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

Rhea-AI Summary

Trinity Capital Inc. (NASDAQ: TRIN) adjusts the conversion rate of its Convertible Notes due to a cash dividend of $0.51 per share. The new rate is 78.0543 shares per $1,000 principal amount, with a conversion price of $12.81 per share.

Financial Analyst

The adjustment in the conversion rate of Trinity Capital Inc.'s Convertible Notes, in response to the company's cash dividend exceeding the initial threshold, is a strategic move that reflects the company's commitment to maintaining the value proposition for its convertible note holders. This adjustment ensures that the value of the notes remains intact despite the distribution of a higher dividend than initially set in the indenture agreement. It's an indication of strong corporate governance and a clear signal to the market about the company's financial health and its ability to reward shareholders while also considering the interests of its debt holders.

From a financial perspective, the increase in the conversion rate dilutes the common stock to a certain extent, which could have a marginal impact on the stock price. However, it also potentially reduces the future cash outflow for the company when the notes are converted, as more shares will be issued at a lower price. This could be seen as a positive sign for stockholders, as it implies management's confidence in the company's future stock performance and its ability to generate sufficient earnings to cover the additional shares without eroding shareholder value.

Tax Advisor

Trinity Capital Inc.'s approach to distributions, aiming to disburse between 90% to 100% of its taxable quarterly income, is aligned with the typical strategies of regulated investment companies (RICs) to avoid corporate-level taxation. The decision to pay supplemental distributions to ensure that nearly all annual taxable income is distributed in the year it was earned, or to allow for spillover into the next year, is a tactical maneuver to manage tax liabilities effectively.

For investors, understanding the tax implications of these distributions is essential. The mix of return of capital and/or capital gains in the distributions can have different tax consequences. A return of capital, for instance, reduces an investor's cost basis in the stock, which can affect capital gains taxes upon sale of the shares. Investors should closely monitor the tax characteristics reported on Form 1099-DIV and in the company's SEC filings to optimize their investment strategy in line with their individual tax situations.

Market Research Analyst

The proactive adjustment of the conversion rate for Trinity Capital Inc.'s Convertible Notes signifies a broader industry practice among growth-stage financial solution providers to maintain investor confidence and align interests between shareholders and debt holders. This move can be perceived as a reflection of the company's operational strength and its ability to manage capital structure proactively. It also underscores the importance of transparency in communicating with the market, as evidenced by the timely notice to the Convertible Notes holders and the trustee.

For potential investors and market observers, such adjustments are important indicators of a company's responsiveness to market conditions and its commitment to upholding the terms of its financial instruments. It reflects the company's understanding of the delicate balance required to navigate shareholder returns and debt obligations, which is a critical aspect for assessing the company's long-term financial stability and growth prospects.

PHOENIX, March 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 April 15, 2024 to stockholders of record as of March 28, 2024. The ex-dividend date for such dividend was March 27, 2024.

Effective immediately after the close of business on March 28, 2024, the conversion rate of the Convertible Notes will be adjusted to 78.0543 shares of the Company's common stock per $1,000 principal amount of Convertible Notes from the prior conversion rate of 76.9453 shares of the Company's common stock per $1,000 principal amount of Convertible Notes, which had been in effect since January 1, 2024.  As a result, effective as of such time, the conversion price applicable to the Convertible Notes will be adjusted to $12.81 per share of common stock from $13.00 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.

What triggered the adjustment to the conversion rate of the Convertible Notes for Trinity Capital Inc. (TRIN)?

The adjustment was made due to the Company's cash dividend of $0.51 per share.

What is the new conversion rate for the Convertible Notes for Trinity Capital Inc. (TRIN)?

The new conversion rate is 78.0543 shares of the Company's common stock per $1,000 principal amount.

What is the new conversion price for the Convertible Notes for Trinity Capital Inc. (TRIN)?

The new conversion price is $12.81 per share of common stock.

What is the ex-dividend date for the cash dividend announced by Trinity Capital Inc. (TRIN)?

The ex-dividend date for the dividend was March 27, 2024.

How does Trinity Capital Inc. (TRIN) aim to qualify for tax treatment as a regulated investment company?

The Company aims to distribute four quarterly distributions approximating 90% to 100% of its taxable quarterly income.