UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

March 2, 2020

 

Hercules Capital, Inc.
(Exact name of registrant as specified in its charter)

 

 

Maryland 

814-00702 

74-3113410 

(State or other jurisdiction

of incorporation)

(Commission File No.)

(I.R.S. Employer

Identification No.)

400 Hamilton Ave., Suite 310

Palo Alto, CA

 

94301

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (650) 289-3060

 

Not Applicable

(Former name or address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

HTGC

New York Stock Exchange

5.25% Notes due 2025

HCXZ

New York Stock Exchange

6.25% Notes due 2033

HCXY

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

 

Emerging growth company         ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            ☐

 



 

 

 

EXPLANATORY NOTE

 

Hercules Capital, Inc. (“we”, “us” or the “Company”) previously filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form N-2 on April 29, 2019 (File No.: 333-231089) (the “Registration Statement”) using the “shelf” registration process as a “well-known seasoned issuer” in reliance on the Small Business Credit Availability Act. Certain items required by Form N-2 have been incorporated by reference into the Registration Statement through documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 20, 2020 (the “Form 10-K”), that are incorporated or deemed incorporated by reference into the prospectus that is part of the Registration Statement (the “Prospectus”).

 

The purpose of this Current Report on Form 8-K (the “Report”) is to file certain information that is required to be disclosed on Form N-2 but that was not required to be disclosed in the Form 10-K, so that this information is incorporated by reference into the Registration Statement. This Report should be read in conjunction with the Form 10-K, which is incorporated by reference herein. A copy of the consent of PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, is also attached as an exhibit to the Report and incorporated by reference into the Registration Statement.

 

Item 8.01 Other Events

 

FEES AND EXPENSES

 

The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Hercules Capital, Inc.

 

Stockholder Transaction Expenses (as a percentage of the public offering price):

 

 

 

 

Sales load (as a percentage of offering price)(1) 

 

 

%

Offering expenses

 

 

%(2)

Dividend reinvestment plan fees

 

 

%(3)

Total stockholder transaction expenses (as a percentage of the public offering price)

 

 

%(4)

Annual Expenses (as a percentage of net assets attributable to common stock):(5)

 

 

 

 

Operating expenses

 

 

6.03

%(6)(7)

Interest and fees paid in connection with borrowed funds

 

 

5.92

%(8)

Total annual expenses

 

 

11.95

%(9)

 


 

(1)

In the event that our securities are sold to or through underwriters, a corresponding prospectus supplement to the Prospectus will disclose the applicable sales load.

(2)

In the event that we conduct an offering of our securities, a corresponding prospectus supplement to this prospectus will disclose the estimated offering expenses.

(3)

The expenses associated with the administration of our dividend reinvestment plan are included in “Operating expenses.” We pay all brokerage commissions incurred with respect to open market purchases, if any, made by the administrator under the plan. For more details about the plan, see “Dividend Reinvestment Plan.”

(4)

Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.

(5)

“Net assets attributable to common stock” equals the weighted average net assets for the year ended December 31, 2019, which is approximately $1.0 billion.

(6)

“Operating expenses” represents our actual operating expenses incurred for the year ended December 31, 2019, including all fees and expenses of our consolidated subsidiaries and excluding interests and fees on indebtedness.

(7)

We do not have an investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals.

(8)

“Interest and fees paid in connection with borrowed funds” represents our estimated interest, fees and credit facility expenses by annualizing our actual interest, fees and credit facility expenses incurred for the year ended December 31, 2019, including our $75.0 million revolving senior secured credit facility with Wells Fargo Capital Finance, LLC, or the Wells Facility, $200.0 million revolving senior secured credit facility with MUFG Union Bank, N.A., or the Union Bank Facility, and, together with the Wells Facility, the Credit Facilities, 4.625% notes due 2022, or the 2022 Notes, 6.25% notes due 2024, or the 2024 Notes, 4.77% notes due 2024, or the July 2024 Notes, 5.25% notes due 2025, or the 2025 Notes, 6.25% notes due 2033, or the 2033 Notes, 4.375% convertible notes due 2022, or the 2022 Convertible Notes, fixed rate asset-backed notes due 2027, or the 2027 Asset-Backed Notes, fixed rate asset-backed notes due 2028, or the 2028 Asset-Backed Notes, and the Small Business Administration, or SBA, debentures.

 

 

 

(9)

“Total annual expenses” is the sum of “operating expenses,” and “interest and fees paid in connection with borrowed funds.” “Total annual expenses” is presented as a percentage of weighted average net assets attributable to common stockholders because the holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) bear all of our fees and expenses, including the fees and expenses of our wholly-owned consolidated subsidiaries, all of which are included in this fee table presentation.

 

 

Example 

 

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. These amounts are based upon our payment of annual operating expenses at the levels set forth in the table above and assume no additional leverage.

 

   

1 Year

   

3 Years

   

5 Years

   

10 Years

 

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return

  $ 115     $ 324     $ 505     $ 861  

 

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown. Moreover, while the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or lesser than 5%. In addition, while the example assumes reinvestment of all distributions at our net asset value, or NAV, participants in our dividend reinvestment plan may receive shares valued at the market price in effect at that time. This price may be at, above or below NAV. See the section of our Registration Statement entitled “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

 

 

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

 

Our common stock is traded on the NYSE under the symbol “HTGC.”

 

The following table sets forth the range of high and low sales prices of our common stock, the sales price as a percentage of NAV and the distributions declared by us for each fiscal quarter. The stock quotations are interdealer quotations and do not include markups, markdowns, or commissions.

 

           

Price Range

   

Premium/
Discount of
High Sales

   

Premium/
Discount of
Low Sales

   

Cash
Distribution
Declared

 
   

NAV(1)

   

High

   

Low

   

Price to NAV

   

Price to NAV

   

per Share

 

2018

                                               

First quarter

  $ 9.72     $ 13.25     $ 11.89       36.3

%

    22.3

%

  $ 0.310  

Second quarter

  $ 10.22     $ 12.97     $ 11.99       26.9

%

    17.3

%

  $ 0.310  

Third quarter

  $ 10.38     $ 13.64     $ 12.71       31.4

%

    22.4

%

  $ 0.330 (2) 

Fourth quarter

  $ 9.90     $ 13.28     $ 10.63       34.1

%

    7.4

%

  $ 0.310  

2019

                                               

First quarter

  $ 10.26     $ 14.04     $ 11.23       36.8

%

    9.5

%

  $ 0.330 (2) 

Second quarter

  $ 10.59     $ 13.75     $ 12.57       29.8

%

    18.7

%

  $ 0.340 (2) 

Third quarter

  $ 10.38     $ 13.44     $ 12.66       29.5

%

    22.0

%

  $ 0.350 (2) 

Fourth quarter

  $ 10.55     $ 14.44     $ 12.98       36.9

%

    23.0

%

  $ 0.400 (2) 

2020

                                               

First quarter (through February 27, 2020)

    *     $ 15.99     $ 13.97       *       *       **  

 


(1)

NAV per share is generally determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(2)

Includes a supplemental distribution.

*

NAV has not yet been calculated for this period.

**

Cash distribution per share has not yet been determined for this period.

 

 

 

The last reported price for our common stock on February 27, 2020 was $14.60 per share.

 

Shares of business development companies, or BDCs, may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock have traded at a premium to NAV and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below NAV.

 

SENIOR SECURITIES

 

Information about our senior securities is shown in the following table for the periods as of December 31, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, and 2010. The information as of December 31, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011 and 2010 has been derived from our audited financial statements for these periods, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The report of PricewaterhouseCoopers LLP on the senior securities table as of December 31, 2019 is attached hereto as Exhibit 99.1. The “N/A” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities. 

 

Class and Year

 

Total Amount
Outstanding
Exclusive of
Treasury Securities(1)

   

Asset Coverage
per Unit
(2)

   

Average
Market
Value
per Unit
(3)

 

Securitized Credit Facility with Wells Fargo Capital Finance

                       

December 31, 2010(6)

                N/A  

December 31, 2011

  $ 10,186,830     $ 73,369       N/A  

December 31, 2012(6)

                N/A  

December 31, 2013(6)

                N/A  

December 31, 2014(6)

                N/A  

December 31, 2015

  $ 50,000,000     $ 26,352       N/A  

December 31, 2016

  $ 5,015,620     $ 290,234       N/A  

December 31, 2017(6)

                N/A  

December 31, 2018

  $ 13,106,582     $ 147,497       N/A  

December 31, 2019(6)

                N/A  

Securitized Credit Facility with Union Bank, NA

                       

December 31, 2010(6)

                N/A  

December 31, 2011(6)

                N/A  

December 31, 2012(6)

                N/A  

December 31, 2013(6)

                N/A  

December 31, 2014(6)

                N/A  

December 31, 2015(6)

                N/A  

December 31, 2016(6)

                N/A  

December 31, 2017(6)

                N/A  

December 31, 2018

  $ 39,849,010     $ 48,513       N/A  

December 31, 2019

  $ 103,918,736     $ 23,423       N/A  

Small Business Administration Debentures (HT II)(4)

                       

December 31, 2010

  $ 150,000,000     $ 3,942       N/A  

December 31, 2011

  $ 125,000,000     $ 5,979       N/A  

December 31, 2012

  $ 76,000,000     $ 14,786       N/A  

December 31, 2013

  $ 76,000,000     $ 16,075       N/A  

December 31, 2014

  $ 41,200,000     $ 31,535       N/A  

December 31, 2015

  $ 41,200,000     $ 31,981       N/A  

December 31, 2016

  $ 41,200,000     $ 35,333       N/A  

December 31, 2017

  $ 41,200,000     $ 39,814       N/A  

December 31, 2018

                N/A  

Small Business Administration Debentures (HT III)(5)

                       

December 31, 2010

  $ 20,000,000     $ 29,564       N/A  

December 31, 2011

  $ 100,000,000     $ 7,474       N/A  

December 31, 2012

  $ 149,000,000     $ 7,542       N/A  

December 31, 2013

  $ 149,000,000     $ 8,199       N/A  

December 31, 2014

  $ 149,000,000     $ 8,720       N/A  

December 31, 2015

  $ 149,000,000     $ 8,843       N/A  

December 31, 2016

  $ 149,000,000     $ 9,770       N/A  

December 31, 2017

  $ 149,000,000     $ 11,009       N/A  

December 31, 2018

  $ 149,000,000     $ 12,974       N/A  

December 31, 2019

  $ 149,000,000     $ 16,336       N/A  

 

 

Class and Year

 

Total Amount
Outstanding
Exclusive of
Treasury Securities(1)

   

Asset Coverage
per Unit(2)

   

Average
Market
Value
per Unit(3)

 

2016 Convertible Notes

                       

December 31, 2011

  $ 75,000,000     $ 10,623     $ 885  

December 31, 2012

  $ 75,000,000     $ 15,731     $ 1,038  

December 31, 2013

  $ 75,000,000     $ 16,847     $ 1,403  

December 31, 2014

  $ 17,674,000     $ 74,905     $ 1,290  

December 31, 2015

  $ 17,604,000     $ 74,847     $ 1,110  

December 31, 2016

                 

April 2019 Notes

                       

December 31, 2012

  $ 84,489,500     $ 13,300     $ 986  

December 31, 2013

  $ 84,489,500     $ 14,460     $ 1,021  

December 31, 2014

  $ 84,489,500     $ 15,377     $ 1,023  

December 31, 2015

  $ 64,489,500     $ 20,431     $ 1,017  

December 31, 2016

  $ 64,489,500     $ 22,573     $ 1,022  

December 31, 2017

                 

September 2019 Notes

                       

December 31, 2012

  $ 85,875,000     $ 13,086     $ 1,003  

December 31, 2013

  $ 85,875,000     $ 14,227     $ 1,016  

December 31, 2014

  $ 85,875,000     $ 15,129     $ 1,026  

December 31, 2015

  $ 45,875,000     $ 28,722     $ 1,009  

December 31, 2016

  $ 45,875,000     $ 31,732     $ 1,023  

December 31, 2017

                 

2022 Notes

                       

December 31, 2017

  $ 150,000,000     $ 10,935     $ 1,014  

December 31, 2018

  $ 150,000,000     $ 12,888     $ 976  

December 31, 2019

  $ 150,000,000     $ 16,227     $ 1,008  

2024 Notes

                       

December 31, 2014

  $ 103,000,000     $ 12,614     $ 1,010  

December 31, 2015

  $ 103,000,000     $ 12,792     $ 1,014  

December 31, 2016

  $ 252,873,175     $ 5,757     $ 1,016  

December 31, 2017

  $ 183,509,600     $ 8,939     $ 1,025  

December 31, 2018

  $ 83,509,600     $ 23,149     $ 1,011  

December 31, 2019

                 

2025 Notes

                       

December 31, 2018

  $ 75,000,000     $ 25,776     $ 962  

December 31, 2019

  $ 75,000,000     $ 32,454     $ 1,032  

2033 Notes

                       

December 31, 2018

  $ 40,000,000     $ 48,330     $ 934  

December 31, 2019

  $ 40,000,000     $ 60,851     $ 1,054  

July 2024 Notes

                       

December 31, 2019

  $ 105,000,000     $ 23,181       N/A  

2017 Asset-Backed Notes

                       

December 31, 2012

  $ 129,300,000     $ 8,691     $ 1,000  

December 31, 2013

  $ 89,556,972     $ 13,642     $ 1,004  

December 31, 2014

  $ 16,049,144     $ 80,953     $ 1,375  

December 31, 2015

                 

2021 Asset-Backed Notes

                       

December 31, 2014

  $ 129,300,000     $ 10,048     $ 1,000  

December 31, 2015

  $ 129,300,000     $ 10,190     $ 996  

December 31, 2016

  $ 109,205,263     $ 13,330     $ 1,002  

December 31, 2017

  $ 49,152,504     $ 33,372     $ 1,001  

December 31, 2018

                 

2027 Asset-Backed Notes

                       

December 31, 2018

  $ 200,000,000     $ 9,666     $ 1,006  

December 31, 2019

  $ 200,000,000     $ 12,170     $ 1,004  

2028 Asset-Backed Notes

                       

December 31, 2019

  $ 250,000,000     $ 9,736     $ 1,004  

2022 Convertible Notes

                       

December 31, 2017

  $ 230,000,000     $ 7,132     $ 1,028  

December 31, 2018

  $ 230,000,000     $ 8,405     $ 946  

December 31, 2019

  $ 230,000,000     $ 10,583     $ 1,021  

Total Senior Securities(7)

                       

December 31, 2010

  $ 170,000,000     $ 3,478       N/A  

December 31, 2011

  $ 310,186,830     $ 2,409       N/A  

December 31, 2012

  $ 599,664,500     $ 1,874       N/A  

December 31, 2013

  $ 559,921,472     $ 2,182       N/A  

December 31, 2014

  $ 626,587,644     $ 2,073       N/A  

December 31, 2015

  $ 600,468,500     $ 2,194       N/A  

December 31, 2016

  $ 667,658,558     $ 2,180       N/A  

December 31, 2017

  $ 802,862,104     $ 2,043       N/A  

December 31, 2018

  $ 980,465,192     $ 1,972       N/A  

December 31, 2019

  $ 1,302,918,736     $ 1,868       N/A  
 

 


(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, including senior securities not subject to asset coverage requirements under the 1940 Act due to exemptive relief from the SEC, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage per Unit.

(3)

Not applicable because senior securities are not registered for public trading.

(4)

Issued by Hercules Technology II, L.P., or HT II, one of our prior SBIC subsidiaries, to the Small Business Association, or SBA. On July 13, 2018, we completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA license with respect to HT II. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(5)

Issued by Hercules Technology III, L.P., or HT III, our SBIC subsidiary, to the SBA. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(6)

The Company’s Wells Facility and Union Bank Facility had no borrowings outstanding during the periods noted above.

(7)

The total senior securities and Asset Coverage per Unit shown for those securities do not represent the asset coverage ratio requirement under the 1940 Act because the presentation includes senior securities not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC. As of December 31, 2019, our asset coverage ratio under our regulatory requirements as a BDC was 198.0% excluding our SBA debentures as a result of our exemptive order from the SEC which allows us to exclude all SBA leverage from our asset coverage ratio.

 

OUTSTANDING SECURITIES AS OF FEBRUARY 14, 2020

 

Title of Class

Amount Authorized

Amount Held by Company for its Account

Amount Outstanding

Common Stock, $0.001 par value per share

200,000,000

---

110,550,633

5.25% Notes due 2025

---

---

$75.0 million aggregate principal amount

6.25% Notes due 2033

---

---

$40.0 million aggregate principal amount

 

 

Item 9.01 Financial Statements and Exhibits 

 

(d)

Exhibits

 

 

23.1

Consent of PricewaterhouseCoopers LLP.

 

 

99.1

Report of PricewaterhouseCoopers LLP.

 

 

 

SIGNATURES 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

HERCULES CAPITAL, INC.

 
         

March 2, 2020

 

By:

/s/ Melanie Grace

 
     

Melanie Grace

General Counsel and Secretary

 

 

 

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