Hercules Surpasses its 2014 New Origination Growth Target - Analyst Blog

Hercules Technology Growth Capital, Inc. (HTGC) released its portfolio update for fourth-quarter 2014, which reflected sturdy loan origination performance. The company achieved $900 million of annual new origination commitments for 2014, beating its yearly growth target of $700–$850 million.

The leading specialty finance company's achievement for the stated quarter mainly involved seven IPO registrations and eight mergers & acquisitions (M&A) to facilitate liquidity requirements as well as ten new commitments.

4Q14 Origination Activities in Detail

As of Dec 23, 2014, Hercules recorded $316.0 million worth of debt and equity commitments to new and existing portfolio companies. Of these, $28.0 million worth of debt commitments as well as renewals were made to existing portfolio companies.

The new commitments made by the company mainly involved venture capital-backed companies in the growth stage. Around $138.0 million was invested in technology companies and about $150.0 million was invested in the life science portfolio.

Other Liquidity Events

Hercules' fourth quarter portfolio update included several liquidity events such as IPOs and M&A activities undertaken to capitalize on the evolving technology sector. As of Dec 23, 2014, Hercules held warrant and equity positions in seven portfolio companies including Box, Inc., Good Technology, Inotek Pharmaceuticals, Inc. and Zosano Pharma, Inc.

Moreover, the eight M&As that took place in the fourth quarter are as follows:

In Oct 2014, Hercules' portfolio companies – Central Desktop and Location Labs – were acquired by Premiere Global Services, Inc. (PGI) and AVG Technologies (AVG), respectively.

In the same month, another portfolio company of Hercules – United Orthopedic Group, Inc. announced its merger with Breg, Inc., following which the former will operate as a wholly-owned subsidiary of the latter.

Moreover, in Oct 2014, InterCloud Systems, Inc. and General Mills, Inc. completed the respective acquisition of Hercules' portfolio companies – VaultLogix, LLC and Annies, Inc. Hercules does not have any investments in Annies now.

Furthermore, in Oct 2014, two of Hercules' portfolio companies – Transcept Pharmaceuticals, Inc. and Paratek Pharmaceuticals, Inc. – merged with one another in an all-stock transaction.

In Nov 2014, Mavenir Systems (MVNR) and MegaChips Corporation completed the acquisition of Hercules' portfolio companies – Stoke, Inc and SiTime Corporation, respectively. The MegaChips–SiTime acquisition was a $200 million cash deal.

Apart from these liquidity activities, Hercules continued trimming and rebalancing its investment portfolios. Further, as of Dec 23, 2014, Hercules received roughly $177.8 million in principal repayments comprising around $146.5 million worth of unscheduled early repayments.

Overall, Hercules' enhanced fourth quarter portfolio update continued the strong origination activities visible in the previous three quarters of 2014. This commendable development in originations activities will propel the company's top-line growth, which may be reflected in the upcoming quarterly results.

Currently, Hercules carries a Zacks Rank #3 (Hold).