BlackRock TCP Capital Corp. Q4 FY2024 earnings call

• Phil Tseng discussed 2024 results, markdowns on Razor, Securus, Astra; updates on Amazon aggregators (Razor struggling with inventory, SellerX making progress). Added Renovo and InMoment to non-accrual. Board reduced regular dividend to $0.25 per share, declared special dividend. Advisor waived 1/3 of base management fee for three quarters.
• Focus on core middle market with proactive sourcing/underwriting, diversified portfolio, prioritize first lien loans, leverage BlackRock platform.
• Jason Mehring reviewed portfolio composition (fair market value $1.8B across 154 companies), new investments (e.g., $14.7M loan to GES, $12.8M loan to Applause), and market environment (M&A activity impacted by rates, potential policy shifts post-election).
• Erik Cuellar discussed financial results (adjusted net investment income, gross investment income, operating expenses), liquidity (total liquidity $615M at quarter end, $519M available leverage, $92M cash).

Full year 2024 adjusted net investment income was $1.52 per share compared to $1.84 per share in 2023. Fourth quarter adjusted net investment income per share was flat with last quarter at $0.36. Non-accruals represented 5.6% of the portfolio at fair market value. NAV per share was $9.23 compared to $10.11 per share. Gross investment income for the fourth quarter was $0.72 per share. Operating expenses for the fourth quarter were $0.32 per share. As of December 31, 2024, 12 portfolio companies were on non-accrual status, representing 5.6% of the portfolio at fair value and 14.4% at cost.

• Board reduced regular dividend to $0.25 per share for Q1 2025, declared special dividend for Q1. Intends to declare special dividend of at least $0.02 in Q2 and Q3 2025.
• Advisor waived 1/3 of base management fees for three quarters starting January 1, 2025.

• Markdowns on Razor, Securus, Astra; non-accruals impacting performance.
• Impact of lower base rates, tighter spreads, slower deal environment, declining interest rates.
• Potential future markdowns/non-accruals for some portfolio companies.
• Tariffs and material price issues affecting certain portfolio companies like Renovo.

Q: On the dividend and the specials, can you give some color on your spillover now, and what the target level will be?

A: Erik Cuellar mentioned about $0.10 carryover from prior quarter, Phil Tseng discussed thoughtful approach to sustainable regular dividend level considering base rates, spread environment, and portfolio rotation.

Q: We've all seen the BlackRock HPS acquisition, and it appears that TCP will be a unit roll-up to HPS, and that means your investment portfolio management, et cetera, function becomes part of theirs. So, do you have any, like should we brace for any strategic change in, say, your investment strategy or anything like that?

A: Phil Tseng said no meaningful change expected yet, acquisition highlights BlackRock's commitment to private credit, brings expanded resources, borrower relationships, and sourcing capabilities.

Q: What level of confidence should we have that this is it, so to speak, in terms of the write downs?

A: Phil Tseng said laser focused on managing existing non-accruals and markdown positions, Razor markdown was a surprise, most markdowns from existing cohort, but potential future markdowns/non-accruals may exist.

Q: Your NAV per share decreased 22 in 2024 versus 9% a year earlier. And is what has changed? I know there was the acquisition. Is there additional management overhead from being part of BlackRock?

A: Phil Tseng said it's result of broader factors like rapid rate increase in 2022-2023, slower growth environment, higher interest burden on operating companies, not due to additional management overhead from BlackRock acquisition.