BKCC - Earnings call transcript Q4 2018 | BlackRock Capital Investment Corp

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Operator

Good morning, ladies and gentlemen. My name is Greg, and I will be your conference facilitator today for the BlackRock Capital Investment Corporation Fourth 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. Private Capital Group; Jason Mehring, Chairman of the U.S. Committee; Strategy. Singhal, Investment Relations of Group's Business and Capital and Head Nik Investor Private been on have Lines placed mute. And after line session. the they will the speakers complete for their a updates, open question-and-answer you. Thank Instructions] [Operator Mr. And you Paredes, your 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

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

Jim Keenan

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

to more was fourth the quarter, asset per Based the the per net share. portfolio the it For repayments Board Net $XX investment was share talk for income will an distribution the XX% of $X.XX declared shortly. quarter, $X.XX approximately on quarter. million Directors, about which Company's by coverage for had We of realized net distribution I certain per share Well per U.S. decreased of of $X.XX from unrealized in value largely equity legacy were of X.X% in last The loss. equity-like share or concentrated Company's as in December million investment investments. losses unrealized resulted decrease. $XX quarter-over-quarter Net and $X.XX quarter million a $XX alone per XX, share

entity of prices December additional stock closing December a to the be quarter-end U.S. price investment lock-up price subject of for XXXX, the for USWS discounts valuation in with traded privately ticker to closing portion which anticipate can on no XX, a subject Well publicly legacy reflected shareholder was assurances, of As the increased, call of XXXX, the mentioned line The of valuation has provisions. merge with to are pursuant continue in held Well USWS This markup $X.XX SPAC quarter, Since common this on that last approval. will there Well stock. U.S. to merger in a although USWS the XX, the to and which into U.S. shares SPAC, pending publicly USWS, of shift November, we periods. closed quarter-end traded the or we was converted equity the with significant certain of

the with saw markets equity quarter falling XX% XXXX Russell the decline fourth the Additionally, Index a quarter-over-quarter. broad in

As the Company's to the contributing valuations. other the result also significantly investments this, used a declined, of multiples reduced some comparable valuing in of

monetizing continue We exiting legacy toward portfolio. work to certain the and assets in

are had positions which a best seven XXXX believe in stockholders. by in the improve the strategy portfolio and net advisor to cumulative we focused quarters, the of March interest that Under income non-core fees create totaled of X, the December million. Company's the income in We incentive the waiver, fees or to investment on XX, reduce waived these be sales positions these manner we natural $XX.X seeking on spanned volatility over in valuation. on based exits Company's XXXX. proceeds waived exiting to to Company and We Strategically, this redeploying are the to core

XXXX, We from X.XX in times, now relative XX, extended two quarters to X.XX June the progress net to activity continue quarter, to as in until additional make this the the leverage have times waiver repositioning repayment quarter. portfolio. we declined an prior Due for to

the activity, Under repurchased We XXXX. share program, to quarter, million no and of maturing an and X.X have until were have ample the price debt average shares during subsequent $X.XX. of million to investment at liquidity support repurchase existing new fourth $XXX approximately

and Company deal investment December to the affiliated XX, going the to acquisition believe BlackRock will TCP As to expect Capital teams increase stockholders. industry-specific of processes have middle-market for forward. on Subsequent the the integrated, the The announced, added add the integrating year, integration lending the Since and XXXX, that co-investments a August expertise investment of with BlackRock. been flow for resulting last as begun previously Company help the manager. and operations Company's BlackRock's bolstering BlackRock quarter-ended TCP Company. TCP, has increased been funds, direct in in frequency of We leading we of TCP's has value closing, into closed and Tennenbaum Partners, position on the co-invest focused the

by greater lien Additionally, sector to the creating to deliberately we and believe that risk this and increasing co-investment ability exposures mitigate first Company's loans issuer portfolio diversity. helps

Company's Senior Partners Partners, venture Loan first Both underlying and Brothers lien diversified the Loan primarily Company lien loans Gordon generate has bring The Finance Capital. attractive first Brothers joined three, of and expertise deployment Windward the joint are with new lending. investment in committee vast a channels has core pools Levkowitz for who TCP investments entities. portfolio that to two, in investments four former XX% Howard first We risk-adjusted as company pleased high-quality Company's two Company, and on fourth in returns, announce investments the of Raj managing its and added investments and add-on portfolio investments each quarter. these Company; that experience during yielding direct investments; three or Vig, second-lien to Loan the Finance Company's higher are; supports one, Senior BCIC voting members, in four Senior that and Partners the portfolio company in Gordon partners of

Partners We including exposure performing portfolio Loan Partners. through expand The in lien continue to first investment Senior the Loan underlying of very well. is Company, Senior

the for the totaling and decrease portfolio. repayments. our exit in the earnings following large quarter, million the activity and The quarter term approximately non-core in fourth to $XX new to the detailed other the Company's for were in a release. net portfolio, Turning we activity. from merger, $XX investments by made million marks repayments loan million, million exits, investment the Company's Well of deployments U.S. during U.S. $XX and offset of one partial revolver a $XX which accounting This of investment are repayments Well due positions was repaid

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

value the of investments XX, Company's represented by December of BlackRock. is market As almost by fair portfolio by deployed investment XX%

holders. me performing book talk portfolio, debt value. was producing of little XX Company's of and value Let XX% the by the at non-accrual value fair which Sur securities non-core fair La portfolio three income at part AGY, about December of of Well a fair is bit with by three, comprised by This and X% and XX% Vertellus non-earning equity. as on And market consisting at fair X% Table largest Two, the value. of investments by primarily U.S. one being now the Vertellus legacy equities

ups mentioned expiring November U.S. portion in the Well in lock publicly and form a is As shares, a of earlier, equity the May common traded is to subject which XXXX. of of now significant USWS

legacy book. to of of names, a As AGY non-accrual value. preferred some on first Lighting Westmoreland's the of second part of status each the included process stock lien, Advanced and continues total at XX, December progress. is represented non-core lien, Westmoreland bankruptcy market the investments of which fair These X.X% watch-list Among portfolio

numerous by While fair resolution it the fourth stock X% difficult decline is still multiples exposure of in part reflection is decline a in constituencies market portfolio. referenced given a year-over-year than soon, market for expected quarter total the in The in decline, preferred by involved. represents of outcome is equity predict was decrease less in which driven Westmoreland At the market to a fair used in AGY's and profitability, the the comparable value part previously. to value, the valuation,

strong details direct capabilities regarding emphasize I'd to Company's that for sourcing enhanced results, you, Before BlackRock's call leverage and of additional and expertise in the to the the to Over to position Mike. liquidity industry lending puts platform. great it benefit I over low turn Mike Pungello the like financial from expanded

Mike Pungello

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

XX, income attributable quarter in average approximately investment the was compared offset decrease December December partially ended higher by to dispositions income income, which the XX, XXXX. quarter to dividend for in the fee and to other primarily Excluding impact XXXX, and quarter higher same portfolio XXXX, XXXX. throughout total X.X%, The a the investment of decreased a environment as rate decrease income ended by size of portfolio is for due primarily

and X.XX investments XXXX, preferred respectively, of at at X.X% representing total decrease to quarter compared position, and period compared market internal fair December and investment non-accrual fair XX, debt other debt to three XXXX, investment XX, decreased investment or expenses of cost at for of million XXXX XXXX, value total from and That Total was as of $X.X due non-accrual approximately fair positions at in the the there X.X% of XX, As to X.X% cost, three XX.X% facility average stock XXXX. December December and December a respectively. as fees credit XX, prior preferred rating and and stock investments were value primarily and comparable ended approximately expense. interest X.X% value The at X.XX the in months end.

As December we to XXXX a which management previously income extended waiver X, been fees incentive of based disclosed, June has announced XX, XX, on XXXX. XXXX, to from March

cumulative Through the million ended income of XXXX, For been waived fees incentive of earned total have $XX.X we based a by waived. have on XX, $X.X the incentive investment based December million advisor on company's management on management XX, quarter XXXX, a income basis. fees December

unrealized the and certain months quarter, from unrealized XXXX, legacy million investment. Net for primarily on loss with resulting no an management gains. equity During incentive $XX.X December deferred based depreciation realized for three tax before ended XX, in was fees there on increase the accrual

of the the in three a resulted December our unrealized XX, in reversal subsidiary $X.X gain to XXXX, tax ended deferred liability an consolidated months taxable For million. in decrease

quarter fourth X,XXX,XXX under a At $XX.X availability grow to average to share, XXXX, for position portfolio December Company including in strong of per We availability were $X.XX million cash very would for turn $XXX had approximately Jimmy. and brokerage shares million price repurchased XX, company at the call that, During base. like the liquidity credit commissions. With is investments an I of and facility its cash equivalents. our the between investment to of back XXXX,

Jim Keenan

to to This thank for you, support. would as team demonstrate closing, we Thank our for continued In portfolio your concludes like would work, moment thank their to achieving would our objectives. Mike. in open our a progress take and like to remarks. it for them you hard I also up we Operator, prepared I questions. like recognize continued

Operator

we have JPMorgan, And from Rick first [Operator Instructions] Shane.

Rick Shane

terms time, did. in hedge it mark-to-market. in mark just rearview see way you model to am at look of we that more curious, especially going Well probably are how more been U.S. the continuing was cycle curious, any you NAV make they that sense really point that display? restoring through a terms try to you and I And and of that, the they am obviously in opportunities I understand it's appreciate we the acquisition But Look, given at in now the in does precisely this over fact sort I decline. enhance importantly, long the guys as are the the pretty to than of position? when just as to mirror has windshield history,

Marshall Merriman

have to to respect hedge Well the the Merriman. NAV acquisition, acquisition. Marsh the we're marks when that on to issues, don't then exposed - ability that been have process we attempting do volatility other equity know And to so. the is positions continued to as volatility, and respect with are possible exposed the you in the that the the opinion to This And we we exit U.S. with to

pointed substantial went portfolio other our going of marks Well of bit value valuation and with obviously market. the end to that portion trading for in the reflective where marks is, Jimmy comparables those a a going at One, December stock; what's trading of We're are see the and on public is we little what out positions. all tied so, going U.S. there we earlier, of down are of the used the on As of what value on part are you those to in reflective when was the the QX. are that on,

Rick Shane

has The fair highly versus the Look think remarks the approaches. we that's things into going I And at that I the for certainly appreciate point. market Group. divergent quarter a very been the there that. looked It's quality way correlated,

this model really to do So restore start is under-leveraged this How point the NAV? the little a challenge But within we that. appreciate business think you at bit I distributions. the point at that and being did

Jim Keenan

This is we've I Marsh mentioned, that, To been that. explicit. Jim. obviously, I will on think on touch as add

and our through volatility the to which position, to entity continue of and is work legacy to exit that. bearing of having Our or inherent many plan are aggregate goal associated or non-core non-interest these risk

been I we've that that you the hedge part having under-leverage leverage the book. in the running relative would of lower with mentioned the, inherent volatility to as call So the entity of had has

book core As should once have more not more can one on stable the that dividend strategy, a exits, of it be really able we to just able stream. we profile work into the to to a income-oriented volatility at we look an have exits, strategy those that levered more through those into these on advisor far and that sales, efforts based the redeploy with to case the be proceeds, in value is focus to these fully portfolio, at but reduce the as that that that but we exiting these regards create combined positions, is diversified our redeploy which stable

Rick Shane

given I look there legacy to And and can portfolio new and that book quickly originations be liquidity the too is certainly you - destroyed that takes transitioning if is do appreciate imprudently. the time a of from value

the appreciate process definitely there guys. Thanks, as well. So,

Operator

Fargo. O'Shea Instructions] Wells Next with have we Fin [Operator

Fin O'Shea

be be? going in any versa BlackRock or TCP suitable, integration the Raj Like find strategy? Howard but can with as loans that after Investment ongoing opportunities kind any the vice and on commentary differences will quarter investment on, the doesn't will or the other forward, you what differences of the - joining touched or sorry, Appreciating main explain TCP in you including, Committee, or there BKCC the

Jim Keenan

transform - such If you and stable standpoint, I a more top-down philosophies create in what to we've mean, BKCC been look mentioned, at dividend strategic want is that sense stream. of that creates from the portfolio mean the we a similar income the as to diversified I trying

within origination combined started allows across a and relief that. entity with far could this that to I’d assets to we potentially us And it buy us call and more, breadth both for and co-exemption the we've the from to some see depth types has industries co-invest as it resources, of with to it already across think given I activity the order, noted, and the standpoint, regards regard BDCs, portfolio.

more of to So, from similar lien a regards have kind have weighting strategic into first we've to the standpoint, status, separate relative to BKCC that we to more past. NAV - that regards distinct the is in entity. a philosophy greater having with going a at in the and the kind dividend what a and portfolio lien, - of diversified first again stable a a is With stabilize to stabilize in seen more current portfolio

BDCs to integrated has of co-exempt through the with And at so opportunities with invest all capital, portfolio potential said, of constraints as any asset that relief are you regards time. one deploy and and strategically to in to being teams may lead there order, have differences that portfolio for period that portfolios bulk platform. the differentials one know, looking both kind the and to come assets That

Fin O'Shea

Mr. originating a a it at maybe like I seems leverage, picture And origination. your on another private lot was terms Shane big competitors think what the this quarter, very just and less were on then your touching less, of it and have but look extends robust markets in of this bit advantaged, and

have have rate a So not the already over you solidly of you took since pretty BlackRock team leverage, - guys been deal deploying over. past very with years, and existing few good your why you place, previous in

dialing conservative look legacy at what dwindling back numbers - You deployment? names. on How think of rates - - know, you is as see your are are wise what or we I focusing super we this do you do about

Jim Keenan

there a into I know the gestation that Obviously, of start the couple the of period quarter in the - obviously in market, some some were finish. take can a that to of think from long done you go time that. very these deals things fourth of

conservative But own on we the markets, composition sheet, that regards ended an a see our that QX some from that and impact prepayments components origination, impact come we and closed assets in couple exits confidence this really the we things August an say, kind the an had of QX I I to And of say would will our one, we're our of had we about on exit certainly QX of would in we're the And increased What see aggressive from more standpoint, visibility volatility some and that deals two own point were generally through in of worked through being more we the associated certainly would from and our in I of deployment conservative. we we that, I on think and level were which some more of expect into - say, public on the with balance into of between our the think was, some fourth probably being those started increased say trying go-forward - transaction come as remember we obviously and deals net work that quarter. that potential is that or of I significant volatile alongside to of if had pipeline, of teams see the basis, increase there that so we the to equity like not and say last standpoint, I would saw in of see going potential would origination you TCP to QX, had that were really our integration kind at book, year would the legacy to with a what from book. in more definitely of the is standpoint. kind with a not to positions. the we our that are and the of deployments the QX.

Operator

back we or have to it at time, questions. turn look closing for remarks. And any Instructions] additional I'll doesn't [Operator any like further the management this floor

Jim Keenan

no team any thank Great. all you. your free all thank is Operator. us Thank their our questions, are directly. anybody portfolio. support. If contact you, again please like Thank on to there further questions further to for If And there the feel for the of from all efforts I'd with line, you

Operator

gentlemen, And thank concludes do for call joining ladies our that We you and us. today. for

may now disconnect. You

BlackRock Capital Investment (BKCC) 7 Mar 192018 Q4 Earnings call transcript