Q2 2024 BlackRock TCP Capital Corp Earnings Call

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Operator: Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's second quarter 2024 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.

Unknown Executive: Ladies and gentlemen, good afternoon.

Unknown Executive: Welcome everyone to Black Law, TCP Capital Corp.

Unknown Executive: 2nd quarter, 2024, Ernie 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.

Speaker Change: Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's second quarter 2024 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.

Operator: 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 these instructions before we begin the Q&A session. Now, I would like to turn the call over to Makayla Murray, a member of the BlackRock TCP Capital Corp Investor Relations team. Makayla, please proceed. Thank you.

Unknown Executive: Please press the star key followed by the digit one.

Speaker Change: I will repeat these instructions before we begin the Q&A session.

Michaela Murray: For our TCP Capital Corp investor relations team, Michaela, please proceed. Thank you.

Michaela Murray: And now, I would like to turn the call over to Makayla Murray, a member of the BlackRock TCP Capital Corp Investor Relations Team. Makayla, please proceed.

Makayla Murray: Thank you. Before we begin, I'll note that 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 guaranteed for future performance. Forward-looking statements 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 changes without notice. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified.

Unknown Executive: Before we begin, I'll note that 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. Forward-looking statements 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 changes out notice. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information.

Makayla Murray: Thank you. Before we begin, I'll note that 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 guaranteed a future performance.

Makayla Murray: Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected.

Makayla Murray: Any forward-looking statements made on this call are made as of today and are subject to changes without notice. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information.

Makayla Murray: Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the second quarter ended June 30, 2024. We also posted a supplemental earnings presentation on our website at TCP Capital. To view 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, Raj Vig. Thanks, Michaela, and thank you all for joining us.

Unknown Executive: Earlier today, we issued our earnings release for the 2nd quarter and did June 30, 2024. We also posted a supplemental earnings presentation to our website at tcpcapital.com. To view the slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events and Presentations.

Makayla Murray: Earlier today, we issued our earnings release for the second quarter ended June 30, 2024. We also posted a supplemental earnings presentation to our website at tcpcapital.com.

Makayla Murray: To view the slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events and Presentations.

Unknown Executive: These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today.

Makayla Murray: 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 , Raj Vig.

Raj Bigg: I will now turn the call over to our Chairman and CEO, Raj Bigg. Thanks, Lucala, and thank you all for joining TCPC's Q2 2024 rooms call. With me today as our president, Bill Singh, our CFO, Eric Coyard, as well as Jason Mary, who was recently appointed as our COO. Our way of background, Jason, the key member of our U.S. Department of Medicine team, who they want 10-year at BlackRock, has been a voting investment committee member of TCPC for some time now. Phil and I have worked with Jason for almost six years, and we look forward to continuing to work with him.

Rajneesh Vig: This is a Q2 2024 earnings call. With me today is our president, Philip Tseng, our CFO, Erik Cuellar, as well as Jason Mary, who was recently appointed as our COO. By way of background, Jason is a key member of our U.S.

Raj Vig: Thanks Michaela, and thank you all for joining TCPC's Q2 2024 earnings call.

Speaker Change: With me today is our President, Phil Tseng, our CFO , Erik Cuellar, as well as Jason Maring, who was recently appointed as our COO.

Speaker Change: By way of background, Jason is a key member of our US Direct Lending Investment Team with a long tenure at BlackRock, and has been a voting and investment committee member of TCP Capital Corp.

Speaker Change: for some time now.

Raj Bigg: It is an expanded role.

Speaker Change: Phil and I have worked with Jason for almost six years and we look forward to continuing to work with him in his expanded role.

Raj Bigg: Today, after I provide an overview of our 2nd quarter results, Bill will discuss our portfolio and investment activity. Eric will then review our financial results, as well as our capital and liquidity position.

Rajneesh Vig: Direct Lending Investment Team with a long tenure at BlackRock and has been a voting investment committee member of TCPC for some time now. Phil and I have worked with Jason for almost six years, and we look forward to continuing to work with him in his extended role. Today, after I provide an overview of our second-quarter results, Phil will discuss our portfolio and investment activity, and Erik will then review our financial results, as well as our capital and liquidity position. We will all be available to answer questions, and before opening the call to your questions, I will wrap up with some closing comments.

Speaker Change: Today after I provide an overview of our second quarter results, Phil will discuss our portfolio and investment activity and Erik will then review our financial results as well as our capital and liquidity position. We will all be available to answer questions and before opening the call up to your questions I will wrap up with some closing comments.

Raj Bigg: We will all be available to answer questions, and before opening a call to your questions, I will wrap up with some closing comments.

Raj Bigg: I will start now with the key highlights from the 2nd quarter of 2024. We delivered the adjusted investment income of 38 cents per share, and our annualized net investment income return on average equity was approximately 14 percent, which remains at the high end of our historical ranges. Our board of directors declared the 3rd quarter dividend of 34 cents per share, which implies dividend coverage of 110 percent based on our 2nd quarter adjusted MII. The 3rd quarter dividend is payable on September 30 to shareholders of record on September 16. We continue to take a disciplined approach to our dividend, with an emphasis on stability and strong coverage from recurring net investment income.

Rajneesh Vig: I'll start now with the key highlights from the second quarter of 2024. We delivered adjusted net investment income of $0.38 per share, and our annualized net investment income return on average equity was approximately 14%, which remains at the high end of our historical record. Our Board of Directors declared a third quarter dividend of $0.34 per share, which implies dividend coverage of 112% based on our second quarter adjusted MII. The third quarter dividend is payable on September 30th to shareholders of record on September 15th.

Speaker Change: I'll start now with the key highlights from the second quarter of 2024.

Erik Cuellar: We delivered adjusted net investment income of $0.38 per share, and our annualized net investment income return on average equity was approximately 14%.

Speaker Change: which remains at the high end of our historical ranges.

Speaker Change: Our Board of Directors declared the 3rd quarter dividend of $0.34 per share, which implies dividend coverage of 112% based on our 2nd quarter adjusted MII.

Speaker Change: The third quarter dividend is payable on September 30th to shareholders of record on September 16th. We continue to take a disciplined approach to our dividend with an emphasis on stability and strong coverage from recurring net investment income.

Rajneesh Vig: We continue to take a disciplined approach to our dividend, with an emphasis on stability and strong coverage for recurring net investments. As a reminder, throughout TCPC's 12-year history, we have consistently covered our dividends with recurring NII and have also paid several recent special dividends. During the second quarter, our NAD declined 8.4%, and we added six portfolio companies to non-accrual status, taking non-accruals from approximately 1.7% to 4.9% of fair value. While this increase is clearly notable and disappointing, it's important to point out that, for the most part, the change is due to a set of factors at each individual company level that are wholly unrelated but coincidentally converged this quarter to More importantly, these changes do not change our view of the overall strong health of our portfolio.

Raj Bigg: As a reminder, throughout TCPC's 12-year history, we have consistently covered our dividends with the recurring NII and have also paid several recent special dividends.

Speaker Change: As a reminder, throughout TCPC's 12-year history, we have consistently covered our dividends with recurring NII and have also paid several recent special dividends.

Raj Bigg: During a second quarter, our NAD declined 8.4%, and we added six portfolio companies to non-actual status, taking non-actuals from approximately 1.7% to 4.9% of fair value. While this increase is clearly notable and disappointing, it's important to point out that, for the most part, the changes due to a set of factors at each individual company level that are wholly unrelated, but coincidentally converge in a quarter to drive the non-accrual levels. More importantly, these changes do not change our view of the overall strong health of our portfolio.

Speaker Change: During the second quarter, our NAD declined 8.4%, and we added six portfolio companies to non-accrual status, taking non-accruals from approximately 1.7% to 4.9% of fair value.

Speaker Change: While this increase is clearly notable and disappointing, it's important to point out that for the most part the change is due to a set of factors at each individual company level that are wholly unrelated but coincidentally converge this quarter to drive the non-accrual levels.

Speaker Change: More importantly, these changes do not change our view of the overall strong health of our portfolio.

Raj Bigg: I'd like to take a few minutes now to discuss a number of action items for several of the companies that have actually been in process for some time now, and that we believe that they can drive near-term exclusions to the limited number of impacted names in the court floor. The overall majority, or roughly 70% of the increase in non-acrual levels, is really just three companies, Cellar X, Floral Sight, and Mapathy. Most of what we have discussed in previous quarters, we have been working intensely with each of these companies towards a full-sum balance of restructuring that we believe in facilitating a path to recovery.

Rajneesh Vig: I'd like to take a few minutes now to discuss a number of action items for several of the companies that have actually been in process for some time now and that we believe can drive near-term improvements to the limited number of impacted names in their portfolios. The overwhelming majority, or roughly 70% of the increase in non-accruals, is related to just 3 companies, Celerex, Pluralsight, and Maffei, most of which we have discussed in previous quarters. We have been working intensely with each of these companies toward a fullsome balance sheet restructuring that we believe can facilitate a path to recovery. The first is Cellarex, which is an Amazon aggregator.

Speaker Change: I'd like to take a few minutes now to discuss a number of action items for several of the companies that have actually been in process for some time now and that we believe can drive near-term improvements to the limited number of impacted names in the portfolio.

Speaker Change: The overwhelming majority, or roughly 70% of the increase in non-accruals, is related to just three companies. Celerex, Pluralsight, and McAfee.

Speaker Change: most of which we have discussed in previous quarters.

Speaker Change: We have been working intensely with each of these companies toward a fulsome balance sheet restructuring that we believe can facilitate a path to recovery.

Raj Bigg: The first is Cellar X, which is an Amazon heavy air. Following the combined impact of a stress balance sheet and a slowdown in online consumer spending, we decided to place Cellar X on non-acrual status this quarter. We've been actively engaged in company management, the rest of the leather group, and Cellar X's ownership group to effectuate their agreement to address the company's capital structure and liquidity. You may recall, if you briefly placed Brazil on non-acrual status in Q4, a company that faced a similar set of challenges, and as a result of its successful restructuring, the company quickly returned to approval status in the following quarter Q1 for this year.

Rajneesh Vig: Following the combined impact of a stressed balance sheet and a slowdown in online consumer spending, we decided to place SolarEx on non-accrual status this quarter. We have been actively engaged with company management, the rest of the lender group, and SellerX's ownership group to effectuate an agreement to address the company's capital structure and liquidity. You may recall that we briefly placed Thrasio on non-accrual status in Q4, a company that faced a similar set of challenges.

Speaker Change: The first is Cellarex, which is an Amazon aggregator. Following the combined impact of a stressed balance sheet and a slowdown in online consumer spending, we decided to place Cellarex on non-accrual status this quarter.

Speaker Change: We have been actively engaged with company management, the rest of the lender group, and SellerX's ownership group to effectuate an agreement to address the company's capital structure and liquidity.

Speaker Change: You may recall that we briefly placed Thrasio on non-accrual status in Q4, a company that faced a similar set of challenges.

Rajneesh Vig: And as a result of a successful restructuring, the company quickly returned to approval status in the following quarter, Q1 of this year. We remain optimistic that over the medium to longer term, the aggregator space remains attractive, and that continued consolidation and cost optimization will result in fewer, larger scale, and better capitalization. The second name is Pluralsight, which is held by a number of public PDs and which many of you have probably heard about in the media or on other earnings calls already. As a reminder, Pluralsight is an enterprise learning platform that provides training software, online courses, and videos for software developers.

Speaker Change: And as a result of a successful restructuring, the company quickly returned to approval status in the following quarter, Q1 of this year.

Raj Bigg: We remain optimistic that over the medium to longer term, the aggregator space remains attractive, and that continued consolidation and cost optimization will result in fewer, larger scale, and better capitalized vendors.

Speaker Change: We remain optimistic that over the medium to longer term, the aggregator space remains attractive and that continued consolidation and cost optimization will result in fewer, larger scale, and better capitalized vendors.

Raj Bigg: The second name is Floral Sight, which is held by a number of public BDCs, and which many of you have probably heard about in the media or on other earnings calls already. As a reminder, Floral Sight is an enterprise learning platform designed to train software, online courses, and video or software developers. The company's premium product offering was netaly impacted by a tougher macro-efficient environment, which led to entire IT budgets and layoffs in the tech sector, as well as a higher rate environment, which resulted in liquidity and pressure for the company. While we are not the leaked lender, nor agent for Floral Sight, we have been closely engaged and aligned with the rest of the lender group to determine the best path forward, and are hopeful for a near-term resolution of this process.

Speaker Change: The second name is Pluralsight, which is held by a number of public BDCs.

Speaker Change: and which many of you have probably heard about in the media or on other earnings calls already.

Speaker Change: As a reminder, Pluralsight is an enterprise learning platform that designs training software, online courses, and video for software developers.

Rajneesh Vig: The company's premium product alteration was negatively impacted by a tougher macroeconomic environment, which led to tighter IT budgets and layoffs in the tech sector as well as a higher rate environment, which resulted in liquidity pressure for the company. While we are not the lead lender nor agent for Pluralsight, we have been closely engaged and aligned with the rest of the lender group to determine the best path forward and are hopeful for a near-term resolution of this process.

Speaker Change: The company's premium product alteration was negatively impacted by a tougher macroeconomic environment, which led to tighter IT budgets and layoffs in the tech sector.

Speaker Change: as well as the higher rate environment which resulted in liquidity pressure for the company.

Speaker Change: While we are not the lead lender nor agent for Pluralsight, we have been closely engaged and aligned with the rest of the lender group to determine the best path forward and are hopeful for a near-term resolution of this process.

Raj Bigg: The third noble move is McAfee, a cyber security company that has also held by a number of lending groups. That has seen weaker revenue trends and tighter liquidity over the past few quarters, and that result has been evaluating a potential balance sheet restructure. There are a number of public news articles and public disclosures that suggest the company is evaluating a financing alternative that leads to its near-term liquidity challenges.

Rajneesh Vig: The third notable move is McAfee, a cybersecurity company that is also held by a number of lending companies and that has seen weaker revenue trends and tighter liquidity over the past few quarters. And as a result, it has been evaluating a potential balance sheet restructure. There are a number of public news articles and public disclosures that suggest the company is evaluating a financing alternative that would ease its near-term liquidity challenges. The remaining approximately 1% of change in our accruals is related to another three companies that we have also discussed before, Lithium, Astra, and INH Fire, each of which has experienced idiosyncratic circumstances that have led to credit considerations sufficient for us to reflect the non-accrual names of this court.

Speaker Change: The third notable move is McAfee, a cybersecurity company that is also held by a number of lending groups.

Speaker Change: that has seen weaker revenue trends and tighter liquidity over the past few quarters and as a result has been evaluating a potential balance sheet restructuring.

Speaker Change: There are a number of public news articles and public disclosures that suggest the company is evaluating a financial alternative that would ease its near-term liquidity challenges.

Raj Bigg: The remaining approximately 1% per change in our rules is related to another few companies that we have also discussed before: Lithium, Astra, and INHBIRD. Each of which has experienced idiosyncratic circumstances that have led to credit consideration sufficient for us to reflect the monocural names of this quarter.

Speaker Change: The remaining approximately 1% of change in our accruals is related to another three companies that we have also discussed before, Lithium, Astra, and INH Fire.

Speaker Change: Each of which has experienced idiosyncratic circumstances that have led to credit considerations sufficient for us to reflect the non-accrual names of this quarter.

Raj Bigg: In summary, at the end of June, debt investments in 10 of our 150 corporate companies, or approximately 6%, were on monocural status, representing 10.5% of the portfolio at cost and again 4.9% at fair value. Net realized losses for the quarter were $35 million due to the restructuring of our investments in D'Roddo, pre-teen mention in Thailand. Net unrealized losses were $52 million through and primarily again by Cellar X, Pluralsight, and Lithia. Despite these challenge names, the overall credit quality of our portfolio remains strong, and we are actively monitoring the health of our portfolio companies with respect to their business and markets, capital structure, and the impact of higher rates and inflation on their performance.

Rajneesh Vig: In summary, at the end of June, debt investments in 10 of our 158 portfolio companies, or approximately 6%, were on non-accrual status, representing 10.5% of the portfolio at cost and, again, 4.9% at fair value. Net Realized Losses for the quarter were $35 million due to the restructuring of our investments in Terrazio, as previously mentioned, and Hyland. Net unrealized losses were $52 million, driven primarily, again, by Seller X, Pluralsight, and Little.

Speaker Change: In summary, at the end of June , debt investments in 10 of our 150 portfolio companies, or approximately 6%, were on non-accrual status, representing 10.5% of the portfolio at cost, and again 4.9% at fair value.

Speaker Change: Net real-life losses for the quarter were $35 million due to the restructuring of our investments in Terrazio, previously mentioned, and Highland.

Speaker Change: Net unrealized assets were $52 million, driven primarily again by Seller X, Pluralsight, and Lithium.

Rajneesh Vig: Despite these challenged names, the overall credit quality of our portfolio remains strong, and we are actively monitoring the health of our portfolio companies with respect to their business and markets, capital structure, and the impact of higher rates and inflation on their performance. As of June 30th, 2024, our weighted average internal risk rating was 1.5 compared to 1.56 as of March 31st, 2024, underscoring that our portfolio companies are performing generally in line or above our base case expectations, and the majority of our portfolio companies continue to report revenue and market expansion. For reference, the rating categories are defined in the footnotes of our investor presentation.

Speaker Change: Despite these challenged names, the overall credit quality of our portfolio remains strong and we are actively monitoring the health of our portfolio companies with respect to their business and markets, capital structure, and the impact of higher rates and inflation on their performance.

Raj Bigg: At the June 30, 2024, our weighted average internal risk rating was 1.5 compared to 1.56 as of March 31, 2024, underscoring that our portfolio companies are performing generally in line or above our base-based expectations, and the majority of our portfolio companies continue to report revenues and market expansion. For reference, the rating categories are defined in the footnotes of our investor presentations.

Speaker Change: As of June 30, 2024, our weighted average internal risk rating was 1.5 compared to 1.56 as of March 31, 2024, underscoring that our portfolio companies are performing generally in line or above our base pace expectations

Speaker Change: and the majority of our portfolio companies continue to report revenue and margin expansion.

Speaker Change: For reference, the rating categories are defined in the footnotes of our investor presentation.

Raj Bigg: Before turning the call over to Phil, I would like to share a few additional updates. First, I'd like to congratulate Phil, who was recently appointed to TCP's Board of Directors. As you know, Phil is an invaluable contributor to our company. For many years, he's both our president and a member of BlackRock's private debt platform.

Rajneesh Vig: Before turning the call over to Phil, I would like to share a few additional updates. First, I'd like to congratulate Phil, who was recently appointed to TCP's Board of Directors. And as you know, Phil has been an invaluable contributor to our company for many years and is both our president and a member of BlackRock's private debt platform. Second, I'm pleased that we were able to capitalize on attractive capital market conditions to raise $325 million in fixed-rate unsecured debt at an attractive rate of 6.95% in May 2024.

film: Before turning the call over to Phil, I would like to share a few additional updates.

film: First, I'd like to congratulate Phil, who was recently appointed to TCP's Board of Directors. And as you know, Phil has been an invaluable contributor to our company for many years, and is both our president and a member of BlackRock's private dev platform.

Raj Bigg: Second, I'm pleased that we were able to capitalize on attractive capital markets conditions to raise $325 million in fixed-rate, unsecured debt at an attractive rate of 6.95% in May 2024. In addition, on August 1, we amended only credit utility, extending the maturity date by 3 years and reducing the sofa rate adjustment on the facility. When we announced TCP's merger with BlackRock Investing Capital of quarter, we noted that one of the benefits of the merger would be approved access to capital, and we're pleased to see that it is already happening. We appreciate the support of our bondholders and bankers, and we're glad to have this right power to capitalize on new investment entities.

film: Second, I'm pleased that we were able to capitalize on attractive capital market conditions to raise $325 million in fixed rate unsecured debt at an attractive rate of 6.95% in May 2024.

film: In addition, on August 1, we amended our credit facility, extending the maturity date by three years and reducing the SOFR rate adjustment on the facility. When we announced TCPC's merger with BlackRock Investment Capital Corp.

film: We noted that one of the benefits of the merger would be approved access to capital, and we are pleased to see that it is already happening.

Rajneesh Vig: In addition, on August 1st, we amended our credit facility, extending the maturity date by three years and reducing the SOFR rate adjustment on the facility. When we announced TCPC's merger with BlackRock Investment Capital Corp., we noted that one of the benefits of the merger would be approved access to capital, and we are pleased to see that it is already happening. We appreciate the support of our bondholders and bankers and are glad to have the driving power to capitalize on new investment opportunities. Now, we'll turn it over to Phil to discuss our investment activities and portfolios.

film: We appreciate the support of our bondholders and bankers and are glad to have the drive power to capitalize on new investment opportunities.

Philip Tseng: Now we'll turn it over to Phil to discuss our investment activity at Portfolio. Phil. Thanks, Raj. In the second quarter, we invested $130 million, $124 million, which was in senior secured loans, which experienced a meaningful pickup in activity across our platform as deployments increased by approximately 40%. Last year, reflecting the return of M&A and refinancing activity. The deployments in the quarter included loans to 5 new and 5 existing portfolio companies, and all of our debt investments in the second quarter were first lien loans. Investing in incumbent portfolio companies is an important part of our strategy, and a competitive advantage that allows us to invest new capital in great businesses in industries that we know well.

film: Now I'll turn it over to Phil to discuss our investment activity and portfolio. Phil?

Philip Tseng: In the second quarter, we invested $130 million, $124 million of which was in Senior Secured Loans. We experienced a meaningful pickup in activity across our platform as deployments increased by approximately 40% versus last year, reflecting the return of M&A and refinancing activity. Deployments in the quarter included loans to five new and five existing portfolio companies, and all of our debt investments in the second quarter were first lien loans. Investing in incumbent portfolio companies is an important part of our strategy and a competitive advantage that allows us to invest new capital in great businesses in industries that we know well.

Phil: Thanks, Raj.

Phil: In the second quarter, we invested $130 million, $124 million of which was in Senior Secured Loans.

Phil: We experienced a meaningful pickup in activity across our platform as deployments increased by approximately 40% versus last year, reflecting the return of M&A and refinancing activity.

Phil: Deployments in the quarter included loans to five new and five existing portfolio companies. And all of our debt investments in the second quarter were first lien loans.

Phil: Investing in incumbent portfolio companies is an important part of our strategy and a competitive advantage that allows us to invest new capital in great businesses in industries that we know well.

Philip Tseng: During the second quarter, we made a follow-on investment in AlphaSense, a growing enterprise SaaS company that provides an artificial intelligence and machine learning search engine to financial service firms, corporations, and global consulting firms that want access to market intelligence on competitors, customers, and markets. TCPC provided AlphaSense with a first-linked term loan in 2022 as a sole lender, and we're thrilled to participate in their recent refinancing to support a business that is now twice the size compared to when we made the initial loan in 2022. This is a great example of how we support our borrowers across their lifecycle and how we've earned a strong reputation with management teams for doing so.

Philip Tseng: During the second quarter, we made a follow-on investment in AlphaSense, a growing enterprise SaaS company that provides an artificial intelligence and machine learning search engine to financial service firms, corporations, and global consulting firms that want access to market intelligence on competitors, customers, and markets. TCPC provided AlphaSense with a first-name term loan in 2022 as a sole lender, and we're thrilled to participate in their recent refinancing to support a business that is now twice the size compared to when we made the initial loan in 2022.

Phil: During the second quarter, we made a follow-on investment in AlphaSense, a growing enterprise SaaS company that provides an artificial intelligence and machine learning search engine to financial service firms, corporations, and global consulting firms.

Phil: that want access to market intelligence on competitors, customers, and markets.

Speaker Change: TCPC provided AlphaSense with a first-name term loan in 2022 as a sole lender, and we're thrilled to participate in their recent refinancing to support a business that is now twice the size compared to when we made the initial loan in 2022.

Philip Tseng: This is a great example of how we support our borrowers across their life cycle and how we've earned a strong reputation with management teams for doing so. Another company we invested in during the quarter was Sumba, a leading global payment solutions company focused on empowering small to medium-sized merchants with an affordable, intuitive payment solution. In 2021, we provided SumUp with a first-lane term loan to support geographic and product offering expansion plans. Since then, some have successfully executed this strategy.

Speaker Change: This is a great example of how we support our borrowers across their lifecycle and how we've earned a strong reputation with management teams for doing so.

Philip Tseng: Another company we invested in during the quarter was Sumbup, a leading global payment solutions company focused on empowering small to medium-sized merchants with an affordable, intuitive payment solution. In 2021, we provided Sumbup with a first-linked term loan to support geographic and product offering expansion plans. Since then, Sumbup successfully executed strategy. We were pleased to participate in their 2024 refinancing. Sumbup was co-sourced by our U.S. direct lending team and BlackRock's capital markets business, which speaks to the benefits we realized from being part of the BlackRock platform. We believe our channel-agnostic approach to deal sourcing allows us to eliminate risks associated with single-source channel concentration and to remain selective in choosing the best possible investments from as robust a pipeline at any point in time.

Speaker Change: Another company we invested in during the quarter was SumUp, a leading global payment solutions company focused on empowering small to medium-sized merchants with an affordable, intuitive payment solution.

Speaker Change: In 2021, we provided SumUp with a first-link term loan to support geographic and product offering expansion plans.

Philip Tseng: We were pleased to participate in a 2024 refinance. Summit was co-sourced by our U.S. direct lending team and BlackRock's Capital Markets business, which speaks to the benefits we realize from being part of the BlackRock platform. We believe our channel agnostic approach to deal sourcing allows us to eliminate risks associated with single-source channel concentration and to remain selective in choosing the best possible investments from a robust pipeline at any point in time.

Speaker Change: Since then, Sum Up successfully executed strategy. We were pleased to participate in their 2024 refinancing.

Speaker Change: Sum Up was co-sourced by our U.S. direct lending team and BlackRock's Capital Markets business, which speaks to the benefits we realize from being part of the BlackRock platform.

Speaker Change: Okay.

Speaker Change: We believe our channel agnostic approach to deal sourcing allows us to eliminate risks associated with single source channel concentration and to remain selective in choosing the best possible investments from as robust a pipeline at any point in time.

Philip Tseng: The weighted average annual effective yield of our portfolio was 12.4 percent compared with 13.4 percent last quarter. We received $185 million in proceeds from the sale or repayment of investments during the quarter. New investments had a weighted average yield of 12.6 percent, while investments we exited had a yield of 14.2 percent, which explains some of the yield compression we experienced this quarter. We remained disciplined with our underwriting standards and an environment where spreads have tightened. In several instances, we chose not to refinance or reprise existing loans at lower yields or without covenants when the perceived risk simply did not manage our potential return targets.

Philip Tseng: The weighted average annual effective yield of our portfolio was 12.4% compared with 13.4% last quarter. We received $185 million in proceeds from the sale or repayment of investments during the quarter. New investments had a weighted average yield of 12.6%, while investments we exited had a yield of 14.2%, which explains some of the yield compression we experienced this quarter. We remain disciplined with our underwriting standards in an environment where spreads have tightened. In several instances, we chose not to refinance or reprice existing loans at lower yields or without covenants when the perceived risk simply did not match our potential return targets.

Speaker Change: The weighted average annual effective yield of our portfolio was 12.4% compared with 13.4% last quarter.

Speaker Change: We received $185 million in proceeds from the sale or repayment of investments during the quarter.

Speaker Change: New investments had a weighted average yield of 12.6%, while investments we exited had a yield of 14.2%, which explains some of the yield compression we experienced this quarter.

Speaker Change: We remain disciplined with our underwriting standards in an environment where spreads have tightened.

Speaker Change: In several instances, we chose not to refinance or reprice existing loans at lower yields or without covenants when the perceived risk simply did not match our potential return targets.

Philip Tseng: At quarter end, our portfolio was comprised of investments in 158 companies with a total fair market value of approximately $2 billion in an average investment size of 12.5 million. 91 percent of our portfolio was invested in senior secured loans, 81 percent of which were in first lien loans. 93 percent of our debt investments were in floating rate loans. And recurring income was distributed broadly across our diverse portfolio, with more than 75 percent of our portfolio companies each contributing less than 1 percent of the total.

Philip Tseng: At Quarter End, our portfolio was comprised of investments in 158 companies with a total fair market value of approximately $2 billion and an average investment size of $12.5 million. Additionally, 91% of our portfolio was invested in senior secured loans. 81% of which were in first lien loans. 93% of our debt investments were in floating rate loans. And recurring income was distributed broadly across our diverse portfolio, with more than 75% of our portfolio companies each contributing less than 1% of the total. Now, I'll turn it over to Erik to walk through our financial results and our capital and liquidity position.

Speaker Change: At Quarter End, our portfolio was comprised of investments in 158 companies with a total fair market value of approximately $2 billion and an average investment size of $12.5 million.

Speaker Change: 91% of our portfolio was invested in senior secured loans.

Speaker Change: 81% of which were in first lien loans.

Speaker Change: 93% of our debt investments were in floating rate loans.

Speaker Change: And recurring income was distributed broadly across our diverse portfolio with more than 75% of our portfolio companies each contributing less than 1% of the total.

Eric Coyard: Now I'll turn it over to Aaron to walk through our financial results and our capital and liquidity positions. Thank you, Phil. As rationally did, our net investment income for the quarter was $0.38 per share on an adjusted basis.

Erik Cuellar: Now, I'll turn it over to Erik to walk through our financial results and our capital and liquidity position.

Erik Cuellar: As Rajneesh noted, our net investment income for the quarter was $0.38 per share on an adjusted basis, as detailed in our earnings press release. Adjusted NII excludes amortization of the purchase accounting discount resulting from the merger with BCIC and is calculated in accordance with GAAP. A full reconciliation of adjusted NII to GAAP NII as well as other non-GAAP financial metrics is included in the earnings press release and 10-

Erik Cuellar: Thank you, Phil.

Erik Cuellar: As Rajneesh noted, our net investment income for the quarter was $0.38 per share on an adjusted basis.

Eric Coyard: Services. As detailed in our earnings press release, adjusted NII excludes amortization of the purchase accounting discount resulting from the merger with VCIC and is calculated in accordance with GAAP. A full reconciliation of adjusted NII to GAP NII, as well as other non-GAP financial metrics, is included in an earnings press release and 10-Q. Gross investment income for the second quarter was 84 cents per share. This included recurring cash interest of 67 cents per share, non-recurring interest of 7 cents, recurring discount and fee amortization for cents, and pick income of 3 cents. Pick income remains in line with the average over our history.

Erik Cuellar: as detailed in our earnings press release.

Erik Cuellar: Adjusted NII excludes amortization of the purchase accounting discount resulting from the merger with BCIC and is calculated in accordance with GAAP.

Erik Cuellar: A full reconciliation of adjusted NII to GAAP NII, as well as other non-GAAP financial metrics is included in the earnings price release and 10-Q.

Erik Cuellar: Gross investment income for the second quarter was $0.84 per share. This included recurring cash interest of $0.67 per share, non-recurring interest of $0.07, recurring discount and fee amortization of 4 cents, and Peck Income of three cents. Pick Income remains in line with the average over a history.

Erik Cuellar: Gross investment income for the second quarter was $0.84 per share.

Erik Cuellar: This included recurring cash interest of $0.67 per share.

Erik Cuellar: Non-recurring interest of $0.07

Erik Cuellar: recurring discount and fee amortization four cents.

Erik Cuellar: and peak income of $0.03.

Eric Coyard: Investment income also included three cents of dividend income. Operating expenses for the second quarter were 42 cents per share, including 23 cents of interest and other 29 notes during the quarter. Incentive fees for the quarter total $6.8 million, or $0.08 per share. Net realized losses for the quarter were $35.5 million, or $0.41 cents per share. Net unrealized losses totaled $52 million or $0.60 cents per share, primarily reflecting unrealized markdowns on the investments for our discussed earlier. The adjusted net decrease in assets for the quarter was $51.3 million, or $0.60 cents per share. At the end of the second quarter, our available liquidity was $780 million, which includes $585 million in available capacity under our leverage program and $195 million of cash and cash equivalents.

Erik Cuellar: Investment income also included $0.03 of dividend income. Operating expenses for the second quarter were $0.42 per share, including $0.23 of interest and other debt expenses, reflecting higher interest rates and debt expenses from the merger with BCIC and the issuance of our 2029 notes during the quarter. Incentive fees for the quarter totaled $6.8 million, or $0.08 per share. Net realized losses for the quarter were $35.5 million, or $0.41 per share. Net unrealized losses totaled $52 million, or $0.60 per share, primarily reflecting unrealized markdowns on the investments Raj discussed earlier. The adjusted net decrease in assets for the quarter was $51.3 million, or $0.60 per share.

Erik Cuellar: PIC income remains in line with the average over our history.

Erik Cuellar: Investment income also included $0.03 of dividend income.

Erik Cuellar: Operating expenses for the second quarter were $0.42 per share, including $0.23 of interest and other debt expenses.

Erik Cuellar: reflecting higher interest rates and debt expenses from the merger with BCIC and the issuance of our 2029 notes during the quarter.

Erik Cuellar: Incentive fees for the quarter total $6.8 million or $0.08 per share.

Erik Cuellar: Net real life losses for the quarter were $35.5 million or $0.41 per share.

Erik Cuellar: Net unrealized losses totaled $52 million, or $0.60 per share, primarily reflecting unrealized markdowns on the investments Raj discussed earlier.

Erik Cuellar: The adjusted net decrease in assets for the quarter was $51.3 million, or $0.60 per share.

Erik Cuellar: At the end of the second quarter, our available liquidity was $780 million, which included $585 million in available capacity under a leveraged program and $195 million of cash and cash equivalents, unfunded loan commitments to portfolio companies for only 5% of total investment, for approximately $93 million, of which only $58 million were Revolver commitments. Net leverage at the end of the quarter was 1.13 times, which is well within our target range of 0.9 times to 1.20 times.

Erik Cuellar: At the end of the second quarter, our available liquidity was $780 million.

Raj Vig: which includes $585 million in available capacity under a leveraged program and $195 million of cash and cash equivalents.

Eric Coyard: Unfunded loan commitments to portfolio companies were only 5% of total investments for approximately $93 million, of which only $58 million were revolver commitments. Net leverage at the end of the quarter was 1.13 times, which is well within our target range of 0.9 times to 1.20 times. Our diverse and flexible leverage program includes three low-cost credit facilities for unsecured note issuances and an SBA program. And the weighted average interest rate on that outstanding at the end of the quarter was 5.0%.

Raj Vig: Unfunded Loan Commitments to Portfolio Companies.

Raj Vig: for only 5% of total investments.

Raj Vig: for approximately $93 million.

Raj Vig: of which only 58 million were Reballer commitments.

Raj Vig: Net leverage at the end of the quarter was 1.13 times.

Raj Vig: which is well within our target range of 0.9 times to 1.20 times.

Erik Cuellar: Our diverse and flexible leverage program includes three low-cost credit facilities for unsecured note issuances and an SBA program. And the weighted average interest rate on that outstanding at the end of the quarter was 5.0%. Now I'll turn the call back over to Rajneesh.

Raj Vig: Our diverse and flexible leverage program includes three low-cost credit facilities,

Raj Vig: for unsecured note issuances and an SBA program.

Raj Vig: And the weighted average interest rate on that outstanding at the end of the quarter was 5.0%.

Raj Bigg: Now I'll turn and call back over to Ron.

Raj Bigg: Thanks, Eric.

Rajneesh Vig: Thanks Erik. Before taking your questions, I will wrap up with some closing comments. Although the private credit market and our business are showing many healthy signs, we did experience higher non-accruals this quarter. Throughout our 20-plus year history, we've been through some challenging times, and we are taking the same approach we have always, as it has proven effective. That approach is to maintain a deep understanding of the business and its long-term prospects and to work collaboratively with our borrowers, other lenders, as appropriate, and business owners to constructively resolve business and credit issues.

Raj Bigg: Before taking your questions, I will wrap up with some closing comments. Although the private credit market and our business are shown many healthy sides, we did experience higher than our growth as quarter. Over our 20-plus year history, we've been through some challenging times. And we are taking the same approach we have always, as it has proven effect.

Raj Vig: Now, I'll turn the call back over to Raj.

Raj Vig: Thanks Erik. Before taking your questions I will wrap up with some closing comments.

Raj Vig: Although the private credit market and our business are showing many healthy signs, we did experience higher non-accruals this quarter.

Raj Vig: Over our 20-plus year history, we've been through some challenging times, and we are taking the same approach we have always, as it has proven effective.

Raj Bigg: Executive. That approach is to maintain a deep understanding of the business and its long-term prospects and to work collaboratively with our borrowers, other lenders, applicable and business owners to constructively resolve business and credit issues. By making a highly selected and disciplined approach to deployment capital, they credit first downside protected mindset. We remain focused on the core mental market where there is less competition, more covenant protection, and attractive pricing. We continue to invest in great companies that have the business model and management teams to operate successfully in the current environment. We continue to pass on transactions that do not need our underwriting standards, leveraging our experience in special situations, lending, destructured deals with strong financial covenants and lender-friendly deal structures.

Raj Vig: That approach is to maintain a deep understanding of the business.

Raj Vig: and its long-term prospects and to work collaboratively with our borrowers, other lenders, applicable and business owners to constructively resolve business and credit issues.

Rajneesh Vig: Resolving issues quickly is a priority, but we are also equally focused on achieving the best possible outcome for our investors. As we head into the second half of 2024, we have a strong capital position and a robust pipeline of opportunities. We are taking a highly selective and disciplined approach to deploying capital with a credit first, downside protected mindset. We remain focused on the core middle market, where there is less competition. More Covenant Protection and Attractive Prices

Raj Vig: Resolving issues quickly is a priority, but we are also equally focused on achieving the best possible outcome for our investors.

Raj Vig: As we head into the second half of 2024, we have a strong capital position and a robust pipeline of opportunities.

Raj Vig: We are taking a highly selective and disciplined approach to deploying capital with a credit-first downside-protected mindset.

Raj Vig: We remain focused on the core middle market where there is less competition, more covenant protection, and attractive pricing.

Rajneesh Vig: We continue to invest in great companies that have the business models and management teams to operate successfully in the current environment. We continue to pass on transactions that do not meet our underwriting standards, leveraging our experience in special situations lending to structured deals with strong financial covenants and Lender-Friendly Deal Structures. As Phil mentioned, we are also supporting many existing portfolio companies with follow-on finance. We remain committed to maintaining our well-covered dividend and to delivering attractive returns to our shareholders and look forward to keeping you updated on our progress. And with that, Operator, please open the call for questions.

Raj Vig: We continue to invest in great companies that have the business model and management teams to operate successfully in the current environment.

Raj Vig: We continue to pass on transactions that do not meet our underwriting standards, leveraging our experience in special situations lending to structure deals with strong financial covenants and lender-friendly deal structures.

Raj Bigg: The film mentions we are also supporting many existing portfolio companies that follow-on financing. We remain committed to maintaining our well-covered dividend and to delivering attractive returns to our shareholders, and look forward to keeping you updated on our progress.

Raj Vig: As Phil mentioned, we are also supporting many existing portfolio companies with follow-on financing.

Phil: We remain committed to maintaining our well-covered dividend and to delivering attractive returns to our shareholders and look forward to keeping you updated on our progress.

Unknown Executive: And with that operator, please open the call for questions. Thank you.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered. The first question is from the line of Christopher Nolan with Landenburg-Fellman. You may proceed.

Operator: And with that, Operator, please open the call for questions.

Unknown Executive: We will now begin the question and answer session. If you would like to ask a question, please press star followed by 100 telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And, as a reminder, if you are using a speaker phone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered.

Speaker Change: Thank you.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2.

Speaker Change: Again, to ask a question, press star 1. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered.

Christopher Nolan: The first question is from the line of Christopher Nolan with Landenburg Feldman.

Speaker Change: The first question is from the line of Christopher Nolan with Landenburg-Fellman. You may proceed.

Christopher Nolan: You may proceed.

Christopher Nolan: Hey, guys. Okay, I got a number of questions here. How much did the increase in non-accuracy affect DPS in the quarter?

Christopher Nolan: Hey guys, okay, I've got a number of questions here.

Christopher Nolan: Hey guys. Okay, I got a number of questions here. How much did the increase in non-accruals affect EPS in the quarter?

Raj Bigg: You have a question, Chris. It was roughly 8 cents per share. That's the increase in the quarter.

Christopher Nolan: How much did the increase in non-accruals affect DPS in the quarter?

Speaker Change: Thank you. Thank you.

Speaker Change: Yeah, good question, Chris. It was roughly eight cents.

Rajneesh Vig: You have a good question, Chris. It was roughly $0.08 per share. And that's the increase in the quarter. And I'll just note that we did take all of them on an accrual as of the beginning of the quarter. So that was the full quarter.

Speaker Change: per share.

Raj Bigg: And I'll just note, we did take all of them on our grill. This is the beginning of the quarter. So that was the full quarter impact. Okay. And I guess that should be a sort of runway. So that these take a few quarters to realize that there's an assumption? Yes, it's still ongoing currently. But it wouldn't be incremental to what we reported in the quarter. The quarter already reflected no income on these things. Okay.

Speaker Change: That's the increase in the quarter. And I'll just note we did take all of them on an accrual at the beginning of the quarter so that was a full quarter impact.

Rajneesh Vig: Okay, and I guess that should be sort of a runway. Assuming that these take a few quarters to resolve, is that a fair assumption?

Chris: Okay, and I guess that should be sort of a runway, assuming that these take a few quarters to resolve, is that a fair assumption?

Rajneesh Vig: Yes, it's still ongoing currently, but it wouldn't be incremental to what we reported in the quarter, because the quarter already reflected no increase.

Speaker Change: Yes, it's still ongoing currently, but it wouldn't be incremental to what we reported in the quarter. The quarter already reflected no income on...

Raj Bigg: And then. I know that BCIC and TCPC had overlapping investments. But were these given that you just exited or just completed a merger? How much of these were legacy TCPC? How much were from the merger? Well, keep in mind, at the time of the merger, the portfolios were pretty much overlapping, except for a few legacy BCIC positions, you know, for the most part related to the Gordon Brothers entity. So I wouldn't necessarily call them legacy TCPC or legacy BCIC. the both portfolios were active and, you know, converged over time since GCP's acquisition over six years ago.

Rajneesh Vig: I know that BCIC and TCPC had overlapping investments, but were these, given that you just exited or just completed a merger, how much of these were legacy TCPC?

Speaker Change: Thank you. Thank you.

Speaker Change: Okay, and then...

Speaker Change: I know that BCIC and TCPC had overlapping investments, but given that you just completed a merger, how much of these were legacy TCPC and how much were from the merger?

Rajneesh Vig: Well, keep in mind at the time of the merger, the portfolios were pretty much overlapping except for a few legacy BCIC positions, you know, for the most part related to the Gordon Brothers entity. So I wouldn't necessarily call them legacy TCPC or legacy BCIC; both portfolios were active and, you know, converged over time since acquisition over six years ago. It's not really a distinction, you know, given that we invest across the variety of funds we manage.

Speaker Change: Well, keep in mind at the time of the merger, the portfolios were pretty much overlapping except for a few legacy BCIC positions, you know, for the most part related to the Gordon Brothers entity.

Speaker Change: So, I wouldn't necessarily call them legacy TCPC or legacy BCIC.

Speaker Change: Both portfolios were active and, you know, converged over time since...

Raj Bigg: It's not really a distinction, you know, given that we invest across the variety of funds we manage.

Speaker Change: TCP acquisition over six years ago, it's not really a distinction given that we invest across the variety of funds we manage.

Christopher Nolan: Okay.

Christopher Nolan: Okay. Leverage. Leverage is now an issue for you guys. Your death equity ratio, according to my estimate, is 1.34. What sort of range are you targeting? What's the upper limit?

Christopher Nolan: Leverage. Leverage is now an issue for you guys. Your death equity ratio, quarter of my estimates, 1.34. What sort of range are you targeting? What's that? Yeah, and I'm assuming that 1.34 that you mentioned is not net of cash. Yeah, so a regulatory net leverage is 1.13 times that is net of cash. We actually were holding on to about 194 million of cash at the end of the quarter, which will be primarily used to repay our 2024 notes, which are due in about a week from now. So we're purposely had not prepaid them as we're actually earning more in cash than the rate on those notes are coming due next week.

Speaker Change: Okay. Leverage. Leverage is now an issue for you guys. Your death equity ratio, according to my estimate, is 1.34. What sort of range are you targeting? What's the upper limit?

Christopher Nolan: Yeah, and I'm assuming that that 1.34 that you mentioned is

Speaker Change: Yeah, and I'm assuming that that 1.34 that you mentioned is...

Christopher Nolan: We're holding on. Yeah, so our regulatory net leverage is 1.

Speaker Change: is not net of cash.

Speaker Change: You were holding on.

Speaker Change: Yeah, so our regulatory net leverage is 1.13 times.

Speaker Change: That is net of cash. We actually were holding on to about $194 million of cash at the end of the quarter Which will be primarily used to repay our 2024 notes which are due in about a week from now So we purposely had not prepaid them

Speaker Change: as we're actually earning more in cash than the rate on those notes that are coming due next week. Yeah, I guess I would push back on that, Chris. I don't think leverage is an issue.

Christopher Nolan: Yeah, I guess I would put it that way.

Raj Bigg: Yeah, I guess I would push back on that, Chris. I don't think leverage is an issue. I think it's just a couple of moving items that you may, you know, you look at it all in net net. It's actually pretty much in the range what we've been doing historically, maybe even a little lower. Yeah, net net of cash. That's a fair point.

Christopher Nolan: I think it's just a couple of moving items that, may. You know, when you look at it all in that net, it's actually pretty much in the range of what we've been doing historically, maybe even a little lower.

Chris: I think it's a couple of moving items that may.

Speaker Change: You know, you look at it all in net-net, it's actually pretty much in the range of what we've been doing historically, maybe even a little lower.

Christopher Nolan: Yeah, Netacash, that's a fair point. Last point is... You guys seem to accelerate investments in the quarter. And you just completed a merger, and the non-accruals increased. It seemed like you had a lot of stuff going on in the quarter, and why was it this quarter that you suddenly decided to step on the gas for more investments?

Raj Bigg: Last point is you guys seem to accelerate, you know, investments in the quarter, and you just complete a merger as the non-accruals increase. I think I had a lot of stuff going on in the quarter. And why was it this quarter that you suddenly decide to step on the gas for more investments?

Netacash: Yeah, Netacash, that's a fair point. Last point is...

Speaker Change: You guys seem to accelerate, you know, investments in the quarter. And you just completed a merger and the non accruals increase. It seemed like you had a lot of stuff going on.

Speaker Change: in the quarter and

Speaker Change: Why was it this quarter that you suddenly decided to step on the gas for more investments?

Philip Tseng: Yeah, maybe I'll ask you to cover the investment side. I mean, I love since the one outlier quarter is absolutely non accruals. I think time will tell, maybe in the very near term, whether that really is a spike or is, you know, convergence of events, you know, that kind of come in and come out.

Rajneesh Vig: Yeah, maybe I'll ask Phil to cover the investment side. I mean, look, the one outlier in the quarter is absolutely the non-accrual. I think, you know, time will tell, maybe even in the very near term, whether that really is a spike or is, you know, convergence of events, you know, that kind of come in and come out. But, but I guess I'd turn over to Phil on the investments.

Speaker Change: Yeah, maybe I'll ask Phil to cover the investment side, I mean the one outlier in the quarter is absolutely the non-accruals.

Phil: I think, you know, time will tell, maybe even in the very near term.

Phil: whether that really is a spike or is, you know, convergence of events.

Philip Tseng: But I guess I turn over to fill on the investment side. I wouldn't characterize it as accelerating. It's pretty normal deployment. Yeah, yeah, Chris, I'd spell. Yeah, we don't really view it as having accelerated our deployment. I think maybe what you're seeing is a number of companies that were in our portfolio have grown and actually refinanced the existing loans. I mentioned some up in Alpacent in the script earlier, largely because those are ones that we actually upsize our investments in as they grew in size. So, you know, if our existing portfolio companies are looking for expanded financing opportunities to support their growth and they've shown great evidence of execution and support of, you know, equity value there underneath of debt, then we're very happy to continue investing new dollars to support their growth.

Phil: You know that kind of come in and come out but but I guess I've turned over to fill out the investments I don't I wouldn't characterize it as accelerating. It's pretty normal

Rajneesh Vig: I don't, I wouldn't characterize it as accelerating. It's pretty normal. Yeah, yeah, Chris Hytesville. Yeah, we don't really view it that way

Philip Tseng: Yeah, Chris, hi, it's Phil. Yeah, we don't really view it as having accelerated our deployment. I think maybe what you're seeing is a number of companies that were in our portfolio have grown and actually refinanced the existing loans. I mentioned SumUp and AlphaSense in the script earlier, largely because those are ones that we actually upsized our investments in as they grew in size. So, you know, If our existing portfolio companies are looking for expanded financing opportunities to support their growth, and they've shown great evidence of execution and supportive equity value there underneath the debt, then we're very happy to continue investing new dollars to support their growth. I think that's all that it is. Great

Speaker Change: Unknown Employment. Yes.

Speaker Change: Yeah, Chris, hi, it's Phil. Yeah, we don't really view it as having accelerated our deployment. I think maybe what you're seeing is a number of companies that

Speaker Change: were in our portfolio.

Speaker Change: had grown and actually refinanced the existing loans. I mentioned SumUp and AlphaSense in the script earlier, largely because those are ones that we actually upsized our investments in as they grew in size. So, you know,

Speaker Change: If our existing portfolio companies are looking for expanded financing opportunities to support their growth and they've shown great evidence of execution and and Supportive, you know equity value there underneath the debt then we're very happy to continue investing new dollars to support their growth

Christopher Nolan: Great. I think that's great. That's more correct. Great.

Unknown Executive: Thank you.

Speaker Change: oh

Speaker Change: I think that's all I have.

Speaker Change: Great, thank you.

Robert Dodd: The next question is from the line of Robert Dodd with Raymond James; you may proceed. Hi guys, a question about like overall portfolio construction, right? I mean, it looks like over the last little while, there's been more concentration by industry than by portfolio names, right? I mean, four of them were in the same niche, and three of those four ended up with our major restructuring, or I'm not a core. Are there other pockets within the portfolio where you might have multiple portfolio names, but they're operating in the same niche. So is there more industry concentration than it looks like there is when we look at name concentration?

Robert Dodd: The next question is from the line of Robert Dodd with Raymond James.

Speaker Change: Thank you for having me.

Speaker Change: The next question is from the line of Robert Dodd with Raymond James.

Robert Dodd: Hi guys. A question about overall portfolio construction, right? I mean, it looks like over the last little while there's been more concentration by industry than by portfolio names, right? I mean, the Amazon aggregator space is a niche. You have 150 plus different companies, but four of them were in the same niche, and three of those four ended up with either major restructuring or a lot of cool stuff. Are there other pockets within the portfolio where you might have multiple portfolios, but they're operating in the same niche? So is there more industry concentration than it looks like there is when we look at name concentration? Because that certainly was the case in the Amazon aggregator space, and that hasn't worked out really well.

Speaker Change: You may proceed.

Robert Dodd: Hi guys. A question about like overall portfolio construction, right? I mean,

Robert Dodd: It looks like over the last little while, there's been more concentration by industry than by portfolio names, right? I mean, the Amazon aggregator space, it's a niche. You have 150 plus different companies, but four of them were in the same niche.

Speaker Change: and three of those four ended up with a major restructuring or a monocore. Are there other pockets within the portfolio where you might have multiple portfolio names?

Speaker Change: but they're operating in the same niche. So is there more industry concentration than it looks like there is when we look at name concentration? Because that was certainly the case in the Amazon aggregator space and that hasn't worked out real well.

Robert Dodd: Because that was certainly the case in the Amazon aggregate. That hasn't worked out really well.

Rajneesh Vig: Yeah, it's a great question, and I think, let me kind of address it in a couple of ways. The aggregator space Absolutely, it's correlated. And I think for several quarters now, maybe more, we've been talking about it. It's just a matter of time between, you know, the ones that have pulled the trigger, so to speak, on a restructuring, in many cases, which we are pushing. And, you know, last quarter, Q4, Q1, you saw Fragio come in and out. This quarter, you know, you saw SEL and SEL-REX.

Raj Bigg: Yeah, there's a great question. And I think, let me kind of address it in a couple of ways. The aggregator space absolutely is correlated. And I think for several quarters now, maybe more, we've been talking about it; it's just a matter of time between, you know, the ones that have pulled the trigger, so to speak, but are restructuring, in many cases, which we are pushing. And, you know, last quarter, the Q4Q, what you saw, if Roger come in and out this quarter, you saw, sell, sell, or act. Ultimately, they are, I think, going to continue some view around consolidation, you know, scale benefits, et cetera.

Speaker Change: Yeah, it's a great question. And I think, let me kind of address it in a couple of ways. The aggregator space.

Speaker Change: Absolutely it's correlated, and I think for several quarters now, maybe more, we've been talking about it. It's just a matter of time between, you know, the ones that have pulled the trigger, so to speak, on a restructuring, in many cases which we are pushing.

Speaker Change: And, you know, last quarter you saw Q4, Q1, you saw Baragio come in and out. This quarter, you know, you saw SELC and SELRx. Ultimately, they are, I think, going to continue some...

Rajneesh Vig: Ultimately, they are, I think, going to continue some views around consolidation, scale benefits, etc. Again, we've been talking about those. I've been kind of a one-off in this space for some time now. Beyond that, we do not see any, you know, correlation along the lines of what you're talking about. We have weighted industries that we like, and, you know, I think that generally has worked out very well for us, you know, in very defensive names.

Raj Bigg: Again, we've been talking about those themes kind of as one-off in the space for some time now. Beyond that, we do not see any, you know, correlation along the lines that you're talking about. We have had a waiting to industry that we like. And, you know, I think the generally has worked out very well for us. You know, a very decent name. And keep in mind that some of the industry is like software or healthcare or financial or financial services. There are many, many subcategories that really don't correlate, even though they may be under one, you know, kind of holding industry grooving.

Speaker Change: View Around Consolidation, Scale Benefits, etc. Again, we've been talking about those themes.

Speaker Change: kind of a one-off in the space for some time now.

Speaker Change: Beyond that, we do not see any along, you know.

Speaker Change: Correlation along the lines of what you're talking about, we have had a weighting to industries that we like, and I think that generally has worked out very well for us.

Rajneesh Vig: And keep in mind, in some of these industries, like software or, you know, healthcare or professional or financial services, there are many, many subcategories that really don't correlate, even though they may be under one, you know, kind of holding industry grouping. So we do not see that, you know. The only other thing I would say, and again, we've talked about in the past, is there's some risk in health care around regulatory reimbursement, but for the most part, we've navigated that, I think, well, but the aggregator space, in and of itself, is unique. So thus far, we don't see, you know, a trend line like that.

Speaker Change: are working quickly and very professionally in very defensiv names and keep in mind that some of these industries like software or healthcare or financial services are already working very hard to end homelessness

Speaker Change: There are many, many subcategories that really don't correlate, even though they may be under one, you know, kind of holding industry grouping.

Raj Bigg: So we do not see that, you know, the only other thing I would say, and again, we've talked about the past, is there's some risk in healthcare around regulatory reimbursement. But for the most part, we've navigated that, I think, well. But the aggregated space in and of itself, to me. So, thus far, you know, we don't see, you know, a trend line like in the Q4Q. I appreciate that. I mean, that's, that's, I guess, the question.

Speaker Change: So we do not see that, you know, the only other thing I would say, and again we've talked about in the past, is there's some risk in health care around regulatory reimbursement, but for the most part we've navigated that I think well.

Speaker Change: but the aggregated space in and of itself unique so thus far you know we don't see a you know a trend line like in the portfolio.

Robert Dodd: I appreciate that. I mean, that's the question. Is there anything that's been done in how deals are evaluated, how they're on-boarded in the future to avoid any risk of these kinds of correlated industry, but not same-name concentrations? I mean, has anything changed in procedures to avoid this kind of situation? I think so. Look, I think...

Raj Bigg: I mean, is it, is there anything that's been done in how deals evaluated, how they're, how they're on boarded in future to avoid any risk of these kind of correlated industry, but not saying name, content, contentation? I mean, does anything change the procedures to avoid the kind of situation I think, I think, I think, I think it doesn't double that short. In many ways, the ability to invest within an industry and the knowledge that comes from that approach has actually met, netbed a very big positive. You know, being able to assess competitors, being able to talk to industry executives, and really do a deep dive has allowed us, I think, to invest well by industry.

Speaker Change: Appreciate that. I mean, that's, I guess, the question.

Speaker Change: Thank you.

Speaker Change: Is there anything that's been done in how deals are evaluated, how they're on-boarded in future to avoid...

Speaker Change: Any risk of these kind of correlated industry, but not same name Concentrations, I mean is anything changed in procedures to avoid?

Rajneesh Vig: I think it's a double-edged sword in many ways; the ability to invest within an industry and the knowledge that comes from that approach has actually been a very big positive. Unknown Executive, Paul Johnson, Christopher Nolan, Ryan Lynch, Philip Tseng, Risk Approach In fact, we've avoided a lot of, you know, worse outcomes, you know, in that greater space. I think what we had was a whipsaw effect, you know, coming out of COVID with the balance sheet and inventory, over-over purchasing, and then consumer spending declined, that Jeff hit those companies, and it was a little bit of bad forecasting on trends that actually will be positive in the long-term.

Speaker Change: I think it's double-edged sword in many ways the ability to invest within an industry and the knowledge that comes from

Speaker Change: That approach has actually net-net been a very big positive.

Speaker Change: being able to assess competitors, being able to talk to industry executives and really do a deep dive.

Raj Bigg: I think in the case of the aggregators, there might have been, it must have necessarily a and the risk of that approach. In fact, we've avoided a lot of worst outcomes in the integrated space. I think what we had was a whipsaw effect, coming out of COVID with the balance sheet and inventory over purchasing, and consumer spending declined that just hit those companies, and it was a little bit of a back workcasting on trends that actually longer will be positive. So net net industry approach has been a great way for us to invest knowledgeably and choose the best companies.

Speaker Change: has allowed us, I think, to invest well by industry. I think the case of the aggregators, it might have been, it wasn't necessarily a...

Speaker Change: risk approach. In fact, we've avoided a lot of, you know, worse outcomes, you know, in that greater space. I think what we had was a whipsaw effect, you know, coming out of COVID with the balance sheet and inventory.

Speaker Change: Overpurchasing and then consumer spending declined that just hit those companies and it was it was a little bit of a

Rajneesh Vig: So, net-net, the industry approach has been a great way for us to invest knowledgeably and choose the best companies. I think in this one case, thus far, it has been a detriment, but you know the show isn't over, and I would say, like all restructuring until the money's back, and the cash is in, you don't know what it looks like, but our history of getting very strong recovery on names that have volatility until, you know, on an unrealized basis.

Speaker Change: You know, a bad forecasting on trends that actually long-term will be positive. So, Net-Net, the industry approach has been a great way for us to invest knowledgeably.

Raj Bigg: I think in this one case thus far it has been a detriment, but the show isn't over, and I would say, like all restructuring, until the money's back and the cash is in. You don't know what it looks like, but our history of getting very strong recovery on names that have volatility until you know on a unrealized basis. I would highlight that record as being very positive and effective, and you know time will tell here story and over. Great. You do have a good track record on that front.

Speaker Change: and choose the best companies. I think in this one case, thus far, it has been...

Speaker Change: a detriment, but the show isn't over. And I would say, like all restructuring, until the money's back and the cash is in, you don't know what it looks like, but our history of getting very strong recovery on names

Speaker Change: that have volatility until, you know, on an unrealized basis. You know, I would highlight that record as being very positive and effective. And, you know, time will tell here. The story isn't over.

Rajneesh Vig: and Time Will Tell. Here, the story isn't over.

Robert Dodd: I agree, right, you do have a good track record on that one, so that's the follow-up question. Unknown Speaker 0.1.1.1.1.1.1.1.1.1.1.1.

Raj Bigg: So that's the follow-up next question. All of the knowledge rules will be stress assets it has right now. How many or what percentage are you in the driver's seat as the restructuring? Obviously, that's not the case with polls, right? For example, and probably not McCapsley, right. So on that front, I mean how many are you driving the car, so to speak, to get that restructuring outcome? I would say in most of them you know we are pretty meaningfully involved. Now it would include that you know obviously in the source side there's a longer list of folks you know very well I post that you're working with but if you take the argument that in every corner which we talk about most of our deals are either sole lead or small club then by proxy you know the the negotiation and the process for corporate milk that way will have us being the sole or you know in very influential voice on the restructuring and that's by design that's not a question and we want to we want to be involved and meaningfully involved because I think we have a you know a DNA which you know more and than not result in a better than average outcome.

Speaker Change: I agree, but you do have a good track record on that one, so that's the follow-up next question. Of the non-accruals...

Speaker Change: and Paul Johnson, how many or what percentage are you in the driver's seat of the restructuring? Obviously, that's not the case with Pearl, for example, and probably not McCaffrey, right? So on that front, I mean, how many of you

Rajneesh Vig: I would say that, you know, we are pretty meaningfully involved in most of them. And I would include that, you know, obviously, Flourish is a longer list of folks, you know, very qualified folks that we are working with.

Speaker Change: driving the car, so to speak, to get that restructuring outcome.

Speaker Change: I would say most of them, you know, we are pretty meaningfully involved and I would include that, you know, obviously with Pluralsight there's a longer list of folks, you know, very qualified folks that we are working with.

Rajneesh Vig: But if you take the argument that, in every quarter we talk about, most of our deals are either solely led or small clubs. Then, by proxy, you know, the negotiations and the process for a portfolio that's built that way will have us being the sole or, you know, very influential voice on the restructuring, and that's by design; that's not a coincidence. We want to be involved and meaningfully involved because, I think we have a DNA which, more often than not, results in a better than average outcome.

Speaker Change: But if you take the argument that

Speaker Change: In every quarter, which we talk about, most of our deals are either sold, led, or small club. Then, by proxy, you know, the negotiations and the process.

Speaker Change: for a portfolio that's built that way will have us being the sole or very influential voice on the restructuring. And that's by design, that's not a coincidence.

Speaker Change: We want to we want to be involved and meaningfully involved because

Speaker Change: I think we have a DNA which.

Robert Dodd: Got it. I understand.

Robert Dodd: Yeah, I got it, I understand. Then just more broadly, if I can, on liquidity in the portfolio, not the stress name, are you seeing any changes in sponsor willingness to support, obviously it's called parallel to a crawl site where the sponsor stops supporting, but are you seeing any..., you know, incremental changes in how sponsors are willing to discuss success or what they're asking for, or whether they're continuing where necessary? It's always necessary to put capital in. Is anything changing on that front?

Speaker Change: You know, more often than not, results in a better than average outcome.

Robert Dodd: Then just more broadly if I can on I should have liquidity in the portfolio, not the stress name. Are you seeing any changes in sponsor willingness to support? Obviously, for parallel to the site where the sponsor's not supporting, but are you seeing any, you know, incremental changes in, you know, how sponsors are willing to discuss success or what they're asking for or whether they're continuing where necessary or to put capital. There's anything changing on that point. Hey, Roberts Phil. I would say we're not really seeing a real change in sponsors' interest in supporting and not supporting their companies.

Speaker Change: Yes, got it, understood. Then just more broadly, if I can, on liquidity in the portfolio, not the stress name.

Speaker Change: Are you seeing any changes in sponsor willingness to support? Obviously it's called parallel to a crawl site where the sponsor stops supporting, but are you seeing any...

Speaker Change: Get an incremental

Speaker Change: changes in you know, how sponsors are willing to discuss success or what they're asking for, or whether they're continuing where necessary, it's always necessary to put capital in. Is anything changing on that front? Yeah, hey Robert, it's Phil.

Philip Tseng: Hey Robert, it's Phil. I would say we're not really.

Philip Tseng: Hey Robert, it's Phil. I would say we're not really seeing a real change in sponsors' interest in supporting or not supporting their companies. I think it's very much a case-by-case basis. As you can imagine, they're making rational decisions around the valuation of the businesses where they're putting up new money, whether it's equity or... Transcription by https://otter.ai. We are still seeing a number of sponsors putting in more money, either to defend their ownership or to go on offense, to support their company, to make an acquisition, or to keep growing the business, and that's across various industries. So I would say, generally speaking, I can't put a broad theme on sponsor behavior, but they're very much rational actors as are we.

Phil: I would say we're not really seeing a real change in sponsors' interest in supporting or not supporting their companies. I think it's very much a case-by-case basis. As you can imagine, they're making rational decisions around the valuation of the businesses where they're putting up new money, whether it's equity or some kind of stuff like that.

Philip Tseng: I think it's very much a case-by-case basis, as you can imagine. You know they're making rational decisions around the valuation of the businesses, where you know they're putting up new money, whether it's equity or supporting a piece of paper, and also the return on that new money. So I think it's very much a case by case basis depending on how the company is performing, how lever the business is, and how long it'll take to turn it around given the accretion. And you know if the company's going through a tough amendment, maybe it's you know there's a lot of pick which keeps it creating pushing down the value of the equity and so on.

Phil: supporting a piece of paper, and also the return on that new money.

Phil: So, I think it's very much a case-by-case basis depending on how the company is performing, how leveraged the business is.

Phil: and how long it'll take to turn it around, given the accretion and, you know, if the company's going through a

Phil: tough amendment, maybe it's, you know, there's a lot of pick which keeps accreting pushing down the value of the equity and so on. So I think it's very much a case by case basis.

Philip Tseng: So I think it's very much a case-by-case basis. We are still seeing a number of sponsors putting in more money, either to defend their ownership or to go, and often to support their company and to make an acquisition or to keep growing the business, and that's across various industries. So I would say, generally speaking, I can't put a broad theme on sponsor behavior, but they're very much rational actors, as are we. Got it, thank you.

Phil: We are still seeing a number of sponsors putting in more money either to defend their ownership or to go on offense to support their company to make an acquisition or to keep growing the business.

Phil: and that's across various industries. So I would say, generally speaking, I can't put a broad theme on sponsor behavior, but they're very much rational actors as are we.

Paul Johnson: Thank you. The next question is from the line of Paul Johnson with KVW. You may proceed. Good afternoon, thanks for picking my question. Just a few following up on Robert's question, first on leverage. It would seem that the gross kind of 1.5 death equity, 1.3 net leverage does seem a little high, possibly not outside of your target range, but does seem like it might be, at least on the margin, a limiter of potential growth going forward, so just want to get your thoughts and how you're managing around that as well as keeping in mind the investment grade rating.

Speaker Change: Got it. Thank you.

Paul Johnson: The next question is from the line of Paul Johnson with KVW. You may proceed.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Paul Johnson with KVW. You may proceed.

Paul Johnson: Good afternoon. Thanks for taking my questions. Just a few follow-ups on Robert's question. First, on leverage, it would seem that the, you know, gross kind of 1.5 debt to equity, you know, 1.3 sort of, you know, net leverage does seem a little high, possibly not outside of your target range, but does seem like it might be, at least on the margin, a limiter of, you know, potential growth going forward.

Paul Johnson: Yeah, good afternoon. Thanks for taking my question. Just a few following up on Robert's question. First on leverage, it would seem that the, you know, gross kind of 1.5 debt to equity, you know, 1.3 sort of, you know, net leverage does

Speaker Change: seem a little high, possibly not outside of your target range, but it does seem like it might be, at least on the margin, you know, a limiter of, you know, potential growth.

Paul Johnson: So, just kind of want to get your thoughts on how you're managing, you know, around that as well as keeping in mind, you know, the investment grade rating. I'm sure there's some kind of leverage you would like to maintain, and I understand Fitch recently upgraded the rating outlook there as well. So, that's positive, mainly just kind of the management around current leverage levels.

Speaker Change: going forward. So just kind of want to get your thoughts on how you're managing, you know, around that, as well as keeping in mind, you know, the investment grade rating, I'm sure there's some kind of leverage you would like.

Paul Johnson: I'm sure there's some kind of leverage he would like to maintain, and I understand which recently upgraded the rating outlook there as well, so that's positive, but mainly just kind of the management around current leverage levels will be helpful.

Speaker Change: and I understand Fitch recently upgraded the rating outlook there as well. So that's positive, but mainly just kind of the management around current leverage levels would be helpful.

Raj Bigg: Yeah, good question, Paul, and the 1.3 leverage that you mentioned, it's very much temporary and very short-term. We view it as nettle cash, because next week when we use that cash to pay down debt, you will see our leverage over 25 points. So we view it as 1.1, 3.4 on a net basis, and it is within our range between 0.9 to 1.2. But certainly leverage is something that we watch on a daily basis, but we're comfortable with where it's at.

Erik Cuellar: Yeah, good question, Paul. And the 1.1, and the 1.3 leverage that you mentioned is very much temporary and very short term. We view it as net of cash because next week, when we use that cash to pay down debt, you will see our debt, and our leverage go down over 25 points. So we view it as 1.13 at quarter end on a net basis. And it is within our range between 0.9 and 1.2. But certainly, leverage is something that we watch on a daily basis, but we're comfortable with where it's at.

Paul Johnson: Yeah, good question, Paul.

Paul Johnson: the 1.1.

Paul Johnson: The 1.3 leverage that you mentioned, it's very much temporary and very short term. We view it as...

Paul Johnson: Neto Cash, because next week when we use that cash to pay down debt, you will see our debt, our leverage go down over about 25 points. So we view it as 1.13 at quarter end on our.

Paul Johnson: on a net basis.

Paul Johnson: and it is within our range between 0.9 to 1.2 but certainly leverage is something that we watch on a daily basis but we're comfortable with with where it's at.

Raj Bigg: Got it, and then in terms of new investments, I think you talked about this a little bit in Todd's questions, but has it been a shift to a smaller investment size? It's just kind of given a leverage constraint, and you can focus on just diversification, or how should we think about that? Yeah, I think you should think about it as being pretty consistent, and we've always taken an approach of keeping a very diverse portfolio. I would call it a 1, maybe 1.5%, give or take a position side. So we will continue that approach. I think that given the side of the assets growing post merger, the dollar amount may pick up, but you're not going to see the concentration pick up.

Paul Johnson: Got it. And then, you know, in terms of new investments, I mean, I think you talked about this a little bit in Dodd's questions, but I mean, has there been, you know, a shift to potentially smaller investment sizes, just kind of given the leverage constraint and, you know, continued focus on just diversification or, you know, how should we think about that?

Paul Johnson: i

Speaker Change: Got it. And then, you know, in terms of new investments, I mean...

Speaker Change: I think you talked about this a little bit in Dodd's questions, but I mean, has there been, you know, a shift to potentially smaller investment sizes, just kind of given the leverage constraint and, you know, continued focus on just diversification or

Philip Tseng: Yeah, I think you should think about it as being pretty consistent. We've always taken an approach of keeping a very diversified portfolio, call it a one, maybe one and a half percent, give or take. Transcription by CastingWords, So we will continue that approach.

Speaker Change: You know, how should we think about that?

Speaker Change: Thank you. Thank you.

Speaker Change: Yeah, I think you should think about it as being pretty consistent. We've always taken an approach of...

Speaker Change: Keeping a very diversified portfolio, I would call it a 1, maybe 1.5%, give or take position size.

Philip Tseng: I think that given the size of the assets growing post-merger, the dollar amount may pick up, but you're not gonna see the concentration pick up. The other thing is we absolutely will stay focused on being within the range of the guidance of the rating agencies. There's a lot of room, in my opinion, between the 1.13 and where that is and historical levels.

Speaker Change: So we will continue that approach. I think that given the size of the assets growing post-merger, the dollar amount may pick up, but you're not going to see the concentration pick up. The other thing is we absolutely will stay focused on being within the range of the guidance of the rating agencies.

Raj Bigg: The other thing is we absolutely will stay focused on being within the range of the guidance of the rating scenes, but there's a lot of room, you know, my opinion to the 1.13 and where that is and historical, you know, levels. The other thing I would highlight is with a pick up in the market, both the BSL market and some of the activity in our market, we have seen a little bit pick up and refinancing. And keep in mind those refinancings, you have great cash in. Often times with a bit of a prepayment and the un改merized go ID being picked up and that's obviously a good source of capital without growing the leverage to redeploy and to put back in the market.

Speaker Change: There is a lot of room in my opinion to the 1.13 where that is and historical levels. I would highlight with a pickup in the market, both the BSL market and some of the activity

Philip Tseng: The other thing I would highlight is a pickup in the market, both the BSL market and some of the activity. In our market, we have seen a little bit of a pickup in refinancing, and keep in mind that refinancings bring cash in, oftentimes with a bit of a prepayment and the unamortized OID being picked up. And that's obviously a good source of capital without growing the leverage to redeploy, and to put back into the market.

Speaker Change: In our market, we have seen a little bit of a pickup in refinancing, and keep in mind those refinancings, you know, bring cash in.

Speaker Change: often times with a bit of a prepayment and the unamortized OID being picked up, and that's obviously a good source of capital without growing the leverage.

Philip Tseng: Some of that you already saw this quarter based on the earlier question that Phil answered about the deployment side. We're just getting money back. And when we do that, that allows us to meet the demand of our borrowers, and ends the fund, the public fund.

Raj Bigg: Some of that you already saw in this quarter, based on the earlier question that Phil answered about deployment side, we're getting money back, and when we do that, that allows for us to meet the demand of our borrowers within the fund, the public fund.

Speaker Change: to redeploy and to put back in the market. Some of that you already saw in this quarter based on the earlier question that Phil answered about the deployment side. We're just getting money back and when we do that that allows for us to meet the demand of our borrowers.

Paul Johnson: Thanks for that, and then the last question for me was just on the advisor support for the dividend. Can you remind me, is it how long does the advisor submit their support for the dividend? And I was also curious; I believe it's a 32-cent level that the advisor has agreed to waive fees if earnings falls below that level. What's the reason for 32 cents versus just a 34 cent current dividend? What's the difference there?

Paul Johnson: Thanks for that. And then the last question for me was just on advisor support for the dividend. Can you remind me, is it?

Speaker Change: would end the fund, the public fund.

Speaker Change: Thanks for that. And then last question for me was just on the advisor support for the dividend. Can you remind me, is it

Paul Johnson: How long does the advisor commit to their support for the dividend? And I was also curious; I believe it's a $0.32 level where the advisor has agreed to waive fees if earnings fall below that level. Why is the reason for $0.32 versus just a $0.34 current dividend? What's the difference?

Speaker Change: How long does the advisor commit their support?

Speaker Change: for the dividend. And I was also curious, I believe it's a 32 cent level that the advisor has agreed to waive fees if earnings falls below that level. What's the reason for 32 cents versus just a 34 cent current dividend?

Raj Bigg: Sure, yeah, thanks for the question, Paul. Yes, the investor manager support is for four quarters after the date of the close of the merger, so there's still two more quarters left in that support. And it covers anything below 32 cents of NII that the 32 cents was the dividend rate that TCC was paying at the time that the merger was agreed to. And we have since then taken up the dividend from that point, but that's how the 32 cents was derived. Yeah, and keep in mind the last quarter, the coverage was, you know, 112 percent, so it's kind of a move point that we've really gotten as a shareholder protection, but we don't anticipate certainly what the coverage of we have even posted on a cruel of being at that threshold.

Erik Cuellar: Sure. Yeah, thanks for the question, Paul. He has the The investment manager support is for four quarters after the date of the close of the merger. So there's still two more quarters left in that support. The $0.32 was the dividend rate that TCPC was paying at the time that the merger was agreed to. And we have since then taken up the dividend from that point, but that's how the $0.32 was derived.

Speaker Change: yeah

Speaker Change: What's the difference there? Sure. Yeah. Thanks for the question, Paul. Yeah, the, uh,

Speaker Change: The investment manager's support is for four quarters after the date of the close of the merger. So there's still two more quarters left in that support.

Speaker Change: and it covers anything below $0.32 of NII.

Speaker Change: The $0.32 was the dividend rate that TCPC was paying at the time that the merger was agreed to, and we have, since then, we took up the dividend.

Erik Cuellar: Yeah, and keep in mind this last quarter, the coverage was, you know, 112%, so it's kind of a moot point. It was really done as shareholder protection, but we don't anticipate, certainly with the cover zones we have, even post the non-accrual.

Speaker Change: from that point. But that's how the $0.32 was derived. Yeah, and keep in mind this last quarter.

Speaker Change: The coverage was, you know, 112%. So it's kind of a moot point. It was really done as a shareholder protection, but we don't anticipate, certainly with the cover zones we have, even post the non-accruals of, you know, being at that threshold.

Paul Johnson: Uhm, ho, ho! Being at that threshold.

Paul Johnson: Yeah, that's helpful. And then just to be clear, it's two more quarters, so the dividend support will run through the end of the year. That's right. Okay, thank you. It's all for me. Thank you.

Paul Johnson: Got it. That's helpful. And then Just to be clear, it's two more quarters, so the dividend support will run through the end of this year.

Erik Cuellar: Correct. That's correct. Yeah. Thank you. That's all for me. Thank you.

Speaker Change: Correct, that's correct, yes.

Speaker Change: Thank you, that's all for me.

Unknown Executive: There are currently no questions registered, so as a reminder, it is star one to ask a question. There are no additional questions waiting at this time.

Operator: There are currently no questions registered. So, as a reminder, it is Star one to ask a question, and Unknown Speaker 0.5. There are no additional questions waiting at this time. I would like to pass the conference over to the management team for any closing remarks.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: There are currently no questions registered, so as a reminder, it is star 1 to ask a question.

Unknown Executive: I would like to pass the comments over to the management here for any closing remarks. Thank you all for your participation on today's call. I would like to thank our shareholders and capital partners for their continued support, and our team for all their hard work and dedication. Thanks for joining us. This concludes today's call. That concludes the BlackRock TCP Capital Corp. Second quarter, 2024 earnings call. Thank you for your participation, and enjoy the rest of your day.

Speaker Change: There are no additional questions waiting at this time. I would like to pass the conference over to the management team for any closing remarks.

Rajneesh Vig: Thank you all for your participation in today's call. I would like to thank our shareholders and capital partners for their continued support and our team for all their hard work and dedication. Thanks for joining us. This concludes today's call.

Speaker Change: Thank you all for your participation on today's call. I would like to thank our shareholders and capital partners for their continued support and our team for all their hard work and dedication. Thanks for joining us. This concludes today's call.

Operator: That concludes BlackRock TCP Capital.

Speaker Change: That concludes the BlackRock TCP Capital Corp second quarter 2024 earnings call. Thank you for your participation and enjoy the rest of your day.