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): February 19, 2020
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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2100 McKinney Avenue, Suite 1500 Dallas, 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: (469) 621-3001
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)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, par value $0.01 per share |
TSLX |
The New York Stock Exchange |
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 February 19, 2020, the registrant issued a press release announcing its financial results for the quarter and year ended December 31, 2019. 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 February 19, 2020, the registrant issued a press release, included herewith as Exhibit 99.1, announcing the declaration of aggregate special cash dividends per share of $0.50 that will be paid to shareholders during the second quarter of 2020. Specifically, $0.25 per share will be payable on April 30, 2020 to shareholders of record as of April 15, 2020, and $0.25 per share will be payable on June 30, 2020 to shareholders of record as of June 15, 2020. The registrant also announced the declaration of a first quarter 2020 base dividend per share of $0.41 to shareholders of record as of March 13, 2020, payable on April 15, 2020, and a fourth quarter 2019 supplemental dividend per share of $0.06 to shareholders of record as of February 28, 2020, payable on March 31, 2020.
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: February 19, 2020 |
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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
Full Year and Fourth Quarter 2019 Earnings Results
TPG Specialty Lending, Inc. Reports Full Year and Fourth Quarter 2019 Earnings Results; Declares Aggregate Special Dividends Per Share of $0.50, a 5% Increase in First Quarter Base Dividend Per Share to $0.41, and a Fourth Quarter Supplemental Dividend Per Share of $0.06
NEW YORK—February 19, 2020— TPG Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $128.3 million, or $1.94 per share, and net income of $154.6 million, or $2.34 per share, for the year ended December 31, 2019. For the quarter ended December 31, 2019, net investment income was $33.8 million, or $0.51 per share, and net income was $37.7 million, or $0.57 per share. Reported net asset value per share was $16.83 at December 31, 2019 as compared to $16.72 at September 30, 2019.
Return on equity (ROE) for the full year 2019 was 12.0% and 14.5% on a net investment income and a net income basis, respectively. Annualized ROE for the fourth quarter 2019 was 12.2% and 13.6% on a net investment income and a net income basis, respectively.
The Company announced that its Board of Directors (the “Board”) has declared aggregate special cash dividends per share of $0.50 that will be paid to shareholders during Q2 2020. Specifically, $0.25 per share will be payable on April 30 to shareholders of record as of April 15, and $0.25 per share will be payable on June 30 to shareholders of record as of June 15. The Company’s Board also announced a 5% increase to its quarterly base dividend per share from $0.39 to $0.41 to shareholders of record as of March 13, payable on April 15, and a Q4 supplemental dividend per share of $0.06 to shareholders of record as of February 28, payable on March 31.
On January 31, 2020, the Company completed an amendment to the Revolving Credit Facility, which increased the aggregate commitments under the facility from $1.245 billion to $1.315 billion, increased the accordion to allow for commitments of up to $1.75 billion from $1.50 billion, and extended the stated maturity date to January 31, 2025. Other key terms of the Revolving Credit Facility remain unchanged.
On February 5, 2020, the Company issued $50.0 million aggregate principal amount of unsecured notes that mature on November 1, 2024 (the “Reopened 2024 Notes”) at a price to the public of 102.075% of their principal amount and spread to 5-year Treasury of 195 basis points. The Reopened 2024 Notes are a further issuance of, fungible with, rank equally in right of payment with and have the same terms (other than the issue date and the public offering price) as the initial issuance on November 1, 2019 of unsecured notes that mature on November 1, 2024. The Company used the net proceeds of the Reopened 2024 Notes to repay outstanding indebtedness under the Revolving Credit Facility. In connection with the issuance of the Reopened 2024 Notes, the Company entered into an interest rate swap to continue to align the interest rates of its liabilities with its investment portfolio, which consists of predominantly floating rate loans.
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Net Investment Income |
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2019 ($MM): 4Q19 ($MM): |
$128.3 $33.8 |
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2019 (per share): 4Q19 (per share): |
$1.94 $0.51 |
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Net Income |
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2019 ($MM): 4Q19 ($MM): |
$154.6 $37.7 |
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2019 (per share): 4Q19 (per share): |
$2.34 $0.57 |
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NAV |
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4Q19 ($MM): |
$1,119.3 |
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4Q19 (per share): |
$16.83 |
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4Q19 (per share, PF): |
$16.77 |
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ROE |
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2019 (NII): 4Q19 (NII, annualized): |
12.0% 12.2% |
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2019 (NI): 4Q19 (NI, annualized): |
14.5% 13.6% |
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Dividend (per share) |
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4Q19 (Supp.): |
$0.06 |
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1Q20 (Base): |
$0.41 |
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2019 (Base): 2019 (Supp.): 2019 (Total): |
$1.56 $0.19 $1.75 |
1
Portfolio and Investment Activity
For the year ended December 31, 2019, new investment commitments totaled $1,233.5 million. This compares to $908.2 million for the year ended December 31, 2018.
For the year ended December 31, 2019, the principal amount of new investments funded was $1,087.6 million in 32 new portfolio companies and 14 existing portfolio companies. For this period, the Company had $575.2 million aggregate principal amount in exits and repayments.
For the year ended December 31, 2018, the principal amount of new investments funded was $816.9 million in 19 new portfolio companies and 14 existing portfolio companies. For this period, the Company had $790.3 million aggregate principal amount in exits and repayments.
Fourth Quarter
For the quarter ended December 31, 2019, new investment commitments totaled $329.3 million. This compares to $169.3 million for the quarter ended December 31, 2018.
For the quarter ended December 31, 2019, the principal amount of new investments funded was $289.1 million in 9 new portfolio companies and 4 existing portfolio companies. For this period, the Company had $104.1 million aggregate principal amount in exits and repayments.
For the quarter ended December 31, 2018, the principal amount of new investments funded was $147.7 million in 4 new portfolio companies and 6 existing portfolio companies. For this period, the Company had $382.6 million aggregate principal amount in exits and repayments.
As of December 31, 2019 and December 31, 2018, the Company had investments in 63 and 46 portfolio companies, respectively, with an aggregate fair value of $2,245.9 million and $1,706.0 million, respectively. As of December 31, 2019, the average investment size in each portfolio company was $35.7 million based on fair value.
As of December 31, 2019, the Company’s portfolio based on fair value consisted of 96.5% first-lien debt investments, 0.6% second-lien debt investments, 0.1% mezzanine investments, and 2.8% equity and other investments.
As of December 31, 2018, the Company’s portfolio based on fair value consisted of 96.9% first-lien debt investments, 0.2% second-lien debt investments, 0.2% mezzanine investments, and 2.7% equity and other investments.
As of both December 31, 2019 and December 31, 2018, approximately 97.1% of the portfolio was invested in secured debt.
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As of December 31, 2019, 99.2% of debt investments based on fair value in the portfolio bore interest at floating rates (when including investment specific hedges), with 93.5% 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 December 31, 2019 and September 30, 2019, 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 10.5% 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 10.7% and 10.8%, respectively.
As of December 31, 2019, 100% of the portfolio at fair value was meeting all payment and covenant requirements, and no investments were on non-accrual status.
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Results of Operations
For the Full Year and Quarter Ended December 31, 2019
For the years ended December 31, 2019 and 2018, investment income totaled $251.5 million and $261.9 million, respectively. The decrease in investment income was primarily driven by a decrease in accelerated amortization of upfront fees and prepayment fees due to fewer paydowns, which was partially offset by an increase in the average portfolio size for the year ended December 31, 2019.
Net expenses totaled $119.4 million and $114.6 million for the years ended December 31, 2019 and 2018, respectively. This increase in net expenses was primarily driven by an increase in interest expense from an increase in the average debt outstanding.
Fourth Quarter
For the quarters ended December 31, 2019 and 2018, investment income totaled $66.5 million and $74.7 million, respectively. The decrease in investment income was primarily driven by a decrease in accelerated amortization of upfront fees and prepayment fees, which was partially offset by an increase in the average portfolio size for the quarter ended December 31, 2019.
Net expenses totaled $31.9 million and $29.7 million for the quarters ended December 31, 2019 and 2018, respectively. This increase in net expenses was primarily due to an increase in interest expense from an increase in the average debt outstanding.
Liquidity and Capital Resources
As of December 31, 2019, the Company had $14.1 million in cash and cash equivalents (including $9.3 million of restricted cash), total principal value of debt outstanding of $1,118.2 million, and $749.3 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 4.1% and 4.4% for the quarters ended December 31, 2019 and September 30, 2019, respectively. Average debt to equity was 0.97x and 0.86x during the quarters ended December 31, 2019 and September 30, 2019, respectively.
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(1) |
Adjusted to reflect the January 2020 amendment of the Revolving Credit Facility that increased total commitments by $70 million and the February 2020 issuance of $50 million of Reopened 2024 Notes, the net proceeds of which were used to pay down a portion of the outstanding revolver borrowings. |
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(2) |
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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4Q19 |
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Investment Income: $66.5MM Net Expenses: $31.9MM |
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Total Principal Debt Outstanding |
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$1,118.2MM |
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Available Liquidity |
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$749.3MM (actual) $869.7MM (adjusted)(1) |
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Debt-to-Equity Ratio |
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4Q19 Quarter End: |
1.00x |
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2019 Average(2): 4Q19 Average(2): |
0.84x 0.97x |
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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 8:00 a.m. Eastern Time on February 20, 2020. Please visit TSLX’s webcast link located on the Events & Presentations 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: 7077458
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 February 20 through February 27 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: 7077458
5
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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December 31, 2019 |
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September 30, 2019 |
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December 31, 2018 |
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Investments at Fair Value |
$ |
2,245.9 |
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2,047.5 |
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$ |
1,706.0 |
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Total Assets |
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2,280.9 |
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$ |
2,073.3 |
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$ |
1,730.3 |
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Net Asset Value Per Share |
$ |
16.83 |
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$ |
16.72 |
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$ |
16.25 |
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Supplemental Dividend Per Share |
$ |
0.06 |
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$ |
0.08 |
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$ |
0.12 |
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Pro Forma Net Asset Value Per Share(1) |
$ |
16.77 |
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$ |
16.64 |
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$ |
16.13 |
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Investment Income |
$ |
66.5 |
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$ |
70.1 |
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$ |
74.7 |
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Net Investment Income |
$ |
33.8 |
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$ |
36.7 |
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$ |
44.1 |
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Net Income |
$ |
37.7 |
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$ |
30.3 |
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$ |
14.2 |
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Net Investment Income Per Share |
$ |
0.51 |
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$ |
0.55 |
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$ |
0.67 |
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Net Realized and Unrealized Gains (and Losses) Per Share |
$ |
0.06 |
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$ |
(0.09 |
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$ |
(0.45 |
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Net Income Per Share |
$ |
0.57 |
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$ |
0.46 |
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$ |
0.22 |
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Annualized Return on Equity (Net Investment Income)(2) |
12.2% |
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13.3 |
% |
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16.4 |
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Annualized Return on Equity (Net Income)(2) |
13.6% |
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11.0 |
% |
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5.3 |
% |
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Weighted Average Yield of Debt and Income Producing Securities at Fair Value |
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10.5 |
% |
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10.7 |
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11.6 |
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Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost |
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10.7 |
% |
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10.8 |
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11.7 |
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Percentage of Debt Investment Commitments at Floating Rates (3) |
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99.2 |
% |
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99.1 |
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99.7 |
% |
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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. |
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(2) |
Return on equity is calculated using prior period’s ending net asset value per share. |