BKCC - Earnings call transcript Q2 2018 | BlackRock Capital Investment Corp

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Operator

Good morning. My name is Derrick. And I will be your conference facilitator today for the BlackRock Capital Investment Corporation Second Quarter 2018 Earnings Call. Hosting the call will be Chairman and Interim Chief Executive Officer, James Keenan; 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. Mehring the Jason Group; Capital Chairman U.S. of Private and Head Strategy. of Capital Group's Relations Singhal, Committee; Investment difficulty] Private Investor Nik and [technical Lines mute. have on been placed After open they question-and-answer their the for session. line a will speakers complete the update, Instructions] Thank you. [Operator Mr. Paredes, you conference may the begin call.

Larry Paredes

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

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

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

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

Jim Keenan

our investment discuss on you difficulty] performance performance Mike I to a provide second Interim second quarter update Good [Technical the will before business for during earnings and Larry. joining financial you it our bit morning with activity you, our CFO more results portfolio Thank Pungello, turning then in our over to thank and detail. and underlying quarter. the call. highlights,

For million was Based the existing XX% investment second the net our of portfolio distribution quarter. per Directors per income in there share. declared and new quarter share distribution on the two four $X.XX deployed companies. coverage Board $XX approximately We was for $X.XX by

million the However due quarter-over-quarter. value X.X% significant to certain was to repayment $XX for activity of June asset $X.XX share incremental positions. large in on portfolio. decline This per per share of share Net decreased $X.XX legacy drove or repayment from downs XX, quarter a net per as mark part last

portfolio in more in cover our detail will We discussion. overview

nearly down X.X share leverage do to [ph] investment of We difficulty] the million of at an payments. XXXX. Our by quarter difficulty] average decreased prior $XXX times existing maturing our until from repurchased have liquidity new shares no to Under program, support X.X X.XX quarter million [technical debt and repurchase have activity we $X.XX. our price driven [technical the ample during

Gordon Senior and lien portfolio to these are new Partners, on our portfolio deployment quality one; investments and Two; investment investment three; Capital. for Brothers junior lien difficulty] in be the discussed Windward Company our Both our As Loan with second portfolio Gordon BCIC two our to three attractive high primarily adjust Brothers the its in ons Partners returns. investments investments three [technical Finance loans venture calls, first continue opportunities. diversified three of in in prior and company pools joint capital Senior Finance company Senior Loan quarter. [technical in underlying Yielding investments Company on Partners in difficulty] entities. at risk have higher add each first

we venture $XX Joint commitment from upsizing in million As to April. in $XXX their our commitment previously million Partners announced, manner. equity partner Loan Senior a to upsized pro rata

Additionally, upsized total facility credit subsequent very $XXX $XXX continues it investment end to providing important is is with million an strategy over of a our partners million. to investment to part it's Loan million, loan from refinance capacity quarter $XXX and and the of Partners business portfolio perform Senior underlying well.

[ph] million investment million decrease in totaling a company's quarter. the net by for due this which of investment $XX - portfolio $X activity approximately activity. the investments during our approximately to repayments were new $XXX We offset made million Turning exits to

earnings million. second investment our repayments Partners are Senior quarter release. increased We detailed net Loan and in in deployments Our $XX our by

in to credit invested reflect approach portfolios market. Northstar Services disciplined Financial also two which selection companies our new Pharmalogic, We this in and

repayment XX quarter, up as XX activity which end $XXX X, of and quarter. approximately last March investments XX, have $XXX million of weighted in XX.X% June of with portfolio company managing quarter, responsibility producing new value companies value of the million from at the of XXXX into to this average BlackRock assumed our second is the fair the we IRR basis With the when of exited the activities a team $XXX BlackRock the The investment market yield securities at for From deployment now has fair XX.X%. realized has was been deployed of points million. market income

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

on X.X% stock status. preferred preferred of of June had fair debt our non-accrual we stock one market and value. AGY at investment a representing investments As XX,

last legacy was loan driven million primarily portfolio in offset US merger due and decrease by SPAC. stock We continue certain portfolio negative and change marks a the preferred valuations publicly Well in increases fair quarter. volatility to in difficulty] in difficulty]. in Wes $X.X traded [ph] or pending Moreland of [technical with partially AGY announced Vertellus [ph] by Well versus SPAC equity The [technical US have which drove the value market investments our to

bears macro and forces movements to underlying call credit nature like that the investments or four in experiences equity contributed changes for the special [technical work [Technical varying improvement of last decline difficulty] continues Moreland these difficulty] to at we pointed in Wes [ph] As out producers. EBITDA they be sensitive in these degrees attention are quarter to valuations. of a that

our realized difficulty] Monetizing the investments. relatively from SVP at on difficulty] diligent earning small activities, by $X with Offset net gains to arising realized our million, in producing of exit recoveries claim. this position loss million stable from we [technical pool remain on continue of portfolio assets. strategy the ECI. enhancing portfolio into from rebuild of $X assets. mark and we redeploying income We To and the had contingent worldwide [technical accomplish restructured equity interest reorg Apart equities goal,

no of As we to XX, have June market SVP. value exposure fair

Mike Capital BlackRock to additional results. would you BlackRock's some the Partners our Before like Pungello by turning Over the for position I details closing to add acquisition global that of the about financial Mike. excited over regarding which very Tennenbaum to we call leading are manager. bolsters credit

Mike Pungello

share you, for million income, per the June Thank to as XX, XXXX. compared review the for or financial or months investment our information a per June quarter. months I'll declared NII XXXX GAAP the ended $XX.X months net XX, minutes ended distribution decreased $X.X three income for share to three XXXX. portfolio XX% $X.XX the XX.X% NII XXXX. additional, Relative ended the Total distribution XX, June and three investment was of the second take few Jimmy. to coverage $X.XX was quarter of for million

ended June quarter XXXX. offset income Excluding rate fee ended XX, investment The portfolio size June and XX.X% income total and by Primarily is for compared XXXX. XX.X%. the a quarter a higher which decrease in investment income, environment portfolio XXXX. approximately to the higher dispositions amortized attributable as at decreased and of dividend partially primarily due during XX, half average by to cost XXXX of the of decrease to in was second impact The in the XXXX

XXXX of cost non-accrual stock investment position one value X.X% of respectively. and there June representing XX, X.X% and and preferred total approximately at fair As debt investment was

of positions cost December respectively and non-accrual stock value to XXXX. approximately at investments [ph] fair XX, and As debt X.X% and of preferred at investment XX.X% total

internal million for expenses end. fees fair from XXXX investment in XX, value period base as at X.XX XXXX XX.X% compared was ended comparable to market the average $X.X management XX, three months and Our Total the June at primarily a due expenses. X.XX quarter in prior June rate decrease decreased or interest at XXXX the to

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

on we've fees waived accumulative investment based ended based incentive a basis. $X.X XX, June incentive fees by been our of on million waived. XXXX total advisor XX, million income Through of management quarter the $XX.X earned management on For June XXXX income of have

Limited. $X.X before as as increased million Net depreciation the ECI to resulting legacy $X.X partially to depreciation due a for based gain non-accrual the During our offset investments investment on Net is a gain. unrealized SVP in of upon relating realized million certain disposition. Holdings taxes reversal was increase recognized management incentive sale the fee gain well an on the realized depreciation loss on previously primarily Worldwide from of Cayman by quarter primarily

$X.X the a subsidiary liability For resulted ended tax taxable of deferred three months in [technical million. unrealized June XXXX difficulty] XX, consolidated

portfolio availability and investments position in During base. strong brokerage we price the XX, shares I grow availability the like $X.X our to second commission. had $X.XX including facility with company turn credit June to of and under of $XXX back of X,XXX,XXX would between equivalents. to At per are average difficulty] XXXX, million Jim. share quarter cash our [technical very million We of cash our With that we investment approximately liquidity XXXX a call

Jim Keenan

also open transition. Thank their the work line recognize you your take moment you for to and our for continued support. Mike. concludes the would like for current This our like questions. thank thank a I continued through team I even would prepared Operator, hard can we of In closing, remarks. to all to you

Operator

with Fargo Instructions] question ahead. first from go Securities. [Operator our take Please we'll Fin O'shea Wells and

Fin O'shea

to Just we Wes about with to start in losses, I the the these [ph] were Both bad last of know severe drops start year. Moreland talked pretty stuff.

your Or big both I color that just I comfortable were on guess were in You guess with these there us turns there. [technical some them? negative just in Did difficulty] give of front?

Marsh Merriman

This just things, respect with to morning, is of Merriman. a morning Thanks this your Oxford. couple Good time Fin. Marsh for

are issues involved evident news regarding is discussions from out coming As play, in here various filings forward. moves the constituencies, parties in as in the the that public various the from

macro with you. give the I respect that's liberty there, nature to tends of a see equity disclosure that we're there or just discuss the play inter-year perceives is and some already on public the quarter-by-quarter a market status of discussions at that's value beyond at detail the we the With given to are lot think forward AGY, business not certainly company issues can there's the predict an there. so a outcome visibility subject not lumpiness to this to that, out basis

Fin O'shea

So the mandates. is front. some on difficulty] maybe [technical something gave BDCs are to to co-exist how by your any difficulty] you move similar TCP will probably acquisition there interim All think managers on color respectively two Can [technical give block. the you that assuming I kudos

You focusing sitting the in different parts and difficulty]. [technical on of platform

Jim Keenan

their Jim. them we're the would effort. say, acquisition the would Fin, say, are closing obviously within obviously excited breadth closely TCP their the I we're onto the platform the on them breadth in own is yesterday both of with scale Thanks scope this and record working the platform. And platform I a great bring BDC, of excited a of they've but optimize on of combined to got we track to very the about advisor.

the the complementary the very is what of done. is, the they've much to track deal our and of we believe investments, combined that and so they've nature record of existing team benefit the great of type I business had, think done we've

similarly, at about be quality excited both I that outcomes to broader, on better will [technical think BDC's, better, combined expansion what for BKCC but So we'll lead do and in effort difficulty] there. the could we're I able a we provide efforts think to in better advisor, specifically underwrites

Fin O'shea

or things you [technical difficulty]. for keep there bylaws separate any time you let's shared have - structural you example they you give mandates SEC that you I for sorry Do thank to of able in being? sets the are how a similar know [ph] case, has go a there, are say for mandate ahead. few few Are options allocation? can of terms in So

Jim Keenan

able to to No through absolutely, that really But and Paredes that. scale I to let Larry actually over is him be benefits I'll the platform. it think run will turn provide to

I'll turn to it Larry. So over

Larry Paredes

Thanks Jim.

So we both SEC should currently exemptive [technical which order arise. to an have co-investment the opportunity [ph] difficulty] co-invest BDCs

or should opportunities to continuously will a not should not We or evaluate determine the and whether take consistently co-investment place.

Fin O'shea

supply noted now. Okay, like marked thank who behalf reported of having far just competitors quarter on sort at quite least throughout a your one do on lender-friendly A more I'll comment but low maybe past Any thus not of question. you and despite through and your macro-oriented leverage this lot continuing originations still reasonably rates? heavy

Jason Mehring

victorious would in of by actions active Mehring a is say that as working, an had there we structures direction lumpy in the we we in whom auction with businesses opportunities terms the we're we that had quarter definition of the very, or Fin, process. in in its in here. were somewhat I or variety our events of Jason very know not were you interest perhaps were ultimately either reviewed, different the parties

matter being managing a active were we or think I part very transaction. winning or just again, of we're So good it's win to having getting the and of looks

comfortable way, looking the backdrop. certainly are level proceed feel we we our and a lot with of given [indiscernible] after activity continue to So But cautious things. in at

Fin O'shea

guys. you Thank so much

Operator

And the queue Instructions] we questions question from [ph] no current have [Operator [technical and have difficulty]. in with Melissa Whittle we a

Unidentified Analyst

hear me? you Can

Jim Keenan

go Melissa, ahead.

Unidentified Analyst

Sorry portion the the comprised on of this that. Wanted manage to update [indiscernible] quick of on plan at get is investments, that legacy point? update about a to portfolio

Marsh Merriman

It's Melissa. Marsh Good morning, again.

have Our positions the the we we In be as all it is long, same circumstances been which plan the that investments those legacy exits, will control. do what in are continues of sort long with respect those to fashions permit, best think exit we has timing how excess and hard to the [ph]? of manner we while advantageous. many when of of work of not it level we it's have We to predict situation takes over influenced or let and

Jim Keenan

is just our I'll add with This standpoint. goals I Marsh. a Thanks strategic from mean be onto that. clear to Jim. just

through to that times legacy is clear, portfolio plan to at to the is work or of continue years. and then to there best we assets the deployed results. create interest of associated we best said, last get that stable the with over similar [ph] or Marsh obviously ultimately a ultimately to more more limitations the the the bit be exiting, book regards As monetize complexities those in to positions three to can but redeploy volatility them bearing how And our

trying I book. of the continued that say to we're timing to the So a continue but has would to transition around move remaining aggressively bit,

Unidentified Analyst

in portion what and legacy Understood of the remains investments? portfolio

Marsh Merriman

I approximately Melissa. believe, It's XX%

Unidentified Analyst

release whole and will then that with - basically difficulty] the the Okay to separate will BlackRock vehicles acquisition, just be the operate. independent there clarify two on that have [technical co-investment

Jim Keenan

before, across order we are but from transaction. pointed the Larry other Correct, the governs there out variety transaction BDCs wide across are two there SEC BKCC, Larry the co-exempt vehicles continue we there's the we teams. the together of range jump of could Whereas continue And and that right and to the the be to - the in, platform of have. strategies team's are now optimize investments run create there will by two ultimately that as certainly Obviously and vehicle [ph] but will better to work vehicles. you two

Unidentified Analyst

Okay, thank you.

Operator

queue you in further Thank and no questions at this have we time. the

Jim Keenan

here. Well I With again all Great. you done the in the but your highlight to the Thank support the and thank that, thank wanted the again, business portfolio, and team you for end you work you. just you. all they've we'll thank for call. across all

BlackRock Capital Investment (BKCC) 2 Aug 182018 Q2 Earnings call transcript