Q2 2021 BlackRock Capital Investment Corp Earnings Call

Good morning, My name is Lauren and I will be your conference facilitator today for Blackrock Capital Investment Corp, second quarter 2021 earnings call.

Hosting the call will be James Keenan, Chairman and interim Chief Executive Officer.

Cingal.

President other company.

Abby Miller, Chief Financial Officer, and Treasurer, Laurence D Paredes General Counsel and corporate Secretary of the company.

Marshall Merriman head of portfolio management, and Jason Jason Mehring.

Managing director and member of the company's investment Committee.

Lines have been placed on mute.

After the speakers complete their update they will open the line for a question and answer session in order to ask a question you can press star 1 on your telephone.

Thank you Mr. Paradis, you may begin the conference call.

Good morning, and welcome to the second quarter 2021 earnings Conference call for Blackrock Capital Investment Corp, RPC IC.

Before we begin our remarks today I would like to point out that certain comments made during this conference call and within corresponding documents contain forward looking statements subject to risks and uncertainties.

Many of these forward looking statements can be identified by the use of words, such as anticipates believes expects intends will should may and similar expressions.

We call for your attention. The fact that <unk> actual results may differ from these statements.

As you know <unk> has filed with the SEC reports, which list some of the factors, which may cause <unk> results to differ materially from these statements.

<unk> assumes no duty to and does not undertake to update any forward looking statements.

Additionally, certain information discussed and presented May have been derived from third party sources and has not been independently verified accordingly, <unk> makes no representation or warranty with respect to such information.

Please note we've posted to our website, an investor presentation that complements this call shortly Jim will highlight some of the information contained in the presentation. The presentation can be accessed by going to our website at www Dot Blackrock <unk> dot com and clicking the August 2021 <unk>.

<unk> presentation link in the presentations section of the investors page.

I would now like to turn the call over to Jim.

Thank you Larry good morning, and thanks to all of you for joining our second quarter earnings call.

I'll provide a high level update of our second quarter performance, which reflected continued progress towards our strategic goals and priorities.

Nick Cingal will then give you an update on our portfolio activity and status and Andy Miller will follow with a discussion of our financial results in more detail.

We will then open the call for questions.

We produced strong momentum in the second quarter generating solid investment portfolio growth increased NII and a higher NAV.

7.5% increase in NAV per share from the prior quarter was largely driven by increased valuation of SVP singer equity.

Which was a legacy non core position.

A large portion of this investment was monetize subsequent to the second quarter at a level consistent with the Q2 Mark.

This resulted in cash proceeds of approximately $20 million.

As we have highlighted before a key strategic priority for BCE ICEE has been to rotate out of non core legacy and other junior capital investments.

Following the monetization of the SPP singer equity we are pleased to report that the non core portfolio is now less than 5% of the total portfolio on a pro forma basis.

Of this less than 2% consists of non income producing investments.

For the SVP and other recent exits our goal of non core portfolio divestiture is largely behind us.

Our near term priorities are focused on using our resources and expertise to continue to build the portfolio for stable long term strength.

We deployed nearly $90 million in the quarter, we continued to draw upon the power of Blackrock platform to identify compelling new opportunities with solid risk adjusted returns.

We remain committed to building a diversified portfolio of income generating senior secured loans with an emphasis on first lien positions.

The new investment dollars deployed during the quarter more than 75% are in first lien term loans.

We now have 74 portfolio companies, a total debt represents steady and ongoing progress for us.

Suite of greater diversity.

This compares to 60 portfolio companies at the close of the first quarter and 47 at the end of 2019.

As we continue to capitalize on Blackrock robust origination and underwriting platform. We believe that we can selectively deploy capital and continue to increase both issuer diversity and the percentage of first lien loans in the portfolio over the coming quarters.

Net deployments of $64 million during the quarter helped to increase the portfolio leverage to 5.6 times and enabled a 1 <unk> increase in the NII per share quarter over quarter.

We expect to methodically increase leverage by continuing to redeployment of capital in a disciplined manner.

As the portfolio continues to grow in coming quarters, we expect such growth to be accretive to NII, leading to increased dividend coverage for our shareholders.

I'll now turn the call over to Nick Cingal to discuss our portfolio activities in further detail.

As Jim mentioned, we continue to make solid progress in monetizing non core assets and growing the core investment portfolio.

Alrighty and subsequent to the second quarter $38 million of cash proceeds were received on non core and other junior positions leading to substantial completion of our efforts and exiting this part of the book.

During the second quarter, we had strong deployments across a variety of industries.

Vast majority being in first lien investments consistent with our strategy to lower overall portfolio risk and increases the first lien percentage in the book.

Gross deployments were $89 million in the quarter across 16, new and for existing portfolio companies, which further diversified our portfolio.

Both industry and issuer.

As a result from the SVP exited the first lien percentage from the portfolio is 66% by fair value on a pro forma basis.

From 50% at the end of 2000 <unk> Corp.

The details of each of our new investments can be found from the earnings release.

But some of our more prominent investments include the following.

If firstly LIBOR plus 8% term zone, Andrew Walmart, 2 fluoro site and learning and development platform that helps businesses and individuals develop critical technology skills, the CIC committed to $11.9 million for this investment.

Okay, Firstly, LIBOR, plus 9% delayed draw term loan and worse in laser group, a consolidator of small to medium sized brands net.

Sell through Amazon Third party platform.

<unk> committed to $11.8 million for the term loan in this investment.

Firstly in LIBOR, plus 725% term loan.

The key truck a provider of safety and fleet management solutions for the transportation and logistics industry.

Blackrock was the sole lender and the investment enriched for BCA commit.

<unk> committed $90.6 million.

With several non core exits already realized and the refinancing pressure easing Q.

To also happen to be our biggest net deployment quarter in 3 years.

This helped us for progress towards our leverage target and boosted NII.

Our opportunity set for new investments remain solid.

In the third quarter to date for added 2 new first lien and 1 second lien investment in addition to several follow on investments.

While the markets remain competitive.

We're able to create a large funnel of opportunities.

Due to the broad scope of our origination channels deep multi sector expertise.

And the capital base provide complete solutions for both sponsored and non sponsored borrowers.

This allows us to be selective and.

And to move quickly on attractive transactions.

We're seeing opportunities across a variety of industries, we continue to focus on investing in less cyclical businesses and.

They are experiencing strong secular growth.

A co investment order from the SEC.

Allows us to co invest with other funds on the Blackrock private credit platform, enabling the company to participate in larger transactions without creating excessive portfolio concentration.

We continue to emphasize transactions, where we lead our co lead negotiations on their terms.

Our core portfolio with an increasing percentage of first lien loans has continued to perform well as evidenced by no new non accrual investments.

2021.

I'll now turn the call over to Abbvie.

To further discuss our financial results for the quarter.

Thank you Nick I will take a few minutes to review some additional financial results for the second quarter.

GAAP net investment income NII was $4.8 million or 7 cents per share for the quarter.

Up 15, 6% from the first quarter.

I cover 65 per cent of the $7.4 million distributions to stockholders.

An improvement from 56% coverage in the prior quarter.

The increase in NII was primarily driven by a larger investment portfolio, resulting from strong net deployment.

Total investment income was $10.9 million.

0.6 million or 5.7% from the first quarter of 2021.

Total expenses decreased 1.1% quarter over quarter.

Within that general operating expenses, excluding management fees and financing expenses decreased by approximately $260000 or 17% driven primarily by lower professional fees incurred.

Partially offsetting that was the $216000 for 7.8 per cent increase.

Financing expenses due to higher leverage.

The company did not incur any incentive fees based on income or capital gains during the quarter.

Net realized and unrealized gains.

$27.2 million for the quarter.

Primarily driven by a $23.2 million increase in the valuation of our equity position in SBA Zynga couple.

A couple of ways for zero million of net fair value Mark up across the portfolio as credit spreads narrowed and we saw improved financial performance at a number with our portfolio company.

At quarter end.

In other words, 3 nonaccrual investments, representing 4.4% of total debt and preferred stock investment at fair value as compared to 5.5% at the end of first quarter.

Our weighted average internal portfolio rating at fair value also improved.

So 137 compared to 172 in the prior quarter demonstrating.

Demonstrating our continued improvement in portfolio credit quality.

At June 30th 2021, we had a strong liquidity position of approximately 230 million from borrowing availability under our credit facility and cash on hand.

Our net leverage ratio was 0.5 fixed price.

Upfront.

3.8 times at March 30, price 2021, which was primarily driven by positive net deployment.

We expect to gradually return to normalized leverage levels as we continue to deploy capital and for <unk>.

If we grow our portfolio over time.

During the second quarter, we repurchased approximately 81000 shares of our stock for 0.3 million at an average price of $3.73 per share including brokerage Commission.

As of June 32021, approximately 7.2 million shares remain available for repurchase under the current buyback program.

As announced yesterday.

Quarterly distributions of <unk> 10 per share was declared payable on October 6.2021 to stockholders of record at the close of business on.

September 15.2021.

With that I would like to return the call back to Jim.

Thank you Abby.

In closing we are pleased with our second quarter performance, which was driven by the ongoing hard work of our entire team.

And we are excited about the remainder of the year.

We are in great financial shape and are well positioned to pursue our goal of growing and further diversifying our portfolio. So that it will produce steady reliable income and lower net asset value volatility.

I also want to thank our shareholders for the ongoing support through this portfolio repositioning process.

This concludes our prepared remarks.

Operator, we'd like to open the call for questions.

Thank you as a reminder, if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again that is star 1 to ask a question.

We'll take our first question from Finian O'shea with Wells Fargo Securities.

And I do apologize.

<unk>.

Mr. O'shea is no longer on the line 1 moment please.

Okay.

Thanks, operator.

Sure.

It looks like we may have lost and is there any other questions.

Okay.

We have no further questions at this time.

Great well, we thank everybody for their time and I think we could call there, but I appreciate everyone.

<unk> over the quarter. Thank you.

That does conclude today's conference. We thank you for your participation you may now disconnect.

Yeah.

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