Trinity Capital (NASDAQ:TRIN) reported third-quarter net investment income of $0.52 per share, covering its $0.51 quarterly distribution, as investment income and assets under management rose from a year earlier.
The business development company generated $98 million in total investment income, up 30% year over year, and $50 million in net investment income. Net asset value per share increased to $13.61 from $13.47 in the prior quarter, primarily because of share issuances above net asset value, Chief Financial Officer Michael Testa said on the Nov. 4 earnings call.
Chief Executive Officer Kyle Brown said the company is paying a monthly dividend of $0.17 through the end of the fourth quarter. He also said Trinity’s year-to-date total return was 31% through the end of the third quarter, the highest in the BDC sector.
Originations and Portfolio Quality
Trinity funded $614 million during the quarter and recorded $880 million in new commitments. Platform assets under management reached $3.4 billion, up 31% year over year. Brown said the company’s pipeline was the largest in its history at the time of the call.
Unfunded commitments totaled $1.4 billion at Sept. 30. Brown said 91% remained subject to ongoing diligence and investment committee approval, while 9% were unconditional. Chief Operating Officer Gerry Harder said roughly one-third of the unfunded commitments were in healthcare and life sciences, about one-quarter in equipment finance and approximately 20% in tech lending.
Non-accruals declined to 0.7% of the portfolio at fair value, with three companies on non-accrual at quarter end. Harder said two small non-accrual positions were realized during the quarter and no new credits were added to non-accrual status. Trinity recorded $7.5 million in net realized losses, partially offset by $4.4 million in net unrealized appreciation.
First-position liens secured 89% of total principal, and the weighted-average loan-to-value ratio for enterprise-backed loans was 22%, Harder said. Financial technology was the largest sector concentration at 15% of the portfolio at cost, spread across 18 borrowers.
Managed Funds and Joint Ventures
Trinity’s managed funds platform contributed $0.05 per share to net investment income in the quarter, General Counsel and Chief Compliance Officer Sarah Stanton said. She said managed funds and joint ventures had nearly $1 billion of combined capacity.
The company’s small business investment company fund has closed more than $75 million in equity commitments and begun deploying capital. Stanton said the fund is expected to provide more than $300 million of incremental platform capacity at full scale, using government leverage at a 2-to-1 debt-to-equity ratio.
Trinity also closed a second joint venture with Capital Southwest, called Desert Star, with potential capacity of $500 million. The vehicle will co-invest in Trinity-originated sponsor finance deals, focusing primarily on more mature lower-middle-market software companies, Brown said. Portions of those investments are held on Trinity’s balance sheet and portions are syndicated to the joint venture, according to Harder.
Testa said Desert Star’s leverage was close to 1-to-1 and could rise toward 2-to-1. Trinity’s first joint venture with Capital Southwest, which focuses on first-out senior secured loans, held $132 million in assets across 14 portfolio companies at quarter end, Stanton said.
Capital and Outlook
Trinity raised $58 million through its at-the-market equity program at an average 32% premium to net asset value during the quarter. Testa said higher repayments and syndications allowed the company to moderate new equity issuance.
The company repaid $125 million of unsecured notes that matured in August. It also announced a $350 million senior unsecured bond offering on the final day of the quarter, which closed after quarter end. Net leverage was 1.17 times at Sept. 30, and platform liquidity stood at $847 million, Testa said.
Asked about the lending environment, Brown said spreads had tightened in some verticals over recent years but that Trinity was testing higher pricing. He said he expects spreads in 2027 to be flat to higher, while noting that conditions vary by lending vertical.
Brown also said rising interest rates could increase Trinity’s income because most of its facilities have rate floors but no ceilings. Higher rates could also prompt some borrowers to repay loans, generating additional fee income, he said.
About Trinity Capital (NASDAQ:TRIN)
Trinity Capital Inc (NASDAQ:TRIN) is a business development company that provides debt financing to venture capital- and private equity-backed companies. The company focuses primarily on growth-stage businesses that may require capital to support expansion, product development, acquisitions, working capital and other corporate needs.
Through its investment platform, Trinity Capital offers a range of financing solutions, including secured loans, equipment financing, growth capital and other customized debt structures.
