Fund Managers

HTGC breaks its own record with $1.21bn in commitments during 2018

The BDC passed its prediction of $1.1bn of investments for the year that was made at the end of the third quarter.

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Hercules Capital (HTGC) broke its own record and prediction for capital commitments in 2018.

The venture debt-focused business development company announced on Monday it surpassed their own expectations and originated over $1.21 billion of debt and equity commitments over the year.

Manuel Henriquez, the chief executive, chairman and founder of HTGC, said on the vehicle’s third-quarter earnings call that he had originally expected the BDC to reach over $1.1 billion in commitments during 2018, which would have also set a record.

HTGC deployed over $320 million in new capital commitments during the fourth quarter. The BDC saw the most activity in 2018 during the second quarter, when it invested over $460 million in new commitments, according to its second-quarter earnings report.

“I would say that probably the biggest success this year was the new formation of a division called SaaS Finance,” Michael Hara, senior director of investor relations and corporate communications, told Private Debt Investor. “That has experienced tremendous growth.”

The vehicle launched its SaaS Finance programme in June, with $305 million in commitments, according to the third-quarter earnings results. That portion grew to over $390 million by the end of the third quarter. The programme makes up more than 20 percent of the BDC’s total portfolio. This strategy extends loans of between $10 million and $100 million to fast-growing software and technology companies.

The BDC’s shareholders recently approved an increase in allowable leverage from a 1:1 debt-to-equity to 2:1 in December, as PDI previously reported, which will relieve pressure on the vehicle’s potential growth heading into 2019.

“The benefit of having a higher ceiling is that if we are going through high growth periods, it allows us to better manage the timing of when you do a debt raise versus an equity raise,” Hara said. “If you are seeing good dealflow, you don’t want to be forced into raising equity capital.”

Hercules Capital is a Palo Alto, California-based investment firm that has committed over $8.2 billion in capital commitments since the organisation’s inception in 2003.