BlackRock Capital Investment (BKCC) 3 Mar 222021 Q4 Earnings call transcript

Good morning. My name is Jenifer, and I'll be your conference facilitator today for the BlackRock Capital Investment Corporation Fourth Quarter 2021 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 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 at this time have been placed on mute. After the speakers complete their update, they will open the line for a question-and-answer session. you. Thank Instructions] [Operator Mr. begin may the you conference. Paredes,

and Conference Call morning, welcome Corporation to Earnings XXXX Quarter Fourth of BCIC. the or Good BlackRock Investment Capital

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

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

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

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

with on in basis, secured year million a in We rotation well-diversified investments, our in including $XXX to culminated which deploying open first a legacy income-producing We strategic senior particular. questions. the portfolio strong We on lien XXXX out the call a million will we of gross the on we and then assets. was non-core the loans completed very active full fourth focused year debt, year quarter. by $XX for repositioned

including XXXX, term XX% For of end only down from in loans. from XXXX to our lien our the times. flexibility first all the were at disciplined leverage and now of first of of increased at end could consists operating significant XX% dollars Approximately the for portfolio, manner, in ended ratio We build modest our of X% us dividend the of X.XX gives XX% portfolio of the year investments, portfolio lien deployment and ROE junior XX% accretive close and up at XX% XX% end non-core and which XXXX. be In This investments, a our a with in comprises the of of provide to and continue stockholders. fourth to Junior quarter. capital $XXX XXXX, of coverage NII $XX XXXX. at million XXXX the million now of we exited capital

opportunities, X.X credit end quality weighted new our generated ahead. the did And at capitalize with we returns beginning average to at up Given overall we team, we year-end. our the improved intend are XX investment confident the We and set of BlackRock of to expertise XX% portfolio risk-adjusted rating the identify million our can on increasing X.XX the internal year also building year-end. XXXX. broader sectors at of extensive in into momentum from XXXX, fair to middle the breadth to XX at years a market ago. the compelling that XXXX with platform during further by diversify we and portfolio from on of We year non-accrual the we XXXX. of ended XXXX. range like opportunities stable size of We companies, the portfolio value The portfolio the have The exceeded $XXX any upon in of also touch new the I two target would at not positions the of portfolio. to grew solid

through our overall, material We credit inflationary side companies to generally withstand We is economic front. Our to have inflationary commodity chain underwriting believe current inability exposure well prices on to analysis cycle. where approach focuses that portfolio on positioned monitor or our to they're or the we material businesses And that the pass evaluate the on supply impacts. labor and the cost avoid inflation have through environment.

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

the predict magnitude be NII. we anticipate increases by rate approximately to our and of of points Fed, excess basis cannot the we to XX timing hikes While in accretive rate

our as discuss June maturity. sufficient I'll bond in to or now further for Lastly, we we convertible bonds Nik activity prior call we believe to issuance, portfolio as approach turn redeem XXXX the the and new we on to credit to a well are detail. or over flexibility existing on facility, our markets may our refinance their have positioned capital

you, continuing primarily completed To Thank diversified reiterate, the of a our Jim. book we to investments. portfolio are lien build derisking effectively first and of have

already $XX of gross history The we know quarter the across investments that portfolio continues opportunity capital. a nearly with dollars companies investment in the portfolio portfolio remaining of and we XX% of existing deployment quarter, have follow-on our first support XX% approximately important new and lien our proven deployments This portfolio were and be gives companies. to companies fourth invest of in the to into of deployments companies investments, going new with to strategy. new XX an ability our source existing to us the businesses XX the During in to with originations, consistent with. respect million XX% had With

investment dollars. follow-on our XXXX, approximately For gross represent investments total of XX%

sponsor of gross in grew exits during modestly in note and almost half Acquisition deployments global is point-of-sale $XXX Windward investments be influential Senior $XXX reach, of also of earnings found making BlackRock completely provider. XXXX by million X% by term $X.X were A held of repayments combination We possible previously X.XX% of as other million positions, deal. with $X.X education consistent with including BlackRock's in term the from plus Astra of quarter and the lead which been tranche. exited. SumUp were SumUp with investment has offset loan-to-value included business, software portfolio Anthology, The by loan of the delayed Funds of strong this now mobile here can At $X institutions our capital exits comfortable million, funded. entity. investment consisted cash Details plus the or JV our our from $XX million our brands venture joint that some return was were second with XX% or provider investment more Repayments that Holdings, fundamentals million combined The We leverage U.K.-based platform. LIBOR that third-party sector club first K-XX of the A the with million ratio. higher also including through funded Partners, the made the conservative Capital, of year. end, were delayed globally. global Amazon's known total LIBOR million these $XXX to remaining release Our the SellerX, expertise. million, lenders loan prominent based sell non-core commitment junior small-to-medium-sized million this educational or as $XX other plus our ratio BCIC million X% to lien and was our during draw a of this a quarter repayments amount lien quarter our $X.X support the relatively on sourcing million second investments, being of lender strategy. from LIBOR to $XX.X to the following; during and draw of BlackRock Corp., Loan $XX.X facility. first commitment lien Initial a on loan a consolidator on Funds lien were a

We taking are BlackRock participate much private the in funds too without with co-invest us credit on to larger enabling transactions in platform, other able concentration to risk.

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

quarters. for result, We results eventually to quarter. will over We a believe our $X.XX fifth will goal NII continue we normalized turn I'll further several share this now And quarter to per over gradually with invest in more in a we row. call a a cash levels expect that disciplined to the Abby declared leverage next to the in the our to grow us covering enable discuss which financial the increase manner. of as for dividend, to the

hypothetical few results distribution approximately improvement per the some of of stockholders, an $X.X NII accrual minutes with the review Thank million additional that gains incentive million capital be quarter. $X.X realized covered income fourth share, the GAAP you, gains or that liquidation Nik. prior to take the I'll fee to XX% quarter. to quarter. financial on $X.X XX% GAAP for in quarter, fee in up if unrealized would net the the from capital third $X.XX quarter consider basis. included fourth GAAP million a was capital gains investment third from accrued the were the million compared unrealized a incentive XX% in gains results requires payable an such coverage $X.X

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

unrealized the exceed gains capital did period XXXX, realized and ending capital XX, December For not losses. realized six-month

consistent third in accruals, Total a was would or gains coverage dividend slight $X.X $XX.X earned from was income $XX.X the increase million, the share million investment investment the net per capital Excluding of prior fee, income with $X.XX have XX%, million and adjusted quarter. yielded incentive quarter.

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

flat with capital investments investments portfolio investments, expenses Net the relatively remained end. gains prior consistent and the the million realized the Excluding valuations. primarily quarter. accrual three no representing quarter, to fair fourth were for gains At September in for value, the unrealized the fee, year-end, non-accrual quarter. during portfolio had $X.X quarter to appreciation compared were total new There relatively attributable X.X% of at non-accrual incentive

at liquidity a at between X.XX position available At portfolio the improvement portfolio of funds X.XX Our weighted in fair average hand. of end December to credit quality. value compared on XXXX, X.XX cash we had improved and under XX, million demonstrating facility and rating strong our $XXX also prior XXXX, ongoing end the quarter to approximately internal at credit

times X.XX the from Our up end of at XXXX. net was leverage ratio X.XX times,

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

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

the of XXXX, share. shares For XXX,XXX at during full repurchased we approximately $X.XX an per average price year

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

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

Abby. you, financial a in objectives strong summary, strategic XXXX many portfolio built In have achieved and Thank foundation. we

shareholders our We shareholders. producing our would call now reliable to remarks. and stability NAV diversify the their portfolio We We with for discipline to for This our solid and are and income, positioned questions. continued like support. the thank open concludes prepared grow results for well

with [Operator O’Shea Finian we'll Thank first Fargo Instructions] go Wells to you. Securities. And

relevant strategy that for private-to-public Hi and the any everyone, given update And if good Jim about BDC you provide a ground on private to if potentially any the we're think could be on a the like to that's Nik, similar information running? that looks public us BlackRock off morning. or it's now? just will

is out get and This Jimmy. will get filed time to running. I'll up take Thanks. will and That that. the to running. take is for there, just some time some The but private appreciate take it BDC. Yes, up we that I filing one.

of – different As that is U.S. BDC well forum know you the funds we've both private as co-invest with. talked does the alongside BlackRock's a in variety this BDC about capital format and private this funds, in aggregate has as

the will a be the and has overall perspective. goals get So will similar sense of the with would to going probably be think some from say differences, to in the up probably that that BDC that and agreement and new that across investments scope differences broader I it is might you have regard an of about there will the running when investing private platform. versus so it fit this NII

Some give that to us fit alongside a it jointly into be that, for an will but of co-invest types to platform opportunity grow. on assets and the able of the fund will with

And with if the think I'm helpful. the you dropped financing recall that new a forget me year Also, But upcoming convert considered, if refinance side, replace That's I'm mentioned the or your on ago. you correct wrong options you of Great. as one there. me wrong there I that which would to agency rating I from the bond, Correct I all what the two are sort have convert? well. you

for Yes, Fin, question. Thanks this is the Nik.

bank first to of just redeem note would revolver we I that, under So bonds flexibility in full. all, our the sufficient have

public access capital form maturity, an market. tapped template established we XXXX And the between markets BDCs private There's or opportunistically realistic already. form. option very have for placement Additionally, Many that either June in for BKCC issuance that's a well. now might as in the the that

That's final one... just And Sure. Okay. helpful. a

Yes. okay? And I using route, And just private example. rating again, issued on in so yes, other have your placement we BDCs bonds think December, dropped point, for Fitch

or concerns have about our notes. ability refinance we to our redeem So no

within press on familiar something the route. that, to if direct that we're name, a desired potential if the into would franchise that's financing we allocation fit franchises? in And but And way sort your different post-quarter make you're in involved strategies Private was the with has for in Obviously, of its evolved the BKCC? Credit senior saw a that would if deal the BDC that BlackRock lending wondering wondering than past,

BDC, strategies It's is route opportunistic broader When been base. we've that you to trying what different the Jimmy, this comes consistent BDC it I'll know, restructure platform variety as been jump we've in. more that Yes, think of the one to associated of is fits to strategy a I with our in.

more to create that are focused and And on first of assets that so lien standpoint. income performing NAV an from we generally stability try to resiliency

what this a those So just we've bit trying be may higher format little at be and of BDC we're more some the that's where of volatility been and from level those what associated things complex describing might because putting to of a generally to we're of we just consistent types that there BDC. for opportunistic assets, into some stay

from so Excellent. That’s Thanks all me. much.

Thanks Fin.

Melissa to next We'll at go Wedel with JPMorgan.

of you the with jump portfolio driver exited. Appreciate that the I wanted was given of on income with taking which of cost, a quarter-over-quarter some at the yields were pretty increase, be Good start questions investments morning. hoping to it was today. some yield sort prepayment in sequentially. potentially understand saw I may my up to nice sort flat And to that maybe like of line newer some that looks X.X%.

just on then going SLP I about impact So that thinking to and how you're and that exit want forward? of the better the understand the potential yield

question. for you Thank Nik. is the this Melissa, Hi,

address years what's of the make the substantially general to lot portfolio. time specific which of over of we're portfolio, a exiting I And questions, non-core before the heavy a last we've led that spent is comment carefully lien book. your deleveraging three first a the very well-diversified So constructed, and complete, want that's out to I

than XX in is years ago, our book. a XX% percentage three it's used portfolios ago. disclosed less we to long XX% book and be lien to now. significant in we've the the materials, It increase up first As Again, too the from have not in

down of declined book significantly. Additionally, book. the the to It's of equities X% percentage just has now in the

set what two out tremendous sort So success years do to I story a think in we ago. of it's been

our maintain without much really our able top things portfolio to level the a deal the maintain despite the either levels the at yield, – level. at proprietary at the yields have that than these risk being portfolio a expertise, look, really yield taking of too terms the flow, They helped incremental markets overall bring our industry sourcing level our that's really us of or we've breadth on the platform. channels individual at of funnel and strength security tighter before, of all us function the been really In of or our

yield BCIC it the mentioned, our exit even reason dividend no the the it of JV an Senior with that was low. Specifically, was increase paying essentially that though for was Loan security equity was you actually yield Partners. some of level quarter-over-quarter and

was that the vehicle So vehicle was effectively trapped that portfolio exit in of because some more cash received. efficient our that makes even

Okay.

that, in hearing yield differently? like one-time should sounds but not a view your from increase be SLP that I'm with as portfolio pop, that, So sustainable. is the the it That's exit

the I a But to over predict mean, very credit we it's next do mean, how Yes. hard spreads right? look, portfolio. well-diversified land, several quarters, I have

Our deployment strong. pipeline very is

the of Additionally, XX% hikes, can play here are yield X.XX The tailwinds a loans. additionally, portfolio especially of rate okay, us our all capital times been have deploy allow our the generate. the out on. And our anticipation of volatile, spreads. portfolio have here, markets we the provides given which floating And may with grow at in prevalent loans leverage, that more Fed flexibility at from the to potential to the favor, to operating that

goal. our focused That's what So that's we're on.

contributing the the was of Nik, repayment in Thanks And helpful. some fourth then, to activity Okay. that's SLP. quarter obviously,

sizable any we expectations Looking forward, prepayment you I'm from curious any about? if if be thinking – upcoming? that repayment that Or should you're seeing activity have

almost repayments unpredictable. don't by in our actually Prepayments we gross period X-year be can something to are again, control. range one-fourth follow-on are any the question. of and been Melissa, not incumbency see hold mitigate Yes. we generally term, average some is change. In gives our us for that see periods we any has Look, given on are controllable Fundamentally, from X.X in long-term, us. the advantage repayment deployment the average also deployments that's a existing can investments – good of that short lumpy investment. portfolio and Look, our I'd that really hold deployments of to time-to-time. that companies and going in add us the why, reason help these pressure

The other assets came we that pressure thing if really behind approximately or is right? would at repayments, trying capital junior I Most of half note XXXX, were exit, half that to look that from of non-core is our us. you

In fact, all that is us. of behind

scenario, unpredictable. more repayment normalized operate just feel like a quarter having we're inherently in we So is versus individual any going said deployment that, to

one question. then understood. if could, I final Sure, And

been pretty you've repurchase over throughout quarters. think was authorization you. Is by using I Is the the you're about last using that anticipating two rate Thank at that – thinking a stable that remainder XXXX? that authorization the design? something repurchase how

Yes.

two is So repurchases as and our sort of we And view conducted And value. are XXb-XX So to the are basically approach. in many repurchase is share share shares forward to one which share program. current to we XXbX-X expect consistent we other view to And right? prices. and to One at our our periods provide market with the pursuant accretive look, share shareholder of pre-decided volatility, goals plans, repurchases automated. buy to of deliver be protection repurchases tools some

Nik. Thanks

participation. time, no does are conclude We And for you your today's conference. this questions. there thank at This further