Solar Capital Ltd (SLRC)

[mthiker2004]

Jan: I've always appreciated your well-reasoned thoughts on the various BDCs and their performance. I don't disagree with anything you have said as it pertains to SLRC and its future prospects. On the one hand, I've been impressed with management's discipline to not simply grow the portfolio for the sake of growth, especially over the most recent 2 years. However, I am concerned about mgmt's apparent practice of borrowing the full amount of the credit line on the day before quarter end, and repaying it the following day (discussed, sort of, several quarters ago in the CC). The only purpose I can see in this action is to increase the assets at quarter end, and thus increase the management fee "earned" based on gross assets at quarter end. Absent evidence that there is a benefit to the shareholders for this gimmickry (for lack of a better word), it would appear that mgmt's interests are not as aligned with the shareholders as I would like. Although such conflicts of interest are inherent in externally managed BDCs, the magnitude in this instance, troubles me (notwithstanding the significant percentage of insider ownership). I still hold SLRC, but monitor it carefully.