BCP Investment Corp. Q3 FY2024 earnings call

• Ted mentioned the company refinanced the 2018-2 secured notes, extended the JPM credit facility maturity, reduced the spread by 30 basis points, and refinanced remaining $85 million of 2018-2 secured notes, resulting in net spread savings. The company repurchased 33,429 shares in Q3 2024 at an aggregate cost of ~$600,000. The Board approved a $0.69 per share distribution for Q4 2024. - Patrick discussed the investment portfolio, noting 88.5% of debt securities portfolio was floating rate, net repayments and sales of ~$11.6 million in Q3, diversified investment portfolio across 28 industries with 72 unique companies, non-accrual investments at 1.6% of fair value, and exited some acquired portfolios. - Brandon discussed financial results, lower interest expense due to refinancing, core investment income, leverage ratios, and the $0.69 per share quarterly distribution approved.

For the third quarter of 2024, Portman generated $15.2 million of investment income, with $12.7 million attributable to interest income (including PIK) from the debt investment portfolio. This compared to $16.3 million total investment income in Q2 2024, with $13.7 million from interest income. Total expenses for Q3 2024 decreased to $9.4 million from $9.9 million in the prior quarter. Net investment income was $5.8 million ($0.63 per share) in Q3 2024, down from $6.5 million ($0.70 per share) in the prior quarter. As of September 30, 2024, net asset value was $188 million ($20.36 per share), a decrease from $196.4 million ($21.21 per share) in the prior quarter. Gross leverage ratios were approximately 1.4 times as of 9/30/2024, and net leverage ratio net of cash was 1.3 times. The company had $40.5 million of available borrowing capacity under the senior secured revolving credit facility.

• Expect to be active in the market and net deployers of capital in Q4 2024 and early 2025 to restore net investment income to normalized levels. - Confident in prudent investment strategy, strong pipeline, and experienced management team to deliver positive returns to shareholders.

• Economic activity and dynamic interest rate environment pose uncertainties. - Potential default rates and recovery rates affecting NAV, as discussed with illustrative 10% default rate and 70% recovery rate impacting NAV.

Q: What's the driver of the realized losses?

A: Brandon said the primary driver was QualTek, which was successfully exited at prior quarter marks, so no impact from that realized loss previously captured.

Q: On the interest rate sensitivity, how does the impact of rate changes compare?

A: Brandon explained it's a difference between $475 million and $455 million, not a full 1% reduction.

Q: How much is spillover?

A: Brandon said it's about $0.70 per share from the prior year.

Q: Strategy to grow earnings and NAV?

A: Ted mentioned embedded NAV from loans maturing at par, potential NAV increase as rates go down, and refi wave expected to revert fee income to normal.

Q: Are we expecting net deployments in the fourth quarter?

A: Brandon said yes, expecting to be a net deployer over the next couple of months.

Q: Reason for decline in PIK income?

A: Ted said a couple of portfolio companies had PIK that reverted to cash.

Q: What was the prudent cash and portfolio management prior to refinancing notes?

A: Brandon said the company was sitting on additional cash and incremental capacity in the JPMorgan facility to ensure smooth refinancing process, holding back on investments and sitting on cash for a smooth refinancing.