Form 8-K

 

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): May 4, 2016

 

 

TPG Specialty Lending, Inc.

(Exact name of registrant as specified in charter)

 

 

 

Delaware   001-36364   27-3380000

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

301 Commerce Street, Suite 3300

Fort Worth, TX

  76102
(Address of Principal Executive Offices)   (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):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


Item 2.02 – Results of Operations and Financial Condition

On May 4, 2016, the registrant issued a press release announcing its financial results for the quarter ended March 31, 2016. 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 May 4, 2016, the registrant issued a press release, included herewith as Exhibit 99.1, announcing the declaration of a second fiscal quarter 2016 dividend of $0.39 per share, payable on or about July 29, 2016 to stockholders of record as of June 30, 2016.

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:

 

Exhibit

Number

  

Description

99.1    Press Release, dated May 4, 2016


SIGNATURES

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.

 

         TPG SPECIALTY LENDING, INC.
    

                    (Registrant)

Date: May 4, 2016

     By:  

/s/ Ian Simmonds

       Ian Simmonds
       Chief Financial Officer
EX-99.1

Exhibit 99.1

TPG Specialty Lending, Inc. Announces Quarter Ended March 31, 2016 Financial Results; Board Declares Quarterly Dividend of $0.39 Per Share for the Second Fiscal Quarter of 2016

NEW YORK – (BUSINESS WIRE) – May 4, 2016 – TPG Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $23.2 million, or $0.42 per share, for the quarter ended March 31, 2016. Net asset value per share was $15.11 at March 31, 2016 as compared to $15.15 at December 31, 2015. The Company’s Board of Directors declared a first quarter dividend of $0.39 per share, payable to stockholders of record as of March 31, 2016 that was paid on April 29, 2016.

The Company also announced that its Board of Directors has declared a quarterly dividend of $0.39 per share for stockholders of record as of June 30, 2016, payable on or about July 29, 2016.

FINANCIAL HIGHLIGHTS:

 

(amounts in thousands, except per share amounts)                   
           Three Months Ended        
           (unaudited)        
   March 31, 2016     December 31, 2015     March 31, 2015  

Investments at Fair Value

    $ 1,563,664       $ 1,485,709       $ 1,330,993   

Total Assets

    $ 1,584,252       $ 1,506,568 (1)     $ 1,359,605 (1) 

Net Asset Value Per Share

    $ 15.11       $ 15.15       $ 15.60   

Investment Income

    $ 42,751       $ 43,559       $ 37,730   

Net Investment Income

    $ 23,192       $ 23,643       $ 20,787   

Net Income (Loss)

    $ 17,771       $ (4,342    $ 24,468   

Net Investment Income Per Share

    $ 0.42       $ 0.44       $ 0.39   

Net Realized and Unrealized Gains (and Losses) Per Share

    $ (0.10    $ (0.52    $ 0.06   

Net Income (Loss) Per Share

    $ 0.32       $ (0.08    $ 0.45   

Weighted Average Yield of Debt and Income Producing Securities at Fair Value

     10.5     10.3     10.4

Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost

     10.3     10.1     10.3

Percentage of Debt Investment Commitments at Floating Rates

     96 %(2)      95 %(2)      97

 

(1) The Company adopted ASU 2015-03 during the quarter ended March 31, 2016 and adjusted prior period balance sheets to reflect the change. The adoption of this guidance did not have an impact on the Company’s results of operations or cash flows.
(2) Includes one fixed rate investment for which we entered into an interest rate swap agreement to swap to a 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 5, 2016. 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: 78797512

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 May 5 through May 19 via a webcast link located on the Investor Resources section of the Company’s website, and via the dial-in numbers listed below:

Domestic: (855) 859-2056

International: +1 (404) 537-3406

Conference ID: 78797512

Portfolio and Investment Activity

For the three months ended March 31, 2016, gross originations totaled $164.6 million. This compares to $399.3 million for the three months ended December 31, 2015 and $267.8 million for the three months ended March 31, 2015.

For the three months ended March 31, 2016, the Company made new investment commitments of $129.6 million, $78.5 million in four new portfolio companies and $51.1 million in four existing portfolio companies. For this period, the Company had $45.8 million aggregate principal amount in exits and repayments, resulting in a net portfolio increase of $83.8 million aggregate principal amount.

For the three months ended March 31, 2015, the Company made new investment commitments of $137.8 million, $101.0 million in three new portfolio companies and $36.8 million in three existing portfolio companies. For this period, the Company had $60.8 million aggregate principal amount in exits and repayments, resulting in a net portfolio increase of $71.0 million aggregate principal amount.

As of March 31, 2016 and December 31, 2015, the Company had investments in 48 and 46 portfolio companies, respectively, with an aggregate fair value of $1,563.7 million and $1,485.7 million, respectively.

As of March 31, 2016, the portfolio consisted of 89.0% first-lien debt investments, 7.7% second-lien debt investments, 1.9% mezzanine and unsecured debt investments, and 1.4% equity and other investments. As of December 31, 2015, the portfolio based on fair value consisted of 88.2% first-lien debt investments, 8.1% second-lien debt investments, 1.9% mezzanine and unsecured debt investments, and 1.8% equity and other investments.


As of March 31, 2016, 96.2% of debt investments based on fair value in the Company’s 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 facility also bears interest at floating rates.

As of March 31, 2016 and December 31, 2015, 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 10.3%, 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 10.3% and 10.1%, respectively.

As of March 31, 2016, 99.6% of debt investments based on fair value were meeting all payment requirements and 97.8% of debt investments based on fair value were meeting all covenant requirements. One investment was on non-accrual status at March 31, 2016.

Results of Operations for the Three Months Ended March 31, 2016 compared to the Three Months Ended March 31, 2015

Investment Income

For the three months ended March 31, 2016 and 2015, investment income totaled $42.7 million and $37.7 million, respectively. The increase in investment income for the quarter was primarily driven by an increase in the average size of the investment portfolio, accelerated amortization of upfront fees from unscheduled paydowns and dividend income, slightly offset by lower prepayment, syndication, amendment and agency fees, as compared to the same period in 2015.

Expenses

Net expenses totaled $19.1 million and $16.6 million for the three months ended March 31, 2016 and 2015, respectively. The increase in net expenses was primarily due to higher interest expense related to an increase in the weighted average debt outstanding.

Liquidity and Capital Resources

As of March 31, 2016, the Company had $4.0 million in cash and cash equivalents, total debt outstanding of $638.2 million, and $298.0 million of undrawn commitments on its revolving credit facility, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 2.6% for the three months ended March 31, 2016 and March 31, 2015.

On March 3, 2016, the Company issued 5,000,000 shares of common stock at $16.42 per share. Net of underwriting fees and offering costs, the Company received total cash proceeds of $78.3 million. During the three months ended March 31, 2016, 86,081 shares were repurchased under the Company 10b5-1 Plan at a weighted average price per share of $15.44, inclusive of commissions, for a total investment of $1.3 million.

The Company is rated BBB- by Fitch Ratings and Standard and Poor’s. Both Fitch Ratings and Standard and Poor’s affirmed the Company’s BBB- rating and stable outlook during the first quarter of 2016.


Financial Statements and Tables

TPG Specialty Lending, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

     Three Months Ended     Three Months Ended  
     March 31, 2016     March 31, 2015  

Income

    

Investment income from non-controlled, non-affiliated investments:

    

Interest from investments

   $ 39,170      $ 32,879   

Dividend income

     474        —     

Other income

     723        3,377   
  

 

 

   

 

 

 

Total investment income from non-controlled, non-affiliated investments

     40,367        36,256   

Investment income from controlled, affiliated investments:

    

Interest from investments

     2,333        1,417   

Other income

     51        57   
  

 

 

   

 

 

 

Total investment income from controlled, affiliated investments

     2,384        1,474   
  

 

 

   

 

 

 

Total Investment Income

     42,751        37,730   
  

 

 

   

 

 

 

Expenses

    

Interest

     5,298        4,220   

Management fees

     5,748        4,950   

Incentive fees

     4,902        5,007   

Professional fees

     1,923        1,209   

Directors’ fees

     97        96   

Other general and administrative

     1,254        1,156   
  

 

 

   

 

 

 

Total expenses

     19,222        16,638   
  

 

 

   

 

 

 

Management and incentive fees waived

     (98     —     
  

 

 

   

 

 

 

Net Expenses

     19,124        16,638   
  

 

 

   

 

 

 

Net Investment Income Before Income Taxes

     23,627        21,092   

Income taxes, including excise taxes

     435        305   
  

 

 

   

 

 

 

Net Investment Income

     23,192        20,787   

Unrealized and Realized Gains (Losses)

    

Net change in unrealized gains (losses):

    

Non-controlled, non-affiliated investments

     197        (5,907

Controlled, affiliated investments

     (4,359     605   

Translation of assets and liabilities in foreign currencies

     (2,703     7,215   

Interest rate swaps

     1,240        (353
  

 

 

   

 

 

 

Total net change in unrealized gains (losses)

     (5,625     1,560   
  

 

 

   

 

 

 

Realized gains:

    

Non-controlled, non-affiliated investments

     —          265   

Interest rate swaps

     —          1,852   

Foreign currency transactions

     204        4   
  

 

 

   

 

 

 

Total realized gains

     204        2,121   
  

 

 

   

 

 

 

Total Unrealized and Realized Gains (Losses)

     (5,421     3,681   
  

 

 

   

 

 

 

Increase in Net Assets Resulting from Operations

   $ 17,771      $ 24,468   
  

 

 

   

 

 

 

Earnings per common share—basic and diluted

   $ 0.32      $ 0.45   
  

 

 

   

 

 

 

Weighted average shares of common stock outstanding—basic and diluted

     55,802,270        53,902,074   
  

 

 

   

 

 

 


TPG Specialty Lending, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

     March 31, 2016     December 31, 2015  

Assets

    

Investments at fair value

    

Non-controlled, non-affiliated investments (amortized cost of $1,521,669 and $1,443,017, respectively)

   $ 1,501,060      $ 1,422,211   

Controlled, affiliated investments (amortized cost of $90,124 and $86,659, respectively)

     62,604        63,498   
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $1,611,793 and $1,529,676, respectively)

     1,563,664        1,485,709   

Cash and cash equivalents

     4,029        2,431   

Interest receivable

     11,829        10,146   

Receivable for interest rate swaps

     1,642        402   

Prepaid expenses and other assets

     3,088        7,880   
  

 

 

   

 

 

 

Total Assets

   $ 1,584,252      $ 1,506,568   
  

 

 

   

 

 

 

Liabilities

    

Debt (net of deferred financing costs of $9,790 and $10,365, respectively)

   $ 626,063      $ 642,423   

Management fees payable to affiliate

     5,734        5,530   

Incentive fees payable to affiliate

     4,819        4,915   

Dividends payable

     23,098        21,124   

Payable for investments purchased

     22,045        4,435   

Payables to affiliate

     1,758        1,492   

Other liabilities

     6,064        5,908   
  

 

 

   

 

 

 

Total Liabilities

     689,581        685,827   
  

 

 

   

 

 

 

Commitments and contingencies

    

Net Assets

    

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, 59,314,768 and 54,166,959 shares issued, respectively; and 59,225,688 and 54,163,960 shares outstanding, respectively

     593        542   

Additional paid-in capital

     892,675        812,586   

Treasury stock at cost; 89,080 and 2,999 shares held, respectively

     (1,359     (30

Undistributed net investment income

     26,712        27,521   

Net unrealized losses

     (34,005     (28,380

Undistributed net realized gains

     10,055        8,502   
  

 

 

   

 

 

 

Total Net Assets

     894,671        820,741   
  

 

 

   

 

 

 

Total Liabilities and Net Assets

   $ 1,584,252      $ 1,506,568   
  

 

 

   

 

 

 

Net Asset Value Per Share

   $ 15.11      $ 15.15   
  

 

 

   

 

 

 


The Company’s investment activity for the three months ended March 31, 2016 and 2015 is presented below (information presented herein is at par value unless otherwise indicated).

 

     Three Months Ended  
($ in millions)    March 31, 2016     March 31, 2015  

New investment commitments:

    

Gross originations

   $ 164.6      $ 267.8   

Less: Syndications/sell downs

     35.0        130.0   
  

 

 

   

 

 

 

Total new investment commitments

   $ 129.6      $ 137.8   

Principal amount of investments funded:

    

First-lien

   $ 127.5      $ 122.0   

Second-lien

     —          9.8   

Mezzanine and unsecured

     2.1        —     

Equity and other

     —          —     
  

 

 

   

 

 

 

Total

   $ 129.6      $ 131.8   

Principal amount of investments sold or repaid:

    

First-lien

   $ 43.6      $ 43.8   

Second-lien

     —          17.0   

Mezzanine and unsecured

     2.2        —     
  

 

 

   

 

 

 

Total

   $ 45.8      $ 60.8   
  

 

 

   

 

 

 

Number of new investment commitments in new portfolio companies

     4        3   

Average new investment commitment amount in new portfolio companies

   $ 19.6      $ 33.7   

Weighted average term for new investment commitments in new portfolio companies (in years)

     5.0        5.5   

Percentage of new debt investment commitments at floating rates

     98.3     92.9

Percentage of new debt investment commitments at fixed rates

     1.7     7.1

Weighted average interest rate of new investment commitments

     9.0     10.2

Weighted average spread over LIBOR of new floating rate investment commitments

     8.0     9.3

Weighted average interest rate on investments sold or paid down

     8.8     8.6

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 Special Situations Partners, the dedicated special situations and credit platform of TPG, with over $16 billion of assets under management as of March 31, 2016, and the broader TPG platform, a global private investment firm with over $74 billion of assets under management as of December 31, 2015. For more information, visit the Company’s website at www.tpgspecialtylending.com.


Forward-Looking Statements

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.

Source: TPG Specialty Lending, Inc.

Investor Relations:

Lucy Lu

212-601-4753

IRTSL@tpg.com

Media:

Luke Barrett, 212-601-4752

lbarrett@tpg.com

Owen Blicksilver PR, Inc.

Jennifer Hurson, 845-507-0571

jennifer@blicksilverpr.com