BlackRock TCP Capital (US:TCPC)2024-05-01 11:56Financial Structure and Leverage - The Company has a leverage program consisting of $300 million in available debt under a revolving credit facility, $200 million under a senior secured revolving credit facility, and $250 million in senior unsecured notes maturing in 2024, among other debt instruments [273]. - Total leverage outstanding as of March 31, 2024, included $160.0 million subject to a SOFR credit adjustment of 0.11% [328]. - The total leverage as of March 31, 2024, was $1.3 billion, with $286 million available for borrowing [331]. - As of March 31, 2024, the company's asset coverage ratio was 182%, down from the previous requirement of 200% to 150% approved by shareholders [331]. - The company is in compliance with all financial and operational covenants required by its Leverage Program as of March 31, 2024 [337]. 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 [272]. - As of March 31, 2024, 81.4% of the Company's total assets were invested in qualifying assets, which include securities and indebtedness of private U.S. companies [278]. - As of March 31, 2024, the consolidated investment portfolio was valued at $2,116.4 million, with 92.3% invested in debt investments, primarily senior secured debt [303]. - During the three months ended March 31, 2024, the company invested approximately $607.0 million, with 95.8% in senior secured loans [300]. - The portfolio consisted of 157 companies, with the largest investment representing approximately 4.7% of the total portfolio [303]. - The industry composition of the portfolio included 13.3% in Diversified Financial Services and 13.3% in Internet Software and Services as of March 31, 2024 [305]. - Debt investments in five portfolio companies were on non-accrual status as of March 31, 2024, representing 1.7% of the portfolio at fair value [307]. - As of March 31, 2024, 98.5% of investments were categorized as Level 3, indicating reliance on unobservable inputs for valuation [294]. Revenue and Income - The Company generated revenues primarily from interest on debt investments, with expected maturities generally between three to five years [279]. - Investment income for the three months ended March 31, 2024, totaled $55.7 million, an increase from $50.3 million in the same period of 2023, primarily due to higher interest income from increased SOFR rates [308]. - Net investment income increased to $28.3 million in Q1 2024 from $25.4 million in Q1 2023, reflecting higher total investment income [310]. - Adjusted net investment income for Q1 2024 was $27.7 million, compared to $25.4 million in Q1 2023, reflecting the exclusion of purchase accounting discount amortization [321]. - The change in net unrealized depreciation for Q1 2024 was $(23.0) million, compared to an appreciation of $28.0 million in Q1 2023, driven by losses in several investments [312]. Expenses and Dividends - The Company’s operating expenses include management fees, administration fees, and costs related to its investment activities [280]. - Total operating expenses for Q1 2024 were $27.5 million, up from $24.9 million in Q1 2023, primarily due to increased interest expenses and incentive fees [309]. - The company paid $26.9 million in dividends to common shareholders during the three months ended March 31, 2024 [335]. - A regular dividend of $0.34 per share was declared for the second quarter, payable on June 28, 2024, to shareholders of record as of June 14, 2024 [351]. - The company has a new dividend reinvestment plan effective from March 18, 2024, allowing shareholders to reinvest dividends into additional shares [323]. Mergers and Agreements - The Company completed a Merger with BCIC on March 18, 2024, resulting in the issuance of 27,823,870 shares of its common stock to former BCIC shareholders [275]. - The Merger Agreement included an Exchange Ratio of 0.3834 shares of the Company's common stock for each outstanding share of BCIC's common stock [275]. - The company completed a merger with BCIC on March 18, 2024, which was treated as a tax-free reorganization [316]. - The company has entered into a royalty-free license agreement with BlackRock and the Advisor for the use of their names [350]. Economic Conditions and Risks - Unfavorable economic conditions may impact the company's ability to raise capital and could limit its investment opportunities [338]. - The impact of interest rate changes on net investment income is significant, with potential material adverse effects from significant market rate fluctuations [353]. - The Company assesses portfolio companies periodically to ensure they can meet interest payments amid potential interest rate increases [353]. Interest Rate Sensitivity - At March 31, 2024, 97.1% of debt investments bore interest based on floating rates, with 92.1% of those subject to an interest rate floor [307]. - Interest rate sensitivity indicates that a 300 basis point increase could result in a net investment income of $42,135,914, equating to $0.61 per share [355]. - A 200 basis point increase in interest rates would yield a net investment income of $28,090,610, or $0.41 per share [355]. - A 100 basis point increase would generate $14,045,305 in net investment income, translating to $0.20 per share [355]. - Conversely, a 100 basis point decrease would lead to a loss of $14,045,305, or $(0.20) per share [355].