THL Credit investment income, assets rise

The business development company of Boston-headquartered lender THL Credit has reported both an increase in investment income and assets for the fourth quarter of 2014. Its net investment income grew to $12.8 million as of 31 December 2014, up from $12.2 million in the third quarter and $9.1 million in the last quarter of 2013, representing a 34 percent rise year-on-year. Net investment income per share was $0.37 at the end of the last quarter, up from $0.36 in the third quarter and $0.27 in the last quarter of 2013.

Assets also grew to $784.2 million from $718 million in the third quarter and $648 million in the last quarter of 2013. The vehicle achieved an average yield on investments of 11.7 percent, said Chris Flynn, the firm’s co-chief executive on the earnings call today (11 March). The BDC deployed $119 million into new investments in the fourth quarter, which represented a much larger ratio to its sales, repayments and refinancing in the same period which amounted to $34.2 million. Of the new lending, $42 million was for nine existing borrowers.

The majority of the vehicle’s investments in the fourth quarter (72 percent) were in first and second lien secured floating rate investments, Flynn said. The firm has also started making commitments via its THL Credit Logan JV, which it formed with wealth management firm Perspecta Trust towards the end of last year. The vehicle can access two turns of leverage, as opposed to the BDC’s 1:1. Flynn expects to make more syndicated loans first to ramp up the vehicle and do more direct lending later.

Sam Tillinghast, the firm’s other chief executive, also noted that the vehicle had about $50 million invested in oil and gas across three companies, representing about 6 percent of the portfolio. The decline in the value of those investments amounted to about eight cents per share in the last quarter.

The vehicle evaluated 170 energy companies since 2012 and only made three investments, said Houston-based Tillignhast. He added that the portfolio is well diversified and he doesn’t expect to see much in terms of further declines within its oil and gas exposures.

Flynn said activity has been somewhat slow so far this year. The vehicle has made $15.3 million in new commitments so far. Though Tillinghast expects to see more in the year ahead. “Despite the downward price pressure on BDCs, the mid-market lending environment continues to be strong,” he said.