NEW YORK--(BUSINESS WIRE)--TPG Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $31.2 million, or $0.51 per share, for the quarter ended March 31, 2018. Net asset value per share was $16.27 at March 31, 2018 as compared to $16.09 at December 31, 2017. The Company’s Board of Directors previously declared a fourth quarter supplemental dividend of $0.03 per share and a first quarter base dividend of $0.39 per share, payable to stockholders of record as of February 28, 2018 and March 15, 2018, respectively, that was paid on March 30, 2018 and April 13, 2018, respectively.
The Company announced that its Board of Directors has declared a second quarter 2018 base dividend of $0.39 per share for stockholders of record as of June 15, 2018, payable on July 13, 2018. The Company’s Board of Directors also declared a first quarter supplemental dividend of $0.06 per share for stockholders of record as of May 31, 2018, payable on June 29, 2018.
NII & NI
|$31.2MM / $33.8MM|
NII / Share & NI / Share
|$0.51 / $0.56|
ANNUALIZED ROE (NII & NI)
|12.7% / 13.8%|
NAV / Share & PF NAV / Share
|$16.27 / $16.21|
Base Dividend & Supplemental Dividend
|$0.39 / $0.06|
(amounts in millions, except per share amounts)
|Three Months Ended|
|March 31, 2018||December 31, 2017||March 31, 2017|
|Investments at Fair Value||$||1,909.3||$||1,693.7||$||1,580.3|
|Net Asset Value Per Share||$||16.27||$||16.09||$||16.04|
|Supplemental Dividend Per Share||$||0.06||$||0.03||$||0.04|
|Pro Forma Net Asset Value Per Share (1)||$||16.21||$||16.06||$||16.00|
|Net Investment Income||$||31.2||$||26.9||$||28.5|
|Net Investment Income Per Share||$||0.51||$||0.45||$||0.48|
|Net Realized and Unrealized Gains (and Losses) Per Share||$||0.05||($||0.01||)||($||0.01||)|
|Net Income Per Share||$||0.56||$||0.44||$||0.47|
|Annualized Return on Equity (Net Investment Income)(2)||12.7||%||11.1||%||12.0||%|
|Annualized Return on Equity (Net Income)(2)||13.8||%||11.0||%||11.9||%|
|Weighted Average Yield of Debt and Income Producing Securities at Fair Value||11.1||%||10.7||%||10.3||%|
|Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost||11.2||%||10.8||%||10.4||%|
|Percentage of Debt Investment Commitments at Floating Rates (3)||100.0||%||100.0||%||100.0||%|
Pro Forma Net Asset Value Per Share gives effect to the supplemental dividend declared related to earnings in the applicable period.
Return on equity is calculated using weighted average equity. Weighted average equity is calculated by starting with NAV at the beginning of the period, adjusting daily for equity issuances and adjusting on the last day of the period for that quarter’s net income and dividends payable.
Includes one or more fixed rate investments for which the Company entered into an interest rate swap agreement to swap to floating rate.
Conference Call and Webcast
Conference Call Information:
The conference call will be broadcast live at 8:30 a.m. Eastern Time on May 4, 2018. Please visit TSLX’s webcast link located on the Events & Presentation page of the Investor Resources section of TSLX’s website http://www.tpgspecialtylending.com for a slide presentation that complements the Earnings Conference Call. Please visit the website to test your connection before the webcast.
Participants are also invited to access the conference call by dialing one of the following numbers:
|Domestic: (877) 359-9508|
|International: +1 (253) 237-1122|
|Conference ID: 8997046|
All callers will need to enter the Conference ID followed by the # sign and reference “TPG Specialty Lending” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected.
An archived replay will be available from approximately 12:00 p.m. Eastern Time on May 4 through May 11 via a webcast link located on the Investor Resources section of TSLX’s website, and via the dial-in numbers listed below:
|Domestic: (855) 859-2056|
|International: +1 (404) 537-3406|
|Conference ID: 8997046|
Portfolio and Investment Activity
For the three months ended March 31, 2018, gross originations totaled $564.6 million. This compares to $1,066.7 million for the three months ended December 31, 2017 and $285.9 million for the three months ended March 31, 2017.
For the three months ended March 31, 2018, the Company made new investment commitments of $331.7 million in seven new portfolio companies. For this period, the Company had $106.0 million aggregate principal amount in exits and repayments.
For the three months ended March 31, 2017, the Company made new investment commitments of $149.2 million, in five new portfolio companies. For this period, the Company had $213.5 million aggregate principal amount in exits and repayments.
AVERAGE INVESTMENT SIZE
As of March 31, 2018 and December 31, 2017, the Company had investments in 48 and 45 portfolio companies, respectively, with an aggregate fair value of $1,909.3 million and $1,693.7 million, respectively. As of March 31, 2018, the average investment size in each portfolio company was $39.8 million based on fair value.
% FIRST LIEN DEBT
% SECURED DEBT
As of March 31, 2018, the portfolio based on fair value consisted of 94.4% first-lien debt investments, 3.2% second-lien debt investments, and 2.4% equity and other investments. As of December 31, 2017, the portfolio based on fair value consisted of 93.4% first-lien debt investments, 3.6% second-lien debt investments, and 3.0% equity and other investments. As of March 31, 2018 and December 31, 2017, approximately 97.6% and 97.0% of the portfolio was invested in secured debt, respectively.
As of March 31, 2018, 100.0% of debt investments based on fair value in the portfolio bore interest at floating rates (when including investment specific hedges), with 94.1% of these subject to interest rate floors. The Company’s credit facilities also bear interest at floating rates. In connection with the Company’s Convertible Senior Notes and other Notes, which bear interest at fixed rates, the Company entered into fixed-to-floating interest rate swaps in order to align the nature of the interest rates of its liabilities with its investment portfolio.
WEIGHTED AVERAGE YIELD
FAIR VALUE / AMORTIZED COST
|11.1% / 11.2%|
As of March 31, 2018 and December 31, 2017, the weighted average total yield of debt and income-producing securities at fair value (which includes interest income and amortization of fees and discounts) was 11.1% and 10.7%, respectively, and the weighted average total yield of debt and income-producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 11.2% and 10.8%, respectively.
As of March 31, 2018, 100% of the portfolio at fair value was meeting all payment and covenant requirements. No investments were on non-accrual status at March 31, 2018.
|(4)||Represents percentage of total investment portfolio at fair value.|
Results of Operations for the Three Months Ended March 31, 2018 compared to the Three Months Ended March 31, 2017
TOTAL INVESTMENT INCOME
For the three months ended March 31, 2018 and 2017, investment income totaled $57.8 million and $50.9 million, respectively. The increase in investment income was primarily driven by an increase in the average size of the investment portfolio, and higher syndication and other fees.
Net expenses totaled $25.7 million and $21.7 million for the three months ended March 31, 2018 and 2017, respectively. This increase in net expenses was primarily due to an increase in the average interest rate on the debt outstanding following an increase in LIBOR, higher outstanding debt balances, as well as higher management and incentive fees.
Liquidity and Capital Resources
TOTAL NET ASSETS
TOTAL DEBT OUTSTANDING
AVERAGE DEBT/EQUITY (5)
As of March 31, 2018, the Company had $8.9 million in cash and cash equivalents, including $5.7 million of restricted cash, total principal value of debt outstanding of $853.9 million, and $421.1 million of undrawn capacity on its revolving credit facility, subject to borrowing base and other limitations. The Company’s weighted average interest rate on debt outstanding was 3.7% and 3.4% for the three months ended March 31, 2018 and December 31, 2017, respectively. Average debt to equity was 0.84x and 0.72x during the three months ended March 31, 2018 and December 31, 2017, respectively.
The Company is rated BBB- with positive outlook by Fitch Ratings and BBB- with negative outlook by Standard and Poor’s.
|(5)||Daily average debt outstanding during the quarter divided by the daily average net assets during the quarter. Daily average net assets is calculated by starting with the prior quarter end net asset value and adjusting for capital activity during the quarter (adding common stock offerings / DRIP contributions).|
Financial Statements and Tables
|TPG Specialty Lending, Inc.|
|Consolidated Balance Sheets|
|(Amounts in thousands, except share and per share amounts)|
|March 31,||December 31,|
|Investments at fair value|
Non-controlled, non-affiliated investments (amortized cost of $1,729,452 and $1,523,844, respectively)
Controlled, affiliated investments (amortized cost of $167,427 and $162,406, respectively)
Total investments at fair value (amortized cost of $1,896,879 and $1,686,250, respectively)
|Cash and cash equivalents (restricted cash of $5,697 and $3,150, respectively)||8,870||6,665|
|Prepaid expenses and other assets||3,413||13,088|
|Debt (net of deferred financing costs of $16,512 and $11,770, respectively)||$||835,914||$||703,428|
|Management fees payable to affiliate||6,631||6,219|
|Incentive fees payable to affiliate||6,574||5,628|
|Other payables to affiliate||2,410||1,901|
|Commitments and contingencies|
Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding
|Common stock, $0.01 par value; 400,000,000 shares authorized, 64,256,031|
|and 60,336,281 shares issued, respectively; and 64,166,951 and 60,247,201|
|shares outstanding, respectively||643||603|
|Additional paid-in capital||971,843||906,521|
|Treasury stock at cost; 89,080 and 89,080 shares held, respectively||(1,359||)||(1,359||)|
|Undistributed net investment income||64,965||61,790|
|Net unrealized gains||6,510||6,718|
|Undistributed net realized gains (losses)||1,365||(4,989||)|
|Total Net Assets||1,043,967||969,284|
|Total Liabilities and Net Assets||$||1,930,144||$||1,720,238|
|Net Asset Value Per Share||$||16.27||$||16.09|
|TPG Specialty Lending, Inc.|
|Consolidated Statements of Operations|
|(Amounts in thousands, except share and per share amounts)|
|Three Months Ended||Three Months Ended|
|March 31, 2018||March 31, 2017|
|Investment income from non-controlled, non-affiliated investments:|
|Interest from investments||$||47,967||$||47,770|
Total investment income from non-controlled, non-affiliated
|Investment income from controlled, affiliated investments:|
|Interest from investments||3,734||1,000|
|Total investment income from controlled, affiliated investments||3,786||1,052|
|Total Investment Income||57,767||50,948|
|Other general and administrative||1,238||1,301|
|Management and incentive fees waived||(63||)||—|
|Net Investment Income Before Income Taxes||32,036||29,269|
|Income taxes, including excise taxes||850||750|
|Net Investment Income||31,186||28,519|
|Unrealized and Realized Gains (Losses)|
|Net change in unrealized gains (losses):|
|Non-controlled, non-affiliated investments||8,339||11,240|
|Controlled, affiliated investments||(3,371||)||(7,750||)|
|Translation of other assets and liabilities in foreign currencies||(981||)||(5,793||)|
|Interest rate swaps||(4,194||)||154|
|Total net change in unrealized losses||(207||)||(2,149||)|
|Realized gains (losses):|
|Non-controlled, non-affiliated investments||2,645||1,322|
|Foreign currency transactions||212||586|
|Total realized gains||2,857||1,908|
|Total Unrealized and Realized Gains (Losses)||2,650||(241||)|
|Increase in Net Assets Resulting from Operations||$||33,836||$||28,278|
|Earnings per common share—basic and diluted||
|Weighted average shares of common stock outstanding—basic and diluted||60,840,459||59,796,731|
The Company’s investment activity for the three months ended March 31, 2018 and 2017 is presented below (information presented herein is at par value unless otherwise indicated).
|Three Months Ended|
|($ in millions)||March 31, 2018||March 31, 2017|
|New investment commitments:|
|Less: Syndications/sell downs||232.9||136.7|
|Total new investment commitments||$||331.7||$||149.2|
|Principal amount of investments funded:|
|Mezzanine and unsecured||—||—|
|Equity and other||2.5||—|
|Principal amount of investments sold or repaid:|
|Mezzanine and unsecured||—||11.5|
|Equity and other||12.1||10.7|
Number of new investment commitments in new portfolio companies
Average new investment commitment amount in new portfolio companies
Weighted average term for new investment commitments in new portfolio companies (in years)
Percentage of new debt investment commitments at floating rates (1)
Percentage of new debt investment commitments at fixed rates
Weighted average interest rate of new investment commitments
Weighted average spread over LIBOR of new floating rate investment commitments
Weighted average interest rate on investments sold or paid down
(1) Includes one or more fixed rate investments for which the Company entered into an interest rate swap agreement to swap to floating rate.
About TPG Specialty Lending, Inc.
TSLX is a specialty finance company focused on lending to middle-market companies. The Company seeks to generate current income primarily in U.S.-domiciled middle-market companies through direct originations of senior secured loans and, to a lesser extent, originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company has elected to be regulated as a business development company, or a BDC, under the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. TSLX is externally managed by TSL Advisers, LLC, a Securities and Exchange Commission (“SEC”) registered investment adviser. TSLX leverages the deep investment, sector, and operating resources of TPG Sixth Street Partners, the dedicated special situations and credit platform of TPG, with over $21 billion of assets under management as of December 31, 2017, and the broader TPG platform, a global private investment firm with approximately $82 billion of assets under management as of December 31, 2017. For more information, visit the Company’s website at www.tpgspecialtylending.com.
Statements included herein may constitute “forward-looking statements,” which relate to future events or the Company’s future performance or financial condition. These statements are not guarantees of future performance, conditions or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update any such forward-looking statements. TSLX undertakes no duty to update any forward-looking statements made herein.