BlackRock TCP Capital (TCPC) - 2023 Q4 - Annual Results

Financial Highlights and Executive Summary This section summarizes BlackRock TCP Capital Corp.'s Q4 and full-year 2023 financial performance, key metrics, and strategic outlook, including the pending merger Q4 & Full Year 2023 Performance Overview The company reported solid Q4 and full-year 2023 financial results, with strong net investment income growth and consistent dividend coverage - Generated solid net investment income in Q4 2023, contributing to a strong year with 20% NII growth and a 14.5% net investment income return on equity[3] - Achieved 47 consecutive quarters of dividend coverage, with Q4 2023 net investment income of $0.44 per share exceeding the regular dividend of $0.34 per share[4] - Net asset value (NAV) per share declined to $11.90 at December 31, 2023, from $12.72 at September 30, 2023, primarily due to unrealized losses on three idiosyncratic portfolio positions[3][4] Key Financial Metrics Key financial metrics for Q4 and full-year 2023 highlight strong NII, a decline in NAV, active investment management, and stable dividend declarations Key Financial Metrics Table | Metric | Q4 2023 | Full Year 2023 | | :--------------------------------- | :-------------------- | :-------------------- | | Net Investment Income (NII) (million USD / share) | $25.3 million ($0.44/share) | $106.6 million ($1.84/share) | | Net Asset Value (NAV) per share (USD) | $11.90 (as of Dec 31, 2023) | $11.90 (as of Dec 31, 2023) | | Net Decrease in Net Assets from Operations (million USD / share) | $13.3 million ($0.23/share) | $38.5 million ($0.67/share) (Net Increase) | | Total Acquisitions (million USD) | $40.6 million | $226.1 million | | Total Dispositions (million USD) | $42.2 million | $218.7 million | | Loans on Non-Accrual Status (Fair Value) (%) | 2.0% of portfolio | 2.0% of portfolio | | Loans on Non-Accrual Status (Cost) (%) | 3.7% of portfolio | 3.7% of portfolio | | Q1 2024 Dividend Declared (USD / share) | $0.34 per share | N/A | Strategic Initiatives & Outlook The company maintains solid credit quality, focuses on selective investments, and expects its merger with BCIC to close in Q1 2024, creating scale and NII accretion - Overall credit quality is solid, and the company is well-positioned to execute its strategy of selectively investing in compelling, new opportunities[5] - The proposed merger with BlackRock Capital Investment Corporation (BCIC) is anticipated to close in Q1 2024, creating substantial scale, operational cost synergies, better access to capital, and is expected to be accretive to NII[4][5] Portfolio and Investment Activity This section details the company's investment portfolio composition, including asset types, fair value, non-accrual status, and investment and disposition activities Portfolio Composition As of December 31, 2023, the investment portfolio comprised 142 companies with a fair value of approximately $1.6 billion, primarily senior secured debt and floating rate investments Portfolio Composition Table | Metric | Value/Percentage (as of Dec 31, 2023) | | :--------------------------------- | :------------------------------------ | | Total Fair Value of Portfolio (billion USD) | Approximately $1.6 billion | | Number of Portfolio Companies | 142 | | Senior Secured Debt (% of total portfolio) | 89.3% of total portfolio | | First Lien Debt (% of total portfolio) | 77.6% of total portfolio | | Equity Positions (% of total portfolio) | Approximately 10.7% of total portfolio | | Floating Rate Debt Investments (% of debt investments) | 95.6% of debt investments | | Floating Rate Debt with Interest Rate Floors (% of floating rate debt) | 94.0% of floating rate debt | | Weighted Average Annual Effective Yield (Debt Portfolio) (%) | 14.1% | | Weighted Average Annual Effective Yield (Total Portfolio) (%) | 13.3% | - Debt investments in four portfolio companies were on non-accrual status, representing 2.0% of the portfolio at fair value and 3.7% at cost, including the loan to Thras.io placed on non-accrual during Q4[4][7] Investment Activity & Yields During Q4 2023, the company actively managed its portfolio with $40.6 million in new investments and $42.2 million in dispositions, focusing on high current income and principal protection Investment Activity & Yields Table | Metric | Q4 2023 | | :--------------------------------- | :-------------------- | | Total Investments Made (million USD) | $40.6 million | | Primary Investment Type | Senior secured loans (91.4% of acquisitions) | | Proceeds from Sales/Repayments (million USD) | $42.2 million | | Weighted Average Effective Yield (New Investments) (%) | 13.4% | | Weighted Average Effective Yield (Exited Investments) (%) | 12.5% | - The company's investment strategy emphasizes obtaining a high level of current income with an emphasis on principal protection, primarily through senior secured loans, bonds, and subordinated debt, as well as select equity investments[8] Asset and Net Asset Value Total assets remained stable at $1.7 billion, while net assets and net asset value per share decreased from the prior quarter Asset and Net Asset Value Table | Metric | Dec 31, 2023 | Sep 30, 2023 | | :-------------------- | :-------------------- | :-------------------- | | Total Assets (billion USD) | $1.7 billion | $1.7 billion | | Net Assets (million USD) | $687.6 million | $735.0 million | | Net Asset Value per Share (USD) | $11.90 | $12.72 | Consolidated Results of Operations This section presents the company's investment income, operating expenses, net investment income, and the impact of realized and unrealized gains and losses on net assets Investment Income Total investment income for Q4 2023 was $50.8 million ($0.88 per share), primarily from interest income, recurring original issue discount, and PIK income Investment Income Table | Income Source | Q4 2023 (per share) | | :--------------------------------- | :-------------------- | | Total Investment Income (USD / share) | $0.88 | | Recurring Original Issue Discount & Exit Fee Amortization (USD / share) | $0.04 | | Interest Income Paid in Kind (PIK) (USD / share) | $0.06 | | Dividend Income (USD / share) | $0.02 | | Other Income (USD / share) | $0.00 | Operating Expenses Total operating expenses for Q4 2023 were $25.6 million ($0.44 per share), with interest and incentive compensation as major components, and annualized expenses at 4.5% of average net assets Operating Expenses Table | Expense Category | Q4 2023 (per share) | | :--------------------------------- | :-------------------- | | Total Operating Expenses (USD / share) | $0.44 | | Interest and Other Debt Expenses (USD / share) | $0.20 | | Incentive Compensation from Net Investment Income (USD / share) | $0.09 | | Annualized Expenses (excl. incentive comp, interest/debt) (% of average net assets) | 4.5% of average net assets | Net Investment Income and Net Assets Changes Net investment income for Q4 2023 was $25.3 million ($0.44 per share), offset by $38.6 million ($0.67 per share) in net unrealized losses, resulting in a net decrease in net assets from operations Net Investment Income and Net Assets Changes Table | Metric | Q4 2023 | | :--------------------------------- | :-------------------- | | Net Investment Income (million USD / share) | $25.3 million ($0.44/share) | | Net Realized Losses (million USD / share) | $0.0 million ($0.00/share) | | Net Unrealized Losses (million USD / share) | $38.6 million ($0.67/share) | | Net Decrease in Net Assets from Operations (million USD / share) | $13.3 million ($0.23/share) | - Key drivers of net unrealized losses included investments in Edmentum ($13.8 million), Thras.io ($8.6 million), Aventiv Technologies (Securus) ($5.4 million), Astra Acquisition ($2.4 million), and Nephron ($2.3 million)[12][13] Liquidity and Capital Resources This section details the company's liquidity position, debt structure, and share repurchase program, highlighting available capital and financing arrangements Liquidity Position As of December 31, 2023, the company maintained approximately $359.0 million in available liquidity, comprising cash and available capacity under its leverage program Liquidity Position Table | Metric | Amount (as of Dec 31, 2023) | | :--------------------------------- | :-------------------------- | | Total Available Liquidity (million USD) | $359.0 million | | Available Capacity under Leverage Program (million USD) | $246.8 million | | Cash and Cash Equivalents (million USD) | $112.2 million | Debt Structure Total debt outstanding at December 31, 2023, was $988.6 million (carrying value) with a 4.29% weighted-average interest rate, comprising various facilities and notes Debt Structure Table | Debt Instrument | Maturity | Rate | Carrying Value (Dec 31, 2023) (USD) | Available Capacity (USD) | | :------------------------ | :--------- | :--------- | :---------------------------- | :------------------- | | Operating Facility | 2026 | SOFR+2.00% | $163,168,808 | $136,831,192 | | Funding Facility II | 2027 | SOFR+2.05% | $100,000,000 | $100,000,000 | | SBA Debentures | 2024−2031 | 2.52% | $150,000,000 | $10,000,000 | | 2024 Notes | 2024 | 3.900% | $249,596,009 | — | | 2026 Notes | 2026 | 2.850% | $325,791,013 | — | | Total Leverage | | | $988,555,830 | $246,831,192 | | Weighted-Average Interest Rate on Debt Outstanding (%) | | 4.29% | | | Share Repurchase Program The Board re-approved a stock repurchase plan for up to $50.0 million of common stock, though no shares were repurchased during Q4 or the full year 2023 - The Board re-approved a stock repurchase plan to acquire up to $50.0 million of common stock at prices below net asset value per share[18] - No shares were repurchased during the three months or year ended December 31, 2023[18] Merger Agreement This section details the merger agreement with BlackRock Capital Investment Corporation (BCIC), including its status, approvals, expected closing, and post-merger advisor fee structure Merger Details and Status The company's merger agreement with BCIC, updated January 10, 2024, is board-approved and anticipated to close in Q1 2024, pending stockholder and regulatory approvals - The Merger Agreement with BlackRock Capital Investment Corporation (BCIC) was initially entered into on September 6, 2023, and an Amended and Restated Agreement was entered into on January 10, 2024[4][19] - The merger has been approved by both companies' Boards of Directors, including independent directors, and is subject to stockholder and customary regulatory approvals[19][21] - The transaction is currently anticipated to close during the first calendar quarter of 2024[4][21] Post-Merger Advisor Fee Structure Upon merger closing, the Advisor will reduce its base management fee rate from 1.50% to 1.25% on assets up to 200% of net asset value, maintaining 1.00% for assets above this threshold - Subject to the closing of the Merger, the Advisor has agreed to reduce its base management fee rate from 1.50% to 1.25% on assets equal to or below 200% of the net asset value of the Company[22] - The base management fee rate on assets exceeding 200% of net asset value will remain 1.00%, with no change to the basis of calculation[22] Recent Developments This section highlights recent key events, specifically the declaration of the first quarter dividend Dividend Declaration The Board of Directors declared a first quarter dividend of $0.34 per share, payable on March 29, 2024 Dividend Declaration Table | Dividend | Amount (USD) | Payable Date | Record Date | | :-------------------- | :------- | :----------- | :---------- | | Q1 2024 Dividend (USD / share) | $0.34/share | March 29, 2024 | March 14, 2024 | Financial Statements This section presents the company's consolidated statements of assets and liabilities and operations for recent fiscal years Consolidated Statements of Assets and Liabilities The Consolidated Statements of Assets and Liabilities detail the company's financial position at year-end 2023 and 2022, including investments, cash, debt, and net assets Consolidated Statements of Assets and Liabilities Table | Item | December 31, 2023 | December 31, 2022 | | :------------------------------------------ | :-------------------- | :-------------------- | | Assets | | | | Total investments, at fair value (USD) | $1,554,941,110 | $1,609,587,641 | | Cash and cash equivalents (USD) | $112,241,946 | $82,435,171 | | Total assets (USD) | $1,698,772,353 | $1,719,349,849 | | Liabilities | | | | Debt (net of deferred issuance costs) (USD) | $985,200,609 | $944,005,814 | | Total liabilities (USD) | $1,011,170,807 | $972,596,059 | | Net Assets | | | | Total net assets (USD) | $687,601,546 | $746,753,790 | | Net assets per share (USD) | $11.90 | $12.93 | Consolidated Statements of Operations The Consolidated Statements of Operations present the company's financial performance for 2021-2023, highlighting investment income, operating expenses, and net changes in net assets Consolidated Statements of Operations Table | Item | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | | Total investment income (USD) | $209,328,883 | $181,002,459 | $165,105,708 | | Total operating expenses (USD) | $102,524,810 | $92,564,286 | $92,562,594 | | Net investment income (USD) | $106,556,758 | $88,438,173 | $72,543,114 | | Net realized gain (loss) (USD) | $(31,648,232) | $(18,230,951) | $4,287,643 | | Net change in unrealized appreciation (depreciation) (USD) | $(36,434,094) | $(79,432,554) | $63,166,306 | | Net increase (decrease) in net assets resulting from operations (USD) | $38,474,432 | $(9,225,332) | $133,790,774 | | Basic and diluted earnings (loss) per share (USD) | $0.67 | $(0.16) | $2.32 | Company Information This section provides an overview of BlackRock TCP Capital Corp., its investment objectives, forward-looking statement disclaimers, and contact information About BlackRock TCP Capital Corp. BlackRock TCP Capital Corp. is a specialty finance BDC focused on direct lending to middle-market and small businesses, seeking high total returns via current income and capital appreciation with principal protection - BlackRock TCP Capital Corp. (NASDAQ: TCPC) is a specialty finance company and a publicly-traded Business Development Company (BDC) regulated under the Investment Company Act of 1940[29] - The company focuses on direct lending to middle-market and small businesses, investing across industries where it has significant knowledge and expertise[29] - Its investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection[29] Forward-Looking Statements This section disclaims forward-looking statements, indicating actual results may differ due to economic, financing, interest rate, regulatory, and merger-related risks - Forward-looking statements are based on management's estimates, projections, beliefs, and assumptions and are not guarantees of future performance, involving risks and uncertainties[31] - Actual results could differ materially due to factors such as changes in economic conditions, financing availability, interest rates, regulatory changes, and specific risks detailed in the company's Form 10-K[31] - Merger-related risks include uncertainties regarding timing, expected synergies, ability to realize benefits, stockholder approval, competing offers, and other closing conditions[31] Contact Information Contact details for BlackRock TCP Capital Corp. investor relations are provided for inquiries - For investor relations inquiries, contact Katie McGlynn at 310-566-1094 or investor.relations@tcpcapital.com[33]