BlackRock TCP Capital Reports $21.1MM in Q2 Net Investment Income, Petro Joins Board



BlackRock TCP Capital, a business development company, reported net investment income for the quarter ended June 30, 2020 of $21.1 million, or $0.36 per share on a diluted basis, compared with the dividend of $0.36 per share paid on June 30, 2020. BlackRock TCP Capital also reported a net increase in net assets resulting from operations for the quarter ended June 30, 2020 of $46.4 million, or $0.80 per share. Net asset value per share at June 30, 2020 was $12.21 compared with $11.76 at March 31, 2020.

BlackRock TCP Capital logged $56 million in total acquisitions and $101.8 million on total dispositions during the quarter ended June 30, 2020. In addition, one nonaccrual was added during the second quarter. As of June 30, 2020, loans on nonaccrual status represented 0.6% of the portfolio at fair value and 1.6% at cost.

During the quarter ended June 30, 2020, BlackRock TCP Capital extended the maturity of its SVCP credit facility from May 6, 2023 to May 6, 2024 and increased the capacity from $270 million to $300 million. The interest rate on the facility remained unchanged at LIBOR + 2.00%. On July 31, 2020, the SVCP credit facility was amended to include a $100 million accordion feature, which allows for expansion of the facility to up to $400 million subject to consent from the lender and other customary conditions.

On Aug. 4, the TCPC Funding credit facility was replaced with a new $200 million revolving credit facility maturing Aug. 4, 2025 with Morgan Stanley as administrative agent. The new facility includes a $50 million accordion feature and generally bears interest at LIBOR plus 2%, unchanged from the TCPC Funding facility which also generally bore interest at LIBOR plus 2%.

On Aug. 4, 2020, Brian Wruble retired from the board of directors after serving on the board since 2015, and Andrea Petro was appointed to the board of directors. Following her appointment, half of the board’s independent directors are women.

“While the pandemic caused significant economic and market disruption in the first half of 2020, our highly diversified portfolio of primarily senior secured investments continued to perform well, with total non-accruals accounting for only 0.6% of the portfolio at fair value at the end of the second quarter,” Howard Levkowitz, chairman and CEO of BlackRock TCP Capital, said. “We also benefited from the broader market recovery in the second quarter and our NAV increased 3.8%, reflecting a 1.6% net market value gain on our investments.

“The board’s decision to adjust the dividend rate was a prudent response to substantial declines in LIBOR over the last year and a half. We are confident in the sustainability of our dividend at this level. We also strengthened our diversified and low-cost leverage program by extending and expanding our SVCP credit facility and replacing our TCPC Funding credit facility with a new facility with improved terms. We appreciate the ongoing support of our lenders.

“And finally, we are pleased to announce the appointment of Andrea Petro to our board of directors. With nearly 30 years of experience in commercial finance, she further strengthens our very accomplished and diverse board. Building a diverse board has been a longstanding priority, and following Andrea’s appointment, half of our independent directors are now women. Andrea replaces Brian Wruble, who retired after serving as a board member to funds managed by our Advisor for 16 years, including five years on our board. We thank Brian for his dedication and outstanding contributions over the years.”

Portfolio and Investment Activity

As of June 30, 2020, BlackRock TCP Capital’s investment portfolio consisted of debt and equity positions in 101 portfolio companies with a total fair value of approximately $1.6 billion, 92% of which was senior secured debt. Total debt positions represented approximately 93% of the investment portfolio at fair value, and equity positions, including equity interests in portfolios of debt and lease assets, represented approximately 7%. Ninety-two percent of the company’s debt investments were floating rate, 79% of which had interest rate floors.

As of June 30, 2020, the weighted average annual effective yield of BlackRock TCP Capital’s debt portfolio was approximately 9.8%, and the weighted average annual effective yield of the total portfolio was approximately 9.4% compared with 10.3% and 9.8%, respectively, as of March 31, 2020, as LIBOR continued to fall. Debt investments in three portfolio companies were on nonaccrual status as of June 30, 2020, representing 0.6% of the portfolio at fair value and 1.6% at cost.

During the three months ended June 30, 2020, BlackRock TCP Capital invested approximately $56 million, primarily in five investments composed of two new and three existing portfolio companies. The investments included approximately $52.9 million in senior secured loans. The remaining $3.1 million was comprised primarily of equity investments. Additionally, the company received proceeds from sales and repayments of investment principal of approximately $101.8 million. Investments in new portfolio companies during the quarter had a weighted average effective yield of 10.6%. Investments the company exited had a weighted average effective yield of 9.3%. BlackRock TCP Capital said it expects to continue to invest in senior secured loans, bonds and subordinated debt, as well as select equity investments.

As of June 30, 2020, total assets were $1.7 billion, net assets were $705.1 million and net asset value per share was $12.21 compared with $1.7 billion, $679.6 million and $11.76 per share, respectively, as of March 31, 2020.

Consolidated Results Of Operations

Total investment income for the three months ended June 30, 2020 was approximately $45.1 million, or $0.78 per share, and reflected the impact of the reduction in LIBOR on BlackRock TCP Capital’s portfolio. Since December 31, 2018, three-month LIBOR has decreased 250 basis points to 0.3% as of June 30, 2020, which reduced quarterly net investment income run rate by approximately $0.09 per share over the 18-month period before incentive fees.

Investment income for the second quarter ended June 30, 2020 included $0.01 per share from prepayment premiums and related accelerated original issue discount and exit fee amortization, $0.04 per share from recurring original issue discount and exit fee amortization, $0.06 per share from income paid in kind, and $0.08 per share in amendment fees and other income.

Total operating expenses for the three months ended June 30, 2020 were approximately $24.1 million, or $0.42 per share, including interest and other debt expenses of $10.6 million, or $0.18 per share, and incentive compensation from net investment income of $5.2 million, or $0.09 per share.

Net unrealized gains for the three months ended June 30, 2020 were $25.7 million, or $0.45 per share, primarily driven by spread tightening and volatility during the three months ended June 30, 2020 after the dramatic spread widening and volatility during the three months ended March 31, 2020 related to the market impact of COVID-19. Net realized losses for the three months ended June 30, 2020 were $0.4 million, or $0.01 per share.

Liquidity and Capital Resources

As of June 30, 2020, BlackRock TCP Capital had available liquidity of approximately $348.3 million, comprising approximately $328.3 million in available capacity under its leverage program and $20.6 million in cash and cash equivalents, less approximately $0.6 million in net outstanding settlements of investments purchased. The combined weighted-average interest rate on debt outstanding at June 30, 2020 was 3.53%.

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