BlackRock TCP Capital (TCPC) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter NAV remained unchanged from the previous quarter at $8.71 [4] - Adjusted net investment income was $0.30 per share, compared to $0.31 in the second quarter [14] - Gross investment income was $0.59 per share, down from $0.61 per share in the prior quarter [14] - Net realized losses for the quarter were approximately $97.0 million, or $1.14 per share [15] - Net unrealized gains were $94.1 million, or $1.11 per share [16] Business Line Data and Key Metrics Changes - Non-accruals improved to 3.5% of the portfolio at fair market value, down from 5.6% at the end of 2024 [5] - The portfolio had a fair market value of $1.7 billion, invested across 149 companies [11] - 89% of the portfolio was invested in senior-secured debt, all in floating-rate instruments [11] - The weighted average annual effective yield of the portfolio was 11.5%, down from 12% in the prior quarter [12] Market Data and Key Metrics Changes - There was a 20% increase in the number of deals reviewed compared to the last quarter [8] - A 40% increase in the number of deals advanced to the screening stage was noted [8] - The company invested $241 million in 18 new and 13 existing portfolio companies [11] Company Strategy and Development Direction - The company is focused on resolving challenged credits and improving the quality of its investment portfolio [4] - The integration of BlackRock and HPS into the Private Financing Solutions platform is expected to enhance access to deal flow [8] - The company aims to deliver strong, sustainable returns to investors while improving credit quality and portfolio diversity [19] Management's Comments on Operating Environment and Future Outlook - Management noted that while M&A activity is showing signs of life, most borrowers are focused on refinancing existing debt [19] - The company is encouraged by the increase in deal flow and is focused on deploying capital into high-quality deals [19] - Management expressed disappointment over restructurings that did not yield expected results but emphasized that operational issues take time to resolve [23] Other Important Information - The board declared a third-quarter dividend of $0.25 per share, consistent with the base dividend level [7] - The company repurchased more than 25,000 shares during the third quarter and an additional 170,000 shares after quarter-end [7] - The weighted average interest rate on outstanding debt was 5.0% at quarter-end [18] Q&A Session Summary Question: Discussion on recent restructurings and common themes - Management acknowledged disappointment over restructurings that reverted to non-accrual status but noted no commonality among the cases [23] Question: Market environment and refinancing activity - Management confirmed that refinancing remains predominant, with M&A activity beginning to pick up, indicating potential for higher volumes in the future [25] Question: Indicators of stress in the portfolio and deals - Management is focused on credit risks and noted common themes around cyclical names and AI-related risks, but no atypical risk factors were identified [32]