BlackRock Capital Investment (BKCC) 3 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Jenny and I will be your conference facilitator today for the BlackRock Capital Investment Corporation Second Quarter 2023 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 Paredes, General Counsel and Corporate Secretary; Jason Mehring, Managing Director and member of the company’s Investment Committee.

Lines have been placed on mute. After the speakers complete their update, they will open the line for a question-and-answer session. Instructions] [Operator

Paredes, the Mr. call. may you you. conference begin Thank

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

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

BCIC’s BCIC undertake to the to you reports, factors some not which results BCIC assumes and materially does forward-looking lists 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 and presented discussed may been warranty or representation Accordingly, sources from such verified. respect with certain information. third-party to been not BCIC information has makes

accessed presentation. our Please XXXX presentation posted the clicking Investor the our investor the to section information page. website in some our Presentations complements in August will call. that of website Investors Shortly, contained at the presentation www.blackrockbkcc.com have this management be of to note, can team an by the we going highlight The and Presentation link

I would now like call Jim. to turn to the over

in up update will and performance call for highlights on an morning detail Chip you provide earnings and we joining Good questions. Nik overview After Larry. the then financial open discuss thank quarter, our activity. portfolio will for to an and second you, your our results will our I more Thank our call. the of give quarter

maintaining of income net produced We portfolio while level management, successfully results, our strategy our solid on by of credit investment strong quality. executing quarter of strong continuing prudent another

up of from a of close XXX% dividend our XXXX. covered For our at XXX%, quarter, coverage the fourth robust $X.XX the with NII consecutive

our approach in our to ongoing credit Our and diversity in downturn. culture, any investments, complements and uncertainty senior positions current well economic potential capital our robust market us portfolio to navigate the focus on positions

new First XX% and portfolio, our end lien make capital of XX% investments BCIC portfolio, from up of a investments make up the for only at XXXX. of peak our up Junior now now down X% of companies portfolio the portfolio quarter end companies, ended twice XXXX. is than XX% from the at more at the XXXX. with had We XXX which the end number of of we

we've our years progress in platform non-accrual under enhancing We no the in new in few positioning. its We BlackRock are substantial of the last had proud investments the quarter. made diversifying the portfolio second and credit

loans have protections. better also been benefit from pricing a structure that able We improved structural with and to environment lender-friendly new

in portfolio yield LIBOR weighted XX.X% in from quarter rates. Our to average prior second XX.X%, SOFR and quarter. driven increased the This was up increases by

Our lien $XX.X net all X.XXx consecutive was quarter X.XXx leverage loans. for of by nearly excess believe in portfolio. our repositioning on basis period. a results that over $XXX that of deploying portfolio quarter, This our million prior the new of comprehensive of We in deployments, increased benefits a second from the growth, from net gross first driven our from demonstrate million fifth the quarter derived our net

the have on including compelling portfolio. identify leverage end. was we deployment, $XX and at quarter cash available as increase investments Notably, to we for room ROE, improve hand, liquidity and methodically million Total diversify further

potential of rates conditions. mindful the create continue conditions As headwind for increases of the we financial economy. continue with the we macroeconomic for to for second potential be down, to borrowers. the certain tighter may into of Higher has the coming a while half to Inflation, further year, also move remain pockets

we and to We of companies portfolio our and challenges. the in an to support outlook, with the emerging well proactively defensively of prevalence lien are engage our with companies, diversified regularly the in management our and communicate event well economic with the their help health that portfolio teams equipped of We resources experience assess in believe in with being as nature portfolio downturn. positioned quality high us first loans, of ownership as financial

to companies emphasize We continue positioned that less are recessionary well relatively withstand pressures. cyclical to

across confident ability in are generating shareholders. of our improved profitability while We succeed our to economic behalf on cycles

detail. the to call Nik over activity now discuss more turn portfolio to the I'll in

all of this into Jim. XX% and the provided strong power. progress portfolio new portfolio dollars five companies. existing lower earnings names strategy a of to quarter, risk risk growth. loans, existing again Thanks, deployments remains. the growing as profile, We first consistent recession lien in went We facilitate were and a further made delivering capital our quarter maintaining especially investment of steady Approximately Nearly to of consistently second our three with

during Construction, Fusion XX.X%. quarter and in of realized repayments were $X.X the Asphalt Sunland combined & the a with and Management, IRR Total Risk included exits RigUp, our investments full million. of This exits

We In of of non-accrual position company. a case also Company full the our $XXX,XXX loan remaining Fusion received first repayment and from new a financing with investment. the Brothers in $XXX,XXX Management, in our Risk a debt Finance repayment then Gordon participated unsecured lien partial received term in we

million was loan unfunded plus of and a first deal portion term revolver. SOFR X% Our million a the $X.X new lien $X.X

services $X.X term the Payments, a new plus lien provider provider Sumo $X.X software a to unfunded and native loan million sector. SOFR for investments term first a two and security a X.X% Logic, to quarter and $X.X gaming observability million $X.X management; to payment SOFR million commitment unfunded the Global and include in loan, portfolio commitment other first cloud Our X.X% million plus company lien

be transactions although assurances of quarter, second our close. have that no seeing can committee very the all pending new we to or $X.X across flow subsequent end and there activity, such the approved either of has respect existing remain are but what current Since investment second a our to With names, in. million closed we transactions that invest opportunities of about both steady the quarter close, will we're investment selective

As previously during we no the non-accrual mentioned, positions had quarter. second new

unrealized largely by in portfolio valuation markdown the to by equity a this of L.P. in The names. the deterioration was driven $X in Our or primarily was company's event to decreased SVP-Singer in in three XX% concentrated received performance. monetization second was this per Holdings, our the $X.X NAV million position investment. valuation driven that with that equity Stitch decline underlying share attributable million by decline XXXX quarter, the was note in in financial connection We legacy related prior X.X%

zero, have portfolio the of investments legacy to the a in the non-core Following Stitch markdown minimis equity value. de

the portfolio. on emphasis economic our loans, senior believe positioned With a liens, about that a we the confident deteriorating environment. well especially feel withstand quality impact of we potentially heavy of to secured Overall, first credit we're

turn now our Chip to further the the quarter. I'll discuss results financial over to call for

review financial Thank $X.XX for minutes XXXX. investment results from quarter. second first of for additional quarter million strong NII second you, the per with of Nik. and the income BCIC increase our XXXX share, quarter a take second the the GAAP quarter XX% I to from some few or consistent levels will now net an $X.X was of

quarter, a was an performing deployments, non-accrual and increase XXXX. rate new was $XX.X Our higher interest quarter, driven million prior with X% second by the the The assets. of from of impact gross environment, quarter the net and for portfolio of primarily increase new second the up no investment XX% from a income

Company’s increased by first up weighted in based from outstanding increase quarter an by XX.X% driven primarily $X.X for average to an second XX.X% on interest an approximately the yield quarter, balance and debt to net Total portfolio increased rates. increase due costs fair expenses value first LIBOR our the million average other in in quarter, in second in SOFR from and quarter. borrowing quarter-over-quarter, and the uptick

a was on the million million interest We rate $X.X principally for in portfolio to a companies, second realized the three million depreciation of our $X.X and portfolio, unrealized for million unrealized loss Net gains $X.X swap. due quarter. in valuation our recorded decline concentrated quarter, $X to

consistent just was rating value. at the X.X% end our value X.XX internal at end, at quarter prior weighted quarter, at fair average portfolio and of two portfolio XXXX. non-accrual compared representing X.XX to end XX X.XX investments, of fair The March portfolio’s with quarter total At the had

approximately deployment end, and quarter to million, borrowing for leverage operating based general and use available including hand subject restrictions. $XX on liquidity cash was At total and

first leverage ratio net Our due to deployment. at the borrowings the quarter X.XXx additional to was fund new of end up from X.XXx

on share, September of As XX, yesterday, to per business announced we the declared quarterly of payable dividend $X.XX XXXX XXXX. on X, of close record at a October shareholders

would like to call that, I turn Jim. back to With the

our execute our strong the in Chip. progress positioning, focusing team's merits generate of you, while exceptional closing, to the In our on we portfolio for returns shareholders. Thank and senior our strategy and believe demonstrates ability diversifying

your for call the open to like now would we that, With questions,

And to Melissa Stanley from [JPMorgan]. [Operator Wedel from Morgan Instructions] question is going our (Sic) come

with of there towards were start some just a And that it to be outlook seemed in levels. very leverage sort gradual of exits some sort commentary your in repayments or money ramping to put Noticed while few terms to hoping quarter. during new the you and work new on the investments, deployments. Was of of very process target

guess wariness do particularly the this right macro macro terms heard that we since are you taking with about how environment, on comments portfolio attractive now? about -- have leverage new So your about investments think I that ramping

Yes. for Melissa, your this question. is Nik Singhal. Thanks

take for just second. me let So here a back step a

Since up we going portfolio the legacy to had so XXX back leverage old as companies or portfolio tremendous XX with of or March ago, years two back X.Xx leverage and that's ramped more X.XXx okay, made approximately ratio have progress in our were to we portfolio we than our portfolio XXXX, well June we of twice at have as level. a exiting companies, then, So, then.

Okay.

solid generally very, that up have basis capital, gone volume. Last where last trend had rates year, how has its Obviously, speaking, year this behaved, healthy towards they've That had very, points we to as on impact few activity very the opportunities, be. growth So because over progression, a et we quarters. XXX LBO from perspective, a cetera. refinancing by very a okay, we growth want view deployment

doesn't $XXX So, we're our that deployments can we've lumpy. still last deploying deployment of seeing be new million market, I quarters. has had would still -- over five net zero. right? slowed given is the down quarter volumes That capital. that in the We're note Any mean that And

we we which between don't Our that to and our we our disciplined, target okay? as strategy -- want will at be We'll X.Xx, BDC to target core deploy leverage ratio. remain runs X.Xx. capital still to towards will anywhere continue remains we progress And in range maybe Xx leverage

to Melissa, is this Nik's there. the add on comments Jim I'll And just here.

probably is terms with just perspective being are everything we I think said, this you're That tightened as that see well, and Nik our some that right. we and concerns say volumes earlier has volatility some and a Obviously, are would up own that regards lower, are fairly seeing market in market had. on. lender you've from the and to I said, with of what as the comments we heard standards as favorable overall the gone Nik the

general in to leads that volumes. So slower

the one But very you two of a level, is disciplined or create some -- up just tried What from some being of now so. have what the with slow could we're years X% shift far more at of positions you was kind kind standpoint, was concentrated volatility. idiosyncratic methodic X% risk this portfolio, to you remember where see four names we've ramp and or reminder three, to the portfolio a portfolio ago if is

an And be deals to the X%. think we're to important. each X% deal that On additional going we closing, that's is

said, ramped being de-risk more the a up the ramp as plus is to methodical. portfolio that's way. that of that major XXX names in that Nik diversity said, means But the And kind

Also Gordon of on nonetheless. points. Okay. small partial follow those I you, repayment appreciate and Brothers. from but both I it up partial was interesting I the repayment, wanted from if know comments take could to a the

of update Any have going Just of further us sight on there? on line that to any that kind what's be great? wondering Thanks. repayments if on you path you could or would

Yes. Hi Melissa.

chief the potential sources mentioned two recovery on investment. we in of our as -- there past, are the remaining So

Brothers $X.X to the and Gordon specific them other that in the is to of Callodine, which Callodine the XXXX's XXXX, note from portfolio we that participation related note note the also a share a by This a profits that sold first-loss to related profit Company, Finance it payment to payment million refers is annual this received entity's GBFC held buyer. One share profit a through for GBFC participation earnings of to the And year, was payment note. our specific purchasing entitles this at last the hold.

since actually years I a time. So note given will our versus And November sold participation note just again And it's portfolio, the XXXX our would have receive that first-loss $XX and GBFC we excess we continue million also of reiterate expectation that in profit that their residual still the of will multiple to paydowns of few received when the in remains position. over period on I quarters. a paydowns just nature

will conclude you Thank question-and-answer call. as today's participation. this well And today's session for as your

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