Q1 2021 BlackRock TCP Capital Corp Earnings Call
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The question and answer session will follow the Companys formal remarks.
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And now I would like to turn the call over to Katie Mcglynn director of the of the Blackrock TCP Capital Corp, Global Investor Relations team Katy. Please proceed.
And do you write down the before we begin I will note that this conference call may contain forward looking statements based on the estimates and assumptions of management at the kind of such statements and are not guarantees of future performance forward looking statements involve risks and uncertainties and actual results could differ materially from those projected any forward looking statements.
And on this call are made as of today and are subject to change without notice earlier.
Earlier today, we issued our earnings release for the first quarter ended March 31, and 2021. The also posted a supplemental earnings presentation to our website at TCP capital Dot com.
The slide presentation, which we will refer to on today's call. Please click on the Investor Relations link and select events and presentations.
These documents should be reviewed in conjunction with the company's form 10-Q, which was filed with the SEC earlier today I will now turn the call over to our chairman and CEO Howard Lefkowitz.
Thanks, Katie and thank you all for joining US today, we appreciate your continued interest and TCP and.
And I hope you are safe and well for several members of the TCP team on the call with me, including our President and COO of Raj Vig.
Our CFO, Paul Davis, and our controller Erich <unk>.
I will start with a few comments on our performance and the first quarter and an update on our portfolio.
Paul will review, our financial results as well as our capital and liquidity positioning after the I will provide some closing comments before opening the call to your questions.
Beginning with the highlights from our first quarter, we delivered another robust quarter of results that included further Nab depreciation and continued strong credit quality steady originations and strong investment income.
Our consistent results were driven in part by our focus on the established middle market companies with resilient business models and less cyclical industries. Despite the significant market volatility and 2020, our NAV ended the year of higher than it was at the end of 2019 and are now of further.
Appreciate it to 4% and the first quarter.
Of this year.
Now of appreciation and the first quarter reflected further spread narrowing on middle market private credit transactions as well as strong financial performance across most of our portfolio of companies.
Our credit quality remained solid with.
With loans, the two portfolio companies on non accrual totaling just point for percent of the portfolio at fair value at quarter and.
We also took advantage of the favorable bond market during the quarter to lower our borrowing costs.
Issued an additional $175 million of unsecured notes and an attractive rate of 285%, which was record pricing for sub index eligible BDC bond issuance and February both Moody's and Fitch also reaffirmed our investment grade rating with stable outlook.
Turning to our portfolio positioning.
At quarter, and our portfolio had a fair market value and excess of $1 7 billion.
And increase of over $100 million from the prior quarter.
89% of our investments are senior secured debt and are spread across a range of industries, providing portfolio diversity and minimizing concentration risk of <unk>.
Folio is also weighted towards businesses with limited direct exposure to sectors that have been more severely affected by the pandemic.
Furthermore, our loans to companies and more impacted industries, including those in the retail and airline sectors are generally supported by strong collateral protections and most of our investments in these industries continue to perform well.
During the quarter, we successfully exited our equity and one sky the second largest provider of private jet aviation services, and the country and our loan to dealer FX and technology solutions provider for automotive dealership service departments, which was repaid.
Our diverse portfolio, including 98 companies at quarter end.
And our largest position 36th Street capital represents four 2% of the portfolio and.
And provides further diversification given its underlying portfolio of leased assets.
As the chart on the left side of slide six of the presentation illustrates.
Our recurring income is spread broadly across our portfolio and is not reliant on income from any one portfolio company and in fact over half of our portfolio of companies each contribute less the 1% of our recurring income.
94% of our debt investments are floating rate. Additionally, 86% of our debt investments are first lien.
Moving onto our investment activity market origination volumes were significant and the first quarter. While we have been actively deploying capital in this market. We are also leveraging the breadth and depth of the Blackrock platform selecting from a wide range of opportunities to maintain our disciplined approach to investing.
We continue to review a significant number of potential investment opportunities, but invest and only a small percent of them.
During the first quarter, we invested $183 million.
Including investments and 15, new loans six of which were existing borrowers.
Follow on investments and existing portfolio companies continue to be an important source of opportunities from a risk management perspective. These are companies, we know and understand well.
And as we analyze new investment opportunities, we continue to emphasize seniority and the capital structure industry diversity and transactions, where we act as lead or co lead.
Our largest new investment during the first quarter was of senior secured first lien term loan to world remit.
<unk> is a leading global money transfer platform that facilitates international transfers using a computer or mobile device, enabling users to send money more easily and securely.
The portfolio of company is well positioned to gain market share as the volume of global remittances conducted through digital transactions is expected to continue to increase we are pleased the world remit chose our team to lead their first lien financing and support of their M&A strategy.
New investments and the first quarter were partially offset by dispositions totaling $96 million.
These included the sale of our equity investment and one sky and dealer FX as I noted earlier as well as repayments of our loans to the web dot com and patient point.
The overall effective yield on our debt portfolio was nine 5% as of March 31, and.
Investments and new portfolio companies during the quarter at a weighted average yield of nine 3% modestly above the 9% weighted average effective yield on investments, we exited and the quarter.
Since December 31, 2018, LIBOR has declined 261 basis points or by 94%, which has put pressure on our portfolio yield. However, our portfolio is largely protected from any further declines in interest rates as 84% of our floating rate loans are currently operating with LIBOR.
Lars.
We continue to invest selectively focusing on companies that are minimally impacted by the pandemic or are beneficiaries of the current economic environment.
Our investment activity and the second quarter to date totals approximately of $106 million primarily.
Primarily and seven senior secured loans with the combined effect of the yield of approximately eight 9%.
The yields on investments and our pipeline are generally in line with our current.
The portfolio to date.
To date, we have had limited prepayment activity and the second quarter.
Before turning the call over to Paul I would like to thank him for his tremendous contributions over the past 17 years as.
As we announced last month.
Paul will be leaving on June 3rd to pursue new opportunities.
<unk>, a first class operation over nearly two decades with our team.
And we would like to acknowledge him for his dedication and his partnership.
I would also like to congratulate Eric <unk> on his promotion to CFO.
Eric has been an instrumental part of the finance team working alongside Paul and serving as TCP SEIS controller.
Eric has extensive experience and the BDC sector, and and asset management, more broadly and making them highly qualified to succeed Paul Eric.
We'd like to say a few quick words.
Thank you Howard and I would also like to thank Paul for his leadership and guidance over the years.
After serving as TCP SEIS controller for the past 10 years I've had a chance to work with most of you and I look forward to working with all of you even more closely and continuing to work with the TCP C team to deliver strong results for our shareholders.
Now I'll turn the call over to Paul who will discuss our financial results and more detail Paul Thanks, Eric Thanks Howard.
Congratulations to Eric on the spending appointment.
Worked alongside of Eric for a decade and.
None to the of capable and experienced leader and well qualified to serve as the company's CFO.
I am grateful for the trust and the opportunity to who served our shareholders since our inception and.
I'll leave our team and the company and good hands.
Now turning to our financial results for the quarter.
We generated net investment income of 32 per share, which exceeded our dividend of <unk> 30 per share.
We remain committed to paying a sustainable dividend that is fully covered by net investment income as we've done every quarter since our IPO in 2012.
Today, we declared the second quarter dividend of <unk> 30 per share.
Investment income for the quarter was for the first quarter was 71 per share.
This included recurring cash interest of 57.
Recurring discount and fee amortization of <unk> and.
And Pik income of <unk>.
Notably this was our lowest level of pik income and more than three years.
As a reminder, our income recognition follows our conservative policy of generally amortizing upfront economics over the life of an investment.
Other than recognizing all of it at the time of the investment is made.
Investment income also included <unk> of other income of <unk> of dividend income and depending from accelerated OID and exit fees.
Dividend dividend income and the first quarter included $1 3 million or <unk> <unk> per share of recurring dividend income on our equity investment and advent them.
Operating expenses for the first quarter were 31 per share and included the interest and other debt expenses of <unk> 17 per share.
The incentive fees and the first quarter.
Including zero point $6 million of previously deferred fees totaled $4 7 million or <unk> <unk> per share for total net investment income of 32 per share.
As we've previously noted incentive fees related to our income from the first quarter of 2020.
Were deferred when our performance temporarily fell below the total return hurdle.
While the full amount was earned in the second quarter of that year.
When our performance again surpassed our total return hurdle.
We voluntarily further defer the amount of over six quarters through September of this year.
Subject to our cumulative performance remaining above the hurdle.
We believe this deferral of further aligns our interest with our shareholders.
And demonstrates our confidence and the strength of our portfolio and its earnings capacity over time.
Our net increase and net assets for the quarter was $35 million or <unk> 61 per share, which included net unrealized gains of $14 million and net realized gains of $3 million.
Unrealized gains reflected both continued spread tightening and credit specific game set of number of portfolio companies. The largest driver of the unrealized gains and the quarter was $6 2 million of appreciation on our investment and Atlanta.
The company delivered improved financial results and.
And the interest and its online educational products continues to increase.
Realized gains of $3 million included a significant gain on the sale of our equity investment and one sky, partially offset by the exit of our loans to glass and solar.
Substantially all of our investments are valued every quarter using price as provided by independent third party sources.
These include quotation services and independent valuation services.
And our process is also subject to rigorous oversight, including back testing of every disposition against our valuation.
Our overall credit quality remains strong.
As Howard noted with no new non accruals and the first quarter.
Following the exit of our loans to glass volume, we now just have.
And I have just two portfolio companies on non accrual CIBC and <unk>, which together represent the only zero to one 4%.
Of the portfolio of fair value of 0.8% of cost.
We ended the quarter with total liquidity of $420 million.
And this included available leverage of $396 million cash.
Cash of $14 million.
And net pending settlements of $10 million.
Unfunded loan commitments of two portfolio companies of quarter end equal just for percent of total investments for $75 million.
Of which $29 million revolver commitments.
In February we Opportunistically issued an additional $175 million of unsecured notes at 285%.
As Howard noted a record low coupon for a sub index eligible BDC bond issuance.
Our diverse and flexible leverage program now includes two low cost of credit facilities convertible note issuance three.
And three straight unsecured note issuances and an SBA program.
Our unsecured debt continues to be investment grade rated by both Moody's and Fitch.
And January Fitch reaffirmed our investment grade rating with stable outlook, noting among other things our quote solid track record and credit and experienced management team.
And strong funding flexibility and growth.
And in February.
Moody's also reaffirmed its investment grade rating with stable outlook, noting tcp's growth track record of financial performance for its eight year operating history effective liquidity management.
And and investment portfolio comprised of a high proportion of senior secured loans, which should aid credit performance and earnings stability and growth.
Given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing and our leverage program is well lathered.
And our nearest maturity is March of 2022.
And particularly now after our recent bond issuance, we are very well positioned to redeem those notes.
Combined the weighted average interest rate on our outstanding liabilities decreased to 348% down from 354% of the beginning of the quarter.
I'll now turn the call back over to Howard.
Thanks, Paul the last 14 months have emphasized the key role of the Bdc's play and providing capital to the middle market businesses that account for roughly third of private sector GDP as well as the stability and resiliency of these businesses.
Market companies increasingly look to direct lenders like Blackrock for tailored financing solutions to achieve their strategic growth initiatives, we remain selective and making new investments leveraging the strength and scale of the Blackrock platform to source of unique or overlooked opportunities as we've done throughout our history. Our team has been lending to middle market.
Companies for more than two decades through multiple cycles, and we continue to drop on this experience to inform our investment decisions and to deliver strong risk adjusted returns for our shareholders.
Since our IPO and 2012, <unk> return of more than $12 per share and dividends, which translates to an annualized cash return to investors of nine 8% and is reflective of our return on invested assets of 10, 7% TCE.
TCP has also consistently outperformed the wells Fargo BDC index.
The overall market environment is robust and we continue to see a pickup and activity.
If we remained selective and disciplined as we navigate the current market environment. We are guided by our experience managing through several economic cycles, and we will continue to seek to may.
And maintain a diversified portfolio and underweight highly cyclical industries take.
Take advantage of unique and not widely understood industry of the new dynamics.
And <unk> senior secured positions and structure transactions to include specific collateral our assets for downside risk mitigation and.
In closing, we would like to thank our entire team for their continued hard work dedication and focus on generating strong risk adjusted returns for our shareholders, particularly given the challenging environment over the past year and with that operator. Please open the call for questions.
Thank you we will now begin the question and answer session.
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Today's first question comes from Chris Kotowski with Oppenheimer. Please go ahead.
Yes, I was wondering in particular.
And on page 18 of the presentation you will see.
So significant step down and the interest income and and significant step up and dividend income and you referenced $1 3 million of dividend income, but I was wondering is there some other kind of reclassification or what happened there.
Hey, Chris its Raj I'll take that I think the.
The biggest part of that movement is probably tied to and <unk>.
Mentum, where we have an equity position.
That's the Crewing.
And obviously.
And we had the the recap and the repayment of the debt and.
And prior quarters.
And then.
And I would note that debt as we view it as recurring dividend income right.
The $1 $3 million that you referenced as the corn.
As most of it yes, anything anything tied to advent and which I think is the majority of that is recurring contractual.
Net income.
Correct and.
And the step down and the interest income.
And that kind of just the other side of the equation was it was the net debt equity swap or.
Yes.
Interest income has been pretty steady and the $40 41 billion area and then.
Got it.
Yes.
Three of $4 million in the quarter.
No it wasn't big part by that switch from from debt to equity on the Edmonton position.
Okay, and really no no prepayment income this quarter, which does flow into interest income and I guess it would be clear it wasn't of debt equity swap within and between the quarters. It was a repayment of the debt position and and ongoing.
Okay.
Income tax of the equity, which was stepped up because of the evaluation of <unk>.
And which that transaction was closed wasn't of swap technically and if this was the ongoing position as equity.
Okay, the higher value and then.
And then secondly, I think you indicated that there were no.
And the current quarter to date that there were no significant paydowns.
I Wonder can you characterize.
The the.
The.
And flow side of it.
And the equation is there.
And one would think from the.
From Dealogic M&A statistics there.
It's a very active market.
Okay.
Chris Thanks for the question it is and just for clarity.
Eric's comment was not that there werent.
The material.
Prepayments, but there wasn't significant prepayment income.
And making that distinction.
And as I think you and others are aware well aware, we have episodic prepayment premiums from different investments.
And they range and amounts from quarter to quarter.
And we're just identifying that we haven't to date and gotten significant amounts of those our deal activity is robust you can see from Q1.
We added a number of investments most of which we were the leader solar and invest the deron certainly and the larger ones that continues into Q2 also but repayments and prepayment income are both episodic.
Q1 has historically been a little lighter and it for us although it's been robust on the origination side. We're only five weeks into Q2, so I wouldn't derive too much from five weeks of data.
Okay.
Alright, Thats it for me I'll, let somebody else.
Got it thank you.
Thanks.
And our next question today comes from Robert Dodd with Raymond James. Please go ahead.
Hi, guys and Tesla component on the Clinton is just the kind of drill down to the the <unk>.
Dividend income question a little bit.
So the code.
Troll of.
A dividend was one seven.
You say one three of that was related to mid seven minutes the coding.
Now, let's see so there is another 400000, which obviously theres any G on the core coupled by the control equity positions.
Was the other 400000 and for them and as that and adopt <unk>.
And we had about <unk> 5 million from from Iron core of this quarter. We also had about I think 800.
And from 36th Street, and then and some other income from the Amtech and dividend income this quarter.
About 800 from the amtech as well.
Understood and then how much is basically all of the dividend income and you said that basically just the one fees with having I mean the flow.
No.
Alright. Thanks.
So I don't have and exact breakdown of but I would say most of that should be recurring 36th Street as you know has a.
A preferred rate of contractual and then we have a participation and the dividend income with the mentioned.
The majority of split which has actually been we're well into that each quarter and it's growing.
So that is actually partly recurring and then.
The variable component actually takes us up quite a bit over the recurring amount, which we like so.
And the majority of obviously the majority of its recurring but then where it's not we're actually seeing good consistent.
Variable income that has actually been growing is attached 36th Street.
Got it got it.
So thats kind of recurring non recurring.
Recurring non recurring.
Got it.
Yes, I appreciate it.
Just on the portfolio overall and it looks.
To be in very very good good shape, I mean, ignoring if I can.
Seeing mid tier and the payments.
And the expected.
What's the probability.
And the overview with the M&A market through the rest of the year, which appears likely especially if the tax changes next year.
Yoga and just see a material.
Acceleration in prepayment activity and that comes with fees on all of its different question right the prepayment activity kind of.
And in the middle of this year enhance the pipeline.
Ready to cope with that and then any color on that front it looks like the bucket and you can see.
Net repay capital and on a good number of assets.
Maybe I'll try to start and.
Ask others of Howard to join in.
And the expected, but I would say debt. So let me try to break it up a little bit the pipeline is good.
Very good and you've seen that in the deck.
<unk> for the quarter and just the early part of the next quarter.
It's hard to predict prepayments income in part because of the timing of prepayments and also the level of.
What gets triggered at the time of prepayment.
I would also say that the portfolio has been generating good leads.
Internally from add on opportunity. So a lot of a lot of folks right now are actually.
And to invest and their business growth for M&A. So it is not so much a prepayment and it's actually.
Additional capital to pursue those initiatives, which we like and we don't really like those of those types of deals.
So it's hard to predict and I don't actually want to get in the game of predicting what happens with prepayment.
From a repayment, but it's very episodic as Howard said overtime.
Spect that we'll see some more but it's just hard to predict within each quarter.
But the pipeline I think just to go back to my earlier point is in good shape to handle that as it comes.
Robert just to build on and on what Roger said.
It's Howard when we look back at our portfolio historically and TCP C has been public well over nine years and its predecessor funds the existed privately for two decades.
Every quarter it's.
It varies but over long periods of time prepayments are fairly consistent and this includes even the very difficult periods through the great Dfc.
And you can see variance of Q4, we had significant prepayments Q1, they were low but if you look at a multi quarter period of time historically.
You have quarter to quarter deltas, but over long periods of time, it tends to be fairly consistent.
And.
We think thats likely to continue, albeit with Roger's comment that we are really actively working with good borrowers to retain them and historically.
For a long period of time over half are.
The loans have been too.
Listing borrowers and relationships and it has the advantage of having been doing this for a long time, having good relationships with people.
And so thats something thats really important to us and we look to do where it makes sense.
Got it thank you.
Thanks for the questions.
And our next question comes from Ryan Lynch with VW and snow.
Yeah.
Yeah.
Hi, guys. Thanks for taking my questions.
The first one just kind of a higher level of one you guys obviously have had.
A nice increase in your deal flow.
And both in the first quarter, but also of really strong start.
The Q2 can you just talk about from from where you guys see what.
It is kind of all of the main drivers.
And that's resulting in the income.
And deal flow that you guys are able to take advantage of.
Yes. Thanks for the question I would say, excluding the when you exclude the sort of.
The immediate post COVID-19 period, but in the current period, it's very much what we've seen historically, which is M&A.
Some of some growth capital investments in fact, many sectors are we're seeing.
And even in the defense of areas of seeing good growth and initiatives, particularly around the technology space healthcare and financial services.
But I think its good use of proceeds to invest and the business or invest.
And the business the acquisition of another business.
And I would say those of the themes or exceed consistently.
Across the sectors that we that we like.
Like and have exposure to.
Does the.
It's where we are as far as coming out of the cycle having the.
Outlook for very strong economic.
Economic growth over the coming quarters, and hopefully coming years does that change the screen, which you guys are looking to deploy capital either debt Ian.
Certain sectors or and where you guys are looking to invest and the capital structure of the.
The.
The company of the.
Sectors that Youre currently and.
I would say marginally I mean, we really do.
And not only the history of the public company, but just the platform and general we've always said, we're going and we'd like focusing on the defensive.
The industries.
I think going into COVID-19, we didn't anticipate Colgate.
COVID-19, but we anticipated defensive industry is being able to hold up well and generally they did.
I think at the margin as we see growth.
Wouldn't say, it's going to change where we wanted to be in the capital structure, we may be willing to participate in that growth.
And.
Okay.
And more and more actively and it doesn't mean, we're going to stretch on our loan to value our attachment points.
There is some evidence and growth and some reliability on the the valuations and the credit worthiness at drive so I think at the margin will be open to those.
And within the sectors that we follow the generally speaking what we've been doing we feel works, where we have been investing.
And the cap structure feels like the right place and I think it very much.
Echo that we want to do more of the same.
With our borrowers.
Okay.
Understood I appreciate the time today.
Thanks Ryan.
And our next question for when it comes from any of those with Wells Fargo. Please go ahead.
Hi, everyone. Good afternoon.
Congratulations Paul and.
And everyone else on the new beginnings.
I just kind of question.
The tying a lot of the dialogue together on.
And the origination environment and a slower repayment environment.
I wanted to ask about your leverage I know that you don't tie yourself to a number there.
But we are on.
The higher end of where Youll typically run.
Is this a function of.
When combining that with the and outlook for portfolio growth.
And thats, a function of more unsecured debt and the economy blood and theirs.
More and more opportunities should we think of that.
Things driving leverage potentially higher or.
Should we think about the TCP sort of relaxing and portfolio growth.
Over the next couple of quarters.
And then thanks for the question, it's Howard the good afternoon to you and Thats still good morning from us here in Santa Monica.
Appreciate the question on leverage we are very mindful of the leverage that we run and the right side of our balance sheet.
We're very pleased with what we've been able to do there a year ago, starting to extend the facilities and more unsecured debt, we have ample liquidity on our revolver and flexibility and.
And as we think about the balance sheet.
We build it one loan at a time.
And it's we're really focused on doing good deals how do they fit in with our portfolio construction and management and we have the flexibility.
To go up and down and our leverage a little bit and and we really prefer to think about does each incremental deal fit in with the portfolio of well or not as opposed to does this add just a small increment of additional leverage on it and as long as we're within our band of safety and comfort, which we're well within that.
<unk>.
Received favorable treatment from both trading agents agencies earlier this year.
We are comfortable letting the leverage go up a little bit or come down as it did for a number of the last quarters as opposed to focusing on that is the singular issue and our goal is to provide good solutions to our borrowers have good loans on the books and not get overly concerned with whether the leverage attachment point is moving up or down a little bit as long as it stays within.
And our comfort risk range, and we are well within that.
Okay.
Was there any.
And then looking for the latest rating agency.
Revenue is there any change in and Theyre sort of target of guidelines zone.
On your maintain investment grade.
No I mean, the this is Paul.
And our last conversations within the five all of them very positive.
And they're seeing the way we're tracking against their metrics from all everything I can tell is strong and positive and.
A lot of confidence and our rating going forward.
Daryl and views on the sector as a whole but.
For on US there and they've both been very positive and we're grateful for that.
Okay, Great and Thats all for me and thank you.
Thanks Ben.
And of our next question today comes from Kevin and Foods.
JMP Securities. Please go ahead.
Good morning, most of my questions have been answered already but I just have one one follow up on prepayments.
And I know, we're talking about a five week period with the pump with some visibility beyond that but would you say the cadence of prepayments quarter to date is similar to what you saw in the first quarter.
It's really too early to make that assessment. If you look at our prepayments and Q1 versus Q4, there's a big difference.
They were much larger in Q4 and ear and it has its own pattern Q1 has its own pattern, but I don't wouldn't derive a whole lot from that other than the fact that it's a 13 week period and any given quarter.
And in a few weeks, sometimes you can have loans, we had the loan last year the.
And we thought we're going to going to pay off three quarters and in a row the kept taking it up and the big issues technical issues, and so and with the larger loans and Thats. The kind of thing that happens in these portfolios, it's very normative and.
At this point.
And we're simply highlighting the fact that.
We hadn't seen the significant prepayment income.
We do from time to time have quarters, where it's more significant for this quarter to date, we haven't yet.
So much of it.
Okay understandable and again, thank you for taking my questions and congrats for the quarter.
Thank you.
And our next question today comes from Christopher Nolan with Ladenburg Thalmann. Please go ahead.
First of all of say congratulations to both Paul and the Eric pulse of the pleasure working with you and Eric and looking for to working with you and the future.
And most of my questions.
Most of my questions have been asked and answered except there is one.
And we're talking we're hearing more and more about economic inflation, starting to creep in and it's already affecting the economy.
And then looking at the Q roughly three quarters of your adjustments.
Our value of USA income approach using the discount rate.
And I know that according to the Q <unk>.
Interest rates were to go up your net investment income.
But what happens to your book value per share.
Is it impacted and if so how much do you think from.
Okay.
But we have the interest rate sensitivity on that and of course, that's tied to LIBOR.
And over time, we will see of transition away from LIBOR and I would just note that the interest rate changes that everybody is so focused on our more and the treasury market and in the LIBOR market.
And so.
And I'd keep that in mind of but we have the granular disclosure.
And what we would expect there with respect to interest rates.
And.
Sure.
The disclosure.
Go ahead.
Yes, I was going to add debt because most of our portfolio is floating rate.
It is unlikely that it would have a significant impact the effect on valuations, it's really more driven by changes and spreads versus the.
<unk> changes since it is mostly floating rate.
Well I guess my concern is more how your valuations happened because of interest rates go up and you're using and discount rate normally the discount rate would go up.
And that would in fact impact of the fair value of your investments.
Yes, I think for Eric is saying is if the interest rates went up the reference rate went up and it was actually tied to LIBOR as floating.
Floating rate assets the.
Overall rate on the loans will also go up and so I don't think that mitigates.
That difference between debt.
Valuation rate and what the loan rate is but I think it also just speaking practically.
And if things went up gradually I don't see that being.
The big shots of the system, because the asset side and the liability side and the rates will just.
Progressively move if it was a sudden and dramatic move in rates, perhaps that's different and something along the lines of what happened and COVID-19, but again thats just its hard to predict.
A shock to the system, but I think and gradual moves.
Allow us to match it on the asset side.
Chris we've been using we used third party valuations for almost our entire portfolio every quarter.
And we've been using this process going back two decades is very robust and you can actually see historically I mean, we have had rate movement, we have at LIBOR go up and down.
No.
Over the last five years, and fact, and certainly the last eight or nine coming out of.
And the global financial crisis, and you can see quarter over quarter of the impacts on our books and I think as both Eric and Roger pointing out.
And if youre getting a move in LIBOR itself, we would expect the spreads to.
And to move it and the way they have historically probably.
And you can see how that flows flows through up through and our and our books and it's.
There's a lot of precedent for.
And the punch line, we actually with.
Welcome higher rates.
We said at the last time rates for from the downward trend I think again on the asset side Thats something in terms of the underwriting environment would be would be welcome to us.
Great. Thank you for detailed answer that's it for me.
Thank you we appreciate.
Ladies and gentlemen. This concludes the question and answer session and I will turn the call back over to Howard Lefkowitz for any final remarks.
Thanks, We appreciate your questions and our dialogue today.
Like to thank all of our shareholders for your confidence and your continued support and I'd also like to think of.
Our experienced and talented team of fresh professionals at Blackrock TCP Capital Corp. For your continued hard work and dedication. Thanks for joining US. This concludes today's call.
Thank you Sir you may now disconnect your lines and have a wonderful day.