BlackRock TCP Capital (US:TCPC)2025-11-06 13:02Financial 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].