BlackRock TCP Capital Corp (NASDAQ:TCPC) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 01:00 pm ET

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BlackRock TCP Capital Corp (NASDAQ:TCPC) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Howard M. Levkowitz

and we reduced the hurdle rate to 7%, while maintaining our cumulative total return hurdle which is one of the only such structures in the industry.

Before moving on to our fourth quarter highlights, I would like to address the year-over-year decline in our net asset value. The write-off of our investment in Fidelis accounted for almost all of this decline. On our last two quarterly earnings calls, we've described several Company-specific challenges that Fidelis face in the increasingly competitive cyber security industry. At the time of our initial underwriting more than four years ago Fidelis was operating in a high-growth industry with a strong client base. The Company was well capitalized with a low loan to value. However, the owners and management team failed to sufficiently react to the shift in industry dynamics that accelerated in the last several years. Utilizing our extensive turnaround experience, our team worked alongside the sponsor and the management team to try to resolve these issues that ultimately decided to exit rather than to invest further in the Company. We are not satisfied with this result, but believe the challenges faced by Fidelis were distinct and are not indicative of any broader macroeconomic issues or other trends.

Moving to a few highlights from the quarter. As shown on slide 6, we earned net investment income of $0.38 per share, outearning our dividend by $0.02, and today we declared a first quarter dividend of $0.36 per share payable on March 31 to shareholders of record as of March, 17. Additionally, we delivered another strong quarter of deployments, totaling $142 million. Dispositions in the quarter were $152 million.

Turning to slide 7 of the presentation. At year end, our portfolio had a fair market value of $1.6 billion, 92% of which was in senior secured debt. In constructing our portfolio we have consistently focused on seniority as well as diversification. As of December 31st, our largest position represented only 4% of the portfolio and taken together, our five largest positions represented less than 17% of the portfolio.

Furthermore, as the chart on the left side of slide 7 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 income. Our portfolio continues to be predominantly floating rate with an emphasis on first lien exposure. At year end, 92% of our debt investments were floating rate and 81% consist of first lien exposure as demonstrated on slide 8.

I would now like to take a minute to provide more detail on our investment approach, which has remained consistent throughout our team's two decades of investing in middle market companies. We continue to leverage our deep industry knowledge and experience in addition to the expanded access to deal flow and additional resources of the broader BlackRock platform to identify attractive investment opportunities.