BKCC - Earnings call transcript Q4 2017 | BlackRock Capital Investment Corp

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Operator

Good morning. My name is John, and I will be your conference facilitator today for the BlackRock Capital Investment Corporation Fourth Quarter 2017 Earnings Call. Hosting the call will be Chief Executive Officer, Michael J. Zugay; Interim Chief Financial Officer and Treasurer, Michael Pungello; General Counsel and Corporate Secretary of the Company, Laurence D. Paredes; Marshall Merriman, Head of Portfolio Management for BlackRock's U.S. Nik Relations and Business Group; Capital Singhal, and Investor Strategy. Private mute. have been lines placed All on After their speakers a the complete question line open and for the answer session. update, they will Mr. Instructions] [Operator you Paredes, the begin conference may call.

Laurence Paredes

BlackRock to call. conference welcome and morning Capital Corporation’s XXXX fourth Investment earnings quarter Good

comments be our call certain forward-looking and subject documents forward-looking will, during similar Before within words attention expects, call can from Capital out the as we like such differ statements. to point of of your may BlackRock statements uncertainties. these identified these use should, by today, corresponding Investment anticipates, believes, statements remarks results begin the Corporation’s the to expressions. Many intends, risks fact would that course and actual I to that may made conference of We and this contains

differ know, update you may Corporation’s has BlackRock the statements. does SEC BlackRock which filed to BlackRock not assumes which no with to Corporation from forward-looking Capital of Investment duty cause factors reports As Investment to Capital the materially Capital undertake and these any Corporation some statements. lists Investment results

page. overview would highlights. to Presentations call section quarter to Investor who www.blackrockbkcc.com link highlight Presentation independently certain complements Corporation the in Accordingly, information. Additionally, and accessed have Mike been the may going derived of the BlackRock fourth that Shortly, third-party business we have information an March and of Investors the respect provide some note, by will at our clicking discussed to Please the website sources or The and not Investor has this Capital the our Thank turn presented from Investment Presentation now presentation. warranty representation website an XXXX makes will over and such be I contained no the been presentation in with Zugay, information like verified. to you. of Mike to posted can call.

Michael Zugay

joining year-end quarter for market to call. during thank to quarter. Good highlights, giving the move financial Thank environment would like and you, by and our start our and I earnings business fourth fourth current and the on Larry. activity investment you morning the then quarter update an

portfolio Lastly, our Pungello, performance results bit CFO more in Mike turning the over to underlying our it to discuss I before Interim detail. financial will discuss a

For the fourth distribution was per share Board the per declared the of quarter, $X.XX Directors, by for net our Based approximately was investment share. income there distribution $X.XX coverage quarter. XXX% on

share XXX%. year large a legacy to per share of has been The of value asset due per positions, decline partially the decrease. quarter two or was end. per $X.XX XXXX, $X.XX per as December our share one quarter last Net of relative in part quarter-over-quarter post declared distributions XX, which X.X% exited decreased $X.XX coverage distribution share, For from was full NII to to

We will more in the overview detail cover portfolio this in section.

X.X% of In Our Under to rate the rate of $XXX longer low Pro notes debt their done nearly the value leverage of we liability unsecured program, Quickly no reduced with with during revolver to million This of the our closely $XX profile entire of fixed repurchased X.XX average tranche remaining we is million February XXX,XXX $XXX outstanding. we with common our shares quarter, forma X.X% redemption, buying our an support shares for existing of ample notes approximately we and investment times were actively have the fixed our rate fixed of quarter. we repaid convertible over $X.XX. with matched on profile are fourth million. we XXXX, cash the a maturity course our XXXX. debt unsecured extended From the turning investments management rate the at regard have convertible our price debt In at the the to company. liabilities work the liabilities million our at under par of over repurchase share have interest of activity. new XXXX, remains proceeds $XXX and to stock relatively and liquidity maturity hand. of

Additionally, XX% in putting rising benefit investments to have rate from favorable a of position debt coupons the our LIBOR-based interest environment. us

Now turning strategy. the market to and our investment

due attractiveness many quarter, passed the structure on of the relative which such have and/or pricing, quality, During opportunities. we reduced opportunities potential to of all credit

quarters, led several market especially has as As has second-lien categorized loans been capital leverage compression, middle be available, for of highly the case loans. junior for being for competitive generally to the can current an spread conditions abundance which last market with

We especially $XX million are than middle structures, in of seeing the greater loans covenant-light upper-end higher total weaker more market leverage the EBITDA. levels of and

be Given profiles with on continue credit borrowers first-lien to loans. we strong this backdrop, bias a towards senior with focused underlying secured

and prior entities three be of As opportunities, company Gordon our portfolio Company; loans Company, to regard in attractive Finance in continue joint high-quality deployment to two BCIC Loan first-lien investments capital Brothers discussed Senior channels for yielding XX% returns investment our on investments Partners, our risk-adjusted portfolio calls, have that and Loan higher our Brothers Partners generate in core junior venture. our With these and company in diversified of on BCIC pools or investments both underlying Gordon investments Senior entities. Finance primarily first-lien

and strategy into Senior of investment program capacity. JV We part new fourth Loan for Partners end investments. our our of over investment of increases team making is partner as to important invested. over Partners has XXXX, the the the very of our year This with $XXX commitments million underlying opportunities X, is the to assumed company March existing quarter, the exploring responsibility deployed portfolio the to the expand BlackRock incremental activities the become Senior are fully an business well. Loan performing We anticipating From managing possibly when course

As XX% portfolio is deployed December market XX, current investment by of investments by fair approximately represented value by of BlackRock.

million which a was approximately $XX net than more by totaling other in decrease activity. due million, million our during investment to repayments new $XX our approximately Turning investment investments activity to quarter. and made We the offset portfolio for $XXX of exits

three Our companies. elevated portfolio deployments quarter exits. out one-time activity and related income fee portfolio are invested the on new exited We strong experience did amount is of company Due and we our to the on to the We existing an above generated new portfolio in companies release. these in IRRs, with premiums runoff replace goal five repaid repayments prepayment in primarily repayment to investments. It detailed fourth our of quarter, investments. earnings average

scale platform and XXXX. began flow benefits BlackRock Our size the strong as of team amount we the from deal of and a are seeing broader we

as XX at a of at fair weighted-average our quarter, portfolio we income December from which market value have securities was approximately quarter. unchanged producing companies in $XXX million. With the value repayment market us last and XX, deployment The activity this of of XX.X% fair now yield

total MBS As SVP represented our of December XX, Holdings, X% non-accrual on had of and Group investments fair we which market status. two value. at debt investments

During the of MBS connection change control recapitalized we quarter, Group with transaction. Holdings in a

part Holdings which applied in of of transactions. were As quarter, debt a entity. to Subsequent and to these escrow, modest the we the the At proceeds the Group to the new on equity debt, of were end was Legacy held of MBS pending of non-accrual. investments proceeds the partially a part portion of end quarter, the the the recapitalization, exit completion the provided of new MBS

private improve expertise a business We operations, sponsor their partnered industry from and the equity assistance with now with that to operating are has partners. its the

the order right position debt Regarding you of involved size with working to better execute non-accrual, in Worldwide, the the mezzanine holders, of on and previous continue other to other stakeholders our members with the we SVP many our to sponsor. we SVP are tranche believe the in as company to as to and first-lien its business we of closer balance liquidity plan. calls, resolution from know constructively have provide equity been the getting work to company We sheet

them no then this status. Lighting be there It moved and to that during off was recapitalized be point. However, should can noted quarter, Advanced the at was restructured about fourth non-accrual Technologies certainty

this primarily have million legacy Holdings We volatility the versus quarter. were increases drove in continue the only of change offset the which, Apple were decreases quarter valuations our to quarter positive certain SVP The value and by fair dollar valuations, terms. MBS majority $XX.X partially negative movements negative Red Vertellus in two due the movers. in last the and valuations Group this to market Worldwide market in investments, fair which represented of in of

equity-like degrees of Mike I equity financial Given businesses movements that would these and additional over contributed movement nature valuations. increase sensitive call the to results. EBITDA the our like that, in in varying highly Pungello details the to they some and are turn to EBITDA to for With experienced regarding of these investments,

Michael Pungello

and $XX.X financial or current I the Mike. on and during to income quarter. $X.X XXXX. XXXX. or was to investment ended few GAAP $XX.X the you, portfolio quarter for the XX, Total NII and a million per additional would of $XX.X fourth for net per income $X.XX take information review investment share three December respectively and year was months quarter, the million earned year preceding commitments totaled during share quarter income as the during quarter. in prior million minutes year quarter million $X.XX $XX.X million the million, million the million as $XX administration earned the to compared quarter prior for and $X.X prepayments, during and earned capital Fee compared $X.X structuring, Thank preceding

shares our $X.XX $X.X fourth During at for of price share an XXXX, XXX,XXX million brokerage of per repurchased quarter average including commission. the we

were XXXX, As amortized market in X.X% at quarter non-accrual value fair total were debt and at compared of respectively. market which December X.X% X% fair in value with investments status, XX.X% investments our cost amortized last cost, two XX, of and in

XX, at to as depreciation on sheet was at million million. XXXX. unrealized net investment internal unrealized increased to quarter average rating of total September balance XXXX $XX.X depreciation Our investments during investments value bringing X.XX the XX, as current compared December Net on market X.X $XX.X fair

million offset million due of During portfolio on investments, on $XX.X investments valuations. $XX.X depreciation by million driven a positions for gross depreciation of legacy unrealized the unrealized by net primarily of depreciation $X.X to gross was quarter,

income fees waiver X, we XXXX As XXXX. announced previously from to disclosed, the based incentive March of XX, December management on

such ended on is since this XXXX, fees For March were the waived X amount waived income fees XXXX, million of December management months of $X.X management to incentive million. based three The XX, $X announcement. cumulative incentive pursuant

At credit gains. was equivalents, of consisting total $XXX.X upon base $XX on under liquidity fees our in XXXX December the of for of management $XXX.X and XX, our and no XX, availability calculation. quarter, there based million, cash based borrowing approximately had During million million facility we XXXX, incentive cash accrual December

portfolio Mike. turn our the for asset call company capacity coverage investments $XXX.X like to is With would requirement. that, debt approximately available I million Our to under back

Michael Zugay

call the This to questions. your that, you operator, We today’s for remarks. would prepared to in you, participation With thank Mike. Thank call. open we concludes like our

Operator

question [Operator first Instructions] Wells with We’ll take Fargo our Securities. Jonathan from Bock

Jonathan Bock

thank and for taking you questions. my morning Good

Just a starting first with maybe few names.

Looking their Advanced exchange BDC I the increase exposure another actually think overall allocation. was that there Lighting, increased on to

took opportunity to You reduce. the

was kind And no-cost of so equity wondering, received how I the kind you stake. of

Michael Zugay

it’s Mike Zugay Jonathan, Hey, here.

being So in we increase to in also the Lighting. deployed participated the Advanced capital

of to large holds are piece into participated them. or Lighting, BDC. and securities Advanced you had referring equity. it think probably I So MBS the the converted we but with that you one mixing that the our ratable in equity The the got equity might We be with other with holders we that

our first-lien some position converted investment the infusion into well about roughly as that and rata the made company that was and second-lien the companies. existing the new million and as $X we into a was our share into in capital into So pro securities equity,

participate did well. also in as We that

Jonathan Bock

it. you. Got Thank

So, model maybe question. a

do point to is they a exist. are A, the to to a and that, you order respect allocation They easier but would BDC doing the the opposed do more are limited are transactions, just we kind one more expect them, balance directly are out to Or the I with Would is, say, understand to where grow. liquid, to reorient SLF point Folks out say balance at of past. on platform could in just lack and harder opportunity? of as there. sheet BDC like more looking Just one to a to B, is today as time building is in a they available find it’s they’ve easier, been originated and origination now growth SLF, platform, trying leverage much sheet you are in it’s tailored

a So moment. balance sheet just the a and for SLF let's growth overall little on aside comment leave

Michael Zugay

Yes. Look, we your not kind I point think and of that opportunity. to a of definitely seeing B, are address lack A

good what to I risk-adjusted returns be marketplace. of think a what categorize see in I the it would as opportunity lack for we

in definitely comes looks portfolio. selective a highly lack through eventually what So the in its way our not what it’s we're makes the marketplace. of being committee and But into

say leverage a seeing longer point sheet, you in on balance is I we to more looking time, it we the some that at would and quarter, opportunities but time. roll-off look a are time at So this a period of horizon. have the And longer had

targets kind if leverage good So, think X.XX that marketplace of time. the as higher But in know XXXX. of kind us and the for course around the leverage see of you I the anticipate we through you point opportunities can to or in getting lower are at whatever that

Jonathan Bock

I it. that. Got appreciate And

excellent time risk-adjusted returns if it a available there point aren’t are but, So got, you attractive, origination purchase think to stock. – problem is the that I team in in your return risk-adjusted – just a with your have you’ve

why to an not the can the opportunity that repurchase a on it’s just you that right it. you about can but the leverage you want overaccelerate wouldn’t fantastic giving asset And do given on opportunity certainly with so low, is market share giving now talk is And side, you side.

Michael Zugay

the auto a – the is do Absolutely. shares an the bought by rough Look, just plan we call the place quarter. BDC fourth roughly in that of I’ll Board has it We numbers set Board. – in XXX,XXX share repurchase generically

n stock So, shares. we the provided bands trading to we are is able will that buying be where buy,

a across, will, us plan investment of based that's that’s you would you actively pretty by like look make set you we Board good And on our attractive can we the Board. So allocation quarter. stock investment something stock. something our fourth that, agree the the a that a is with more predetermined capital if if I But investments, by considered in and opportunity provides an did in

Jonathan Bock

to in would then, And so Board’s investments? should you size, fair – just it today, decision I over think, I with say, repurchases it relates wanted actually, and/or it. to on choose be that – while it’s recommend more would to to the to Got as mean, is new important, it share emphasize par fact making perhaps

Michael Zugay

balancing it's opportunity leave opportunities really We have the to I different to a sets you and invest you act Look, see. SLF. good in do across that know all said

Jonathan Bock

said, I you But SLF. you talking are it, about just you didn’t. the got

Michael Zugay

company us good, about in particular to we the so, you Gordon have, Yes, you think for two as opportunities about Brothers portfolio as of deploy XX% those that, and than investments think capital. very greater that have

and as a into in and it’s share we between share approved balancing for the – shares So, three million act potential of that also have additional quarter, are outstanding period repurchases, pillars. the the really buyback repurchases time deploying could have still – see to and that into But – fourth core you $X.X were by those but shares. active Board been we a

Jonathan Bock

Okay.

Michael Zugay

have balancing well. of strategy opportunities from that or that equal appears So, return primary as we deployment agree but it’s two two investment – the standpoint It pillars a you. a with opportunity, with to our good be the better

Jonathan Bock

taking Thank my you questions. for Okay, great.

Michael Zugay

Thanks, Jonathan.

Operator

take from Wedel We’ll Instructions] Morgan. Melissa next question JP [Operator with our

Melissa Wedel

Melissa guys. going How potential on the A quick XQ, question fee for perhaps income, of if elevated in same as are elevated morning, fee was had in on today. income, you even XXXX? thinking Good the Rick kind not about into but which level the at XQ. you for additional

Michael Zugay

components – the the We premiums is here. Mike – fee There Melissa. that is fee year. it’s is There to fee Hi, Zugay on predict investments of income It’s very course There new existing income. prepayment of on different over potential holdings. hard income.

quarter elements any you’ll entire that course year. portfolio. or forecast have the just you – income the of the repayments in across are to as it’s So, There in as one an fee very hard

opportunity fee to have income just We It’s hard the on achieve those. very predict. to

to I over – predict a period ball course one in longer that those I for me our to even But into, better would a to the had any So, crystal time. hard of or forecast you of wish for just are because on very – quarter see help side. unfortunately,

Melissa Wedel

more Fair broadly enough. can Perhaps, we talk then.

that to As are in senior think want said loan - you on opportunities invest you you side. finding you that are the

Given environment right now? right you with fees the that? able income those emphasizing structure into prepayment are to now, borrower-friendly you deals Are

Michael Zugay

So, JV you Senor loan when referring broadly are the referring to to – or Loan you say senior more that sheet our you the deals, BDC? Partners loan deals balance are portfolio on senior for the are

Melissa Wedel

Both.

Michael Zugay

Both.

– So point a market for those given senior are X what loan sheet balance deals any can the on points. range is from at fees X.X of market fees BDC, there the to condition really the for

OID more into Those generally for point Senior flow We X deals that up point same are as or are market buying are a Loan It’s fee we of On band the first-lien or for signing would market. in right it’s Partners, generally of point that we today’s and in up documents a of But clubbed first-lien debt, group. are to. X loans. currently around where by X the kind more effectively specified environment in a have investor well, but income. ebb

Melissa Wedel

Okay. that. Thanks for

Michael Zugay

problem. No

Operator

And Instructions] further questions for over additional or no to remarks. there time. appears conference closing any back this it turn I’d at like our [Operator the are to speakers

Michael Zugay

the questions you. Thanks, next call. everybody. and Thanks the quarterly be soon Thank in we’ll talking for

Operator

today's Thank participation. for concludes you your call. that And

You now may disconnect.

BlackRock Capital Investment (BKCC) 8 Mar 182017 Q4 Earnings call transcript