Kroll Bond Rating Agency (KBRA) assigns a BBB+ rating to TPG Specialty Lending's ("TSLX" or "the Company") $300 million proposed senior unsecured notes maturing 2024 ("the Notes"). The Outlook is Stable. TSLX expects to use the proceeds to paydown a portion of its outstanding bank loans and refinance its $115 million senior unsecured notes at maturity in December 2019. The Notes rank equally with existing and future senior unsecured notes issued by TSLX.
Formed in 2010, TPG Specialty Lending is a publicly traded externally managed closed-end business development company listed on the NYSE under the symbol TSLX with a market capitalization of $1.4 billion. As of June 30, 2019, the Company's $2.06 billion investment portfolio consisted almost entirely of senior secured first lien debt of private middle-market companies. The portfolio is well diversified with 56 companies in 18 industries. TSLX benefits from the ability to leverage the scale of its external manager.
The BBB+ ratings reflect TPG Specialty Lending Inc's TSLX ties to TSL Advisers, LLC, its investment adviser, which is managed through TPG Sixth Street Partners (TSSP), the $32 billion global finance and investment firm, an investment portfolio comprised almost exclusively of first lien senior secured investments and appropriate leverage. Furthermore, the Company has a solid nine-year track record with minimal non-accruals, a strong management team with decades of experience in middle market lending and solid risk management practices. The Company continues to transition to a greater weighted unsecured borrowing model. These strengths are counterbalanced by the illiquid nature of the assets and retained earnings constraints as a Regulated Investment Company (RIC).
As of June 30, 2019, TSLX's leverage was 0.86 times, well below the current regulatory requirement of 2 times. In March 2018, BDCs with Board of Directors and/or shareholder approval were permitted to lower asset coverage to 150% from 200%. While the Company received shareholder in October 2018, TSLX is slowly increasing leverage while maintaining its strong underwriting standards and anticipates that leverage will not exceed 1.25 times over the next 12 to 18 months.
The ratings are assigned using KBRA's Global Finance Company Rating Methodology, published November 28, 2017.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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