KBRA assigns a BBB rating to AG Twin Brook Capital Income Fund's ("TCAP" or "the company") $90 million, 7.69% senior unsecured notes due March 19, 2027, and its $150 million, 7.78% senior unsecured notes due March 19, 2029. The ratings Outlook is Stable. The proceeds will be used for general corporate purposes and to pay down secured credit facilities.

Key Credit Considerations

The ratings and Outlook are supported by TCAP’s ties to TPG Angelo Gordon’s $78 billion investment platform, with $20 billion of direct lending within the TPG Twin Brook Capital Partners middle market lending platform, that allows for SEC exemptive relief to co-invest with TPG Angelo Gordon affiliated funds. TPG Angelo Gordon provides the company with robust deal sourcing, a strong sponsor network, and extensive banking relationships. More recently, TPG Inc., a global alternative asset manager, acquired TPG Angelo Gordon, resulting in an aggregate of $222 billion of AUM and further strengthening the company’s support base. TCAP has a solid management team, which has a long track record working with the private debt markets with each member of senior management having 15 or more years of experience in the industry. The ratings are also supported by TCAP’s growing and well-diversified $1.4 billion investment portfolio comprised largely of senior secured first lien loans (96%) to 195 portfolio companies across 37 sectors in primarily the lower middle market. As of December 31, 2023, the portfolio companies had a weighted average EBITDA of $23.5 million, were largely sponsor backed with meaningful equity cushions with low LTVs, and had net leverage of 4.73x and interest coverage of 2.0x, using a “current quarter” calculation. Health Care Providers & Services (28.9%), Media (8.7%), and Diversified Consumer Services (7.7%) are the leading portfolio industries. Although concentrated in the Health Care sector, this concentration is mitigated by several factors, including the credit platform’s expertise within the industry and strong subsector diversity. As of December 31, 2023, gross leverage was low at 0.80x and asset coverage was 224% due to the recent BDC formation and its cautious approach to deploying capital. Leverage is well within regulatory coverage of 150% and within its target leverage of 1.10x or lower, which is somewhat lower than traditional BDC peers to ensure sufficient liquidity for potential redemptions as a perpetual-life BDC in less favorable markets. This unsecured issuance results in pro forma unsecured debt to total debt of 37%.

Counterbalancing these credit strengths is the unseasoned portfolio that provides an element of uncertainty with respect to future performance. Further counterbalancing the company’s strengths are the potential risk related to the company’s illiquid investments, retained earnings constraints as a RIC, and a more uncertain economic environment with high interest rates, geopolitical risks, and the potential of increasing non-accruals.

Rating Sensitivities

A rating upgrade is not expected in the medium term. The Outlook could be revised to Negative, or the rating could be downgraded, if a prolonged downturn in the U.S. economy has a material impact on performance, including increased non-accruals and a significant rise in leverage. An increased focus on riskier investments or a change in the current management structure and/or a change in strategy and risk management that negatively impacts credit metrics could also pressure ratings.

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Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1003545

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