Blank Check BDIC Solar Senior Cap IPO wants NAV premium

Business Development Investment Corp (BDIC) Solar Senior Capital (SUNS) expects a $170mm IPO at $20. 100% to be sold on the IPO. Scheduled for Friday, February 25, 2011.

Joint Book-Running Managers include Citi, Wells Fargo Securities, Deutsche Bank Securities, SunTrust Robinson Humphrey. Lead Manager is RBC Capital Markets. Junior Co-Managers include BB&T Capital Markets, Ladenburg Thalmann, Lazard Capital Markets.

SUMMARY

. Blank check SUNS is aggressively trying to obtain an 8% premium over it’s initial raise, without any existing investments.

. A similar Business Development Investment Corp (BDIC) Solar Capital (SLRC) run by the same management team as SUNS IPO’d a year ago at 95% of Net Asset Value. SLRC is up 35% to $25 and pays at a rate of almost 9% (annualizing a 95% payout of March quarter’s estimated earnings) . .SLRC itself is currently priced at 10% over NAV, so why would investors pay 8% over NAV for a similar blank check fund (SUNS) that has no current investments? . SUNS anticipates its IPO funds will be invested within three to six months.

BUSINESS

. Blank check closed end private junk bond fund focusing on mid-market companies . Formed December 2010 as a newly organized business development company. For tax purposes intends to elect to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. . Objective is a to maximize current income consistent with the preservation of capital. Intends to invest primarily in senior secured loans, including first lien, unitranche and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which SUNS refers to collectively as "senior loans."

DISTRIBUTION POLICY

To obtain and maintain the RIC status, SUNS must distribute at least 90% of its ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution.

FOCUS

Private middle market senior secured debt provides an attractive risk reward profile, according to SUNS.

. In general, terms for illiquid, middle-market leveraged loans have been more attractive than leveraged loans for larger corporations which are typically more liquid. . SUNS believe this is because fewer institutions are able to invest in the illiquid asset class. In 2010, on average, the total debt to EBITDA ratio for middle-market LBOs was 4.2x, versus 4.7x for large capitalization LBOs. In addition, in 2010, the average discounted spread between mid-market loans over large-cap loans was approximately 2.6%. Default rates . From 1995 through 2010, 3.6% of leveraged loans issued in tranches under $100 million in total aggregate amount defaulted and 7.0% of leveraged loans issued in tranches between $100 million and $249 million in total aggregate amount defaulted, versus a default rate of 7.6% on loan tranches $500 million or greater in total aggregate amount. . Middle-market loans have also exhibited higher average recovery rates than all loans in the aggregate. SUNS believes that middle-market companies in which it intends to invest will generally have loan tranches of less than $250 million. . SUNS also believes that the average new issue yield for leveraged loans made to middle-market companies is currently significantly higher than the yield for newly-issued loans made to companies with annual revenues above $1 billion.

SAME MANAGEMENT TEAM AS

Solar Capital Ltd. (SLRC)

. Chairman and Chief Executive Michael Gross and Chief Operating Officer Bruce Spohler. . Gross is the former chairman and CEO of Apollo Investment Corp. (Public, NASDAQ:AINV) where he helped raise about $930 million in gross proceeds in an IPO. He was also a founder and senior partner of private equity firm Apollo Management LP, where he helped manage $13 billion. . Spohler was formerly a managing director co-head of U.S. leveraged finance for CIBC World Markets.

EMPLOYEES

. SUNS currently has no employees. Mr. Gross, the chairman and chief executive officer, and Mr. Spohler, the chief operating officer, currently serve as the managing member and a partner, respectively, of SUNS’s investment adviser, Solar Capital Partners. . Nicholas Radesca, the chief financial officer and secretary, is an employee of Solar Capital Management, and performs his functions as chief financial officer under the terms of the Administration Agreement. . Guy Talarico, the chief compliance officer, is the chief executive officer of Alaric Compliance Services, LLC, and performs his functions as the chief compliance officer under the terms of an agreement between Solar Capital Management and Alaric Compliance Services, LLC. . Solar Capital Management has retained Mr. Talarico and Alaric Compliance Services, LLC pursuant to its obligations under an Administration Agreement.

USE OF PROCEEDS

From sale of eight million public shares plus 500,0000 shares to Solar Senior Capital Investors LLC in a concurrent private placement.

. Investments in portfolio companies

. Also to pay operating expenses, including management and administrative fees, and may pay other expenses such as due diligence expenses of potential new investments

. Anticipates that substantially all of the net proceeds of this offering will be used for the above purposes within three to six months

Solar Senior Capital Ltd. (SUNS)
Mid-market private junk bonds
New York, NY
Compare & contrast with recent Business Dev Inv Corp (BDIC) IPOs
	IPO	IPO	IPO price/	Price	Change from
	price	NAV	NAV	18-Feb	IPO price
Solar Senior Cap (SUNS) proj	$20.00		8%
Solar Capital (SLRC)	$18.50	19.48	-5%	$25.00	35%
Golub Capital (GBDC)	$14.50	14.23	2%	$17.25	19%
THL Credit (TCRD)	$13.00	13.01	0%	$13.17	1%
	Current	Premium	Market cap	Expected	Annualized rtrn
	NAV	over NAV	($mm)	March earnings	with 95% dist
Solar Senior Cap (SUNS) proj	$18.59	8%	$170
Solar Capital (SLRC)	$22.71	10%	$909	$0.55	8.7%
Golub Capital (GBDC)	$14.74	17%	$306	$0.30	7.3%
THL Credit (TCRD)	$13.10	1%	$261	$0.22	6.0%
Date of IPO
SLRC: Feb 11, 2010
GBCD, April 14, 2010
TCRD, April 10, 2010