Good afternoon, ladies and gentlemen, and welcome Q2 2019 Solar Senior Capital Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Michael Gross, Chairman and Co-CEO. You may begin.

Thank you very much and good morning. Welcome to Solar Senior Capital's earnings call for the fiscal quarter ended June 30, 2019. I'm joined here today by Bruce Spohler, our Co-CEO; and Rich Peteka, our Chief Financial Officer. Rich, would you please start off by covering the webcast and forward-looking statements?

Of course. Thanks, Michael. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Solar Senior Capital Limited. and that any unauthorized broadcast in any form are strictly prohibited. This conference call is being webcast on our website at www.solarseniorcap.com. Audio replays of this call will be made available later today as disclosed in our press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking information. Statements made in today's conference call and webcast may constitute forward-looking statements, which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance, financial condition or results and involve a number of risks and uncertainties. Additionally, past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC. Solar Senior Capital Ltd. undertakes no duty to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website or call us at 212-993-1670. At this time, I'd like to turn the call back to our Co-CEO, Michael Gross.

Thank you, Rich. We're pleased to report that Solar Senior Capital continued its solid operating performance during the second quarter of 2019. Net asset value was $16.34 per share at June 30. In addition, GAAP net investment income of $0.35 per share fully cover our distributions for the quarter. At quarter's end our comprehensive portfolio was $652 million, an increase of approximately 9% over the prior quarter due to $58.2 million of net positive originations across the platform including an acquisition by our ABL subsidiary North Mill, which I'll highlight in a moment. Overall the fundamentals of our portfolio companies remains strong. Our diversified portfolio of senior secured, cash flow and asset-based loans is 99% performing at 6/30 on a cost basis with only one loan on nonaccrual status. At June 30 approximately 98% of Solar Senior's comprehensive portfolio is invested in first lien senior secured loans with approximately 43% of total portfolio in first lien asset-based loans and 55% in first lien cash flow loans. Middle market cash flow lending continues -- remains extremely competitive due to sustained inflows of capital to private credit funds and the lower volume of middle market transactions in the first half of 2019 compared to a year ago. We believe it is paramount to maintain our discipline in cash flow lending in the face of aggressive structures, tight pricing and elevated risk. While facing frothy market conditions in cash flow lending in the face of aggressive structures, tight pricing and elevated risk. While facing frothy market conditions in cash flow lending, our specialty finance businesses Gemino Healthcare Finance and North Mill Capital provide investments with collateral coverage and strong structural protections. These niche businesses generate loans that yields double-digit IRRs. To further capitalize on the favorable risk return characteristics available in our ABL…

Thank you, Michael. Solar Senior Capital Ltd.'s net asset value at June 30 was $262.1 million or $16.34 per share. This compares to a net asset value of $263.1 million or $16.40 per share at March 31, 2019. Solar Senior's balance sheet investment portfolio at June 30, 2019 had a fair market value of $474.2 million in 50 portfolio companies operating in 22 industries compared to a fair market value of $467.7 million in 49 portfolio companies operating in 21 industries at March 31. At June 30, 2019, SUNS' net leverage increased to 0.81 times from 0.78 times at March 31. As a reminder, Solar Senior's target leverage is 1.25 times to 1.50 times debt to equity under the reduced asset coverage requirement. From a P&L perspective, gross investment income for the three months ended June 30, 2019 totaled $10.0 million versus $10.2 million for the three months ended March 31, 2019. Net expenses for the three months ended June 30, 2019 were $4.4 million compared to $4.6 million for the three months ended March 31. Net investment income for the quarter ended June 30 therefore was $5.7 million or $0.35 per average share as compared to $5.7 million and $0.35 per average share for the three months ended March 31. Below the line, Solar Senior had net realized and unrealized loss for the second fiscal quarter totaling $1.1 million compared to a net realized and unrealized gain of $1.7 million for the three months ended March 31. Accordingly, Solar Senior had a net increase in net assets resulting from operations of $4.6 million or $0.29 per average share for the three months ended June 30, 2019. This compares to a net increase in net assets resulting from operations of $7.4 million or $0.46 per average share for the three months ended March 31. Lastly, our Board of Directors declared a monthly distribution for August 2019 of $0.1175 per share payable on August 30, 2019 to stockholders of record on August 22 2019. At this time, I'd like to turn the call over to our Co-CEO, Bruce Spohler

Thank you, Rich. As Michael highlighted, our intention is to expand our portfolio by investing in our three core strategies; first lien cash flow loans to upper middle-market sponsor-owned companies; first lien asset-based loans secured by accounts receivable to midsized companies operating in the health care industry through our wholly-owned subsidiary Gemino; and lastly, through North Millions, which offers first lien asset-based and factoring facilities secured by accounts receivable to midsized companies operating primarily in the manufacturing, services and distribution industries. Additionally, we are actively evaluating opportunities to further expand our specialty finance business lines through either controlled equity stakes in specialty finance platforms as well as through organic growth. In the aggregate at June 30, our investments across all three businesses total $650 million encompassing 232 borrowers. The portfolio is highly diversified with an average investment per issuer of approximately $2.8 million or 0.4% of the portfolio. Approximately, 98% of our portfolio consisted of senior secured loans of which approximately 55% are in first lien cash flow loans and approximately 43% are in first lien asset-based loans with only 1.6% in second lien cash flow loans. Our equity exposure increased slightly in the quarter to 0.5% of the portfolio as a result of the fair value appreciation of this equity investment. SUNS weighted average yield on a fair value basis at June 30 was 10.1%. Including investments and repayments across all three business lines, our second quarter gross originations totaled $87 million and we had repayments of $29 million resulting in net portfolio growth at $58 million for the quarter. Now let me provide an update on the credit quality and earnings power of the portfolio. At June 30, 98.5% of the portfolio on a cost basis was performing with one investment on non-accrual status. Our internal risk assessment…

Thank you, Bruce. Since inception of SUNS in 2011, our investment decisions have consistently been focused on generating strong returns for shareholders over the long-term. While maintaining alignment of interest with you our investors. Importantly, we've been prudent in the face of sustained frothy credit markets and have remained disciplined not compromising credit quality for yield. The result is a solid portfolio foundation from which we can grow. We've always maintained an investment philosophy of assuming that we're late in the credit cycle and we believe that in the current environment it pays to be cautious. We're confident that our differentiated origination platform and diversified portfolio position us well to navigate in any environment. At just over 0.8 times debt to equity, we are under-levered relative to our target range of 1.25 times to 1.5 times net debt to equity. We have substantial dry powder to deploy via differentiated investment verticals. If the credit cycle does shift, we believe our history of conservatism will enable us to outperform on a relative and absolute basis. We will be well positioned to take advantage of market dislocations. As a reminder, late last year Solar Senior's Adviser, Solar Capital Partners announced the closing of private credit funds with total equity commitments of over $750 million bringing our combined investable capital across all fund mandate to approximately $5.5 billion including expected leverage. The increased scale across the platform strategically positions Solar Capital Partners to be a solutions provider with an ability to speak for up to $200 million in a given transaction, while still maintaining highly diversified portfolios. The greater hold capacity across the platform has already resulted in more attractive investment opportunities for SUNS. At last night's close of $16.23 per share SUNS carries a dividend yield of 8.7%, which represents a significantly high rate of return and a 6% implied yield of the S&P/LSTA Leveraged Loan 100 Index. Given the overall credit quality of SUNS' diversified portfolio, our differentiated origination engine and our disciplined investment strategy we believe SUNS represents an attractive investment opportunity on both the relative and absolute value basis. We thank you for your time this morning and look forward to speaking to you next quarter. Operator, could you please open the line for questions?

No further comments other than thank you for your participation today and look forward to talking to you soon.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now all disconnect.