BlackRock TCP Capital (TCPC) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net investment income was $0.38 per share with an annualized net investment income return on average equity of approximately 14$35 million, while net unrealized losses totaled $52 million [12][21] - Available liquidity at the end of the quarter was$780 million, including $585 million in available capacity under the leverage program and$195 million in cash [22] Business Line Data and Key Metrics Changes - The company invested $130 million in the second quarter, with$124 million in senior secured loans, reflecting a 40% increase in deployment activity compared to the previous year [14][15] - The weighted average annual effective yield of the portfolio decreased to 12.4% from 13.4% in the previous quarter [18] - 91% of the portfolio was invested in senior secured loans, with 81% in first lien loans [19] Market Data and Key Metrics Changes - The company noted a meaningful pickup in activity across its platform, driven by a return of M&A and refinancing activity [14] - The overall credit quality of the portfolio remains strong, with a weighted average internal risk rating of 1.5, slightly improved from 1.56 in the previous quarter [12] Company Strategy and Development Direction - The company is focused on maintaining a disciplined approach to capital deployment, emphasizing credit-first downside protection and investing in the core middle-market [23] - The merger with BlackRock Investment Capital Corp is expected to improve access to capital, allowing the company to capitalize on new investment opportunities [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the increase in non-accruals but emphasized the overall strong health of the portfolio and ongoing efforts to resolve issues with impacted companies [5][23] - The company remains committed to maintaining a well-covered dividend and delivering attractive returns to shareholders [23] Other Important Information - The company raised $325 million of fixed-rate unsecured debt at an attractive rate of 6.95$0.32 of net investment income [46] Q&A Session Summary Question: How much did the increase in non-accruals affect EPS in the quarter? - The increase in non-accruals affected EPS by roughly $0.08 per share [24] Question: Were the non-accruals legacy TCPC or from the merger? - The portfolios were largely overlapping at the time of the merger, making it difficult to distinguish between legacy TCPC and BCIC positions [26] Question: What is the target range for leverage? - The regulatory net leverage is 1.13x, which is within the target range of 0.9x to 1.20x [22][27] Question: Why did the company decide to increase investments this quarter? - The increase in investments was not characterized as an acceleration but rather a normal deployment reflecting growth in existing portfolio companies [29][30] Question: Is there more industry concentration in the portfolio? - The company acknowledged the correlation in the Amazon aggregator space but does not see similar trends across other industries in the portfolio [32][34] Question: How many restructurings is the company driving? - The company is meaningfully involved in most restructurings, with a focus on being a significant voice in negotiations [37][38] Question: Are sponsors willing to support their companies? - Sponsor behavior is case-by-case, with some continuing to provide support while making rational decisions based on business performance [40] Question: How is the company managing current leverage levels? - The company views the current leverage as temporary and expects it to decrease significantly after using cash to pay down debt [43]