportation, Inc. (10)
Road & Rail
10.22-10.62%
7/31/2017
1/1/2026
4,578
4,578
4,578
Tailwinds, LLC (10)
Air Freight & Logistics
8.50-9.00%
7/26/2019
8/1/2024-10/16/2025
2,267
2,267
2,267
The Smedley Company & Smedley Services,
Inc. (10)
Commercial Services & Supplies
10.21-15.36%
7/31/2017
10/29/2023-2/10/2024
3,798
3,800
3,536
Trinity Equipment Rentals, Inc. (10)
Commercial Services & Supplies
7.94-8.75%
10/8/2021
11/1/2024-12/1/2026
777
777
777
Trolleys, Inc. (10)
Road & Rail
9.99%
7/18/2018
8/1/2022
1,573
1,573
1,540
Up Trucking Services,
LLC (10)
Road & Rail
11.21%
3/23/2018
8/1/2024
696
705
696
Warrior Crane Services, LLC (10)
Commercial Services & Supplies
8.95%
7/11/2019
8/1/2024-8/1/2026
2,567
2,567
2,518
Wind River Environmental, LLC (10)
Diversified Consumer Services
8.43-10.00%
7/31/2019
8/1/2024-10/5/25
870
873
870
Womble Company, Inc. (10)
Energy Equipment & Services
9.11%
12/27/2019
1/1/2025
547
547
537
Shares/Units
SLR Equipment Finance Equity Interests (2)(9)*
Multi-Sector Holdings
7/31/2017
200
145,000
129,102
Total Equipment Financing
$
292,365
$
273,795
Preferred Equity 0.7%
SOAGG LLC (2)(3)(4)
Aerospace & Defense
8.00%
12/14/2010
6/30/2023
446
$
446
$
1,121
SOINT, LLC (2)(3)(4)
Aerospace & Defense
5.00% (11)
6/8/2012
6/30/2023
56,030
5,603
4,509
Total Preferred Equity
$
6,049
$
5,630
See notes to consolidated financial statements.
111
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Description
Industry
Acquisition
Date
Shares/Units
Cost
Fair
Value
Common Equity/Equity Interests/Warrants53.6%
aTyr Pharma, Inc. Warrants *
Pharmaceuticals
11/18/2016
6,347
$
106
$
CardioFocus, Inc. Warrants *
Health Care Equipment & Supplies
3/31/2017
90
51
Centrexion Therapeutics, Inc.
Warrants *
Pharmaceuticals
6/28/2019
289,102
136
65
Conventus Orthopaedics, Inc.
Warrants *
Health Care Equipment & Supplies
6/15/2016
157,500
65
Delphinus Medical Technologies, Inc. Warrants *
Health Care Equipment & Supplies
8/18/2017
444,388
74
80
Essence Group Holdings Corporation (Lumeris) Warrants *
Health Care Technology
3/22/2017
208,000
63
258
KBH Topco LLC (Kingsbridge) (2)(5)
Multi-Sector Holdings
11/3/2020
73,500,000
136,596
145,996
RD Holdco Inc. (Rug Doctor) (2)*
Diversified Consumer Services
12/23/2013
231,177
15,683
RD Holdco Inc. (Rug Doctor)
Class B (2)*
Diversified Consumer Services
12/23/2013
522
5,216
5,216
RD Holdco Inc. (Rug Doctor)
Warrants (2)*
Diversified Consumer Services
12/23/2013
30,370
381
Senseonics Holdings, Inc. (3)(8)*
Health Care Equipment & Supplies
7/25/2019
406,923
117
1,086
SLR Credit Solutions (2)(3)
Diversified Financial Services
12/28/2012
280,303
280,737
298,766
Venus Concept Ltd. Warrants* (f/k/a Restoration Robotics)
Health Care Equipment & Supplies
5/10/2018
27,352
152
Total Common Equity/Equity Interests/Warrants
$
439,377
$
451,467
Total Investments (6) 198.3%
$
1,696,953
$
1,670,582
Description
Industry
Acquisition
Date
Maturity
Date
Par Amount
Cash Equivalents 38.0%
U.S. Treasury Bill
Government
12/31/2021
1/25/2022
$
320,000
$
320,000
$
320,000
Total Investments & Cash Equivalents 236.3%
$
2,016,953
$
1,990,582
Liabilities in Excess of Other Assets (136.3%)
(1,148,301
)
Net Assets 100.0%
$
842,281
(1)
Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank
Offered Rate (LIBOR), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current rate of interest, or in the case of leases the current implied yield, in effect as of December 31,
2021.
(2)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the Investment Company Act of 1940 (1940 Act), due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment.
Transactions during the year ended December 31, 2021 in these controlled investments are as follows:
See notes to
consolidated financial statements.
112
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Name of Issuer
Fair Value at
December 31, 2020
Gross
Additions
Gross
Reductions
Realized
Gain
(Loss)
Change in
Unrealized
Gain
(Loss)
Interest/Dividend
Income
Fair Value at
December 31, 2021
AviatorCap SII, LLC
$
2,941
$
$
2,941
$
$
$
92
$
Equipment Operating Leases, LLC
25,540
6,667
66
1,950
18,939
Kingsbridge Holdings, LLC
80,000
(79
)
6,568
80,000
KBH Topco, LLC (Kingsbridge)
136,596
9,400
13,250
145,996
Loyer Capital LLC
14,456
3,731
1,426
10,725
RD Holdco Inc. (Rug Doctor, common equity)
1,226
(1,226
)
RD Holdco Inc. (Rug Doctor, class B)
5,216
5,216
RD Holdco Inc. (Rug Doctor, warrants)
Rug Doctor LLC
10,559
1,270
(6
)
1,300
11,829
SLR Credit Solutions
296,766
2,000
22,500
298,766
SLR Equipment Finance (equity)
129,102
129,102
SLR Equipment Finance (debt)
850
850
42
SOAGG LLC
2,300
(1,179
)
1,543
1,121
SOINT, LLC
4,101
271
137
271
4,509
$
709,653
$
1,541
$
14,189
$
$
9,113
$
48,942
$
706,203
(3)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2021, on a fair value
basis, non-qualifying assets in the portfolio represented 23.1% of the total assets of the Company.
(4)
The Companys investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common
shares, respectively.
(5)
Kingsbridge Holdings, LLC is held through KBH Topco LLC, a Delaware corporation.
(6)
Aggregate net unrealized appreciation for U.S. federal income tax purposes is $19,495; aggregate gross
unrealized appreciation and depreciation for U.S. federal tax purposes is $82,598 and $63,103, respectively, based on a tax cost of $1,651,087. Unless otherwise noted, all of the Companys investments are pledged as collateral against the
borrowings outstanding on the senior secured credit facility. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the Securities Act). These
investments are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act. All investments are Level 3 unless otherwise indicated.
See notes to consolidated financial statements.
113
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
(7)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are often subject to a LIBOR or PRIME rate floor.
(8)
Denotes a Level 1 investment.
(9)
SLR Equipment Finance is held through NEFCORP LLC, a wholly-owned consolidated taxable subsidiary and NEFPASS
LLC, a wholly-owned consolidated subsidiary.
(10)
Indicates an investment that is wholly held by the Company through NEFPASS LLC.
(11)
Interest is paid in kind (PIK).
(12)
Denotes a subsidiary of SLR Equipment Finance.
(13)
OmniGuide Holdings, Inc., Domain Surgical, Inc. and OmniGuide, Inc. are
co-borrowers.
(14)
AmeriMark Interactive, LLC, AmeriMark Direct LLC, AmeriMark Intermediate Sub, Inc., L.T.D. Commodities LLC,
Dr. Leonards Healthcare Corp. and Amerimark Intermediate Holdings, LLC are each co-Borrowers.
(15)
Spread is 6.00% Cash / 2.00% PIK.
(16)
Spread is 2.50% Cash / 12.50% PIK.
(17)
Spread is 5.50% Cash / 0.50% PIK.
*
Non-income producing security.
**
Investment is on non-accrual status.
Industry Classification
Percentage of Total
Investments (at fair value) as
of December 31, 2021
Multi-Sector Holdings (includes Kingsbridge Holdings, LLC, SLR Equipment Finance, Equipment
Operating Leases, LLC and Loyer Capital LLC)
24.8
%
Diversified Financial Services (includes SLR Credit Solutions)
20.7
%
Health Care Providers & Services
9.6
%
Pharmaceuticals
7.8
%
Software
5.0
%
Health Care Equipment & Supplies
5.0
%
Biotechnology
2.4
%
Wireless Telecommunication Services
2.2
%
Personal Products
2.0
%
Road & Rail
1.9
%
IT Services
1.9
%
Diversified Consumer Services
1.8
%
Insurance
1.6
%
Commercial Services & Supplies
1.6
%
Capital Markets
1.6
%
Auto Parts & Equipment
1.5
%
Internet & Catalog Retail
1.5
%
Packaged Foods & Meats
1.1
%
Life Sciences Tools & Services
1.0
%
Communications Equipment
0.9
%
Specialty Retail
0.7
%
Auto Components
0.6
%
Airlines
0.6
%
Health Care Technology
0.5
%
See notes to consolidated financial statements.
114
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2021
(in thousands, except share/unit amounts)
Industry Classification
Percentage of Total
Investments (at fair value) as
of December 31, 2021
Machinery
0.3
%
Aerospace & Defense
0.3
%
Metals & Mining
0.3
%
Hotels, Restaurants & Leisure
0.3
%
Consumer Finance
0.1
%
Air Freight & Logistics
0.1
%
Energy Equipment & Services
0.1
%
Oil, Gas & Consumable Fuels
0.1
%
Construction & Engineering
0.1
%
Containers & Packaging
0.0
%
Total Investments
100.0
%
See notes to consolidated financial statements.
115
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(in thousands, except share/unit amounts)
Description
Industry
Spread
Above
Index (7)
LIBOR Floor
Interest
Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Senior Secured Loans 93.7%
First Lien Bank Debt/Senior Secured Loans
Aegis Toxicology Sciences Corporation
Health Care Providers & Services
L+550
1.00%
6.50%
5/7/2018
5/9/2025
$
16,869
$
16,666
$
16,531
Alteon Health, LLC
Health Care Providers & Services
L+650
1.00%
7.50%
9/14/2018
9/1/2023
14,293
14,233
14,007
American Teleconferencing Services, Ltd. (PGI)
Communications Equipment
L+650
1.00%
7.50%
5/5/2016
6/8/2023
29,984
29,520
27,735
Atria Wealth Solutions, Inc
Diversified Financial Services
L+600
1.00%
7.00%
9/14/2018
11/30/2022
5,841
5,808
5,841
AviatorCap SII,
LLC (2)
Aerospace & Defense
L+700
7.23%
3/19/2019
1/29/2021
2,941
2,941
2,941
Basic Fun, Inc
Specialty Retail
L+675
1.00%
7.75%
10/30/2020
10/30/2023
3,183
3,138
3,135
Enhanced Permanent Capital, LLC(3)
Capital Markets
L+700
1.00%
8.00%
12/29/2020
12/29/2025
18,288
17,763
17,763
iCIMS, Inc.
Software
L+650
1.00%
7.50%
9/7/2018
9/12/2024
19,341
19,050
18,955
Kingsbridge Holdings, LLC(2)
Multi-Sector Holdings
L+700
1.00%
8.00%
12/21/2018
12/21/2024
80,000
79,634
80,000
KORE Wireless Group, Inc.
Wireless Telecommunication Services
L+550
5.75%
12/21/2018
12/21/2024
36,477
35,949
36,477
Legility, LLC
Commercial Services & Supplies
L+600
1.00%
7.00%
2/27/2020
12/17/2025
19,625
19,282
18,644
Logix Holding Company, LLC
Communications Equipment
L+575
1.00%
6.75%
9/14/2018
12/22/2024
7,027
6,983
6,887
One Touch Direct, LLC
Commercial Services & Supplies
P+100
6.50%
4/3/2020
3/29/2021
2,458
2,458
2,458
Pet Holdings ULC & Pet Supermarket, Inc. (3)
Specialty Retail
L+550
1.00%
6.50%
9/14/2018
7/5/2022
28,745
28,614
28,457
PhyNet Dermatology LLC
Health Care Providers & Services
L+550
1.00%
6.50%
9/5/2018
8/16/2024
17,065
16,973
16,468
Pinnacle Treatment Centers, Inc.
Health Care
Providers &
Services
L+625
1.00%
7.25%
1/22/2020
12/31/2022
11,773
11,688
11,773
PPT Management Holdings, LLC
Health Care Providers & Services
L+850 (15)
1.00%
9.50%
9/14/2018
12/16/2022
20,816
20,749
18,943
Sentry Data Systems, Inc
Software
L+675
1.00%
7.75%
9/27/2020
10/6/2025
15,765
15,462
15,450
Smile Doctors LLC
Personal Products
L+600
1.00%
7.00%
12/17/2020
10/6/2022
3,302
3,237
3,236
Soleo Health Holdings, Inc
Health Care Providers & Services
L+575
1.00%
6.75%
3/31/2020
12/29/2021
7,579
7,579
7,579
The Childrens Place, Inc.(3)
Specialty Retail
L+800
1.00%
9.00%
10/5/2020
5/9/2024
15,765
$
15,542
$
15,528
USR Parent, Inc. (Staples)
Specialty Retail
L+884
1.00%
9.84%
6/3/2020
9/12/2022
4,418
4,418
4,440
Total First Lien Bank Debt/Senior Secured Loans
$
377,687
$
373,248
See notes to consolidated financial statements.
116
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Description
Industry
Spread
Above
Index (7)
LIBOR Floor
Interest
Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Second Lien Asset-Based Senior Secured Loans
Greystone Select Holdings LLC & Greystone & Co., Inc.
Thrifts & Mortgage Finance
L+800
1.00%
9.00%
3/29/2017
4/17/2024
$
19,506
$
19,398
$
19,506
Varilease Finance, Inc.
Multi-Sector Holdings
L+750
1.00%
8.50%
8/22/2014
11/15/2025
36,438
36,307
36,438
Total Second Lien Asset-Based Senior Secured Loans
$
55,705
$
55,944
Second Lien Bank Debt/Senior Secured Loans
PhyMed Management LLC
Health Care Providers & Services
L+1100 (17)
1.00%
12.00%
12/18/2015
9/30/2022
33,881
$
33,736
$
31,340
Rug Doctor LLC (2)
Diversified Consumer Services
L+975 (11)
1.50%
11.25%
12/23/2013
5/16/2023
10,559
10,543
10,559
Total Second Lien Bank Debt/Senior Secured Loans
$
44,279
$
41,899
First Lien Life Science Senior Secured Loans
Alimera Sciences, Inc.
Pharmaceuticals
L+765
1.78%
9.43%
12/31/2019
7/1/2024
20,074
$
20,287
$
20,275
Apollo Endosurgery, Inc.
Health Care Equipment & Supplies
L+750
1.36%
8.86%
3/15/2019
9/1/2024
20,492
20,860
20,799
Ardelyx, Inc. (3)
Pharmaceuticals
L+745
0.25%
7.70%
5/10/2018
11/1/2022
24,500
25,275
25,235
Axcella Health Inc.
Pharmaceuticals
L+850
0.20%
8.70%
1/9/2018
1/1/2023
26,000
27,070
26,910
Cardiva Medical, Inc.
Health Care Equipment & Supplies
L+795
1.76%
9.71%
9/24/2018
12/1/2023
27,667
28,596
29,327
Centrexion Therapeutics, Inc.
Pharmaceuticals
L+725
2.45%
9.70%
6/28/2019
1/1/2024
16,400
16,472
16,564
Cerapedics, Inc.
Health Care Equipment & Supplies
L+695
2.50%
9.45%
3/22/2019
3/1/2024
24,175
24,501
24,537
Delphinus Medical Technologies, Inc.
Health Care Equipment & Supplies
L+850
1.00%
9.50%
8/18/2017
6/1/2022
2,177
$
2,410
$
2,395
GenMark Diagnostics, Inc. (3)
Health Care Providers & Services
L+590
2.51%
8.41%
2/1/2019
2/1/2023
49,522
50,892
50,884
Kindred Biosciences, Inc. (16)
Pharmaceuticals
L+675
2.17%
8.92%
9/30/2019
9/30/2024
9,197
9,243
9,242
Neuronetics, Inc.
Health Care Equipment & Supplies
L+765
1.66%
9.31%
3/2/2020
2/28/2025
15,613
15,689
15,691
OmniGuide Holdings, Inc. (13)
Health Care Equipment & Supplies
L+805
1.00%
9.05%
7/30/2018
2/1/2021
10,500
11,532
11,287
PQ Bypass, Inc.
Health Care Equipment & Supplies
L+795
1.00%
8.95%
12/20/2018
12/19/2022
10,000
10,190
10,500
Rubius Therapeutics, Inc. (3)
Pharmaceuticals
L+550
5.65%
12/21/2018
12/21/2023
40,291
40,692
40,747
scPharmaceuticals, Inc.
Pharmaceuticals
L+795
2.23%
10.18%
9/17/2019
9/17/2023
4,684
4,721
4,725
SI-BONE, Inc. (3)
Health Care Equipment & Supplies
L+940
0.33%
9.73%
5/29/2020
6/1/2025
17,843
17,856
17,843
Total First Lien Life Science Senior Secured Loans
$
326,286
$
326,961
Total Senior Secured Loans
$
803,957
$
798,052
See notes to consolidated financial statements.
117
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Description
Industry
Interest Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Equipment Financing 33.4%
AmeraMex International,
Inc. (10)
Commercial Services & Supplies
10.00%
3/29/2019
3/28/2022
$
5,435
$
5,397
$
5,489
Blackhawk Mining, LLC (14)
Oil, Gas & Consumable Fuels
10.97-11.16%
2/16/2018
3/1/2022-11/1/2022
3,531
3,415
3,443
Boart Longyear Company (14)
Metals & Mining
10.44%
5/28/2020
7/1/2024
3,455
3,455
3,455
C&H Paving, Inc. (14)
Construction & Engineering
9.94-11.66%
12/26/2018
1/1/2024-11/1/2024
3,416
3,455
3,410
Capital City Jet Center, Inc. (10)
Airlines
10.00%
4/4/2018
10/4/2023-6/22/26
3,882
3,882
3,812
Central Freight Lines, Inc. (10)
Road & Rail
7.16%
7/31/2017
1/14/2024
1,212
1,212
1,212
Champion Air, LLC (10)
Airlines
10.00%
3/19/2018
1/1/2023
2,255
2,255
2,255
Easton Sales and Rentals,
LLC (10)
Commercial Services & Supplies
10.00%
9/18/2018
10/1/2021
1,235
1,233
1,188
Environmental Protection & Improvement Company,
LLC (10)
Road & Rail
8.25%
9/30/2020
10/1/2027
6,520
6,567
6,520
Equipment Operating Leases, LLC (2)(12)
Multi-Sector Holdings
7.53-8.37%
4/27/2018
8/1/2022-4/27/2025
26,338
26,338
25,540
EquipmentShare.com, Inc. (14)
Commercial Services & Supplies
6.60%
1/8/2020
1/8/2025
8,097
7,658
8,097
Family First Freight, LLC (10)
Road & Rail
8.00-10.33%
7/31/2017
2/1/2022-5/1/2023
1,022
1,021
1,014
Freightsol LLC (14)
Road & Rail
12.51-12.89%
4/9/2019
11/1/2023
1,880
1,910
1,880
Garda CL Technical Services, Inc. (14)
Commercial Services & Supplies
8.30-8.77%
3/22/2018
6/5/2023-10/5/2023
1,956
1,957
1,953
Georgia Jet, Inc. (10)
Airlines
8.00%
12/4/2017
12/4/2021
973
973
954
Globecomm Systems Inc. (14)
Wireless Telecommunication Services
13.18%
5/10/2018
7/1/2021
413
413
413
GMT Corporation (14)
Machinery
12.55%
10/23/2018
10/23/2023
5,446
5,409
5,446
Haljoe Coaches USA, LLC (14)
Road & Rail
8.03-9.69%
7/31/2017
7/1/2022-7/1/2024
4,883
4,883
4,132
HTI Logistics Corporation (10)
Commercial Services & Supplies
9.69-9.94%
11/15/2018
5/1/2024-9/1/2025
527
527
514
Hypro, Inc. (10)
Machinery
11.53%
9/30/2019
10/1/2023
1,925
1,940
1,875
Interstate NDT, Inc. (14)
Road & Rail
10.91-14.11%
6/11/2018
7/1/2023-10/25/2023
1,795
1,795
1,704
ISR Holdings, LLC (10)
Commercial Services & Supplies
9.25%
8/27/2019
8/27/2022
3,124
3,124
3,124
JP Motorsports, Inc. (14)
Road & Rail
16.06%
8/17/2018
1/25/2022
118
118
117
Kool Pak, LLC (14)
Road & Rail
8.58%
2/5/2018
3/1/2024
484
484
484
Lineal Industries, Inc. (10)
Construction & Engineering
8.00%
12/21/2018
12/21/2021
45
45
45
Loyer Capital LLC (2)(12)
Multi-Sector Holdings
8.73-11.52%
5/16/2019
5/16/24-9/25/24
14,731
14,731
14,456
Mountain Air Helicopters,
Inc. (10)
Commercial Services & Supplies
10.00%
7/31/2017
4/30/2022-2/28/2025
1,870
1,865
1,902
NEF Holdings, LLC (2)
Multi-Sector Holdings
8.50%
8/14/2020
8/14/2021
850
850
850
Rane Light Metal Castings
Inc. (14)
Machinery
10.00%
6/1/2020
7/1/2024
338
338
338
Rango, Inc. (10)(14)
Commercial Services & Supplies
9.33%-9.79%
9/24/2019
4/1/2023-11/1/2024
5,137
5,207
5,041
Rossco Crane & Rigging,
Inc. (14)
Commercial Services & Supplies
11.13-11.53%
8/25/2017
4/1/2021-9/1/2022
332
332
330
See notes to consolidated financial statements.
118
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Description
Industry
Interest Rate (1)
Acquisition
Date
Maturity
Date
Par Amount
Cost
Fair
Value
Royal Coach Lines, Inc.(14)
Road & Rail
9.56%
11/21/2019
8/1/2025
$
1,215
$
1,215
$
1,085
Royal Express Inc. (14)
Road & Rail
9.53%
1/17/2019
2/1/2024
914
927
914
Sidelines Tree Service
LLC (14)
Diversified Consumer Services
10.25%
7/31/2017
10/1/2022
79
79
76
South Texas Oilfield Solutions, LLC (14)
Energy Equipment & Services
12.52-13.76%
3/29/2018
9/1/2022-7/1/2023
2,194
2,194
2,110
ST Coaches, LLC (14)
Road & Rail
8.21-8.58%
7/31/2017
10/1/2022-1/25/2025
4,755
4,755
4,318
Stafford Logistics, Inc. (10)
Commercial Services & Supplies
12.63-13.12%
9/11/2019
10/1/2024-10/1/2025
6,870
6,870
6,604
Star Coaches Inc. (14)
Road & Rail
8.42%
3/9/2018
4/1/2025
3,385
3,385
2,902
Sturgeon Services International Inc. (10)
Energy Equipment & Services
18.42%
7/31/2017
2/28/2022
816
816
770
Sun-Tech Leasing of Texas, L.P. (14)
Road & Rail
8.68%
7/31/2017
7/25/2021
36
36
36
Superior Transportation, Inc. (14)
Road & Rail
9.40-12.26%
7/31/2017
4/1/2022-8/1/2024
5,524
5,511
5,142
Tailwinds, LLC (10)
Air Freight & Logistics
8.50%-9.00%
7/26/2019
8/1/2024-10/16/2025
2,633
2,633
2,633
The Smedley Company & Smedley Services, Inc. (10)
Commercial Services & Supplies
10.03-14.97%
7/31/2017
10/29/2023-2/10/2024
3,902
3,905
3,634
Thora Capital, LLC (10)
Airlines
9.00%
7/3/2019
7/1/2025
5,602
5,602
5,596
Trinity Equipment Rentals, Inc. (14)
Commercial Services & Supplies
11.23%
9/13/2018
10/1/2022
538
538
538
Trolleys, Inc. (14)
Road & Rail
9.98%
7/18/2018
8/1/2022
1,999
1,999
1,919
Up Trucking Services,
LLC (14)
Road & Rail
11.21-12.53%
3/23/2018
4/1/2022-8/1/2024
1,638
1,657
1,651
Warrior Crane Services, LLC (10)
Commercial Services & Supplies
8.95%
7/11/2019
8/1/2024-8/1/2026
3,087
3,087
3,030
Wind River Environmental, LLC (10)
Diversified Consumer Services
8.43%-10.00%
7/31/2019
8/1/2024-10/5/25
1,112
1,118
1,112
Womble Company, Inc. (14)
Energy Equipment & Services
9.11%
12/27/2019
1/1/2025
694
694
681
Shares/Units
NEF Holdings, LLC Equity Interests (2)(9)
Multi-Sector Holdings
7/31/2017
200
145,000
129,102
Total Equipment Financing
$
304,810
$
284,846
Preferred Equity 0.8%
SOAGG LLC (2)(3)(4)
Aerospace & Defense
8.00%
12/14/2010
6/30/2023
446
$
446
$
2,300
SOINT, LLC (2)(3)(4)
Aerospace & Defense
5.00% (11)
6/8/2012
6/30/2023
53,321
5,332
4,101
Total Preferred Equity
$
5,778
$
6,401
See notes to consolidated financial statements.
119
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Description
Industry
Acquisition
Date
Shares/Units
Cost
Fair
Value
Common Equity/Equity Interests/Warrants51.9%
aTyr Pharma, Inc. Warrants *
Pharmaceuticals
11/18/2016
6,347
$
106
$
B Riley Financial Inc. (3)(8)
Research & Consulting Services
3/16/2007
38,015
2,684
1,681
CardioFocus, Inc. Warrants *
Health Care Equipment & Supplies
3/31/2017
90
51
Centrexion Therapeutics, Inc. Warrants *
Pharmaceuticals
6/28/2019
289,102
136
71
Conventus Orthopaedics, Inc. Warrants *
Health Care Equipment & Supplies
6/15/2016
157,500
65
Crystal Financial LLC (2)(3)
Diversified Financial Services
12/28/2012
280,303
280,737
296,766
Delphinus Medical Technologies, Inc. Warrants *
Health Care Equipment & Supplies
8/18/2017
444,388
74
82
Essence Group Holdings Corporation (Lumeris) Warrants *
Health Care Technology
3/22/2017
208,000
63
258
KBH Topco LLC
(Kingsbridge) (2)(5)
Multi-Sector Holdings
11/3/2020
73,500,000
136,596
136,596
PQ Bypass, Inc. Warrants *
Health Care Equipment & Supplies
12/20/2018
300,000
106
675
RD Holdco Inc. (Rug
Doctor) (2)*
Diversified Consumer Services
12/23/2013
231,177
15,683
1,226
RD Holdco Inc. (Rug Doctor) Class B (2)*
Diversified Consumer Services
12/23/2013
522
5,216
5,216
RD Holdco Inc. (Rug Doctor) Warrants (2)*
Diversified Consumer Services
12/23/2013
30,370
381
Scynexis, Inc. Warrants *
Pharmaceuticals
9/30/2016
12,243
105
Senseonics Holdings, Inc. Warrants *
Health Care Equipment & Supplies
7/25/2019
526,901
117
81
Sunesis Pharmaceuticals, Inc. Warrants *
Pharmaceuticals
3/31/2016
10,400
118
Venus Concept Ltd. Warrants* (f/k/a Restoration Robotics)
Health Care Equipment & Supplies
5/10/2018
27,352
152
Total Common Equity/Equity Interests/Warrants
$
442,390
$
442,652
Total Investments (6) 179.8%
$
1,556,935
$
1,531,951
Description
Industry
Acquisition
Date
Maturity
Date
Par Amount
Cash Equivalents 44.6%
U.S. Treasury Bill
Government
12/31/2020
2/23/2021
$
380,000
$
379,997
$
379,997
Total Investments & Cash Equivalents 224.4%
$
1,936,932
$
1,911,948
Liabilities in Excess of Other Assets (124.4%)
(1,059,925
)
Net Assets 100.0%
$
852,023
(1)
Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank
Offered Rate (LIBOR), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current rate of interest, or in the case of leases the current implied yield, in effect as of
December 31, 2020.
(2)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the Investment Company Act of 1940 (1940 Act), due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment.
Transactions during the year ended December 31, 2020 in these controlled investments are as follows:
See notes to
consolidated financial statements.
120
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Name of Issuer
Fair Value at
December 31, 2019
Gross
Additions
Gross
Reductions
Realized
Gain
(Loss)
Change in
Unrealized
Gain
(Loss)
Interest/Dividend
/Other Income
Fair Value at
December 31, 2020
AviatorCap SII, LLC
$
2,896
$
$
2,896
$
$
$
198
$
AviatorCap SII, LLC
2,713
1,105
877
260
2,941
Crystal Financial LLC
296,000
766
24,000
296,766
Equipment Operating Leases, LLC
29,739
3,401
(798
)
2,290
25,540
Kingsbridge Holdings, LLC (debt)
33,112
46,888
(71
)
3,481
80,000
Kingsbridge Holdings, LLC (equity)
136,596
1,925
136,596
Loyer Capital LLC
14,731
(275
)
1,488
14,456
NEF Holdings, LLC (equity)
145,000
(15,898
)
250
129,102
NEF Holdings, LLC (debt)
850
28
850
RD Holdco Inc. (Rug Doctor, common equity)
7,706
(6,480
)
1,226
RD Holdco Inc. (Rug Doctor, class B)
5,216
5,216
RD Holdco Inc. (Rug Doctor, warrants)
Rug Doctor LLC
9,111
1,448
(6
)
1,128
10,559
SOAGG LLC
4,952
1,095
(1,557
)
111
2,300
SOINT, LLC
5,939
319
380
(1,777
)
508
4,101
$
557,115
$
187,206
$
8,649
$
$
(26,096
)
$
35,667
$
709,653
(3)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2020, on a fair value
basis, non-qualifying assets in the portfolio represented 25.9% of the total assets of the Company.
(4)
The Companys investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common
shares, respectively.
(5)
Kingsbridge Holdings, LLC is held through KBH Topco LLC, a Delaware corporation.
(6)
Aggregate net unrealized appreciation for U.S. federal income tax purposes is $4,446; aggregate gross
unrealized appreciation and depreciation for U.S. federal tax purposes is $52,349 and $47,903, respectively, based on a tax cost of $1,527,505. Unless otherwise noted, all of the Companys investments are pledged as collateral against the
borrowings outstanding on the senior secured credit facility. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the Securities
Act). These investments are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act. All investments are Level 3 unless otherwise
indicated.
See notes to consolidated financial statements.
121
Table of Contents
SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
(7)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are often subject to a LIBOR or PRIME rate floor.
(8)
Denotes a Level 1 investment.
(9)
NEF Holdings, LLC is held through NEFCORP LLC, a wholly-owned consolidated taxable subsidiary and NEFPASS LLC,
a wholly-owned consolidated subsidiary.
(10)
Indicates an investment that is wholly held by the Company through NEFPASS LLC.
(11)
Interest is paid in kind (PIK).
(12)
Denotes a subsidiary of NEF Holdings, LLC.
(13)
OmniGuide Holdings, Inc., Domain Surgical, Inc. and OmniGuide, Inc. are
co-borrowers.
(14)
Indicates an investment that is held by the Company through its wholly-owned consolidated financing subsidiary
NEFPASS SPV, LLC (the NEFPASS SPV). Such investments are pledged as collateral under the NEFPASS SPV, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if
any, of the Company.
(15)
Spread is 6.00% Cash / 2.50% PIK.
(16)
Kindred Biosciences, Inc., KindredBio Equine, Inc. and Centaur Biopharmaceutical Services, Inc. are co-borrowers.
(17)
Spread is 2.50% Cash / 8.50% PIK.
*
Non-income producing security.
Industry Classification
Percentage of Total
Investments (at fair value) as
of December 31, 2020
Multi-Sector Holdings (includes Kingsbridge Holdings, LLC, NEF Holdings, LLC, Equipment Operating
Leases, LLC and Loyer Capital LLC)
27.6
%
Diversified Financial Services (includes Crystal Financial LLC)
19.8
%
Health Care Providers & Services
10.9
%
Pharmaceuticals
9.4
%
Health Care Equipment & Supplies
8.7
%
Commercial Services & Supplies
4.1
%
Specialty Retail
3.4
%
Wireless Telecommunication Services
2.4
%
Road & Rail
2.3
%
Communications Equipment
2.3
%
Software
2.2
%
Thrifts & Mortgage Finance
1.3
%
Diversified Consumer Services
1.2
%
Capital Markets
1.2
%
Airlines
0.8
%
Aerospace & Defense
0.6
%
Machinery
0.5
%
Energy Equipment & Services
0.2
%
Metals & Mining
0.2
%
Construction & Engineering
0.2
%
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2020
(in thousands, except share/unit amounts)
Industry Classification
Percentage of Total
Investments (at fair value) as
of December 31, 2020
Oil, Gas & Consumable Fuels
0.2
%
Personal Products
0.2
%
Air Freight & Logistics
0.2
%
Research & Consulting Services
0.1
%
Health Care Technology
0.0
%
Total Investments
100.0
%
See notes to consolidated financial statements.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(in thousands, except share amounts)
Note 1. Organization
Solar Capital LLC,
a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1,200,000 of which 47.04% was funded by affiliated parties.
Immediately prior to our initial public offering, through a series of transactions, SLR Investment Corp. (f/k/a Solar Capital Ltd.) (the
Company, we, us or our), merged with Solar Capital LLC, leaving SLR Investment Corp. as the surviving entity (the Merger). SLR Investment Corp. issued an aggregate of approximately
26.65 million shares of common stock and $125,000 in senior unsecured notes to the existing Solar Capital LLC unit holders in connection with the Merger. SLR Investment Corp. had no assets or operations prior to completion of the Merger and as
a result, the historical books and records of Solar Capital LLC have become the books and records of the surviving entity. The number of shares used to calculate weighted average shares for use in computations on a per share basis have been
decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
SLR Investment Corp., a Maryland corporation formed in November 2007, is a closed-end, externally
managed, non-diversified management investment company that has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940
Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in FASB Accounting Standards Codification (ASC) Topic 946. In addition, for U.S. federal income tax purposes, the Company has elected to
be treated, and intends to qualify annually, as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code).
On February 9, 2010, the Company priced its initial public offering, selling 5.68 million shares of common stock, including the
underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, the Companys senior management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.
The Companys investment objective is to maximize both current income and capital appreciation through debt and equity investments. The
Company directly and indirectly invests primarily in leveraged middle market companies in the form of senior secured loans, financing leases and to a lesser extent, unsecured loans and equity securities. From time to time, we may also invest in
public companies that are thinly traded.
On December 1, 2021, we entered into an Agreement and Plan of Merger, or the Merger
Agreement, with SLR Senior Investment Corp., a Maryland corporation (SUNS), Solstice Merger Sub, Inc., a Maryland corporation and our wholly-owned subsidiary (Merger Sub), and, solely for the limited purposes set forth
therein, SLR Capital Partners, LLC (f/k/a Solar Capital Partners, LLC) (the Investment Adviser). The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SUNS,
with SUNS continuing as the surviving company and as SUNSs wholly-owned subsidiary (the Merger,) and, immediately thereafter, SUNS will merge with and into us, with us continuing as the surviving company (together with the Merger,
the Mergers). See Note 15 for additional information.
Note 2. Significant Accounting Policies
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally
accepted accounting principles (GAAP), and include the accounts of the
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Company and certain wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair
presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to the
current period presentation.
The preparation of consolidated financial statements in conformity with GAAP and pursuant to the
requirements for reporting on Form 10-K and Regulation S-X, as appropriate, also requires management to make estimates and assumptions that affect the reported amount of
assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these
estimates could cause actual results to differ materially.
In the opinion of management, all adjustments, which are of a normal recurring
nature, considered necessary for the fair presentation of financial statements have been included.
The significant accounting policies
consistently followed by the Company are:
(a)
Investment transactions are accounted for on the trade date;
(b)
Under procedures established by our board of directors (the Board), we value investments, including
certain senior secured debt, subordinated debt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We
attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilize
mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we may utilize
independent third-party valuation firms to assist us in determining the fair value of material assets. Accordingly, such investments go through our multi-step valuation process as described below. In each such case, independent valuation firms
consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus
amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith
by or under the direction of our Board. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board. Such determination of
fair values involves subjective judgments and estimates.
With respect to investments for which market quotations are not
readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:
(1)
our quarterly valuation process begins with each portfolio company or investment being initially valued by the
investment professionals of the Investment Adviser responsible for the portfolio investment;
(2)
preliminary valuation conclusions are then documented and discussed with senior management of the Investment
Adviser;
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
(3)
independent valuation firms engaged by our Board conduct independent appraisals and review the Investment
Advisers preliminary valuations and make their own independent assessment for all material assets;
(4)
the audit committee of the Board reviews the preliminary valuation of the Investment Adviser and that of the
independent valuation firm and responds to the valuation recommendation of the independent valuation firm, if any, to reflect any comments; and
(5)
the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith
based on the input of the Investment Adviser, the respective independent valuation firm, if any, and the audit committee.
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in
accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach
uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash
flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account
in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection
provisions, the nature and realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios
of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an
input in the valuation process. For the fiscal year ended December 31, 2021, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process.
ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1 : Unadjusted quoted prices in active markets for identical assets or liabilities, accessible by the Company
at the measurement date.
Level 2 : Quoted prices for similar assets or liabilities in active markets, or quoted
prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3 : Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience.
(c)
Gains or losses on investments are calculated by using the specific identification method.
(d)
The Company records dividend income and interest, adjusted for amortization of premium and accretion of
discount, on an accrual basis. Loan origination fees, original issue discount, and market
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
discounts are capitalized and we amortize such amounts into income using the effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as
interest income. We record call premiums received on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income
as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.
(e)
The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment
companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise
tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.
(f)
Book and tax basis differences relating to stockholder distributions and other permanent book and tax
differences are typically reclassified among the Companys capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP; accordingly at
December 31, 2021, $2,605 was reclassified on our balance sheet between accumulated distributable net loss and paid-in capital in excess of par. Total earnings and net asset value are not affected.
(g)
Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a
distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.
(h)
In accordance with Regulation S-X and ASC Topic
810 Consolidation , the Company consolidates its interest in controlled investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In
addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.
(i)
The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in
foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Companys investments in
foreign securities, if any, may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the
investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments in terms of U.S. dollars and therefore the earnings of the Company.
(j)
The Company has made elections to apply the fair value option of accounting to the unsecured senior notes due
2022 (the 2022 Unsecured Notes) (see notes 6 and 7), in accordance with ASC 825-10.
(k)
In accordance with ASC 835-30, the Company reports origination and
other expenses related to certain debt issuances as a direct deduction from the carrying amount of the debt liability. Applicable expenses are deferred and amortized using either the effective interest method or the straight-line method over the
stated life. The straight-line method may be used on revolving facilities and/or when it approximates the effective yield method.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
(l)
The Company may enter into forward exchange contracts in order to hedge against foreign currency risk. These
contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation.
Realized gains or losses are recognized when contracts are settled.
(m)
The Company records expenses related to shelf registration statements and applicable equity offering costs as
prepaid assets. These expenses are typically charged as a reduction of capital upon the sale of shares or expensed, in accordance with ASC 946-20-25.
(n)
Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more (90 days or more for equipment financing) and/or when it is no longer probable that principal or interest cash payments will
be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in managements judgment, are likely to continue timely payment of their
remaining principal and interest obligations. Cash interest payments received on such investments may be recognized as income or applied to principal depending on managements judgment.
(o)
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and
so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less would qualify, with limited exceptions. The Company believes
that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.
Recent Accounting Pronouncements
In March 2020, the FASB issued
Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional
expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the
reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is evaluating the potential impact that the adoption of this guidance will
have on the Companys financial statements.
Note 3. Agreements
The Company has an investment advisory and management agreement (the Advisory Agreement) with the Investment Adviser, under which
the Investment Adviser will manage the day-to-day operations of, and provide investment advisory services to the Company. For providing these services, the Investment
Adviser receives a fee from the Company, consisting of two componentsa base management fee and a performance-based incentive fee. The base management fee is determined by taking the average value of the Companys gross assets at the end
of the two most recently completed calendar quarters calculated at an annual rate of 1.75% on gross assets up to 200% of the Companys total net assets as of the immediately preceding quarter end and 1.00% on gross assets that exceed 200%
of the Companys total net assets as of the immediately preceding quarter end. For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving
investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cash borrowings.
The performance-based incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on the
Companys pre-incentive fee net investment income for the immediately preceding
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any
other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus the
Companys operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and distributions paid on any issued and outstanding preferred stock, but
excluding the performance-based incentive fee). Pre-incentive fee net investment income does not include any realized capital gains or losses, or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Companys net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of
1.75% per quarter (7% annualized). The Company pays the Investment Adviser a performance-based incentive fee with respect to the Companys pre-incentive fee net investment income in each calendar
quarter as follows: (1) no performance-based incentive fee in any calendar quarter in which the Companys pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of the
Companys pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate
but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of the Companys pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These
calculations are appropriately pro-rated for any period of less than three months.
The second
part of the performance-based incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement, as of the termination date), and will equal 20% of the Companys cumulative
realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the
end of each calendar year) and all net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the performance-based
incentive fee is accrued based upon 20% of cumulative net realized gains and net unrealized capital appreciation. No accrual was required for the fiscal years ended December 31, 2021, 2020 and 2019.
For the fiscal years ended December 31, 2021, 2020 and 201, the Company recognized $28,277, $24,951 and $26,774, respectively, in base
management fees and $10,309, $2,272 and $18,111, respectively, in performance-based incentive fees.
The Company has also entered into an
Administration Agreement with SLR Capital Management, LLC (f/k/a Solar Capital Management, LLC) (the Administrator) under which the Administrator provides administrative services to the Company. For providing these services, facilities
and personnel, the Company reimburses the Administrator for the Companys allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The
Administrator will also provide, on the Companys behalf, managerial assistance to those portfolio companies to which the Company is required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis.
For the fiscal years ended December 31, 2021, 2020 and 2019, the Company recognized expenses under the Administration Agreement of
$5,575, $5,215 and $5,265, respectively. No managerial assistance fees were accrued or collected for the fiscal years ended December 31, 2021, 2020 and 2019.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Note 4. Net Asset Value Per Share
At December 31, 2021, the Companys total net assets and net asset value per share were $842,281 and $19.93, respectively. This
compares to total net assets and net asset value per share at December 31, 2020 of $852,023 and $20.16, respectively.
Note 5. Earnings Per
Share
The following table sets forth the computation of basic and diluted net increase in net assets per share resulting from
operations, pursuant to ASC 260-10, for the years ended December 31, 2021, 2020 and 2019:
Year ended
December 31, 2021
Year ended
December 31, 2020
Year ended
December 31, 2019
Earnings per share (basic & diluted)
Numerator - net increase in net assets resulting from operations:
$
59,566
$
15,451
$
56,016
Denominator - weighted average shares:
42,260,826
42,260,826
42,260,826
Earnings per share:
$
1.41
$
0.37
$
1.33
Note 6. Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuations used to measure
fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy
are as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market that the Company has the ability to access.
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not
active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a)
Quoted prices for similar assets or liabilities in active markets;
b)
Quoted prices for identical or similar assets or liabilities in
non-active markets;
c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through
correlation or other means for substantially the full term of the asset or liability.
Level 3.
Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements and, if
applicable, an independent third-party valuation firms own assumptions about the assumptions a market participant would use in pricing the asset or liability.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
When the inputs used to measure fair value fall within different levels of the hierarchy, the
level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are
observable (Levels 1 and 2) and unobservable (Level 3).
Gains and losses for assets and liabilities categorized within the
Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may
result in a reclassification for certain financial assets or liabilities. Such reclassifications involving Level 3 assets and liabilities are reported as transfers in/out of Level 3 as of the end of the quarter in which the
reclassifications occur. Within the fair value hierarchy tables below, cash and cash equivalents are excluded but could be classified as Level 1.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2021
and December 31, 2020:
Fair Value Measurements
As of December 31, 2021
Level 1
Level 2
Level 3
Total
Assets:
Senior Secured Loans
$
$
$
939,690
$
939,690
Equipment Financing
273,795
273,795
Preferred Equity
5,630
5,630
Common Equity/Equity Interests/Warrants
1,086
450,381
451,467
Total Investments
$
1,086
$
$
1,669,496
$
1,670,582
Liabilities:
2022 Unsecured Notes
$
$
$
150,000
$
150,000
Fair Value Measurements
As of December 31, 2020
Level 1
Level 2
Level 3
Total
Assets:
Senior Secured Loans
$
$
$
798,052
$
798,052
Equipment Financing
284,846
284,846
Preferred Equity
6,401
6,401
Common Equity/Equity Interests/Warrants
1,681
440,971
442,652
Total Investments
$
1,681
$
$
1,530,270
$
1,531,951
Liabilities:
2022 Unsecured Notes
$
$
$
150,000
$
150,000
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
The following table provides a summary of the changes in fair value of Level 3 assets
for the year ended December 31, 2021, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2021:
Fair Value Measurements Using Level 3 Inputs
Senior Secured
Loans
Equipment
Financing
Preferred Equity
Common Equity/
Equity
Interests/
Warrants
Total
Fair value, December 31, 2020
$
798,052
$
284,846
$
6,401
$
440,971
$
1,530,270
Total gains or losses included in earnings:
Net realized gain (loss)
(8
)
345
337
Net change in unrealized gain (loss)
(13,567
)
1,394
(1,042
)
9,857
(3,358
)
Purchase of investment securities
533,614
76,700
271
610,585
Proceeds from dispositions of investment securities
(378,409
)
(89,137
)
(675
)
(468,221
)
Transfers in/out of Level 3 (1)
(117
)
(117
)
Fair value, December 31, 2021
$
939,690
$
273,795
$
5,630
$
450,381
$
1,669,496
Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:
Net change in unrealized gain (loss)
$
(12,837)
$
1,394
$
(1,042)
$
9,597
$
(2,888
)
(1)
On February 17, 2021, the Company exercised its warrants in Senseonics Holdings, Inc., receiving shares in
the common stock of Senseonics Holdings, Inc. The common stock of Senseonics Holdings, Inc. is publicly traded, so this position is considered to be a Level 1 asset.
The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant
unobservable inputs (Level 3) for the year ended December 31, 2021:
2022 Unsecured Notes
For the year ended
December 31, 2021
Beginning fair value
$
150,000
Net realized (gain) loss
Net change in unrealized (gain) loss
Borrowings
Repayments
Transfers in/out of Level 3
Ending fair value
$
150,000
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
The Company made elections to apply the fair value option of accounting to the 2022 Unsecured
Notes, in accordance with ASC 825-10. On December 31, 2021, there were borrowings of $150,000 on the 2022 Unsecured Notes.
The following table provides a summary of the changes in fair value of Level 3 assets for the year ended December 31, 2020, as well
as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2020:
Fair Value Measurements Using Level 3 Inputs
Senior Secured
Loans
Equipment
Financing
Preferred Equity
Common Equity/
Equity
Interests/
Warrants
Total
Fair value, December 31, 2019
$
852,834
$
320,630
$
10,891
$
309,512
$
1,493,867
Total gains or losses included in earnings:
Net realized loss
(24,570
)
(123
)
(269
)
(24,962
)
Net change in unrealized gain (loss)
10,426
(20,043
)
(3,334
)
(4,898
)
(17,849
)
Purchase of investment securities
264,939
37,977
320
136,626
439,862
Proceeds from dispositions of investment securities
(305,577
)
(53,595
)
(1,476
)
(360,648
)
Transfers in/out of Level 3
Fair value, December 31, 2020
$
798,052
$
284,846
$
6,401
$
440,971
$
1,530,270
Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:
Net change in unrealized loss
$
(5,084)
$
(20,043)
$
(3,334)
$
(4,898)
$
(33,359
)
The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities
measured using significant unobservable inputs (Level 3) for the year ended December 31, 2020:
2022 Unsecured Notes
For the year ended
December 31, 2020
Beginning fair value
$
150,000
Net realized (gain) loss
Net change in unrealized (gain) loss
Borrowings
Repayments
Transfers in/out of Level 3
Ending fair value
$
150,000
The Company made elections to apply the fair value option of accounting to the 2022 Unsecured Notes, in
accordance with ASC 825-10. On December 31, 2020, there were borrowings of $150,000 on the 2022 Unsecured Notes.
133
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Quantitative Information about Level 3 Fair Value Measurements
The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is
ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms
and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our
investment within each portfolio company.
Significant unobservable quantitative inputs typically used in the fair value measurement of
the Companys Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as
enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (EBITDA) multiples of similar companies, and comparable market transactions for equity securities.
Quantitative information about the Companys Level 3 asset and liability fair value measurements as of December 31, 2021 is
summarized in the table below:
Asset or
Liability
Fair Value at
December 31, 2021
Principal Valuation
Technique/Methodology
Unobservable Input
Range (Weighted
Average)
Senior Secured Loans
Asset
$
$
931,769
7,921
Income Approach
Market Multiple (1)
Market Yield
Comparable Multiple
4.0% 19.6% (8.7%)
2.0x-3.0x(2.5x)/
2.0x-3.0x(2.5x)
Equipment Financing
Asset
$
$
144,693
129,102
Income Approach
Market Approach
Market Yield
Return on Equity
7.1% 20.3% (9.8%)
4.6%-4.6%
(4.6%)
Preferred Equity
Asset
$
5,630
Income Approach
Market Yield
3.5% 8.0% (4.4%)
Common Equity/Equity Interests/Warrants
Asset
$
$
151,615
298,766
Market
Multiple (2)
Market Approach
Comparable Multiple
Return on Equity
5.8x 10.5x (9.5x)
6.1% 18.5% (8.6%)
2022 Unsecured Notes
Liability
$
150,000
Income Approach
Market Yield
2.2% 4.6% (4.5%)
(1)
Investments are valued using a
sum-of-the parts analysis, using expected EBITDA multiples (2x-3x) for certain segments of the business and expected revenue
multiples (2x-3x) for certain segments of the business.
(2)
Includes $403 of investments valued using a Black-Scholes model and $151,212 of investments valued using an
EBITDA multiple
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Quantitative information about the Companys Level 3 asset and liability fair value
measurements as of December 31, 2020 is summarized in the table below:
Asset or
Liability
Fair Value at
December 31, 2020
Principal Valuation
Technique/Methodology
Unobservable Input
Range (Weighted
Average)
Senior Secured Loans
Asset
$
798,052
Income Approach
Market Yield
5.8% 16.4% (8.9%)
Equipment Financing
Asset
$
$
155,744
129,102
Income Approach
Market Approach
Market Yield
Return on Equity
6.6% 20.3% (10.3%)
10.9%-10.9%
(10.9%)
Preferred Equity
Asset
$
6,401
Income Approach
Market Yield
3.3% 8.0% (5.0%)
Common Equity/Equity Interests/Warrants
Asset
$
$
144,205
296,766
Market
Multiple (1)
Market Approach
Comparable Multiple
Return on Equity
5.8x 6.3x (6.3x)
(10.3%) 13.7% (0.5%)
2022 Unsecured Notes
Liability
$
150,000
Income Approach
Market Yield
1.5% 4.6% (4.5%)
(1)
Includes $675 of investments valued using a weighted valuation approach, $492 of investments valued using a
Black-Scholes model, $6,442 of investments valued using an EBITDA multiple and $136,596 of investments which, due to the proximity of the transaction relative to the measurement date, were valued using the cost of the investments.
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs
used in deriving bid-ask spreads, if applicable, could result in significantly lower or higher fair value measurements for such assets and liabilities. Generally, an increase in market yields or decrease in
EBITDA multiples may result in a decrease in the fair value of certain of the Companys investments.
Note 7. Debt
Our debt obligations consisted of the following as of December 31, 2021 and December 31, 2020:
December 31, 2021
December 31, 2020
Facility
Face Amount
Carrying Value
Face Amount
Carrying Value
Credit Facility
$
322,500
$
318,015
(1)
$
201,000
$
198,766
(1)
NEFPASS Facility
30,000
29,377
(2)
2022 Unsecured Notes
150,000
150,000
150,000
150,000
2022 Tranche C Notes
21,000
20,964
(3)
21,000
20,930
(3)
2023 Unsecured Notes
75,000
74,592
(4)
75,000
74,225
(4)
2024 Unsecured Notes
125,000
124,143
(5)
125,000
123,877
(5)
2026 Unsecured Notes
75,000
74,384
(6)
75,000
74,276
(6)
2027 Unsecured Notes
50,000
49,940
(7)
$
818,500
$
812,038
$
677,000
$
671,451
(1)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $4,485 and $2,234 as of
December 31, 2021 and December 31, 2020, respectively.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
(2)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $0 and $623 as of
December 31, 2021 and December 31, 2020, respectively.
(3)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $36 and $70 as of
December 31, 2021 and December 31, 2020, respectively.
(4)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $408 and $775 as of
December 31, 2021 and December 31, 2020, respectively.
(5)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $857 and $1,123 as of
December 31, 2021 and December 31, 2020, respectively.
(6)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $616 and $724 as of
December 31, 2021 and December 31, 2020, respectively.
(7)
Carrying Value equals the Face Amount net of unamortized debt issuance costs of $60 as of December 31,
2021.
Unsecured Notes
On September 14, 2021, the Company closed a private offering of $50,000 of the 2027 Unsecured Notes with a fixed interest rate of 2.95%
and a maturity date of March 14, 2027. Interest on the 2027 Unsecured Notes is due semi-annually on March 14 and September 14. The 2027 Unsecured Notes were issued in a private placement only to qualified institutional buyers.
On December 18, 2019, the Company closed a private offering of $125,000 of the 2024 Unsecured Notes with a fixed interest rate of 4.20%
and a maturity date of December 15, 2024. Interest on the 2024 Unsecured Notes is due semi-annually on June 15 and December 15. The 2024 Unsecured Notes were issued in a private placement only to qualified institutional buyers.
On December 18, 2019, the Company closed a private offering of $75,000 of the 2026 Unsecured Notes with a fixed interest rate of 4.375%
and a maturity date of December 15, 2026. Interest on the 2026 Unsecured Notes is due semi-annually on June 15 and December 15. The 2026 Unsecured Notes were issued in a private placement only to qualified institutional buyers.
On December 28, 2017, the Company closed a private offering of $21,000 of the 2022 Tranche C Notes with a fixed interest rate of 4.50%
and a maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28 and December 28. The 2022 Tranche C Notes were issued in a private placement only to qualified institutional buyers.
On November 22, 2017, we issued $75,000 in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of
$73,846. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a fixed rate of 4.50% per year, commencing on January 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023.
On February 15, 2017, the Company closed a private offering of $100,000 of the 2022 Unsecured Notes with a fixed interest rate of 4.60%
and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement only to qualified institutional buyers.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
On November 8, 2016, the Company closed a private offering of $50,000 of the 2022
Unsecured Notes with a fixed interest rate of 4.40% and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement
only to qualified institutional buyers.
Revolving and Term Loan Facilities
On December 28, 2021, the Company closed on Amendment No. 1 to its August 28, 2019 senior secured credit agreement (the
Credit Facility). Post amendment, the Credit Facility is composed of $600,000 of revolving credit and $100,000 of term loans. Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of 1.75%-2.00% or the alternate base rate plus 0.75%-1.00%. The Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year.
The Credit Facility may be increased up to $800,000 with additional new lenders or an increase in commitments from current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition,
the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholders equity and a minimum asset coverage ratio. At December 31, 2021, outstanding USD equivalent
borrowings under the Credit Facility totaled $322,500, composed of $222,500 of revolving credit and $100,000 of term loans.
On
December 28, 2021, the Company prepaid and terminated the NEFPASS SPV LLC September 26, 2018 credit facility.
Certain covenants
on our issued debt may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the
Code.
The Company has made an election to apply the fair value option of accounting to the 2022 Unsecured Notes, in accordance with ASC 825-10. We believe accounting for this facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. ASC
825-10 requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statement of Assets and Liabilities and changes in fair value of the above facility are
reported in the Consolidated Statement of Operations.
The average annualized interest cost for all borrowings for the year ended
December 31, 2021 and the year ended December 31, 2020 was 3.64% and 4.11%, respectively. These costs are exclusive of other credit facility expenses such as unused fees, agency fees and other prepaid expenses related to establishing
and/or amending the Credit Facility, the 2022 Unsecured Notes, the 2022 Tranche C Notes, the NEFPASS Facility, the 2023 Unsecured Notes, the 2024 Unsecured Notes, the 2026 Unsecured Notes and the 2027 Unsecured Notes (collectively the Credit
Facilities), if any. The maximum amounts borrowed on the Credit Facilities during the year ended December 31, 2021 and the year ended December 31, 2020 were $902,550 and $677,000, respectively.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Note 8(a). Income Tax Information and Distributions to Stockholders
The tax character of distributions for the fiscal years ended December 31, 2021, 2020 and 2019 were as follows (1):
2021
2020
2019
Ordinary income
$
41,221
59.5
%
$
48,795
70.4
%
$
65,715
94.8
%
Capital gains
0.0
%
0.0
%
0.0
%
Return of capital
28,087
40.5
%
20,513
29.6
%
3,592
5.2
%
Total distributions
$
69,308
100.0
%
$
69,308
100.0
%
$
69,307
100.0
%
As of December 31, 2021, 2020 and 2019 the total accumulated earnings (loss) on a tax basis were as
follows (1):
2021
2020
2019
Undistributed ordinary income
$
$
$
Undistributed long-term net capital gains
Total undistributed net earnings
Post-October capital losses
Capital loss carryforward
(68,857
)
(69,384
)
(45,400
)
Other book/tax temporary differences
2,332
2,168
2,004
Net unrealized appreciation
19,495
4,446
8,172
Total tax accumulated loss
$
(47,030
)
$
(62,770
)
$
(35,224
)
(1)
Tax information for the fiscal years ended December 31, 2021, 2020 and 2019 are/were estimates and are not
final until the Company files its tax returns, typically in September or October each year.
The Company recognizes in
its consolidated financial statements the tax effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. To the best of our knowledge, we did not have any uncertain
tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein.
Although we file federal and state tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years since 2018 remain subject to examination by the Internal Revenue Service and the state department of revenue.
The capital loss carryforwards shown above do not expire.
Note 8(b). Other Tax Information (unaudited)
For the fiscal years ended December 31, 2021, 2020 and 2019, 0.32%, 0.10% and 0.00%, respectively, of the dividends paid during the year
were eligible for qualified dividend income treatment and the dividends received deduction for corporate stockholders. For the fiscal years ended December 31, 2021, 2020, and 2019, 93.05%, 92.05% and 83.81%, respectively, of each of the
distributions paid during the year represent interest-related dividends. For the fiscal years ended December 31, 2021, 2020 and 2019, none of the distributions represent short-term capital gains dividends.
138
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Note 9. Financial Highlights
The following is a schedule of financial highlights for the respective years:
Year ended
December 31,
2021
Year ended
December 31,
2020
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Per Share Data: (a)
Net asset value, beginning of year
$
20.16
$
21.44
$
21.75
$
21.81
$
21.74
Net investment income
1.44
1.40
1.71
1.77
1.62
Net realized and unrealized gain (loss)
(0.03
)
(1.04
)
(0.38
)
(0.19
)
0.05
Net increase in net assets resulting from operations
1.41
0.36
1.33
1.58
1.67
Distributions to stockholders (see note 8a):
From net investment income
(0.98
)
(1.15
)
(1.55
)
(1.64
)
(1.60
)
From return of capital
(0.66
)
(0.49
)
(0.09
)
Net asset value, end of year
$
19.93
$
20.16
$
21.44
$
21.75
$
21.81
Per share market value, end of year
$
18.43
$
17.51
$
20.62
$
19.19
$
20.21
Total Return(b)
14.66
%
(5.72
%)
16.22
%
2.77
%
4.47
%
Net assets, end of year
$
842,281
$
852,023
$
905,880
$
919,171
$
921,605
Shares outstanding, end of year
42,260,826
42,260,826
42,260,826
42,260,826
42,260,826
Ratios to average net assets:
Net investment income
7.13
%
6.93
%
7.83
%
8.10
%
7.43
%
Operating expenses
5.68
%
4.14
%
5.76
%
5.83
%
5.80
%
Interest and other credit facility expenses
3.50
%
3.18
%
3.13
%
2.67
%
2.35
%*
Total expenses
9.18
%
7.32
%
8.89
%
8.50
%
8.15
%
Average debt outstanding
$
703,670
$
556,104
$
561,249
$
508,445
$
414,264
Portfolio turnover ratio
29.9
%
26.0
%
24.1
%
39.3
%
24.9
%
(a)
Calculated using the average shares outstanding method.
(b)
Total return is based on the change in market price per share during the year and takes into account
distributions, if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load.
*
Ratios are shown without the non-recurring upfront costs that were
expensed in the period associated with the amendment and establishment of the Credit Facility and 2022 Unsecured Notes. Ratios excluding those non-recurring upfront costs would be 2.29% for the fiscal year
ended December 31, 2017.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Note 10. SLR Credit Solutions
On December 28, 2012, we acquired an equity interest in Crystal Capital Financial Holdings LLC (Crystal Financial) for
$275,000 in cash. Crystal Financial owned approximately 98% of the outstanding ownership interest in SLR Credit Solutions (SLR Credit), f/k/a Crystal Financial LLC. The remaining financial interest was held by various employees of SLR
Credit, through their investment in Crystal Management LP. SLR Credit had a diversified portfolio of 23 loans having a total par value of approximately $400,000 at November 30, 2012 and a $275,000 committed revolving credit facility. On
July 28, 2016, the Company purchased Crystal Management LPs approximately 2% equity interest in SLR Credit for approximately $5,737. Upon the closing of this transaction, the Company holds 100% of the equity
interest in SLR Credit. On September 30, 2016, Crystal Capital Financial Holdings LLC was dissolved. As of December 31, 2021, total commitments to the revolving credit facility are $200,000.
As of December 31, 2021 SLR Credit had 22 funded commitments to 19 different issuers with total funded loans of approximately $287,375 on
total assets of $347,821. As of December 31, 2020, SLR Credit had 30 funded commitments to 24 different issuers with total funded loans of approximately $404,115 on total assets of $433,914. As of December 31, 2021 and December 31,
2020, the largest loan outstanding totaled $35,000 and $45,000, respectively. For the same periods, the average exposure per issuer was $15,125 and $16,838, respectively. SLR Credits credit facility, which is non-recourse to the Company, had approximately $100,742 and $183,896 of borrowings outstanding at December 31, 2021 and December 31, 2020, respectively. For the years ended December 31, 2021, 2020 and
2019 SLR Credit had net income of $14,164, $23,293 and $8,021, respectively, on gross income of $33,993, $45,315 and $61,177, respectively. Due to timing and non-cash items, there may be material
differences between GAAP net income and cash available for distributions. SLR Credits consolidated financial statements for the fiscal years ended December 31, 2021 and December 31, 2020 are attached as an exhibit to this annual
report on Form 10-K.
Note 11. Commitments and Contingencies
The Company had unfunded debt and equity commitments to various revolving and delayed-draw term loans as well as to SLR Credit. The total
amount of these unfunded commitments as of December 31, 2021 and December 31, 2020 is $226,733 and $126,180, respectively, comprised of the following:
December 31,
2021
December 31,
2020
SLR Credit Solutions*
$
44,263
$
44,263
Arcutis Biotherapeutics, Inc.
43,470
Glooko, Inc.
25,091
BridgeBio Pharma, Inc.
23,049
CC SAG Holdings Corp. (Spectrum Automotive)
18,827
Inszone Mid, LLC
12,465
One Touch Direct, LLC
7,226
5,042
Rezolute, Inc.
5,675
Maurices, Incorporated
5,649
SLR Equipment Finance
5,000
4,150
NAC Holdings Corporation
4,765
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
December 31,
2021
December 31,
2020
Ivy Fertility Services, LLC
$
4,532
$
SOC Telemed, Inc.
4,448
RQM+ Corp
3,818
Atria Wealth Solutions, Inc.
3,746
3,529
Kid Distro Holdings, LLC
2,650
Foundation Consumer Brands, LLC
2,269
Neuronetics, Inc.
2,230
6,691
MMIT Holdings, LLC
2,009
Basic Fun, Inc.
1,935
1,116
Pinnacle Treatment Centers, Inc.
1,414
1,386
SunMed Group Holdings, LLC
828
Ultimate Baked Goods Midco LLC
801
American Teleconferencing Services, Ltd.
573
Smile Doctors LLC
26,740
Soleo Health Holdings, Inc.
7,421
Cardiva Medical, Inc.
7,333
Kindred Biosciences, Inc.
6,897
PQ Bypass, Inc.
5,000
Centrexion Therapeutics, Inc.
3,785
Sentry Data Systems, Inc.
1,577
Delphinus Medical Technologies, Inc.
1,250
Total Commitments
$
226,733
$
126,180
*
The Company controls the funding of the SLR Credit Solutions commitment and may cancel it at its
discretion.
The credit agreements of the above loan commitments contain customary lending
provisions and/or are subject to the portfolio companys achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences
materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future
earning assets for the Company. As of December 31, 2021 and December 31, 2020, the Company had sufficient cash available and/or liquid securities available to fund its commitments and had reviewed them for any appropriate fair value
adjustment.
Note 12. SLR Equipment Finance
On July 31, 2017, we acquired a 100% equity interest in NEF Holdings, LLC, which conducts its business through its wholly-owned subsidiary
Nations Equipment Finance, LLC. Effective February 25, 2021, Nations Equipment Finance, LLC and its related companies is doing business as SLR Equipment Finance (SLR Equipment). SLR Equipment is an independent equipment finance
company that provides senior secured loans and leases primarily to U.S. based companies. We invested $209,866 in cash to effect the transaction, of which $145,000 was invested in the equity of SLR Equipment through our wholly-owned consolidated
taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and $64,866 was used to purchase certain leases and loans held by SLR Equipment through NEFPASS LLC. Concurrent with the
141
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
transaction, SLR Equipment refinanced its existing senior secured credit facility into a $150,000 non-recourse facility with an accordion feature to expand
up to $250,000. In September 2019, SLR Equipment amended the facility, increasing commitments to $213,957 with an accordion feature to expand up to $313,957 and extended the maturity date of the facility to July 31, 2023.
As of December 31, 2021, SLR Equipment had 135 funded equipment-backed leases and loans to 61 different customers with a total net
investment in leases and loans of approximately $210,986 on total assets of $264,007. As of December 31, 2020, NEF had 138 funded equipment-backed leases and loans to 61 different customers with a total net investment in leases and loans of
approximately $188,448 on total assets of $263,443. As of December 31, 2021 and December 31, 2020, the largest position outstanding totaled $19,207 and $25,103, respectively. For the same periods, the average exposure per customer was
$3,459 and $3,089, respectively. SLR Equipments credit facility, which is non-recourse to the Company, had approximately $118,002 and $100,569 of borrowings outstanding at December 31, 2021 and
December 31, 2020, respectively. For the years ended December 31, 2021, 2020 and 2019, SLR Equipment had net losses of $9,729, $8,883 and $6,023, respectively on gross income of $22,931, $24,512 and $31,928, respectively. Due to
timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. SLR Equipments consolidated financial statements for the fiscal years ended
December 31, 2021 and December 31, 2020 are attached as an exhibit to this annual report on Form 10-K.
Note 13. Capital Share Transactions
As
of December 31, 2021 and December 30, 2020, 200,000,000 shares of $0.01 par value capital stock were authorized.
There were no
transactions in capital stock during the years ended December 31, 2021 and December 30, 2020.
Note 14. Kingsbridge Holdings, LLC
On November 3, 2020, the Company acquired an 87.5% equity interest in Kingsbridge Holdings, LLC (KBH) through KBH Topco LLC
(KBHT), a newly formed Delaware corporation. KBH is a residual focused independent mid-ticket lessor of equipment primarily to U.S. investment grade companies. The Company invested
$216,596 to effect the transaction, of which $136,596 was invested to acquire 87.5% of KBHTs equity and $80,000 in KBHs debt. The existing management team of KBH committed to continue to lead KBH after the transaction. Post the
transaction, the Company owns 87.5% of KBHT equity and the KBH management team owns the remaining 12.5% of KBHTs equity.
As of
December 31, 2021 and 2020, KBHT had total assets of $738,425 and $744,684, respectively. For the same periods, debt recourse to KBHT totaled $216,881 and $219,044, respectively, and non-recourse debt
totaled $323,844 and $335,899, respectively. For the year ended December 31, 2021 and the period November 3, 2020 through December 31, 2020, KBHT had net income of $12,151 and $2,170, respectively, on gross income of $245,889 and
$43,618, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in KBHTs
funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that KBHT will be able to maintain consistent dividend payments to us. KBHTs consolidated financial statements for the year ended
December 31, 2021 and the period November 3, 2020 to December 31, 2020 are attached as an exhibit to this annual report on Form 10-K.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
Note 15. Pending Merger with SUNS
On December 1, 2021, we entered into the Merger Agreement, which provides that, subject to the conditions set forth in the Merger
Agreement, Merger Sub will merge with and into SUNS, with SUNS continuing as the surviving company and as our wholly-owned subsidiary and, immediately thereafter, SUNS will merge with and into us, with us continuing as the surviving company. Both
the Board and SUNSs board of directors, including all of the respective independent directors, in each case, on the recommendation of a special committee comprised solely of the independent directors of us or SUNS, as applicable, have approved
the Merger Agreement and the transactions contemplated thereby.
At the effective time of the Merger (Effective Time), each
share of our common stock issued and outstanding immediately prior to the Effective Time (other than shares owned by us or any of our controlled subsidiaries (the Cancelled Shares)) will be converted into the right to receive a number of
shares of SUNSs common stock equal to the Exchange Ratio (as defined below) (cash may be paid in lieu of fractional shares).
As of
a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time (such date, the Determination Date), each of us and SUNS will deliver to the other a calculation of its NAV as of such date, in
each case using a pre-agreed set of assumptions, methodologies and adjustments. We refer to such calculation with respect to us as the Closing SLRC Net Asset Value and with respect to SUNS as the
Closing SUNS Net Asset Value. Based on such calculations, the parties will calculate the SLRC Per Share NAV, which will be equal to (i) the Closing SLRC Net Asset Value divided by (ii) the number of shares of our
common stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the SUNS Per Share NAV, which will be equal to (A) the Closing SUNS Net Asset Value divided by (B) the number of shares of
SUNS Common Stock issued and outstanding as of the Determination Date. The Exchange Ratio will be equal to the quotient (rounded to four decimal places) of (i) the SUNS Per Share NAV divided by (ii) the SLRC Per Share NAV.
We and SUNS will update and redeliver the Closing SLRC Net Asset Value or the Closing SUNS Net Asset Value, respectively, in the event of a
material change to such calculation between the Determination Date and the closing of the Mergers and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time.
The Merger Agreement contains customary representations and warranties by each of us, SUNS and SLR Capital Partners. The Merger Agreement also
contains customary covenants, including, among others, covenants relating to the operation of each of our and SUNSs businesses during the period prior to the closing of the Mergers.
Consummation of the Mergers, which is currently anticipated to occur during the first half of calendar year 2022, is subject to certain
closing conditions, including requisite approvals of our and SUNSs stockholders and certain other closing conditions.
The Merger
Agreement also contains certain termination rights in favor of us and SUNS, including if the Mergers are not completed on or before December 1, 2022 or if the requisite approvals of our or SUNSs stockholders are not obtained. The Merger
Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring SUNS may be required to pay us a termination fee of approximately $7,600. The Merger Agreement provides that, upon the
termination of the Merger Agreement under certain circumstances, a third party acquiring us may be required to pay to SUNS a termination fee of approximately $25,600.
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SLR INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2021
(in thousands, except share amounts)
The foregoing description of the Merger Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Merger Agreement, which is incorporated by reference as Exhibit 2.1 to this Annual Report on Form 10-K and incorporated by reference herein. The
representations, warranties, covenants and agreements contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement (except as may
be expressly set forth in the Merger Agreement); may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger
Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders should not rely on such
representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Merger Agreement or any of their respective subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures
by the parties to the Merger Agreement.
Note 16. Subsequent Events
The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated
financial statements were issued.
On January 6, 2022, the Company closed a private offering of $135,000 of the 2027 Series F
Unsecured Notes with a fixed interest rate of 3.33% and a maturity date of January 6, 2027. Interest on the 2027 Series F Unsecured Notes is due semi-annually on January 6 and July 6. The 2027 Series F Unsecured Notes were issued in a
private placement only to qualified institutional buyers.
On March 1, 2022, the Board declared a quarterly distribution of $0.41 per
share payable on April 1, 2022 to holders of record as of March 18, 2022.
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Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.