Business development company Trinity Capital (TRIN) has announced they are selling a new issue of baby bonds with a maturity date in 2029.
The copany has stated they may use part of the proceeds to call a portion of their 2025 baby bonds (TRINL). They had already called $30 million of this issue is May.
The preliminary prospectus can be read here.
Thanks to J for posting this in Reader Alerts.
Just one thought…not a defense of these companies and their high cost of debt. I agree that borrowing at 8% and lending at 10% plus expenses is a bad recipe.
But… many of these companies make great pref/bond investments but not common.
BDC/mREIT/CEF, etc. can often be thought of as a bag full of investments…meaning there is true liquidation value, unlike a poorly run traditional corporation/ business. This means there are investments that can be turned into $ to cover the prefs/bonds if absolutely needed. The trick is to know how to avoid the shops with dodgy investment portfolios (i.e. cant be sold anywhere near marks) or management that can’t be trusted. Plus, these companies are serial common stock issuers, meaning they can replenish the equity cushion when things get tight.
Everything is company specific, of course. I don’t know Trinity. I also don’t feel comfortable buying ANY BDC debt simply because no defaults have occurred, as covered in this link.
https://insuranceaum.com/sites/default/files/pdf/Radcliffe-BDC-White-Paper-2023.pdf
can you clarify if you do or don’t feel comfortable given the absence of defaults? (and presumably lack of precedent) The regular BDC debt seems fairly attractive, for reasons discussed here. thanks.
Would anyone here sleep comfortably loading up with most of these recent BBs that have come out over the last several months? For all I know they could be safe and secure but somehow I doubt it based on my gut feelings when some “event” takes place. Seems like all the good companies are like nah.. we are not borrowing at these rates. We can wait. While the ones who gamble/leverage/etc.. are like OH YEA.. let’s borrow some more money. Anytime is a good time.
I dunno. Just me. I realize this post is not useful. Just thinking out loud.
Fc, I like the thinking out loud part. I agree with you for the most part. It seems a lot of these coming to market with high coupons I have to think about. First, I know they have to turn around and loan it back out at a higher rate to make money to pay themselves and the interest on the BB and pay it off at term. They are not doing this for nothing.
I look at Tim’s list of BB and I look at Quantum and I look for companies that have a few outstanding BB and show they have been keeping up with calling them and some have even been ahead of the game. I don’t like seeing 6 or 8 outstanding BB and no history of any paid off. Then I look at the size of company and how long it has been in business, I don’t like it if the common is sub 10.00 stock and the company is only several 100 million in value. Quantum even shows if they have done a reverse stock split. Most important I look at the quarter reports to see how much of their book ( loans) are non accrual. I may not be looking at this correctly, just how I have approached it.
I’ve wondered the same thing. Why are they all offering short term issues when it costs them 3+% underwriting costs? Perpetuals are callable so can be short term if necessary and many have floating interest rates in case rates drop. Why is that worse for the issuer? Slightly lower dividend doesn’t seem like enough to justify it. What am i missing?
As you would expect given TRINZ, the indication is 7.875%.
PHOENIX, July 16, 2024 /PRNewswire/ — Trinity Capital Inc. (“Trinity”) (NASDAQ: TRIN, TRINL, TRINZ), an internally managed business development company, today announced that it has priced an underwritten public offering of $100.0 million in aggregate principal amount of 7.875% notes due 2029 (the “Notes”). The Notes will mature on September 30, 2029, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after September 30, 2026. In connection with the offering, Trinity has granted the underwriters a 30-day option to purchase additional Notes in an amount up to $15.0 million to cover overallotments, if any. The Notes are being issued at 100% of the principal amount per Note.
The offering is subject to customary closing conditions and is expected to close on July 19, 2024. Trinity intends to list the Notes on the Nasdaq Global Select Market within 30 days of the issue date of the Notes under the symbol “TRINI.”
Trinity intends to use the net proceeds from this offering to pay down a portion of its existing indebtedness outstanding under its KeyBank Credit Facility and, depending on the remaining amount of net proceeds after such use, to redeem a portion of its outstanding 7.00% Notes due 2025.
Thanks Fabrib