BKCC - Earnings call transcript Q3 2020 | BlackRock Capital Investment Corp

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Operator

Good morning, everyone. My name is Lisa, and I will be your conference facilitator for the BlackRock Capital Investment Corporation Third Quarter 2020 Earnings Call. Hosting the call will be James Keenan, Chairman and Interim Chief Executive Officer; Michael Pungello, Interim Chief Financial Officer and Treasurer; Nik Singhal, President; Laurence D. Paredes, General Counsel and Corporate Secretary of the company; Abby Miller, Director of Finance; Marshall Merriman, Head of Portfolio Management; and Jason Mehring, Managing Director and Member of the company’s Investment Committee. Lines have been placed on mute. their session. will complete for the speakers question-and-answer a these update, open they line After Thank Mr. Instructions] [Operator you, Paredes, you may begin the conference.

Laurence D. Paredes

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

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

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

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

James Keenan

results to going our made third for quarter. subsequent in Mike our will and before in thank priorities. to during provide Today, discuss quarter third earnings I and closing Thank financial to remarks the strategic also I over significant progress remaining toward you, Larry. questions. the Pungello then providing opening the highlight call. turn you some and to third overview it goals an of near-term joining more other the to quarter our updates call morning Good will detail, I'm

to press stepping he his will release, BCIC’s has be and retire as an Mike XXXX. CFO Interim and Interim to in be from had X, XXXX. And spanning at available will role a over years career distinguished from effective CFO in including BCIC yesterday's Mike years, Pungello, advisory until in down BlackRock. Treasurer March, XX Mike last retirement November announced As our XX BlackRock. planned Treasurer the BlackRock

towards I board effective we to We'd would announce is also like at our for important priorities. plays thankful for Nik are the I’m November congratulate Nik board we President BCIC’s appointed been him to has him the leadership as XXXX. team. and Controller her has BCIC’s announced BlackRock integral new XXXX. to the reflection She to wish as by BCIC, a X, best. as as look in excited appointed of role. this continue of service truly a accomplishment Director November And role forward his BCIC as Nik congratulate progress CFO and finance Treasurer BCIC’s very BlackRock. served that part an BCIC’s of serve and her Abby yesterday, and strategic effective Abby Also to to Singhal as goals serve our X, as since on been to has Mike retirement BCIC’s We like Finance Financial his to XXXX. and Miller September

secured a generate and of of portfolio has strategic rotating that to other and primary be of will income. further Our legacy priority loans senior to capital junior redeployment investments stable continues build out and

and Commercial AGY. to to its transferred a During these progress a objectives, Callodine been reduced exposure we X, Finance as of holding which November towards both our great we made assets On significantly third-party. Company GBFC, majority Finance, and portfolio the a to entity subsequent our new by Gordon third had quarter, largest Brothers controlled

repayment in GBFC's we senior on Callodine. unsecured the million result, $XX $X investment principal facility, to via retain has notes. a a As will secured BCIC which over received million bank rolled

GBFC's Additionally, its rata of share pro BCIC will retain assets. of remaining

Callodine Additional are details Callodine. the million end these transaction, of with Simultaneous of from to the combined in of financing provided to portfolio is Gordon. second for XX% portfolio of exposure are our to of which the provided earnings XX% and approximately transactions forma $XX new GBFC BCIC Pro this release. now the quarter at reduced of

concentration, reducing addition should benefit capital it remaining investment. our in this partners new brings In junior capital to via Callodine,

remaining our transaction quarter, this in occurred against it $X will legacy $X Holdings, $XX resulted prior reflected substantially third investment during quarter. only AGY, valued Definitely a transaction year-end in valued million which be the quarter, the AGY stock subsequent million underwent AGY is recapitalization. preferred the As cash in at June exposure to we in recoveries exited of financials. portfolio The which The in third our the approximately the million. were at

volatility secured AGY million capital $X.XX that We freeing in locate we portfolio these believe and up the in to lead that improvement deployment intend and of by share contributed quarter. senior transactions GBFC core composition per to strategy. a our to third Our in $XX NAV future our reduce meaningful decline NAV

the non-core portfolio. just the complete priorities exits near-term are Our two focused on of substantially areas

the And at the to investment, the the First, of of remaining equity senior these Loan our already legacy value total for The companies this, reduction. reduced in fair is has BCIC Senior portfolio the portfolio the that with only X% forma JV Investments exposure the non-income Partners, GBFC X% pro approximately been at Windward value. seven value, Of which and up fair largest XX% make by generating. is fair of second, debt loan LLC. is total portfolio, unsecured which

initiated have JV. reduce opportunities to to process in We a investment our exit the viable explore or

to to from non-core in consents partner. and and associated junior in leverage our the manner, the our our degree will also which as portfolio the assurance obtaining timing be required dispositions, no JV have such profile. further be managed investments Historically, reduction deleveraging credit can the and there conservative of improve of However, subject our a we would

near-term in accomplished, secured are priorities our unsecured early we and part of the the debt of to to intend maturities XXXX address these XXXX As XXXX.

new loan. details Another the that which our the a To diversified new of ongoing found income prong companies release. earnings of portfolio third we with that is stream assets investments limited quarter, added these strategy in capital into each generate deployment of The was first lien be in the optimization secured volatility. senior can a four of portfolio end, stable

where on negotiations terms. transactions emphasize to lead we continue co-lead or We deal

additional last needs sizing we in of investments, given portfolio competence. our the our existing were quarters, Over few ratio potential cautious for leverage the in capital new

$X.X these the exits investments, portfolio our case new with with MetricStream, sizing portfolio which date, investment However, a to we accomplished are strategic to quarter. new company were approach in our resuming normalized million more this

portfolio at a composition loans, end. target lien at includes As first XX% compared quarter XX% current of reminder, with least our

X% We targeting percentage are portfolio. also the translating sizing portfolio to companies of XX to position to a as XX X%

GBFC. unsecured approximately is XX% Lastly, debt from goal X% in forma down less, for reduction the pro positions or equity or our

X% three portfolio perform less at end despite with has third on of core continued At than well, the the pandemic. fair of the were investments lien to the non-accrual an quarter, Our value. first totaling increasing portfolio only of loans percentage there

associated the the markets are and $X.XX credit Excluding the approximately share quarter, AGY, in decline NAV increased $XX portfolio improvement or with spreads. during and in of GBFC further the rest million value per reflecting

quarter income and investment the the from Net results. for non-accrual. per financial our preferred primarily to due Turning to down share, was the $X.XX in GBFC previous stock quarter $X.XX

X.X% was at June from the since In basis producing portfolio other a items. are amount fair down during quarter, which primarily detailed The movements. terms repayments our press yield and of up last leverage The we September times, end $XX deployed of XX, X the income times weighted was the deployments investment and activity points securities offset X.XX of quarter. by in earnings X.XX as of in was by average release. market driven quarter, Quarter similar million repayments value

this NII the NAV by covered two exits. created decline the pay of was our to portion this dividend the dividend our for we by The reason elected in offsetting some by to bolster quarter. While a stock XXX%, of primary

remains all in goal an dividend the to transition cash back to coming Our quarter.

$X.X Our of $XX.X quarter, the liquidity remains To further are incentive waved at NAV, strong of million BlackRock support permanently for million. Inclusive waived its the has and advisor basis. company's minimal a cumulative fee $X.X relatively unfunded million. this waiver fee commitments incentive which full on totaled

in Michael we the our coming Recognizing turn with while exiting impact portfolio work to recovers we’ve we to accompanied made now assets. non-core I of been I'd strategy you, economy completing significant optimistic remain the pandemic, is of the of NAV the about Pungello, to over emphasize quarters. us, progress Over have behind from gradually these that Before that the like that the in much exits as Mike. believe the call declines, allocation

Michael Pungello

you, Thank Jimmy.

financial for good am Before strategic provide interim I as CFO the three as is approach. necessary the company support to I'd team to have the the their Jimmy thank I I and to started, served support a treasurer. during get Abby years, ready like confident implement continuing and that

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

some compares investments, and decreased at stock there and total environment at of total X.X% and quarter value the primarily income, debt nonaccrual the fair dividend respectably. and period-over-period, comparative June and Excluding of value preferred representing period. investments XXXX. decrease lower cost cost and income and other three to cost create stock investments for XX.X%, in At This fee X.X% and X.X% average investments end debt income amortized XX.X% XX, preferred due to investment non-accrual approximately approximately to of at fair portfolio and a by income a investment rate respectively were X% total

$X.X XXXX internal million three of Our fee top XXXX, for end. waiver average at X.XX prior improved to row management months September the X.XX rating incentive decreased of the as fair from XX, value XX, ended Total XX.X% period net interest XXXX decreases or expenses voluntarily March, from on fees, income, investment XXXX and the at quarter in based September in fee In period-over-period. to cumulative net we the since of income fees bringing based base to the fee quarter, waived incentive due primarily $XX.X entire incentive management million, million. our and credit on third facility $X.X waived incentive fees fees professional market

gains. on based there for no fees Additionally, was accrual management incentive

During net quarter, the were in driven in AGY realized by million, unrealized losses unrealized realized primarily losses third and and depreciation $XX.X GBFC.

As as of facility, $XXX XX, credit well under and approximately equivalents. of XXXX, in cash had million cash we September availability our as

by benefited portion value September and asset on a $XX.X million XX, July net of in third during a XXXX Our paid our dividends XXXX. of quarter, the X, stock result as

the previous a September XX, X, approximately the With XXXX. to repurchase XXXX, existing total until on During the would no like repurchase remaining purchase for call shares authorization Jimmy. have repurchased. purchased our to X.X This authorization on Board such the time renewed available the I remained XXXX and X, shares back program company's November the authorized authorization company shares that X, for million up under unpurchased On third program effective the November and shares that to were the expired quarter turn of under shares the XXXX, X,XXX,XXX the of share XXXX. November million of new all X that Directors been or authorization earlier replaced of as to of

James Keenan

their I Mike. prepared their recognize support Thank open and of moment work. I to we the remarks. restructuring everyone Operator, This hope our our to team we’d for through the for as like to healthy. for call our continued stockholders remains Most concludes hard all, of questions. up the worked and portfolio take like you, would closing, a thank and patience In safe

Operator

O’Shea Securities. Fargo Wells Thank question you. take [Operator from Instructions] with Finian We'll a

Finian O’Shea

equity question Hi you've importantly, that looks on. I like – off pulled over. lumping to of, seem this the one think then of out category this of SLF first BlackRock everyone. my just me with and it guess was on become get and done. that, And But Thanks and understandable. guess didn’t took to non-core, your spend And Gordon strategic core, for seem Congratulations on to as to management more Brothers non-core? joy in didn't new recollection, which things because you're – when having right. passing seemed I pride the I did Brothers sort new first moves I two-part of is on But be quarter. junior less don't guess that's that's question already Gordon part of time as always

So a surprise in need ask you see I something it's of as strategies? there sake stop all questions and revision a been for out asking a one there bit to sort of. SLF just these guess not I'll is the of – I'll – what's many to you view the too the get on of

James Keenan

from I it's plan it's perspective. of Thanks. to move to both here. strategic junior performing not the part risk been portfolio venture NII play has of been a been kind or think Jimmy the Appreciate things asset a GBFC question, to is into it's obviously that trying our risk and lien – capital sheet, to couple portfolio first on a of legacy remove regards with that. the equity of portion been But concentration, of said GBFC, joint more supportive diversified and and book good kind balance reduce on which being regards an A would of with our

kind obviously for we or the diversification that The think was increased which shareholders in joint to increase sense prior our of the leverage approval of improve will of was the that that for and on continue continue more first that's facility impacted perspective, we sheet balance shift BDC from lien to environment. GBFC at help kind its stated it the now us kind a well asset strategy balance lending that try Specific – to liens to NII direct venture equity now, which to the it balance sheet approving on think assets way JV our look balance as core liens, really that the and into shift sheet. company ability COVID lends [Technical into on first getting the and obviously the to reduce to to as in concentration means from or the for first the board those it's backed ability to try put got reduce that falls The to year this position. that the of of balance concentrated standpoint, and company a to to I from But direct had itself a and sheet volatility on on goose to an that by sheet. exposure Difficulty].

Finian O’Shea

structural a just of prevents – a them have is ease follow-on balance Was Is out moved simply for these something of And helps. that small very I Yes, there that matter. mean sheet. to on just, your there have the that just impediment facilitation? with of that brought most that there yours that something peers

James Keenan

sheet, the exit balance ratios place. on factors of from that that that balance are there So new value potential that standpoint as come is to assets both the maximize well or other a options options a of sale, But deployments into of of an to status at looking come which inclusive and look and can include that taking is leverage all of exit into looking sheet, yes, option on that that strategy. at part variety as

Finian O’Shea

That Sure. helps.

NAV reason against the that you growing doesn't partial the paying now reason declared, Would against but the expand more, your as I NAV for understandable say why the that? seem think being more last a I one would of stock quarter, is stock was still Just cases on growing dividend dividend. compelling is contrasts

James Keenan

to a move and to obviously you those into quarters board in and securities. multiple data of some factors this XXX% assets, are, stages as absolutely. out and hope cash quarter the able of setting those for restructure cash some the legacy finally of dividend junior well as stock went split that with we as of to we and final is mean, think I in exit of working Yes, the know, back I the transitioning upcoming being be to clear,

our was with obviously that, side leverage associated some that, that So covenants. has and impact with recognized we that there to liability an decline NAV our

the value, to to that with the to lower think I look post stock levered or sheet. just are that it's to downside as the then and side, sales and we balance and able shareholder volatility XXXX reset forward of the at maximize some of less associated to that with liability have working means dividend, In we the book that price beyond really we're accomplish a discount all really we solidify XXXX junior exposure of and to exist of some aware to bulk it's risk move board these then the with ways and now the having working extend to equity. try liabilities and side in the maturities options certainly And today. and

Finian O’Shea

That's you. Thank me. Sure. helpful. That's all for

James Keenan

Thanks.

Operator

Morgan. next our from from take We'll Shane question Please Rick ahead. go JP

Rick Shane

Thank and not but Nik. all that best is happiest list, you to waivers. guys. so luckiest sure think wanted who's talk Abby point, on the you Mike, fee about incentive I'm Mike, the I of this congratulations the I everybody, to and wishes probably to at

investors, to value in incentive an continues book made inherently, to be because effort do fee. support fair here think the decline, interesting problem in effort At waived equity. have $XX you And hope have million an about since here in You I $XXX XXXX. the what guys that's same been But to of incentive that you cited you decline million by there that. guys that with dividend coincident is the your generates an about time, to is it made flexing think – fees that that is

for construct it, throw that opposed dividend sort upon so protection? a as optionally a they give to shareholders you mechanism waived And you've have of lie where this

James Keenan

back would take reorganization. step are looking obviously or illiquid this say I are Obviously, which in there. I complex at a and did restructuring Rick. restructuring this, many the minority stakes book securities, is of when these Thanks,

So it has taken try time that to some exit as declines. say, certainly NAV fairly to come has a monetize. or amount you significant alongside And of significant

this good a of path very majority quarter on and to we're and think in to of I the try highlighted again, reposition able those kind exit this be to portfolio.

is, board although to that work the has kind several managing work recognized continued working I they of know, a complex the of we that to trying of out this have with securities. the last process alongside declines been review the with lot understand over you understand from annual we to net NAV years, their that board. as us and that And some we've that. are think and understanding the this, associated to legacy And debt of paying

line structures So I which declines. That book. incentive the the restructuring associated something, being our realization is shareholders it to an that standpoint was though line, with had generated working with fee this in recently. approved That's it's still board, think the in the the of the experience NAV even BlackRock fee And said from fee, of is not regards to of our the losses that to partners that market. of associated the with and and our structure book

with So board. we've our worked

looked take and fees not that. associated have to performance We out tried to

shift would some And And a and lien deliver exits I it's I this our assets. say, we'd to those waived portfolio a goals that associated take we're more restructure stable a back itself. on in hope few little into because that of a years, So are longer to mean, when BDC forward. income stream. mainly portfolio, these a this to have BDC completely generally we stable that, the taken of that bit can completely the to back first to putting we'll work into XXX%

the structure for So with both we fee board to the our base. work regards and the to what shareholder continue experiences through

Rick Shane

shareholders. And that I as grows, inherited sure accrue for to realized of dividend because investors to NII that perspective. company actually none that see that that's that weighs from that I'm some having fee upon in it's income one is Understood. a turn and growth greater that's of think I years off the decade, to challenges, stock are My And actually been concern you potentially of growth. shareholders. to for these waiver, the frustrating but grows, the need XX look, extent that And the followed will for transition get incentive even things the earnings benefit my

James Keenan

where a hope think XXXX right those. XXXX losses mean, on outlined exiting keen to I what underlying now the environment that of so, the stabilize all will into factor we're from to we those on that as then is. again, get to to of of market the be, are first lien potential NAV realizing And lot these I are investments. LIBOR said, are, the portfolio things where are And perspective, some our depending spreads where in That then what But ultimately, try And decline. set this – NII to being the be will – I try and shift can NII stable changes occurred severe we to like of where declines. with going of the the largely we're through by to of can't be obviously, the think, or determine market just off potential ultimately book. also had be will going experience, a reducing several that generation to NAV that one that more diversification, level and will first two we've We're names NAV will is. potential help take names having into that where full based past that environment NII you continue so wouldn't shift lien this the And experience that have

now So book. order final of that's are but reposition book is in stages that of certainly than time, the off legacy aggregate that is taken the portfolio. X% to in just is think our of basically based less of that we the it focus I kind And

Rick Shane

appreciate Thank guys. Got I you, that. it.

James Keenan

Thanks Rick.

Operator

over additional the does to would turn that or any question-and-answer conclude remarks. for call management closing session. I the And to like back

James Keenan

his roles. to healthy to restructure patience I'd Thank everyone continue Thanks thank this Also Abby retirement again. and And on Nik all for your and portfolio. you, in stays you hopefully Pungello operator again and support this environment. their to and like as and just welcome again, Mike thank finalize we

Operator

for today's that And you participation. does conclude Thank presentation. your

disconnect. now may You

BlackRock Capital Investment (BKCC) 5 Nov 202020 Q3 Earnings call transcript