Ladies and gentlemen, thank you for standing-by. And welcome to the First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After speaker presentation, there will be a question-and-answer session [Operator Instructions]. Now, I would like to hand the conference to your speaker today Mr. Michael Gross, Chairman and Co-CEO of Solar Senior Capital Limited. Please go ahead sir.

Yes, thank you very much, and good morning. Welcome to Solar Senior Capital Limited earnings call for the fiscal quarter ended March 31, 2020. I'm joined here today by Bruce Spohler, our Co-CEO; and Rich Peteka, our Chief Financial Officer. Rich, before you start, can you please cover the webcast and forward-looking statements?

Sure. Thank you, 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 broadcasts 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 future performance of financial condition. These statements are not guarantees of our future performance, financial condition or results and involve a number of risks and uncertainties. Including the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our portfolio companies and the global economy. Additionally, past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time-to-time in our filings with the SEC. Solar Senior Capital Limited 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-Chief Executive Officer, Michael Gross.

Thank you, Rich. Good morning, everyone. And thank you for joining us today. First and foremost, we hope you and your family, friends and colleagues remain healthy and safe during this pandemic. Our thoughts are with all of our stakeholders including the dedicated employees across Solar Senior Capital, and the Company's investment advisors Solar Capital Partners, who continue to work from home with full business continuity. Also, we would like to express our heartfelt gratitude to all the healthcare and other frontline workers and our sincere condolences to those families who have lost loved ones. The global spread of COVID-19 in Q1 led to nearly unprecedented levels of market volatility and dislocation in March. The shutdown response plunge the world into recession and financial markets into a broad base and deep sell-off. The resulting fed rate cuts, a steep drop in inflation expectations and a flight to safety drew the 10-year U.S. Treasury yields to below 1% for the first time in more than 150 year history. Near-term liquidity issues have been partially mitigated by a rapid and expensive U.S. Monetary and fiscal policy response. But uncertainty and volatility are expected to remain for the foreseeable future given the lack of clarity and timing of getting our economy back to work. To best serve all of our stakeholders during evolving crisis, we are providing detail on our first quarter results as well as an update as of April 30. As wee outlined in our April 1 shareholder letter, our conservative approach to the management of both our assets and liabilities, has resulted in a defensive portfolio, stable funding, low leverage, strong liquidity and favorable position to make new investments. At March 31, Solar Senior’s net asset value per share was $14.59, a 10.6% decline from year-end. Unrealized depreciation represented the…

Thank you, Michael. Solar Senior Capital Limited net asset value at March 31 was $234.1 million or $14.59 per share. This compares to a net asset value of $261.8 million or $16.32 per share at December 31, 2019. Solar Seniors’ balance sheet investment portfolio at March 31, 2020, at a fair market value of $395.8 million in 45 portfolio companies operating in 21 industries compared to a fair market value of $460.3 million in 48 portfolio companies operating in 21 industries at December 31. Turning to our funding profile and leverage. In our opinion, SUNS currently has one of the strongest balance sheets in the Company's history, which we believe will serve us well in the current downturn. On March 31, Solar Senior announced the issuance of 85 million of 3.90% Senior unsecured five-year notes in a private placement with institutional investors. The proceeds were initially used to reduce borrowings under the company's revolving credit facilities, before funding additional investments and for general corporate purposes. At March 31, 2020, SUNS had $174.4 million of debt outstanding and net leverage of 0.69 times down from 0.78 times net leverage in the prior quarter. Solar Senior Capital has over $220 million to fund portfolio growth subject to borrowing base limitations. 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. As of March 31, 2020, Solar Senior Capital had unfunded commitments of approximately $17 million. The unfunded commitments largely consists of contingent, delayed draw term loans related mostly to add-on acquisition financing in our cash flow lending business, as well as incremental financing commitments to Life Science companies tied to capital or operating thresholds or benchmarks. At this point, less than $5 million of the Company's $17 million of unfunded…

Thank you, Bruce. In closing, we would like to thank Solar Senior Capital shareholders for their support and patience during this difficult time. From inception, we've endeavored to make the right decisions to preserve and enhance long-term shareholder value. Our priority has always been to create and maintain the portfolio that can generate steady income for shareholders and protect our capital. Over the course of extended frothy credit markets, we have remained disciplined in the phase of significant spread compression, higher leverage and loose structures all which have elevated the risk of principal loss and middle market leverage finance. As a result, we have positioned SUNS defensively, diversified our portfolio across cash flow and specialty finance, first lien to senior secured loans to manage downside risk. We have operated well under target fund leverage and we have preserved liquidity. We believe we have taken the appropriate steps to navigate successfully through what we anticipate to be a prolonged and difficult period. Throughout, we have maintained alignment through our ownership of SUNS alongside our fellow shareholders. Our decisions prioritize capital preservation rather than leveraging the portfolio and taking on more risk at the wrong time of the cycle, have allowed us to enter into this dislocation in a position of relative strength. Importantly, we've confidence that our team's expertise and ability to provide financing across cash flow and ABL solutions should enable SUNS to continue to support the existing portfolio companies and make new investments during this period of turmoil. As a result of recent fund raising, the SCP platform now has over $6.5 billion investment capital including potential leverage with over $3 billion of that currently available to make new investments. SCPs fund private fund maintain a co-investment strategy with Solar Senior Capital which provides the company access to retracted…

[Operator Instructions] Our first question will come from the line of Mickey Schleien from Ladenburg. You may begin.

Yes, good morning everyone.

Good morning, Mickey.

Hi. Let me start by thanking you for that charitable contribution. As the parent of the healthcare worker, I really appreciate it and I think it's a great thing. Moving on to just a couple of business questions, as you mentioned Solar as a platform's been waiting for a dislocation and the cash flow sponsored finance market for a long time and now it's arrived. And no one could have predicted that it would be from the pandemic but obviously there are many unknowns regarding its duration and the economy, the impact on the economy. Nevertheless, I'm hearing that middle market spreads has widened perhaps a 150 basis point 200 basis points. And as you’ve noted terms have improved a lot for lenders like you. Are the economics attractive enough for you now to go back into the market at this point in time or is there just still too much uncertainty to try to underwrite notwithstanding the better terms that are available.

So, it’s a great question. I would say as Mickey, what has held us on the sideline where we always like more price, has really been your commentary around risk. And that's why, we have been so long invested on the cash flow side. What we are seeing now is its early days. We're all talking about what we expect over the next couple of quarters once people figure out what they own. What how to your point, how is it going to weather this cycle. And this incredibly tragic experience that all portfolio companies will not be immune from. But several will come out the other side and we'll be positioned well. And so, our focus really has been at the moment on finding those opportunities. There is no conversation with sponsors that are approaching us around COVID in light or high levered structures. So, that's the easy conversation and that's been critical for us just what's been keeping us on the sidelines. Pricing tier point is a good 150 basis points 200 basis points higher but importantly it's higher for lower risk. I think the meeting opportunity in cash flow is really a couple of things. One, we have been able to look at some companies that we are lender in common with some of our peers who may need to sell some good assets to short their balance sheets. And so, that's a good opportunity for us where we already knows the risk and have bought into the risk albeit we can buy those discounts and to do so yield, but we've already had signed off on this structure. Secondarily, we see as the market does unfold. There's still that same tremendous pent up private equity capital on the sideline for good healthy businesses. The sponsors are…

Thank you, Bruce. That's really helpful. And just a couple of questions on sponsors which you mentioned. Do you see any meaningful differences in the way they're behaving in terms of their size? I'm specifically I'm referring to sponsors that smaller sponsors that are low and middle market focused and you have larger sponsors which are middle market roughly middle market focused. Any differences in the way they're behaving and your anticipation of how they're going to support their investments?

As you know, we operated the upper mid-markets. So, I apologize, I'm going to reserve the commentary to that part of the marketplace. But why have we've always been after mid-market it's during periods of down term we have seen to your question. More support, generally speaking from sponsors just because the businesses themselves are that much more resilient to get through difficult times. But I think the key issue is really regardless of whether your upper mid-market or another segment. Is really the underlying fundamentals of that business is going to be the determinant and sponsor to spending a lot of time right now going through each asset and their portfolio and figuring out where they're putting good money after good and where does it now makes sense to invest and support the business. So far, we are blessed that at SUNS, we really don’t see liquidity problems or lack of support from the sponsors. I think that's predominantly because we have invested in these defensive businesses that people obviously that all of these companies, let's say that everything is on watch, the source Mickey. You know and everybody's working from home. And you're in a low to zero revenue environment. There's no business that is immune, the key is that being sectors that people believe will have a reason to exist on the other side and dig into recover as we get to you brim for this year. And so, that's what we're seeing is because we've gone into those types of defensive sector. It's more likely than not that either they are very high free cash on businesses which is a key tether in and for underwriting and or they have support from a sponsor. But it is very asset-by-asset.

Yes, okay. And my last question. I do appreciate your comments there. The dry powder that these sponsors are holding, has actually been around for quite a while as we all know. So, I'm curious about the issue of how old are these funds that we're talking about and are they still young enough in their lifecycle to have an incentive to support the borrowers or given that this money have been sitting around so long. Are they less interested in supporting borrowers because the life cycle of the fund is ending anyway.

So, the answer is when really what your focus is on, those funds that are kind of pass their investment period because clearly funds are still at investment period. If they think they cannot now support the company, they're going to call capital and help you to do so. What you are seeing, we're aware of conversations around is what LP-GP, even if their fund is past investment period, do not want to let assets go if they think that business is still viable. And so they are looking at ways where they can raise liquidity into their funds and to either loans or prefer there's a kind of a shadow banking system if you will hope for private equity funds as well that can borrow get the portfolios to inject it. So, we don’t see an issue of kind of funds being too old to support their companies.

That's really interesting Michael. And very helpful, I appreciate it. Those are all my questions today. Everybody stay safe and healthy.

You too, Mickey.

Thank you, Mickey.

We appreciate your time.

[Operator Instructions] One moment for questions. And I'm not showing any questions at this time.

Thank you so much to your time and efforts, we wish everyone to continue to stay healthy and safe. And as you know we're completely transparent, so if there are any questions or concerns anyone has, please feel free to reach out any of us anytime. Take care, and be safe.

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