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TriplePoint Venture Growth: Expands and Amends Revolver

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NEWS

On December 14, 2020 TriplePoint Venture Growth (TPVG) announced the “extension and expansion” of its revolving credit facility.

Deutsche Bank AG serves as administrative agent and as a lender.

“The Credit Facility, as amended, among other things, increases the capacity of the Credit Facility from $300 million to $325 million, extends the revolving period to November 30, 2022 and extends the scheduled maturity date to May 31, 2024. The $25 million increase was made under the accordion feature in the Credit Facility, which allows the Company, under certain circumstances, to increase the size of the Credit Facility to up to $400 million”.

Customers Bank was added as a new lender to the existing 7 bank lending group.


ANALYSIS

Context

The Deutsche-bank led Revolver is the only secured financing TPVG enjoys, and dates back to 2014 with a $150mn initial commitment.

The pricing on the facility is tied to a LIBOR base varies depending on utilization – the greater usage made, the lower the interest rate.

The average cost of borrowing in the IIIQ 2020 was 4.27% in the IIIQ 2020.

Barring any change in LIBOR, the cost of the Revolver may increase slightly subsequent to this amendment.

Not stated in the press release – but likely based on prior extensions – the changes in the facility may be subject to a fee to be booked in the IVQ 2020.

As of September 30, 2020 total outstandings under the Revolver were $112mn, in line with the quarter’s average.

As a result – and subject to borrowing base limitations that might be involved – TPVG will have $213mn in unused Revolver commitment, based on the IIIQ 2020 numbers.


VIEWS

Minor

This is a routine – but still worth noting – development for TPVG.

Shareholders will be reassured that yet another lender has done its due diligence and joined the bank group, which is always a validation.

The extension in the revolving period and of the final maturity is also a positive just months after a severe disruption in the markets.

All Good

Overall, the BDC’s liability structure seems to be in a good place.

TPVG is financed with the now-$325mn Revolver and two unsecured note offerings, one due in 2022 (publicly traded TPVY) and another due in 2025 and privately placed.

That’s nowhere near as complex as the financing structure of its venture lending peers Hercules Capital (HTGC) and Horizon Technology Finance (HRZN), but seems to be working.

Sailing

The BDC had no liquidity or financing challenges during the March 2020 market turndown and has maintained an unchanged dividend.

Debt to equity is one of the lowest in the BDC sector at 0.62x, versus a target of 1.00x.

On paper, TPVG,  with an unused Revolver commitment of $213mn has more than enough capacity to borrow the $154mn in debt necessary to reach the target level of 1:1.

Musings

Still, if TPVG does grow its portfolio by borrowing we imagine TPVG will refinance TPVY and possibly expand the amount borrowed to $100mn to maintain a balance of secured and unsecured debt.

We would expect TPVG to be able to place any new unsecured debt with institutional investors and at a yield slightly lower than the 4.50% achieved in March 2020 for the 2025 Notes.

That would place the BDC in the unusual- but enviable position – of being able to borrow unsecured debt for a longer period and on equal, or better terms, than its secured borrowings.

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