BlackRock TCP Capital (TCPC) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nonaccruals decreased to 3.7% of the portfolio's fair market value, down from 4.4% last quarter and 5.6% at the end of 2024 [6] - NAV declined during the quarter primarily due to markdowns on previously restructured portfolio companies [6] - Adjusted net investment income was $0.31 per share, down from $0.36 in the first quarter, while gross investment income was $0.61 per share compared to $0.66 in the prior quarter [23] Business Line Data and Key Metrics Changes - The portfolio had a fair market value of approximately $1.8 billion invested across 153 companies in over 20 industry sectors [21] - The average investment size was $11.7 million, with 89% of the portfolio invested in senior secured debt, all in floating rate instruments [21] - The weighted average annual effective yield of the portfolio was 12% in the second quarter, compared to 12.2% in the prior quarter [21] Market Data and Key Metrics Changes - New investments had a weighted average yield of 10.8%, while exited investments carried an average yield of 10.5% [21] - Total liquidity at quarter end was $566 million, including $455 million of available leverage and $107 million in cash [27] Company Strategy and Development Direction - The acquisition of HPS is expected to enhance TCPC's capabilities in private credit, creating a new platform called Private Financing Solutions (PFS) [31] - PFS aims to centralize private investment sourcing and origination teams to maximize collaboration and effectiveness [32] - TCPC will continue to directly source investments while leveraging PFS's extensive deal sourcing capabilities [32] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over additional markdowns but noted progress in reducing nonaccruals and sourcing attractive investments [34] - The company is focused on diligently working through portfolio challenges to deliver the best possible outcomes for shareholders [34] - Management acknowledged that the high rate environment and macroeconomic conditions could impact demand and performance of portfolio companies [56] Other Important Information - The Board declared a second quarter dividend of $0.25 and a special dividend of $0.04 per share, payable on September 30 [13] - The company repurchased 40,830 shares of TCPC stock during the quarter [13] Q&A Session Summary Question: Changes in the investment process with new committee members - Management indicated that the investment process will benefit from centralized origination and sourcing, leveraging resources from both BlackRock and HPS [36][38] Question: Ensuring TCPC receives proper access and resources during growth - Management assured that TCPC remains a strategic priority for the PFS platform and will continue to receive deep engagement across investment processes [42][44] Question: Markdown on Auto Alert and its performance - The markdown was primarily driven by market comps rather than performance issues, although the company has shown improvements since restructuring [45]