Item 1.01. Entry into a Material Definitive Agreement.
Securitization Transaction
On June 22, 2022,
Hercules Capital, Inc. (the Company) completed a term debt securitization in connection with which an affiliate of the Company completed a private placement of $150,000,000 in aggregate principal amount of fixed-rate asset-backed notes
(the Class A Notes). The Company engaged Kroll Bond Rating Agency, Inc. to rate the Class A Notes. The Class A Notes were issued by Hercules Capital Funding Trust 2019-1 (the
Issuer) pursuant to an indenture, dated as of June 22, 2022 by and between the Issuer and U.S. Bank Trust Company, National Association, as trustee, and were sold to the holders thereof pursuant to a note purchase agreement, dated
as of June 22, 2022, by and among the Company, the Issuer, Hercules Capital Funding 2019-1 LLC, as Trust Depositor (the Trust Depositor) and each of the investors party thereto. The
Class A Notes are backed by a pool of senior loans made to certain portfolio companies of the Company and secured by certain assets of those portfolio companies and are to be serviced by the Company. The outstanding principal balance of the
pool of loans as of June 22, 2022 was approximately $236.2 million. Interest on the Class A Notes will be paid, to the extent of funds available. The Class A Notes will bear interest at a fixed rate of 4.95% per annum and have a legal
final payment date of July 20, 2031.
As part of this transaction, the Company entered into a sale and contribution agreement with the Trust
Depositor under which the Company has agreed to sell or has contributed to the Trust Depositor certain senior loans made to certain portfolio companies of the Company (the Loans).
The Class A Notes are secured obligations of the Issuer and are non-recourse to the Company. The Issuer also
entered into an indenture governing the Class A Notes. In addition, the Trust Depositor entered into an amended and restated trust agreement.
The
Loans will be serviced by the Company pursuant to a sale and servicing agreement. The Company will perform certain servicing and administrative functions with respect to the Loans. The Company will be entitled to receive a monthly fee from the
Issuer for servicing the Loans. This servicing fee will equal the product of one-twelfth (or in the case of the first payment date, a fraction equal to the number of days from and including May 31, 2022
through and including July 4, 2022 over 360) of 2.00% and the aggregate outstanding principal balance of the Loans, excluding all defaulted Loans and all purchased Loans, as of the first day of the related collection period (the period from the
5th day of the immediately preceding calendar month through the 4th day of the calendar month in which a payment date occurs, and for
the first payment date, the period from and including May 31, 2022, to the close of business on July 4, 2022).
The Company will also serve as
administrator to the Issuer under an administration agreement.
The foregoing descriptions of the sale and servicing agreement, the sale and contribution
agreement, the note purchase agreement, the administration agreement, the indenture and the amended and restated trust agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the sale and
servicing agreement, the sale and contribution agreement, the note purchase agreement, the administration agreement, the indenture and the amended and restated trust agreement, copies of which will be filed with the Companys Quarterly Report
on Form 10-Q for the quarter ending June 30, 2022.
Issuance of Notes
On June 23, 2022, the Company and certain qualified institutional investors entered into the second supplement to the note purchase agreement dated as of
February 5, 2020. The supplement provides for the issuance of $50,000,000 in aggregate principal amount of senior unsecured notes with a fixed interest rate of 6.00% per year (the June Notes). The June Notes will mature on
June 23, 2025 unless redeemed, purchased, or prepaid prior to such date by the Company or its affiliates in accordance with their terms.