After announcing an expected increase of 3 cents per share in net investment income per annum after the Federal Reserve raised interest rates by 0.25%, Hercules Technology Growth Capital, Inc.HTGC is now taking efforts to position it better through active liquidity and balance sheet management in order to capitalize on the changed interest rate environment.
In an attempt to lower cost of financing, the company had previously announced the redemption of $40.0 million of the $85.9 million in issued and outstanding aggregate principal amount of the company's 7.00% Senior Unsecured Notes due September 2019. The completion of the same was announced by the company yesterday.
While the completion of partial redemption of the Notes is expected to result in annual interest expense savings of around $3.0 million or 4 cents per annum, the move is anticipated to give rise to a one-time non-cash expense in the fourth quarter of 2015.
The non-cash expense will lead to acceleration of unamortized original debt issuance costs of about $825,000 or 1 cent per share of additional expense during the said quarter.
Moreover, Hercules may complete additional redemptions of its Notes throughout 2016 (subject to market conditions and its anticipated liquidity position), which is expected to be accretive to net investment income per share during 2016.
Hercules, which is a specialty finance company that provides venture capital to technology and life science-related companies, continues to further strengthen its balance sheet through proactive management to take advantage of the rising rate scenario. This will likely boost net investment income and generate positive earnings growth for its investors.
"We continue to be extremely proactive in the management of our overall capital structure as we work to continue to optimize the Company's balance sheet, particularly as the interest rate environment changes," stated Mark R. Harris, chief financial officer at Hercules. "As rising interest rates are expected to benefit our net investment income, we are also opportunistically taking steps to lower our cost of financing on the right side of the ledger."
Currently, Hercules carries a Zacks Rank #3 (Hold). Some better-ranked companies in the same space include BlackRock Capital Investment Corporation BKCC , Garrison Capital Inc. GARS and Horizon Technology Finance Corporation HRZN . All these stocks hold a Zacks Rank #2 (Buy).