TPG Specialty Lending, Inc. Announces Quarter Ended September 30, 2015 Financial Results; Board Declares Quarterly Dividend of $0.39 Per Share for the Fourth Fiscal Quarter of 2015

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TPG Specialty Lending, Inc. Announces Quarter Ended September 30, 2015 Financial Results; Board Declares Quarterly Dividend of $0.39 Per Share for the Fourth Fiscal Quarter of 2015

NEW YORK--(BUSINESS WIRE)--Nov. 3, 2015-- TPG Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $25.8 million, or $0.48 per share, including a one-time charge of $0.06 per share related to the acceleration of deferred financing costs associated with the termination of the Company’s SPV Asset Facility, for the quarter ended September 30, 2015. Third quarter net investment income per share adjusted for this one-time charge was $0.54. Net income was $9.3 million, or $0.17 per share, for the quarter ended September 30, 2015. Net asset value per share was $15.62 at September 30, 2015 as compared to $15.84 at June 30, 2015. The Company’s Board of Directors declared a third quarter dividend of $0.39 per share, payable to stockholders of record as of September 30, 2015 that was paid on October 30, 2015.

The Company announced that its Board of Directors has declared a quarterly dividend of $0.39 per share for stockholders of record as of December 31, 2015, payable on or about January 29, 2016.

FINANCIAL HIGHLIGHTS:

 

       

 

(amounts in thousands, except per share amounts)

(Unaudited)

     
 

Three Months Ended

September 30, 2015 June 30, 2015 September 30, 2014
 
Investments at Fair Value $1,396,426 $1,397,560 $1,233,181
Total Assets $1,429,009 $1,459,005 $1,280,043
Net Asset Value Per Share $15.62 $15.84 $15.66
 
Investment Income $46,774 $45,352 $38,404
Net Investment Income $25,849 $25,020 $23,116
Net Income $9,337 $34,105 $18,603
 
Net Investment Income Per Share $0.48 $0.46 $0.43

Net Realized and Unrealized Gains (and Losses) Per Share

($0.31) $0.17 ($0.08)
Net Income Per Share $0.17 $0.63 $0.35
 
Weighted Average Yield of Debt and Income Producing Securities at Fair Value 10.5% 10.3% 10.5%
Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost 10.5% 10.4% 10.6%
 
Percentage of Debt Investment Commitments at Floating Rates 95% 96% 98%
 

Conference Call and Webcast

Conference Call Information:

The conference call will be broadcast live at 8 a.m. Eastern Time on November 4, 2015. 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 (224) 357-2393
Conference ID: 51403934

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 November 4th through November 18th 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: 51403934

Portfolio and Investment Activity

For the three months ended September 30, 2015, gross originations totaled $184.8 million. This compares to $112.3 million for the three months ended June 30, 2015 and $288.6 million for the three months ended September 30, 2014.

For the three months ended September 30, 2015, the Company made new investment commitments of $184.8 million, $160.9 million to six new portfolio companies and $23.9 million to five existing portfolio companies. For this period, the Company had $148.4 million aggregate principal amount in exits and repayments, resulting in a net portfolio increase of $15.8 million aggregate principal amount.

For the three months ended September 30, 2014, the Company made new investment commitments of $248.6 million, $216.9 million to four new portfolio companies and $31.7 million to four existing portfolio companies. For this period, the Company had $109.6 million aggregate principal amount in exits and repayments, resulting in a net portfolio increase of $114.4 million aggregate principal amount.

As of September 30, 2015 and June 30, 2015, the Company had investments in 44 and 40 portfolio companies, respectively, with an aggregate fair value of $1,396.4 million and $1,397.6 million, respectively.

As of September 30, 2015, the portfolio consisted of 87.0% first-lien debt investments, 8.8% second-lien debt investments, 1.9% mezzanine and unsecured debt investments, and 2.3% equity and other investments. As of June 30, 2015, the portfolio consisted of 90.5% first-lien debt investments, 7.5% second-lien debt investments, 1.1% mezzanine and unsecured debt investments, and 0.9% equity and other investments.

As of September 30, 2015, 94.9% of debt investments bore interest at floating rates, subject to interest rate floors. The Company’s credit facility also bears interest at floating rates.

As of September 30, 2015 and June 30, 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 10.5% and 10.4%, respectively.

The weighted average total yield of new debt and income producing securities made to new portfolio companies during the quarter was 10.7% at amortized cost.

As of September 30, 2015, 100.0% of debt investments were meeting all payment requirements and 98.1% of debt investments were meeting all covenant requirements. No investments were on non-accrual status at September 30, 2015.

Results of Operations for the Three Months Ended September 30, 2015 compared to the Three Months Ended September 30, 2014

Investment Income

For the three months ended September 30, 2015 and 2014, investment income totaled $46.8 million and $38.4 million, respectively. The increase in investment income for the quarter was primarily driven by an increase in the average size of our investment portfolio, accelerated amortization of upfront fees from unscheduled paydowns, prepayment fees, and dividend income, slightly offset by lower syndication, amendment and agency fees, as compared to the same period in 2014.

Expenses

Net expenses totaled $20.5 million and $14.9 million for the three months ended September 30, 2015 and 2014, respectively. The increase in net expenses was due to higher interest expense related to an increase in the weighted average debt outstanding and the acceleration of deferred financing cost of $3.2 million related to the termination of the SPV Asset Facility during the quarter, higher general and administrative expenses associated with servicing a growing investment portfolio, partially offset by a decrease in the average interest rate on our debt outstanding and a decrease in net incentive fees.

Liquidity and Capital Resources

As of September 30, 2015, the Company had $3.8 million in cash and cash equivalents, total debt outstanding of $538.6 million, and $355.0 million of undrawn commitments on its revolving credit facility, subject to borrowing base and other limitations. The Company’s weighted average interest rate on debt outstanding was 2.6% for the three months ended September 30, 2015, as compared to 2.7% for the three months ended September 30, 2014.

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 2015.

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 Nine Months Ended
September 30, 2015   September 30, 2014 September 30, 2015   September 30, 2014
Income
Investment income from non-controlled, non-affiliated investments:
Interest from investments $ 43,986 $ 33,728 $ 120,040 $ 109,270
Dividend income 474 474
Other income   708   3,301   4,714   6,510
Total investment income from non-controlled, non-affiliated investments 45,168 37,029 125,228 115,780
Investment income from controlled, affiliated investments:
Interest from investments 1,532 1,312 4,442 1,681
Other income   74   63   186   81
Total investment income from controlled, affiliated investments   1,606   1,375   4,628   1,762
Total Investment Income   46,774   38,404   129,856   117,542
Expenses
Interest 7,963 3,812 16,910 11,096
Management fees 5,460 4,651 15,706 13,409
Incentive fees 3,045 4,161 15,182 14,495
Professional fees 2,366 1,029 4,857 3,376
Directors’ fees 101 90 288 249
Other general and administrative   1,634   1,170   4,061   2,982
Total expenses   20,569   14,913   57,004   45,607
Management and incentive fees waived   (104 )     (104 )   (2,465 )
Net Expenses   20,465   14,913   56,900   43,142
Net Investment Income Before Income Taxes 26,309 23,491 72,956 74,400
Income taxes, including excise taxes   460   375   1,301   609
Net Investment Income 25,849 23,116 71,655 73,791
Unrealized and Realized Gains (Losses)
Net change in unrealized gains (losses):
Non-controlled, non-affiliated investments (10,191 ) (6,251 ) (1,698 ) (6,168 )
Controlled, affiliated investments (4,454 ) (247 ) (3,925 ) (247 )
Translation of assets and liabilities in foreign currencies 1,227 3,265 4,536 4,492
Interest rate swaps 1,879 (1,038 ) 672 (246 )
Foreign currency forward contracts     17     1,261
Total net change in unrealized losses   (11,539 )   (4,254 )   (415 )   (908 )
Realized gains (losses):
Non-controlled, non-affiliated investments (4,975 ) 10 (5,042 ) 127
Interest rate swaps 1,852
Foreign currency transactions   2   (269 )   (140 )   (1,765 )
Total realized losses   (4,973 )   (259 )   (3,330 )   (1,638 )
Total Unrealized and Realized Losses   (16,512 )   (4,513 )   (3,745 )   (2,546 )
Increase in Net Assets Resulting from Operations $ 9,337 $ 18,603 $ 67,910 $ 71,245
Earnings per common share—basic and diluted $ 0.17 $ 0.35 $ 1.26 $ 1.44
Weighted average shares of common stock outstanding—basic and diluted   54,017,302   53,493,026   53,969,423   49,427,943
 
   
TPG Specialty Lending, Inc.
 
Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
(Unaudited)
 
September 30, December 31,
2015 2014
Assets
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost of $1,332,433

and $1,225,672, respectively)

$ 1,326,937 $ 1,221,875
Controlled, affiliated investments (amortized cost of $79,358 and $47,580,

respectively)

  69,489   41,636
Total investments at fair value (amortized cost of $1,411,791 and $1,273,252,

respectively)

1,396,426 1,263,511
Cash and cash equivalents 3,788 2,413
Interest receivable 9,185 6,137
Receivable for interest rate swaps 1,692 1,020
Prepaid expenses and other assets   17,918   30,650
Total Assets $ 1,429,009 $ 1,303,731
Liabilities
Debt $ 538,619 $ 395,864
Management fees payable to affiliate 5,439 4,887
Incentive fees payable to affiliate 4,959 5,955
Dividends payable 21,070 20,981
Payable for investments purchased 6,737 29,017
Payables to affiliate 1,762 2,918
Other liabilities   6,451   8,704
Total Liabilities   585,037   468,326
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, 54,028,546 and

53,798,357 shares issued, respectively; and 54,025,547 and 53,797,358 shares

outstanding, respectively

540 538
Additional paid-in capital 811,581 808,053
Treasury stock at cost; 2,999 and 999 shares held, respectively (30 ) (1 )
Undistributed net investment income 15,555 6,555
Net unrealized gains (losses) (226 ) 188
Undistributed net realized gains   16,552   20,072
Total Net Assets   843,972   835,405
Total Liabilities and Net Assets $ 1,429,009 $ 1,303,731
Net Asset Value Per Share $ 15.62 $ 15.53

The Company ’s investment activity for the three months ended September 30, 2015 and 2014 is presented below (information presented herein is at par value unless otherwise indicated).

 
Three Months Ended
($ in millions) September 30, 2015   September 30, 2014
New investment commitments:
Gross originations $ 184.8 $ 288.6
Less: Syndications/sell downs     40.0
Total new investment commitments $ 184.8 $ 248.6
Principal amount of investments funded:
First-lien $ 99.6 $ 198.8
Second-lien 30.7 25.2
Mezzanine and unsecured 15.1
Equity and other   18.8  
Total $ 164.2 $ 224.0
Principal amount of investments sold or repaid:
First-lien $ 138.4 $ 97.6
Second-lien 10.0 12.0
Mezzanine and unsecured    
Total $ 148.4 $ 109.6
Number of new investment commitments in

new portfolio companies

6 4
Average new investment commitment amount in

new portfolio companies

$ 26.8 $ 54.2
Weighted average term for new investment

commitments in new portfolio companies

(in years)

5.1 4.1
Percentage of new debt investment commitments

at floating rates

91.1 % 98.7 %
Percentage of new debt investment commitments

at fixed rates

8.9 % 1.3 %
Weighted average interest rate of new

investment commitments

9.6 % 10.3 %
Weighted average spread over LIBOR of new

floating rate investment commitments

8.9 % 9.3 %
Weighted average interest rate on investments

sold or paid down

9.8 % 9.8 %
 

About TPG Specialty Lending, Inc.

TPG Specialty Lending, Inc. (“TSLX” or the “Company”) 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 loans and investments in corporate bonds and equity securities. The Company has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. TSLX is externally managed by TSL Advisers, LLC, a 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 $12 billion of assets under management and the broader TPG platform, a global private investment firm with over $74 billion of assets under management. 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:
TPG Specialty Lending, Inc.
212-601-4753
212-430-4119
IRTSL@tpg.com
or
Media:
Luke Barrett, 212-601-4752
lbarrett@tpg.com
or
Owen Blicksilver PR, Inc.
Jennifer Hurson, 845-507-0571
jennifer@blicksilverpr.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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