Trinity Capital Inc. Announces Adjustment to Conversion Rate of its 6.00% Convertible Notes due 2025

Rhea-AI Summary

Trinity Capital announced an adjustment to the conversion rate of its 6.00% Convertible Notes due 2025, following a cash dividend of $0.51 per share, payable on July 15, 2024. The conversion rate is now set at 79.2226 shares per $1,000 principal amount, up from 78.0543 shares. The conversion price has been adjusted to $12.62 from $12.81 per share of common stock. This adjustment follows the second supplemental indenture, affected by the Company's quarterly cash dividend exceeding the $0.30 per share threshold. The announcement ensures the company maintains its tax treatment as a regulated investment company, distributing 90% to 100% of its taxable income annually.

Positive

• Increased conversion rate to 79.2226 shares from 78.0543 shares per $1,000 principal amount.
• Adjusted conversion price to $12.62 from $12.81 per share.

Negative

• The company is compelled to adjust terms due to exceeding dividend thresholds, potentially signaling financial strain or over-distribution.

Insights

Financial Analyst

The adjustment to the conversion rate of Trinity Capital Inc.'s 6.00% Convertible Notes from 78.0543 to 79.2226 shares per $1,000 principal amount is essential for investors to consider. This adjustment fundamentally alters the value proposition for current note holders. By increasing the conversion rate, Trinity Capital effectively sweetens the deal for note holders, making it potentially more beneficial for them to convert their notes into stock.

From a financial perspective, this move can impact the stock price by increasing the number of shares in circulation if more note holders choose to convert. Since the conversion price decreases from $12.81 to $12.62 per share, this slight reduction makes conversion marginally more attractive. It might signal the company's intention to keep investors engaged and maintain liquidity. However, it could dilute existing shareholders' equity, which might have a dampening effect on the stock price in the short term.

In the long term, this strategy could be seen as a confident signal from the company about its future cash flow and profitability, given their commitment to maintaining attractive returns for investors. It's vital to scrutinize whether this adjustment positively impacts Trinity's long-term earnings growth and how it aligns with market expectations.

Tax Expert

Trinity Capital's strategy of distributing approximately 90% to 100% of its taxable income to qualify as a regulated investment company (RIC) under the Internal Revenue Code is a key consideration for retail investors. This tax-efficient structure allows the company to avoid paying corporate income tax on distributed earnings, thereby maximizing the returns for investors. The payment of supplemental cash dividends, as indicated, ensures that the company can manage its taxable income effectively and meet regulatory requirements.

Investors should be aware that distributions may include a return of capital, which can affect the cost basis of their investment. This element of tax planning is crucial, as it impacts the capital gains taxes owed when shares are eventually sold. Understanding the tax implications of these distributions, especially regarding Form 1099-DIV, is essential for optimizing after-tax returns.

PHOENIX, June 28, 2024 /PRNewswire/ -- Trinity Capital Inc. (NASDAQ: TRIN) ("Trinity" or the "Company"), a leading provider of diversified financial solutions to growth stage companies, today announced an adjustment to the conversion rate of its 6.00% Convertible Notes due 2025 (the "Convertible Notes") as a result of the Company's cash dividend of $0.51 per share, payable on July 15, 2024 to stockholders of record as of June 28, 2024. The ex-dividend date for such dividend was June 28, 2024.

Effective immediately after the close of business on June 28, 2024, the conversion rate of the Convertible Notes will be adjusted to 79.2226 shares of the Company's common stock per $1,000 principal amount of Convertible Notes from the prior conversion rate of 78.0543 shares of the Company's common stock per $1,000 principal amount of Convertible Notes, which had been in effect since April 1, 2024. As a result, effective as of such time, the conversion price applicable to the Convertible Notes will be adjusted to $12.62 per share of common stock from $12.81 per share of common stock.

The adjustment to the conversion rate of the Convertible Notes is being made pursuant to the second supplemental indenture, dated as of December 11, 2020, governing the Convertible Notes as a result of the Company's regular quarterly cash dividend discussed above exceeding the initial dividend threshold of $0.30 per share of common stock set forth in the second supplemental indenture and the Company paying a supplemental cash dividend.

Notice of the conversion rate adjustment will be delivered to the holders of the Convertible Notes and U.S. Bank Trust Company, National Association, as trustee, in accordance with the terms of the second supplemental indenture governing the Convertible Notes.

Certain Information Regarding Distributions
The Company's objective is to distribute four quarterly distributions in an amount that approximates 90% to 100% of its taxable quarterly income or potential annual income for a particular year in order to qualify for tax treatment as a regulated investment company under the Internal Revenue Code of 1986. In addition, during any particular year, the Company may pay additional supplemental distributions, so that the Company distributes approximately all its annual taxable income in the year it was earned, or it may spill over the excess taxable income into the coming year for future distribution payments.

Distributions are paid from taxable earnings and may include a return of capital and/or capital gains. The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company's periodic reports filed with the Securities and Exchange Commission.

Forward-Looking Statements
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties, including the impact of the COVID-19 pandemic on the economy, financial markets, our business, our portfolio companies and our industry. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Trinity undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

About Trinity Capital Inc.
Trinity (Nasdaq: TRIN), an internally managed business development company, is a leading provider of diversified financial solutions to growth stage companies with institutional equity investors. Trinity's investment objective is to generate current income and, to a lesser extent, capital appreciation through investments, including term loans, equipment financings and equity-related investments. Trinity believes it is one of only a select group of specialty lenders that has the depth of knowledge, experience, and track record in lending to growth stage companies. For more information, please visit the Company's website at www.trinitycap.com.

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SOURCE Trinity Capital Inc.

FAQ

What adjustment was made to the conversion rate of Trinity Capital's 6.00% Convertible Notes (TRIN) due 2025?

The conversion rate was adjusted to 79.2226 shares per $1,000 principal amount from 78.0543 shares.

Why did Trinity Capital (TRIN) adjust the conversion rate of its 6.00% Convertible Notes?

The adjustment followed a cash dividend of $0.51 per share, which exceeded the initial dividend threshold of $0.30 per share.

What is the new conversion price for Trinity Capital's (TRIN) Convertible Notes after the adjustment?

The new conversion price is $12.62 per share, down from $12.81 per share.

When is the cash dividend announced by Trinity Capital (TRIN) payable?

The cash dividend of $0.51 per share is payable on July 15, 2024.