Slide 1: Review of Need for Change at TICC
August 2016 TPG Specialty Lending Review of Need for Change at TICC
Slide 2: Company Information | Forward-Looking Statements
Company Information | Forward-Looking Statements About TPG Specialty Lending TPG Specialty Lending, Inc. (“TSLX” or the “Company”) is a specialty finance company focused on lending to middle-market companies. The Company seeks to generate current income primarily in U.S.-domiciled middle-market comp
Slide 3: Forward-Looking Statements (cont.)
Forward-Looking Statements (cont.) | Third Party-Sourced Statements and Information Risks and uncertainties related to a possible transaction include, among others, uncertainty as to whether TSLX will further pursue, enter into or consummate a transaction on the terms set forth in its proposal or on
Slide 4: Proxy Solicitation Information
Proxy Solicitation Information Proxy Solicitation Information In connection with TSLX’s solicitation of proxies for the 2016 annual meeting of TICC stockholders in favor of (a) the election of TSLX’s nominee to serve as a director of TICC and (b) TSLX’s proposal to terminate the Investment Advisory
Slide 5: Table of Contents
Table of Contents Executive Summary Vote to Terminate the Existing Adviser Vote to Elect T. Kelley Millet
Slide 6: I. Executive Summary
I.Executive Summary
Slide 7: TPG Specialty Lending: About Us
TPG Specialty Lending: About Us TPG Specialty Lending, Inc. (“TSLX”) is a specialty finance company focused on lending to middle-market companies principally located in the United States. TSLX owns approximately 3.2% of TICC Capital Corp.’s (“TICC” or the “Company”) common stock with a market value
Slide 8: TICC Underperformance Demands Immediate Change
TICC Underperformance Demands Immediate Change The Company has drastically underperformed on most standard industry metrics TSLX believes that TICC management has consistently failed stockholders in favor of self-enrichment. Immediate change is needed. BDC Composite comprised of ACAS, AINV, ARCC, BK
Slide 9: TICC's Board has Failed to Uphold Basic Principles of Governance
TICC’s Board has Failed to Uphold Basic Principles of Governance Stockholders have lost trust in the Board’s corporate governance as the Board has repeatedly prioritized management’s interests ahead of the interests of stockholders A federal judge found that TICC likely violated securities laws and
Slide 10: TICC Continues to Mislead Stockholders
TICC Continues to Mislead Stockholders What They Will Tell You Reality of Situation Why TICC’s Action is Unacceptable TICC appointed an independent Chairman of the Board of Directors. TICC’s new “independent” Chairman is Steven Novak, who has served on the Board for more than 12 years and received $
Slide 11: The Choice for Stockholders
The Choice for Stockholders A vote for GOLD offers a path toward value creation Voting TSLX (Gold Card) Presents opportunity for change that the status quo manager and Board have proven incapable of providing Removes a manager that has delivered a decade of abysmal returns Offers an opportunity to i
Slide 12: II. Vote to Terminate the Existing Adviser
II.Vote to Terminate the Existing Adviser
Slide 13: Why Stockholders Should Vote to Terminate the Management Agreement
Why Stockholders Should Vote to Terminate the Management Agreement Question: Why terminate the external adviser? Answer: TICC has failed stockholders with its significant underperformance that has delivered total stockholder returns since its IPO below almost every relevant benchmark. TICC has pursu
Slide 14: Poor Stewardship has Resulted in Drastic Long-Term Underperformance
Poor Stewardship has Resulted in Drastic Long-Term Underperformance TICC Relative Underperformance Total Return (%)(¹) YTD(4) 1Y 3Y Since IPO(²) Since IPO Annualized(²) YTD(4) 1Y 3Y Since IPO(²) Since IPO Annualized(²) TICC 4.7% 8.1% (9.8)% 61.5% 3.8% - - - - BDC Composite(³) 15.2 13.9 8.5 254.1 10.
Slide 15: TICC Total Returns Have Consistently Underperformed Since IPO
TICC Total Returns Have Consistently Underperformed Since IPO Performance above peers? P O O O O P P O O P O O O Board renewed external adviser contract? (With no changes!) P P P P P P P P P P P P O Total return calculation includes share price appreciation and cumulative dividends paid BDC Composit
Slide 16: Remove the Management and Board Discount
Remove the Management and Board Discount TICC has traded below NAV on 487 out of 506 days over the past two years ... A clear sign that the market does not believe in management Note: Market data as of August 4, 2016 Source: Bloomberg, Capital IQ
Slide 17: TICC's Fees and Expenses Exceed Total Economics to Stockholders
TICC’s Fees and Expenses Exceed Total Economics to Stockholders TICC Stockholders are Overpaying Fees BDC expenses must be examined relative to the collateral that each BDC manages Proprietary credit work justifies higher fees whereas investing in CLO equity is much easier for a manager to do TICC’s
Slide 18: TICC has Consistently Under-Earned its Dividend and Eroded NAV
TICC has Consistently Under-Earned its Dividend and Eroded NAV TICC’s Failure to Earn its Dividend Represents an Effective Return of Capital to Stockholders Fact: TICC’s dividend is in part comprised of a return of investment capital Fact: No dividend comprised of investment capital is sustainable F
Slide 19: TICC's Failed Manager has Destroyed Net Asset Value
TICC’s Failed Manager has Destroyed Net Asset Value (“NAV”) Stockholders have suffered under TICC Management 52% NAV Per Share Decline Since IPO NAV per share under TICC’s management has even fallen 12% from the trough of the financial crisis ($7.46 in 2009Q1 to $6.54 in 2016Q2) Source: SNL
Slide 20: Analysts Question TICC Management's Performance
Analysts Question TICC Management’s Performance Source: Research Reports, Public Filings Wells Fargo, Feb 4th, 2016 “TICC in our view essentially resembles an underperforming ‘senior floating’ BDC, where fee structures today are closer to 1 percentage point, given the lesser top line economics that
Slide 21: Terminating the External Adviser Forces a Strategic Review
Terminating the External Adviser Forces a Strategic Review Improved Total Returns Eliminate Discount to NAV With average performing external adviser, stockholders could assume ongoing performance at or close to BDC Composite1 level. If TICC had been delivering returns at or near the level of the BDC
Slide 22: III. Vote to Elect T. Kelley Millet
III.Vote to Elect T. Kelley Millet
Slide 23: Net Present Value Economic Interest of External Manager vs. Stockholders
Net Present Value Economic Interest of External Manager vs. Stockholders . . . Source: Bloomberg, SEC Filings Note: Marked data as of August 4, 2016 Assumes 1.5% annual base management fee assuming total assets remains constant to most recent quarter ($696mm) in perpetuity Assumes 10% discount rate
Slide 24: The TICC Board's Actions Reflect a Lack of Independence
The TICC Board’s Actions Reflect a Lack of Independence Year Performance Above Peers? Management base fee reduced by Board? Changes made to Board composition? TICC Facing Proxy Contest at Annual Meeting? 2004 YES NO NO NO 2005 NO NO NO NO 2006 NO NO NO NO 2007 NO NO NO NO 2008 NO NO NO NO 2009 YES N
Slide 25: The TICC Board's Actions Reflect a Lack of Independence
The TICC Board’s Actions Reflect a Lack of Independence In addition to failing to independently evaluate the adviser on an annual basis, TICC’s Board has amassed a troubling track record of actions that appear to favor the external adviser Over recent years, the TICC Board has: Failed to run a compl
Slide 26: Actions Taken in 2016 with the External Adviser Under Pressure
Actions Taken in 2016 with the External Adviser Under Pressure Year Proxy Statement Filed Annual Meeting Record Date Annual Meeting Date Mgmt Fees Threatened? 2004 May 18 April 27 June 17 NO 2005 May 2 April 29 June 8 NO 2006 April 28 April 27 June 6 NO 2007 April 30 April 26 June 5 NO 2008 April 29
Slide 27: The Chairman Approved of These Actions
The Chairman Approved of These Actions “The simple fact is that direct share purchases by self-interested directors and management team members effectively create votes in favor of the external manager. By failing to implement buy-backs at the Company level, it appears the board is allowing self-int
Slide 28: Analysts Question TICC Governance Practices
Analysts Question TICC Governance Practices Source: Research Reports, Public Filings Raging Capital Management, LLC letter to TICC Board, Sept 21st, 2015 “Now, we want to ensure that the TICC Board is acting in accordance with its fiduciary obligations…We find ourselves at a critical juncture in TIC
Slide 29: Elect T. Kelley Millet to the TICC Board of Directors
Elect T. Kelley Millet to the TICC Board of Directors Mr. Millet has a proven track record of: Successfully reinvigorating companies Driving substantial growth Prioritizing stockholders’ interests Protecting stockholders’ investments Mr. Millet has significant leadership experience and is highly qua
Slide 30: Summary
Summary The external adviser and Board have delivered more than a decade of failure and cannot be trusted to independently implement a program to benefit stockholders. TICC stockholders have suffered long enough from the Board and management’s self-interested actions and poor financial performance.
Slide 31: Appendix A: Reconciliation of Non-GAAP Financial Measures
Appendix A:Reconciliation of Non-GAAP Financial Measures
Slide 32: Reconciliation of Non-GAAP Measures – Ratio of Stockholder Fees and Expenses to Total Economics
Reconciliation of Certain Non-GAAP Financial Measures – Ratio of Stockholder Fees and Expenses to Total Economics Fees as a portion of Total Economics of your investment, as set forth in this Proxy Statement, may be considered a non-GAAP financial measure. TSLX provides this information to stockhold
Slide 33: TICC Stockholder Fees and Expenses 2012–2016
TICC 2012 2013 2014 2015 2016 (through Jun 30) Cumulative Net Increase in Net Assets Resulting from Operations (GAAP) $ 68,323 $ 58,945 $(3,348) $(66,134) $ 31,150 $ 88,936 Stockholder Fees & Expenses: Compensation expense (GAAP) $ 1,183 $ 1,648 $ 1,861 $ 1,159 $ 420 $ 6,270 Investment advisory fees
Slide 34: Reconciliation of Non-GAAP Measures – TICC Expense Ratio
Reconciliation of Certain Non-GAAP Financial Measures – TICC Expense Ratio The TICC Expense Ratio, as set forth in this presentation, may be considered a non-GAAP financial measure. TSLX provides this information to stockholders because TSLX believes it enhances stockholders’ understanding of the re
Slide 35: TICC Quarterly Stockholder Fees and Expenses
TICC Quarter Ended Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Cumulative Stockholder Fees & Expenses: Compensation expense (GAAP) $ 480 $ 396 $ 90 $ 193 $ 241 $ 179 $ 1,579 Investment advisory fees (GAAP) 5,010 5,308 5,256 4,196 3,706 2,412 25,888 Professional fees (GAAP) 606 905 819 3,36