BlackRock TCP Capital Corp. (“we,” “us,” “our,” “TCPC” or the
“Company”), a business development company (NASDAQ: TCPC), today
announced its financial results for the third quarter ended
September 30, 2023 and filed its Form 10-Q with the U.S. Securities
and Exchange Commission.
FINANCIAL HIGHLIGHTS
- Net investment income for the quarter ended September 30, 2023
was $28.3 million, or $0.49 per share on a diluted basis, which
exceeded the regular quarterly dividend of $0.34 per share paid on
September 29, 2023. This represents 46 consecutive quarters of
dividend coverage.
- Net asset value per share was $12.72 at September 30, 2023
compared to $12.94 at June 30, 2023.
- Net increase in net assets from operations for the quarter
ended September 30, 2023 was $12.8 million, or $0.22 per share,
compared to $16.3 million, or $0.28 per share for the quarter ended
June 30, 2023. Net increase in net assets from operations for the
nine months ended September 30, 2023 was $51.8 million, or $0.90
per share.
- Total acquisitions during the quarter ended September 30, 2023
were $92.4 million and total dispositions were $125.6 million.
- In October, Moody’s reaffirmed the Company’s investment-grade
rating with stable outlook.
- As of September 30, 2023, three portfolio companies are on
non-accrual status, representing 1.1% of the portfolio at fair
value and 1.7% at cost.
- On August 4, 2023, the Funding Facility II was amended to
extend the maturity date from August 4, 2025 to August 4, 2027. As
part of the amendment, the interest rate was revised to SOFR plus a
credit spread adjustment of 0.15%, plus a margin of 2.05%.
- On November 2, 2023, our board of directors declared a fourth
quarter regular dividend of $0.34 per share and a special dividend
of $0.25 per share, both payable on December 29, 2023 to
stockholders of record as of the close of business on December 15,
2023.
- As previously disclosed, on September 6, 2023, the Company
entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with BlackRock Capital Investment Corporation, a
Delaware corporation (“BCIC”), pursuant to which the Company will
merge with and into a wholly owned, indirect subsidiary of TCPC
(“Merger Sub”), subject to shareholder approval, customary
regulatory approvals and other closing conditions. Following the
merger, TCPC will continue to trade on the Nasdaq Global Select
Market under the ticker symbol “TCPC” and the Merger Sub will
continue as a subsidiary of TCPC.
“We generated another strong quarter of earnings, with net
investment income up 17% year-over-year, as we capitalized on the
floating rate nature of our portfolio and the higher proportion of
our liabilities that are fixed rate,” said Rajneesh Vig, BlackRock
TCP Capital Corp. Chairman and CEO. “We selectively identified
compelling new investment opportunities and funded a number of
growth initiatives with our existing portfolio companies. The
credit quality of our diverse portfolio of 143 companies also
remains strong.”
“Importantly, we are excited about the proposed merger with
BlackRock Capital Investment Corporation, which will drive further
scale for TCPC,” Vig added. “The proposed merger brings together
two similar portfolios that we know well as the same investment
team has been managing both portfolios for many years. We believe
the transaction positions the combined companies for sustained
growth and would create meaningful value for shareholders,
resulting from more efficient access to capital, the potential for
improved trading dynamics, combined operating efficiencies, and a
base management fee reduction in conjunction with a successful
closing of the transaction.”
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2023, our investment portfolio consisted of
debt and equity positions in 143 portfolio companies with a total
fair value of approximately $1.6 billion, 88.7% of which was senior
secured debt. 76.1% of the total portfolio was first lien. Equity
positions, which include equity interests in diversified portfolios
of debt, represented approximately 11.3% of the portfolio. 94.9% of
our debt investments were floating rate, 94.8% of which had
interest rate floors.
As of September 30, 2023, the weighted average annual effective
yield of our debt portfolio was approximately 14.1%(1) and the
weighted average annual effective yield of our total portfolio was
approximately 13.2%, compared with 13.8% and 12.8%, respectively,
as of June 30, 2023. Debt investments in three portfolio companies
were on non-accrual status as of September 30, 2023, representing
1.1% of the portfolio at fair value and 1.7% at cost.
During the three months ended September 30, 2023, we invested
approximately $92.4 million, primarily in 8 investments, comprised
of 4 new and 4 existing portfolio companies. Of these investments,
$91.5 million, or 99.0% of total acquisitions, was in senior
secured loans, and $0.9 million, or 1.0% of total acquisitions, was
comprised primarily of equity investments. Additionally, we
received approximately $125.6 million in proceeds from sales or
repayments of investments during the three months ended September
30, 2023. New investments during the quarter had a weighted average
effective yield of 14.8%. Investments we exited had a weighted
average effective yield of 12.7%. We expect to continue to invest
in senior secured loans, bonds and subordinated debt, as well as
select equity investments, to obtain a high level of current
income, with an emphasis on principal protection.
As of September 30, 2023, total assets were $1.7 billion, net
assets were $735.0 million and net asset value per share was
$12.72, as compared to $1.8 billion, $747.6 million, and $12.94 per
share, respectively, as of June 30, 2023.
CONSOLIDATED RESULTS OF OPERATIONS
Total investment income for the three months ended September 30,
2023 was approximately $54.2 million, or $0.94 per share.
Investment income for the three months ended September 30, 2023
included $0.03 per share from recurring original issue discount and
exit fee amortization, $0.06 per share from interest income paid in
kind, $0.02 per share in dividend income and $0.00 per share of
other income. This reflects our policy of recording interest
income, adjusted for amortization of premiums and discounts, on an
accrual basis. Origination, structuring, closing, commitment, and
similar upfront fees received in connection with the outlay of
capital are generally amortized into interest income over the life
of the respective debt investment.
Total operating expenses for the three months ended September
30, 2023 were approximately $25.9 million, or $0.45 per share,
including interest and other debt expenses of $12.1 million, or
$0.21 per share, and incentive compensation from net investment
income of $6.0 million, or $0.10 per share. Excluding incentive
compensation, interest and other debt expenses, annualized third
quarter expenses were 4.2% of average net assets.
Net investment income for the three months ended September 30,
2023 was approximately $28.3 million, or $0.49 per share. Net
realized losses for the three months ended September 30, 2023 were
$0.1 million, or $0.00 per share. Net unrealized losses for the
three months ended September 30, 2023 were $15.4 million, or $0.27
per share. Net unrealized losses for the three months ended
September 30, 2023 were comprised of a $4.5 million unrealized loss
on our investment in Edmentum, a $4.0 million unrealized loss on
our investment in Khoros, a $3.6 million unrealized loss on our
investment in Magenta Buyer, a $2.5 million unrealized loss on our
investment in 36th Street Capital, a $2.4 million unrealized loss
on our investment in Hylan, a $2.2 million unrealized loss on our
investment in CIBT, offset by a $3.2 million unrealized gain on our
investment in Astra Acquisition. Net increase in net assets
resulting from operations for the three months ended September 30,
2023 was $12.8 million, or $0.22 per share.
__________________________
(1) Weighted average annual effective yield includes
amortization of deferred debt origination and end-of-term fees and
accretion of original issue discount, but excludes market discount
and any prepayment and make-whole fee income. The weighted average
effective yield on our debt portfolio excludes any debt investments
that are distressed or on non-accrual status.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2023, available liquidity was approximately
$352.9 million, comprised of approximately $261.2 million in
available capacity under our leverage program and $91.7 million in
cash and cash equivalents.
The combined weighted-average interest rate on debt outstanding
at September 30, 2023 was 4.24%.
Total debt outstanding at September 30, 2023 was as follows:
Maturity
Rate
Carrying Value (1)
Available
Total Capacity
Operating Facility
2026
SOFR+1.75%
(2)
$
148,826,611
$
151,173,389
$
300,000,000
(3)
Funding Facility II
2027
SOFR+2.05%
(4)
100,000,000
100,000,000
200,000,000
(5)
SBA Debentures
2024−2031
2.52%
(6)
150,000,000
10,000,000
160,000,000
2024 Notes ($250 million par)
2024
3.900%
249,443,956
—
249,443,956
2026 Notes ($325 million par)
2026
2.850%
325,887,724
—
325,887,724
Total leverage
974,158,291
$
261,173,389
$
1,235,331,680
Unamortized issuance costs
(3,784,018
)
Debt, net of unamortized issuance
costs
$
970,374,273
(1)
Except for the 2024 Notes and the 2026 Notes, all carrying
values are the same as the principal amounts outstanding.
(2)
As of September 30, 2023, $139.0 million of the outstanding
amount is subject to a SOFR credit adjustment of 0.11%. $7.8
million of the outstanding amount bore interest at a rate of
EURIBOR + 2.00% and $2.0 million of the outstanding amount bore
interest at a rate of Prime + 1.00%.
(3)
Operating Facility includes a
$100.0 million accordion which allows for expansion of the facility
to up to $400.0 million subject to consent from the lender and
other customary conditions.
(4)
Subject to certain funding
requirements and a SOFR credit adjustment of 0.15%.
(5)
Funding Facility II includes a
$50.0 million accordion which allows for expansion of the facility
to up to $250.0 million subject to consent from the lender and
other customary conditions.
(6)
Weighted-average interest rate,
excluding fees of 0.35% or 0.36%.
On October 27, 2023, our board of directors re-approved our
stock repurchase plan to acquire up to $50.0 million in the
aggregate of our common stock at prices at certain thresholds below
our net asset value per share, in accordance with the guidelines
specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange
Act of 1934. During the three months and quarter ended September
30, 2023, no shares were repurchased.
MERGER AGREEMENT
As previously disclosed, on September 6, 2023, the Company
entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with BlackRock Capital Investment Corporation, a
Delaware corporation (“BCIC”), BCIC Merger Sub, LLC, a Delaware
limited liability company and indirect wholly-owned subsidiary of
the Company (formerly known as Project Spurs Merger Sub, LLC,
“Merger Sub”), and, solely for the limited purposes set forth
therein, (x) BlackRock Capital Investment Advisors, LLC, a Delaware
limited liability company and investment adviser to BCIC (“BCIA”),
and (y) Tennenbaum Capital Partners, LLC (the “Advisor”). The
Company’s Board of Directors and the BCIC Board of Directors,
including all of the independent directors of each board, on the
recommendation of a special committee comprised solely of the
independent directors of each respective board, have approved the
Merger Agreement and the terms and transactions contemplated
thereby. For more information, please refer to the Form 8-K as
filed with the Securities and Exchange Commission (the “SEC”) on
September 6, 2023.
On October 6, 2023, the Company filed a preliminary registration
statement on Form N-14, which included a joint proxy statement of
the Company and BCIC and the Company’s prospectus. The registration
statement on Form N-14 is subject to review by the SEC. Once the
registration statement on Form N-14 is declared effective, we will
file the final joint proxy statement/prospectus with the SEC and
begin mailing proxies to stockholders. The transaction is subject
to approval by our and BCIC’s stockholders, customary regulatory
approvals and other closing conditions. Assuming these conditions
are satisfied, the transaction is expected to close in the first
calendar quarter of 2024. For more information, please refer to the
Form 8-K as filed with the Securities and Exchange Commission (the
“SEC”) on September 6, 2023 and the joint proxy statement on Form
N-14, as filed with the SEC on October 6, 2023.
In connection with entry into the Merger Agreement and subject
to closing of the merger, the Advisor has agreed reduce its base
management fee rate for managing the Company from 1.50% to 1.25% on
assets equal to or below 200% of the net asset value of the Company
(for the avoidance of doubt, the base management fee rate on assets
that exceed 200% of the net asset value of the Company would remain
1.00%) with no change to the basis of calculation.
RECENT DEVELOPMENTS
On November 2, 2023, our board of directors declared a fourth
quarter dividend of $0.34 per share and a special dividend of $0.25
per share, both payable on December 29, 2023 to stockholders of
record as of the close of business on December 15, 2023.
CONFERENCE CALL AND WEBCAST
BlackRock TCP Capital Corp. will host a conference call on
Thursday, November 2, 2023 at 1:00 p.m. Eastern Time (10:00 a.m.
Pacific Time) to discuss its financial results. All interested
parties are invited to participate in the conference call by
dialing (833) 470-1428 ; international callers should dial (404)
975-4839. All participants should reference the access code 113449.
For a slide presentation that we intend to refer to on the earnings
conference call, please visit the Investor Relations section of our
website (www.tcpcapital.com) and click on the Third Quarter 2023
Investor Presentation under Events and Presentations. The
conference call will be webcast simultaneously in the investor
relations section of our website at
http://investors.tcpcapital.com/. An archived replay of the call
will be available approximately two hours after the live call,
through November 9, 2023. For the replay, please visit
https://investors.tcpcapital.com/events-and-presentations or dial
(866) 813-9403. For international replay, please dial (929)
458-6194. For all replays, please reference access code 369837.
BlackRock TCP Capital
Corp.
Consolidated Statements of
Assets and Liabilities
September 30, 2023
December 31, 2022
(unaudited)
Assets
Investments, at fair value:
Non-controlled, non-affiliated investments
(cost of $1,417,840,118 and $1,474,146,428, respectively)
$
1,357,720,924
$
1,402,764,659
Non-controlled, affiliated investments
(cost of $38,607,673 and $37,132,993, respectively)
65,709,964
69,089,697
Controlled investments (cost of
$195,494,803 and $158,500,500, respectively)
169,889,830
137,733,285
Total investments (cost of $1,651,942,594
and $1,669,779,921, respectively)
1,593,320,718
1,609,587,641
Cash and cash equivalents
91,653,006
82,435,171
Interest, dividends and fees
receivable
26,660,224
20,903,797
Deferred debt issuance costs
4,061,159
3,597,236
Receivable for investments sold
—
—
Prepaid expenses and other assets
3,469,747
2,826,004
Total assets
1,719,164,854
1,719,349,849
Liabilities
Debt (net of deferred issuance costs of
$3,784,018 and $5,056,427, respectively)
970,374,273
944,005,814
Incentive fees payable
6,010,047
4,883,575
Interest and debt related payables
3,776,700
9,260,738
Reimbursements due to the Advisor
1,232,776
1,498,733
Management fees payable
—
6,084,202
Distributions payable
—
2,888,363
Payable for investments purchased
—
1,937,465
Accrued expenses and other liabilities
2,773,761
2,037,169
Total liabilities
984,167,557
972,596,059
Net assets
$
734,997,297
$
746,753,790
Composition of net assets applicable to
common shareholders
Common stock, $0.001 par value;
200,000,000 shares authorized, 57,767,264 and 57,767,264 shares
issued and outstanding as of September 30, 2023 and December 31,
2022, respectively
$
57,767
$
57,767
Paid-in capital in excess of par
967,890,570
967,890,570
Distributable earnings (loss)
(232,951,040
)
(221,194,547
)
Total net assets
734,997,297
746,753,790
Total liabilities and net assets
$
1,719,164,854
$
1,719,349,849
Net assets per share
$
12.72
$
12.93
BlackRock TCP Capital
Corp.
Consolidated Statements of
Operations
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Investment income
Interest income (excluding PIK):
Non-controlled, non-affiliated
investments
$
46,722,801
$
42,027,715
$
138,140,812
$
116,673,959
Non-controlled, affiliated investments
48,712
38,543
141,950
105,586
Controlled investments
2,970,153
1,970,246
7,954,881
5,706,085
PIK income:
Non-controlled, non-affiliated
investments
3,511,734
2,061,595
8,728,033
5,146,491
Controlled investments
—
—
310,993
—
Dividend income:
Non-controlled, non-affiliated
investments
263,420
278,321
821,599
765,404
Non-controlled, affiliated investments
672,734
597,715
1,960,002
1,741,419
Controlled investments
—
855,124
—
3,419,023
Other income:
Non-controlled, non-affiliated
investments
21,387
331,420
376,209
657,153
Non-controlled, affiliated investments
—
45,650
45,650
97,503
Total investment income
54,210,941
48,206,329
158,480,129
134,312,623
Operating expenses
Interest and other debt expenses
12,133,863
10,167,966
35,971,338
28,882,380
Management fees
6,092,673
6,629,270
18,065,948
19,903,163
Incentive fees
6,010,047
5,173,948
17,255,238
13,876,038
Professional fees
745,978
386,531
1,519,106
1,366,919
Administrative expenses
357,921
403,355
1,092,268
1,324,450
Director fees
185,500
287,541
745,319
746,654
Insurance expense
134,212
146,566
426,790
508,688
Custody fees
94,811
80,659
276,727
241,181
Other operating expenses
122,860
539,026
1,781,273
2,047,545
Total operating expenses
25,877,865
23,814,862
77,134,007
68,897,018
Net investment income before
taxes
28,333,076
24,391,467
81,346,122
65,415,605
Excise tax expense
13,164
—
48,604
—
Net investment income
28,319,912
24,391,467
81,297,518
65,415,605
Realized and unrealized gain (loss) on
investments and foreign currency
Net realized gain (loss):
Non-controlled, non-affiliated
investments
(128,841
)
133,449
(31,153,173
)
(29,235,313
)
Non-controlled, affiliated investments
—
124,191
—
11,172,439
Controlled investments
—
—
—
(124,801
)
Net realized gain (loss)
(128,841
)
257,640
(31,153,173
)
(18,187,675
)
Net change in unrealized appreciation
(depreciation):
Non-controlled, non-affiliated
investments
(9,268,963
)
(15,273,883
)
11,820,648
(23,435,906
)
Non-controlled, affiliated investments
(4,131,670
)
(1,568,147
)
(5,339,736
)
(8,726,239
)
Controlled investments
(1,967,506
)
18,431,930
(4,837,760
)
23,494,107
Net change in unrealized appreciation
(depreciation)
(15,368,139
)
1,589,900
1,643,152
(8,668,038
)
Net realized and unrealized gain
(loss)
(15,496,980
)
1,847,540
(29,510,021
)
(26,855,713
)
Net increase (decrease) in net assets
resulting from operations
$
12,822,932
$
26,239,007
$
51,787,497
$
38,559,892
Basic and diluted earnings (loss) per
share
$
0.22
$
0.45
$
0.90
$
0.67
Basic and diluted weighted average
common shares outstanding
57,767,264
57,767,264
57,767,264
57,767,264
ABOUT BLACKROCK TCP CAPITAL CORP.
BlackRock TCP Capital Corp. (NASDAQ: TCPC) is a specialty
finance company focused on direct lending to middle-market
companies as well as small businesses. TCPC lends primarily to
companies with established market positions, strong regional or
national operations, differentiated products and services and
sustainable competitive advantages, investing across industries in
which it has significant knowledge and expertise. TCPC’s investment
objective is to achieve high total returns through current income
and capital appreciation, with an emphasis on principal protection.
TCPC is a publicly-traded business development company, or BDC,
regulated under the Investment Company Act of 1940 and is
externally managed by its advisor, a wholly-owned, indirect
subsidiary of BlackRock, Inc. For more information, visit
www.tcpcapital.com.
FORWARD-LOOKING STATEMENTS
Prospective investors considering an investment in BlackRock TCP
Capital Corp. should consider the investment objectives, risks and
expenses of the company carefully before investing. This
information and other information about the company are available
in the company’s filings with the Securities and Exchange
Commission (“SEC”). Copies are available on the SEC’s website at
www.sec.gov and the company’s website at www.tcpcapital.com.
Prospective investors should read these materials carefully before
investing.
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions. Actual
results could differ materially from those projected in these
forward-looking statements due to a variety of factors, including,
without limitation, changes in general economic conditions or
changes in the conditions of the industries in which the company
makes investments, risks associated with the availability and terms
of financing, changes in interest rates, availability of
transactions, and regulatory changes. Certain factors that could
cause actual results to differ materially from those contained in
the forward-looking statements are included in the “Risk Factors”
section of the company’s Form 10-K for the year ended December 31,
2022, and the company’s subsequent periodic filings with the SEC.
In connection with the Merger, certain factors includes the
uncertainties associated with (i) the timing or likelihood of the
Merger closing; (ii) the expected synergies and savings associated
with the Merger; (iii) the ability to realize the anticipated
benefits of the Merger, including the expected accretion to net
investment income and the elimination or reduction of certain
expenses and costs due to the Merger; (iv) the percentage of BCIC
and TCPC stockholders voting in favor of the proposals submitted
for their approval; (v) the possibility that competing offers or
acquisition proposals will be made; (vi) the possibility that any
or all of the various conditions to the consummation of the Merger
may not be satisfied or waived; (vii) risks related to diverting
management’s attention from ongoing business operations; (viii) the
risk that stockholder litigation in connection with the Merger may
result in significant costs of defense and liability; (ix) changes
in the economy, financial markets and political environment,
including the impacts of inflation and rising interest rates; (x)
risks associated with possible disruption in the operations of BCIC
and TCPC or the economy generally due to terrorism, war or other
geopolitical conflict (including the current conflict between
Russia and Ukraine), natural disasters or public health crises and
epidemics; (xi) future changes in laws or regulations (including
the interpretation of these laws and regulations by regulatory
authorities); (xii) conditions in BCIC’s and TCPC’s operating
areas, particularly with respect to business development companies
or regulated investment companies; and (xiii) other considerations
that may be disclosed from time to time in BCIC’s and TCPC’s
publicly disseminated documents and filings. Copies are available
on the SEC’s website at www.sec.gov and the company’s website at
www.tcpcapital.com. Forward-looking statements are made as of the
date of this press release and are subject to change without
notice. The company has no duty and does not undertake any
obligation to update or revise any forward-looking statements based
on the occurrence of future events, the receipt of new information,
or otherwise.
SOURCE: BlackRock TCP Capital Corp.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102082306/en/
BlackRock TCP Capital Corp. Katie McGlynn 310-566-1094
investor.relations@tcpcapital.com
BlackRock TCP Capital (NASDAQ:TCPC)
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