Q2 2021 BlackRock TCP Capital Corp Earnings Call
Q1 earnings Conference call Today's conference call is being recorded for replay purposes.
During the presentation, all participants will be in a listen only mode. A question and answer session will follow the company's formal remarks to ask a question. Please press the star key followed by the digit 1 I will repeat piece of instructions before we begin the Q&A session and now I would like to turn the call over to Katie Mcglynn director of the Blackrock.
C P Capital Corp, Global Investor Relations team Katy. Please proceed.
Thank you, Matt before I begin on America.
This conference call may contain forward looking statements based on the estimates and assumptions of management at the time of such statements and are not guarantees of future performance.
Looking statements may involve risks and uncertainties and actual results could differ materially from those projected any forward looking statements made on this call are made as of today and are subject to change without notice.
Earlier today, we issued our earnings release for the second quarter ended June 32021, we also posted a supplemental earnings presentation to our website at TCP capital Dot Com is the the slide presentation, which we will refer to on today's call. Please click on the Investor Relations link and select events and presentation. These documents.
Should be reviewed in conjunction with the form 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.
Thank you Katie and thank you.
And all for joining US today. We appreciate your continued interest and TCP C and we hope you are safe and well.
There are several members of the TCP team on the call with us today, including our President and Chief Operating Officer, Raj Vig, and our Chief Financial Officer, Eric courtyard, I will start with a few highlights from the second quarter.
Raj will then provide an update on our portfolio and the investment activity next Eric will review, our financial results as well as our capital and liquidity positioning after that I will provide some closing comments before opening the call to your questions.
Beginning with highlights from our second quarter.
<unk> delivered another strong quarter of results driven by a meaningful increase and the value of our portfolio.
Investments, which drove significant net asset value growth as well as outstanding credit quality and robust deployment.
And the second quarter, our net asset value increased 4.8% and year over year net asset value is up 16, 4%. This is our fifth consecutive quarter of net asset value increases and builds on the positive net asset value accretion we had during 2020.
The result of which we are extremely proud of.
As Eric will discuss in more detail the increase and net asset value and Q2 was primarily driven by a $41 million unrealized gain on our investment and and Mentum together with more modest increases and value.
Across the portfolio.
Net investment income in the quarter was $17.8 million or for a 31 per share, which again exceeded our dividend of <unk> 30 per share.
Our credit quality remains solid with loans to just 2 portfolio companies on non accrual.
Totalling 30 basis points of the portfolio at fair value and 70 basis points at cost.
As Raj will discuss in more detail, we had significant gross deployment activity and the second quarter and we increased the number of our investments by 10% to 108, while the market environment remains competitive we continue to benefit from the relationships we've developed over more than 2 decades of lending to middle market companies.
And as well as the extensive resources of the Blackrock platform that provide our team with attractive investment opportunities.
We also continue to seek ways to enhance our strong balance sheet and liquidity positioning and June we amended the <unk> credit facility.
As part of the amendment, we extended the maturity 2 years to May 2026, and lowered the stated rate from LIBOR, plus 2% to LIBOR plus 1 the point 75%.
Despite the volatility that occurred in 2020, TCP see delivered strong results for shareholders over the past year as we've done throughout our nearly 10 years as a public company throughout this period, we have generated a 10, 9% return on invested assets and a total cash return of 9.7% while also output.
Of forming the Wells Fargo BDC index.
3 years into the TCP acquisition by Blackrock, we are fully leveraging the strength and unparalleled scale of the Blackrock platform to build upon TCP performance track record.
And view of these accomplishments of 2 months ago, I announced my plans to retire for my position as Chief Executive Officer of TCP seat effective August 5 and as chairman of TCP see effective September 30.
And we'll remain at Blackrock through year, and I'm extremely proud of the deep bench of talent that we have developed over 2 decades of TCP C and now Blackrock, which allows for a smooth transition Raj.
Raj Vig will succeed me as CEO, and chairman and fill saying will be appointed President and COO Raj.
Raj, Phil and I have worked together for more than 15 years, and together, we built and industry, leading private credit platform.
Raj and Phil are also co heads of the Blackrock U S private capital team.
Been instrumental in the integration and growth of our team at Blackrock and are well equipped to continue to build upon tcp's successful track record and.
In addition, I would like to congratulate Eric <unk> on his appointment as CFO of position for which he is extremely well prepared after serving as TCP SEIS controller since 2011.
Eric has assumed the disposition seamlessly.
Additionally, Kathleen Corbet announced her retirement from the TCP seaboard effective today cash.
Lean has been and and valuable member of the board and we thank her for her tireless service on behalf of TCP 6 shareholders now I will turn it over to Raj to discuss our portfolio positioning.
Thanks, Howard let me first take a moment to recognize Howard significant contributions to our team and to TCP.
It has been a well recognized leader and our industry and of key architect and building what is now the U S private capital business at Blackrock.
Hello, and I greatly appreciate our long standing partnership with Howard and we are extremely proud of the team of talented investment professionals. We have attracted and developed also greatly appreciate the boards confidence and appointing me as chairman and CEO, along with Phil and the rest of the Tcp's leadership team I look forward to continuing our track record of success.
Now turning to our portfolio of positioning and investment activity during the second quarter.
At quarter, and our portfolio had a fair market value of an excess of $1.8 billion and an increase of nearly $100 million from the prior quarter.
88% of our investments are senior secured debt and are spread across a wide range of industries, providing portfolio diversity and minimizing concentration risk.
Our portfolio is also weighted towards companies with established business models and less cyclical industries.
The portfolio remains diverse at quarter end and was made up of investments and 108 companies.
As the chart on the left side of slide 6 shows of the presentation.
Our recurring income and spread broadly across our portfolio and is not reliant on income from any 1 company in.
In fact over half of our portfolio companies each contribute less than 1% to our recurring income.
87% of our debt investments are first lien, providing significant downside protection and 94% of our debt investments are floating rate positioning us well for 1 of interest rates eventually rise.
Moving on to our investment activity.
And our view many of the competitive market dynamics that existed prior to the pandemic have resurfaced.
<unk> and increasing number of middle market companies continue to seek private credit solutions due to their more tailored and flexible financing options leading to investment opportunity.
We continue to source a wide range of investment opportunities leveraging the relationships we developed over 2 decades.
Our deep industry expertise and the breadth and depth of the resources available to us across Blackrock global credit platform.
And while we have been actively deploying capital and this market, we always maintain a disciplined approach to investing and while we regularly review of a substantial number of opportunities and we end up investing and only a small percentage of them.
Investment activity and the second quarter was robust we invested $236 million primarily of 19 investments.
Moving loans to 16, new portfolio of companies.
And loans to 3 existing companies.
Follow on investments and existing holdings continue to be an important source of opportunity for us the accounting for more than a third of our total investments over the last 12 months and.
On the risk management perspective. These are companies, we already know and understand well.
As we analyze new investment opportunities, we continue to emphasize seniority and the capital structure portfolio diversity and transactions, where we act as lead or co lead.
Our largest investment during the second quarter with a first lien loan to <unk> site and enterprise technology learning platform. The designed and provides training software and services for software developers.
While our investment and was part of the larger total loan that are typical of investment fluoro.
<unk> presented a compelling opportunity to invest and a strong and growing business the.
Company has a solid existing customer base that provides visible recurring revenue and cash flows and strong support from a well established equity sponsor.
Our second largest investment and the quarter keep trucking leverage our team da venture lending capabilities and relationships.
Founded in 2013 keep truck and provides video safety compliance and fleet management solutions for transportation and logistics companies.
Our team worked directly with the management to provide the entire firstly and financing.
New investments and the second quarter were partially offset by dispositions totaling $185 million.
These included the maturity and repayment of our loan to Dodge data as well as payoffs to our loans to aerotech Greystone and auto track.
The overall effective yield on our debt portfolio was 9.3% as of June 30, and.
And investments and new portfolio companies during the quarter at a weighted average effective yield of 8.8% modestly below the 9.2% weighted average effective yield on dispositions during the quarter.
Since December 31, 2018, LIBOR has declined 265 basis points or by 95%.
And which has put pressure on our overall portfolio yield however, 87% of our floating rate loans are currently operating with LIBOR floors.
And given that 94% of our loans are floating rate, we are well positioned to benefit when rates eventually rise.
We continue to invest selectively maintaining our discipline and focusing on companies and established business models that are well positioned and the current economic environment.
Our activity and the third quarter to date totaled approximately $61 million, primarily and 5 senior secured loans, where the combined effective yield of approximately 9.1%.
The yield on investments and our pipeline are generally in line with our current portfolio and to date, we have had limited prepayment income in the third quarter.
Before turning the call over to Eric I would like to congratulate him on his well deserved promotion to CFO.
Eric has been an instrumental part of our finance team and his promotion is a recognition of his significant contributions as TCP SEIS controller over the past 10 years.
And very much look forward to working with Eric and his new role.
Eric Thank.
Thank you Raj and I appreciate that.
Turning to our financial results for the second quarter.
We generated net investment income of 31 per share, which exceeded our dividend of <unk> 30 per share.
We're committed to paying a sustainable dividend that is fully covered by net investment income as we have done every quarter since our IPO in 2012.
Today, we declared a third quarter dividend of <unk> 30 per share.
Investment income for the second quarter was 72 per share.
This included recurring cash interest of <unk> 61.
Recurring discount and fee amortization of <unk> and.
And Pik income of <unk>.
Notably Pik income is at the lowest level and more than 3 years.
For the reminder, our income recognition follows our conservative policy of generally amortizing upfront economics over the life of an investment rather than recognizing all of it at the time to the investment is made.
Investment income also included a penny of other income of <unk>.
<unk> of dividend income and <unk> from accelerated OID and exit fees.
Dividend income and the second quarter included $1.1 million or <unk> <unk> per share of <unk>.
The recurring dividend income on our equity investment and Edmonton.
Operating expenses for the second quarter were <unk> 33 per share and included interest and other debt expenses of <unk> 19 per share.
Incentive piece and the quarter, which included <unk> 6 million of previously deferred piece.
Total for $5 million for <unk> per share for.
For total net investment income of 31 per share.
As we have previously noted we voluntarily deferred incentive fees related to our income from 2020 over a period of 6 quarters.
And the final amount to be recognized and the third quarter of this year.
Subject to our cumulated performance remaining above the hurdle.
Our net increase and net assets for the quarter was $55 million.
Or <unk> 95 per share, which included net unrealized gains of $37 million or <unk> 65 per share.
And net realized losses of <unk> $2 million or less and a penny per share.
Unrealized gains primarily reflected a $47 million gain on our investment and had mentum.
For the result of on additional equity investment and committed to the company and the second quarter.
And Mentum continues to benefit from the dramatic increase and demand for online education.
The additional equity investment also resulted and the sale of approximately 1 third of our investment and the company post quarter end.
Unrealized gains and the second quarter also reflected overall spread tightening and continued market recovery as well as improved investor sentiment.
Following the significant market dislocation and the first half of last year as the result of the pandemic.
Unrealized gains were partially offset by the reversal of $7.6 million.
Of unrealized gains and amtech and.
And $5.3 million and unrealized losses from fishbowl.
Fishbowl provides marketing software and services to restaurants and is our only direct exposure to the restaurant industry.
Given the fish both exposure to this industry the company has been slower to recover.
Substantially all of our investments are valued every quarter using prices 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 valuations.
Our overall credit quality remained strong as Howard noted with non accrual loans are limited to just 2 portfolio companies that represent just <unk>, 3% of the portfolio of fair value and 0.7% at cost at June 30.
Turning to our liquidity.
We ended the quarter with total liquidity of $373 million.
This included available leverage of $389 million cash.
Cash of $18 million.
And net pending settlements of $34 million.
Unfunded loan commitments to portfolio of companies at quarter, and equaled 5.8% of total investments or approximately a $105 million of which 35 million for revolver commitments.
Our diverse and flexible leverage program includes 2 low cost of credit facilities of convertible note issuance.
3 and 3 straight unsecured note issuances and an SBA program.
And subsequent to quarter, and we received an additional $10 million and capacity from the SBA.
Our unsecured debt continues to be investment grade rated by both Moody's and Fitch.
Additionally, given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing.
And our maturities are well ladder.
Our nearest maturity is march of 2022.
And given the success of our latest bond issuance earlier. This year, we are very well positioned to redeem or refinance those notes.
Combined the weighted average interest rate on our outstanding liabilities decreased to 348%.
From 354% at the beginning of the year.
And with that I'll turn it back over to Howard.
Thanks, Eric and closing I would like to thank our entire team for their hard work and dedication over the years.
I am incredibly proud of the team and the company we built.
I would also like to thank our investors for their trust and support over the years.
As many of you know TCP 6 predecessor vehicle.
Dates back to 2000.
21 years ago.
And I am grateful and appreciative of that a number of those investors are still invested and the fund today.
The results, we have delivered for our shareholders over the years have truly been a team effort.
Raj and Phil have both worked alongside me for more than 15 years and most of our senior investment professionals have worked with us for well over a decade and you have.
And every confidence and this team going forward and the ability to continue to deliver the results of the TCP see shareholders of come to expect and with that operator. Please open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone if youre using a speakerphone. Please pick up of your handset before pressing the keys and <unk>.
And anytime you question, that's been addressed and you would like to withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble our roster.
Okay.
Our first question will come from Robert Dodd with Raymond James. Please go ahead.
Hi, guys and for us.
Okay. Thanks for Howard.
And it will be a decade of help and.
Understanding the space and.
Good luck with 1 of the.
And so whatever your future endeavors on.
Thanks will and assistance of the yields on that Howard.
And then just.
On the question Amit.
Just competitively obviously.
And the very active second quarter of more active and the second quarter of it.
And the fourth quarter last year, which is kind of a theme we're seeing.
Is that the result of that activity all of the as a consequence of that is competition shifting materially of mistakes.
And that's come back to kind of pre COVID-19, but anything else on on terms of general dynamics, given we've got net.
Extremely active both on.
Obviously, the origination opportunities, but the amount of capital chasing any color you can give us that.
Sure Robert Thank you for your comments first of all of.
Truly enjoyed the relationship as well, let me say a few brief things and then I'll turn it over to Raj to respond further.
Our origination activity has always been somewhat lumpy.
We have a platform that's diverse that's.
Industry focused that creates a wide variety of opportunities and all environments.
Good markets bad markets, and I think Thats 1 of the things that has distinguished our business clearly we benefit also from being part of the larger origination platform here at at Blackrock.
But we've been able to generate deal flow and all kinds of and <unk>.
<unk>.
Raj would probably.
It'd be helpful. If you add some things specifically about the competitive environment were seeing today, but I do think it's important to remember that we have this diversity of origination streams for that I think for a little bit distinct from many of the others and the business, yes and.
And I'd Echo Robert Europe, Thanks to Howard again.
And I appreciate your comments, but let me just touch a little bit more on the competitive environment.
I would say that the.
In fact that it's competitive is not new I think thats been the case.
People have been attracted to the returns and the.
Opportunity set.
I do think though that the what it takes the compete particularly at this level and could be maintaining or improving the physician as a fulsome solutions provider that people can go to for all for their needs. Even if you don't end up doing the deal you're on your own being.
And being positioned to be able to do that and provide a solution is.
And that's important as it's ever been maybe more important.
Part of that means you need to have the right capital base part of it means you really need to be able to move quickly.
The velocity of transactions it seems to have picked up as well as the interest level and given our approach and.
And we've always taken the approach of coming at it from an industry point of view.
Having a broader platform and the ability to provide us the fulsome solution.
And didn't necessarily different but it perhaps may be more important and there is an ability for.
And even though there is more competition on everyone can do that and I think that does lead to.
And ongoing opportunity set that we're that we're excited about so.
And so hopefully that provides for more color.
But this quarter was good I think good evidence of being able to do that given where we were a sole lender.
Or maybe part of the small club that is the overall characteristic of our investment activity and I think that is a result from being well positioned and.
And that context.
And I just laid out.
Understood and kind of and if I can follow up to that and.
I mean, how it is point you typically.
And maybe a a wide.
The funnel the.
And then the lot of others, you do a lot of things beyond just kind of plain.
Plain vanilla cash flow lending.
Asset <unk>.
<unk> would you expect.
The level of competition stays and hence with all of the tap yet.
Would you expect to maybe element.
And you do element of your portfolio to come from those differentiated channels, rather than just doing the lack of the loop Edison of vanilla cash flow lending club deal would you expect to utilize more of your differentiated channel or do you expect it to kind of just stay the same.
I think it's hard to say I think our focus has always been on we really are channel agnostic. So if that happens I believe we're well positioned because we do cover.
On the industries themselves, we have good coverage of <unk>.
Private equity folks that we work with not everyone, but the ones, we work with and we do a lot of repeat business.
And then we find pockets of value when those arise like the AAR deals we were early in that space.
The ABL or asset backed structures, where at the appropriate.
And we're open to that so it's hard to predict that becomes the mainstay I think rather than trying to predict it or being smart enough to predict that we want to be positioned to take advantage of.
Wherever the deal flow comes from and approaching things with and industry lens and being very cognizant of.
And what we think what risks.
And reward work for us.
Hopefully, let us take advantage of a wider funnel.
And without the concentration of cars.
On the on a go forward basis.
And just because I appreciate that thank you.
Thank you.
Our next question will come from Finian O'shea with Wells Fargo. Please go ahead.
Hey, everyone and good afternoon all.
Second of Roberts.
Angela.
Appreciate the comments on.
Yeah.
The leadership.
For the BDC and will add.
The 1 on 1 of them.
Of the.
Part of the pioneer and group.
Credit and look back, but now your peers with revenue.
Most of the jobs.
And very much appreciate it.
I'll and I'll move on to a couple of questions I'll also sort of.
Session is for growth.
On the origination so for bi.
Of course.
Just wanted to ask sort of on the fundraising side.
A couple of years.
A couple of the large alternative managers and then.
The black box turns and.
For the large alternative manager as well and some sense.
And.
Really stepping up the fund raising the games of the retail channels and that's really driving a lot of this competition.
Dean.
Do you believe or.
And <unk>.
And so should and will Blackrock and Greg.
All of that.
Some of the fund raising races.
Stepping up at this time.
Ben.
Thanks for the comments, both personally and I think much more importantly for what we've done institutionally with respect to the look back.
For those of you who are newer to joining us.
When we took <unk> public it was a private investment vehicle and we left in place its institutional structure with respect to look back and something we're very proud of and believe in.
With respect to competition and the industry. They are constantly new sources of people coming into this business.
And the public vehicles private vehicles registered vehicles on registered vehicles.
Different sources of investors.
The domestic foreign institutional retail and I think your comments and questions around the push and by other people into the retail or high net worth channel or interesting avia.
Obviously as the.
Global asset manager of Blackrock size, we touch investors across every different aspect and we're always looking to try and make sure. We're doing the right thing for our investors over time with respect to TCP C. We think it provides a great opportunity for all investors and.
Institutional and individual.
And those who need daily liquidity as well as those who have been with us for now 2 decades to get the product and we'll continue to probably see people offering different things and different channels, but we're really focused on making sure that we can do the right things for our investors.
<unk>.
Okay. Thanks.
And all of those 2 small follow up I think.
And you gave some color on the NIM from post quarter. The are you able to.
And I'll answer your ex dates really.
Added to that.
Equity on bolt.
Sorry can you repeat that you faded a little bit I think you asked about and mentioned and the exit and what what the exit was comprised of.
Yes, and you get out of the debt or equity for your book.
Yes. It was all the equity at the moment, we only invest and the equity at this point to the beginning of last quarter, yes.
Yes, just to be clear the when we did the original transaction we had.
1 of the sponsors for came in.
The post that time, we've only been and equity the balance sheet was refinanced and to Eric's point that sell down was of that equity position.
Okay. That's all for me thanks, so much.
Our next question will come from Ryan Lynch with <unk>. Please go ahead.
Good morning, there and I.
And I just wanted to.
Gradually.
And Howard view.
Best wishes and I really enjoyed working with you over the years and and.
And congratulations to you Raj on the promotion.
Following up on <unk> question regarding and Mentum.
Can you repeat the your commentary I believe you said you had a $1.2 million of recurring income.
And the second quarter over quarter from net investment.
Can you talk about.
What was that and and non.
Dan.
What was that and nonrecurring items should we expect the future income from net.
And then how does that look regarding.
The post sale of the portion of your position as well as on top of that.
When you sold on a third of your position and how did that amount come about why was it not a full exit or what do you guys not just cheaper to hold all of the volume what you guys just kind of right size it down to just selling off the third.
Sure I'll address this is Eric I'll address the dividend question first.
Yes.
Recurring dividend income, we actually were invested both in and of the preferred equity tranche and then the common equity as well and.
And as you recall last quarter, we had the somewhat elevated level of dividend and income, but this was more normalized recurring.
But as you mentioned, we did sell down of portion of that that equity position, yes, and let me let me pick up on that so as Eric mentioned the nice thing is we.
Yes. This comes as a result of a nice run up and the valuation and all.
And our realized.
Exit and park at those elevated valuations.
The benefit here is we can take that those proceeds and obviously redeploy it into a more normative investment profile for interest income.
We do believe obviously that is part of the sell down that it was important to manage the position size.
Being an equity owner of the business is not the normative strategy doing so as a way to really fully realize the work effort.
And the benefits of that work and the position was part of the sell down philosophy, but at the same time, we are still excited.
Excited about the business its well positioned theres been a lot of work to get it to where it is today.
I do think there is ongoing.
And a positive wins.
And the sales so to speak for the business.
You have new institutional investors, who have come in.
As well as part of this transaction. So we wanted to be of part of that success on an ongoing basis, but we want to balance it with what.
And what the core part of the strategy is as well as managing a diverse and well diversified.
Book with with the growth and that position and that is sort of of the combination of things that led us to partially exit take some chips off the table, but also be of part of the future success of the business.
Okay.
And then.
And then and.
Believe you mentioned.
And of your new originations this quarter 16 came from new portfolio of companies and 3 came from <unk>.
That is correct.
Deals like the lot of of <unk>.
Direct lenders over the past year have been leaning more and to existing portfolio companies.
And based on.
Additional capital deployment.
You, all and again I don't want to draw on.
Too many conclusions on 1 single quarter Sanofi can fluctuate, but when you kind of look that trend this quarter and really focusing a lot on new portfolio of companies for for deployment. So.
Although the charity commentary on why there was kind of such a large number of new portfolio of companies this quarter versus existing.
Okay.
Brian.
Thanks for the follow up and also thanks for your initial comments truly have enjoyed working with you as well I'm going to let Raj give you a little bit more granularity from but would like to emphasize your statement which is.
Don't pay too much attention to a single quarter.
For a number of years now we've talked about the fact that.
We have the benefit.
Doing a significant part of our business with existing borrower relationships and that has been running well over half.
So the fact that for a particular quarter. There is a slightly different relationship is and our view not indicative of a new trend.
It's simply a small set of data sets for this quarter, we continued to benefit from having these long term robust relationships.
With lots of existing companies.
Cost of lot of industries, and notes and a very important part of our deal flow.
I mean, I think just to reiterate.
And Howard.
Usual commentary about near notes no single quarter is indicative of the trend, we're going to keep that that phraseology EBITDA.
And it apart, but it is true I mean, there is no no single quarter or quarter day period, I think typify the trend I would highlight of reiterate that over the past year or so about a third of our investment activity has come from the existing portfolio of and I think that is really the message that Adam at a level, where you have a mature.
Our portfolio and.
And business model, there is a benefit from the existing relationships and the existing portfolio of itself to self generate leads and <unk>.
We have seen that with more consistency versus the data point of this quarter.
And I expect that.
Would continue just given.
How do we view the pipeline.
The performance over the last year, and just the general level of maturity and our business and.
And Ryan and I'll, just add a little bit of color on the.
Activity post quarter, and we mentioned we've done 5 deals in excess of $60 million and 3 of those 5 were to existing portfolio companies.
Okay.
Understood.
And I totally understand that the.
1 quarter doesn't make a trend, but it was just a little bit unusual and it sounds like things were.
And he'll be revert back to normal going forward. So those are all my questions I appreciate the time today.
Thank you.
Our next question will come from Devin Ryan with JMP Securities. Please go ahead.
No.
Kevin has dropped off on our next question will come from Christopher Nolan with Ladenburg Thalmann. Please go ahead.
Howard I want to congratulate you on the move and you or.
And a cost.
BDC rules and you will be missed.
And then once the Raj, Eric and Phil Congratulations on the new promotions.
Raj is there going to be any sort of strategy in terms of.
Shifting to other types of on.
And industry groups.
And what we've seen before.
I would say and.
And of high level, no not really I think what we what we liked about the business and.
Experience, we've had to date is that right.
And I believe what we do and where we focus works certainly 2020 was of great.
Great very good validating timeframe to be defensive.
Occasionally we see opportunity and businesses that perhaps are a little more cyclical than what we've what we typically invest in.
But they're oftentimes we are focusing more on an asset.
Based on for collateral mitigating that business dynamic, but to answer your question sort of on a more succinct way I don't see it we would not anticipate of big change and the strategy. Although we're always very open to being.
Open to good opportunities.
Where they come from.
And I guess, what the follow up I mean, given that your cost of capital is going down and especially with the latest.
Bond rates are.
Are you finding the youre able to compete more attractively on price, but make it up on better terms and conditions.
We I think that's a good outcome of.
The lower cost of capital on the financing side, but to be honest when we look at our investing activity our make our underwriting decisions. We are bifurcated that from the financing decisions.
So we really want the the investment to work on an unlevered basis for the perceived level of risk and then the financing is more of our portfolio management versus.
Creating and investment capacity, where it may or may not work.
Otherwise so I think it's something we will be opportunistic about but I would keep that viewpoint that is separate from the investment decision.
Alright, Thank you and congratulations to all of you guys.
Chris Thank you and really appreciate your comments.
Our next question will come from Derek Hewett with Bank of America. Please go ahead.
Good morning, everyone. I also want to congratulate Howard on your pending retirement, and then also Raj tailwind the Eric on your new rules.
And so it's been about 3 years now.
On the Blackrock platform, so what percentage of the current portfolio or co investment opportunities with <unk>.
With the <unk> at this point.
And maybe could we kind of compare it to.
Maybe 1 year ago.
I would say so keep it keep in mind.
<unk> is under our co investment order so.
By definition of the day, we started today it will be a higher percentage, we don't disclose the.
And the percentage of the overlap, but just logically.
That activity has obviously been a function of.
And the requirements of that order, but.
And I'm sorry, the second part of your question was.
And just comparing it from 1.
1 year ago, but I think.
I think you already answered, yes, so and I would say going back to the beginning of our transaction clearly higher going back a year ago again.
Being constrained by disclosures.
I wouldn't want to make that comment Derek.
And let me just maybe add 1 thing on to what Raj has thing, which is we haven't had exemptive relief.
For over 15 years, the long before we became part of Blackrock and clearly being part of Blackrock, there are lots of opportunities and entities.
But we have for a very long time and certainly the long since before the <unk> public functioned in the way that we were investing across our various vehicles and had the benefit of being able to do that.
So this is nothing new.
And it's expanded but not new or different.
Okay, great. Thank you.
Thank you and thank you for your comments at the beginning as well.
Again, if you of a question. Please press Star then 1 of our next question will come from Devin Ryan with JMP Securities. Please go ahead.
Hey, great good afternoon, everyone and Howard and again best wishes.
On future endeavors, and Ross congratulations great to see the continuity of the strategy. So looking forward and working more with you.
In terms of.
The first question and a little bit of of a follow up just on the competitive dynamics that you guys are seeing clearly the pendulum swung out during the pandemic with the dip.
The location of the markets.
Created maybe from some outsized opportunities at the moment, but.
As potential and that's been coming back to the middle of the macro stress does it feel like we're hitting kind of at that point of equilibrium.
Just given given the capital and competition you are skewing of the market or do.
Do you think that we could actually see more compression and just given given that kind of elevated level of capital and different providers stepping into the market.
Yeah.
Yes, I mean, I'll take try and take on and ask her to add any comments.
And now if the phrase equilibrium.
But since 2020 of our since I joined over.
And over a decade and a half ago it feels like it's there.
Very consistent level of activity. It's just a question of what that activity looks like.
And I also 1 of the.
The careful and avoid making any broader market comments because.
And where we position and where we look for deals we tend not to be just searching the broader market.
And so our dynamic is really defined by our pipeline and.
We're sourcing of our deals from which may not be as reflective, but I think in terms of on deals and just the activity level.
It feels it clearly feels like things are recovered and activity.
As we mentioned the earning script terms and.
Yes, but people are looking for has sort of retrace their their character acute pre pandemic.
The levels and Diane and.
Asks if you will.
But at the same time, we're also saying no to of lots of deals and focusing on the ones that work for our for.
For our portfolio and our.
Our business, so whether it's an equilibrium and the market or it's.
And that's going to have additional compression what we will do is really what we feel works for us where we can get the right terms and pricing, where we can stay disciplined and do the right work and that may or may not coincide with the broader market, but I do think Regina.
Good stabilization and our portfolio.
But LIBOR has been a.
A very different dynamic that we've got the sort of account for.
And that May mean, more deal activity and may be and less but we're just going to focus on our pipeline and the things that we can control.
Okay terrific great color. Thank you and then a follow up just looking at the overall asset mix of the portfolio would you clearly benefited from strong performance on the equity side and I believe equity now 11% of assets after the event.
So the veracity of the state a little color on how you're thinking about the asset mix moving forward.
And we should expect to see more monetization of the equity.
Maybe moving back to.
And it was 2020 kind of mid.
The single digit level will be overall portfolio.
Yes, we are.
And the credit business. We are focused on credit instruments is the primary strategy, where we have equity it's a function of either some ability to have warrants.
Are things that convert into that or its a function of something like advent somewhere.
Path of defending our capital is defined by converting to a different instrument, which is really the exception not the rule of.
Fortunately those a number of those have worked out and.
And some cases very well.
But I would say in terms of a normal course activity you should expect us to be a debt primarily of senior secured debt portfolio.
<unk> things.
Need a little bit of a different type of work for activity.
That may result in equity, but that is really not the primary focus that is a function of.
Protecting the protecting the portfolio of versus deploying it and and original investment.
Okay terrific I'll leave it there.
Thanks, so much.
Thank you.
And thanks for joining us today.
This concludes our question and answer session I would like to turn the conference back over Howard Lefkowitz for any closing remarks.
We appreciate your questions and our dialogue today I'd like to once again, thank all of our shareholders for your confidence and your support I would also like to again and thank our experienced and talented team of professionals at Blackrock TCP Capital Corp. For your continued hard work and dedication. Thanks for joining US today. This concludes our <unk>.
Call.
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