425: Silver Spike Investment Corp. Discusses Q2 2024 Results and Chicago Atlantic Loan Portfolio Acquisition

Silver Spike Investment Corp. held a conference call on August 9, 2024, to discuss its Q2 2024 financial results and the proposed acquisition of a loan portfolio from Chicago Atlantic Loan Portfolio, LLC.

Summary

• Silver Spike Investment Corp. (SSIC) held a conference call on August 9, 2024, to discuss its financial results for the second quarter ended June 30, 2024, and the proposed acquisition of a loan portfolio from Chicago Atlantic Loan Portfolio, LLC (CALP).
• Gross investment income for Q2 2024 was $3.1 million, compared to $2.9 million in the same quarter last year.
• Excluding expenses related to the loan portfolio acquisition, expenses were approximately $1 million, resulting in net investment income of $2.1 million, compared to $1.9 million last year.
• Transaction-related expenses of about $0.6 million were incurred in the quarter related to Form N-14 filings.
• Net assets at the end of the period were $84.3 million, down from last year primarily due to the payment of dividends and transaction expenses.
• Investment income, excluding transaction expenses, was $0.33 per share compared to $0.31 last year, with net investment income of $0.25 per share and a net asset value per share of $13.56 as of June 30th.
• The Board declared a regular quarterly cash dividend of $0.25 per share, payable on September 27th to stockholders of record on September 19th.
• The company's active debt deal pipeline is in excess of $550 million.
• As of August 8, 2024, the company has almost $57 million invested with an average yield to maturity of almost 18%.
• The company participated in a $13.3 million syndication for Workbox Holdings, a non-cannabis company, investing in a package of term loans, preferred equity, and warrants.
• Subsequent to the end of the quarter, on July 16th, the company made another investment in Ascent Wellness in its 12.75% senior secured notes due 2029.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to increased investment income and a robust deal pipeline, but tempered by transaction expenses and uncertainties surrounding the Loan Portfolio Acquisition.

Positives

• Gross investment income increased to $3.1 million in Q2 2024 from $2.9 million in the same quarter last year.
• Net investment income, excluding transaction expenses, increased to $2.1 million from $1.9 million last year.
• The company's active debt deal pipeline exceeds $550 million.
• The company's portfolio has almost $57 million invested with an average yield to maturity of almost 18%.
• All positions in the portfolio are first lien loans or secured bonds, and none are in non-accrual status.
• The Board declared a regular quarterly cash dividend of $0.25 per share.

Negatives

• Net assets decreased to $84.3 million, primarily due to the payment of dividends and transaction expenses.
• The company incurred $0.6 million in transaction-related expenses related to the Chicago Atlantic Loan Portfolio acquisition.

Risks

• The timing and likelihood of the Loan Portfolio Acquisition closing is uncertain.
• There are risks associated with realizing the anticipated benefits of the Loan Portfolio Acquisition.
• Changes in the economy, financial markets, and political environment could impact the company.
• Elevating levels of inflation could impact the company and its portfolio companies.
• The company faces risks related to the ability of the Adviser to locate suitable investments and monitor them.

Future Outlook

The company anticipates the Chicago Atlantic Loan Portfolio acquisition to close in early fourth quarter 2024 and is building out its pipeline and activity outside of the cannabis sector.

Management Comments

• Scott Gordon stated that the overall macro environment for the cannabis-related lending business remains similar to last quarter, with some confusion and skepticism around rescheduling timing.
• Scott Gordon noted that operating trends among the larger operators appear to be stable, if not slightly positive.
• Scott Gordon mentioned that the company is excited to be building out its pipeline and activity outside of the cannabis sector.

Industry Context

The announcement discusses the cannabis industry, including the potential rescheduling of cannabis and regulatory developments in key states like Ohio and Florida. It also mentions capital market activity and refinancing efforts by MSOs (Multi-State Operators).

Comparison to Industry Standards

• The company's gross portfolio yield of 18% compares favorably to the broader listed BDC universe.
• No specific comparable companies or projects are mentioned in the document.

Stakeholder Impact

• Shareholders will receive a regular quarterly cash dividend of $0.25 per share.
• The Loan Portfolio Acquisition could impact shareholders through changes in the company's asset base and investment strategy.

Next Steps

• The company will continue to work towards closing the Chicago Atlantic Loan Portfolio acquisition in early fourth quarter 2024.
• The company will continue to build out its pipeline and activity outside of the cannabis sector.
• The company will provide further updates on the transaction and speak with everyone on the next earnings call.

Key Dates