BlackRock TCP Capital (TCPC)2025-02-27 13:18Financial Structure and Leverage - The Company has a leverage program consisting of $300.0 million in available debt under a revolving credit facility, $200.0 million under a senior secured revolving credit facility, and $325.0 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 $519.33 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 $11.7 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 $209.3 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 $131.8 million, compared to $106.6 million in 2023 and $88.4 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 $106.56 million in 2023[492]. - Adjusted net investment income for 2024 was $121.45 million, compared to $106.56 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 $102.5 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, worsening from $(31.6) million in 2023 and $(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) 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, with a per share distribution of $1.46[511]. - The company declared a first quarter regular dividend of $0.25 per share and a special dividend of $0.04 per share for the first quarter of 2025[520]. - Approximately $2.3 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 $19.2 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].