Sunrise Realty Trust, Inc. (SUNS) Q1 2020 Earnings Report, Transcript and Summary

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 vast majority of decline was primarily driven by unrealized mark-to-market losses delayed to the impact of spread widening on the valuation of our portfolio. Our portfolio as a whole has not been immune to the severe economic disruption caused by the COVID pandemic. We do expect to recoup a significant portion of unrealized appreciation as a secretary market technicals and economy improves. Overall, our portfolio companies are proving to have resilient business models and access to liquidity to enable them to successfully withstand this crisis. We attribute the solid position of our portfolio toward long-term investment discipline centered in the philosophy that we invest as if we were always late in the credit cycle. In addition, we took a multi -- undertook a multi-year initiative to build and acquire niche specialty finance and asset based lending businesses, which have historically exhibited lower default and loss rates through our business cycles compared to traditional cash flow lending. Importantly, the ABL and Life Science teams have resilient business models and highly experienced teams, each of which have managed to multiple cycles over career spanning to 20 to over 30 years. The specialty finance loan portfolios are diversified and defensive in composition. The teams are skilled at working through problems and are well positioned to be secure liquidity providers to borrowers under more favorable terms in the current environment. Our comprehensive portfolio is comprised of approximately 99% firstly finished good loans with a small exposure to one secondary cash flow investment. Importantly, we’ve remain patient and intentionally under leverage in order to preserve liquidity for a market dislocation. When risk adjusted returns are generally more attractive. At March 21, 2020, 99% of our $625 million comprehensive investment portfolio at fair value was comprised of firstly cash flow loans and approximately 55% of those loans were in specialty finance niches. $20 million with a contraction in our portfolio fair value quarter-over-quarter resulted from net portfolio repayments. During Q1, we had $88 million repayments, all of which were at or above par and fundings of $68 million. As of March 31, all of our borrowers made the interest payments at April 30 as well. As the march 31, only one loan had to pick components with interest rate and cash interest in dividends represented over 99.9% of our Q1, 2020 gross investment income. Solar Senior’s NII per share for the quarter totaled $35.25. We are confident that SUNS enter the current economic slowdown for position of relative strength; the sustainability of our dividend is facing certain headwinds. At March 31, Solar Senior’s portfolio was under levered relative to our target range of 1.25 times to 1.5 times. In addition, Feds recent commitment to set base rates to zero for the foreseeable future is placing downward pressure and yields and a predominantly floating rate portfolio. In response to SUNS’ low leverage and expectation of low base rates for extended period of time, the Board approved the reduced cash distribution of $0.10 per share per month for the month of May in the foreseeable future. In addition, the investment advisor is agreeing to waive management incentive fees [indiscernible] necessary for net investment income to cover this rate of monthly distribution throughout 2020. We believe that a reduction in our distribution is prudent by realigning SUNS distribution with our near-term expectations for net investment income, we're establishing a foundation from which to grow. Importantly, as we invest a portion of our available liquidity, we expect SUNS net investment income to cover distributions without the supportive fee waivers by the manager. As we approach the target leverage of 1.5 times, we expect net investment income to exceed the current distributions. With the market now dislocated, we expect the next 12 to 18 months to present an abundance of compelling investment opportunities at higher expected returns with federal structure protections is an ideal time for us to grow our income producing portfolio. Each of our investment verticals is led by experienced professionals who have invested through multiple cycles understand the benefits of having capital to deploy into a recovery. Our diversified investment platform spending cash flow lending, multiple ABL strategies and Life Science venture lending position SUNS as solutions provider to borrowers. It also enabled us to originate attractive risk does unavailable to firms which are only able to underwrite cash flow loans. We expect portfolio growth in the coming quarters to come in the form of high yield -- higher yielding assets with more lending funding terms, which will hopefully drive our net investment income higher in future quarters. During the first quarter, SUNS significantly improved its funding liquidity profile. On March 31, Solar took advantage of its investment credit rating and issued $85 million of 3.9% senior unsecured notes in a private place with institutional investors. As a result of the issuance at March 31, approximately 50% of the Company's funded debt was comprised of unsecured term notes, which gives SUNS significant unencumbered assets and provides meaningful over collateralization of its combined $300 million credit facilities, which are over 70% undrawn. We have significant capital available to pay off [indiscernible]. At March 31, 2020, our net leverage was 0.69 times and as of April 30, our estimated leverage was similarly low at 0.71 times. Importantly, funds has no near-term debt maturities having termed out both its primary $225 million credit facility, and its secondary $75 million are credit facility to 2023 and 2024, respectively. In addition, we have a march 31, 2025 maturity of our newly issued senior unsecured fixed rate notes. With a weighted average maturity on the Company's funded portfolio loans of July 2022, we're substantially asset liability match funded. Importantly, we believe that these weighted average maturities over two years from now provide Solar Senior with one way to manage in the current economic contraction , : Now that this location has arrived, unfortunately in a tragic fashion, we are fortunate to have a solid foundation and are poised to deploy capital support our valued sponsors and management teams. Earlier this week, we announced the addition of four highly expressed professionals to the Solar Capital Partners team. The expansion of our investment and business development teams speaks to our confidence and the strength of the platform and conviction in the investment opportunity set. As a final note, our investment advisors alignment of interest with the company stakeholders has been one of our guiding principles. Through significant SUNS share purchases since inception, our senior management team now owns approximately 6% of our outstanding common stock. Additionally, all members of the team have a significant percentage of annual compensation invested in SUNS stock. Senior managing investment [loan side] fellow shareholders demonstrates our confidence and the Company's defensive portfolio, our stable funding, strong liquidity and fair position to make new investments. AT this time, I'll turn the call over to our CFO Rich Peteka to take you through the financial highlights, the specific emphasis on liquidity and funding profile.

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 commitments are [four] revolvers that can be fully drawn today by the borrower's representing of current liquidity to non-contingent unfunded commitments coverage ratio of approximately 48 times. In our opinion, this abundance of liquidity not only enables SUNS to be opportunistic in our originations during this location, but also preserves our ongoing access to the capital markets. From a P&L perspective, gross investment income for the three months ended March 31, 2020, totaled $8.8 million versus $9.5 million for the three months ended March and the December 31, 2019. Net expenses for the three months ended March 31, 2020 with $3.1 million, compared to $3.8 million for the three months ended December 31, 2019. Net investment income for the quarter ended March 31, 2020 was $5.7 million or $0.35 per average share as compared to $5.7 million or $0.35 per average share for the three months ended December 31, 2019. For the quarter ended March 31. The investment advisor voluntarily waived management fees 964,000 and incentive fees of 56,000 compared to 671,000, in fees waived for the quarter ended December 31, 2019. Below the line, Solar Senior had a net realized and unrealized loss for the first fiscal quarter totaling $27.7 million compared to net realized and unrealized gain of $0.1 million for the three months ended December 31, 2019. Accordingly, Solar Senior had a net decrease in net assets resulting from operations of $22.1 million or $1.37 per share for the three months ended March 31, 2020. This compares to a net increase in net assets resulting from operation to $5.8 million or $0.36 per average share for the three months ended December 31, 2019. Lastly, our Board of Directors to create a monthly distribution for May 2020 of $0.10 per share, payable on June 2, 2020 to stockholders of record on May 22, 2020. At this time, I'd like to turn the call over to our Co-Chief Executive Officer, Bruce Spohler. Bruce Spohler. Thank you, Rich. Solar Senior’s portfolio has benefited greatly from our initiative to expand the origination platform could be development and acquisition specialty finance businesses. At quarter end, approximately 55% of our total portfolio was in senior secured asset based and Life Science lending strategies, which represents SUNS highest allocation to commercial finance assets since inception. The remaining 45% of the portfolio was invested in senior secured cash flow loans, predominantly first lien assets. As of March 31, our $625 million comprehensive portfolio is highly diversified, encompassing $234 issuers across over 130 Industries. Our largest industry exposures are healthcare providers and services, professional services and insurance. The average investment per issuer was $2.7 million or less than 0.5% of the portfolio. At quarter end approximately 100% of our portfolio fair value consisted of senior secured loans comprised of close to 99% first lien assets and 1% second lien asset. We believe that our efforts to position the portfolio to almost an entirely first lien construct, which carry less risk and second lien and mezzanine loans will result in greater capital preservation during this crisis. At March 31, our weighted average asset level yield at fair value was 9.8%. By focusing our commercial finance verticals, we've been able to maintain asset level yields approaching 10%. Despite the sharp drop in LIBOR resulting from the Federal Reserve's efforts to aid the economy. At March 31, the weighted average investment risk rating of SUNS portfolio was 2.0 based on 1 to 4 risk rating scale, with 1 representing the least amount of risk. As further indication of the resiliency of our investments to-date, 100% of SUNS portfolio was performing at quarter end and continues to be at April 30. Including activity across our four business lines originations totaled $68 million and repayments were $88 million in the first quarter. Originations were a mix of new deals and upsizing to existing borrowers. Let me now provide an update on each of our investment verticals, including details on our valuation approach. Well, let me start with cash flow. While the disruption to the economy as a result of the COVID pandemic has been unprecedented, we believe that our cash flow portfolio is well positioned to withstand a long recession. Our cash flow portfolio does not have direct exposure to cyclical industries such as energy, commodities, travel, retail, leisure, heavy manufacturing or consumer discretionary sectors. We have been in active dialogue with management teams and sponsors across our portfolio companies regarding their business prospects as a result of COVID. We are encouraged by the steps taken by the portfolio companies to preserve their liquidity. As well as the continued strong sponsor support of these businesses. Our predominantly first lien portfolio in 99% together with a relatively modest average first lien leverage of just under 5 times, together with the significant junior capital cushion and strong sponsor support positions us well to withstand economic headwinds in our cash flow portfolio. We view the majority of our investments as generally providing essential services in non-cyclical sectors that will continue to be required, if the same place restrictions are eased. Solar conducted a rigorous COVID stress tests across the entire cash flow portfolio as part of our first quarter valuation process. Our valuation framework incorporated sector specific market spread movements in the quarter, adjusting for the existence of LIBOR floors. We expected weighted average life of our investments, the existence of covenant, and other issuers specific factors such as their liquidity profile, the sponsor supportive the business and our position in the company's capital structure. The majority that declined in our portfolio [indiscernible] are reflective of market spread movements that we expect to reverse over time. To provide further context market spreads for the LCD first lien single D index widened approximately 400 basis points during the first quarter. Since quarter end, it has reversed somewhat and tightened by approximately 150 basis points, or 35% as of April 30. At quarter end, our cash flow portfolio consisted of $282 million or approximately 45% of our comprehensive portfolio. We invested across 32 borrowers with an average investment size of just under $9 million. These companies had a weighted average EBITDA of $107 million, which highlights our long standing commitment to finance larger business, which we believe are better positioned to withstand in economic downturn. The weighted average yield of our cash flow portfolio was just over 8%. During the first quarter, we originated $33 million of first lien cash flow loans, and experienced repayments of $70 million. Our new investments were primarily a combination of new investments and add-on investments to existing portfolio companies. We are very encouraged by our available liquidity of SUNS to take advantage of the current market dislocation, which we expect to persist. Over the last few years, we've made a conscious decision to shrink our cash flow portfolio owing to fraught market conditions, which resulted in highly levered deals with very loose documentation. We have begun to see more opportunities to finance large middle market companies at lower leverage levels, and with better covenant, and call protections, and wider spreads. We will continue to maintain our discipline of investing in non-cyclical sectors focused on the upper end of the middle market in our cash flow book. Now, let me give an update on our asset base strategies. As a reminder, SUNS owned two commercial finance businesses that specialize in making senior secured ABL loans on a first lien basis, secured predominantly by accounts receivable. These companies lend to small and mid-sized U.S. businesses typically have limited access to traditional bank financing. Gemino Healthcare is focused on providing revolving accounts receivable facilities exclusively to healthcare service providers. Collateral here consists of medicare, medicaid and private insurance receivables. Our [indiscernible] business finances companies operating in the distribution, business services, and manufacturing sectors. North Mill is typically the agent and sole lender to its borrowers, and its financing structures predominantly include revolving accounts receivable, financing, as well as factoring agreements. In addition, all factoring agreements have recourse to the underlying borrowers. Both Gemino and North Mill are led by teams of seasoned professionals who have been an asset based lending for 25 to 40 years, the management teams are experienced risk underwriters across multiple economic cycles. Their business models are highly resilient, relationship driven, and serve as a lifeline of working capital provider to small businesses across the U.S. In prior economic downturns, ABL loans generally provided high recovery rates, more so than those supported only by cash flows. Overall both Gemino and North Mills portfolios continue to perform well and in accordance to our expectations at the time of purchase. In addition to collaboration across Gemino and North Mill on the business development side, together with North Mills, acquisition of Summit Financial Resources last year, has broadened and deepened our coverage across the regions. It's also enhanced the pipeline of our investment opportunities. Now let me provide a brief update on both Gemino and North Mill. Our valuation approach and the current investment environment. Let me start with North Mill. At quarter and North Mills portfolio was just over $180 million representing 29% of SUNS’ portfolio. The portfolio consists of over 155 borrowers with an average investment of just over a $1 million. Over 99% of North Mills borrowers are doing essential businesses. And the PPP is expected to be highly beneficial to North Mills portfolio companies. Importantly, the portfolio is defensively positioned with approximately one-third of its exposure in the distribution industry, but the concentration of food one-third is also in staffing with an emphasis on outsource and remote IT and one-third is in manufacturing, with many borrowers operating in essential industries. Both at quarter end and April 30, there were no defaults or delinquencies across North Mills borrowers. During the first quarter, we funded over $16 million of new investments and equity payments of just under $5 million at North Mill. Weighted average asset level yield at quarter end was 12.5%. At March 31, the fair value of our equity investment in North Mill was marked down by approximately 10% from the prior quarter. SUNS utilize the service of an independent third-party valuation firm during this process. Our valuation framework is primarily driven by price to book values of public peer comparables, as well as private market transactions of similar commercial finance businesses. And to a lesser extent, the change in mark-to-market yields. Knowing where comparable businesses have been acquired over the past few years, we believe that North Mill is conservatively valued. During the first quarter North Mill paid the company cash dividend of just over $1.25 million down from $1.4 million in the prior quarter. The reduction matches the dividend earnings and it's conservative as we think about the current economic environment and North Mills business prospects. The integration with Summit Financial in the North Mill is proceeding ahead of expectations. We were encouraged by the disciplined and shared credit culture, broader geographic coverage and enhanced pipeline of attractive investment, attractive investments across both ABL and factoring structures. We view factoring as a highly attractive asset class in this portfolio, as well as the addition of Summit’s core underwriting [MPDO] team has increased North Mills exposure to an expertise in factoring. Importantly, North Mill takes a conservative approach by prioritizing factoring agreements with recourse to the underlying borrower. We anticipate continued steady performance and growth for North Mill. Now let me turn to Gemino. Our healthcare ABL business has not been negatively impacted by the COVID pandemic. In fact, it is extremely well positioned to benefit from this public health emergency. The impairment risk remains extremely low given Gemino’s disciplined underwriting, and focusing -- focus on financing health service providers who have government and high quality insurance company accounts receivable as collateral. Cash collections typically go directly into Gemino hot boxes, as well as fees and interest payments which we debit automatically. At quarter end, as well as at April 30, there were no defaults nor delinquencies across Gemino borrowers. At March 31, the Gemino portfolio was $138 million consisting, I'm sorry representing approximately 22% of our total portfolio. It’s comprised of 37 borrowers, with an average loan size of just over $3.5 million to weighted average asset level yield at Gemino was approximately 9.5%. During the first quarter, we funded $16 million of new investments and had repayments of approximately $10 million. During the quarter Gemino delivered a 12% ROE, the highest that we have seen from 11 years. Gemino has stable funding with no near-term maturities, having refinanced its credit facility late last year into a new four year credit facility at LIBOR plus 225 compared to the previous facility LIBOR plus to 260. At quarter end, the fair value of our equity investment in Gemino was marked down approximately 3% from the prior quarter. SUNS also uses the services of an independent third-party valuation firm in this process. While evaluation framework for control equity investments is fundamentally grounded in an assessment of peer price to book values. There are no great comparable public companies for Gemino. So we rely more on private transactions as we value this highly specialized business. If not for the trading down to public finance company peers, resulting from the COVID crisis, we actually would have marked Gemino up from the prior quarter given the growth in its portfolio, and achievement of its highest ROE in its history. Since only Gemino price to book valuation has been very conservative relative to commercial finance companies with similar risk profiles. For the first quarter, Gemino paid SUNS cash dividend of just under $1 million consistent with the prior quarter, representing an 11% return. As we look into the future, we feel very confident in the portfolio quality at Gemino and believe the company is well positioned to capture additional growth if the market settles down. And finally, let me touch on our Life Science lending business. Overall Life Science portfolio is largely insulated from short-term market and economic dislocations given the long dated equity investment periods and product cycles of our portfolio company’s assets. At the present time, the impact of COVID-19 has had the minims impact on the portfolio. 100% of our loans in this segment are performing and we continue to expect no losses in this segment. As a reminder, we have never realized a loss in our Life Science portfolio across the platform. Currently, none of our Life Science portfolio companies have less than three months of cash runway. The 100% of these companies have more than 12 months of cash runway. This is largely a result of our investment focus on public and venture capital back complete stage multi product pharma and medical device companies that are either close to or entering commercialization. It's important to remember that our discipline is to make Life Science investments and very low loan to values 15% to 20% on average, where value is defined as actual cash invested in the business and not an enterprise value, post the most recent round of funding or if public, market capitalization. While the FDA may be slowing trials down for new products, [indiscernible] fast track and COVID treatments or vaccines, and patients may also be reluctant to participate in trials given this pandemic. The projected three to nine months potential delays for some companies is small in relation to the 10 year to 15 year development process that they've been undergoing as well as the significant capital invested in these companies relative to the size of our loan. In addition, there are some late stage development companies we invested in these revenues may be deferred as a result of delays in procedures or surgeries that are considered elective or non-essential. The financial viability many hospitals doctors and healthcare providers rely on these non-essential services as a key source of revenues. And we expect these services to begin to ramp back up in the next couple of months. As we get into the second half of 2020. At quarter end, our Life Science portfolio totaled just over $22 million consisted of 7 borrowers with an average investment size, just over $3 million. Our Life Science loans represented 3.5% of our total portfolio and 9.5% of SUNS first quarter gross investment income. The weighted average yield on this portfolio was just under 10% excluding success fees and warrants. Evaluation framework for Life Science investments is based on marketing each investment close to advertise costs, including the final fee that we contractually receive that pay-off. There is no liquid market for private Life Science venture debt, and we don't use any equity benchmark for determining that fair value. At April 30, there have been no material changes to the underlying credit quality of our Life Science investments. Healthcare space, in general continues to be extremely attractive and we are not seeing a slowdown in new Life Science investment opportunities. Also, the increased scale of the Solar platform enhances the opportunity set for investments and even later stage public, pharma and device companies that may require even larger loan sizes. However, we will continue to be highly disciplined in new investments. In conclusion, we believe that SUNS portfolio is extremely well positioned to weather this crisis. As we continue to navigate this challenging environment, we will remain in close contact with our portfolio companies, their management and sponsor teams and support them and as well as work with our extensive network of relationships to also play-off and look for new investment opportunities. Solar Capital Partners commercial finance platform, and significant dry powder enables us to provide structured financing solutions, including both cash flow and asset based loans for capital constrained companies during this time period. Solar Senior will also be able to participate in these financings while continuing to gain significant diversification across its issuers. At this time, I'll turn the call back to Michael.

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 co-investment opportunities and upper middle market companies that otherwise would not have with its capital base alone. Specifically, the collected dry powder enables the platform to speak for large positions and provide rescue financing solutions as well as add-on acquisition financing when M&A activity resumes. Now more than ever, our scale should serve as a competitive advantage for Solar Senior Capital. Importantly for Solar Senior Capital, this scale flexibility of finance cash flow and asset-based solutions for larger companies is a significant advantage today. Traditionally, the greatest investment opportunities exist during periods of market dislocation and capitalist tariffs. With only $220 million available capital and a strong foundation, given our defensive portfolio and low leverage, we're doing the company positioned to originate attractive new investments or are supporting our existing portfolio companies as needed. Our patience and willingness to remain underinvested provides us the foundation to be opportunistic. Given the magnitude of the economic disruption, we believe that the improved investment opportunity set will persist for several quarters as company see liquidity and financing solutions. With a solid portfolio foundation, stable funding sources and strong liquidity results in a great position to capitalize and opportunistic investments. We currently have no anticipated needs for additional liquidity or capital and we currently have no plans to issue dilutive equity or expenses on secured debt. Each year for the past eight years, our shareholders have granted up the approval to issue share at the low net asset value subject to board's approval at the time issuance. We'd always need this trust and the great responsibility and management paces according have never taken advantage of those. We may now believe in the company's abilities to successfully navigate the current challenges, we're disappointed in the current share price. We remain competent at the quality of our portfolio result in a stable net asset value which also would be reflected in a higher and absolute volatile share price. We hope that all of you are in good health. We would like to thank the unsung heroes in the healthcare profession and the essential service workers on the front lines this crisis. To support their efforts in a home study of New York today, currently at the center of the epidemic. Solar Capital Partners, our investment advisor donated $1 million to the Mount Sinai Hospital and Columbia University Irving Medical Center collectively to be used for the procurement of PPE, for COVID research and for the mental health of those frontline health care workers and their families. We thank you very much for your time today. Operator, could you please open the line for questions.

[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 going to look to take advantage of this opportunity, deploy equity into platforms where they want to buy down their multiple and take advantage of some opportunities to add on acquisitions. Many of those vendors maybe tapped out and we will look to lend into those businesses as the companies are getting bigger and de-risking alongside the equity coming in. so, I think that the first opportunity set on the M&A side as opposed to new platform creation as we get deeper into 2020. And in the interim, we're also working with our ABL teams, are originators of highly coordinated across the platform to bring our ABL expertise into cash flow companies. For what we're doing there is using the ability to take advantage of this Swiss cheese documents that exist in the marketplace today for cash flow lending that allow people to carve out certain tools of collateral. So, we can bring in a North Mill, a Gemino, or a Crystal in nations equipment and hive off collateral and charge to that 200 basis point premium albeit on the collateralized basis. And the meantime, get to know the business that we're not an incumbent lender, just see to your point is this a sector that beyond this underlying collateral value that we like the cash flows when we get to the other side of this and things start to reopen. So, we're starting to plant some seeds there so that we can position ourselves to deploy more cash flow capital. We would like to look back a year from now, a year and a half, and really have not only continue to grow North Mill and Gemino but really scaled up our cash flow book.

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.