Triangle Capital Corp. (NYSE:TCAP) is a relatively quiet business development company. Other than the occasional press release about a new investment, it doesn't file much material information with the SEC.

That makes watching it from quarter to quarter a bit of a drag -- earnings releases and the subsequent conference calls give investors just four opportunities to "check in" each year. But a recent filing for another baby bond offering sheds some light into what's going on behind the scenes at Triangle Capital.

Triangle Capital is probably refinancing its debt
Triangle Capital filed with the SEC to issue $50 million in seven-year debt. It's a baby bond offering, and thus the debt will trade in $25 "chunks" on the New York Stock Exchange, similar to Triangle Capital's previous offerings.

This is a timely debt increase. The company has $69 million in 2019 notes that become callable on March 15, 2015. Given that these baby bonds were issued in 2012, Triangle Capital's new debt raise will likely be at much lower rates than the 7% it is paying on its 2019 notes. Smart move, but...

A BBB rating might be out of the cards, for now
Throughout 2014, analysts peppered Triangle Capital's managers with questions about its debt ratings. When would Triangle Capital seek and obtain the all-important investment-grade rating?

With such a rating in hand, BDCs can issue long-term debt at rates well below those of their noninvestment-grade alternatives. Triangle Capital's peer, Main Street Capital (NYSE:MAIN), recently received an investment-grade rating and, impressively, raised $175 million of five-year debt at 4.5%.

Noninvestment-grade-rated BDCs typically have to issue baby bonds or preferred stock, often at rates well above 6% or 7% per year. Issuing with an investment-grade rating in large chunks is substantially better, resulting in lower rates and underwriting costs.

Given that Triangle Capital is refinancing its existing baby bonds with another baby bond offering suggests that an investment-grade rating and a big debt raise would be off the table.

Another try in October?
Triangle Capital has another $80.5 million in 2022 notes that will come up for redemption in October 2015. That gives it enough time to patch up some recent nonaccrual assets, raise new equity as needed, and gear up for a try at an investment-grade rating.

I don't mean to belabor the point, but an investment-grade rating is more important now than ever. For one, the credit cycle probably is closer to a peak in than a bottom. Second, Triangle Capital has already exhausted its ability to borrow government-subsidized debt through the Small Business Administration, provided the leverage limits do not change in 2015. It will have to "go it alone" and raise debt on its own terms going forward.

It might seem like a small thing, but it's anything but. Investors should pay close attention to Triangle Capital's financing decisions in the next two quarters. If it piles on new investments funded primarily by its credit facility, that could be a sign that an all-important investment-grade rating is around the corner. If not, the high cost of baby bonds could put a dent in its net interest margin on new investments going forward.