UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2018
TPG Specialty Lending, Inc.
(Exact name of registrant as specified in charter)
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Delaware |
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001-36364 |
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27-3380000 |
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(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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301 Commerce Street, Suite 3300 Fort Worth, TX |
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76102 |
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(Address of Principal Executive Offices) |
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(zip code) |
Registrant’s telephone number, including area code: (817) 871-4000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 – Results of Operations and Financial Condition
On November 6, 2018, the registrant issued a press release announcing its financial results for the quarter ended September 30, 2018. The text of the press release is included as Exhibit 99.1 to this Form 8-K.
The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
Item 7.01 – Regulation FD Disclosure
On November 6, 2018, the registrant issued a press release, included herewith as Exhibit 99.1, announcing the declaration of a fourth fiscal quarter 2018 base dividend of $0.39 per share for stockholders of record as of December 14, 2018, payable on January 15, 2019, and a quarterly supplemental dividend of $0.05 per share for stockholders of record as of November 30, 2018, payable on December 31, 2018.
The information disclosed under this Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
Item 9.01 – Financial Statements and Exhibits
(d) Exhibits:
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Exhibit |
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Description |
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99.1 |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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TPG SPECIALTY LENDING, INC. (Registrant) |
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Date: November 6, 2018 |
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By: |
/s/ Ian Simmonds |
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Ian Simmonds |
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Chief Financial Officer |
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Exhibit 99.1
Third Quarter 2018 Earnings Results
TPG Specialty Lending, Inc. Reports Third Quarter NII Per Share of $0.50 and NAV Per Share of $16.47; Declares a Third Quarter Supplemental Dividend Per Share of $0.05 and a Fourth Quarter Base Dividend Per Share of $0.39
NEW YORK—November 6, 2018— TPG Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $32.3 million, or $0.50 per share, and net income of $37.4 million, or $0.57 per share, for the third quarter ended September 30, 2018. Net asset value per share was $16.47 at September 30, 2018 as compared to $16.36 at June 30, 2018.
Annualized return on equity (ROE) for the third quarter 2018 was 12.2% and 14.1% on a net investment income and a net income basis, respectively.
The Company announced that its Board of Directors has declared a fourth quarter 2018 base dividend of $0.39 per share for stockholders of record as of December 14, 2018, payable on January 15, 2019. The Company’s Board of Directors also declared a third quarter supplemental dividend of $0.05 per share for stockholders of record as of November 30, 2018, payable on December 31, 2018.
The Company’s Board of Directors previously declared a second quarter supplemental dividend of $0.08 per share and a third quarter base dividend of $0.39 per share, payable to stockholders of record as of August 31, 2018 and September 14, 2018, respectively, which were paid on September 28, 2018 and October 15, 2018, respectively.
The Company also announced it has amended its revolving credit facility to, among other things, reduce the asset coverage covenant from 200% to 150%. Size, pricing and other significant terms in this facility remain unchanged. This amendment follows the approval of the application of the 150% minimum asset coverage ratio by the Company’s stockholders at its special meeting on October 8, 2018. As a result, the minimum asset coverage ratio applicable to the Company is now 150%.
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Net Investment Income |
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Q3 2018 ($MM): |
$32.3 |
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Q3 2018 (per share): |
$0.50 |
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Net Income |
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Q3 2018 ($MM): |
$37.4 |
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Q3 2018 (per share): |
$0.57 |
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NAV |
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Q3 2018 ($MM): |
$1,073 |
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Q3 2018 (per share): |
$16.47 |
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Q3 2018 (per share, PF): |
$16.42 |
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Annualized ROE |
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Q3 2018 (NII): |
12.2% |
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Q3 2018 (NI): |
14.1% |
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Dividend (per share) |
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Q3 2018 (Supp.): |
$0.05 |
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Q4 2018 (Base): |
$0.39 |
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LTM Q3 2018 (Supp.): |
$0.22 |
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LTM Q3 2018 (Base):
LTM Q3 2018 (Total): |
$1.56
$1.78 |
1
Portfolio and Investment Activity
For the three months ended September 30, 2018, gross originations totaled $317.1 million. This compares to $944.4 million for the three months ended June 30, 2018 and $501.2 million for the three months ended September 30, 2017.
For the three months ended September 30, 2018, the Company made new investment commitments of $142.1 million in four new portfolio companies and two existing portfolio companies. For this period, the Company had $118.8 million aggregate principal amount in exits and repayments.
For the three months ended September 30, 2017, the Company made new investment commitments of $359.0 million in seven new portfolio companies and five existing portfolio companies. For this period, we had $330.9 million aggregate principal amount in exits and repayments.
As of September 30, 2018 and June 30, 2018, the Company had investments in 49 and 48 portfolio companies with an aggregate fair value of $1,981.9 million and $1,955.1 million, respectively. As of September 30, 2018, the average investment size in each portfolio company was $40.4 million based on fair value.
As of September 30, 2018, the portfolio based on fair value consisted of 93.6% first-lien debt investments, 3.2% second-lien debt investments, 0.1% mezzanine investments, and 3.1% equity and other investments. As of June 30, 2018, the portfolio based on fair value consisted of 93.8% first-lien debt investments, 3.1% second-lien debt investments, and 3.1% equity and other investments. As of September 30, 2018 and June 30, 2018, approximately 96.8% and 96.9% of the portfolio was invested in secured debt, respectively.
As of September 30, 2018, 99.8% of debt investments based on fair value in the portfolio bore interest at floating rates (when including investment specific hedges), with 94.2% 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 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.
As of September 30, 2018 and June 30, 2018, 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 11.4%, 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 11.3% and 11.4%, respectively.
As of September 30, 2018, 100% of the portfolio at fair value was meeting all payment and covenant requirements, and no investments were on non-accrual status.
2
Results of Operations for the Three Months Ended September 30, 2018
Compared to the Three Months Ended September 30, 2017
For the three months ended September 30, 2018 and 2017, investment income totaled $63.0 million and $52.3 million, respectively. The increase in investment income was primarily driven by an increase in the average size of the investment portfolio and an increase in the effective LIBOR on our debt investments.
Expenses
Net expenses totaled $30.1 million and $20.7 million for the three months ended September 30, 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
As of September 30, 2018, the Company had $11.3 million in cash and cash equivalents, including $6.7 million of restricted cash, total principal value of debt outstanding of $894.8 million, and $482.7 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 4.3% and 4.1% for the three months ended September 30, 2018 and June 30, 2018, respectively. Average debt to equity was 0.91x and 0.89x during the three months ended September 30, 2018 and June 30, 2018, respectively.
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Total Investment Income |
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$63.0MM |
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Net Expenses |
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$30.1MM |
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Total Principal Debt Outstanding |
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$894.8MM |
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Available Liquidity |
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$482.7MM |
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Debt-to-Equity Ratio |
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Q3 2018 Quarter End: |
0.83x |
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Q3 2018 Average(1): |
0.91x |
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(1) |
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). |
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Conference Call and Webcast
Conference Call Information:
A conference call to discuss the Company’s financial results will be held live at 8:30 a.m. Eastern Time on November 7, 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: 8989464
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.
Replay Information:
An archived replay will be available from approximately 12:00 p.m. Eastern Time on November 7 through November 14 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: 8989464
4
Financial Highlights
(Amounts in millions, except per share amounts)
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Three Months Ended |
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(unaudited) |
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September 30, 2018 |
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June 30, 2018 |
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September 30, 2017 |
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Investments at Fair Value |
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1,981.9 |
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1,955.1 |
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1,550.3 |
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Total Assets |
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2,007.0 |
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$ |
1,978.5 |
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$ |
1,581.1 |
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Net Asset Value Per Share |
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16.47 |
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$ |
16.36 |
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$ |
16.09 |
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Supplemental Dividend Per Share |
$ |
0.05 |
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$ |
0.08 |
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$ |
0.06 |
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Pro Forma Net Asset Value Per Share(1) |
$ |
16.42 |
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$ |
16.28 |
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$ |
16.03 |
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Investment Income |
$ |
63.0 |
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$ |
66.4 |
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$ |
52.3 |
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Net Investment Income |
$ |
32.3 |
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$ |
36.3 |
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$ |
30.9 |
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Net Income |
$ |
37.4 |
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$ |
33.6 |
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$ |
24.8 |
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Net Investment Income Per Share |
$ |
0.50 |
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$ |
0.56 |
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$ |
0.51 |
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Net Realized and Unrealized Gains (and Losses) Per Share |
$ |
0.07 |
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$ |
(0.04 |
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$ |
(0.10 |
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Net Income Per Share |
$ |
0.57 |
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$ |
0.52 |
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$ |
0.41 |
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Annualized Return on Equity (Net Investment Income)(2) |
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12.2 |
% |
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13.9 |
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12.8 |
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Annualized Return on Equity (Net Income)(2) |
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14.1 |
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12.9 |
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10.2 |
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Weighted Average Yield of Debt and Income Producing Securities at Fair Value |
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11.1 |
% |
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11.4 |
% |
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10.7 |
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Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost |
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11.3 |
% |
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11.4 |
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10.8 |
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Percentage of Debt Investment Commitments at Floating Rates (3) |
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99.8 |
% |
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100.0 |
% |
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100.0 |
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(1) |
Pro Forma Net Asset Value Per Share gives effect to the supplemental dividend declared related to earnings in the applicable period. |