Morningstar DBRS Confirms TriplePoint Venture Growth BDC Corp.'s Long-Term Credit Ratings at BBB (low) With a Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the Long-Term Issuer Rating and Long-Term Senior Debt rating of TriplePoint Venture Growth BDC Corp. (TPVG or the Company) at BBB (low). The trend on all ratings is Stable. The Company's Intrinsic Assessment (IA) is BBB (low), while its Support Assessment is SA3, resulting in the Company's final credit rating being equalized with its IA.

KEY CREDIT RATING CONSIDERATIONS
The confirmation of the credit ratings reflects TPVG's solid and established franchise via its relationship to the overall TriplePoint Capital LLC (TPC) global venture lending platform. The Company importantly had a substantial decline in leverage from the prior year period, which was in part elevated due to compliance requirements associated with unfunded commitments to borrowers that were deemed to be "non-qualifying assets" under Section 55(a) of the Investment Company Act of 1940, as amended (the 1940 Act). TPVG returned to profitability in 2024, as earnings improved over two previous years of losses despite a smaller investment portfolio, but net change in net assets from operations (net income) was still constrained from net realized and unrealized losses. Non-accruals and watchlist names were still predominantly from consumer-focused companies, as TPVG rotates into durable, high-potential technology sectors such as verticalized software, aerospace & defense and artificial intelligence to position the investment portfolio for asset-level credit progress. TPVG's funding demonstrated resiliency as the Company renewed its $300 million revolving credit facility in August 2024 and repaid a $70 million maturity in early 2025 with a $50 million private placement issuance, unrestricted cash, and excess revolver capacity.

The Stable trend reflects our expectation that the Company will restore growth to the investment portfolio despite broad volatile macroeconomic conditions driven by changing U.S. government policies which continue to challenge the venture capital (VC) ecosystem, particularly outside of artificial intelligence focused companies. We anticipate this growth to come from the Company's successful rotation in its investment focus by sector and should be supportive of improved earnings and overall portfolio credit performance. Weakening economic activity outside of our baseline scenario is a downside risk that may pressure operating performance at TPVG's portfolio companies.

CREDIT RATING DRIVERS
Over the long-term, a sustained improvement in earnings and credit performance while operating with conservative gross leverage would result in a credit ratings upgrade. Conversely, should operating performance materially worsen, including further notable losses that erode net asset value, or significant credit deterioration, the credit ratings would be downgraded.

CREDIT RATING RATIONALE
Franchise Building Block Assessment: Good / Moderate
TPVG's solid and established franchise is based on TPC's position in the VC ecosystem with an executive management team that has long-standing experience investing through economic cycles. The Company's investment portfolio has continued to decline by 16% year-over-year to $676.2 million as of Q4 2024 but still has sufficient scale to maintain portfolio company diversity, and TPVG benefits from co-investment SEC exemptive relief, which allows TPC to allocate larger investments across its various pockets of capital. At Q4 2024, the investment portfolio consisted of approximately 74% first lien loans, 9% second lien, and 17% equity and warrant positions with 109 total portfolio companies.

Earnings Building Block Assessment: Moderate
Earnings have improved from last year, but net realized and unrealized losses remained a headwind at the net income level. TPVG reported net investment income (NII) of $54.5 million for 2024 down from $73.8 million in 2023 and net income of $32.0 million for 2024 compared to a net loss of $39.8 million for 2023. Net realized and unrealized losses were $22.5 million for 2024, improved from $113.6 million in 2023 and $83.6 million in 2022. TPVG's ability to generate solid asset yields remains with a weighted average portfolio yield on debt investments increasing to 15.7% in 2024 from 15.4% in the prior year, despite a decrease in prevailing prime base rates. PIK income increased to 14% of total investment income in 2024 from 8% in 2023 above the average of 7% in our ratings universe.

Risk Building Block Assessment: Moderate
TPVG's credit performance continues to be challenged, with four portfolio companies on non-accrual representing 5.3% of the investment portfolio at cost. We view the credit risk of VC-backed loans as elevated as repayments are typically reliant upon future capital raises and exits to repay obligations instead of internal cash flow deleveraging. At Q4 2024, 20% of TPVG's investment portfolio at cost was fair value marked at 85% or below of par, signaling the potential for further investment portfolio deterioration. Non-qualified assets, primarily driven by international portfolio companies, were still above regulatory thresholds under Section 55 of the 1940 Act as of December 31, 2024, which limits TPVG's ability to make additional investments in non-qualified assets until the proportion is brought below 30% of total assets (32.7% at Q4 2024).

Funding and Liquidity Building Block Assessment: Moderate
TPVG's funding profile has demonstrated resiliency as it renewed its $300 million revolving credit facility in August 2024 to extend its maturity to May 2027, repaid the 4.50% $70 million private placement notes due in March 2025, and issued $50 million of 8.11% private placement notes due in February 2028. Unsecured funding was essentially 100% of the drawn funding for TPVG, which only had $5 million drawn on its revolving credit facility at Q4 2024, which provides substantial unencumbered assets to be pledged if necessary. The Company's liquidity was comprised of unrestricted cash and cash equivalents of $45.9 million and available capacity under the revolving credit facility of $295 million providing sufficient coverage to unfunded commitments of $104.5 million.

Capitalization Building Block Assessment: Moderate
TPVG's capitalization has improved significantly down to 1.16x gross debt-to-equity at Q4 2024 from 1.76x at Q4 2023, which was elevated due to the Company's non-qualified asset exposure, while current leverage is well within the Company's net leverage target of 1.0x to 1.2x. Current leverage is supportive of the credit ratings as the Company's cushion to the asset coverage ratio increased to approximately $145 million, implying that TPVG would need to take a full loss on 21% of the investment portfolio to breach the 2.0x regulatory limit. While the Company has access to issue equity when its stock trades at a premium to book value (0.78x P/BV as of April 3, 2025), it has only $56.5 million in shares remaining available for sale under the current at-the-market equity program at year-end 2024. Dividend coverage from NII was 100% through 2024, as the Company reduced quarterly dividends to $0.30 per share from $0.40 per share. Additionally, book value per share has decreased by 6% from $9.21 at Q4 2023 to $8.61 at Q4 2024.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (November 19, 2024) https://dbrs.morningstar.com/research/443208. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for this credit rating include Morningstar, Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to our Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of our website.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277