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)

☐

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))

Exhibit
Number

Description

99.1

Press Release, dated May 3, 2018

TPG SPECIALTY LENDING, INC.

                    (Registrant)

Date: May 3, 2018

By:

 /s/ Ian Simmonds

 Ian Simmonds

 Chief Financial Officer

NEW YORK—(BUSINESS WIRE)—May 3, 2018— 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

Three Months Ended

(unaudited)

March 31, 2018

December 31, 2017

March 31, 2017

Investments at Fair Value

$

1,909.3

$

1,693.7

$

1,580.3

Total Assets

$

1,930.1

$

1,720.2

$

1,606.9

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

Investment Income

$

57.8

$

48.8

$

50.9

Net Investment Income

$

31.2

$

26.9

$

28.5

Net Income

$

33.8

$

26.7

$

28.3

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

%

(1)

(2)

(3)

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.

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.

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.

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.

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.

GROSS ORIGINATIONS

$564.6MM

NET FUNDING

$207.5MM

AVERAGE INVESTMENT SIZE

$39.8MM (2.1%)⁽⁴⁾

% FIRST LIEN DEBT

94.4%

% SECURED DEBT

97.6%

WEIGHTED AVERAGE YIELD

FAIR VALUE / AMORTIZED COST

11.1% / 11.2%

(4)

Represents percentage of total investment portfolio at fair value.

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.

TOTAL INVESTMENT INCOME

$57.8MM

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.

NET EXPENSES

$25.7MM

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.

TOTAL NET ASSETS

$1,044.0MM

TOTAL DEBT OUTSTANDING

$853.9MM

AVERAGE DEBT/EQUITY ⁽⁵⁾

0.84x

AVAILABLE LIQUIDITY

$421.1MM

(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).

March 31,

December 31,

2018

2017

Assets

Investments at fair value

Non-controlled, non-affiliated investments (amortized cost of $1,729,452

   and $1,523,844, respectively)

$

1,771,750

$

1,557,803

Controlled, affiliated investments (amortized cost of $167,427 and $162,406,

   respectively)

137,570

135,920

Total investments at fair value (amortized cost of $1,896,879 and $1,686,250,

   respectively)

1,909,320

1,693,723

Cash and cash equivalents (restricted cash of $5,697 and $3,150, respectively)

8,870

6,665

Interest receivable

8,541

6,762

Prepaid expenses and other assets

3,413

13,088

Total Assets

$

1,930,144

$

1,720,238

Liabilities

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

Dividends payable

23,556

23,488

Other payables to affiliate

2,410

1,901

Other liabilities

11,092

10,290

Total Liabilities

886,177

750,954

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, 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

Three Months Ended

Three Months Ended

March 31, 2018

March 31, 2017

Income

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

Interest from investments

$

47,967

$

47,770

Dividend income

195

1

Other income

5,819

2,125

Total investment income from non-controlled, non-affiliated

   investments

53,981

49,896

Investment income from controlled, affiliated investments:

Interest from investments

3,734

1,000

Other income

52

52

Total investment income from controlled, affiliated investments

3,786

1,052

Total Investment Income

57,767

50,948

Expenses

Interest

9,070

6,865

Management fees

6,660

6,071

Incentive fees

6,608

6,050

Professional fees

2,112

1,286

Directors’ fees

106

106

Other general and administrative

1,238

1,301

Total expenses

25,794

21,679

Management and incentive fees waived

(63

)

—

Net Expenses

25,731

21,679

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

$

0.56

$

0.47

Weighted average shares of common stock outstanding—basic and diluted

60,840,459

59,796,731

Three Months Ended

($ in millions)

March 31, 2018

March 31, 2017

New investment commitments:

Gross originations

$

564.6

$

285.9

Less: Syndications/sell downs

232.9

136.7

Total new investment commitments

$

331.7

$

149.2

Principal amount of investments funded:

First-lien

$

311.0

$

142.2

Second-lien

—

—

Mezzanine and unsecured

—

—

Equity and other

2.5

—

Total

$

313.5

$

142.2

Principal amount of investments sold or repaid:

First-lien

$

93.9

$

175.6

Second-lien

—

15.7

Mezzanine and unsecured

—

11.5

Equity and other

12.1

10.7

Total

$

106.0

$

213.5

Number of new investment commitments in

   new portfolio companies

7

5

Average new investment commitment amount in

   new portfolio companies

$

47.4

$

29.8

Weighted average term for new investment

   commitments in new portfolio companies

   (in years)

5.7

5.6

Percentage of new debt investment commitments

   at floating rates ⁽¹⁾

100.0

%

100.0

%

Percentage of new debt investment commitments

   at fixed rates

—

—

Weighted average interest rate of new

   investment commitments

10.0

%

9.4

%

Weighted average spread over LIBOR of new

   floating rate investment commitments

7.8

%

8.7

%

Weighted average interest rate on investments

   sold or paid down

11.4

%

9.3

%

(1)

Includes one or more fixed rate investments for which the Company entered into an interest rate swap agreement to swap to floating rate.