Feb 18 Private equity firm TPG Capital LP
registered its business development company (BDC) for an initial
public offering on Tuesday, seeking to capitalize on the growth
of such credit investment vehicles and the rise of the shadow
TPG launched TPG Specialty Lending Inc (TSL) as a
non-publicly traded BDC in 2011, gradually raising $1.5 billion
from investors, including a $117.1 million commitment from TPG
BDCs are pools of capital that invest in different types of
debt of small and middle-market companies. BDCs often trade on
public markets and pay out at least 90 percent of their annual
profits as dividends to avoid corporate taxation under
provisions passed by Congress in 1980.
As traditional lenders face increased capital constraints
and tighter lending guidelines from regulators, BDCs have seen
demand rise. There were 68 active BDCs with assets totaling
$53.7 billion as of the end of June 2013, up from just $5
billion at the end of 2003, according to the U.S. Securities and
In a regulatory filing with the SEC on Tuesday, TSL said it
would use proceeds from the IPO to pay down debt and invest in
portfolio companies. It said it believed it would be one of the
largest BDCs by total assets at the time of the IPO.
The IPO will open a door for TSL investors, including the
Oregon Public Employees Retirement Fund and the State of New
Jersey Common Pension Fund, to exit their investment if they
wish to do so. It will also allow TPG to receive higher
management and incentive fees for its advisory services under
the terms of its agreement with investors.
TSL usually lends to middle-market companies in the United
States with annual earnings before interest, tax, depreciation
and amortization of between $10 million and $250 million.
Among its debt investments in 25 portfolio companies are
bowling alley operator AMF Bowling Worldwide Inc and Mandalay
Baseball Properties LLC, an owner of Minor League Baseball
TSL has reported gross internal rate of return of 17.5
percent on investments it has exited from inception to the end
of September 2013. The company reported net investment income of
$40.5 million in the nine months to the end of September,
compared with $17.1 million in the corresponding period in 2012.
Led by Goldman Sachs Group Inc veteran Joshua
Easterly and former Wells Fargo & Co financier Michael
Fishman, TSL is part of TPG's special situations platform, which
has more than $6 billion in assets invested in credit and equity
instruments. Alan Waxman, who is TPG's chief investment officer
for credit, also advises TSL.
TPG has more than $55 billion of assets under management,
mostly in private equity. Among TPG's major competitors, Apollo
Global Management LLC and Ares Management LLC manage
publicly traded BDCs. Blackstone Group LP, KKR & Co LP
and Carlyle Group LP also have BDCs but have not
yet taken one public.
Carlyle's BDC, Carlyle GMS Finance Inc, told investors at
its inception in 2012 it would aim to go public in the next five
JPMorgan Chase & Co, Bank of America Merrill Lynch
and Goldman Sachs are the lead underwriters on TSL's