PART I Item 1. Business BlackRock Capital Investment Corporation (BKCC) is an externally-managed BDC and RIC focused on providing flexible financing solutions to middle-market companies, primarily through senior secured loans - BlackRock Capital Investment Corporation (BKCC) is an externally-managed, non-diversified closed-end management investment company that has elected to be regulated as a Business Development Company (BDC) under the 1940 Act and intends to qualify as a Regulated Investment Company (RIC) for tax purposes1417 - The company's investment objective is to generate both current income and capital appreciation by investing primarily in middle-market companies (enterprise value typically $100 million to $1.5 billion) through senior and junior secured, unsecured, and subordinated debt, often with an equity component131718 - The Advisor, BlackRock Capital Investment Advisors, LLC (BCIA), is an indirect subsidiary of BlackRock, Inc., a leading investment management firm with $8.7 trillion in AUM as of December 31, 2020, providing significant platform advantages and expertise2027 - The company employs a 4-grade investment rating system to reflect borrower performance and collateral coverage, with an average rating of 1.90 at December 31, 2020, compared to 1.39 at December 31, 2019, indicating increased risk6566 Investment Ratings Distribution (Fair Value) | Grade | December 31, 2020 ($) | December 31, 2019 ($) | | :---------------- | :-------------------- | :-------------------- | | Grade 1 | 189,012,640 | 543,022,093 | | Grade 2 | 198,713,376 | 163,762,457 | | Grade 3 | 38,605,618 | — | | Grade 4 | 51,136,642 | 43,074,531 | | Not Rated | 1,557,200 | — | | Total | 479,025,476 | 749,859,081 | - Effective May 2, 2020, the Base Management Fee was reduced from 1.75% to 1.50% of total assets (up to 200% of NAV) and 1.0% on assets exceeding 200% of NAV. The Incentive Fee based on net investment income was reduced from 20% to 17.5% over a 7% hurdle, and the capital gains Incentive Fee was reduced from 20% to 17.5%75777986 Management Fees Incurred | Year Ended December 31, | Base Management Fees ($) | | :---------------------- | :----------------------- | | 2020 | 10,799,832 | | 2019 | 12,425,101 | | 2018 | 14,138,788 | Incentive Fees Based on Income Incurred (Pre-Waiver) | Year Ended December 31, | Incentive Fees Based on Income ($) | | :---------------------- | :--------------------------------- | | 2020 | 6,304,333 | | 2019 | 8,751,521 | | 2018 | 8,510,866 | - The Advisor voluntarily waived a portion of its Incentive Fees based on income from July 1, 2019, through December 31, 2020, resulting in no net Incentive Fees for 2020 and $1,849,597 for 201985 - The company's Senior Secured Revolving Credit Facility was amended in May 2020, extending maturity to June 5, 2023, reducing aggregate commitment from $340 million to $300 million, and lowering the minimum asset coverage ratio from 200% to 150%99 - The company has $143.75 million in 5.00% Unsecured Convertible Senior Notes due June 15, 2022, with an initial conversion rate of 118.2173 shares per $1,000 principal amount100 Item 1A. Risk Factors Investing in the company's securities is highly speculative and involves significant risks, including intense competition for investment opportunities, potential negative impacts from external events like the COVID-19 pandemic, and capital market disruptions - The company operates in a highly competitive market for investment opportunities, competing with various financial entities, which may lead to less favorable investment terms or missed opportunities114115 - The COVID-19 pandemic has caused significant business disruption, adversely impacted portfolio company valuations, and increased market volatility, potentially affecting the company's ability to value its portfolio, comply with asset coverage ratios, pay dividends, and access capital116118119121122125 - The company's use of borrowed funds (leverage) magnifies potential gains or losses, increasing the risk of loss for common stockholders and potentially restricting distributions if asset coverage ratios are not maintained166171172 - Substantially all of the company's assets are pledged as collateral under its Credit Facility, meaning a default could lead to foreclosure and forced sales at disadvantageous prices, severely impairing operations and distributions153154155 - The illiquidity of the company's private investments makes them difficult to sell quickly, and their fair value is determined by the Board of Directors, involving subjective judgments and estimates, which may differ materially from realized values265266304305307 - The Incentive Fee structure may incentivize the Advisor to pursue riskier or more speculative investments, including those with deferred interest features (PIK interest), which accrue income before cash receipt, potentially creating distribution challenges253254 - As a BDC, the company is generally prohibited from certain transactions with affiliates, though an exemptive order from the SEC permits some affiliated investments subject to conditions, which may still present conflicts of interest for the Advisor355356357 - Failure to maintain RIC status would subject the company to corporate-level income tax, substantially reducing net assets and distributable income to stockholders369370372 - Shares of the company's common stock have historically traded at a discount from net asset value and may do so again, limiting the ability to raise additional equity capital without stockholder and independent director approval373374 Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC - The company has no unresolved staff comments401 Item 2. Properties The company does not own any material real estate or physical properties, utilizing administrative and executive offices in New York, NY, which are deemed suitable for its operations - The company does not own any real estate or other physical properties materially important to its operation. Its administrative and principal executive offices are located at 40 East 52nd Street, New York, NY 10022402 Item 3. Legal Proceedings The company and its Advisor may be involved in legal proceedings in the normal course of business, including enforcing rights under contracts with portfolio companies - The company and its Advisor may be party to legal proceedings incidental to the normal course of business, including enforcement of rights under contracts with portfolio companies. These proceedings are not expected to have a material effect on the consolidated financial statements403 Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable404 PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on The NASDAQ Global Select Market under 'BKCC', and has historically traded at a discount to its Net Asset Value (NAV) - The company's common stock is quoted on The NASDAQ Global Select Market under the symbol 'BKCC' since June 27, 2007406 Common Stock Price and NAV Data | Quarter Ended | NAV ($) | High Sales Price ($) | Low Sales Price ($) | Premium/Discount of High Sales Price to NAV (%) | Premium/Discount of Low Sales Price to NAV (%) | Declared Distributions ($) | | :-------------- | :------ | :------------------- | :------------------ | :---------------------------------------------- | :--------------------------------------------- | :------------------------- | | Dec 31, 2019 | 6.33 | 5.17 | 4.63 | (18)% | (27)% | 0.14 | | Mar 31, 2020 | 5.35 | 5.09 | 1.47 | (5)% | (73)% | 0.14 | | Jun 30, 2020 | 4.84 | 3.51 | 1.79 | (27)% | (63)% | 0.10 | | Sep 30, 2020 | 4.24 | 3.08 | 2.31 | (27)% | (46)% | 0.10 | | Dec 31, 2020 | 4.23 | 3.07 | 2.34 | (27)% | (45)% | 0.10 | - The Board of Directors authorized the purchase of up to 7,500,000 shares, effective until November 2, 2021, or until all authorized shares are repurchased. In 2020, 986,554 shares were purchased for $3,627,604408410 - As of March 3, 2021, there were approximately 206 holders of record of the company's common stock412 Quarterly Distributions Per Share | Record Date | Payment Date | Distribution Amount Per Share Outstanding ($) | | :----------------- | :----------------- | :-------------------------------------------- | | December 18, 2019 | January 8, 2020 | 0.14 | | March 17, 2020 | April 7, 2020 | 0.14 | | June 1, 2020 | July 7, 2020 | 0.10 | | August 18, 2020 | September 29, 2020 | 0.10 | | November 18, 2020 | December 30, 2020 | 0.10 | - To maintain RIC tax treatment, the company must distribute at least 90% of its ordinary income and net short-term capital gains annually. To avoid excise taxes, it must distribute at least 98% of ordinary income and 98.2% of capital gains414415 Estimated Annual Expenses (as a Percentage of Net Assets Attributable to Common Shares) | Expense Category | Percentage (%) | | :---------------------------------------------- | :------------- | | Management Fees | 2.94 | | Incentive Fees Payable Under the Management Agreement | 1.62 | | Interest Payments on Borrowed Funds | 4.95 | | Other Expenses | 2.07 | | Acquired Fund Fees and Expenses | 4.43 | | Total Annual Expenses | 16.01 | Item 6. Selected Financial Data This section presents a five-year summary of the company's unaudited consolidated statement of operations, per share data, and balance sheet data, highlighting key financial performance and position metrics from 2016 to 2020 Consolidated Statement of Operations Data (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------------------------------ | :-------- | :-------- | :-------- | :-------- | :-------- | | Total Investment Income | $67,116 | $78,119 | $83,868 | $97,329 | $117,411 | | Total Expenses | 32,892 | 36,211 | 36,436 | 42,238 | 63,374 | | Net Investment Income | 34,223 | 41,908 | 47,432 | 55,092 | 54,037 | | Net Realized and Unrealized Gain (Loss) including Realized Losses on Extinguishment of Debt | (138,076) | (48,795) | (56,594) | (34,190) | (138,329) | | Net Increase (Decrease) in Net Assets Resulting from Operations | (103,853) | (6,887) | (9,162) | 20,902 | (84,292) | Consolidated Per Share Data | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Net Asset Value Per Common Share at Year End | $4.23 | $6.33 | $7.07 | $7.83 | $8.21 | | Market Price at Year End | 2.69 | 4.97 | 5.29 | 6.23 | 6.96 | | Net Investment Income | 0.49 | 0.61 | 0.66 | 0.75 | 0.74 | | Net Realized and Unrealized Gain (Loss) including Realized Losses on Extinguishment of Debt | (1.98) | (0.71) | (0.79) | (0.46) | (1.90) | | Net Increase (Decrease) in Net Assets Resulting from Operations | (1.49) | (0.10) | (0.13) | 0.29 | (1.16) | | Distributions Declared | 0.44 | 0.64 | 0.72 | 0.72 | 0.84 | Consolidated Balance Sheet Data at Year End (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Total Assets | $511,720 | $774,063 | $693,632 | $799,880 | $957,067 | | Borrowings Outstanding | 179,798 | 313,570 | 186,398 | 206,661 | 335,668 | | Total Net Assets | 315,010 | 435,609 | 487,020 | 571,100 | 596,320 | Other Data | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :------ | :----- | :----- | :----- | :------ | | Total Return | (35.7)% | 5.3% | (4.4)% | (0.6)% | (18.1)% | | Number of Portfolio Companies at Year End | 55 | 47 | 27 | 30 | 38 | | Value of Investments at Year End | $479,025| $749,859| $671,653| $757,941| $931,123| | Yield on Total Portfolio at Cost | 7.4% | 9.4% | 9.7% | 8.7% | 9.2% | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, detailing investment strategy, revenue, expenses, portfolio activity, and liquidity - The company's investment objective is to generate both current income and capital appreciation through debt and equity investments, primarily in middle-market companies440 - As of December 31, 2020, approximately 17.9% of the company's total assets were not 'qualifying assets' under Section 55(a) of the 1940 Act, which requires at least 70% of total assets to be qualifying assets445 - Revenues are primarily generated from interest on debt, dividends on equity, and capital gains from sales of warrants and other interests. Expenses include base management fees, incentive fees, interest, professional fees, and administrative costs446447 Financial and Operating Highlights (December 31, 2020) | Metric | Value ($) | | :-------------------------------------- | :-------------- | | Investment portfolio, at fair value | 479.0 million | | Net assets | 315.0 million | | Indebtedness (excluding deferred financing costs) | 181.2 million | | Net asset value per share | 4.23 | | Cost of investments during period (including PIK) | 143.5 million | | Sales, repayments and other exits during period | 277.6 million | | Number of portfolio companies at end of period | 55 | | Net investment income per share | 0.49 | | Distributions declared per share | 0.44 | | Basic earnings/(losses) per share | (1.49) | | Net investment income | 34.2 million | | Net realized and unrealized gain/(loss) | (138.1) million | | Net increase/(decrease) in net assets from operations | (103.9) million | - During 2020, the company invested $143.5 million, primarily in senior secured loans (57.1% first lien, 14.1% second lien), and received $277.6 million from sales, repayments, and other exits452 Portfolio Composition (Fair Value) | Investment Type | December 31, 2020 (%) | December 31, 2019 (%) | | :-------------------------- | :-------------------- | :-------------------- | | Senior Secured Loans | 77% | 56% | | Unsecured or Subordinated Debt Securities | 13% | 22% | | Equity Investments | 10% | 21% | | Senior Secured Notes | <1% | 1% | Top Three Industry Concentrations (Fair Value) | Industry | December 31, 2020 (%) | December 31, 2019 (%) | | :----------------------------- | :-------------------- | :-------------------- | | Diversified Financial Services | 19.3% | 34.0% | | Road & Rail | 10.0% | 6.2% | | Thrift & Mortgage Finance | 7.8% | 6.2% | Weighted Average Yields | Category | December 31, 2020 (Fair Market Value) | December 31, 2020 (Cost) | December 31, 2019 (Fair Market Value) | December 31, 2019 (Cost) | | :-------------------------------------- | :------------------------------------ | :----------------------- | :------------------------------------ | :----------------------- | | Total portfolio | 8.7% | 7.4% | 10.4% | 9.4% | | Senior secured loans | 9.5% | 9.5% | 10.2% | 10.2% | | Other debt securities | 7.3% | 5.3% | 11.8% | 10.8% | | Debt and income producing equity securities | 8.9% | 8.5% | 10.9% | 10.7% | Investment Income (in thousands) | Investment Income Category | 2020 | 2019 | 2018 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Interest and fees on senior secured loans | $40,270 | $40,727 | $45,742 | | Interest and fees on other debt securities | 18,628 | 21,456 | 21,897 | | Interest earned on short-term investments, cash equivalents | 27 | 114 | 140 | | Dividends and fees on equity securities | 8,190 | 15,792 | 16,040 | | Other income | — | 30 | 48 | | Total investment income | $67,116 | $78,119 | $83,868 | - Total investment income decreased by $11.0 million (14.1%) in 2020 compared to 2019, primarily due to a decrease in dividend income, a lower rate environment, and a 1.3% decrease in the average investment portfolio461 Expenses (in thousands) | Expense Category | 2020 | 2019 | 2018 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Base management fees | $10,800 | $12,425 | $14,139 | | Incentive management fees | 6,304 | 8,752 | 8,511 | | Interest and credit facility fees | 15,584 | 15,559 | 15,228 | | Professional fees | 1,964 | 2,093 | 2,429 | | Administrative services | 1,458 | 1,403 | 1,703 | | Director fees | 652 | 730 | 727 | | Investment advisor expenses | 350 | 350 | 350 | | Other | 2,083 | 1,801 | 1,861 | | Total expenses, before waiver | 39,196| 43,112| 44,947| | Incentive management fee waiver | (6,304) | (6,902) | (8,511) | | Expenses, net of waiver | $32,892 | $36,211 | $36,436 | - Net investment income decreased by $7.7 million (18.3%) in 2020 compared to 2019, primarily due to lower total investment income, partially offset by decreased expenses468 Net Realized Gain (Loss) on Investments (in thousands) | Year Ended December 31, | Net Realized Gain (Loss) ($) | | :---------------------- | :--------------------------- | | 2020 | (116,000) | | 2019 | (24,900) | | 2018 | (45,900) | - Net realized loss in 2020 was primarily due to the restructure of AGY Holding Corp. ($(59.2) million), sale of U.S. Well Services, Inc. equity ($(43.8) million), and sale of Sur La Table, Inc. debt ($(12.3) million)469 Net Change in Unrealized Appreciation or (Depreciation) (in thousands) | Year Ended December 31, | Net Change in Unrealized Appreciation (Depreciation) ($) | | :---------------------- | :------------------------------------------------------- | | 2020 | (22,100) | | 2019 | (23,900) | | 2018 | (10,700) | - The increase in net unrealized depreciation in 2020 was mainly due to a $(85.4) million increase in valuation depreciation in Gordon Brothers Finance Company and BCIC Senior Loan Partners, LLC, partially offset by a $64.0 million reversal from the sale of U.S. Well Services, Inc. equity and AGY Holding Corp. restructure470 Net Increase (Decrease) in Net Assets from Operations (in thousands) | Year Ended December 31, | Net Increase (Decrease) in Net Assets from Operations ($) | | :---------------------- | :-------------------------------------------------------- | | 2020 | (103,900) | | 2019 | (6,900) | | 2018 | (9,200) | - Net cash provided by operating activities for 2020 was $170.6 million, primarily from disposition of investments ($140.5 million). Net cash used by financing activities was $(162.0) million, including debt repayments of $(135.6) million478480 Contractual Payment Obligations (December 31, 2020, in millions) | Obligation | Total ($) | Payments Due in 1-3 Years ($) | | :------------------------------ | :-------- | :---------------------------- | | Credit Facility | 38.8 | 38.8 | | 2022 Convertible Notes | 143.8 | 143.8 | | Interest and Credit Facility Fees Payable | 0.5 | — | - As of December 31, 2020, the company had unfunded commitments of $24.3 million to existing portfolio companies, including $4.2 million to BCIC Senior Loan Partners, LLC496 - On March 2, 2021, the Board declared a distribution of $0.10 per share, payable on April 7, 2021497 Item 7A. Quantitative and Qualitative Disclosure About Market Risk The company is exposed to financial market risks, particularly interest rate changes, as 87% of its yielding debt investments bore floating rates at December 31, 2020 - At December 31, 2020, 87% of the company's yielding debt investments bore interest based on floating rates (e.g., LIBOR, Federal Funds Rate, Prime Rate), with 80% of those containing an interest rate floor499 - The Credit Facility bears variable interest rates with no floors, while the 2022 Convertible Notes bear a fixed interest rate499 Approximate Annual Impact on Net Investment Income from Interest Rate Changes (December 31, 2020, in millions) | Basis Point Change | Net Investment Income ($) | Net Investment Income Per Share ($) | | :----------------- | :------------------------ | :---------------------------------- | | Up 400 | 10.8 | 0.15 | | Up 300 | 7.5 | 0.11 | | Up 200 | 4.2 | 0.06 | | Up 100 | 0.9 | 0.01 | | Down 100 | (0.1) | (0.00) | - The company did not engage in any interest rate hedging activity during the years ended December 31, 2020, 2019, and 2018500 Item 8. Consolidated Financial Statements and Supplementary Data This item refers to the Index to Consolidated Financial Statements for detailed financial reporting - The consolidated financial statements and supplementary data are provided in the Index to Consolidated Financial Statements on page F-1501 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in and disagreements with accountants on accounting and financial disclosure502 Item 9A. Controls and Procedures Management evaluated the effectiveness of the company's disclosure controls and internal control over financial reporting as of December 31, 2020, concluding they were effective - The company's management concluded that its disclosure controls and procedures were effective as of December 31, 2020503 - Management also concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework505 - Deloitte & Touche LLP, the independent registered public accounting firm, issued an unqualified opinion on the company's internal control over financial reporting507511 - There have been no material changes in internal control over financial reporting during the most recently completed fiscal quarter, and no material impact from employees working remotely due to COVID-19508 Item 9B. Other Information There is no other information to report in this item - There is no other information to report509 PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the Registrant's 2021 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders518 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the Registrant's 2021 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders519 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the Registrant's 2021 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders520 Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Registrant's 2021 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders521 Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the Registrant's 2021 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the Registrant's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders522 PART IV Item 15. Exhibits and Consolidated Financial Statement Schedules This section lists all exhibits and consolidated financial statement schedules filed as part of this Annual Report on Form 10-K - The section lists documents filed as part of the Annual Report, including consolidated financial statements and exhibits525 - Financial statement schedules are omitted if not required, not applicable, or if the information is shown in the consolidated financial statements or notes526 - Agreements included as exhibits are for informational purposes regarding their terms and do not necessarily reflect the actual state of affairs526 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on the company's consolidated financial statements and internal control over financial reporting, highlighting the fair value of financial instruments as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion on the company's consolidated financial statements and financial highlights for the periods ended December 31, 2020 and 2019533 - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2020534 - The fair value of financial instruments, particularly Level 3 investments, was identified as a critical audit matter due to the inherent uncertainty and subjective judgments involved in their valuation538541542 Consolidated Statements of Assets and Liabilities The consolidated statements of assets and liabilities present the company's financial position as of December 31, 2020, and 2019, showing a significant decrease in total investments and net assets Consolidated Statements of Assets and Liabilities (in thousands) | Asset/Liability Category | December 31, 2020 ($) | December 31, 2019 ($) | | :----------------------- | :-------------------- | :-------------------- | | Assets | | | | Investments at fair value| 479,025 | 749,859 | | Cash and cash equivalents| 23,333 | 14,679 | | Receivable for investments sold | 5,440 | 1,871 | | Interest, dividends and fees receivable | 2,138 | 5,708 | | Prepaid expenses and other assets | 1,783 | 1,946 | | Total Assets | 511,720 | 774,063 | | Liabilities | | | | Debt (net) | 179,798 | 313,570 | | Interest and credit facility fees payable | 503 | 757 | | Distributions payable | — | 9,637 | | Base management fees payable | 2,313 | 3,251 | | Incentive management fees payable | 1,850 | 1,850 | | Payable for investments purchased | 9,194 | 7,313 | | Accrued administrative services | 389 | 372 | | Other accrued expenses and payables | 2,663 | 1,705 | | Total Liabilities | 196,709 | 338,454 | | Total Net Assets | 315,010 | 435,609 | - Total investments at fair value decreased by $270.8 million (36.1%) from $749.9 million in 2019 to $479.0 million in 2020550 - Total net assets decreased by $120.6 million (27.7%) from $435.6 million in 2019 to $315.0 million in 2020550 Consolidated Statements of Operations The consolidated statements of operations detail the company's financial performance for the years ended December 31, 2020, 2019, and 2018, showing a significant net decrease in net assets in 2020 due to realized and unrealized losses Consolidated Statements of Operations (in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------------------------ | :---------- | :---------- | :---------- | | Investment Income: | | | | | Total investment income from non-controlled, non-affiliated investments | 37,073 | 32,822 | 30,084 | | Total investment income from non-controlled, affiliated investments | 933 | 3,962 | 12,049 | | Total investment income from controlled investments | 29,109 | 41,304 | 41,687 | | Other income | — | 30 | 48 | | Total investment income | 67,116 | 78,119 | 83,868 | | Expenses: | | | | | Total expenses, before incentive management fee waiver | 39,196 | 43,112 | 44,947 | | Incentive management fee waiver | (6,304) | (6,902) | (8,511) | | Expenses, net of incentive management fee waiver | 32,892 | 36,211 | 36,436 | | Net Investment Income | 34,223 | 41,908 | 47,431 | | Realized and Unrealized Gain (Loss): | | | | | Net realized gain (loss) | (115,988) | (24,885) | (45,939) | | Net change in unrealized appreciation (depreciation) | (22,088) | (23,910) | (10,655) | | Net realized and unrealized gain (loss) | (138,076) | (48,795)| (56,594)| | Net Increase (Decrease) in Net Assets Resulting from Operations | $(103,853)| $(6,887)| $(9,162)| Per Share Data | Metric | 2020 | 2019 | 2018 | | :------------------------------------ | :------ | :------ | :------ | | Net Investment Income Per Share—basic | $0.49 | $0.61 | $0.66 | | Earnings (Loss) Per Share—basic | $(1.49) | $(0.10) | $(0.13) | | Distributions Declared Per Share | $0.44 | $0.64 | $0.72 | Consolidated Statements of Changes in Net Assets The consolidated statements of changes in net assets show a significant decrease in net assets in 2020 due to a large net decrease from operations and distributions to stockholders Consolidated Statements of Changes in Net Assets (in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------------------------ | :---------- | :---------- | :---------- | | Net investment income | $34,223 | $41,908 | $47,431 | | Net realized gain (loss) | (115,988) | (24,885) | (45,939) | | Net change in unrealized appreciation (depreciation) before taxes | (22,088) | (23,910) | (10,655) | | Net increase (decrease) in net assets resulting from operations | (103,853) | (6,887) | (9,162) |\ | Distributions to Stockholders (Total) | (30,606) | (44,055) | (51,269) | | Net increase (decrease) in net assets resulting from capital share transactions | 13,859 | (469) | (23,649) | | Total Increase (Decrease) in Net Assets | (120,599) | (51,411)| (84,080)| | Net assets at beginning of period | 435,609 | 487,020 | 571,100 | | Net assets at end of period | $315,010 | $435,609| $487,020| - Net assets at the end of 2020 were $315.0 million, a decrease of $120.6 million from $435.6 million at the end of 2019557 Capital Share Activity | Metric | 2020 | 2019 | 2018 | | :-------------------------------------- | :-------- | :------ | :-------- | | Shares issued from stock distribution and reinvestment | 6,616,964 | — | 137,523 | | Purchases of treasury stock | (986,554) | (85,543)| (4,162,635)| | Net increase (decrease) in shares outstanding | 5,630,410 | (85,543)| (4,025,112)| Consolidated Statements of Cash Flows The consolidated statements of cash flows present the company's cash activities for the years ended December 31, 2020, 2019, and 2018, showing significant cash generation from operations in 2020 Consolidated Statements of Cash Flows (in thousands) | Activity Category | 2020 | 2019 | 2018 | | :-------------------------------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by (used in) operating activities | 170,637 | (76,779) | 82,042 | | Net cash provided by (used in) financing activities | (161,983) | 77,960 | (97,559) | | Net increase (decrease) in cash and cash equivalents | 8,654 | 1,182 | (15,517) | | Cash and cash equivalents, beginning of period | 14,679 | 13,497 | 29,015 | | Cash and cash equivalents, end of period | $23,333 | $14,679 | $13,497 | - In 2020, net cash provided by operating activities was $170.6 million, primarily driven by $277.6 million in proceeds from disposition of investments561 - Net cash used by financing activities in 2020 was $(162.0) million, including $(135.6) million in net debt repayments and $(22.8) million in cash distributions561 Supplemental Cash Flow Information (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------------- | :------ | :------ | :------ | | Cash paid during period for: Interest | $12,322 | $11,875 | $12,562 | | Cash paid during period for: Taxes | 108 | 81 | 176 | | Share issuance — stock distribution and reinvestment | 17,487 | — | 817 | Consolidated Schedules of Investments The consolidated schedules of investments provide a detailed breakdown of the company's portfolio as of December 31, 2020, and 2019, categorized by security type, industry, interest rate, and maturity Investment Portfolio Composition (December 31, 2020) | Investment Type | Cost ($) | Fair Value ($) | | :------------------------------------------------ | :------------ | :------------- | | Senior secured notes | 3,154,101 | 1,098,500 | | Unsecured debt | 43,288,785 | 22,850,000 | | Subordinated debt | 37,625,000 | 37,625,000 | | Senior secured loans | 380,325,711 | 369,000,288 | | Preferred stock | 46,456,865 | 7,277,210 | | Common stock | 17,363,000 | — | | Limited partnership/limited liability company interests | 78,196,644 | 41,020,718 | | Equity warrants/options | 365,348 | 153,760 | | Total investments | 606,775,454 | 479,025,476| Industry Composition of Portfolio (Fair Value) | Industry | December 31, 2020 (%) | December 31, 2019 (%) | | :----------------------------- | :-------------------- | :-------------------- | | Diversified Financial Services | 19.3% | 34.0% | | Road & Rail | 10.0% | 6.2% | | Thrifts & Mortgage Finance | 7.8% | 6.2% | | Health Care Equipment & Supplies | 5.8% | 5.2% | | Health Care Providers & Services | 5.6% | 3.9% | | Internet Software & Services | 5.6% | 2.1% | | Software | 4.3% | 3.4% | | Containers & Packaging | 4.3% | 2.8% | | Media | 4.2% | 2.7% | | Insurance | 3.5% | 0.8% | - As of December 31, 2020, approximately 17.9% of the company's total assets were not 'qualifying assets' under Section 55(a) of the 1940 Act579 - At December 31, 2020, the aggregate fair value of debt and preferred stock investments on non-accrual status represented 6.53% of the portfolio, and 17.77% at amortized cost579 - The company's geographic composition at fair value at December 31, 2020, was 96.2% United States and 3.8% Canada707 - BCIC Senior Loan Partners, LLC, a joint venture, had total investments at fair value of $35.5 million as of December 31, 2020, after selling a majority of its loan portfolio. The company's equity commitment to Senior Loan Partners was $66.1 million, with $4.2 million unfunded at year-end713718 Notes to Consolidated Financial Statements These notes provide comprehensive details on the company's accounting policies, financial instruments, and related party transactions, covering valuation, revenue recognition, tax treatment, and debt facilities 1. Organization BlackRock Capital Investment Corporation was incorporated in Delaware on April 13, 2005, and commenced operations on July 25, 2005, operating as a BDC and RIC focused on middle-market debt and equity investments - BlackRock Capital Investment Corporation was incorporated on April 13, 2005, and commenced operations on July 25, 2005628 - The company has elected to be regulated as a Business Development Company (BDC) under the 1940 Act and intends to qualify as a Regulated Investment Company (RIC) under the Code for tax purposes628 - The investment objective is to generate both current income and capital appreciation through debt and equity investments, primarily in middle-market companies629 2. Significant accounting policies The company's consolidated financial statements are prepared in accordance with GAAP, following ASC 946 for investment companies, with key policies including fair value measurement, accrual-based interest income, and RIC tax compliance - Consolidated financial statements are prepared in accordance with GAAP and ASC 946, requiring management estimates and assumptions630 - Investments for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors, using a multi-step valuation process involving independent valuation firms635636640 - Interest income is recorded on an accrual basis, including amortization of discounts and premiums. PIK interest is accrued only if collection is likely, and must be distributed to maintain RIC status647648 - To qualify as a RIC, the company must distribute at least 90% of its investment company taxable income annually and meet income source and asset diversification requirements651 - The company adopted ASU No. 2018-13 (Fair Value Measurement disclosures) as of January 1, 2020, and early adopted SEC rule amendments for 'significant subsidiary' definition as of December 31, 2020, resulting in reduced disclosures672673 3. Agreements and Related Party Transactions This section details the investment management agreement with BlackRock Capital Investment Advisors, LLC (BCIA), outlining amended fee structures and voluntary waivers, along with administrative service agreements - The company's investment activities are managed by BlackRock Capital Investment Advisors, LLC (BCIA), an indirect subsidiary of BlackRock, Inc., under an Investment Management Agreement674 - Effective May 2, 2020, the Base Management Fee was reduced from 1.75% to 1.50% of total assets (up to 200% of NAV) and 1.0% on assets exceeding 200% of NAV675678 Base Management Fees Incurred | Year Ended December 31, | Base Management Fees ($) | | :---------------------- | :----------------------- | | 2020 | 10,799,832 | | 2019 | 12,425,101 | | 2018 | 14,138,788 | - Effective May 2, 2020, the Incentive Fee based on net investment income was reduced from 20% to 17.5% over a 7% hurdle, and the capital gains Incentive Fee was reduced from 20% to 17.5%675680687 - The Advisor voluntarily waived a portion of its Incentive Fees based on income from July 1, 2019, through December 31, 2020, resulting in no net Incentive Fees for 2020 and $1,849,597 for 2019686 Incentive Fees Based on Income Incurred (Pre-Waiver) | Year Ended December 31, | Incentive Fees Based on Income ($) | | :---------------------- | :--------------------------------- | | 2020 | 6,304,333 | | 2019 | 8,751,521 | | 2018 | 8,510,866 | - The company reimburses the Advisor for certain administrative and operating expenses ($350,000 annually) and BlackRock Financial Management, Inc. (the Administrator) for allocable overhead and administrative services ($1,457,979 in 2020)695698 4. Earnings (Loss) per share This section provides the computation of basic and diluted net increase (decrease) in net assets from operations per share for the years ended December 31, 2020, 2019, and 2018, reporting basic and diluted earnings per share of $(1.49) in 2020 Earnings (Loss) Per Share – Basic | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------------------------ | :------------ | :------------ | :------------ | | Net increase (decrease) in net assets resulting from operations | $(103,852,603)| $(6,886,740) | $(9,162,162) | | Weighted average shares outstanding – basic | 69,801,849 | 68,836,590 | 71,373,570 | | Earnings (Loss) per share – basic | $(1.49) | $(0.10) | $(0.13) | - Due to a net decrease in net assets from operations, no incremental shares were included in diluted EPS calculations as the effect would be antidilutive703 5. Investments This note details the company's investment activities, including purchases, sales, and the composition of its portfolio by security type and industry, highlighting a significant reduction in the BCIC Senior Loan Partners, LLC joint venture portfolio Investment Activity (in thousands) | Metric | 2020 | 2019 | 2018 | | :------------------------------------ | :---------- | :---------- | :---------- | | Purchases of investments (including PIK) | $143,538 | $303,465 | $308,645 | | Proceeds from sales, repayments and other exits | 277,596 | 176,722 | 338,429 | Investment Portfolio Composition (December 31, 2020) | Investment Type | Cost ($) | Fair Value ($) | | :------------------------------------------------ | :------------ | :------------- | | Senior secured notes | 3,154,101 | 1,098,500 | | Unsecured debt | 43,288,785 | 22,850,000 | | Subordinated debt | 37,625,000 | 37,625,000 | | Senior secured loans | 380,325,711 | 369,000,288 | | Preferred stock | 46,456,865 | 7,277,210 | | Common stock | 17,363,000 | — | | Limited partnership/limited liability company interests | 78,196,644 | 41,020,718 | | Equity warrants/options | 365,348 | 153,760 | | Total investments | 606,775,454 | 479,025,476| Industry Composition of Portfolio (Fair Value, Top 5) | Industry | December 31, 2020 (%) | December 31, 2019 (%) | | :----------------------------- | :-------------------- | :-------------------- | | Diversified Financial Services | 19.3% | 34.0% | | Road & Rail | 10.0% | 6.2% | | Thrifts & Mortgage Finance | 7.8% | 6.2% | | Health Care Equipment & Supplies | 5.8% | 5.2% | | Health Care Providers & Services | 5.6% | 3.9% | - BCIC Senior Loan Partners, LLC (Senior Loan Partners), a joint venture, had total investments at fair value of $35.5 million at December 31, 2020, down from $259.5 million in 2019, after selling a majority of its loan portfolio718729 - Senior Loan Partners' New Senior Facility was fully prepaid on December 29, 2020, prior to its July 13, 2023 maturity date, resulting in $1.7 million in realized loss on debt extinguishment716 6. Derivatives The company may use forward foreign currency contracts to manage currency risk and holds warrants/options in portfolio companies, with no open forward foreign currency contracts at December 31, 2020 and 2019 - The company may use forward foreign currency contracts to manage currency risk for foreign-denominated investments, marking them to market and recognizing gains/losses upon settlement731 - There were no open forward foreign currency contracts at December 31, 2020 and 2019731 - The company holds warrants and options in certain portfolio companies, with an aggregate fair value representing 0.05% and 0.02% of net assets at December 31, 2020 and 2019, respectively732 7. Debt This note details the company's debt structure, including its Senior Secured Revolving Credit Facility and Unsecured Convertible Senior Notes Due 2022, and confirms compliance with all debt covenants at year-end 2020 - Effective May 2, 2020, the company's asset coverage requirement was reduced from 200% to 150% under Section 61(a)(2) of the 1940 Act735 - At December 31, 2020, the company's asset coverage was 271%, compared to 235% at December 31, 2019735 - The Senior Secured Revolving Credit Facility was amended in May 2020, extending maturity to June 5, 2023, and reducing the aggregate commitment to $300 million737 - The company has $143.75 million in 5.00% Unsecured Convertible Senior Notes due June 15, 2022738 Outstanding Debt (in thousands) | Debt Type | December 31, 2020 (Principal Amount) | December 31, 2020 (Carrying Value) | December 31, 2019 (Principal Amount) | December 31, 2019 (Carrying Value) | | :----------------------- | :----------------------------------- | :--------------------------------- | :----------------------------------- | :--------------------------------- | | Credit Facility | $38,800 | $38,800 | $174,400 | $174,400 | | 2022 Convertible Notes | 143,750 | 140,998 | 143,750 | 139,170 | | Total | $182,550 | $179,798 | $318,150 | $313,570 | - At December 31, 2020, $38.8 million was drawn on the Credit Facility, with $261.2 million remaining undrawn. The weighted average annual interest cost for 2020 was 4.80%744746 - The company was in compliance with all covenants under the Credit Facility and 2022 Convertible Notes at December 31, 2020751 8. Capital stock This note outlines the company's capital stock activities, including its share repurchase program and distributions to common stockholders, with an amended dividend reinvestment plan allowing cash or stock elections - The Board of Directors authorized the purchase of up to 7,500,000 shares, effective until November 2, 2021. As of December 31, 2020, 7,500,000 shares remained available for repurchase752 - In 2020, the company repurchased 986,554 shares of common stock for $3,627,604753 Distributions to Common Shareholders | Quarter Ended | Distribution in Cash ($) | Distribution in newly issued common shares ($) | Total Declared Distribution ($) | | :--------------- | :----------------------- | :--------------------------------------------- | :------------------------------ | | March 31, 2020 | 9,543,152 | — | 9,543,152 | | June 30, 2020 | 1,363,314 | 5,450,680 | 6,813,994 | | September 30, 2020 | 1,403,889 | 5,613,339 | 7,017,228 | | December 31, 2020| 1,446,700 | 5,784,451 | 7,231,151 | | Total | 13,757,055 | 16,848,470 | 30,605,525 | - The dividend reinvestment plan was amended on May 13, 2020, allowing stockholders to elect to receive distributions in cash or newly issued common shares, which could result in dilution if shares are issued below NAV663755 9. Guarantees, commitments and contingencies The company had no outstanding guarantees but held unfunded commitments of $24.3 million to portfolio companies at December 31, 2020, maintaining sufficient liquidity to fund these obligations - There were no guarantees outstanding on behalf of portfolio companies at December 31, 2020 and 2019756 - At December 31, 2020, the company had unfunded commitments of $24.3 million to existing portfolio companies, including $4.2 million on its equity commitment to BCIC Senior Loan Partners, LLC756 - The company maintains sufficient cash and available borrowings to fund unfunded commitments756 - Legal proceedings are not expected to have a material effect on the company's consolidated financial statements758 10. Fair value of financial instruments This note details the fair value measurements of the company's financial instruments, categorizing them into Level 1, 2, and 3 based on observability of inputs, with a significant portion of investments classified as Level 3 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)759 - The fair value of the Credit Facility and 2022 Convertible Notes is derived from broker quotes and classified as Level 2763 Carrying and Fair Values of Outstanding Debt (in thousands) | Debt Type | December 31, 2020 (Carrying Value) | December 31, 2020 (Fair Value) | December 31, 2019 (Carrying Value) | December 31, 2019 (Fair Value) | | :----------------------- | :--------------------------------- | :----------------------------- | :--------------------------------- | :----------------------------- | | Credit Facility | $38,800 | $35,696 | $174,400 | $165,680 | | 2022 Convertible Notes | 140,998 | 143,211 | 139,170 | 144,109 | | Total | $179,798 | $178,907 | $313,570 | $309,789 | Fair Value Hierarchy of Investments (December 31, 2020, in thousands) | Investment Type | Fair Value ($) | Level 1 ($) | Level 2 ($) | Level 3 ($) | | :------------------------------------------------ | :------------- | :---------- | :---------- | :---------- | | Senior secured notes | 1,099 | — | — | 1,099 | | Unsecured debt | 22,850 | — | — | 22,850 | | Subordinated debt | 37,625 | — | — | 37,625 | | Senior secured loans | 369,000 | — | 15,349 | 353,652 | | Preferred stock | 7,277 | — | — | 7,277 | | Common stock | — | — | — | — | | Limited partnership/limited liability company interests | 4,870 | — | — | 4,870 | | Equity warrants
BlackRock Capital Investment (BKCC) - 2020 Q4 - Annual Report