Exclusive Interview With The CEO, President And Chairman: Triangle Capital Corporation (TCAP) - Garland S. Tucker, III
June 27, 2012 - The Wall Street Transcript has just published Business Development Companies Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Garland S. Tucker, III, is Chief Executive Officer, President and Chairman of Triangle Capital Corporation. Before the companys IPO in 2007, he cofounded Triangle Capital's predecessor companies, Triangle Capital Partners, LLC, and Triangle Mezzanine Fund LLLP in 2002 and 2003, respectively. Before cofounding Triangle, Mr. Tucker and an outside investor group sold First Travelcorp, a corporate travel services company that he and the investors founded in 1991. For the two years preceding the founding of First Travelcorp, Mr. Tucker served as Group Vice President, Chemical Bank, New York, with responsibility for Southeastern corporate finance. Before Chemical Bank, Mr. Tucker spent a decade with Carolina Securities Corporation, serving as President and CEO until 1988. During his tenure, Carolina Securities was a member of the New York Stock Exchange, and Mr. Tucker served a term as President of the Mid-Atlantic Securities Industry Association. He entered the securities business in 1975 with Investment Corporation of Virginia. Mr. Tucker is a graduate of Washington and Lee University and Harvard Business School.
TWST: Would you start with a brief overview of Triangle Capital Corporation?
Mr. Tucker: Triangle Capital (TCAP) operates as a publicly traded BDC. We started initially in 2002 as a private equity limited partnership that converted to a BDC structure in 2007, and have been publicly traded since. We're currently listed on the New York Stock Exchange under the symbol TCAP.We invest in subdebt investments in lower middle-market companies. We're also registered as an SBIC and utilize leverage from the SBA. We are structured as an internally managed BDC.
TWST: What are the types of investments Triangle is focused on today? Are there broad categories and criteria the company looks for? Where does Triangle Capital place its investments of these funds?
Mr. Tucker: First of all, we are very much generalists. We invest across a broad range of industries. We currently have approximately 70 investments in the portfolio, and they are spread over 28 to 30 different industries. We do not have any geographical limits, and we have investments spread pretty much around the country.We do invest strictly in what we call the lower middle market, and our definition of that is companies that have revenues of anywhere from $15 million to $20 million, up to $300 million to $400 million, and would have a historical trailing cash flow of at least $2 million to $3 million, and up to $25 million to $30 million.
TWST: What are some of the underlying fundamentals the company looks for in assessing the quality of a company and its suitability to its portfolio?
Mr. Tucker: First, the starting point for us is to find companies that are in what we call the lower middle market and to find companies that have historical ability to generate cash flow in good economic times, as well as bad economic times. A typical transaction for us would normally be sponsored by a private equity firm and would generally be a change-of-control transaction.Secondly, we look very carefully at the management team. This is the most critically important judgment we make. In addition, we evaluate the industry, the private equity sponsor and the proposed capital structure.
TWST: Please describe the environment over the past year. How actively have others been seeking investments in the areas Triangle Capital focuses on, and what has that meant, as far as competing for deals? What are some of the underlying issues that have had an impact on the competitive landscape?
Mr. Tucker: The lower middle market is not without competition. I think in general, however, it's more of a relationship market, and that's one of the reasons that we like it.One of the competitive advantages that we've enjoyed as a BDC is we've had ongoing access to the capital markets, which has meant that throughout the last five years of our history, because we've been able to access the equity and debt markets, we've had capital to invest, and that's given us a competitive advantage against some of the other investors in our market who are structured as limited partnerships that sometimes are in a fundraising mode, and other times are not.
TWST: When Triangle Capital is assessing management as an investor, does it look at its ability to grow with the company? We sometimes hear about wonderful ideas implemented by a bright management team, but they can't handle rapid growth of the business. What are your thoughts there?
Mr. Tucker: Once we have found a lower middle-market company that has a history of cash flow, the second most important thing that we look for is the quality of management. And we are talking about relatively small companies, so we're generally talking about two, three, maybe four key managers, and our assessment of that management team is probably the most important qualitative decision we make in a deal. It's very important.We've seen time and time again with companies down in this lower middle market that if you've got the right management group, even in a bad industry or a bad overall economy, they will figure out a way to make the deal work.
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