SLR Investment NASDAQ: SLRC reported second-quarter 2026 net investment income of $0.33 per share and net income of $0.15 per share, as the business development company continued to emphasize specialty finance lending amid what executives described as a more challenging direct-lending environment.
Net asset value was $18.00 per share at June 30, down from $18.16 at the end of the first quarter. Chairman and Co-Chief Executive Officer Michael Gross said the decline of less than 90 basis points was primarily driven by markdowns on two loans that were moved to non-accrual status during the quarter.
“These are isolated situations and do not represent a systemic trend in our portfolio,” Gross said, adding that watch-list investments represented 2.5% of the portfolio at quarter-end.
Quarterly Results and Capital Position
SLR reported net investment income of $17.8 million, or $0.33 per average share, unchanged from the prior quarter. Gross investment income totaled $48.8 million, compared with $49.3 million in the first quarter, while net expenses declined to $31.1 million from $31.4 million.
The company recorded net unrealized losses of $9.5 million during the second quarter, compared with unrealized losses of $700,000 in the prior quarter. Net assets increased by $8.3 million from operations, versus a $17.1 million increase in the first quarter.
Chief Financial Officer Shiraz Kajee said SLR had approximately $1.16 billion of debt outstanding at quarter-end, resulting in a net debt-to-equity ratio of 1.16x. That was within the company’s target range of 0.9x to 1.25x.
SLR increased revolving-facility capacity by $25 million during the quarter through the addition of a new lender, bringing total commitments across its two revolving facilities to $995 million. Including available credit-facility capacity at SSLP and its specialty finance portfolio companies, Gross said the company had more than $900 million of capital available for deployment.
The board declared a quarterly distribution of $0.31 per share, payable Sept. 25 to shareholders of record as of Sept. 11.
Specialty Finance Drives New Investment Activity
SLR originated $471 million of new investments across its comprehensive portfolio during the second quarter, with specialty finance representing 98% of that activity. Repayments totaled $431 million, resulting in net originations of roughly $40 million and a comprehensive portfolio of $3.2 billion at quarter-end.
Gross said the company sees specialty finance as a differentiator as regional banks retreat from certain collateral-based lending markets and competition intensifies in sponsor-backed cash flow lending. He said specialty finance investments can provide higher yields, stronger structural protections and liquid collateral that can be actively monitored.
At quarter-end, more than 86% of the comprehensive portfolio was invested in specialty finance. The portfolio had a weighted average asset-level yield of 11.1%, unchanged from the first quarter. About 98% of the portfolio was composed of senior secured loans, including 96% in first-lien loans.
During the question-and-answer session, Co-Chief Executive Officer and Chief Operating Officer Bruce Spohler said an approximately 11% asset-level yield remains a reasonable target for new investments, though the company is seeing some opportunities in both the 9% and 12% ranges. He also said SLR would be comfortable moving leverage toward the higher end of its target range, though repayment activity has kept leverage near 1.15x.
Two Loans Moved to Non-Accrual
Spohler discussed the two new non-accrual investments: RQM Corporation and OmniGuide Holdings.
SLR’s $26 million investment in RQM, a contract research and consulting company focused on medical devices and diagnostics, faced challenges after a regulatory change delayed demand for its services, Spohler said. He said SLR is in discussions with stakeholders and is focused on maximizing recoveries.
OmniGuide, a manufacturer of surgical lasers and single-use fibers used primarily in urological procedures, was affected by operational and supply-chain issues. SLR placed its $34 million par-value loan on non-accrual in anticipation of liquidity challenges and has engaged third parties to assist with operations, according to Spohler.
Outside of those investments, Spohler said the portfolio was performing well. The weighted average investment risk rating was below 2 on SLR’s 1-to-4 scale, where 1 represents the lowest risk, and 97.5% of the portfolio was rated 2 or better. Only 2% of gross income came from payment-in-kind interest resulting from amendments.
ABL, Life Sciences and Healthcare Opportunities
Asset-based lending, or ABL, remained SLR’s largest investment vertical, totaling just over $1.4 billion across 246 borrowers, or more than 43% of the comprehensive portfolio. The company originated more than $280 million in new ABL investments and received $246 million in prepayments. The portfolio’s weighted average yield was 12%, down from 12.3% in the prior quarter.
Spohler said ABL activity increased following a quiet first quarter, including demand from sponsors and entrepreneurs seeking liquidity. SLR recently established an ABL sourcing arrangement with a large U.S. commercial bank and is considering additional partnerships, acquisitions and hiring initiatives to expand its ABL footprint.
Equipment finance represented $1.1 billion, or 34% of the comprehensive portfolio, across 580 borrowers. The company originated $154 million in new equipment finance assets and received nearly $140 million in repayments. The weighted average yield was 10.7%.
SLR’s life sciences portfolio totaled $190 million across six borrowers, representing just under 6% of the total portfolio. Spohler said market conditions in life sciences improved during the first half of 2026, with a larger pipeline and growing opportunities for late-stage life sciences lending. The company originated $24 million in the strategy during the quarter and received $11 million of repayments.
Gross said SLR’s direct software exposure fell below 1% of fair value after a software investment was repaid at a premium during the second quarter. He cited concern about refinancing risks in the software market as maturities approach, while saying SLR’s limited exposure positions it to pursue opportunities in other areas.
The sponsored cash flow portfolio stood at $450 million across 26 borrowers, including loans held in SSLP. All cash flow investments were first-lien structures, with a weighted average loan-to-value ratio of approximately 39% and average interest coverage of 2.25x. SLR made $9 million of first-lien cash flow investments and received about $34 million in repayments during the quarter.
About SLR Investment (NASDAQ:SLRC)
SLR Investment Corp. NASDAQ: SLRC is a closed‐end, externally managed business development company that provides customized debt and equity financing solutions to middle‐market companies. The firm seeks to generate current income and capital appreciation by investing primarily in senior secured loans, second lien financings, mezzanine debt and equity co‐investments. Its flexible capital approach allows it to structure financing across the capital structure to address a range of sponsor‐backed transactions.
SLR Investment Corp.
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