BlackRock TCP Capital Corp. Q3 FY2024 earnings call

Key Remarks

• Raj Vig provided an overview of third quarter results, noted leadership changes at TCPC, and discussed dividend declarations and portfolio monitoring.
• Phil Tseng talked about the market environment, including potential rate cuts and M&A activity, and detailed investment activity, including $73 million invested in six new and three existing portfolio companies, such as iLobby and Docupace.
• Erik Cuellar reviewed financial results, with gross investment income of $0.83 per share, operating expenses of $0.43 per share, net realized losses of $31.4 million, and net unrealized gains of $19.2 million. He also discussed the capital and liquidity position, with $582 million in available liquidity.
• BlackRock has consolidated its direct lending group into a single global business unit to drive collaboration and synergies across geographies.

Adjusted net income for the third quarter was $0.36 per share. The Board declared a fourth quarter dividend of $0.34 per share with 106% coverage based on third quarter adjusted NII, plus a special dividend of $0.10 per share. Non-accrual loans declined from 4.9% to 3.8% of portfolio fair value. Net realized losses for the quarter were $31.4 million due to restructurings, while net unrealized gains totaled $19.2 million. The weighted average internal risk rating was 1.55 as of September 30, 2024.

Forward-Looking Statements

• Board re-approved share repurchase authorization up to $50 million.
• Anticipated NII return to reverse slightly with rate changes.
• Dividend coverage remains strong, with special dividend declared for the fourth quarter.

Risks Discussed

• Non-accrual loans and markdowns impacting net asset value.
• Market uncertainties, including potential rate changes and M&A activity impact on portfolio performance.
• Challenges with specific portfolio companies like Razor Group and InMoment affecting performance.

Q: On NII return and management changes A: Erik Cuellar discussed NII return being on the higher end historically and benefiting from higher base rates, while Phil Tseng mentioned BlackRock's consolidation of direct lending group into a global business unit for collaboration.

Q: On dividend and prepay activity A: Raj Vig and Erik Cuellar discussed dividend capital allocation, balancing distribution requirements and excise tax, and prepay activity expectations being episodic and dependent on market conditions.

Q: On debt cost and SBA capacity A: Phil Tseng explained debt cost factors including refi of notes and higher interest expense vs income, and mentioned remaining SBA license capacity with plans to redeploy capital.

Q: On challenges and stock price A: Phil Tseng discussed focus on portfolio management and non-accruals, and emphasized the team's long track record and consistent dividend payments.

Q: On dividend support A: Phil Tseng noted the Board's dividend decisions, BlackRock's historical support via fee waivers, and expectation to continue meeting or exceeding dividend requirements