Trinity Capital grew its equipment financing portfolio in 2022 amid record commitments and deployments.
Equipment financing investments totaled $29 million in the fourth quarter, down 35% quarter over quarter and 59.9% year over year, according to Equipment Finance News analysis of Trinity’s earnings release.
Phoenix-based Trinity Capital’s equipment financing outstandings clocked in at $246 million at aggregate fair value at the end of 2022, which was flat compared with the prior quarter and an increase of 9.6% YoY, according to the company’s earnings release.
Trinity’s total investment portfolio had an aggregate fair value of approximately $1.1 billion in Q4, up 5% quarter over quarter, and 19.9% YoY, according to the release.
Equipment financings and loans to two portfolio companies were on non-accrual status with a total fair value of approximately $17.8 million at the end of Q4, according to the release. Investments on non-accrual status represented 1.7% of the fair value of the company’s debt investment portfolio, Michael Testa, Trinity’s chief accounting officer, said on the company’s Mar. 2 earnings call.
Equipment finance accounted for 22.5% of Trinity’s investment portfolio in Q4, an increase of 110 basis points (bps) sequentially and up 140 bps YoY, according to the earnings presentation.
Total gross investments for the full year increased 13% YoY to $631.2 million, according to the release.
“All of [our] capital-raising activities allowed us to deliver a record year for both commitments and deployments,” said Trinity Chief Executive and Chairman Steve Brown on the call. “We originated $976 million in new commitments and funded $631 million across 66 portfolio companies.”
Trinity Capital entered into a $171.4 million joint venture (JV) with an unnamed specialist credit manager on Dec. 6 to help Trinity expand its loan and equipment financing portfolio. The joint venture, called “i40,” is co-managed by Trinity and the credit manager, with Trinity committing $21.4 million and the specialist credit manager contributing $150 million to the fund.
“Our JV structure not only allowed us to expand the portfolio, but also generate predictable fee income, while keeping the balance sheet healthy and nimble,” Kyle Brown, president and chief investment officer, said during the Q4 call. The company’s JV partner has invested in about $27.6 million of Trinity-originated loans through March 1, according to the release.
Trinity on Dec. 14 also announced it was granted exemptive relief from the Securities and Exchange Commission that permits the company to organize, acquire and wholly own a portfolio company that intends to operate as an investment adviser registered under the Investment Advisers Act of 1940, according to the release. “The [registered investment advisors] structure will allow us to raise funds off the balance sheet, providing outsized returns for investors in a complementary way,” Kyle Brown said.
Trinity grows debt-to-equity ratio
Trinity’s debt-to-equity leverage ratio was about 135% at yearend, up 17% QoQ and 30.6% YoY, according to Equipment Finance News analysis of the company’s financial statements. The increase was due largely to borrowings under the KeyBank Credit Facility, according to the earnings release.
The company’s policy is to keep its debt-to-equity leverage between 115% and 135%, Steve Brown said. “We’re at the upper end of that right now, and we do plan to keep it within the upper end of that range going forward.”
Trinity Capital had about $173.1 million in available liquidity at yearend, including $10.6 million in unrestricted cash and cash equivalents, according to the release. The company also had $162.5 million in available borrowing capacity under its credit facility subject to existing terms, rates and requirements.