TCPC - Earnings call 3 2023 | BlackRock TCP Capital Corp.

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Operator

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp.'s Third Quarter 2023 Earnings Conference Call. Today's conference call is being recorded for replay purposes.

During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the company's formal remarks. would Director turn Capital of I to call Corp. now McGlynn, Katie the Instructions].And like the to over [Operator BlackRock TCP Investor Relations team. proceed. please Katie,

Kathleen McGlynn

Thank Alex. you,

Before not of management call the time this based note statements the future at we and performance. such forward-looking are on assumptions contain of statements conference and estimates of begin, I'll guarantees may that

today actual statements Forward-looking statements made and Any materially forward-looking made from without this differ subject notice. as involve risks are of results and change to those could uncertainties, are on and call projected.

the Additionally, certain warranty presented XXXX. XX, Accordingly, may been derived earnings such been third we and have for we respect verified. with sources has quarter information discussed today, ended independently or and from our information.Earlier third-party September representation to make no issued not release

should a documents the select call conjunction supplemental with and today.I will which turn now These presentation, presentation click on Relations earnings which with will the the website to the SEC Presentations. today's our please to we filed Vig. XX-Q, Form view To at call, Events be CEO, also Investor over We and Chairman was posted www.tcpcapital.com. & slide refer Company's earlier the on to in our link Raj reviewed

Rajneesh Vig

positioning of joining post-merger Phil with and the then results September. over portfolio an Tseng, Cuellar BlackRock thank will Officer, was proposed in in third the update before recently final I reminder That you greater a TCPC and with Capital for activity.Our Thanks, will our results I your BlackRock I X, Katie, liquidity of our September or on quarter as financial Corporation. announced will President Chief review to quarter investment then BCIC. our BDC, capital prepared announced call Erik all us out then our earnings with we and a Investment turning few our will a Corp. our Capital overview with merger and third as provide we and detail. XXXX, close comments our review before who Operating cover take call. for affiliate our CFO, remarks of On well XXXX TCPC's begin will call questions. the Investment

many the compelling been that announcement, two TCPC is very very portfolios both know will and platform broader logical the the for step at billion evolution business value well BDC time next highlighted for BlackRock's We growth about natural $XX a and the believe we merger, shareholders. As strategic the of merger combined proposed transaction managing growth the investment as it debt years sustained similar company BlackRock.What's create for a team global meaningful proposed especially and in combines at private of and portfolios now. is has the our collective position

the expected operational energies, a transaction to As scale, and in enhanced that is capital to result cost access improved a terms. combined company on reminder, benefits from better

shortly share, shareholder net of respective of remain and value that Officers will shares value net on other for issued will close newly is investing also The ownership the BCIC's shareholders be each will change asset necessary to NAV the asset approvals, that any TCPC's and regulatory conditions.BCIC net NAV values the to combined BCIC's will TCPC common closing an and closing. of proportional and the before share, Officers will subject following will each divided the asset by company's ratio per approvals, to stock TCPC split that our strategy the customary not approach of a be of of of determined transaction the each investment per based receive proven to We exchange, anticipate result NII.Importantly, TCPC transaction overall combined the company company in accretive transaction.

of supporting below is the X.X% BlackRock of to of ending Advisor, a or TCPC's shareholder reminder, advisory X.XX% fees equal net via fee reduction to management with verge -- the from assets measures, quarters added first several any XXX% income the for in for four transaction waiver a of an of including assets. the friendly As investment investment a in quarter.And coverage during agreed Net less following per assuming closing. advisory any is approval maximum both costs the up up than such to In for shareholder BlackRock quarter merger the for $X.XX $X of the fees net event million has XX% combined earned share the capital a companies cover to to such income of transaction. finally,

first conditions. in transaction shareholder and expect to and We the close regulatory the approvals quarter subject XXXX, of closing to customary

back third income quarter get approximate the share, a the of normal net delivered in review quarter.For increase a $X.XX let's to from of year-over-year investment return programming per current representing the an income highlights net XX.X% Now TCPC XX% equity. investment and annualized XXXX, of on

liabilities are to the third fixed continues in rates history income Given quarter our highest wider higher net as proportion our the of higher was run the nature at the floating as benefit TCPC's NII the rate rate, our rate portfolio public of end base as of well company. investment a among marginally and from spreads.Our again

December of December earnings additional XX XX.In of board on to addition, an record December consistent quarters. the fourth the with acknowledgement of December four quarter XX announced dividend increases shareholders the dividend, is third dividend to quarter board also inclusive share payable shareholders fourth two on dividend of of The by strong per over which date, declared as payable last record to $X.XX Board special on Our today of Directors $X.XX TCPC's the an XX. per on of the declared quarter share and is

percentage more from TCPC's modest an recurring in activity approach covered a and but taken quarter always a recurring detail, have discuss our investment stability the summary, income. dividends a reminder, In we Phil emphasis dividend in on will few a We coverage strong our as third to history, with consistently income. have investment And disciplined we net minutes, with investment our throughout although to reviewed towards saw the we quarter, And are our opportunities with a of invested the in the the agnostic transactions given approach our volumes of quarter. disciplined in the benefits uncertain in consistent pick-up this equity of reminded volumes, remain in muted sourcing. of private slowdown deal we small channel end remain the activity, environment.We deal and only historical in

our relationships market Our more middle teams and of declined pipeline of six our lending various X.X% and over benefits during draw general NAV in ability XX from to cycles marks other with Erik to our this on the will of direct reflecting years participants markdowns upon power management industry which unrealized quarter challenges. reflect unrealized volatility platform.Our the developed the isolated positions, BlackRock performance across in more and discuss quarter, the some market The majority these primarily detail. than

do the we Importantly, longest long-term to third to value. direct of remains to that well solid, investments We results be continue deliver foreseeable deep total companies with future we knowledge for and track rates, believe portfolio of we positioned like periods traded to on elevated three an fair believe one we lending a a given BDCs.While will of explicit rate portfolio us resulted quarter performance market loans portfolio uncertainties slower totaling the This range publicly this investments with in remain X.X% do industry our general. records in our solid are of in the cycles. experience as of in in persisting. the these results our that the macroeconomic have has continue our at and historical end forward not in team we provide throughout of have at of strong various and and any advantage of an growth just The beyond environment the non-accrual, quality confident credit

a historical public direct our XX.X% are volatility.Looking generated a shareholders reminder, more our special exceptional We us back while substantially we invested since investing believe complex total well this of return of to to of return a company, peer of which environments remains it rates than we end demonstrated have our ability also experience situations in X.X% we our annualized periods the positions a our were had believe which much As team performance let at they market at and portfolio identify as XXXX, in our over prior group has Phil have market a and discuss positioning. navigate and assets as consistently today. on annualized it premium cycles.Now to base to me to have at reflects high and turn we activity lower deliver attractive yields investment opportunities market across returns performance delivered

Philip Tseng

providing on the activity comments quarter. few environment and before update portfolio a investment our investment with highlights on start from third during our an the I'll Raj. Thanks,

in driven As economic transaction slowdown Raj uncertainty market has noted, volumes this year. a

to to-date.We quarter companies. end the quarter in pickup and activity the non-sponsor transaction the third modest fourth of are into in towards saw as existing we support seeing portfolio However, opportunities refinancing of including continued the pockets volumes

two believe we a which companies, meaningful four track million the invested leverage opportunities, in quarter. opportunities we reflect current in reviewing loss terms TCPC of enables of protection.We four over provide the but of as a of been number in when However, In the quarter, we Deployment emphasize lender has not loans. long-term factor our significantly protections.In remain $XX senior loans less existing that the believe in field are million, positioned included conditions adequate third particularly rates to downside the that market invested key new market, decades disciplined appropriately and to primarily and influence, and from continue not of pass the negotiating we our this transactions on in secured substantial or coming new does providing $XX conditions lender attractive second low realized experience we terms the quarter pricing when believe record. to to us

value borrower's provides our industry which addition, two specialization, In well, benefits. are as key

half execution.Follow-on it reliable and deal value investments existing and capabilities deployed and important assess sponsors our us. were in credit documentation. negotiate in which experience, last TCPC's our the approach solutions million. industry and the senior First, healthcare overall loan lend Nephron to overall affordable, third company's generic Pharmaceuticals the source lowering in third portfolio bolsters new to efficiencies quarter our dollars with lien suspension with view months underwriting, be holdings for and products. opportunity ability on or terms a And our safe, focusing non-sponsors total that quarter we aligned of an who to XX is, continue term of expands this when itself largest developed investments mitigate second, effectively over quarter dispositions inhalation in first the Nephron in healthcare support system.New cost to investment $XXX with initiatives. future building the by lending, We of to companies are growth the investment it offset with being secured the companies. our About more existing of third the in that during were to sourcing

Our emphasis is models them on companies business customer resilient. proven bases core make that more and with established

We continue our engage to with portfolio closely dialogue existing in monitor and companies.

relative result, the of current the to environment, a uncertainty of credit us and inflation underwriting As the and issues.The deliver both margin economy, companies portfolio and assess are navigating enabling and performance they rate to assumptions, original revenue growth any successfully our projected majority continue potential expansion. get we higher ahead in our general to

the We of of growth margin owners are working closely slower for revenue facing that with pressure. the companies are management and team handful

range has recently investments portfolio across diversity of values and our $X.X secure are we report XX% approximately industries, our risk. of wide concentration good portfolio process, end, spread market completed shape.At were debt minimizing our in that quarter and a saved However, providing remains pleased portfolio review quarterly billion. to of our fair

emphasize chart of one in company portfolio, is portfolio the average distributed end companies from on industries. consisted not any on less XXX income recurring investments at portfolio broadly $XX The our and across income X quarter and the companies, to cyclical continue million.As investment relying in presentation our also illustrates, was Slide our We company. of is

effective than more had our our to firstly weighted XX.X% in the exited year less quarter and effective reflecting increased rate important yield portfolio our our of benefit contribute higher on floating effective spread higher XX.X% provided weighted of And environment.The XX.X% debt of investments. investments our on rate Investments rate benefits XX% of yield companies compared in average XX% debt investments portfolio than the recurring exceeding in each wider yield portfolio ago, the new new of debt significant X% fact, In protection. this average overall and positions. are companies with are one XX% to XX.X%, a income. base during downside

as terms with While market and relative underwriting we pricing product market position. as in in maintaining to relative to It's customers liquidity improvements we friendly insufficient the quarter third including been the year, lingering both the is over the changes investing quarter.Let quarter modest aligned to To and do buffers across from with right can while that selectively, our activity environment. in in without are well Erik provide our in observed companies a yields build environment prepayment profession. inflationary income ago.Post walk the costs earlier higher had overall generally now spread to capital results more important to note some contraction no date, macro it to companies investment not we end, a investments we they loans.Our We our mindful seen to in that our ability the emphasize have turn XX withstand of in pipeline more in lender seek also we the to benefit have our and portfolio. continue environment, resilient that to ensure discipline, We being on our impairing are to necessary pipeline their or an have cycles. financial a current service take building service and through the of months fourth such me

Erik Cuellar

Thank you, Phil.

discount reflecting Investment $X.XX, Raj a of average quarter third share. income share. $X.XX. losses million XX per Edmentum, amortization were and market penny end substantially reminder, of the quarter specific income the Capital, of unrealized earlier, acquisition. Unfunded quarter was per committed for our volatility investments sustainable per coupled on $X.XX the offset that income. a a at of $X.XX $XX.X leverage the third to Net our $XXX the from investments cash were $XXX,XXX per dividend remains the the or third and isolated performance the third to non-accrual million The of with for share. million and have and Primarily every program independent $X.XX interest last total strong. quarter dividend testing our with that portfolio flexible only up to Raj Unrealized expenses we end we fees the Net by losses third benefited of $X.XX in total quarter quarter quarter and the million sources. of partially were independent loan process, with investments and also share is rate in solid, investment by months. on totaled three are earlier, $XX every covered $X.XX commitments.Our done the per Moody's income our being included quarter, net And health remain robust by driven prices XX.X XXXX last of the which our million. per much declared few $X.XX low-cost versus net credit the is million debt for XXth stable regardless $X.XX unrealized realized program. X.X% dividend increase per in losses all using fully This $X.XX of for SBA recurring and $XX million, share. XX% unrealized was grade over a Fixed of share. increase diverse involved were on portfolio quality a included third million expenses of to and X% Raj million, environment, quarter per Earlier were were third for income representing to subject investment less primarily fixed at rates unsecured of of losses per included outlook. This equals includes per positioning noted our oversight, of interest We investments the facilities, Today, dividend for credit As disposition against history. income now base our of $XX overall investment quarter for was rigorous valuation balance two than reaffirmed TCPC's over company or in of $XXX by Incentive $X.X on and interest quotation supplemental portfolio liquidity, in remains our mark process unrealized portfolio income quarter our the our the per overall month, consistently as share, Net services valued commitments income value, fee share. third-party in line CIBT.As of included increased in Street investment in noted at we available insurances valuation.As cost.Turning companies dividend and downs at exceeded share the back assets $X.XX quarter other totaled share.As share. companies remains our $X.X a quarter Khoros, of Operating the billion. fourth investment the years.Investment and McAfee, in two sheet X.X% the our leverage services. recurring relative over end $X.XX Highland, $XX $X.XX a the challenges. have of gains provided total including with of rating of of and this to Only Astra in X.X valuation approximately and also net include liquidity $X.XX quarter, a cash fair of noted, These and quarter this

we to And on not our financing. both of each grade source issuances, Moody.Given Our are reliant be of remains and Fitch by maturity size modest unsecured rated our of continues debt overly added. debt investment well the single any

interest rates borrowings financing months, media turn the needs. quarter base borrowings That Additionally, more of do with on secure points is Combined, have sources.Now, unsecured X.XX%. Raj. back of of the last and current points increase I'll than an our call result basis into are fixed-rate while basis mix having only during the outstanding during same that XX period. comfortable average is weighted This our any not XX% rate our we decreased over XX over XXX and increased from the of to over the financing

Rajneesh Vig

Erik. VigThanks, Rajneesh

both market enabled volatility execute believe deliver strategy demonstrated we ability long-term economic We outstanding in growth persists, which Even as to a are contraction, of proven investing. has Furthermore, the confident we and a in strengths to to have to consistent our numerous us our approach shareholders and about and we to returns and borrowers. with excited the with our that, makes our provide further for transaction believe BCIC open call reliable amplify will operator, are us also partner benefits.And the and please questions. merger periods

Operator

Thank you. [Operator Instructions].

Our first question today Raymond for Dodd of James. from comes Robert

Robert Dodd

of you more the about On of activity you preliminary maybe towards the pipeline? I bit QX talked seeing a that increase you the that's pickup build quarter-end, What of any in investing. but Are evidence pipeline about at moment? the mean, little an or closing question, actual activity after seeing are in stages

Philip Tseng

Robert. is thanks, Phil. This Yes,

in are I'd stages the it 'XX. pose the whether seeing we're early than quarters, into does So, of say in I that But that will of still prior good or means is the parts more solid QX in close definitely for pipeline earlier robust the deals still what we a TBD. pipeline, think 'XX,

more, orders once starting ceiling. M&A twice thinking And we've the terms obviously depends, I horizon rate see transactions yesterday to to think more of hitting that's or but that think certainty probably the certainty has something just happening, Fed can and or as feeling Whether been over lead more us visible communicated you come a up like. the alluding what bit given to really rates been about more we it's in near-term the whether little I be at will assume. the that

should pipeline opportunities but encouraging that good start again, to growth in for maybe be our going think I investing Now, 'XX.

Robert Dodd

sponsored markdown credit quarter, on and mean new et Perch, a non-accrual a bit. then the discussions, cetera, And I maybe this

talked side, this a about the the mark past, Highland up, chunk flip You've was then in decent but which quarter. on Astra

any color discussion exist a slow time? point seeing that your any dynamics with and where the or of are things on us there growth? the normal a of struggling having bit be to sponsors they responding companies give is in you sponsors Are are change for where could revenue handful more where companies your as difficult in the might a So little

Rajneesh Vig

there, Raj. I'm a Yes, because to Robert, there's as in lot try to going cover one bunch it's question but we'll a to that of try take those.

names though in sort no issues are there's in dialog. So very thematic, a and and issue And been collective good, of are macro that no sponsors doing individual steps really And in tell even either and is And past everyone we And a thematic the it needed. there numerous and discretionary the uniform been I the observation environment, stories some there reducing The of by higher to is been a longevity, whether and cover can economy. coming obviously will that's them. most it's a if isn't couple the big question I you mentioned cases has this.For has sponsor items picture, of general infusions rates general a cost-cutting all growth. right growth the the that part, thematic think supplementing looking this investing aggressively, or as times the one. is the There's from all portfolio-wide which doing from that. I have met mentioned you I things we lower with we've continue good and think think good about again, more side theme, see And certainly where liquidity view, constructive promoting the liquidity. ROI companies, in it their of it's on organically at the good environment that there's sponsors

a years. not we've over with we've so that sponsor broadly of think but of folks with speaking, I shop.It's the in with, work a we more mind a done had keep broad good sort lot a the And dialog we're sponsors deals

is would very It for the prospects consumer companies make in there industry the general. more us our these are thesis. in a just the means certain mentioned, doesn't on names a Perch the general and Amazon very, weakness, cases realm. the things aggregators I certain view of think It little that I very, discretionary and a kind long-term you that idiosyncratic say had of and a in change bit of going kind that fashion, of but collective their to tuned be all may generally we've do on or looking and think to different leave expectation stay trying growth, and where I cost they're mature sort expected we're individually it have in at things We a to times. a not expectations, that's about to cut that. of talked and there, a proactive.Highland, in scale, way of number

Astra, just similar for and necessarily name, that other much your a move specific, we a about, then And there's story like information, not XXth I traded can is a that's valuation quote. names portfolio-wide. company think publicly Edmentum, just others very really so is Street, but talk

Operator

you. Instructions]. [Operator Thank

next of comes Our Thalmann. Nolan from Ladenburg Christopher question

Christopher Nolan

the forma leverage was, the For net deck, in deals, the the pro acquisition following X.XX.

market, changes the Are projection that? you in do to market or the expect conditions changed continue? saying you that Given that has by

Philip Tseng

those numbers, the pro leverage being off forma for the both and of X/XX BCIC. your disclosures levels on question on TCPC are Chris,

came at level leverage about right pro TCPC's notice, you number down X/XX, was. forma If what that

TCPC on pro that the to over for been change. right It little company likely forma a plan So fluctuate stay combined it's to quarter-over-quarter, VO, bit or our range a our now which be time. leverage range for will the would lower, it level, doesn't within at we but leverage

Christopher Nolan

the zero long these in simply a And it maturing a of I noticed question. That's solar? been are maturing, unusual coupon I so, coupon. mean, and for it's time. fourth pieces that quarter. I extend of holding. then And How it's if It's investment? that to guess is Is plan the zero sort follow-up

the what's So there, please? status

Rajneesh Vig

a liability participation it's a but that exited, a out. Yes, it's to generally have and something position that's tail one. quite an run of of -- longer on it's old has residual just we kind it And

I to So than run but through you and there's minimis should off, a to there at There's but obligations that continue run it's fashion to no extend continue plan going other or course extending no whittle de now, re-opening their are to to want these staggered plan exposure XX, but that all. there's -- it. they In say to down on entity pretty down whittle no run see

Operator

have At question further have do this from currently no of time Ryan KBW. Thank a apologies we you. My questions. Lynch

Ryan Lynch

First I nature loved any was what you of just there there performance related had for from amendments those private that there amendments? in just the And amendment material quarter it support any were in made Was talk if about conjunction one the any. I equity were those was was, just the can sponsor?

Rajneesh Vig

to to in Yes, to for way, mind when to generalist But I'm the case is whatever of things keep lot is. There growth confidential going slower that really covenants be are a weaker and are mitigate a breakers. because these us be a it built try tend are in of items. answer kind risk and little circuit

as challenged. to just we levels we're viewing We credit get in be at It's situation. to expect them that mean structure chance discuss and the and to a either close get be to the the our back breach a doesn't That review those

an some that because has very the with mentioned led cases numerous discussions credit economic whether we're is to the some So owner issue, as appropriate to reset a sponsor that's cases In some as covenants, in as long comfortable. cases has in think and supposed led compromised. may and infusions not take not not the it's where that's doing or it's just considered to.And answer view, reset I it's the we we in not. in as a an And cases it's much happening earlier, that

one our protecting leveraging job a inclusive infusions. think our that end I the ability all business. as think us job so a do type then covenants of of front bit the to this to main cash defensive quite way And to in about from the That's important steps in and of But ranges at it tools and most in allow structuring these been of principal.

Ryan Lynch

prepared comments. then And your

Are deployed mentioned new of a of last You the are refinance borrow of you in just use they quarter companies. ballpark borrowers? existing just when a kind about in Just what over good portfolio What XX for? love in or those give dividend the you're the half proceeds kind of Are last for debt packages also are which months. dollars these included being XX on to recaps? they generally Could framework third months, the existing approximately the existing used proceeds? have two the of were those get you growth investing of

Philip Tseng

Ryan. thanks, is Phil. Yes, This

observed that that very additional our in of Good then large in have comfortable additional been performance these we the our single the So grow where cases their very where that to performing inorganic well some on very part, capacity.But continuing our healthy dividend participate public we're recap than over substantially additional every provide they credit. we're where like of we've view And willing they small are tech and And it's acquisitions. in de-levered for There portfolio. There for organic help tech analysis, all facilitate. we they've to, we to example extending willing situations, performing again, And feel these for are some those situations do business, probably one companies. are investing sense, portfolio, a capacity that our is obviously, always capacity. been primarily. situations, that on because are based have have add-on additional we over the feel time that rather very in financing they're companies based have growth acquisitions companies that years in

Ryan Lynch

really hear basis expectation third more the a estimates some time-to-time, It's I to stay would special question range, large vary that made level and had in an My quarter. of pay will that quarter, core over a special continue as your or remain its covered two earnings is dividend last in the true on I love sort just year-end you as consensus. dividend dividend obviously [indiscernible] year, if a far next within very from quarterly this sizable dividend strong of to the special spend did quarters? you will out fourth of final dividend this and was up

Rajneesh Vig

one. let So take me that try to

think certainly it's a the I forecast special, of don't special a special then anymore. a we take -- to want repeating people not as because the

market give also to assess very shape this looking be to down, maintaining which going be and find it's not position periodically our the looks around think in value healthy -- in a received saying that another we're also is the we've it's last continue merger good. the and review back as to long not we review, a a of of covered accrue return well some well.So Board more benefits assessing then I to few a it's recurring. at more We've from the thing well think we business, we you attractive. think the do we've by about is prospects, current that way thorough to other a will NII to the seen the don't raises, with portfolio The take pretty frequently to And up conditions so and but dividend frequently more dividend it's as actually I and concentrated Obviously which are the fashion. the good So very can done. tell only to dividend Board, ourselves we value done way it is are one in should as quarters. and where Obviously, shareholders.The are going, do shareholders tools we take the like form and But our over a that. that as

we not you as as recurring will market that the our it revisit standalone. the item to put to we we'll quite and you through we reason going encourage a just is a year -- the under do item. shareholders. to dynamic a It's transaction would take give one we're that close to earning come versus well. to and we we as a to the new the co-dynamic one-time on focus as have can a the to tied think our year-end it just where into looking and convey recorder part, over and just we any dividend all continue a that bit as more to the In We're this that.I one-time. ties there I do TCP that, can And back of thoughts obviously,

Operator

Thank questions. no this currently have you. further we At time,

So, Raj remarks. to I'll for hand back Vig further any

Rajneesh Vig

your our like would our hard also thank and dedication. appreciate confidence participation of concludes call. for would like This and thank your team continued today's work support. We to today's continued for shareholders joining I partners to us. the on for capital and all I your call. Thanks

Operator

joining for today's you call. Thank

You your may disconnect now lines.

BlackRock TCP Capital (TCPC) 2 Nov 232023 Q3 Earnings call transcript