Triangle Capital – Class Action Lawsuit Filed
A class action lawsuit has been filed against Triangle Capital Corporation (“Triangle Capital”) (NYSE:TCAP) and certain of its officers in United States District Court, Southern District of New York, on behalf of investors who purchased or otherwise acquired Triangle Capital’s securities between May 7, 2014 and November 1, 2017, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against Triangle Capital and certain of its executives.
Triangle Capital is “a publicly-traded, internally managed business development company” that “offer[s] a wide variety of investment structures, with a primary focus on junior capital – debt and equity, for lower middle market companies.”
The class action complaint alleges that during the Class Period, Triangle Capital Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Defendants allegedly made false and/or misleading statements and/or failed to disclose that:
(i) as early as 2013, Triangle Capital’s investment professionals had internally recommended moving away from mezzanine loan deals due to changes in the market that no longer made these investments attractive risk-reward opportunities; (ii) Triangle Capital’s former Chief Executive Officer, Garland S. Tucker, III, ignored the advice of Triangle Capital’s investment professionals to chase higher short-term yields by causing Triangle Capital to invest in mezzanine debt despite the poor quality of the loans and their increased risk of defaults and nonaccruals; (iii) Triangle Capital’s entire vintage of 2014 and 2015 investments were at substantial risk of non-accrual as a result of the poor quality of the investments and deficient underwriting practices in place at the time of the investments; (iv) more than 13% of Triangle Capital’s investment portfolio at cost was at risk of non-accrual and, thus, the fair value of Triangle Capital’s asset portfolio was artificially inflated; (v) Triangle Capital had materially understated the number of loans performing below expectations and/or in non-accrual and had delayed writing down impaired investments; (vi) Triangle Capital failed to implement effective underwriting policies and practices to ensure it received appropriate risk-adjusted returns on its investments; and (vii) as a result of the foregoing, during the Class Period, Triangle Capital’s shares traded at artificially inflated prices and class members suffered significant losses and damages.
On November 1, 2017, Triangle Capital issued a press release announcing its financial results for the quarter ended September 30, 2017. While discussing Triangle Capital’s results, Triangle Capital’s CEO said the following:
The third quarter was a challenging quarter for Triangle as we experienced meaningful unrealized depreciation associated with certain assets which previously had been valued below cost. Our origination platform continues to find investment opportunities which are more senior-oriented in nature; however, certain legacy investments, predominantly associated with investment vintages 2014 and 2015, are under-performing from a credit perspective. As we take aggressive action to move through these legacy investments as quickly as possible, our Board has lowered our quarterly dividend to $0.30 per share. In addition, as we continue to transition our investment portfolio from historic mezzanine-centric investments to more secure, senior-oriented investments, our Board of Directors has elected to pursue the exploration of certain strategic alternatives, including the potential sale of certain investments, the potential benefit of partnering with another organization to accelerate our corporate initiatives, as well as other alternatives. Our Board is engaged in discussions with several investment banking firms and expects to announce the formal engagement of an advisor in the near future.
The press release (which can be viewed by clicking TCAP_Press Release_11.01.2017) also stated that:
[t]otal investment income during the third quarter of 2017 was $29.9 million, compared to total investment income of $31.2 million for the second quarter of 2017. The decrease in quarter-over-quarter total investment income resulted primarily from a $2.1 million decrease in investment income relating to non-accrual assets partially offset by a $0.6 million increase in quarter-over-quarter non-recurring dividend and fee income. Non-recurring dividend and fee income was $2.1 million in the third quarter of 2017 as compared to $1.5 million during the second quarter of 2017.
Net investment income during the third quarter of 2017 was $17.2 million, compared to net investment income of $19.4 million for the second quarter of 2017. Net investment income per share during the third quarter of 2017 was $0.36, based on weighted average shares outstanding during the quarter of 47.7 million, compared to $0.41 per share during the second quarter of 2017, based on weighted average shares outstanding of 47.7 million.
The Company’s net decrease in net assets resulting from operations was $57.5 million during the third quarter of 2017, compared to a net decrease in net assets resulting from operations of $2.0 million during the second quarter of 2017. The Company’s net decrease in net assets resulting from operations was $1.20 per share during the third quarter of 2017, compared to a decrease of $0.04 per share during the second quarter of 2017.
The Company’s net asset value, or NAV, at September 30, 2017, was $13.20 per share as compared to $14.83 per share at June 30, 2017 and $15.13 per share at December 31, 2016. As of September 30, 2017, the Company’s weighted average yield on its outstanding, currently yielding debt investments was approximately 11.2%.
Following these disclosures, Triangle Capital’s share price fell $2.57, or 20.98%, to close at $9.68 on November 2, 2017.
Have You Purchased or Acquired Triangle Capital Shares?
If you purchased or otherwise acquired Triangle Capital shares and would like to speak privately with a securities attorney to learn whether you may have legal claims, please complete the form to the right or contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected] or send an e-mail to [email protected].
About Kehoe Law Firm, P.C.
Kehoe Law Firm, P.C. is a multidisciplinary, plaintiff–side law firm dedicated to protecting investors and consumers from corporate fraud, negligence, and other wrongdoing. Driven by a strong and principled sense of social responsibility and obtaining justice for the aggrieved, Kehoe Law Firm, P.C. represents plaintiffs seeking to recover investment losses resulting from securities fraud, breaches of fiduciary duty, corporate wrongdoing or malfeasance, those harmed by anticompetitive practices, and consumers victimized by fraud, false claims, deception or data breaches. Together, the partners of Kehoe Law Firm, P.C. have spent more than 30 years prosecuting precedent-setting securities and financial fraud cases in federal and state courts on behalf of institutional and individual clients.