BlackRock TCP Capital (TCPC)2025-02-27 20:53Financial Data and Key Metrics Changes - Full year 2024 adjusted net investment income was 1.84 per share in 2023, with an annualized net investment income ROE of 14.5% [10] - Fourth quarter adjusted net investment income per share was flat at 9.23 from 1.8 billion invested across 154 companies, with 91.2% in senior secured loans [30] - The weighted average effective yield of the portfolio decreased to 12.4% from 13.4% in the previous quarter [31] - New investments had a weighted average yield of 10.8%, while exited investments had a yield of 14% [32] Market Data and Key Metrics Changes - The overall M&A volumes remained below expectations, but there was a healthy flow of new investment opportunities [33][39] - The weighted average interest rate on debt outstanding decreased to 5.2% from 5.4% in the prior quarter [50] Company Strategy and Development Direction - The company plans to focus on the core middle market with a proactive approach to sourcing and underwriting, while also opportunistically investing in lower and upper middle market companies [24] - A highly diversified portfolio will be maintained, limiting exposure to specific industry subsectors [26] - The company will prioritize investing in first lien loans and deepen connections with the broader BlackRock platform for competitive advantage [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future and confidence in their strategic plan to navigate challenges in 2024 [10] - The company acknowledged the impact of lower base rates and increased non-accruals on performance, emphasizing a focus on resolving credit issues [12][10] - Management highlighted the importance of thoughtful solutions for resolving credit issues, which may take time [13] Other Important Information - The Board decided to reduce the regular dividend to 0.04 special dividend [20][21] - The advisor agreed to waive one-third of the base management fee for three quarters beginning January 1, 2025 [22] Q&A Session Summary Question: Can you provide details on the spillover and target level for dividends? - The company has about $0.10 of carryover from the prior quarter and aims for a sustainable regular dividend level based on current earnings power [54][55] Question: Will there be any strategic changes due to the BlackRock HPS acquisition? - Management does not expect meaningful changes and emphasizes a focus on business as usual, while highlighting expanded resources from the acquisition [58][60] Question: What level of confidence is there regarding future markdowns? - Management is focused on managing existing non-accruals and believes most markdowns have been centered around known assets [67][70] Question: What are the risks associated with new non-accruals like Renovo? - Management believes Renovo's issues are primarily operational and less exposed to external factors like tariffs due to its focus on smaller projects [74][76] Question: Is the management fee waiver related to the HPS acquisition? - Management clarified that the fee waiver is a thoughtful approach to acknowledge NAV decline and is not specifically timed with the HPS acquisition [79] Question: What steps are being taken to maintain investment grade rating? - The company is focused on maintaining its investment grade rating and plans to access capital markets closer to the maturity date of its notes [85][88] Question: What has changed regarding NAV per share? - The decrease in NAV is attributed to broader factors including rapid rate increases and a slower growth environment impacting borrowers [90][92]