BlackRock TCP Capital (US:TCPC)2020-05-12 20:33Financial Data and Key Metrics Changes - Net investment income for Q1 2020 was $0.38 per share, exceeding the declared dividend of $0.36 per share [31] - The net decrease in net assets for the quarter was $69.5 million or $1.18 per share, driven by spread widening and volatility related to COVID-19 [34] - Investment income for Q1 was $0.70 per share, primarily from interest income [32] Business Line Data and Key Metrics Changes - The portfolio had a market value of approximately $1.6 billion, with 93% in senior secured debt [14] - Gross deployments in Q1 totaled $143 million, including 13 new loans [22] - Dispositions in the quarter totaled $77 million, including the payoff of a $31 million loan to First Advantage [24] Market Data and Key Metrics Changes - The broadly syndicated loan market experienced significant volatility, ending the quarter down 1,100 basis points from the start of the year [20] - The fair value of the portfolio declined by 5.5% during the quarter [20] - As of March 31, 92% of debt investments were floating rate, with 66% subject to interest rate floors [19] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet and liquidity while supporting portfolio companies through the pandemic [13][48] - The strategy includes providing temporary flexibility in credit terms for certain borrowers to enhance overall enterprise value [75] - The company aims to invest in good companies with strong management teams, emphasizing seniority and industry diversity in new investments [28] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the unprecedented challenges posed by the COVID-19 pandemic and its impact on business models [46] - The company is actively working with borrowers to ensure their long-term health while preserving capital for shareholders [47] - Management expressed confidence in the portfolio's resilience, noting no new non-accruals during the quarter [36] Other Important Information - The Board declared a second quarter dividend of $0.36 per share, emphasizing the importance of maintaining a consistent dividend [29] - The company has a diverse leverage program with no near-term maturities, and 53% of outstanding liabilities were unsecured [21] - The company repurchased one million shares during the quarter, contributing $0.09 per share to NAV [42] Q&A Session Summary Question: How do the textile and apparel loans hold up in the current environment? - Management explained that these loans are secured by assets and intellectual property licensing streams, which provide stability despite retail challenges [55][56] Question: What is the current status of collateral valuations, particularly in the airline sector? - Management indicated that they believe their loans are overcollateralized and that private jet volumes are increasing, providing a positive outlook for their investments in this sector [68][70] Question: Can you provide insight into the requests for credit term changes from borrowers? - Management noted that while there have been requests for relief, the overall percentage is small, and the portfolio remains healthy [94][96] Question: Is the dividend expected to be sustainable long-term? - Management stated that the Board is continuously evaluating the environment and portfolio performance to determine the sustainability of the dividend [78][80] Question: How is the company thinking about capital allocation in the current environment? - Management emphasized a judicious approach to liquidity, balancing the need to protect existing assets while seeking new investment opportunities [86][87]