BlackRock TCP Capital Corp (NASDAQ:TCPC) Q3 2019 Earnings Conference Call - Final Transcript

Nov 06, 2019 • 01:00 pm ET


BlackRock TCP Capital Corp (NASDAQ:TCPC) Q3 2019 Earnings Conference Call - Final Transcript


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Howard M. Levkowitz

rate of 3.9%. I would like to discuss some of the larger movements in our portfolio during the third quarter. We experienced more volatility in the valuation of a few of our investments that we typically experience. Leading portfolio gains was a $5.2 million increase in the value of our investment in Edmentum. As we have previously discussed, we have been working alongside the Edmentum management team to improve operations and we are pleased to see meaningful ongoing improvements to the Company in our holdings as a result of those efforts.

We also recognized $4 million in gains and prepayment income on the payoff of our loan to SnapLogic during the third quarter. The largest mark down in the quarter was a $5 million mark down of our investment in Fidelis, driven in large part by an ongoing liquidity shortfall at the Company. We are actively engaged with management and potential co-investors to both address the shortfall and to proactively deal with the issues that drove the under-performance in the past.

As discussed on last quarter's call, we expect the value of this investment to be volatile, as we work toward a solution to strengthen the balance sheet and we plan to provide updates as appropriate. Additionally, we took mark downs of $3 million on each of our investments in Hylan and AGY, both for company-specific reasons. Hylan is a leading telecom and wireless engineering and construction company, whose competitor -- customers are experiencing project delays in certain end markets, including from delayed 5G projects. AGY continues to be a fundamentally good company that has faced a series of external challenges, including record high commodity prices for certain raw materials, particularly rhodium, as well as some customers slowdowns due to international trade uncertainty.

It's important to note that on a combined basis, these investments account for a very small percentage of our portfolio. We are focused on maximizing their value along with the rest of the portfolio and our team has a strong long-term track record and experience working through challenging situations, as demonstrated by the increase in value of our investment in Edmentum and the gains we realized on SnapLogic.

Turning to Slide 6 of the presentation. At quarter end, our portfolio had a fair market value of $1.7 billion, 93% of which was in senior secured debt. In constructing our portfolio, we have consistently focused on seniority as well as diversification. As of September 30, we held investments in a record 105 companies across a wide variety of industries. Our largest position represented only 3.8% of the portfolio and taken together, our five largest positions represented only 15.8% of the portfolio.

Furthermore, as the chart on the left side of Slide 6 illustrates, our recurring income is distributed across a diverse set of portfolio companies. We are not reliant on income from any one portfolio company. In fact, on an individual company basis, well over half of our portfolio companies each contribute less than 1% to our recurring