BlackRock TCP Capital (TCPC) 25 Feb 222021 Q4 Earnings call transcript

Ladies and gentlemen, good afternoon. Welcome everyone to the BlackRock TCP Capital Corp’s Fourth Quarter and Full Year 2021 Earnings Conference Call. Today's conference call is being recorded for replay purposes.

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

Thank you, Charlie.

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

made those and as projected. subject without risks the involve earnings year could results XX, full statements this are actual call today, ended release and and on of XXXX. uncertainties are forward-looking and to Any notice. materially we Forward-looking statements Earlier for made from issued December quarter differ change fourth today, our

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

who Officer, and I Tseng, XXXX portfolio our Operating then turn provide will on today and a the call. of Phil all you Katie call joining year the to quarter TCP’s as well results. call and for activity. environment, earnings market Thanks, quarter Chief fourth few fourth over our an some XXXX I investment us full today's thank begin our on will will for with comments highlight as update

greater and with and as take your will financial I liquidity will Cuellar to concluding our available will positioning After a be Erik prepared remarks. few results CFO, close our well remarks, all as Our questions. review then our capital detail we in then

particular, market in emerged that view well to the in expressed we source well-positioned of direct pandemic during as a the and environment, capital wider that current in companies. market performed calls, private of lending, financing general, for middle our prior have Turning a markets spectrum

that believe existing remain the during to make in greater market decades full businesses, with power. as growth, investing the in a Activity broad middle We refinance continue is with among earnings that simply levels two our work was of year seek activity over robust. that and case. busiest they the to current acquisitions range and We of or QX XXXX finance

efforts deliver we to year fixed relative categories. income risk attractive quarter which now highlights for lending reward believe source our an investment our and shareholders and direct shareholders. for benefit income such, As key to and I’d position as a a in continue XXXX, like investments other that our performance to delivered again a from strong premium expertise, results of team review discuss our our fourth few

paid. NAV appreciation. investment gains First, net well quarter we fourth was exceed increased share the unrealized per our in as increase and continues X.X%, driven had dividends NAV alone. to as performance that both strong realized including X.X% by holdings, income by an Year-over-year portfolio in of This

in year of public strong full level capital. lower with was the XX.X%, for highest TCPC became cost a ROE a XXXX, Our company the since combined performance portfolio reflecting

strong. quality remained credit portfolio Second,

at pandemic. fair December the the were of just non-accruals throughout at less of to X% As XX, X.X% have limited portfolio or value, remained

and of with many consistent or midst a quality underwriting improving of the credit across our process, during function stable profitability along of is the portfolio pandemic. even companies, excellent Our a disciplined our

XXXX. up wide-variety nearly of capital detail, broader the pre-pandemic private our the of deal activity of to as strength the strength more platform. a sources, relationships is We continue BlackRock levels the X% resources the XX% and with the XXXX Phil the drive reviewed investment as XXXX, a of will underwriting discuss robust in to increased platform investment extensive which was activity. across Year-over-year Third, in TCPC’s testament as and investment well developed in platform US relationships opportunities we've versus

million than quarter in and capital our fourth deployed across industry $XXX groups. attractive continued the opportunities During identify to we more

approximately $XXX million sales had notes in sheet at of portfolio total attractive optimized resulting during further Fourth, $XX repayments net million. $XXX of also unsecured We our issued We of rates. XXXX a February due and of balance liability profile and we million year. growth the

were XXXX, advantage attractive that cost a the maturity, able our prior redeem their As further capital. cost were result, August of to higher thereby reduce of we to financing due taking notes in to environment,

two our headline of terms, lowering favorable one including more on amended facility. we credit facilities the on Additionally, rate borrowing

We are is benefiting seek to hurdle. dividend performance financial of of our we continue TCPC's cumulative member an per every existing serve to On done we in Board our took Independent and governance, Lead capital finally, in diversify XX. exceed flexibility XX, corporate And payable to quarter coverage to strong Directors sheet February strong return and XXXX, structure. Board our share, continuous also and ways of commitment record continue the total from XX of to of results Director. worth enhance Fifth, and balance addition the existing our Draut longtime extended declared side first board a company shareholders to we significant so noting XXXX our since as our in public record the as indication our dividend March on quarter our to elected $X.XX on Eric It having right March in XXXX. of that

XX.X% the with and our our expanding with opportunities a of X.X%, and and As along at we TCPC on of believe market. we a including based platform our XXXX, high our of experience on have losses, to generated and on lending return peer capitalized premium unrealized direct to we the invested is end of assets identify maintains reminder, the annualized consistently total attractive yields. annualized ability demonstrating Since hurdle team's breadth grow gains look X% Throughout a return group a scale XXXX, cash realized back. which and a cumulative returns, total

$X.X Some At XX% a billion. portfolio portfolio providing end, industries range year to are highlights minimizing our secured of wide across of like investments diversity a and value of concentration portfolio split I'd had debt and approximately fair mention. is our risk. senior market

companies companies. established made Our weighted to cyclical and XXX at business models was – continues industries. be of with towards XXX up end less portfolio The investments portfolio in year

and our income income reliant As presentation a seven chart from not our recurring on slide any is the one on the broadly in left on distributed portfolio, across illustrates, company.

downside of to are our environment XX% debt providing the our rate rising positioning floating XX% us income. debt and our nearly portfolio each well our of investments fact, protection, rate, contribute XX% are recurring likely investments entering. than first of lien X% significant less In companies we for are

it Phil positioning. activity to turn will Phil? Now, to discuss investment I and our over portfolio

Thanks, Raj.

Moving recent grown of our activity, lenders years, group small the of financing on to providing remain and capable investment in one a of of lending managers complete while number we has direct reputable solutions. customized

of substantial direct developed and us percentage review generally we protection We approach average a transactions our as the invest result middle been assess investments. risk a is underwrite opportunities. emphasize investing. team lenders an part specialization, industry which and the on very small a source set actively enables act club number or our And decades, relationships sources of As up co-lead we set this few provide small deal we our with end at of as to past increasingly of as them. Also only our a we transaction. and while over long of than spreads standing disciplined lead, note, we've is This negotiating believe market, of in downside well market a We to the where higher to large value our extensive, such, terms investment investing deploying capital conditions that opportunities finding deal regularly we of opportunities but maintain in well.

to the fourth for loans while invested platform we reviewed the private capital in existing was investments XXXX deployments, quarter ones. robust fewer them. in potential new primarily XX of example, to as As nearly companies, Investment million, in portfolio across invested activity eight XX total including XX% we for investments, $XXX factor opportunity, know XXXX, than on important become new XX in an from be sourcing very Follow and and TCPC follow-on US Incumbency risk are management and already clearly understand has investments these And making an well companies accounting an existing in important our XXXX. investments. nearly holdings also investments. in a continued we perspective, in therefore are of investments source of these comfortable

diversity, seniority the new in we portfolio act structure, can transactions capital or As co-lead. as we where and lead we emphasize investment analyze opportunities,

services financial great investment was and Pico’s looking US. connectivity, some a services new Pico our Trading. of secure infrastructure a company largest cloud to term of lien example companies quarter loan network move first was fourth needed how generates provider is analytics quickly. of include portfolio It's data in customers the a existing financial to The for strategic largest attractive a Pico the opportunities. services incremental also the acquisition for services, and financing to the Our during industry.

both our Given their attractive grow since able continued and through witness to plan his lien Pico BlackRock initial as been was the upon management financing company a investment, executed how our and term that our and the well to an to first has this increase has firsthand team saw investment loan, sole we on opportunity lender existing performed business approached well that portfolio to and in acquisitions. company organically provide acquisition the

market Our as to similar favorable term financing online sponsor working second second their a we combined to learning is tailwinds. transactions. a scaled education benefiting of strong very in was experience support given from Anthology very Blackboard. combined and end-to-end a directly, to on software higher company company to leader provide loan platforms, institutions. investing team's great with lien with BlackRock second our opportunity solutions to the competitive lien investment saw Anthology’s out in in Leveraging The equity largest experience positioning acquisition this that reached a us quarter industry is its to

and offset New Credit down Onyx quarter pay managed repayments the and Live included our link investments dispositions as loan Centersource, One sale the $XXX to well loans a sale of These our of Suisse, of asset as loans in were Auctioneers, by the totaling a back of to of credit million. the our fourth notes by Sky. to payoff portfolio

our leading meaningfully a company, sell result a hospitality loans our delivered of December on X.X%. of yield healthy also is that industry, And XX. a X.X%. is was portfolio X.X% We Investments debt yield payment had Our yield a effective the had of the on challenges new average able solutions weighted during recent was our the worth portfolio and in return. effective price positions overall ultimately quarter companies as successful noting, effective as were as weighted The of than was a experienced the exited Onyx pandemic. roughly average at higher to vendor which to exit marks

well Given are is our of the of liabilities our we rate for when we're portfolio debt rates rate, fixed floating rise. believe that positioned XX% and majority outstanding

In have share increase interest modestly we fact, on would interest in our XXX basis in annual in rates net a XXX rate loans, investment floors increase of basis point result increase positive income. approximately our our in a a would impact have majority point given rates per a earnings, while on $X.XX

to We XXXX, companies invest underwriting are business on well-positioned with discipline, throughout and selectively economic succeed to cycles. models continue focusing our maintaining in that established

line we the is and in yields first with on we had Our portfolio are have continue in limited income quarter. broad healthy opportunities in date our pipeline and prepayment sectors. range The to a current our to investments of generally source from pipeline

turn positioning. now well through walk and to our as results, capital over liquidity Erik me Let as our to it financial

the in year will fourth Phil. quarter now and Thanks, results XXXX. full cover for our I financial

net For per full the net per generate income we of $X.XX our fourth we quarter, of $X.XX. investment for dividends dividend of And investment the share, share. year, for out-earning per year by a exceeded income $X.XX which our generated $X.XX share, the

fourth recurring $X.XX level $X.XX. that first of of noted, quarter a our a fees. Notably, was amortization accelerated interest PIK We discount dividend recurring quarter income, included per cents, continue to three cash the more for $X.XX income. also for income $X.XX exit committed Raj income This per lowest we and declared And $X.XX, than and $X.XX years. of income fee and paying share. share. dividend Investment dividend for as covered Investment fully PIK the investment from is the OID in $X.XX sustainable today, by of was included and income year net

and time recognition our made. the follows As share of the share. per quarter $X.XX a $X.XX of totaled in $X.X both an reminder, were our rather interest of is quarter fees Operating or fourth share. million investment included expenses generally economics per at than conservative and the $X.XX for cents the amortizing life policy, income expenses per it the over recognizing other of debt all investment, upfront Incentive

$X.X the or increase previously in for quarter core million, a increase are services and to million, during investments increase offset and gains our exits the share, were including the the Substantially, against is our net reflected party million of net in by include $X.X net independent process net was validations. and included the the credit unrealized back entertainment, primarily quotation or a gains quarter net by as value the partially share. of of assets $X.XX in fourth gains subject Edmentum realized every exited Group. valuation included quarter, in using investment Our of also our prices X realized driver independent These recognized and Razor increase both losses Unrealized $X.XX sources. we our of of reversal Unrealized primary notes every link per losses our third of investments. $XX per million fourth in $X in also a unrealized of provided valued disposition quarter. $XX.X per These all which $XX.X rigorous on million portfolio testing of our million and million investments $X.XX services or oversight, share, also losses Onyx,

at of December Our value, strong cost limited in just three to XX. X.X% with at total the at that represent portfolio fair portfolio credit quality nonaccruals and remains X.X% just companies

Now million total driven our Unfunded with of leverage of by positioning, revolver trades of to level investments The million, at two $XX commitments. which quarter billion. delayed million. million, relative $XXX were in commitments to primarily turning total of our million of draw cash net million December loan quarter-over-quarter total approximately $XXX X.X% ended settlement included as and have $X.X portfolio $XX to unfunded we of quarter the equaled of commitments XX. liquidity of increase companies investments liquidity not funded yet This $XX commitments pending available end that or only was $XXX of

two SBA flexible issuance, grade low and Fitch. our a Moody's convertible leverage credit note program unsecured diverse facilities, an and continues issuances, be And investment rated cost Our two unsecured program. note both to includes debt and by

financing overly single our any the we modest are are of debt and well size of maturities our given Additionally, laddered. issuances, on each not reliant source of

very beginning convertible of with latest August, to X.XX% that, issuance success liabilities refinance in to significant bond our at outstanding our turn our from due the Combined, Raj. redeem And credit and our weighted the interest decreased the of on over on Given back next I'll capacity facilities, well-positioned notes rate it the week. we or X.XX% to back are average XXXX.

ability results we shareholders. conclude, Thanks for to team's confident Erik. To and and full our deliver fourth our ongoing pleased our returns in risk-adjusted are with year quarter strong are

environment. regarding optimistic investment We cautiously current also remain

middle revenue environment, across lending our decades are and and competitive advantages, trends portfolio. strong an team's inflation, seen chain to volumes year, private around like in supply companies. transaction the In market public around the and and start we market the [indiscernible] are this have growth are healthy markets increase experience rates, the EBITDA uncertainty leveraging including our concerns middle to we over of While disruptions markets in volatility two in the

valuable long Our and specialization to sponsors. our track with borrowers deal unique record makes partner, a industry and us combined our

ROI a call with In to for addition, in of questions. XXXX enabled to downside long-term please pandemic. and has These exceptional open that, a XX.X% ROI the structuring operator, in TCPC And the loans start are the our experience protected XX.X% since performance. that advantages deliver contributed

[Operator from We first take now JMP Kevin our Fultz question Securities. of will Instructions]

Please ahead. open. is line Your go

a Hi, morning, nice and good congratulations on quarter.

Thank you.

of you prepared as the you issuing to and cost also So capital remarks, the mentioned lower able by unsecured X.XX% in in facility. credit were your notes the XXXX overall then amending

and like, in what to look financing convertible lower maturing Just particularly additional might notes early with March. opportunity curious you see costs the if that

far. can markets, few in always been we we markets to Yeah, week it's reach definitely the as out the to But so the a to look I watch Obviously, tough years. last that we've one. done and continue take markets. opportunistically capital the

we're tranche to up are due the to far than next coming well in our coming which mentioned, off month very capital are out we can As monitor very continue the the we which those so with and those definitely converts, the our balance We take repay sheet. lower significantly our so but structure, positioned well highest capital cost those facilities, a markets. are have credit converts,

helpful. Okay. That’s

flexibility certainly to was Kevin, sheet tried sufficient Erik we've keep what the to mentioning. I would that add balance just in do just

we're monitor. prices to point at take to them and not that time. opportunistically just in But holding So look both or continue requiring to will we market,

of upcoming BDCs I think past, are we overall that's the flexibility investors and think debt. feel to an the with there a getting with have increasing where deal familiar number than we in the positive, comfortable are so but I

understood. a up weighted question sensitivity. and relating floor for interest rate Raj Could Okay, floating the Thanks, LIBOR provide average you then follow just investments? rate to

Sure. That’s XX basis points, X.X%.

basis XX Thanks for it That's questions. taking for Okay, my points. me.

Thanks, Kevin.

Great. you. Thank

of comes Robert question Raymond next The James. Dodd from

go please line is Your open, ahead.

Congrats guys. on the Hi, quarter.

about a average, term prepaid over you've the about I Just long income, nickel right. averaged for a question mean, in each prepaid quarter.

you results so – that that. income eight quarters, there's just only to the that's been last changed far, some that's point? you've it said the seen do speak? anything is is well. Over been it Has actually in quarter low any -- or the lower there color cycle, limited hit obviously, periods expect a in of in for rebound it's at it's there's the mean, to levels part I other of lower been where to prepaid I normal, so one been new QX you anything or structurally but on And mean, exceeded as or portfolio -- while

question the for Robert compliment. the Thanks, Yeah. and

very a it's our certainly good on discuss We question. it think I side.

money I think we're the you I right a having with anything that isn't it's lower changing a be comfortable the experience know is, answer to it's decisions. with the view, outstanding honest, From level on just of a you the risk it's are of the companies one because positioning, that types lets think we make point just shorter there is portfolio longer. hand, and and positive keeping

you're other more not On smaller so higher hand, the higher run overall, smaller Phil of honest, as the found that of names. But from the other mentioned, up be a is and NII our it a existing and is, it portion rate. but NII is quality a to income XX% episodic, picking actually something that income is as like coming side deployment is well. the of we

So because outstanding longer, the a staying adding onto an credit actually to only at opinion, increasing you're in you know. money Again, are not we're positive names putting my and companies out level. them

don't So winners feel more people are winners I opportunistically. that likely positioning it less or like, necessarily or rise, change staying just it's know longer are to does rates rising of the any the and structural portfolio; actively refinancing

notable So lot benefits an we're periods, something you consciously doing maybe there's it but, element difference a of a as but that, to it of think I overall, that it isn't from mentioned. prior is there's and

produces in upside do credit that does is the protection for I there that have that data doing easier better an borrower, or credit actually not. about evidence for data it's do But in a it data is incumbent incumbent on mean, don't that an any -- to appreciate have way? incumbency, it, want protection it's that. I feel supporting you to investors do or being from say, borrowers the detail XX% the you you I point

in notable start less additional to proof tied looked the level specifically in the or right. -- through But me I'll hand, we've cycle but I the it's X% it's data the Phil let pandemic, Yeah, may something maintaining credit maybe doing at, risk comments. think, I on is what one think pudding have and obviously not of incumbency a a non-accrual

tightening do watch chance have up to anytime I you ways, of back loan, to you underwriting up on a think a going a can credit you'd a you go add many tighten chance the back a get we performance and a in chance and -- -- we because and of either if have to have closely on through basis. earnings documents, prior history that's appropriate,

credit think that's that it and feels I something original or chance and least go at intuitively, to like reassess back estimates underwriting. certainly is a So your enhancing,

is I additional part addition of empirical big think of wouldn't the just the it's may a my observations. that, performance to output. comments, incumbents incumbents, the certainly portfolio, that data to I but are driving overall -- to I some the pretty in isolated point would But Phil have the

things that's considerations. acquiring, other to had company the opportunity diligent that an target up for the incremental Thanks situations Yeah, pleased do the to add-on to existing or outcome the the structural where favorable Robert. great we add just whether whether we borrowers, tighten was was that the of question. with through us, situations we negotiating table, Raj really Pico structuring seat that's loan a an due very I'll and diligence. contemplating Oftentimes, what through provide pricing have to we example and and document, and we're opportunity saying. where in a at we're often is had an for

let's great situations, the add-ons, or in after the generally, investments. in good a say, equity is of these supporting to acquisition wanting good the that's business So, also example money the and And put sponsor capital growth. funding, additional to putting continue for oftentimes,

So opinion, invest situations, to in these are often good our in.

you, the I congrats the the years two and and really. Thank quarter appreciate again, -- on year and that.

you, Thank you much. Thank Robert. very

Thank you.

Instructions] Christopher Ladenburg question Our [Operator from next Nolan of Thalmann. comes

is line go open, please Your ahead.

opposed excuse rise. timing increasing revenues what me, difference would as timing could to by expense a a the of be interest in Fed, there a the increase there Is event your Hey, rate guys. -- between

reset a next quarterly, date, either in reset quarter pickup coming would Hi, see Yeah, there's month of end the at some very and Chris. the in end. Erik. or kick of next any monthly our This so I small timing rates is loans so lag, them most

to stock up past mean, have lagged, a some but as then for value trading your I much strategically, And guys of posted else, of how is not the I'm below sort Okay. that. trying stock follow I per guys multiple? to book issue, thinking to prices often returns, the good are understand And question, something you year, hear like your more increase the is share. performance thoughts you about price where mean, really on

I It's Chris. ask to funny, was same going [Multiple Speakers] the question, you

input but are offline, [Multiple price great but doing you same guys Speakers] but the time I struggling. think the stock at is

the selection, don't control, rate speculate. I is can portfolio for I want we and to investment I to the to -- tried control performance, we've appreciate tried environment. positioning think I guess, that observation what what we've and

So the at that continue that's performance. try do where we've hoping what people some disappointed is, to going sort targeted perform know and of maintain is follow or that positive would the while you I you thing we're done that. but us keep to, from observing a we stock we to had the of we'll and trying pick don't magic can I and just in mentioned, I hopefully observations, just up like think same we think we're same appropriate, than level and that think comments we're all on set way a to the a observed things to investors way answer other

it I'll Thank take offline. you. Okay,

Thank you.

The Lynch next KBW. from question comes Ryan of

ahead. go Your open, is please line

taking for my Thanks guys. questions. morning, Good

maybe obviously, is or one and labor but wanted focused cost worries on, the that's the different just and both issues, market hit lot concerns one in of there raw inflation. on a to inflation probably are input just material potentially First most

of kind of as less maybe services, companies may there so are Your along your exposure, harder a then going evaluating forward? of different about portfolio a has looks and higher particular like worry, are guys input noticed but of sort have that you're lot it have borrowers, the it's services, time any that and costs industry user guys concerned you more passing you end to those portfolio a they

and its lot those your that of business pricing I these topic so side kind are And what there's of was companies. hit. became even Yeah, really our observations that's to concern it's that underwriting these a in is issues a inflation a services. think portfolio subscription and and pricing good other time there's I at we supply companies, day of of do on astute general make And a technology, is And sure of in think we is question. we the power understand engagement of risk lot or much don't the input certain of before there that services, the whether days on a heavy have manufacturing, And the per terms touching costs. actual we're companies lot exposure the revenue revenues for will chain not just

we're these comfortable think I So ability. have companies that that

labor and inflation. we of pricing, but it's I think labor, and pass is wage the one thing inability the obviously fair of so conservatism, that is And that to or that one But we these in structures than are these capital watching more companies really bit underwrite a extent and closely not buffer on inputs a so much the we I normative in increases is that area exposed. other area course of normal any an other wouldn't sort feel upsides it. highlight there company or handle on can

I think evidence, have it's any In we exposure fact, less but issues, of intuition. more point to some just the can't I to topical empirical

that another question in talk company? mentioned hear. you that And increase gain a That's in portfolio in you Can million value core drove what good about was, entertainment. unrealized to guys Okay. $XX

you one that to want Sure. want it. take Phil, take to me you or

go Yeah, Raj. ahead,

it a value, acquire. transaction to of an Okay. so business, tied strategic a actual Basically, was a sale it was actually value

equity transactions, markups business core we conservatively. we – cash-related example consistent value I some tied where many And to if tied highlights that of another so where but to reasonably, seen have try was these them oftentimes think to Edmentum a or specific And strategic equity cash to was sales in the names price we investments tend of be exposure, obviously our not a and to to buyer.

the appreciate That's that today. gotcha. time. Well, exit. successful on Okay, all congrats I for me

you. Thank

are line this no There time. questions further at the on

back So the Raj I'll call to hand Vig. over

to Thank continued challenges This would continued the moment to confidence on participation and all partners you. concludes appreciate it call. thank capital today's shareholders take to all your and the dedication, posed. and for support. joining also I like particularly We work for I pandemic us. for and would hard through thank the a call. today's team like your your Thanks our our

for This today's you joining. Thank concludes call.

You may your now disconnect lines.