Triangle Capital 2022 Bonds -- Lock In A 6.7% Yield On The Dip

Introduction Triangle Capital (TICKER: TCAP) is a business development company (NYSE: BDC) with a $1.1 billion investment portfolio in 91 companies in 30 industries (oil & gas at 1% of portfolio). The portfolio composition over time is highlighted in the chart below. The portfolio is still weighted towards the junior side of the balance sheet, with only 28% of the portfolio in a senior secured position. These more risky junior loans are one reason for the recent portfolio credit problems discussed below. The loan book is 44% variable rate, so there is some measure of interest rate protection.

TCAP was went public in 2007 and has grown assets consistently since then, see chart below. In addition to its core BDC activities, the Company has obtained SBIC licenses which enhances its ability to provide loans with another source of debt capital to fund the business. In my view, the rapid growth in assets under management, at a time of heightened competition in the middle market lending business, put pressure on the company to consider and take on riskier loan positions -- another reason for the recent portfolio woes.

Baby Bonds Below are the parameters of the exchange traded debt (ETD) recommended in this article. For those less familiar, ETD is a bond in all ways, but it trades on the stock exchange like a regular stock. Like all exchange traded debt, it trades flat, meaning there is no accrued interest received or paid when trading these bonds. Interest is paid... Read more

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