BKCC - Earnings call transcript Q4 2019 | BlackRock Capital Investment Corp

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Operator

Good morning. My name is Kathy and I will be your conference facilitator today for the BlackRock Capital Investment Corporation Fourth Quarter 2019 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 Dean Paredes; Marshall Merriman, Head of Portfolio Management for BlackRock's U.S. Private Capital Group; Jason Mehring, Chairman of the U.S. Private Capital Group's Investment Committee; and Nik Singhal, Head of Investor Relations and Business Strategy. Instructions] [Operator

Paredes your Mr. call. may you you. conference begin Thank

Laurence Paredes

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

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

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

Additionally, has not presented certain information. and Investment verified. to BlackRock Accordingly or with third-party independently Corporation respect may derived Capital from warranty information such have no been sources representation been discussed makes and

presentation Please our note to an complements website we've this to call. investor posted that

page. Presentation the Investor highlight link the will the at in website some by Presentations Shortly Jim going our XXXX presentation information the presentation. of contained of can in The to accessed clicking Investors the be www.blackrockbkcc.com March section and

turn the like over to would I Jim. now call to

James Keenan

strategy remarks Interim overview have made results will fourth I Thank quarter. meaningful then providing questions. Pungello to we of it some and detail before start the our overview you, in our financial opening core the with the for joining fourth quarter the closing to Larry. discuss Mike to morning call will turn performance and during earnings CFO of over call. more I the you Good and an thank progress give on an our

and continues of reshape our goal little a be the portfolio to with to provide NII stable stream optimize to income reiterate, To our volatility.

senior core leverage to into create Our our strategy position, in producing involves investments strategic exiting achieve increase significant and these We redeploying income stable XXXX. secured a portfolio. diversified progress on objectives non-core target

ratio to times, desired X.XX to leverage X.X Our levels. our times net closer it bringing from increase leverage

we time, deployments XX $XXX XX portfolio secured or investments. portfolio of from increased During the year, the of companies to increased At including income increased second same diversity meaningfully first improved gross portfolio number had million, composition loans companies. new and lien with XX. A to producing

value XX% XX% beginning of market fair secured to this from investments lien and decline to XX% XX%. XXXX. at XX% increased compared value to market non-core fair increased First as investments of from by XX% accomplished to a exposure the We

minimum XXX% mix. of made in our Company's As assets we non-core announced the last asset portfolio of of a to exiting Company's Directors approved careful Board achieving After of strategic and coverage consideration the requirement XXX%. from improving reduction quarter, the progress goals

May shareholder X, the we at also same With on be of Meeting approval the of seek for to XXXX. to the support intend Board, Annual held stockholders the

shortly. Additional our information to expect in will statements, be file provided we which proxy

investment. to portfolio If such while will We return-on-equity, producing creating of approval. improving shareholder become goal approval then coverage asset of that the more the added the is leverage shall effective today security believe allow obtained, reduced income company a its after diversified to flexibility pursue continue

to X.XX exit, prudently will from As with we leverage target endeavor a X.XX increase further of levels non-core time with achieve steady times. progress state leverage current we to

investments of XX greater to first increasing XX XX%. we a percentage than to With continue account the added the our flexibility, and the book to increase target in portfolio lien diversity with will in portfolio names of

given factors time. portfolio the Although impact any at composition may other

intend base exceed with to of X% an we At the assets management the from becomes to rate that for fee time, to that lower on the reduction XXX% company X.X% coverage the additional NAV. effective, reduced X.XX% asset

sourcing on Additionally, capital and made Tennenbaum from capability. the same along for at The gains has intention the sourcing middle-market of to over integration XX% direct dedicated by the channel, is our strategy. BlackRock. in with Capital platform investment the other our to now time, XX.X%. from within Company to we across resources based incentive invest advisor reduce benefited the U.S. to lending professionals XX It income has and and Partners, our significant additional intend underwriting rates The investments advisor continue including fees to

affiliates diversified portfolio certain expect co-invest enabling risk. construct with reduced And, idiosyncratic is the order Additionally, continue. this company ability to to our trend with under our co-investment more to a we

while confident in remained in returns. a driving creating that strategy power bring the shareholder more this We oriented through result with sector, our the the income stable value shareholder company in or will continuation improved line the and earnings enhanced We book. believe of return-on-equity of strategy

repayments the exit was million quarter other the in the increase investment net million the was million per Turning activity. approximately $XX $XX results, the $XX $X.XX deployed offset an investment fourth totaling which to We quarter by and net share. for to quarter income portfolio during due for

earnings portfolio, our are repayments During with this names release. added of a in five the detailed quarter, we total press new which to along

value prior securities down this The the from since companies. activity Quarter XX last a fair X With increased X.XX market million points December yield average times quarter. fair XX, portfolio XX.X% market at leverage was has weighted was value end $XXX X.X quarter. across times of as a the of of basis net quarter, now deployment income-producing from

$XXX of liquidity XXXX. ample we until have maturing And debt million have activity. no investment new to support We

the XX million. decreased $X.XX per related to by per losses investments profitability as to their value the December X.X% in Corp. significant production due portfolio, non-core a reduced spike last of of $X.XX of in related investment driven by and metals including quarter was share, unrealized a to Holdings realized from used company's to These asset driven process. the largely $X million and atypical were markdown AGY net legacy in one share Net markdowns in AGY’s in legacy part $XX

rotating portfolio, part X is at progress XX, out debt XX% and the by income-producing fair the of reduced of which This Red on comprised performing first our first now I’ll Apple of of, XX% value. by securities last the book La the to from of down AGY XX% non-core quarter. legacy value, portfolio and Table Sur stores as December market lien, being fair discuss largest holdings. With

at Second, Insurance Advanced preferred Well Lightning X X AGY equity. and X% stock non-earning fair by consisting fair primarily on and equities preferred stock value lien. Advantage including U.S. approximately third, investments by at non-accrual value, X% of And lien

the a in fourth million During has of March with of which team Insurance realized were exited $XXX XXXX, approximately our redemption the BlackRock billion of of company the million quarter been Advantage Since $X.X of $X.X into investments, has proceeds XX.X%. partial from realized stock. deployed began managing new IRR preferred the

market As investments of by over XX% December BlackRock. by of XX, value the constitutes portfolio investment made fair company's

the to emphasize and progress Mike turn like the to over strategic call I Pungello, towards company's objectives. I'd Before the continued transformation

evidenced each improved trend the XXXX, we diversity to a in continue. which the composition, of increased As strong that in is portfolio portfolio expect and by deployments

Mike. you, to Over

Michael Pungello

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

in income investment this lien total primarily income Partners as X.X%, fee decreased notes AGY attributable second in other debt. from dividend decreased a Excluding a Senior and Loan income by result a income from of decrease to income approximately non-accruals BCIC and interest

fair and at XX, At quarter-end, X.X% approximately investments X investments of stock to were respectively. and value fair cost total of and stock compares December of debt This value total X.X% and non-accrual respectively representing and debt investments non-accrual cost XXXX. at and X.X% X.X% preferred preferred there at investments

was as at at to Our end. investment as market XXX, quarter the value compared X.XX of XXXX X.XX average rating prior internal December fair

Total due fee. in comparable XX, million based and ended net $X.X fees interest incentive the X expenses months from % primarily in and period for credit facility increased increases the income three or to on XXXX, December XXXX

During quarter, we no fourth In there accrual cumulative million, and voluntarily and incentive was fourth losses based the on quarter, primarily for due the fees valuation waived waived the quarter. net since gain. incentive of depreciation fees investments in $XX.X non-core March incentive $XX.X were management million. bringing portfolio partially fees our In million XXXX to and to realized the quarter, during legacy $X.X unrealized

During no shares the were fourth XXXX, of repurchased. quarter

pipeline We of program. under credit made the closed quarter in to and XXXX, liquidity of X cash XX, opportunities, for As under a approximately fund of availability including million are and a new with positions million cash facility $XXX current equivalents. repurchase robust investment available shares the our December strong

call Jimmy. With to like that, turn to back I’d the

James Keenan

Thank you, Mike.

suffer decline manufacturing first contagion, likely by Before is as in potentially impacted, impact the we outcomes only the relatively well transportation and COVID-XX Irrespective, those the disruptions as tangible in such wide reporting our of leisure, that this such or company comment demand to reportedly COVID-XX. impacts, are impact We live are the in in supply impact, as likely travel, as on harmfulness. on first virus its logistics to less created well businesses with I'd conferences. the as conclude, several with our where due of the believe we Corona speed or sector economy as business activity possible exposure believe the and range regarding near-term but portfolio order those portfolio. events will like order the of uncertainties or chain to is virus, portfolio that one where A potential industries

clearer our We become are several businesses will next of closely weeks. the over expect course monitoring the each to of impact investments that and the

the becomes its data well as regarding As virus, as more impact. available

the such Loan underlying BCIC equity diversity secured. and Gordon of portfolios of one, the Senior We in, get comfort investments of exposes, unsecured the The and Finance portfolio fact our two, Partners, and Brothers the are majority underlying the largest that as portfolio,

also are diversified secured position. Company debt

In our a hard team company thank shareholders on for moment for their our achieving strategy our recognize continued closing, support make I’d progress like and the towards to to take objectives. portfolio work continued as we their

remarks. prepared our concludes This

call the open Operator, to questions. we for like would

Operator

to Thank first you. we'll go [Operator And Rick JPMorgan. Shane of Instructions].

Rick Shane

portfolio to you of in this Hey, guys. guys risk, the described in given are part beta things. way fee sort suggests from Is characterize Thanks an a strategy Really, to idiosyncratic good reduce of the is make two you questions alpha it? it that is my The indexed that that way structure? And strategy. shifting approach to sense a does strategy than server that more taking morning. for and location constantly

James Keenan

Thanks, I Jim, Rick, they towards beta the to it as wouldn't move strategy. it's describe trying

think, or more or legacy risk taken far to we positions a more looked that it equity had produce stream. income trying portfolio the or file, distressed when in more oriented was a I at portfolio the stable into historical concentrated

the regards and So, the marks the NII we've the seen on volatility in associated and experience may that. book risk that to have impairments the has that of stream the legacy with volatility to potential with

what period that of and are When the amount we that one would to rotate our flow there’s of at structure, see our deal significant X% you look probably any and is a time. at work say into, around I our between done. conversion And team rate trying gets of X% we

time beta-oriented. one of kind and There's some and remember associated of to relative strategies broad exists in any the So, the markets advisor. side positions are being a the the a that we period vulnerability at being right, more built-in. get diversification that the of will we co-investing a liquidity said, investments, fair That that, that a different try I diligence of variety and structuring and of amount relative reducing are as these to and the economy look protections over long of within wouldn't to

dividend that more some in the reduce and we a a experienced heavy will that kind So, any diversified but to portfolio happen the a lead portfolio any selection, within of from books. legacy stream are having are taking we've we outside translating think construction assets, to risk diversified NII we've future. to that anyone in one of a that to seen these more significant more And of positions I but consistent

Michael Pungello

we've the that seen there is that time. of to support on strategy I and Yes, has – has about fees out and that, been of been that a and on think been aspect other demand waiving the presumably over think challenge order is side is dividend of I And fair other challenge in presumably, pressure part the the downward to this reduce NII.

James Keenan

over we And of of were volatility all just of you March far the intent yes, Absolutely, as in And, have that bought is NAV from last legacy yes, continue prior to look that years. of fees made work destruction north that if there a new advisor. $XX through been transition impairment to several stable, waved legacy book. And investments that million have at the the XXXX, lot impairment. risk the the more has the since NAV come well by they've assets as less of we

So, don't got forward that experience reduce go to a and our we -- I basis. goal is on then experience

Rick Shane

Got it.

one So guys. and you, that’s question follow my Thank up.

James Keenan

Thanks Rick.

Operator

O'Shea will of to go we Fargo now, Fin And Wells Securities.

Fin O'Shea

Gordon Brothers Can us Hi, quarter? good you background for the in added on taking guys question. give investment this some morning. Thanks my

Jason Mehring

Jason. Hey, it's

Gordon incremental support We incremental continue Brothers, in capital they investments. own [set] their As in it as investments diversified incremental to portfolio. investment make to relates to our fund

think, may fluctuation quarter-to-quarter that in or either I you'd portfolio would decreases is some what size increases you see So, from see -- in as size. you

Fin O'Shea

Okay.

James Keenan

portfolio. Just add of inside Brothers of the duration, more secured on. to Yes, is Gordon that portfolio a shorter nature

are you'll into our that tend profit and in both assets see vehicle, because the we a shorter what see have and So, of frequency to quarter-by-quarter of we duration than book. earning repayments tenure this deployments those

Fin O'Shea

any that did come contribution with third-party you And, investors or Right. from just….?

James Keenan

the But, whereby a their in new investments that that added have incremental the We we we with other it's investors have support to shareholder mix. make made alongside partnership not business investor. growth, to when

Fin O'Shea

has and And the you. on slowdown distribution the you to today? what -- a post Jim, impact of as from us mentioned guidance might you Can of impact quarter your any related one in company sort be felt thank direct Okay, that real-time unrealized activity. give

James Keenan

it from true think of I an I into corporates, potential the but States outcomes is the of along to go the are obviously, or of from and economic spread. which rolls we broad-based standpoint. the the to we everyone potential -- Corona and with municipalities more received, the which would impact pretty is means that trying prevention spread impact of assess and say and so, then are as response Thanks, more And, the United trying overall local to It level that that virus range even the into mode the the governments, globally.

of of we we're So, things generally at of the obviously have are to to exposure I the in think risk. all But, try I spaces, beings, and more where the trying areas it as at convention minimal centers more or we assess overall companies, our level. to the congregation think all highlight airlines human some lodging portfolio that are is

be an will volatility between think There's there'll supply to everything going associated be where area be some temporal. more which to I will be chains, some And dispersion industry.

see right will now, benefits our actually demand. a what pull are some complex forward So, off we at looking some based of probably portfolio in of

we come be are as there quarters, that to And fruition around next more though. we've say, vulnerable. tough that start of to have. that of point, that volatility all necessarily to assess wouldn't do around I this we industries magnitude but seen prevention, call other at some the the data now the earnings we some certain are could of a think think we the over there areas that then, couple bit yet, And little It's

Fin O'Shea

us so Okay. you buyback of some lever valuation are Thank leverage [you you you. you did] that context And color just today rotation are program, viewing forth? one how legacy and final and can question, and where give on

Nik Singhal

Nik. Yes, It’s Hi Fin.

said plan, which our conducted established repurchases are [indiscernible] are Board. share by the So terms the a with under

based stock in the is attractive goal market to buy every are the we the stock not the of figured price really dislocation our provide QX of also That's in So, was last plan the of and in one board effect the yield. the And and terms plan. reevaluate however, plan quarter is the quarter on to repurchases stability plan event does. in back and

So, a of strategy. that continues our be to part

key and exiting strategy in over etc. diversify levels and and of leverage investments. really -- Advantage Insurance, the other non-core La the for we've exposure, target in significant tellers] one, redeploying secure are increasing progress reducing [more reducing quarters, three Table And made our We assets, senior at income and our last Sur de-risking more are current also producing which components

James Keenan

Jim. positions the three parts on level junior book. standpoint. At we a now this in high And valuation that a a as of [XX%] and to tend is Fin, have quarter-to-quarter been be concentrated that around pick specifics, to and of reducing pace the obviously volatility ones to basis those the the seeing most done legacy the it's deployment are start those up from we've positions

-- is reduction So, take to May we legacy legacy I current one we'll kind expect, operating that focus obviously, similar deployments go year. the leverage volatility. will increase regards in with very of reduce -- comfort of leverage we the the say And mentioned as that earlier that, point, that for at leverage and over vote continue to of and those that's that now that is to this to I this to we two we our who as our seven as style with leverage level up. last the times and that reduce quarters, book, think several would be the And, would

Fin O'Shea

so thanks Okay, me. from That's all much.

James Keenan

Thank you.

Operator

like question that, comments. today's with answer back to session. the And turn closing our for conclude to I'd conference and let us presenters

James Keenan

Great, to progress that portfolio. And we here. everyone see continue to stays hopefully support everyone to forward continued for you. We next and And healthy. speak we as transition quarter. you, continued the this thank the Thank you look

Operator

thank conclude your does that participation. for today's call. you gentlemen, and like ladies again that, to with And We'd

now may You disconnect.

BlackRock Capital Investment (BKCC) 5 Mar 202019 Q4 Earnings call transcript