Market Analysis by covering: Gladstone Investment Corporation, FS KKR Capital Corp, Sixth Street Specialty Lending Inc, Goldman Sachs BDC Closed End Fund. Read 's Market Analysis on Investing.com ...

The manic market has been dumping business development companies (BDCs) left and right. Let’s talk about a seven-stock BDC portfolio (yielding 13.5%!) that is poised to bounce back when sanity returns.BDCs, which lend money to small businesses, are on the “outs” with the Wall Street suits after countless soft jobs reports. The spreadsheet jockeys fret about an unemployment-induced economic slowdown and miss the real story: small businesses are making more money than ever thanks to AI.Here is what’s actually ...

Core Viewpoint - Wells Fargo has maintained an Underweight rating on BlackRock TCP Capital Corp. (TCPC) and reduced the price target to $5.50 from $6 following the company's quarterly results, highlighting risks associated with restructured credits [1] Financial Performance - For Q3 2025, TCPC reported revenue of $50.52 million, a decrease of nearly 29% year over year [4] - Total investment acquisitions and dispositions during the quarter were approximately $63.1 million and $139.5 million, respectively [4] Investment Strategy and Portfolio Management - CEO Philip Tseng indicated that the company does not expect to recover value from its investment in Renovo, anticipating a full write-down in Q4 2025, which could reduce the Q4 net asset value by about $0.15 per share on a pro forma basis [2] - TCPC experienced a 20% increase in deals reviewed compared to the previous quarter and a 40% increase in deals moving to the screening stage, with management emphasizing ongoing portfolio diversification [3] - The average position size in the portfolio decreased to $7.8 million from $11.7 million at the end of 2024 [3]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Group 1: Investment Strategy - A solid base of classic dividend growth stocks can be complemented with other asset types to create a balanced portfolio [1]. - The hybrid system developed allows for capturing total returns that align with the performance of the S&P index [1]. Group 2: Investment Focus - The focus is on high-quality dividend stocks and assets that provide potential for long-term growth and significant income generation [1].

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Data and Key Metrics Changes - Third quarter NAV remained unchanged from the previous quarter at $8.71 [4] - Adjusted net investment income was $0.30 per share, compared to $0.31 in the second quarter [14] - Gross investment income was $0.59 per share, down from $0.61 per share in the prior quarter [14] - Net realized losses for the quarter were approximately $97.0 million, or $1.14 per share [15] - Net unrealized gains were $94.1 million, or $1.11 per share [16] Business Line Data and Key Metrics Changes - Non-accruals improved to 3.5% of the portfolio at fair market value, down from 5.6% at the end of 2024 [5] - The portfolio had a fair market value of $1.7 billion, invested across 149 companies [11] - 89% of the portfolio was invested in senior-secured debt, all in floating-rate instruments [11] - The weighted average annual effective yield of the portfolio was 11.5%, down from 12% in the prior quarter [12] Market Data and Key Metrics Changes - There was a 20% increase in the number of deals reviewed compared to the last quarter [8] - A 40% increase in the number of deals advanced to the screening stage was noted [8] - The company invested $241 million in 18 new and 13 existing portfolio companies [11] Company Strategy and Development Direction - The company is focused on resolving challenged credits and improving the quality of its investment portfolio [4] - The integration of BlackRock and HPS into the Private Financing Solutions platform is expected to enhance access to deal flow [8] - The company aims to deliver strong, sustainable returns to investors while improving credit quality and portfolio diversity [19] Management's Comments on Operating Environment and Future Outlook - Management noted that while M&A activity is showing signs of life, most borrowers are focused on refinancing existing debt [19] - The company is encouraged by the increase in deal flow and is focused on deploying capital into high-quality deals [19] - Management expressed disappointment over restructurings that did not yield expected results but emphasized that operational issues take time to resolve [23] Other Important Information - The board declared a third-quarter dividend of $0.25 per share, consistent with the base dividend level [7] - The company repurchased more than 25,000 shares during the third quarter and an additional 170,000 shares after quarter-end [7] - The weighted average interest rate on outstanding debt was 5.0% at quarter-end [18] Q&A Session Summary Question: Discussion on recent restructurings and common themes - Management acknowledged disappointment over restructurings that reverted to non-accrual status but noted no commonality among the cases [23] Question: Market environment and refinancing activity - Management confirmed that refinancing remains predominant, with M&A activity beginning to pick up, indicating potential for higher volumes in the future [25] Question: Indicators of stress in the portfolio and deals - Management is focused on credit risks and noted common themes around cyclical names and AI-related risks, but no atypical risk factors were identified [32]

BlackRock TCP Capital Corp. Investor presentation Q3 2025 Key investment highlights | 1 | Established platform with decades of experience lending throughout market cycles | | --- | --- | | 2 | Strategically-positioned, diverse portfolio with access to the core middle market | | 3 | Extensive network and channel-agnostic approach to deal sourcing | | 4 | Diversified, flexible funding sources | | 5 | Strong shareholder alignment | | 6 | Access to reach and resources of world's largest asset manager | Experien ...

Financial Performance - For Q3 2025, net investment income was $27.3 million, or $0.32 per share, exceeding the regular dividend of $0.25 per share[2]. - Total investment income for Q3 2025 was approximately $50.5 million, or $0.59 per share[15]. - Net investment income for Q3 2025 was approximately $27.3 million, or $0.32 per share, while net realized loss was $97.0 million, or $1.14 per share[17]. - Total investment income for the three months ended September 30, 2025, was $50,515,777, a decrease of 29% compared to $70,932,487 for the same period in 2024[30]. - Net investment income for the nine months ended September 30, 2025, was $87,078,617, down 11% from $97,964,446 in 2024[30]. - Net realized loss on investments for the three months ended September 30, 2025, was $(97,037,398), compared to a loss of $(31,425,777) in 2024[30]. - Basic and diluted earnings per share for the three months ended September 30, 2025, was $0.29, up from $0.25 in 2024[30]. Asset and Liability Overview - Total assets were $1.8 billion, with net assets of $740.0 million as of September 30, 2025[13]. - Total assets as of September 30, 2025, were $1,810.9 million, with total liabilities of $1,070.9 million, resulting in net assets of $740.0 million[28]. - Net asset value per share remained unchanged at $8.71 as of September 30, 2025[2]. - Net assets per share decreased from $9.23 as of December 31, 2024, to $8.71 as of September 30, 2025[28]. - Total debt outstanding as of September 30, 2025, was $1,051.6 million, with a combined weighted-average interest rate of 4.98%[19][20]. Investment Activity - Total investment acquisitions during Q3 2025 were approximately $63.1 million, with $139.5 million in dispositions[2]. - New investments during Q3 2025 totaled approximately $63.1 million, with 97.9% in senior secured loans[12]. - The investment in Renovo, representing approximately 0.7% of total investments at fair value, is expected to be fully written down, impacting NAV by approximately $0.15 per share[25]. Operating Expenses - Total operating expenses for Q3 2025 were approximately $23.2 million, or $0.27 per share[16]. - Total operating expenses after management fee waiver for the nine months ended September 30, 2025, were $70,791,072, a decrease from $100,223,575 in 2024[30]. - Management fees for the three months ended September 30, 2025, were $5,544,927, compared to $6,185,025 in 2024, reflecting a decrease of 10%[30]. Liquidity and Shareholder Returns - As of September 30, 2025, available liquidity was approximately $527.7 million, including $466.1 million under the leverage program and $61.0 million in cash[18]. - The company repurchased 69,446 shares at an average price of $6.68, totaling $464,080 under the Company Repurchase Plan for the nine months ended September 30, 2025[23]. - A fourth quarter dividend of $0.25 per share was declared on November 6, 2025, payable on December 31, 2025[24]. Portfolio Quality - Debt investments on non-accrual status represented 3.5% of the portfolio at fair value, down from 3.7% in the previous quarter[2]. - The weighted average annual effective yield of the debt portfolio was approximately 11.5% as of September 30, 2025, down from 12.0% in Q2 2025[11]. - Net unrealized gain for Q3 2025 was $94.1 million, or $1.11 per share, primarily due to a $74.6 million reversal of previously recognized unrealized loss from Razor[17]. - Net change in unrealized appreciation for the three months ended September 30, 2025, was $94,125,837, compared to $19,181,096 in 2024[30]. Strategic Focus - The company is focused on direct lending to middle-market companies and aims to achieve high total returns through current income and capital appreciation[32].

Core Insights - BlackRock TCP Capital Corp. reported its financial results for Q3 2025, highlighting a net investment income of $27.3 million, which translates to $0.32 per diluted share, surpassing previous expectations [1] Financial Highlights - The net investment income for the quarter ended September 30, 2025, was $27.3 million [1] - The earnings per diluted share were reported at $0.32 [1]

Financial Position and Leverage - The Company has a leverage program consisting of $300 million under a revolving credit facility, $200 million under a senior secured revolving credit facility, and $325 million in senior unsecured notes maturing in 2026 and 2029, among other debt instruments [279]. - Total leverage outstanding as of September 30, 2025, was $1.05 billion, with available capacity of $466.1 million under the combined Leverage Program [344]. - The Company’s total debt, net of unamortized issuance costs, was $1.05 billion as of September 30, 2025 [344]. - The Company’s operating facility has a maturity date in 2029 with a rate of SOFR+2.00%, totaling $151.9 million [344]. - The company is subject to a minimum shareholders' equity requirement and must maintain a ratio of not less than 150% of total assets to total indebtedness [354]. - The company has received exemptive relief from the SEC, allowing it to exclude debt under the SBA Debentures from its asset coverage test, providing increased flexibility under the 150% asset coverage requirement [351]. - As of September 30, 2025, the company's asset coverage ratio was 177.8%, which is above the required minimum of 150% [350]. Investment Strategy and Portfolio - The Company’s investment strategy includes primarily debt investments in middle-market companies, with a focus on senior secured loans and mezzanine debt [277]. - As of September 30, 2025, the consolidated investment portfolio was valued at $1,716.7 million, with 89.7% invested in debt investments, primarily in senior secured debt [313]. - During the three months ended September 30, 2025, the company invested approximately $63.1 million, with 97.9% allocated to senior secured loans [309]. - For the nine months ended September 30, 2025, total investments amounted to approximately $240.6 million, with 93.3% in senior secured loans [311]. - The largest portfolio company investment based on fair value comprised approximately 6.5% of the total portfolio as of September 30, 2025 [313]. - As of September 30, 2025, the industry composition of the portfolio at fair value was led by Software (13.2%) and Internet Software and Services (12.8%) [315]. - As of September 30, 2025, 99.6% of investments were categorized as Level 3, indicating reliance on valuations by independent third-party sources [302]. - The average portfolio company investment at fair value was approximately $11.5 million as of September 30, 2025 [313]. Revenue and Income - The Company generated revenues primarily from interest on debt investments, with expected maturities generally between three to five years [286]. - Investment income for the three months ended September 30, 2025, was $50.5 million, a decrease from $70.9 million in the same period of 2024, primarily due to a decrease in portfolio size and lower SOFR rates [316]. - For the nine months ended September 30, 2025, investment income totaled $157.9 million, down from $198.2 million in 2024, reflecting similar factors as the quarterly results [317]. - Net investment income for the three months ended September 30, 2025, was $27.3 million, down from $33.9 million in 2024, reflecting decreased investment income [320]. - Adjusted net investment income for the nine months ended September 30, 2025, was $82.6 million, compared to $90.7 million for the same period in 2024, indicating a decline of about 8.5% [338]. Expenses and Losses - Total operating expenses for the three months ended September 30, 2025, were $23.2 million, a decrease from $37.1 million in 2024, mainly due to lower incentive fees and interest expenses [318]. - The net realized loss for the three months ended September 30, 2025, was $(97.0) million, compared to $(31.4) million in 2024, primarily due to losses from restructuring investments [322]. - The change in net unrealized appreciation for the three months ended September 30, 2025, was $94.1 million, significantly higher than $19.2 million in 2024, reflecting reversals of previously recognized losses [324]. - Incentive fees for the three months ended September 30, 2025, were $0.0 million, down from $6.5 million in 2024, due to not accruing incentive fees [328]. Shareholder Returns and Dividends - The company declared total dividends of $73.99 million for the nine months ended September 30, 2025, with a per share amount of $0.87 [360]. - A fourth quarter dividend of $0.25 per share was declared, payable on December 31, 2025, to shareholders of record as of December 17, 2025 [369]. - Approximately $2.5 million of cash distributions were reinvested through the new dividend reinvestment plan (DRIP) for the nine months ended September 30, 2025 [340]. - The company repurchased 69,446 shares at an average price of $6.68 per share under the Company Repurchase Plan, totaling $464,080 for the nine months ended September 30, 2025 [343]. - The Company repurchased 169,964 shares at a weighted average price of $5.80, totaling $977,677 from October 1, 2025, to November 5, 2025 [369]. Regulatory Compliance and Taxation - The Company is regulated as a RIC and must distribute at least 90% of its investment company taxable income to avoid corporate level taxes [278]. - The company has elected to be treated as a RIC and intends to distribute at least 90% of its investment company taxable income to shareholders, relieving it from U.S. federal income taxes [329]. - The company must distribute at least 90% of its ordinary income and short-term capital gains to maintain its RIC tax treatment [363]. Economic Sensitivity - The Company’s financial condition and results of operations are subject to various risks, including fluctuations in interest rates and changes in laws or regulations [276]. - A 300 basis point increase in interest rates could result in a net investment income increase of $38,613,665, equating to $0.45 per share [375]. - A 200 basis point increase in interest rates could result in a net investment income increase of $25,742,443, equating to $0.30 per share [375]. - A 100 basis point decrease in interest rates could result in a net investment income decrease of $12,871,222, equating to $(0.15) per share [375]. - A 300 basis point decrease in interest rates could result in a net investment income decrease of $35,520,589, equating to $(0.42) per share [375]. Mergers and Acquisitions - The Company entered into a Merger Agreement on September 6, 2023, resulting in the issuance of 27,823,870 shares of common stock to former BCIC shareholders [281][282]. - The merger with BCIC was completed on March 18, 2024, and was considered a tax-free reorganization, with BCIC's separate existence ceasing [331]. - The Company completed a merger with BCIC on March 18, 2024, which was accounted for as an asset acquisition, resulting in a purchase discount that was allocated to the cost basis of the BCIC investments acquired [336]. Cash Flow and Operating Activities - The net cash provided by operating activities for the nine months ended September 30, 2025, was $114.4 million, consisting of $59.5 million in net investment income and $54.8 million from the settlement of dispositions of investments [352]. - Net cash used by financing activities during the same period was $145.0 million, primarily due to $92.0 million in repayment of 2025 Notes and $74.0 million in dividends paid to common shareholders [353]. - The company has $61.0 million in cash and cash equivalents as of September 30, 2025 [353]. Specific Investments - The investment in Homerenew Buyer Inc. ("Renovo") is expected to be fully written down in Q4 2025, impacting the Company's NAV by approximately $0.15 per share [370]. - As of September 30, 2025, the value of the investment in Renovo represented about 0.7% of the Company's total investments at fair value [370]. - 94.2% of debt investments in the portfolio bore interest based on floating rates as of September 30, 2025 [372]. - The percentage of floating rate debt investments subject to an interest rate floor was 94.5% as of December 31, 2024 [372].