Zacks_Analysts' Blog : Hercules Renews Credit Facility - Analyst Blog

Hercules Technology Growth Capital Inc. (HTGC) announced the completion of its renewal of $300 million credit facility. The company’s credit facility has a commitment of $75 million through Wells Fargo Capital Finance, LLC (WFCF), a division of Wells Fargo & Company (WFC).

Hercules stated that the credit facility has an accordion characteristic wherein the company can increase the credit line up to $300 million that would be funded by other lenders who might join the facility. However, this would be done in agreement with WFCF subject to other customary conditions.

Hercules further commented that WFCF’s renewed commitment of $75 million replaces the old commitment of $50 million in capital. The new credit facility will expire on June 20, 2014. Additionally, Hercules had to pay a closing fee of $1.1 million related to the renewal of the credit facility.

Earlier in March this year, Hercules had announced that it has received a commitment to renew its $300 million accordion credit facility with WFCF. Under this credit facility, borrowings will bear an interest at LIBOR plus 3.50%, with a floor of 5.00%. Moreover, borrowings will have an advance rate of 50% against eligible loans and will be secured by loans in the borrowing base.

Separately, Hercules also modified its $20 million revolving credit facility with Union Bank, N.A. Following which, the company was able to extend the termination date and maturity date from July 31 to September 30 and December 31, respectively.

These two credit facilities along with proceeds from Hercules’ recent convertible debt offering of $75 million will provide sufficient capital to further enhance and expand its investment activities. Also, these would provide long-term growth prospects to the company’s investment portfolio.

Hercules currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. However, considering the fundamentals, we maintain our long-term “Neutral” recommendation on the stock.