BKCC - Earnings call transcript Q2 2022 | BlackRock Capital Investment Corp

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Operator

Good morning. My name is Justin and I will be your conference facilitator today for the BlackRock Capital Investment Corporation Second Quarter 2022 Earnings Call. Hosting the call will be James Keenan, Chairman and Interim Chief Executive Officer; Nik Singhal, President; Chip Holladay, Interim Chief Financial Officer and Treasurer; Laurence D. Paredes, General Counsel and Corporate Secretary; 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. Lines have been placed on mute. their session. will complete for their speakers question-and-answer a the update, open they line After Thank Instructions] [Operator you. Mr. may you Paredes, begin the conference call.

Laurence Paredes

conference earnings or Difficulty] call Capital BlackRock [Technical Investment BCIC. of Corporation,

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

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

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

James Keenan

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

in questions. ongoing the portfolio building We momentum and call will quarter adjusted favorable progress our risk for by to solid deployment strong that returns results, generate shareholders. We highlighted another open a delivered then our of diversified

from by increased prior XX to with quarter. from companies, of XXXX and of leverage during driven We at XX XXXX. a X.XXx deployments X.XXx, XX quarter, companies of reaching at Our portfolio portfolio portfolio milestone million quarter net the new up up the end XXX the in the the added second at $XX end of

XX% metrics of at the We of that and consists Approximately high BCIC comprise towards pleased XXXX. demonstrate down end portfolio advancement XXXX. a from X% for investments, report first Capital our are our to the construction of only investments Junior significant from also point our at of investment lien XX% portfolio, XX% now goals. substantially up portfolio of end of

missed Let's I turn to backdrop current now positioning. the end-markets. our economy the of portfolio

including consumer U.S. on job increased a and year-over-year. footing, some market remains measures sound spending indicate While the economy robust

We or rates, driven possible mindful by about the levels. rising interest unemployment recession are of a and potentially increasing concerns an and impending inflation slowdown

in inflationary tested macroeconomic on the that on the and positions less on well proven remain rising slowdowns along seniority a focus broader committed investing and our that selective cyclical scenario. underwriting time better with economic emphasis capital through pressures, withstand in underwriting to focuses able Our based approach cycle. We rates, to current on are companies the credit structure analysis us

evaluate and business. with impacting landscape regular in dialogue We our companies is how macro the engaged their evolving portfolio are to understand

broad evidence of half we third deployment are level so continuation activity we first of during of seeing not far, revenue a terms. deferral the seen the margin quarter a payment the signs based quarter we an saw of we Notably, growth that in year. of While loans the are we and had no and/or in deterioration. new amendments credit a names, some resulting seeing no in in contraction In the of non-accrual have slowdown

credit also private We more in lenders pricing seeing to the favorable instructions are market.

debt yielding portfolio or the floating are in the our current [floors] market. of [ph] SOFR XX% which investments their have substantially in Additionally, above a LIBOR all rate of coupon,

We be accretive rising to to the environment portfolio expect rate income.

we our new be our in coming true further to through turn As coverage the will for to detail. opportunities provide to our we pursue stockholders we and over as NII the proceed, remaining believe We call now I'll compelling quarters. portfolio this discipline. activity while dividend Nik underwriting discuss will progress to accretive increased

Nik Singhal

primarily Thanks, our Jim. re-levering towards the by diversified lien seeing investments. goal of We're first of good portfolio a book momentum building

new well. in an portfolio X.X to the source our realized continue went investment. and know This companies of by investments remaining and four dollars across existing in strategy. quarter XX% million. XX% Company were was along XX primarily lien on consistent first paydown investments an quarter, Follow-on companies. $XX understand investments X us with with into million second portfolio the these important the investment existing be are companies quarter the portfolio existing Repayments already the legacy average during of deployments were new XX.X%, Finance a for realized Brothers of with in into relationships. deployments XX% of and During the as businesses were the we Gross IRR driven opportunity Gordon new

healthy range pipeline have of We across of wide a opportunities industries. a continue to

over no closed a So, second steady close. the transactions are quarter there seeing subsequent deployment Whilst pending that the investment approved or our either transactions we're has be can pace. far all that assurances $XX close, million quarter, to committee third in will

term customer $X.X first solutions. InMoment, X.X% lien commitments loan revolver to Inc., solutions. [ph] term X.X SOFR Kaseya million term of management of lien Our and loan three of provider global company X.X the management lien of provider [become] analytical experience first SOFR million software. unfunded provider million million unfunded IT X% plus included new following: plus of largest $X Cloud-based software portfolio to a management to million investments a Inc., a A compensation and and an $XX.X plus X.XX% loan SOFR first

BlackRock's Funds term in of sole and deals scaled primary platform. investments, to company two lenders the loan the the of access the these from company highlighting were benefits other to Importantly, BlackRock

X.X% in per share by the impact spreads of market. NAV valuation declined wider Our largely credit quarter, the driven in second the by

we previously no mentioned, new modifications the or nonaccruals quarter. during payment had second As

with deploy objective become focus core income low seeing in of remains stable re-lever this that to Our NAV attractive our consistent opportunities we more and deployment portfolio. volatility. the market We're as the capital

which We increase the this to As a NII leverage that goal further normalized results discuss over turn having believe Chip power gradually quarter. for enable over to our declared we result, levels us call our fully to will time. earnings in per to we the with $X.XX grow more eventually our financial at I'll share now dividend, core to the of expect cash.

Chip Holladay

fee take per from now to financial for distribution quarter. increase minutes NII to share, in additional Thank the a gains XX% on stockholders you, an such $X.X million quarter, Included XX, previously ending for incentive capital gains few gains GAAP liquidation results declared million the required review of or GAAP. hypothetical our XXXX, prior and incentive fee reversal, $X.X a second quarter. up XX% was GAAP advisor. approximately With balance to the Nik. $X.X under fee this payable BCIC we accrued was will was accrued reversal quarter. some the results June annual coverage income was $X.XX the million zero the net on I from covered basis of no second a incentive investment the measurement and prior of by the capital in quarter period XX%

prior quarter quarter. the was reversal, adjusted slight million, $X adjusted NII second million Total for quarter. income Excluding approximately a or prior for investment million $XX.X in-line the was our increase with results from the gross in this per share, $X.XX earned $XX.X NII

the other approximately income had $X.X against in and fees one During time of prior $X.X the company the million quarter. million quarter,

Total originations $X.X capital expenses well first for during yield to LIBOR as driven rise Excluding average largely based The gross and net quarter grew SOFR wider accrual. income new by fair increased decreased as was incentive one-time slightly end. from in the weighted up fees, as a quarter, of our X.X% spreads made approximately of increase reversal million company's the rates, the X% by quarter-over-quarter. on fee XX, prior X.X% we on June by quarter. gains value This of investment driven portfolio as the

Excluding were no debt three roughly the quarter, unrealized impact non-accrual second were partial as to of X.X% of to non-accrual Net our primarily value, quarter, during general the had quarter. widening our repayment losses Brothers for of portfolio investments representing due the position the million realized of $X.X March such during market the reduction no unchanged. investments, portfolio's Gordon an fair end reversal, This the million improvement attributable unsecured total There company was and expenses or were the had Company. from Finance on the quarter. in At losses The the quarter-end. $X.X spread portfolio X.X% the declines. of new of gains

Our weighted borrowing the leverage approximately slightly XXXX restrictions. and June deployment internal X.XX, At X.XX improved total value $XXX quarter-end, rating average available including million, fair liquidity at to to to portfolio prior the at X.XX to for compared quarter-end. base from compared subject and declined and cash-on-hand quarter-end, was

was deployments quarter, prior X.XXx, to up at the due leverage net ratio quarter. X.XXx net Our the end from of strong during the

credit proceeds, their X, As a million notes unsecured June on on notes of previously date. the senior under maturity June used XXXX the our convertible we as in of facility million XX, to as $XXX.X repay outstanding notes $XX availability issued well placement announced, private We XXXX. unsecured

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

X.X repurchase approximately buyback for XX, remained June our of program. As current million available under

distribution to at yesterday, of share paid XXXX XXXX. close quarter per like September on stockholders third be we back Jim. to XX, declared on of With X, October that, announced would I record a to the $X.XX call As turn business to the of

James Keenan

results growth to would In to underwriting, portfolio stability, summary, and solid for to NAV now our for shareholders reliable like Chip. their we support. open you, produce thank Thank income, diversity, shareholders. With and we questions. for that, disciplined emphasize We continue call continued our the prudent

Operator

we JPMorgan. you. Melissa Wedel Thank [Operator with go to will Wedel JPMorgan with And Instructions]

Melissa Wedel

taking for questions morning. my this Thanks

hoping to portfolio at about that power progress driving I on the at of like some sort you're the on drive was was re-leveraging level, seeing that to what an that like into some on of least trajectory your do How how and portfolio. what earnings? could sounds pace, first will year and bit I think get earnings incremental start. and potential of the start, It in originations, the continue to mean think coverage? follow-up I'd thoughts for half back to you dividend of quarter incremental a leverage the little net that active

Nik Singhal

what the spent last a Melissa. just quarters had the And Hi, Nik. be. we great to This XX% first our really rate. just book we first the is we now in to of equity question. as to XX% is repositioning take X% several and relevant as that second and we've which result, construction like liens Yes. are is The mentioned the very unsecured portion starting portfolio, combined would. step out portfolio look and a book And non-core That's X% set a of and is of back, lien lien is

that fortunate repayments We grow X.XXx time And out million market. in the becoming conditions good leverage pricing the from to still from improved had friendly. everything we do our are year. that to momentum redeploy which QX. of Recall we've so of seen accomplishing to gives deployment X.XXx, more at grow also a really We're So, seeing when room half able first plenty us some portfolio. market the George lender We're really in that and of in do. to we to the St. the were set $XX

before think basis, on take [OID basis and yield] I more to LIBOR increase if investments you [ph] interest any structures, lender in points of of and step we're so points new incremental far and seeing fewer that's XX benefit combined rate documents. seeing basis downs both XXX we're return friendly

deploying scale BKCC BlackRock So, of benefits from into. And really the the good platform. really be environment a to

very be a very expertise, industry our to allows have funnel, abandon We and discipline. which prudent not selective, credit underwriting deep broad us

to of say, the pace that point to out very not million in the would mentioned of pending we is to when deals seen say, quarter. can mentioned are might margin second I basis also yields I did to XX SOFR gone SOFR, say approved of And remarks a it we but deployment basis better mean, guess have up close, have last I as necessarily out yields, LIBOR or end the we that of would XX I on which to either quarter them that market. months than comes the since XX even directionally close, about June So, all the points similar come months trending quarter. the we the closed $XX prepared I that XX they've in I points in about since end are the and and we've

So, to your your well. of happy question. hit upon other hopefully addresses aspects We're that's, sort of question any as

Melissa Wedel

Could Thanks, Can about what That in tough that actually investments? needs between I'd you made prepared of more bit? versus helpful. portfolio assume on for environment expand an your capital incremental existing I financing that call that and pick little was remarks and new how Nik. sort make is think and a new the of driving, to on that you opportunities and investment in you'll comment you elaborate existing might a like be fruitful actually attractive and likely between, a through up going on distinguish forward. allocating source earlier companies maybe bridge distinction being around

Nik Singhal

and Yes, we [ph] work provide businesses. portfolio come roughly We rate private context then for sponsors, the when grow XX% [sponsor from it strategy of is been where Most credit to in platform buy companies this like start a initial risk private been to that relationships. absolutely. making platform. really and here, And tend We proven mentioned to often by in was our plays investments have two with historically backed] of platform opportunities we or grow a been for one our thesis be acquisitions good maybe XX% than sponsors again, That's lot rapid sponsor of that more that's investments. percentages, quarter it's was incremental equity and and will acquisitions. that actually finance two-thirds, look the And also. businesses a strategy sponsors book very to really our like the make leverage that incremental that more two-thirds to at we more subsequent they a very then follow-on

XX%, I that's to us. and deployment good for really think opportunities typically it varies a XX% of additional from source

up a in We situations. have investment them. incumbency the then of also invested we've businesses close to at these And chance look these advantage having had in

I how following contextualize investments that's So, the here. would

Melissa Wedel

Okay.

in taking environment Nik, of So some could need What that bolt-on than, portfolio sort just heard financing amendment some of of more you're if stressed bridge companies what financing? deals doing type talking recap and perhaps advantage there. a I companies sort and of I volatility rather scenario about is, the where some some, need M&A might

Nik Singhal

Yes.

So, certain where in volatile you're most if there Melissa, works necessarily place smaller I works think you equity this many or want Actually, consolidate private a subsector sponsor, a it niche markets, right? to a players. market. So, are not in

works of down and with off acquisitions maybe or It then play. So, in two they'll of additional keep acquisitions not actually create, start to sort one making just cycles, cycles. very role a all well

a opportunities down as more sellers willing to maybe become bit sell buying are not to even could in it tend slow though In little cycles attractive. fact, down

really our the view this feature benefit platform as and So, not volatility a of ongoing the necessarily that we has in marketplace. current an

Melissa Wedel

Nik. Thanks Okay.

Operator

Thank session. you. Instructions] the does now question-and-answer the [Operator remarks. conference or I'll over that closing additional to conclude you And for back any turn

James Keenan

end can operator. to and you, questions, shareholders like their further I'd our for there the we continued support Thank just thank If no are call.

Operator

for today's your that day. Thank do you. does participation. And excellent conference. thank conclude We an you Have

BlackRock Capital Investment (BKCC) 4 Aug 222022 Q2 Earnings call transcript