TPG Specialty Lending Inc., the unit of private-equity firm TPG Capital that provides loans to midsized companies, raised $112 million in an initial public offering.
The business development company sold seven million shares at $16 each, according to a regulatory filing today. TPG Specialty has provided financing to companies including the Soho House, a private members club founded in London, and Mandalay Baseball Properties LLC, the owner of minor league teams such as the Frisco RoughRiders in Texas.
TPG Capital, co-founded in 1992 by David Bonderman and James Coulter, is expanding its credit business along with other buyout firms including Apollo Global Management LLC and Blackstone Group LP and KKR & Co. The Fort Worth, Texas-based firm, with more than $59 billion of assets under management, raised its first collateralized loan obligation this month at $479 million.
Apollo, Blackstone and KKR all manage CLOs, which purchase high-yield loans and slice them into securities of varying degrees of risk and return. The funds help finance leveraged buyouts and are the biggest buyers of junk-grade corporate loans arranged by banks.
TPG Specialty began lending to middle-market companies in July 2011, originating more than $2.6 billion of investments since then, according to a regulatory filing this month. Its holdings in 27 companies were valued at about $1 billion at the end of last year.
The firm in 2013 had an investment of $35 million in Mandalay Baseball’s loan that pays interest at 12 percent, and 7 million pounds ($11.6 million) in Soho House’s 9.13 percent privately-placed bond, the filing shows.
BDCs, which provide loans to smaller companies that can’t tap public markets, are helping to fill the void left after the financial crisis when banks pulled back because of tougher capital rules, according to Fitch Ratings. They’ve raised more than $15 billion of equity since 2007, the ratings company said March 13.
TPG Specialty typically invests in companies with $10 million to $250 million of earnings before interest, taxes, depreciation and amortization, the filing shows. The firm plans to use proceeds from the IPO to pay down its revolving credit line, according to today’s filing.
BDCs will probably find it more expensive to raise capital after being removed from Standard & Poor’s U.S. indexes last month, according to Fitch. They’re also facing possible removal from the Russell Indexes, unless the Securities and Exchange Commission removes a fee-reporting requirement for the funds by May 15, Fitch said.
TPG Specialty, which priced its IPO at the low-end of its $16 to $17 per share range, is expected to begin trading on the New York Stock Exchange tomorrow.
Apollo Investment Corp., the firm’s BDC that raised $930 million through an initial public offering in 2004, traded at $8.28 today, down 45 percent from its $15 IPO price.