Fitch affirms Solar Capital

Fitch Ratings said it affirmed the long-term issuer default rating, senior secured and senior unsecured debt ratings of Solar Capital Ltd. at BBB-.

The outlook is stable.

On Aug. 2, Solar received approval from its board of directors to reduce its asset coverage requirement to 150% from 200%, which effectively allows the firm to increase its debt to equity leverage ratio to a maximum of 2x from 1x, effective Aug. 2, 2019.

The company also plans to seek approval from its shareholders at its annual meeting, which if approved, would allow the company to increase leverage more quickly, subject to amendments in bank facility covenants.

Fitch said the affirmation reflects a view that the proposed increase in leverage is sufficiently mitigated by an expected incremental improvement in the risk profile of the portfolio, and an expectation that the covenant cushion will be maintained at a sufficient level to account for potential valuation volatility in the portfolio.

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