BKCC - Earnings call transcript Q1 2022 | BlackRock Capital Investment Corp

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Operator

Good morning. My name is Alan. I'll be your conference facilitator today for the BlackRock Capital Investment Corporation First Quarter 2022 Earnings Call. Hosting the call will be James Keenan, Chairman and Interim Chief Executive Officer; Nik Singhal, President; Abby Miller, Chief Financial Officer and Treasurer; Laurence D. Paredes, General Counsel and Corporate Secretary; Chip Holladay, Managing Director; Marshall Merriman, Managing Director and member of the company's Investment Committee; and Jason Mehring, Managing Director and member of the company's Investment Committee. on placed been have mute. Lines complete After their they open update, for the a speakers lines question-and-answer will their session. [Operator Instructions]. Today's call is begin recorded. Thank you. Mr. begin may you your Paredes, call.

Laurence Paredes

conference welcome quarter Investment Good the or call earnings Corporation, and Capital of morning, BCIC. BlackRock to XXXX first

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

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

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

James Keenan

update overview with our joining earnings provide all Good detail. call. status. follow Larry. in you, an the financial will on for thanks an to a from first our portfolio quarter discussion and you And will results highlights Nik activity more give morning, Abby quarter. our then I'll Thank of and and of

capital the of I'm the quarter. questions. on first a In we XXXX. at keeping of substantially return portfolio building from new the reconstructing XX% on all NAV footing, consist the senior throughout will investments, momentum focus generated the made call this loans. of in end in diversifying We deployed pleased a year to and on secured of and now started have goal XXXX $XX progress We and with on open XXXX. million Approximately up we the solid then of delivering our the of stable up first the of We of with equity. XX% with the competitive first XX% close consisted lien at from lien the debt, portfolio

up to and new broaden nine investments XXXX XX companies, end strengthen quarter portfolio to of portfolio. with We from the XX we our Additionally, portfolio companies the the the at added XX and further XXXX. at ended of and continue diversify end

equity more committed robust profile, on through strong interest support. a underwriting over-leveraged pressures a that generally focuses We investment favor and with from We firmly are prone ability performance through rising growing We to increases and cost cycles. structures the economic industries revenue capital to pass rising businesses to non-cyclical avoid rates. inflation approach are and that

close was first as in healthy new all new down investments exceeded a X.XXx repayments investments. XXXX, leverage There quarter, are Net non-accrual result. of X.XXx of remains XXXX. from quality credit no the of the as Our and at

value. previously logistics, three which the as company has St. included While fair exits the names, George there company quarter, of portfolio portfolio only at X% they by portfolio the largest larger the of were some total such during market

to of any hold be realized that we more George investments repayment of period. going on the now IRR its over anticipate St. XX.X% many in exited, NII investment concentrated With Our muted impact the four-year provided a single forward. more issuer

We as ample capacity discipline have pursue we growth. portfolio leverage

solid compelling returns We to identify we will new be drive and NII confident accretive can for that adjusted our risk opportunities are shareholders.

the We a expect to coupon, debt which in floating rising investments interest floor NII. weighted of the average LIBOR X%. XX% rate SOFR XX% of have our with to be portfolio rates of or accretive have company's a the floor

rates floor benchmark rise per As rate XXX these being equal. all to level, above for we points approximately NII expect by of increase, every quarter else $X.XX the increase basis

thank contributions it BCIC. to CFO pass Nik, and as a treasurer Abby take over to want her I I Before to moment of for

in endeavors. Director best. now turn the to is reported, Managing call we previously BlackRock role, the well to further step joined XXXX. qualified X wish this CFO is to we Board will roles Singhal as portfolio having May the other I'll serve in in our her Chip the appointed Miller into career have We all detail. effective Chip Abby confidence the Holliday with interim has down to and advisor pursue to his activity The step on X. May utmost As Treasurer, and from her abilities. discuss Nik over Chip

Nik Singhal

you, Jim. Thank

portfolio first completed continuing a investments. of diversified to lien build and We work our effectively derisking have the are of primarily

new approximately going into XX% were existing quarter new gross quarter, all were to in the remaining of our nine strategy. portfolio existing deployments and during portfolio primarily of of the During six new this substantially with in the with companies With respect Repayments originations, XX% deployments consistent investment to companies $XX investments we quarter, relationships. and $XX first first the lien the had million. million dollars across

Jim across quarter. names large an As to this portfolio, for the the three be to number leading mentioned, in happened elevated

our repayments, declined As a result size these quarter-over-quarter. total portfolio of

Our opportunities momentum. industry so continue seeing we're In the of healthy, far, from to sectors. we good pipeline second range is source deployment wide quarter and a of opportunities

provider that lien term with additional approved pallet our a equity can term While brands earnings found loan $X.X medium-sized and term Amazon's The of first $X.X quarter-to-date, all including a to X% first can of an totaled assurances prominent this close, third $X.X investment million there $X.X Elevate investments, SOFR well quarter estate A loan will and consolidator small Brands, million release party transactions be term that commitments with sell be in to first Greystone A details unfunded lien wood $X.X platform. no our the solutions. X.X% a in unfunded plus term unfunded $XX following. approximately plus a Company, of real SOFR million. of million loan all warrants investments million plus lien investment $X.X recycled transactions A more as million million loan through in to XXForty, the as Select loan SOFR firm. committee X.X%

highlighting in of company these deals the to investments, were scaled access the two platform. Importantly, of the BlackRock benefits Funds, including lenders the company, proprietary to BlackRock's sole from

notes SOFR-based June issue notes the million an prior swap into the prepayment maturing announced, first we to of for aggregate on execution including $XXX on as effectively revolver These under the XX, debt, our $XX features, proceeds fixed the XXXX. simultaneously XX, We an its pricing the We disclosed pleased previously XXXX. with in a on the our entered amount notes private of June availability interest tranche and convertible a funding are three We're filings. rate which have is tranche obtained which into principal April from convert years rate notes, As $XX anticipate we the placement life. market access million million. the X, as date our outstanding using XXXX, in to redeem of well to

our focus core and stable Our volatility. deployment is objectives NAV of consistent low with income

to are our We grow year, extensive ability this our provides. that optimistic of opportunities the platform portfolio given about our broad funnel

more call with disciplined of manner. our further will per a in so earnings next over financial for enable our do share NII to gradually cover eventually to levels us believe declared normalized cash fully to dividend, this goal core several expect we quarter. row. And in We average continue to the will $X.XX the quarters. turn a we grow We sixth to that now Abby to a the results result, the having I over quarter which discuss as the will our for in increase at the

Abby Miller

the take financial I'll Nik. first you, few additional BCIC some quarter. review Thank to results minutes for a

into five get transition. and help I Before have to kind I working seamless entire results, a ensure with to the his want for years thank thoroughly team will enjoyed past the I the Jim words. for

financial accrued. a required $X.X fee quarter in X.X prior With million the was such up reversal or incentive first results of the by million gains X.X the $X.XX stockholders, XX, from at per to million accrued liquidation XX% approximately incentive to covered under previously balance a fee reversal, XXXX, X.X a approximately hypothetical was on March was capital quarter. GAAP the capital the X% share, increase gains income basis of results. GAAP. in million of NII distribution in net from the investment the prior Now coverage an quarter. GAAP XX% Included

unrealized gains to However, realized gains period it XX, annual losses on XXXX. the extent incentive ending should realized measurement that payable fees be capital and from June become capital that the noted capital only exceed

For did the March losses. XX, and XXXX, exceed realized period gains nine not capital ended months unrealized capital realized

the per XX.X million capital income due was incentive was NII decrease quarter the gross fee, Total of gains our in to Excluding reversal or previously million XX.X portfolio. adjusted repayments accrued prior share. the X.X slight $X.XX from million, investment net in a

X one-time $X.XX $X.X quarter, had million Total net other per the or also approximately company share. the of by million decreased and During fees income expenses quarter-over-quarter.

three and fee, the losses representing no investments decreased December X.X% the the expenses depreciation X.X value, were of to relatively There new first fair had quarter. X unrealized the quarter-over-quarter. primarily million incentive during of portfolio Excluding realized of end. were end due quarter, the during the the investments, the attributable impact with by capital widening consistent non-accrual for Net investments non-accrual spread total gains At quarter portfolio modest to first the the million at quarter, quarter.

prior and XXXX for from to at end, the our funds compared hand. internal remained to X.XX facility quarter quality and on of end, average weighted relatively quarter position portfolio robust X.XX portfolio available consistent end, credit fair between million construction. we portfolio X.XX and at the quarter of At March a rating had strong quarter the XXX also the cash under liquidity credit value approximately compared Our improved demonstrating

ratio net to X.XXx, down end from Our of leverage XXXX repayments due the at was net the during X.XXx quarter. the

time. return to selectively continue levels we capital mentioned, to grow gradually Nik as we expect normalized leverage over deploy As to our portfolio and

second the of our cost Additionally, during quarter of notes will we unsecured expect the capital. our optimize further that issuance

the our $X.XX price quarter, XXX,XXX per brokerage During an at of including we commissions. stock share, shares $XXX,XXX for first repurchased average of approximately

shares March of million X.X available program. XXXX, XX, the for As repurchase under approximately remained buyback current

of announced X, to would I that, this business like XXXX earlier per payable to $X.XX quarterly on back call close distribution of XXXX. turn the share, to record stockholders morning, With declared As of at a on XX, we July June Jim. the

James Keenan

foundation, open financial portfolio With disciplined growth NAV our Thank you, solid and stability continued diversity shareholders our would strengthen emphasizing In we for Abby. reliable closing, now the thank we income, like our continue to to results for for to support. call questions. produce and We shareholders. that, their

Operator

Thank Wells you, question Instructions]. first from [Operator We'll take our Fargo. Finian O’Shea with sir.

Finian O’Shea

question, morning. first spreads and and investment for market about the volume in Hi, terms migrating? Jim, having for and covenants on that is the origination can on. Thanks so of any you both everyone. forth, the the talk time Good me real the of if pipeline if

James Keenan

QX it of as Thanks, a up things volume a both a January the early was busy well of the year slowdown the as flow February. companies book would on refinancing well in our the as activity end own and the to We've pick There obviously, within I'll of market. and was Fin. I M&A XXXX. call significant started within a as portfolio across see overall was of bit say, pretty very certainly

up markets. obviously, lot a a year. usually while it quarter public significantly the picking terms we more in as and perspective, year a a with private pretty little relative early bit similar of the From to the that volatility see the So and comes markets part and more into actually a the to or takes last there's lag

as market that that see does little about more a bit opportunity Pricing are of we the start a thought view opportunity. the for you about documents. aggregation now. last us we an I and would were right structure up we as concerned the deploy which say better the to to in structures getting volatility If is market, bit, in year, and an soften discipline

deploy into actually So a with a robust good of we really the position right think now to numbers, pretty we're to rest regards here. leverage with in calendar our the year

Finian O’Shea

helpful. Great, then good repay, And thanks. the news. matter, St. that on It's obviously on George

to the share more would portfolio? Additionally, your exit drive et does where portfolio better benefits open, given concentrated, that the cetera any less allocation BDC get

James Keenan

Yes, the add and level. book gone it's with consistent with, obviously, aggregate where at the to we've overall resiliency trying

protection to and the first foremost, structure the from defense. quality line a credit our and and of underlying issuers underwrite First is

is The second the diversification. really

regards moved concentrated more from into to positions George in X%. And X% origination an so, to St. that to regards the we've with X.X% standpoint, as engine book. And we like we've name do that that more with deploying X%, you count in know, the able the had core fashion to from been that kind to in have clearly was, in we've of that

across to you'll the of what over just years, the we've and see more X.X% being into and X% to us course continue and taking been book. George redeploying that So the that from kind increase St. doing more core with repayment last consistent diversification of of really positions the two

Finian O’Shea

environment may, on cetera, type -- seeing or certain a to anything so more little you sectors overall issues. yet forth? company the inflation, Are Okay, on just supply you I what in a portfolio thank you. performance chain, if question, to et headwinds with underwrote final within And and

Nik Singhal

Yes, This is Fin, for morning. Good thanks Nik. question. the

philosophy why also, which think in businesses labor that XXXX. prices. I have our no to reliance avoid have intensive have that's underwriting reason we commodity increases. held do in non-accruals. are even cost And businesses up ability primary portfolio very And is QX, not over are the or primarily avoid new well the Our on structures And pass leveraged, to which on

of are and good we're through our are entire where of bit little our goes Then avoid the here. very of a especially to is those labor margin, been most seeing we little ability to see bit be It's portfolio when companies our situations BDC. outside there will do do be goal we getting in BDC, increases. pass pressure upside As has our is the on the might margin companies risk across, always review portfolio the where down. at And that companies, portfolio real. But cost component structure higher. a disrupted a cost inflation In

Finian O’Shea

for Great. That's me. all Thanks much. so

James Keenan

Thank you, Fin.

Operator

come JPMorgan. The with line of will next question the Wedel from Melissa

Melissa Wedel

everyone. Good taking appreciate questions you morning, my today. I

answer your pressure X Nik, some was companies X. curious of seeing that if margin portfolio that some a there, in on level Grade are just related I'm Following Grade shift the to of versus

a bit assuming of that just came bit. the driven be most X X might came into changes. driving Q, I little by Grade then dig those just understand that at incremental down Just looking you're what quite up portfolio And that a Grade exit George. seeing hoping of of in bit. a I'm St. and was the little was to kind the

Nik Singhal

Yes, Melissa, question. great

exiting, arose Obviously up. of migration. the a huge all, George It's two that down, goes of very lot a go a from graded St. migration correct migration. absolutely First the percentage that names you're not denominator a basically It tiny name. graded of which was one was when

the our had our arising we in Overall, very which of also our levered been margin core our portfolios. we a that loan the lien, really transitioning cannot seeing support not not the focus from is to would I in that, philosophy, behind portfolio, really would any through pricing further very are XX% And adds add us situations our with concern strong book to I values number that's has really that say equity to do portfolio. to think resiliency are And conservative speaking, [ph]. have in systemic now small I broadly book. migrations over first look, And idiosyncratic really I reiterate, again, just of very of are function credit our think were just avoiding or In inflation power, pass compression. the issues.

Melissa Wedel

missed then, Okay, appreciate got I'm And not sure if it. I that. I this.

On particular the income. repayment exit, St. or outsized any George fees did drive that

James Keenan

Abby, can you chime in here?

Abby Miller

fee the Abby. impact. to is it Yes, one-time income. Thank the just a Melissa. one-time bit for to the total This for little up quarter, of approximately did per recall, one-time question. other income Hi, $X.XX fee of you or And share income drive

Melissa Wedel

or point been in for Got we there foresight are of that that quarter? that that. future repayments aware doesn't at thinking should it. by into visibility Is a terms more of repayment the activity committee the of you this in me. into definitely of final And quarter-to-date. anything we And least with be the might lot a amounts have be a then at impact necessarily about that and that March one lot insight portfolio approved the appreciate appreciate come I like investment sizable the saw

Nik Singhal

the right, you repayments our to sizes in average When tended Yes, I years quarter. a long-term look historical just always have to some are be there at two say three average. normal course, performance, core every Melissa, would on

In two expect exited slower. the rate of To more were other just don't impact larger that we change. the become is their muted. are having also St. other benefit probably refinancings there going to be George future a then So that and repayments, extent And rising environment, to possessions. the names incidentally

any so okay. that We one far, names may haven't had the repayments always around buzz in or two refinance. quarter There's

will that as do cost the of to but sponsor us are the right now. lower, feelers and aware give capital business opportunity the Sometimes grows, becomes significant we nothing that, of

Melissa Wedel

Thanks, appreciate That's very helpful. Nik. it. I

Operator

looks like further questions time. at no we it this have right, All

additional like I'd over remarks. turn or to closing back So to it speakers any our for

James Keenan

we're deploy set that, Thank lot you, portfolio the We think leverage continue into continue NII. positioned the grow thanks a to ramp and of up well for to up the in are seeing obviously, very and this and market. we of volatility kind much to questions. to With do

fully our portfolio. to And everybody's we of call. team, you through huge call support that, the we on well the end with as appreciate a transition overall to can continue the So thank get as the and

Operator

thank conference. That for your all conclude does We you today's Thank you, participation. sir.

You may now disconnect.

BlackRock Capital Investment (BKCC) 2 May 222022 Q1 Earnings call transcript