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BlackRock TCP Capital (TCPC) - 2024 Q4 - Annual Report
TCPCBlackRock TCP Capital (TCPC)2025-02-27 13:18
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Financial Structure and Leverage - The Company has a leverage program consisting of 300.0millioninavailabledebtunderarevolvingcreditfacility,300.0 million in available debt under a revolving credit facility, 200.0 million under a senior secured revolving credit facility, and 325.0millioninseniorunsecurednotesmaturingin2026and2029[442].−TotalleverageoutstandingasofDecember31,2024,was325.0 million in senior unsecured notes maturing in 2026 and 2029[442]. - Total leverage outstanding as of December 31, 2024, was 1.13 billion, with available capacity of 519.33million[497].−AsofDecember31,2024,theCompany′sassetcoverageratiowas178.9519.33 million[497]. - As of December 31, 2024, the Company's asset coverage ratio was 178.9%, above the required 150%[501]. Investment Strategy and Portfolio - The Company’s investment strategy focuses on achieving high total returns through current income and capital appreciation, primarily investing in the debt of middle-market companies[441]. - As of December 31, 2024, the consolidated investment portfolio was valued at 1,794.8 million, with 91.5% invested in debt investments, primarily in senior secured debt[473]. - The average portfolio company investment at fair value was approximately 11.7millionasofDecember31,2024[473].−AsofDecember31,2024,98.311.7 million as of December 31, 2024[473]. - As of December 31, 2024, 98.3% of investments were categorized as Level 3, indicating significant reliance on unobservable inputs for valuation[464]. - The largest portfolio company investment based on fair value was approximately 6.2% of the total portfolio as of December 31, 2024[473]. Revenue and Income - The Company generates revenues primarily from interest on debt investments, with expected maturities generally between three to five years[449]. - Investment income for the year ended December 31, 2024, totaled 259.4 million, an increase from 209.3millionin2023and209.3 million in 2023 and 181.0 million in 2022, primarily driven by higher interest income due to increased SOFR rates and investments from the Merger[478]. - Net investment income for the year ended December 31, 2024, was 131.8million,comparedto131.8 million, compared to 106.6 million in 2023 and 88.4millionin2022,reflectinghighertotalinvestmentincomedespiteincreasedexpenses[480].−FortheyearendedDecember31,2024,netinvestmentincomewas88.4 million in 2022, reflecting higher total investment income despite increased expenses[480]. - For the year ended December 31, 2024, net investment income was 131.76 million, a 23.6% increase from 106.56millionin2023[492].−Adjustednetinvestmentincomefor2024was106.56 million in 2023[492]. - Adjusted net investment income for 2024 was 121.45 million, compared to 106.56millionin2023,reflectinga14106.56 million in 2023, reflecting a 14% increase[492]. Expenses and Losses - Total operating expenses for the year ended December 31, 2024, were 127.2 million, up from 102.5millionin2023and102.5 million in 2023 and 92.6 million in 2022, largely due to increased interest expenses from higher debt levels following the Merger[479]. - The net realized loss for the year ended December 31, 2024, was (67.1)million,worseningfrom(67.1) million, worsening from (31.6) million in 2023 and (18.2)millionin2022,primarilyduetolossesfromrestructuringinvestmentsinseveralcompanies[481].−ThechangeinnetunrealizeddepreciationfortheyearendedDecember31,2024,was(18.2) million in 2022, primarily due to losses from restructuring investments in several companies[481]. - The change in net unrealized depreciation for the year ended December 31, 2024, was (127.8) million, compared to (36.4)millionin2023and(36.4) million in 2023 and (79.4) million in 2022, with significant losses attributed to investments in Razor and Edmentum[482]. Dividends and Distributions - The Company must distribute at least 90% of its ordinary income and short-term capital gains to maintain its qualification as a RIC[508]. - For the year ended December 31, 2024, the total dividends declared amounted to 115,280,670,withapersharedistributionof115,280,670, with a per share distribution of 1.46[511]. - The company declared a first quarter regular dividend of 0.25pershareandaspecialdividendof0.25 per share and a special dividend of 0.04 per share for the first quarter of 2025[520]. - Approximately 2.3millionofcashdistributionswerereinvestedthroughthenewdividendreinvestmentplan(DRIP)in2024[494].−Thecompanyhastheabilitytodeclarealargeportionofadividendinsharesinsteadofcashtosatisfyannualdistributionrequirements[516].TaxandRegulatoryConsiderations−TheCompanyhaselectedtobetreatedasaRICforU.S.federalincometaxpurposes,allowingittoavoidcorporateleveltaxesondistributedincome[443].−Thecompanymayfaceadversetaxconsequencesifitdoesnotdistributeacertainpercentageofitsincomeannually[515].MergersandAcquisitions−TheCompanyenteredintoaMergerAgreementonSeptember6,2023,withBCIC,resultinginBCICceasingtoexistasaseparateentity[444].−TheCompanycompletedaMergerwithBCIConMarch18,2024,whichwastreatedasatax−freereorganization,allowingtheCompanytocarryforwardthehistoricalcostbasisoftheacquiredinvestments[487].−TheCompanyissued27,823,870sharesofitscommonstocktoformerBCICshareholdersasaresultoftheMerger,withanexchangeratioof0.3834shares[445].−Thecompanypaid2.3 million of cash distributions were reinvested through the new dividend reinvestment plan (DRIP) in 2024[494]. - The company has the ability to declare a large portion of a dividend in shares instead of cash to satisfy annual distribution requirements[516]. Tax and Regulatory Considerations - The Company has elected to be treated as a RIC for U.S. federal income tax purposes, allowing it to avoid corporate level taxes on distributed income[443]. - The company may face adverse tax consequences if it does not distribute a certain percentage of its income annually[515]. Mergers and Acquisitions - The Company entered into a Merger Agreement on September 6, 2023, with BCIC, resulting in BCIC ceasing to exist as a separate entity[444]. - The Company completed a Merger with BCIC on March 18, 2024, which was treated as a tax-free reorganization, allowing the Company to carry forward the historical cost basis of the acquired investments[487]. - The Company issued 27,823,870 shares of its common stock to former BCIC shareholders as a result of the Merger, with an exchange ratio of 0.3834 shares[445]. - The company paid 7.3 million in dividends payable assumed in the merger for former BCIC shareholders[513]. Management and Advisory Fees - The base management fee for the Company was reduced from 1.50% to 1.25% on assets equal to or below 200% of the net asset value following the Merger[453]. - The Company’s investment management agreement allows for incentive compensation based on achieving a cumulative total return of at least 7% on contributed common equity[454]. - Incentive fees included in operating expenses for the year ended December 31, 2024, were 19.2million,adecreasefrom19.2 million, a decrease from 22.6 million in 2023, due to not accruing incentive fees in the last quarter of 2024[484]. - The advisor voluntarily agreed to waive one-third of its base management fee for three calendar quarters starting January 1, 2025[520]. - The advisor and its affiliates may manage other funds, leading to potential conflicts in investment opportunities allocation[519].