Solar Capital Ltd. (NASDAQ:SLRC) (“Solar Capital” or the “Company”) today announced that DSW Group, Inc. has entered into a definitive sale agreement. The Company expects to receive approximately $150 million in gross proceeds for its second lien loan to DS Waters of America, Inc. and its preferred investments in DSW Holding Company, LLC (together, “DS Waters”). Additionally, the Company has received notice that its investment in Midcap Financial Intermediate Holdings, LLC (“Midcap Financial”) will be redeemed at a premium to par for gross proceeds of approximately $87 million. Solar Capital expects estimated total proceeds received from these monetizations to be approximately $237 million, which it intends to use to reduce Solar Capital’s outstanding revolving indebtedness, pending prudent reinvestment.
“We are pleased with the outcome of these two legacy investments,” said Bruce Spohler, Chief Operating Officer of Solar Capital. “Our full exit of DS Waters is expected to result in an internal rate of return, or IRR, of approximately 10.3% since our initial investment almost six years ago and a 1.5x multiple on our invested capital. The repayment of our subordinated loan to MidCap Financial is expected to result in an IRR of approximately 16.5% since our initial investment three years ago, and will mark the culmination of another successful underwriting.” 1
As a result of these significant monetizations, and pending re-investment of these proceeds in new portfolio investments, the Company expects to generate significantly reduced investment income in the near-term. Accordingly, the Company currently anticipates net investment income to be in the range of $0.41 to $0.43 per share for the quarter ended June 30, 2013. Net asset value per share at June 30, 2013 is also expected to be in the range of $22.35 to $22.40. In order to better align the quarterly dividend with expected near-term earnings, the board of directors of Solar Capital has declared a reduced quarterly dividend of $0.40 per share, beginning with the Company’s third fiscal quarter ending September 30, 2013.