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SUNS Reports Waiver Assisted NII To Cover Dividend + NAV Falls

|About: Solar Senior Capital (SUNS)

The consensus projections for Yahoo Finance for Solar Senior Capital Ltd. (SUNS)

Earnings Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 3 3 3 1
Avg. Estimate 0.35 0.35 1.40 1.44
Low Estimate 0.35 0.35 1.39 1.44
High Estimate 0.35 0.35 1.41 1.44
Year Ago EPS 0.35 0.35 1.41 1.40
Revenue Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 1 1 1 1
Avg. Estimate 9.62M 9.7M 38.37M 44.2M
Low Estimate 9.62M 9.7M 38.37M 44.2M
High Estimate 9.62M 9.7M 38.37M 44.2M
Year Ago Sales 7.66M 7.97M 32.17M 38.37M
Sales Growth (year/est) 25.60% 21.80% 19.30% 15.20%

NII/share was $0.3525 compared to a projection of $0.35 and dividend of $0.35.

TII or revenue was $9.471 million compared to a projection of $9.020 million.

Welcome to the land of meaningless numbers . . . . where NII always covers the dividend because the waiver support will oscillate to provide whatever it takes to artificially create the desired 'net' number. And if NII is fiction, then there is fiction going into the NAV calculation. SUNS must be running low on fiction (grin), because the NAV actually fell this quarter.

How can an organization (Solar) which runs such a good regular BDC do such a poor job in running a low PWAY BDC? To paraphrase the lyrics of the Jefferson Airplane --

When the men on the chessboard get upAnd tell you where to goAnd you've just had some kind of mushroomAnd your mind is moving slowGo ask Ares, I think she will know

Ares had the men on the chessboard tell it to give up and liquidate American Capital Senior Floating. The job of running a low PWAY BDC appears and separate and different skill set.

My spreadsheets

Solar Senior Capital Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Realized & Unrealized Gains in millions -135 -137 0.360 -0.422 0.262 0.346 0.633 0.608 4.349 -8.497 -5.580 -0.450 0.201 -0.002 -1.782 -0.475 0.135 -0.684 -1.843 -0.245
Realized & Unrealized Gains/share -0.0084 -0.0085 0.0224 -0.0263 0.0163 0.0216 0.0512 0.0527 0.3771 -0.7368 -0.4838 -0.0390 0.0177 -.0002 -.1545 -0.0414 0.0117 -.0593 -.1598 -.0212
Solar Senior Capital Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13
Total investment income 9.471 9.341 9.047 7.966 7.658 7.496 7.165 7.001 6.681 6.349 6.148 6.520 6.655 6.143 5.912 5.322 5.134 5.736 5.654
Net investment income 5.654 5.654 5.652 5.652 5.651 5.649 5.649 4.536 4.066 4.065 4.066 4.085 3.3462 3.876 4.018 3.528 2.4151 3.853 3.644
Investments @ fair value 0.470 0.424 0.472 0.368 0.441 0.373 0.365 0.328 0.326 0.312 0.306 0.340 0.347 0.345 0.341 0.278 0.266 0.275 0.268
Wt Av Share Count 16.040 16.039 16.037 16.034 16.031 16.028 16.025 12.359 11.533 11.533 11.533 11.533 11.533 11.533 11.533 11.533 11.533 11.532 11.532
TII/share $0.5905 $0.5824 $0.5641 $0.4968 $0.4777 $0.4677 $0.4471 $0.5665 $0.5793 $0.5505 $0.5331 $0.5653 $0.5770 $0.5326 $0.5126 $0.4615 $0.4452 $0.4974 $0.4902
NII/share $0.3525 $0.3525 $0.3524 $0.3525 $0.3525 $0.3524 $0.3525 $0.3670 $0.3525 $0.3525 $0.3525 $0.3542 $0.29012 $0.3361 $0.3484 $0.3059 $0.20941 $0.3341 $0.3160
NAV/share $16.83 $16.84 $16.84 $16.81 $16.79 $16.81 $16.80 $16.78 $16.76 $16.70 $16.33 $17.06 $17.55 $17.65 $17.65 $17.65 $17.85 $18.04 $18.04
Wt Av Yield 8.9% 8.9% 8.3% 8.2% 8.0% 7.8% 8.2% 8.2% 7.9% 7.9% 7.2% 7.0% 6.9% 7.0% 7.2% 7.4% 7.7% 7.5%
NII/TII ratio 59.70% 60.53% 62.47% 70.9% 73.8% 75.4% 78.8% 64.8% 60.9% 64.0% 66.1% 62.6% 51.0% 63.1% 68.0% 66.3% 47.0% 67.2% 64.4%
Fees Waived 437 308 281 712 814 864 871 518 228 385 468 115 000 157 000 153 000 000
Waived/share .0272 .0192 .0175 .0444 .0508 .0539 .0544 .0419 .0198 .0334 .0406 .0100 .0136 .0133
Port Debt/EBITDA 4.5x 4.3x 4.2x 4.0x 4.0x 3.9x
Port interest coverage 2.5x 3.0x 3.0x 2.6x 2.7x 3.0x
Port Revenue growth positive 5.5% 6% 6% 7.5%
Port EBITDA growth positive 7% 9% 0% 0%
1 Q2-14 contained a $1 million one time fee for an amendment and extension of the credit facility
2 Q2-15 contained a $0.8 million one time fee for an amendment and extension of the credit facility
Solar Senior Capital Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Debt 184.163 140,400 124,200 91,000 109.300 86.800 98,300 43,000 141,600 129,100 116,200 146,800 143,400 140,900 143,200 76,400 20,700 56,600
Debt/share 11.4815 8.7537 7.7445 5.6754 6.8180 5.4155 6.1342 3.4792 12.2778 11.1940 10.0754 12.7287 12.4339 12.2171 12.4765 6.6245 1.7950 4.9081
Debt/share to NAV 68.22% 51.98% 45.99% 33.76% 40.61% 32.22% 36.51% 20.73% 73.26% 67.03% 61.70% 74.61% 70.85% 69.22% 70.35% 37.72% 9.95% 27.11%
Interest expense 1,806 1,586 1,131 977 896 844 647 870 913 851 1,314 895 1,160 832 747 556 1,400 437
Interest expense/share 0.1126 0.0989 0.0705 0.0609 0.0559 0.0526 0.0404 0.0704 0.0792 0.0738 0.1139 0.0776 0.1006 0.0721 0.0648 0.0482 0.1214 0.0379
Interest expense/TII 19.07% 16.98% 12.50% 12.26% 11.70% 11.25% 9.03% 12.43% 13.65% 13.40% 21.37% 13.73% 17.43% 13.54% 12.64% 10.83% 24.40% 7.73%
Annualized Int exp/Debt 3.92% 4.52% 3.64% 4.29% 3.28% 3.89% 2.63% 8.09% 2.58% 2.64% 4.52% 2.44% 3.24% 2.36% 2.09% 2.91% 27.05% 3.09%
PWAY - Int exp/Debt 438 bps 526 bps 401 bps 492 bps 441 bps 517 bps 11 bps 562 bps 526 bps 338 bps 476 bps 376 bps 454 bps 491 bps 429 bps N/A 441 bps
BDCs report debt at the end of the quarter and not a weighted average debt amount - which could vary significantly from the average amount
Q2-14 contained "approximately $1.0 million of non-recurring expenses related to the amendment and extension of our credit facility" till 2019
Q2-15 contained "approximately $0.8 million of non-recurring expenses related to the amendment and extension of our credit facility" till 2020
10-Q: average annualized interest cost for all borrowings for the 6 months ended Q2-16 was 2.54% and the year 2015 was 2.25% exclusive of unused fees
Debt is an ending number - not an average number. The interest expense level sometimes correlates to the ending debt level of the prior quarter

Observation and Assessment

Keep SUNS on your radar and buy it when the waiver goes away. SUNS (due to the low PWAY) is close-ish to being as safe as a baby bond - and it will possibly have a high yield.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.