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DATE

Wednesday, Aug. 6, 2025, at 10 a.m. ET

CALL PARTICIPANTS

  • Chairman and Co-Chief Executive Officer — Michael Gross
  • Chief Executive Officer — Bruce Spohler
  • Chief Financial Officer — Shiraz Kajee

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TAKEAWAYS

  • Net Investment Income-- $0.40 per share in net investment income (GAAP) for Q2 2025, down from $0.41 per share in the prior quarter due to timing of investment deployment.
  • Net Asset Value (NAV)-- $18.19 per share as of Q2 2025, up slightly from $18.16 per share as of March 31, reflecting marginal net asset growth during the quarter.
  • Portfolio Growth-- The investment portfolio increased by $180 million to $3.2 billion in Q2 2025 following record quarterly originations of $567 million; repayments offset $87 million.
  • Leverage-- The net debt to equity ratio rose from 1.04x to 1.17x during Q2 2025 as portfolio expansion accelerated.
  • Specialty Finance Allocation-- 83% of the portfolio was in specialty finance investments as of Q2 2025, with cash flow loans at a historical low of 16.9%.
  • Yield on New Investments-- New originations averaged an 11.8% yield for Q2 2025, higher than the average yield on exits of just over 10%.
  • Credit Quality-- 99.5% of debt investments were performing on a cost basis as of Q2 2025; only one investment was on nonaccrual status at period end.
  • First Lien Secured Loans-- 95.9% of the portfolio was comprised of first lien senior secured loans as of Q2 2025.
  • Asset-Based Lending (ABL)-- $373 million in new ABL originations in Q2 2025, the largest in SLRC history, bringing the total to over $1.3 billion, or approximately 42% of the portfolio as of Q2 2025.
  • Equipment Finance-- The portfolio remained stable at just over $1 billion for Q2 2025, with originations of $140 million and repayments of $170 million.
  • Life Sciences-- $215 million portfolio across nine borrowers for Q2 2025, representing just under 7% of the total portfolio and contributing 12% of gross investment income.
  • Sponsor Finance-- $550 million sponsor finance portfolio as of Q2 2025 and weighted average interest coverage of 1.8x.
  • Unsecured Notes Issuance-- $50 million of three-year unsecured notes were privately placed with institutional investors subsequent to Q2 2025 at a fixed rate of 5.96%, bringing total unsecured notes outstanding to $409 million as of July 30, 2025.
  • Liquidity-- Over $50 million in available capital at quarter end for new investments, as stated in the call.
  • Dividend Distribution-- Q3 2025 quarterly base distribution declared at $0.41 per share, payable September 26, 2025.

SUMMARY

SLR Investment Corp. (SLRC 3.27%) reported record new investment originations and a shift toward higher-yielding specialty finance within its diversified portfolio, while maintaining very high credit quality. The company emphasized a growing pipeline stemming from sectoral retrenchment by regional banks and highlighted the sustained yield advantage of new investments (11.8% average yield) over recent repayments (just over 10% average yield). Management confirmed adequate liquidity and a disciplined risk posture, while indicating further portfolio rotation towards asset-backed lending and specialty finance segments may continue. The call also cited continued investment in infrastructure and personnel as drivers of expanded deal flow and sector leadership.

  • Chief Financial Officer Kajee said, "The exits averaged just over 10%, while the new investments averaged about 11.8% for Q2 2025," highlighting yield enhancement in portfolio turnover.
  • Chief Executive Officer Spohler stated, "portfolio currently has one of the strongest credit profiles in SLRC's history," indicating a favorable risk assessment based on management's internal scale.
  • Chief Financial Officer Kajee emphasized, "We have not seen new entrants because it takes a significant investment to do it a long time," underscoring limited competition in SLR's core ABL business.
  • Management confirmed, "SLRC has an approximate 10.3% dividend yield as of yesterday's market close," positioning the stock for income-seeking investors.

INDUSTRY GLOSSARY

  • Asset-Based Lending (ABL): Loans secured primarily by a company's collateral, such as accounts receivable or inventory, commonly used in commercial finance for liquidity provisioning.
  • PIK Income: Payment-in-kind interest, where accrued interest is added to principal rather than paid in cash, considered non-cash income for a lender.
  • SSLP: Senior Secured Loan Program, a specialized lending platform referenced as a segment within SLRC's portfolio.
  • Nonaccrual: A loan status where interest is no longer being accrued due to borrower performance issues; it signals possible credit impairment.

Full Conference Call Transcript

Michael Gross: Thank you very much, and good morning. Welcome to SLR Investment Corp's earnings call for the quarter ended June 30, 2025. I'm joined today by my long-term partner, Bruce Spohler, Chief Executive Officer, as well as our Chief Financial Officer, Shiraz Kajee, and the SLR Investor Relations team. Shiraz, before you begin, would you please start by covering the webcast and forward-looking statements?

Shiraz Kajee: Thank you, Michael. Good morning, everyone. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Investment Corp. and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast from the event calendar in the Investors section on our website at www.slrinvestmentcorp.com. Audio replays of this call will be made available later today as disclosed in our August 5 earnings press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections.

These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties. 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. We do not undertake 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 would like to turn the call back over to our Chairman and Co-CEO, Michael Gross.

Michael Gross: Thank you, Shiraz, and thank you to everyone for joining our earnings call this morning. I will now highlight the benefits of our multi-strategy investment approach to private credit. Summarizing results, SLRC reported net investment income of $0.40 per share and net income of $0.44 per share in the second quarter. NAV per share of $18.19 as of June 30, increased slightly quarter over quarter and was approximately flat year over year. We believe this compares quite favorably to peer publicly traded BDCs. SLRC's annualized net investment income returned 10% equity in the quarter.

While net investment income per share was a penny below SLRC's base dividend of $0.41 per share in the second quarter, we note that the investment portfolio began the quarter levered at 1.04 times, and then ended the quarter levered at 1.17 times as the company was able to source attractive new investments that led to a quarterly record of new originations. Many of the new investments funded towards the end of the quarter and therefore had a limited impact on second-quarter results. We originated $567 million in new investments across the comprehensive portfolio and received repayments of $87 million in the second quarter, resulting in comprehensive portfolio growth of $180 million to $3.2 billion.

Our record originations for Q2 included the largest ABL commitments in SLR's history. These are partially offset by a slightly higher than usual volume of exits. Our portfolio has achieved an annualized growth rate of 15.5% over the past five years. While conditions in the sponsor-backed cash flow market remained fiercely competitive, we experienced more attractive conditions across SLR's broad ABL strategy. With the supply-demand imbalance in the sponsor finance market, there's been a decline of private credit alpha. However, thanks to higher barriers to entry in traditional ABL, a strategy we have been in since 2012, we believe that alpha today resides in our ability to extract complexity premiums.

SLR originated a record quarter of new ABL originations in the quarter at $373 million. Today, ABL lenders serve a broad universe of borrowers, including healthy companies facing temporary dislocation, corporate carve-outs, or even traditional cash flow borrowers looking for incremental liquidity. ABL can be used as a proactive tool to unlock liquidity from borrowers' unpledged liquid assets and it's used by companies across the spectrum. From transitional credits to private equity-backed platforms to family-owned small businesses and even companies in the Fortune 500. Over the last two years, we have expanded the origination funnel in adjacencies and broadening sourcing relationships and channels to investments made across the SLR platform.

SLR has made over 100 new hires across the platform spread across 20 regional offices during this period of time. We believe this broad coverage model and the investments in people and infrastructure have contributed to the expansion in deal flow and a greater recognition of our leadership in the ABL marketplace. With ownership of five commercial finance affiliates that provide in-house servicing and collateral monitoring capabilities, the company has infrastructure and capital to further grow the comprehensive investment portfolio, including through potential portfolio acquisitions. This infrastructure allows us to capitalize on the current trend of continued regional bank retrenchment.

Our strong quarter of ABL originations furthered our portfolio mix shift to asset-based specialty finance strategies over the last couple of years which we believe provide greater downside protection principle for underlying collateral. Approximately 96% of our Q2 originations were in specialty finance due to the more favorable conditions in those markets that we believe present us with greater risk-adjusted returns. Within our incumbent portfolio allowing our sponsor finance portfolio to further shrink. As a result, approximately 83% of our portfolio was derived from specialty finance investments as of June 30, with the remainder of the portfolio comprised of cash flow, sponsor-backed loans to companies in defensive sectors.

With cash flow loans representing 16.9% of the comprehensive portfolio, the allocation of cash flow is at the lowest balance of the company's historical mix. We will, however, continue to approach new investments in cash flow lending, opportunistically. Overall, we remain pleased with the composition, quality, and performance of our portfolio. The tactical allocation afforded by SLR's multi-strategy approach and decision to be more discerning in cash flow loans has safeguarded our performance through the prolonged high-interest rate and inflationary environment. At quarter end, 95.9% of our comprehensive portfolio was comprised of first lien senior secured loans. 99.5% of our debt investments are performing. PIK income continues to make up a de minimis percentage of total income.

We believe these key credit quality metrics along with a minimum trailing twelve-month loss rate compare favorably to peer public BDCs. At June 30, including available credit facility capacity at SSLP, our special events portfolio companies, SLRC had over $50 million available capital to deploy. This puts the company in a position to take advantage of either stable economic conditions or softening of the economy. I'll now turn over the call to Shiraz to take you through the Q2 financial highlights.

Shiraz Kajee: Thank you, Michael. SLR Investment Corp's net asset value at 06/30/2025 was $992.3 million or $18.19 per share compared to $18.16 per share at March 31. At quarter end, SLRC's on-balance sheet investment portfolio had a fair market value of approximately $2.1 billion in 115 portfolio companies across 32 industries. Compared to a fair market value of $2 billion in 118 portfolio companies across 32 industries at March 31. SLRC's investment portfolio is funded by a combination of our revolving credit facilities and the issuance of term debt in the unsecured debt markets. The company is investment grade rated by Fitch, Moody's, and DBRS.

Subsequent to quarter end, the company privately placed with institutional investors $50 million of three-year unsecured notes at a fixed interest rate of 5.96%. Inclusive of the $50 million unsecured notes issued on July 30, the company has $409 million of unsecured notes outstanding. We believe our issuance of these notes reflects an attractive and flexible cost of debt capital for shareholders. We expect to continue to opportunistically issue unsecured debt in the future. The company does not have any near-term refinancing obligations. With the next unsecured note maturing occurring in December 2026. At June 30, the company had approximately $1.2 billion debt outstanding with a net debt to equity ratio of 1.17 times.

We believe we have ample liquidity of cash and borrowing capacity to support our unfunded commitments. Moving to the P&L for the three months ended June 30, gross investment income totaled $53.9 million versus $53.2 million for the three months ended March 31. Net expenses totaled $32.3 million for the three months ended June 30. This compares to $31.1 million for the prior quarter. Accordingly, the company's net investment income for the three months ended 06/30/2025 totaled $21.6 million or $0.40 per average share. Compared with $22.1 million or $0.41 per average share for the prior quarter.

Below the line of the company, our net realized and unrealized gains for the second quarter totaling $2.6 million versus a net realized and unrealized loss of $2.2 million for the 2025. As a result, the company had a net increase in net assets resulting from operations of $24.2 million for the three months ended 06/30/2025. Compared to a net increase of $19.9 million for the three months ended March 31. On August 5, the Board of SLRC declared a Q3 2025 quarterly base distribution of $0.41 per share payable on 09/26/2025. With that, I'll turn the call over to our Co-CEO, Bruce Spohler.

Bruce Spohler: Thank you, Shiraz. As Michael indicated, we've continued to shift our portfolio towards specialty finance strategies. Because of their more attractive risk-adjusted returns in today's market. Our specialty finance strategies offer higher pricing than sponsor finance loans. And greater downside protection through their underlying collateral, which includes accounts receivable, finished goods inventory, commercial loan portfolios, essential use equipment, as well as intellectual property. In most cases, the assets are governed by dynamic borrowing-based frameworks, enabling real-time monitoring of the underlying asset performance. Moreover, they provide leverage for us to manage our exposure. Including eligibility tightening, advance rate adjustments, and cash dominion. This downside protection is critical in periods of economic uncertainty like today.

Importantly, we are fortunate to have the infrastructure across our investment strategies that enables us to capitalize on this attractive opportunity set and collateralize collateral-based lending strategies. Now let me turn to the portfolio. At quarter end, and on a fair value basis, the comprehensive investment portfolio consisted of approximately $3.2 billion with an average exposure of $3.5 million. Measured at fair value, 98.3% of the comprehensive portfolio consisted of senior secured loans, with approximately 96% invested in first lien loans including our investment in the SSLP. Only 0.2% was invested in second lien cash flow loans, with the remaining 2.2% invested in second lien asset-based loans.

At quarter end, our weighted average yield on the comprehensive portfolio was 12.2%, consistent with the first quarter. We attribute this consistency to the heavy weighting towards specialty finance in our 2025 originations. Based on our quantitative risk assessment scale, the portfolio currently has one of the strongest credit profiles in SLRC's history. At quarter end, the weighted average investment risk rating was under two based on our one to four risk rating scale. With one representing the least amount of risk. Just under 98% of the portfolio is rated two or higher. Moreover, 99.5% of the portfolio on a cost basis and 99.7% on a fair value basis was performing. With only one investment on nonaccrual.

Now let me touch on each of our four investment verticals. I'll start with asset-based lending. At quarter end, the ABL portfolio totaled over $1.3 billion across 259 borrowers, representing approximately 42% of our comprehensive portfolio. Regional domestic payment models are retreating from the ABL market creating an attractive opportunity for SLR's ABL team. Under tighter credit regulations, regional banks' asset-based loans to non-rated companies are bumping into higher risk capital charges which makes these business lines economically less attractive to the banks. SLR is positioned to collaborate with these banks who are shifting their ABL strategies in reaction to these capital challenges.

For the second quarter, we originated $373 million of new ABL investments and have repayments of just under $150 million. To give you a flavor of a couple of transactions in the quarter, we closed on a $125 million first lien ABL borrowing base-driven credit facility to a manufacturer and supplier of products for the North American agricultural and food system. Proceeds from the loan will be used to refinance their existing loans. The highly structured ABL facility provides an advance against the liquidation value of both the company's receivables and inventory. In another ABL investment, we arranged a working capital solution via a $35 million commitment to a senior secured ABL credit facility for a leading regional jewelry retailer.

Our investment repaid an existing credit facility and is structured with a first priority security interest in all assets including the jewelry. In the second quarter, the weighted average asset level yield of our ABL portfolio was 13.4% compared to 13.8% in the first quarter. We continue to see opportunities to provide ABL facilities to traditional cash flow borrowers who are experiencing liquidity pressures. This capability allows us to continue to be a value-added partner to our sponsors, clients, during times when the cash flow opportunity set carries a less favorable risk-reward profile.

These are highly structured ABL facilities, which can achieve higher advance rates while maintaining traditional ABL risk parameters and fundamentally expanding the liquidity options for their middle market borrowers. A good example of this is the recent $75 million investment by our platform in an ABL facility to a sponsor-owned premium pet food manufacturer against the liquidation value of their receivables and finished goods inventory. The facility was used to repay their existing loan and provide liquidity for ongoing working capital needs. With the increased demand for our ABL solutions, we continue to add personnel and evaluate further ways to expand and support our ABL franchise.

It's important to note that this increased demand for ABL solutions is very different than the ever-present headlines of an increasing supply of asset-based finance strategies among some of our peer alternative investment managers. The recent headlines reflect more of an expansion of the opportunity set in asset-based finance or asset-based securitizations which includes the financing of pools of consumer assets such as credit card receivables, student loans, and residential mortgages. Just to name a few. While these pools of financial assets are large and present scaled opportunities, for diversified asset managers to distribute in size.

It remains an area very different than SLR's focus on direct lending to individual companies backed by their working capital assets including receivables and inventory. We continue to focus on the commercial borrower and believe that our specialized focus in ABL has meaningful barriers to entry. Now let me touch on equipment finance. At quarter end, this portfolio totaled just over $1 billion representing just under 33% of our comprehensive portfolio and was diversified across 630 borrowers. The credit profile was unchanged and stable quarter over quarter. During the second quarter, we originated just over $140 million of new assets with the majority of this coming from our business that provides leases to investment-grade corporate borrowers.

We had repayments of approximately $170 million. The weighted average asset level yield for this asset class was 11.6% consistent with the first quarter. Our investment pipeline has expanded, and we're seeing demand from our borrowers to extend their existing leases on equipment rather than buying new equipment at higher tariff-adjusted prices. Now let me turn to Life Sciences. Our Life Science portfolio totaled approximately $215 million across nine borrowers. 75% of the portfolio is invested in companies that have over twelve months of cash runway. Additionally, eight out of nine of these companies have revenues with at least one product in the commercialization stage, which significantly derisks our life science investments.

Life science debt investments represented just under 7% of the comprehensive portfolio, contributing 12% of our gross investment income for the quarter. During the second quarter, the team funded approximately $30 million of new investments, including two incremental investments to existing borrowers. We had just $1 million of contractual amortization repayments. Leading the originations for Life Sciences in the second quarter was a partial funding associated with a new $400 million debt facility for Cogent, a publicly traded biotech company that includes tranches subject to clinical and operating milestones for future draws under our facility.

We believe our life science team's longstanding relationships and expertise in the sector ultimately led SLR to winning this business for a groundbreaking company of one of the largest commitments for life sciences in SLR's history. At quarter end, the weighted average yield on the first lien portfolio was 13.1% inclusive of potential success fees but excluding warrants. We are seeing signs of recovery in the life science sector. However, the recent cuts at the FDA and NIH, evolving public policy, and continuing valuation challenges remain headwinds for the sector. Now more than ever, extensive industry expertise is required to successfully navigate the investment opportunity set.

We are fortunate to have one of the most seasoned teams in life science lending. And while they continue to remain extremely cautious, the pipeline of opportunities is increasing. Finally, let me touch on sponsor finance. In our sponsor finance business, we originate first lien senior secured loans to middle market companies in noncyclical industries such as healthcare, business services, and financial services. This has helped us mitigate the impact on our portfolio from cyclical factors as well as tariffs. At quarter end, the sponsor cash portfolio was just under $550 million across 33 borrowers, including loans in our SSLP.

With approximately 99% of the cash flow portfolio invested in first lien loans, we believe we are well positioned to withstand either tariff or economic headwinds. Our borrowers have a weighted average EBITDA of approximately $90 million and carry low LTVs of under 44%. In sponsor finance, the average EBITDA and revenue growth continues to be in the mid-single digits year over year for our portfolio companies. Overall, they have successfully managed the transition to an environment with higher cost of capital as well as input prices. Weighted average interest coverage on our sponsor finance book is 1.8 times. Additionally, approximately $500,000 of our second quarter gross investment income is in the form of capitalized PIK from cash flow borrowers.

Resulting from an MX. During the quarter, we made investments of $24 million in first lien cash flow loans and experienced repayments of just under $70 million. As Michael mentioned, sponsor finance deal flow continues to be muted due to the lower M&A volume. And we are selectively letting investments go in connection with refinancings. If there are new risk-return profiles, do not meet our investment criteria. Our specialty finance strategies enable us to be more selective in cash flow lending, during periods of increased competition. At quarter end, the weighted average yield on our cash flow portfolio was 10.3% down from 10.4% in the first quarter. Lastly, let me touch on our SSLP.

During the second quarter, we earned total income of $1.1 million from the SSLP, representing a 9.3% annualized yield. During the quarter, we made $32 million of new investments and had repayments of $14 million. The investment portfolio began the quarter at just under 1x leverage and ended at 1.15x levered. We expect to continue to rebuild this portfolio opportunistically. At quarter end, SSLP had capacity of approximately $70 million. Now let me turn back to Michael.

Michael Gross: Thank you, Bruce. While the path ahead is fraught with looming economic uncertainties from the ultimate impact of tariffs, the level of interest rates, and an overhang in supply-demand imbalance and sponsor events conditions, we believe that our diversified and predominantly asset-backed portfolio sits in a position of relative strength to deliver attractive results for shareholders across economic cycles. We are pleased with the growth of SLRC over the last couple of years, creating a diversified commercial finance company with broad investment capabilities and deep experience to a 320-person team across the SLR platform. These investments across the platform can be evaluated through the lens of record quarter originations, which was led by SLR's asset-based strategies and strong credit performance.

SLR's multi-strategy approach to private credit investing, our emphasis on preservation of capital, and our portfolio construction with a specialty finance emphasis differentiates us from the majority of our BDC peers and provides an investment portfolio that contains very limited investment overlap with other private credit managers. The combination of a diversified portfolio with strong credit metrics, momentum across our investment strategies, and a growing investment pipeline tilted heavily toward specialty finance investments positions the company favorably to navigate the current climate. To the second half of the year, we will remain opportunistic and prudent as we deploy capital with discipline and conviction.

In closing, SLRC trades at an approximate 10.3% dividend yield as of yesterday's market close, which we believe presents an attractive investment for both income-seeking and value investors and also offers a more diversified investment portfolio compared to cash flow-only private credit strategies. Our investment advisor's alignment of interest with our shareholders continues to be one of our significant hallmark principles. The SLR team owns over 8% of the company's stock and has a significant percentage of their annual incentive compensation reinvested in SLRC stock every year. The team's investment alongside fellow institutional private wealth investors demonstrates our confidence in the company's portfolio, stable funding, and earnings outlook.

We thank you all again for your time today as we recognize that it is a busy day for those that follow the listed BDC marketplace closely. Operator, will you please open up the line for questions?

Operator: Certainly, Mr. Gross. Thank you. Ladies and gentlemen, at this time, if you do have any questions, please press 1. We will go first this morning to Erik Zwick of Lucid Capital Markets.

Erik Zwick: Thanks. Good morning, guys. First, congratulations on such a strong quarter of originations. That's an impressive feat by the originations team. Curious, you noted that the new rate originations didn't have much of an impact on 2Q results due to the timing of when they hit the balance sheet. In order just to kind of think about that impact going forward, are you able to provide any, you know, what was the average yield on the new originations? And I'm curious how that compared to either the exits during the quarter, or just relative to the average yield on the existing portfolio?

Shiraz Kajee: Yeah. So the investments and the repayments did sort of on a weighted average dollar basis. Happened more towards the end of May. So really saw that net growth of $180 million impact the portfolio in June. Predominantly. The exits were just over 10% on average, and the new investments were at about 11.8% on average.

Erik Zwick: Okay. That's a nice pickup then on that swap. And then, just given the strong originations in the quarter, I'm curious about the level of the pipeline entering the third quarter relative to say maybe three months ago, how does that stand and what does it look like in terms of new versus add-on opportunities?

Shiraz Kajee: So it is definitely geared towards new opportunities. I would say it's fair to assume that it's not gonna be as robust as Q2 was, but still should be in line with our traditional activity levels. As you know, the summer can be a little bit seasonally slow just in terms of getting things closed. But, you know, we feel like we have a steady cadence. Okay. Just a minute, Ben, several years now that you've talked about the opportunity in ABL with the banks pulling back due to capital restraints. You've been in a great position to take advantage of that continues to be an opportunity for you.

I'm curious, is that bringing any new entrants, any other special lenders or any non-banks into that arena? And are you seeing any increased competition there at this point? Not really. Look, think we've talked a lot about you know, we've been doing this since 02/2012. We've added 100 people. These are not businesses that you can wake up one day and say, gonna go be in them. You have to build out the infrastructure because of how complex they are. And so we have not seen new entrants because it takes a significant investment to do it a long time. There's been a lot of talk about people in private credit investing in asset-based lending.

The predominance of it and the vast, vast majority is in more of ABS buying portfolios of consumer loans whether it's credit card receivables, car loans, etc. So we don't see new entrants into the space that we compete in today. No, it's a great position for you to be in. And one last one for me, and I'll step aside. You know, your portfolio from a credit perspective continues to be very clean, and you pointed out the low risk weighting today and just one credit on nonaccrual.

As you kind of look out at, you know, just in the economy and potentially into your pipeline and deals that you turned down, are you seeing any concerning developments in any sectors or any parts of the economy at this point? No. First of all, as you know, we're burdened by and benefit from the fact that we are generally focused on non-cyclical sectors. When we do look at cyclical opportunities, it will be on an asset-based basis where we're really just looking to the liquidity and liquidation value of the working capital assets. That protects us. But across the cash flow book as you know it's centered on recession-resilient sectors such as healthcare.

So we really don't have a great wind into it. But I will say that as we look across our ABL portfolio, which does lend to some cyclical sectors, we are seeing stress, but I would not call it significant.

Erik Zwick: Appreciate the color. Thanks for taking my questions.

Operator: Thank you. We go next now to Melissa Wedel of JPMorgan.

Melissa Wedel: Good morning. Thanks for taking my questions. Appreciate all the color that you offered on the ABL strategies. A quick follow-up on that. You mentioned that some of the changing capital rules have led regional banks to sort of pull away from that market, creating some opportunity for you. I'm just wondering with those capital rules or some capital rules being revisited, is there any chance that some relief might be brought to those regional banks that might bring them back into the market?

Bruce Spohler: So I guess it's always a possibility, but we're not seeing signs of that. Similar to Michael's commentary, around the barriers to entry for private credit managers, the banks face those same barriers once they pull out. It's not something that you can dip your toe in and out of. You need the investment in infrastructure and you can't create that quickly. And this is not the first place they're going to be looking to redeploy capital. So as you think back to the acquisition made in the second half of last year, at Webster Bank, you know, we bought the infrastructure, we bought the portfolio, we brought the team, it's very difficult to then turn that back on quickly.

Melissa Wedel: Okay. Understood. I think timing of the strong origination net originations sort of benefiting maybe one month out of the quarter. How I mean, if you were to analyze or estimate the NII impact, if you would have the benefit of a full quarter, of that deployment, would have been full dividend coverage?

Shiraz Kajee: Yes.

Melissa Wedel: Okay. And then I guess last question for me right now would just be around the leverage levels within the portfolio. There's not a ton of dry powder, just given again, a strong deployment. Is there given sort of the forward curve implying future rate cuts, can you talk about how you're thinking about the sustainability of the earnings power of the portfolio going forward if we were to get those rate cuts that are currently embedded in forward expectations? Thanks.

Bruce Spohler: Sure. So we do have some dry powder as you mentioned over $600 million to deploy. We are going to be very focused on continuing this rotation from low yielding to higher yielding assets. They carry borrowing bases, and collateral and we think better risk management tools for the lender, but they also carry higher returns as you can see. Across the portfolio. And are less geared towards and correlated with changes in base rates. So we think that gives us a little bit of cushion there. In terms of potential spread compression, because what we find is it's an all-in return asset.

So as base rates or spreads come down, we can compensate and with fees and other levers still keep those returns rather healthy. Obviously, if we went back to a zero rate environment that would have some impact we generally find that there is much less correlation with rates across the specialty finance assets.

Melissa Wedel: Thank you.

Operator: Thank you. We go next now to Helly Sheff of Raymond James.

Helly Sheff: Good morning. Thanks for the question. So you mentioned you earned a total of $1.1 million from the SSLP this quarter, and that's lower than what we've seen in 2024 and also last quarter in 1Q. Can you provide any additional color there? Was this quarter a one-off or was there an over-distribution in the previous quarters? And is this the new normalized dividend distribution run rate?

Bruce Spohler: Sure. So just to step back for a moment, if you look back the SSLP had been in ramp mode and got to full deployment. Which is where you saw that more elevated to the $1.8 million level. There's a lag effect. So we had let some of those assets repay. Consistent with what we did on balance sheet as we were getting repriced to rates that we thought were not acceptable. And so that's trickled through in Q2 even though you saw the portfolio come down in Q1, had some built-up income over the last year that we distributed.

So as we mentioned, the portfolio did rebuild a little bit in Q2 and we hope to continue to do that. So it will ebb and flow, but I don't see the 1.1 as a constant. We expect to continue to rebuild that and already did in Q2. And dividend distribution will grow accordingly.

Helly Sheff: Got it. Thanks for the color. Appreciate it.

Operator: Thank you. And just a quick reminder, ladies and gentlemen, any further questions? And we'll take a follow-up question now from Melissa at JPMorgan.

Melissa Wedel: Thanks. Just one more question from me. When we look at the schedule of investments within equipment finance, it looks like the business that you have there on balance sheet which is the majority of that portfolio there, the multi-sector holding SLR equipment finance it looks like the fair value to cost of that has sort of declined pretty steadily over the last year or so. Can you talk about what's driving that mark and what's happening within that portfolio? Thanks.

Bruce Spohler: Sure. So we have been shrinking that portfolio which has been what's driving that valuation. We are starting to rebuild the portfolio but we had pulled back on that risk over the last year and a half and pivoted more towards investment-grade leasing portfolio. Thanks, Rich. The Kingsbridge sister subsidiary. So you'll start to see that grow over the next couple of quarters here.

Operator: Thank you. And Mr. Gross, it appears we have no further questions today. Sir, I'd like to turn the conference back to you for any closing comments.

Michael Gross: Once again, we thank you all for your attention today. Recognize it is quite a busy time and week in the BDC space. And as always, if you have any questions, please feel free to call any of us at any time. Have a great day.

Operator: Thank you, Mr. Gross. Ladies and gentlemen, again, this will conclude the SLR Investment Corp second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.