TPG Specialty Lending, Inc. Announces Quarter Ended March 31, 2018 Financial Results; Board Declares Quarterly Base Dividend of $0.39 Per Share for the Second Fiscal Quarter of 2018 and a Quarterly Supplemental Dividend of $0.06 Per Share

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TPG Specialty Lending, Inc. Announces Quarter Ended March 31, 2018 Financial Results; Board Declares Quarterly Base Dividend of $0.39 Per Share for the Second Fiscal Quarter of 2018 and a Quarterly Supplemental Dividend of $0.06 Per Share

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
 
FINANCIAL HIGHLIGHTS:
 

(amounts in millions, except per share amounts)

     
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)

 

Pro Forma Net Asset Value Per Share gives effect to the supplemental dividend declared related to earnings in the applicable period.

(2)

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.

(3)

Includes one or more fixed rate investments for which the Company entered into an interest rate swap agreement to swap to 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 4, 2018. Please visit TSLX’s webcast link located on the Events& Presentation page of the Investor Resources section of TSLX’s websitehttp://www.tpgspecialtylending.comfor a slidepresentation 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: 8997046

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 4 through May 11 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: 8997046

Portfolio and Investment Activity

 

GROSS ORIGINATIONS

$564.6MM

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.

 

NET FUNDING

$207.5MM

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.

 

AVERAGE INVESTMENT SIZE

$39.8MM (2.1%)(4)

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.

 

% FIRST LIEN DEBT

94.4%

 

% SECURED DEBT

97.6%

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.

 

WEIGHTED AVERAGE YIELD

FAIR VALUE / AMORTIZED COST

11.1% / 11.2%

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.

As of March 31, 2018, 100% of the portfolio at fair value was meeting all payment and covenant requirements. No investments were on non-accrual status at March 31, 2018.

(4)   Represents percentage of total investment portfolio at fair value.
 

Results of Operations for the Three Months Ended March 31, 2018 compared to the Three Months Ended March 31, 2017

Investment Income

 

TOTAL INVESTMENT INCOME

$57.8MM

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.

Expenses

 

NET EXPENSES

$25.7MM

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.

Liquidity and Capital Resources

 

TOTAL NET ASSETS

$1,044.0MM
 

TOTAL DEBT OUTSTANDING

$853.9MM
 

AVERAGE DEBT/EQUITY (5)

0.84x
 

AVAILABLE LIQUIDITY

$421.1MM

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.

(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).
 

Financial Statements and Tables

 
TPG Specialty Lending, Inc.
 
Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
(Unaudited)
     
 
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  
 
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, 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  
 

The Company’s investment activity for the three months ended March 31, 2018 and 2017 is presented below (information presented herein is at par value unless otherwise indicated).

    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.

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 Sixth Street Partners, the dedicated special situations and credit platform of TPG, with over $21 billion of assets under management as of December 31, 2017, and the broader TPG platform, a global private investment firm with approximately $82 billion of assets under management as of December 31, 2017. 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.

TPG Specialty Lending, Inc.
Investors:
Ian Simmonds, 212-601-4739
IRTSL@tpg.com
or
Media:
Luke Barrett, 212-601-4752
lbarrett@tpg.com
or
Abernathy MacGregor
Patrick Clifford
pfc@abmac.com

Disclaimer

Archived presentations on our website describing the financial performance of TPG Specialty Lending, Inc. are furnished for historical purposes only. The information provided in any such presentation is as of the date of that particular presentation. Our business, financial condition, results of operations and prospects may have changed since the date of any such presentation. The presentations archived on our website might include forward-looking statements and projections, and we ask that you refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. To obtain copies of our latest SEC filings, please click here. TPG Specialty Lending, Inc. has no obligation to update the forward-looking statements contained herein.

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