AG Twin Brook Capital Income Fund

05/21/2026 | Press release | Distributed by Public on 05/21/2026 14:52

Regulation FD Disclosure (Form 8-K)

Item 7.01 Regulation FD Disclosure
Portfolio Commentary
(All data as of March 31, 2026, unless otherwise noted)
TPG Twin Brook Capital Income Fund ("TCAP") has built its portfolio with the objective of generating attractive, consistent total returns across market cycles. While the first quarter was characterized by market volatility and uncertainty, TCAP continues to deliver strong performance. On a year-to-date basis, TCAP generated a 2.5% total return (Class I) outperforming leveraged loans(1) and fixed income(2) markets by 180bps and 250bps year-to-date, respectively. On a trailing twelve month basis, TCAP generated a 10.3% total return, outperforming those same markets by 430bps and 600bps, respectively. We remain confident in TCAP's portfolio, that has been built defensively to be resilient across market cycles. We believe the following characteristics of our strategy support this objective:
•Cash Flow Senior Secured Lending: TCAP's portfolio consists of 100% first lien senior secured debt investments(3) in portfolio companies that have a demonstrated track record of cash flow generation. TCAP's portfolio does not include any annualized recurring revenue transactions, asset-based or broadly syndicated loans, which we believe contribute to volatility.
•Differentiated Business Selection: With a keen focus on the lower middle market, and an average EBITDA of $18.3 million at origination,(4) Twin Brook Capital Partners, LLC ("TPG Twin Brook") is able to secure covenants and revolvers(5)(6) in 100% of its investments, which are two important hallmarks of our active portfolio management approach.
•Resilient Portfolio: TCAP's portfolio is comprised of all directly originated loans. As a result of our lower middle market focus and thorough underwriting process, TCAP's average portfolio company has a loan-to-value ratio of 40%,(7) which has been relatively stable since inception, and an interest coverage ratio of 2.4x.(8) 100% of the loans in TCAP's portfolio are to private equity sponsored companies,(9) and TPG Twin Brook is a lead lender(10) for nearly all loans in TCAP's portfolio. We believe these characteristics, along with others, have led to competitive payment-in-kind ("PIK") and non-accrual rates of 1.3%(11) and 0.2%(12), respectively, with minimal to no change from the prior quarter.
•Established Origination Capabilities: TPG Twin Brook has established itself as a leader within the lower middle market and benefits from consistent capital deployment with high selectivity (<4%). (13)
Direct Lending Market Commentary: Despite various geopolitical headwinds and uncertainty regarding AI which have weighed on dealmaking in the first quarter, we believe a more friendly lending environment may be emerging due to a potential moderation of the supply-demand imbalance within the private credit markets driven by slowing retail flows and widening spreads, first seen in the syndicated markets. US Mid-Market Direct Lending quarterly volume decreased ~30% quarter-over-quarter and year-over-year; however to put this level of activity into perspective, first quarter volumes have historically dropped by 25% on average versus prior fourth quarter volumes.(14) Further, while volume in the first quarter of 2026 did not keep pace with 2025, quarterly volume was higher than the previous five years. TPG Twin Brook experienced an active first quarter generating nearly $2 billion in loan originations, $462 million of which were committed to by TCAP.
Competitive dynamics, including the loan supply-demand imbalance, have put downward pressure on spreads since peak pricing in 2023. However, the lower middle market remains well-positioned given the sustained pricing premium during the first quarter for first lien loans, which was approximately 10-25bps on average versus the larger markets.(15) TCAP's weighted average spread has increased during the first quarter by 10bps to 540bps. Further, the leverage offered in the lower middle market continues to be more conservative than that of larger markets, offering a higher spread per unit of leverage, or risk-adjusted return.
We believe the lower middle market value proposition continues to be strong and differentiated, benefiting from less competition than investment strategies focused on larger companies, the potential for stronger lender protections(16) in the form of covenants and stricter underwriting standards, and as a result, we believe TCAP has built a resilient portfolio with low percentages of payment-in-kind interest. TCAP has exhibited strong performance
to date and is well positioned to take advantage of the robust opportunity set within its niche of the lower middle market.
TCAP's Summary Statistics TCAP's Portfolio Company Statistics
Inception-to-date total net return (Class I)(17)
9.8%
Average Issuer EBITDA(4)
$18.3M
Annualized Distribution Rate (Class I)(18)
9.9%
Average loan-to-value(7)
40%
TCAP Distribution Spread(19)
Interest Coverage Ratio(8)
2.4x
-Average 3-Month Daily SOFR
625 bps
Transaction Leadership(10)
~100%
-Leveraged Loans
165 bps
Sponsored Investments(9)
100%
TCAP Excess Returns(20)
Transactions with Covenants(5)
100%
-1Q26 Excess Total Return over Leveraged Loans
180 bps
Transactions with Revolvers(6)
100%
-1 Year Excess Total Return over Leveraged Loans
430 bps
Average Position Size(30)
0.37%
-1 Year Excess Total Return over Non-Listed BDCs
410 bps
Assets TCAP's Private Debt Investments in New Portfolio Companies in Q1 2026 Statistics
First Lien Senior Secured Debt(3)
100%
New Loans Originated(31)
12
Floating Rate Investments(21)
~100%
Amount Committed to Loans(32)
$462M
Private Investments (Level 3)(22)
100%
Offering Proceeds(33)
$193M
Non-accruals (at cost)(12)
0.2%
First Lien Senior Secured Debt(3)
100%
Payment-in-kind interest(11)
1.3%
Weighted average yield(34)
8.8%
Liabilities
TCAP sole/lead lender(10)
100%
Debt-to-equity ratio(23)
0.8x
Direct Lending Market Statistics
Market Size(24)
$1.4 trillion
Share of Private Credit Fundraising(25)
43%
Share of LBOs Financed in Private Credit Markets(26)
82%
Lower Middle Market Share of M&A Volume(28)
37%
Share of Lower Middle Market Activity Represented by M&A Volume(29)
70%
Lower Middle Market Spread Premium per Turn of Leverage(27)
~35 bps
End Notes
Note: Data is as of March 31, 2026 unless otherwise indicated. Reflects TPG Twin Brook's views and beliefs as of the date of this report only, which is subject to change. Returns for periods greater than one year are annualized. Past performance is no guarantee of future results. There can be no assurance that TCAP will achieve results comparable to those of any of TPG Twin Brook's prior funds or be able to implement its investment strategy, achieve its investment objectives or avoid significant losses. There can be no assurances that any of the trends described herein will continue or will not reverse.
(1)Leveraged Loans represented by the Morningstar LSTA US Leveraged Loan Index, which returned 0.7% and 6.0% year-to-date and over the trailing twelve months, respectively, through March 31, 2026.
(2)Fixed Income represented by the Bloomberg US Aggregate Index, which returned 0% and 4.3% year-to-date and over the trailing twelve months, respectively, through March 31, 2026.
(3)Represents senior secured first lien debt as a percentage of total debt investments and excludes TCAP's equity investments.
(4)Earnings before interest, taxes, depreciation and amortization. Calculated as a weighted average at investment closing.
(5)Represents transactions including one or more financial covenants in the credit agreement.
(6)Represents transactions where TCAP holds the revolving line of credit facility.
(7)Loan-to-value calculation uses the weighted average of all term loans, funded delay draw term loans, and funded revolvers, in each case as of investment close date.
(8)Interest coverage ratio is estimated as the ratio of LTM EBITDA to cash interest paid using average 3-month daily SOFR as of March 31, 2026. Amounts derived from the most recently available portfolio company financial statements, have not been independently verified by TCAP, may reflect a normalized or adjusted amount, and are generally 90 days in arrears. Accordingly, TCAP makes no representation or warranty in respect of this information. EBITDA is a non-GAAP financial measure. For a particular portfolio company, LTM EBITDA is generally defined as net income before net interest expense, income tax expense, depreciation and amortization over the preceding 12-month period. Currency fluctuations may have an adverse effect on the value, price or income and costs of our portfolio companies and investments which may increase or decrease as a result of changes in exchange rates.
(9)Represents the number of transactions with portfolio companies that are owned by a private equity firm.
(10)Includes all private debt investments in new portfolio companies funded from January 1, 2026 to March 31, 2026 (excluding add-ons and incremental loans to existing portfolio companies and drawdowns on delayed draw term loans and revolvers committed in prior periods). TCAP is categorized as sole or lead lender where TCAP held the total facility at closing or had a "Lead Arranger" designation.
(11)Calculated as payment-in-kind interest as a share of total investment income earned for the three months ended March 31, 2026.
(12)As of March 31, 2026. Calculated as the amortized cost of loans on non-accrual divided by total amortized cost of the TCAP portfolio. Based on the fair market value of the TCAP portfolio, TCAP's non-accrual rate is 0.1%. Loans are generally placed on non-accrual status when there is reasonable doubt whether principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management's judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
(13)Selectivity ratio represents TPG Twin Brook platform deals closed versus deals screened since inception in 2014 through March 31, 2026.
(14)LSEG LPC's 1Q26 US Sponsored Market Private Deal Analysis; Sponsored Middle Market Loan Volume (Syndicated and Direct).
(15)KBRA DLD Insights and Outlook Private U.S. Sponsored Deals Analysis as of March 2026. Represents three month rolling averages for first lien term loans. Lower Middle Market represented by companies with EBITDA of <$20 million. "larger markets" represented by the core middle, upper middle, and large markets companies with greater than $20 million of EBITDA.
(16)Lender protections are structural elements of a loan investment that serve to strengthen the lender's position but are not a guarantee against losses. These may include, but are not limited to, first lien perfected security
interests on tangible/intangible assets of a portfolio company and covenant packages with both financial and negative covenants.
(17)Inception to date ("ITD") Total Return is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested) divided by the beginning NAV per share. All returns are derived from unaudited financial information and are net of all TCAP expenses, including general and administrative expenses, transaction related expenses, management fees, incentive fees, and share class specific fees. Returns are prior to the impact of early repurchase deductions for shares outstanding for less than one year and any potential upfront placement fees, unless otherwise noted. ITD Total Return has been annualized for periods less than or greater than one year. An investment in TCAP is subject to a maximum upfront placement fee of 1.5% for Class D and 3.5% for Class S, which would reduce the amount of capital available for investment, if applicable. There are no upfront placement fees for Class I shares. Past performance is historical and not a guarantee of future results. The returns have been prepared using unaudited data and valuations of the underlying investments in TCAP's portfolios which are estimates of fair value and form the basis for TCAP's NAV. Valuations based on unaudited reports from the underlying investments may be subject to later adjustments, may not correspond to realized value, and may not accurately reflect the price at which assets could be liquidated. The Class I inception date is May 10, 2022, which is the date Class I shares were first sold to third parties by AGTB Private BDC, TCAP's predecessor. TCAP merged with AGTB Private BDC on January 1, 2023, with TCAP surviving. For additional information regarding such merger, see TCAP's prospectus. The Class S inception date is October 1, 2023 and the Class D inception date is December 1, 2023. Class S ITD Total Return with and without upfront placement fee is 8.6% and 10.1%, respectively. Class D ITD Total Return with and without upfront placement fee is 9.9% and 10.6%, respectively.
(18)As of March 31, 2026. Annualized distribution rate reflects the current month's distribution, divided by the last reported NAV, annualized, assuming the reinvestment of distributions in the distribution reinvestment plan. This does not include any Special Dividend. Distributions are not guaranteed and there can be no assurance as to the amount or timing of any future distribution. TCAP may fund distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings, return of capital or offering proceeds, and we have no limits on the amounts we pay from such sources. Distributions may be funded, directly or indirectly, from temporary waivers or expense reimbursements borne by TCAP's Adviser or its affiliates that may be subject to reimbursement to the Adviser or its affiliates. We have not established limits on the amounts we may fund from such sources. As of March 31, 2026, 100% of inception to date distributions were funded from net investment income or realized short-term capital gains. See TCAP's prospectus for more information and TCAP's website for notices regarding distributions subject to Section 19(a). Class S and Class D annualized distribution rate is 9.0% and 9.7%, respectively.
(19)TCAP distribution spread is approximate and represents the annualized TCAP dividend distribution rate per share for Class I shares as a spread to average 3-month daily SOFR and the Morningstar LSTA US Leveraged Loan Index ("Leveraged Loans") as of March 31, 2026. Please see "Index Definitions" below. Dividend distribution rate reflects the annualized distribution per share for Class I shares in the specific period divided by beginning of period NAV. Please see footnote 18 for additional details on TCAP distributions.
(20)Excess Returns calculated as the total return difference between (i) TCAP and the Leveraged Loan Index, which is represented by the Morningstar LSTA US B/BB Ratings Loan Index and (ii) Non-Listed BDCs, which is represented by the Stanger Non-Listed BDC Index. Please see "Index Definitions" below. As of March 31, 2026, the three-month and one-year returns for TCAP were 2.5% and 10.3%, respectively. See Footnote 17 for additional information regarding return calculations. During this same period, the three-month and one-year returns for the Morningstar LSTA US B/BB Ratings Loan Index were 0.7% and 6.0%, respectively, and the 1-year return for the Stanger Non-Listed BDC Index was 6.2%.
(21)TPG Twin Brook expects to originate 100% of its loans as floating rate investments. Current portfolio includes >99% floating rate investments measured at fair value.
(22)As of March 31, 2026. Private Investments represent Level 3 investments in the investment portfolio which may be quoted or non-quoted but for which inputs to the valuation methodology are unobservable and significant to overall fair value measurement, divided by total investments.
(23)As of March 31, 2026. Debt-to-equity ratio represents the ratio of total principal outstanding debt to net assets.
(24)Estimated by KBRA Direct Lending Deals as of December 31, 2025 using Middle Market CLOs, Business Development Company Assets Under Management and Direct Lending Fund Assets Under Management.
(25)Private Debt Investor Fundraising Report 1Q2026; represents senior debt year-to-date fundraising as a percentage of total private debt fundraising.
(26)Pitchbook LCD year-to-date data for Leveraged Buyouts through March 31, 2026.
(27)KBRA DLD Research as of March 31, 2026. Spread premium per turn of leverage calcuated as the market segment spread versus leverage for the lower middle market versus larger market. Lower middle market represented by companies with EBITDA of less than $20 million. Averages are based on a 3-month rolling basis; represents first-lien spread per one turn of first lien leverage. Annual recurring revenue deals are excluded
(28)LSEG LPC's 1Q26 US Sponsored Middle Market Private Deals Analysis; represents trailing twelve month Sponsored MM M&A volume (US$bn) by EBITDA size. Lower Mid-Market defined as less than $25 million EBITDA, Core Mid-Market defined as $25 up to $50 million EBITDA, Upper Mid-Market defined as equal to or greater than $50 million EBITDA.
(29)KBRA DLD Research as of March 31, 2026; Percentages may not equal 100% because of rounding and/or some transactions split proceeds for more than one purpose. For example, a refinancing and add-on acquisition. Lower middle market represented by companies with EBITDA of less than $20 million.
(30)Average position size calculated as the weighted average position size as a percentage of fair value for debt investments.
(31)Number of new loans originated represent commitments to a particular portfolio company for the three months ended March 31, 2026.
(32)Total principal amount of investments committed for the three months ended March 31, 2026.
(33)Represents the amount of proceeds raised from shares sold in TCAP's ongoing offering during the three months ended March 31, 2026.
(34)During January 1, 2026 to March 31, 2026, private debt investments in new portfolio companies (excluding add-ons and incremental loans to existing portfolio companies and drawdowns on delayed draw term loans and revolvers committed in prior periods) were underwritten with a yield of 8.8% (on average this yield was comprised of 3.5% base rate/floor and 5.3% spread).
Important Disclosure Information
AG Twin Brook Capital Income Fund published this content on May 21, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 21, 2026 at 20:52 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]