UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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TPG Specialty Lending, Inc.
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| TPG Specialty Lending Expanding Tools for Value Creation and Financial Flexibility April 2018 ht t p://www.t pgspe cia lt yle ndi ng.com/ |
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| Disclaimer and Forward-Looking Statement General Disclaimer The information containe d in this prese ntation (the “Presentation”) is pre liminary, may not be comple te and may be change d. By acce ptance here of, you agree that the information containe d he rein may not be use d, re produce d or distribute d to others, in whole or in part, for any othe r purpose without the prior writte n conse nt of TPG Spe cialty Le nding, Inc. (“TSLX”). Re fe rences in this Pre sentation to “TSLX,” “we,” “us,” “our,” and “the Company” re fer to TPG Spe cialty Le nding, Inc. The conte nts he reof should not be construe d as inve stme nt, le gal, tax or othe radvice and you should consult your own advisers as to le gal, business, tax and othe r re late d matte rs conce rning an investme nt in TSLX. TSLX is notacting for you and does not re gard youas a custome r ora clie nt. It will not be responsible to you for providing protections afforde d to clie nts or be advising you on the re levant transaction. Unless otherwise noted, the information contained herein has been compiled as of De cember 31, 2017. There is no obligation to update the information. This Presentation does not constitute a prospectus and should unde r no circumstances be unde rstood as an offe r to se ll or the solicitation of an offe r to buy common stock nor will the re be any sale of common stock in any state or jurisdiction in which such offe r, solicitation or sale would be unlawful prior to re gistration or qualification unde r the securities laws of such state or jurisdiction. Such an offe r orsolicitation can only be made by way of an offe ring me morandum in accordance with the securities laws. No re pre sentation or warranty is give n in re spe ct of the information contained he re in, and ne ithe r the de live ry of this docume nt nor any investme nt in TSLX securities will under any circumstances create any implication that such Company has update d the information containe d here in. Information throughout the Prese ntation provide d by sources othe r than TSLX has not be e n independently ve rifie d. Differences between past pe rformance and actual results may be material and adverse. Future investme nts may be unde r mate rially diffe rent e conomic conditions, including interest rates, marke t tre nds and gene ral business conditions, in diffe re nt portfolio companies and using diffe re nt investme nt strate gies. Each of these material marke t or economic conditions may or may not be re peate d. It should not be assume d that strate gies employe d by TSLX in the future will be profitable or wille qual the performance described in this Presentation. Forward Looking Statements This Prese ntation include s forward-looking state me nts about TSLX that involve substantial risks and uncertaintie s. These forward-looking state me nts are not historical facts, but rathe r are base d on curre nt e xpectations, estimate s and projections about us, our curre nt and prospective portfolio investme nts, our industry, our be lie fs, and our assumptions. Words such as “anticipate s,” “e xpe cts,” “intends,” “plans,” “belie ves,” “seeks,” “estimate s,” “would,” “should,” “targe ts,” “projects,” and variations of these words and similar e xpressions are inte nde d to ide ntify forward-looking state me nts. These state me nts are not guarantees of future performance and are subject to risks, unce rtainties, and othe r factors, some of which are be yond our control and difficult to predict, that could cause actual results to diffe r materially from those e xpresse d or forecaste d in the forward-looking state me nts. Such state me nts are also subject to a numbe r of unce rtainties and factors outside TSLX’s control. Such factors include , but are not limite d to the risks, uncertainties and othe r factors we ide ntify in the section entitle d “Risk Factors” in our offe ring me morandum and filings we make with the Securities and Exchange Commission. Opinions e xpresse d are curre nt opinions as of the date of this Presentation. Should TSLX’s estimate s, projections and assumptions or these othe r unce rtainties and factors mate rialize in ways that TSLX did not e xpect, actual results could diffe r mate rially from the forward-looking state ments in this Presentation, including the possibility that inve stors may lose a mate rial portion of the amounts inve ste d. No re presentation or warranty, e xpress or implie d, is made as to the accuracy or comple te ness of the information containe d in this Prese ntation, and nothing shall be re lie d upon as a promise or re prese ntation as to the pe rformance of any investme nt. Inve stors are cautioned not to place undue reliance on such forward-looking statements and should rely on the ir own assessment of an inve stment. Important Additional Information In connection with the Company’s special mee ting of stockholde rs, the Company has file d a proxy state me nt with the SEC and maile d the proxy state ment and/or Notice of Inte rne t Availability of Proxy Mate rials to its stockholde rs on or about April 3, 2018. Stockholde rs are encourage d to read the proxy state ment because it contains important information about the proposal to be vote d on at the special mee ting. The proxy state me nt is available at no charge on the SEC’s website at http://www.se c.gov, on the Company’s we bsite at http://www.tpgspecialtylending.com, and at www.proxyvote .com. In addition, stockholde rs may also reque st copies of the proxy state ment from us free of charge by following the instructions on the Notice of Inte rnet Availability of Proxy Mate rials. TSLX (NYSE) 2 |
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| Special Meeting of TSLX Stockholders To Our Stockholders: We will be holding a Special Meeting of Stockholders of TPG Specialty Lending, Inc. on May 17, 2018, at 9:30 AM, local time, at the offices of TPG, 888 7th Avenue. Floor 35, New York, NY 10106. At the meeting, you will be asked to consider and vote upon a proposal to authorize the Company, with approval of its board of directors, to sell or otherwise issue shares of its common stock at a price below its then-current net asset value (“NAV”) per share in one or more offerings, subject to certain conditions as set forth in the proxy statement for the Special Meeting, including that the number of shares issued does not exceed 25% of its then-outstanding common stock immediately prior to each such offering. The proxy statement for the Special Meeting was filed and notice sent to stockholders on or about April 3, 2018. The board believes that having the flexibility for the Company to sell common stock below NAV in certain instances is in the Company’s best interest and the best interests of its stockholders. We urge stockholders to vote “FOR” this proposal: Provide access to capital markets to pursue attractive investment opportunities during periods of volatility Improve capital resources to enable the Company to compete effectively for high quality investment opportunities Add financial flexibility TSLX (NYSE) 3 |
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| Market Conditions May Create Attractive Investment Opportunities (1) (2) Average BDC P/NAV BAML HY Index (OAS) 1.1x 7.5% 7.0% 1.0x 6.5%—NAV BAML to P/NAV = 1.0x 6.0% - 1.0x US HY
Price BDC 5.5% Index e 0.9x Averag 5.0% (OAS) 4.5% 0.9x 4.0% 0.8x 3.5% Dec ‘14 May ‘15 Oct ‘15 Mar ‘16 Aug ‘16 Jan ‘17 Jun ‘17 Nov ‘17 Mar ‘18 1) Average price-to-NAV calculated as the average trading price of all publicly traded BDCs as a multiple of their respective last reported net asset values per share 2) BofA Merrill Lynch Option-Adjusted Spreads are the calculated spreads between the BofA Merrill Lynch US High Yield Master II Index value (which tracks the performance of US dollar denominated below investment grade rated corporate debt publically issued in the US domestic market) and a spot Treasury curve Source: SNL, FRED Credit Market Dislocation (late 2015 – early 2016) From time to time, there may be volatility in the broader capital markets, disruption in liquidity in the debt capital markets, significant write-offs in the financial services sector, and / or repricing of credit risk in the broadly syndicated markets During these periods, there could be a reduction in capital available to certain specialty finance companies and / or other capital providers, causing a reduction in competition for investment opportunities. For example, in late 2015 through early 2016, these conditions also coincided with lower stock prices for BDCs, with the BDC sector generally trading below NAV We believe that favorable investment opportunities at attractive risk-adjusted returns may be created during these periods of disruption and volatility TSLX (NYSE) 4 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV 1 Total Returns (since TSLX IPO) Track Record of 90.0% (1) (2) (3) TSLX Wells Fargo BDC Index S&P 500 High Yield Leveraged Loans Strong Performance 70.0% 63.0% 50.0% 51.8% 30.0% 19.0% 16.1% 10.0% 9.1% (10.0%) (30.0%) Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Note: Returns from 3/20/2014 through 4/3/2018 1) TSLX total return is measured by change in market value per share plus dividends during the period; assumes reinvestment of dividends 2) Source: S&P U.S. Issued High Yield Corporate Bond Index (Index Code: SPUSCHY) 3) Source: S&P LSTA Leveraged Loan Index Strong stockholder total returns versus peer and industry benchmarks TSLX (NYSE) 5 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV 1 Total Returns (since TSLX IPO) Track Record of Strong $1.63 TSLX Total Returns Outperformance Performance (since IP O) versus: Wells Fargo BDC Index: +53 points $1.52 Leveraged Loans: +46 points High Yield: +44 points S&P 500: +11 points $1.19 $1.16 $1.09 $1.00 Invested at Wells Fargo Leveraged(1) High Yield(2) S&P 500 TSLX(3) TSLX IPO BDC Index Loans Today Note: Returns from 3/20/2014 through 4/3/2018 1) Source: S&P LSTA Leveraged Loan Index 2) Source: S&P U.S. Issued High Yield Corporate Bond Index (Index Code: SPUSCHY) 3) TSLX total return is measured by change in market value per share plus dividends earned during the period; assumes reinvestment of dividends Strong stockholder total returns versus peer and industry benchmarks TSLX (NYSE) 6 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Equity Raise Discipline 1.55x (1) TSLX BDC Peers 1.40x TSLX Average: 1.16x Book 1.25x 2 to -Price—1.10x Disciplined 0.95x Capital Allocation 0.80x BDC Peers Average: 0.92x 0.65x Mar ‘14 Jul ‘14 Nov ‘14 Mar ‘15 Jul ‘15 Nov ‘15 Mar ‘16 Jun ‘16 Oct ‘16 Feb ‘17 Jun ‘17 Oct ‘17 Feb Mar ‘18 ‘18 $900m / $1.6bn of potential fee paying Canceled pre-IPO capital commitments assets Potential to raise equity(2) 99% of trading days Primary Equity raises since IPO Two 1) BDC Peers consist of 17 externally managed BDCs in the S&P BDC Index with total assets greater than $600 million based on 6/30/17 financials, with the addition of OCSI, CPTA and CGBD 2) Reflects trading days that TSLX closed above 100% of net asset value per share Source: SNL Financial, data as of 4/3/2018 Discipline in accessing the equity capital markets reflective of stockholder alignment TSLX (NYSE) 7 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Equity Raise Discipline (March 2018) 14.3% 12.2% 13.0% 2 10.7% 9.2% Disciplined 8.9% Capital Allocation Cost of New Implied Yield on New ROE on New Equity(1) Breakeven Yield Assets (3) Equity(4) on New Assets(2) 1) Reflects base dividend per share annualized and expressed as a percentage of offering price per share of $17.45 adjusted for offering fees and expenses 2) Average all-in yield required on new assets in order to achieve 8.9% ROE based on the midpoint of our target leverage ratio (0.8x) and cost and operating structure 3) Range’s lower bound reflects average all-in yield that may be achieved on new assets and range’s upper bound reflects potential yield that may be achieved through prepayment fees, syndication fees and other income on those assets 4) Implied ROE based on our target leverage ratio and cost and operating structure Responsible past use of share issuance; ROE-accretive equity raise with ROE on new equity exceeding cost of new equity TSLX (NYSE) 8 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Flexibility for the Company to sell its common stock below NAV is in the Company’s best interests and the best interests of its stockholders as it would provide: Access to the capital markets to pursue attractive investment opportunities during periods of elevated volatility and / or dislocation Improved capital resources to enable the Company to compete more effectively for high quality investment opportunities Added financial flexibility to comply with regulatory requirements and debt facility covenants 3 Potential ROE-Accretive Opportunities TSLX (NYSE) 9 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Analysis Framework (2) Illustrative NAV Dilution (%) % of Shares Outstanding Issued -0.91% 5.0% 7.5% 10.0% 12.5% o 2.5% (0.1%) (0.2%) (0.2%) (0.3%) t (1) in nt 5.0% (0.2%) (0.3%) (0.5%) (0.6%) l—V l ou A A c 7.5% (0.4%) (0.5%) (0.7%) (0.8%) is N D 10.0% (0.5%) (0.7%) (0.9%) (1.1%) (2) Illustrative NAV Dilution ($ per share) % of Shares Outstanding Issued ($0.15) 5.0% 7.5% 10.0% 12.5% to 2.5% ($0.02) ($0.03) ($0.04) ($0.04) 3 n (1) nt i—5.0% ($0.04) ($0.06) ($0.07) ($0.09) u V l Al co A s Di N 7.5% ($0.06) ($0.08) ($0.11) ($0.13) Potential ROE- 10.0% ($0.08) ($0.11) ($0.15) ($0.18) Accretive 1) Inclusive of underwriting discount and other offering expenses Opportunities 2) Based on last reported NAV of $16.09 per share and shares outstanding as of March 19, 2018 of 60,400,496 TSLX’s proposal has a per offering issuance limit of 25% of then-outstanding shares TSLX (NYSE) 10 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Analysis Framework (2) Illustrative ROE Accretion / (Dilution) on New Investments (%)
All-in Yield on New Assets 2.44% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% o 2.5% 0.3% 1.8% 3.3% 4.8% 6.2% 7.7% t (1 ) in nt 5.0% 0.0% 1.5% 3.0% 4.5% 6.0% 7.5% - u All co is NAV 7.5% (0.2%) 1.2% 2.7% 4.2% 5.7% 7.2%
D 10.0% (0.5%) 1.0% 2.4% 3.9% 5.4% 6.9% Impact per share on entire shareholder base (2) Illustrative ROE Accretion / (Dilution) on New Investments ($ per share) All-in Yield on New Assets $0.04 10.0% 11.0%
12.0% 13.0% 14.0% 15.0% 3to 2.5% $0.00 $0.03 $0.05 $0.07 $0.10 $0.12 n (1) nt i—5.0% $0.00 $0.02 $0.05 $0.07 $0.09 $0.12 co u A V All N 7.5% ($0.00) $0.02 $0.04 $0.07 $0.09 $0.11 Potential ROE- D is 10.0%
($0.01) $0.01 $0.04 $0.06 $0.08 $0.11 Accretive 1) Inclusive of underwriting discount and other offering expenses. Assumes an issuance of 7.5% of shares outstanding prior to issuance (column 2 of slide 10) Opportunities 2) Reflects the ROE of new
investments less the cost of new equity raised. For this analysis, cost of new equity raised is based on net proceeds to issuer. ROE based on the midpoint of our target leverage ratio (0.8x) and cost and operating structure TSLX expects to sell shares below NAV only if the combination of discount to NAV and yield on new assets allows for an accretive investment opportunity… TSLX (NYSE) 11 |
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| Reasons For TSLX to Have Flexibility to Sell Common Stock Below NAV Analysis Framework (2) Illustrative Payback Period (Years) on Equity Raise All-in Yield on New Assets 2.95 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% o 2.5% 6.1 1.0 0.6 0.4 0.3 0.2 t ) n t (1 n i—5.0% 106.7 2.4 1.2 0.8 0.6 0.5 u A ll AV sco i N 7.5% NM 4.3 2.0 1.3 0.9 0.8 D 10.0% NM 7.6 3.0 1.8 1.3 1.0 3 Potential ROE-Accretive 1) Inclusive of underwriting discount and other offering expenses. Assumes an issuance of 7.5% of shares outstanding prior to issuance (shown in column 2 of slide 10) Opportunities 2) Reflects the ROE accretion from new investments expressed on a per share basis (shown on slide 11) divided by NAV dilution per share from the equity offering (shown in column 2 of slide 10). ROE based on the midpoint of our target leverage ratio (0.8x) and cost and operating structure …And a reasonable payback period TSLX (NYSE) 12 |
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| To Vote The proxy statement is now available. You may use one of the following methods to provide your voting instructions: Vote by Internet: Online at www.proxyvote.com. Have your control number listed on the proxy card or voting instruction form ready and follow the instructions; or Vote by Telephone: Call 1-800-690-6903. Have your control number listed on the proxy card or voting instruction form ready and follow the instructions; or Vote by Mail: Mark, sign, and date your proxy card and return it in the postage-paid return envelope provided. TSLX (NYSE) 13 |
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| Contact Us: For assistance voting your TSLX shares: D.F. King Toll-free at (800) 347-4750 or Collect at (212) 269-5550 For other questions: TSLX Investor Relations IRTSL@tpg.com (212) 601-4753 (212) 601-4739 |