Q4 2024 BlackRock TCP Capital Corp Earnings Call
Ladies and gentlemen, good afternoon, welcome everyone's Blackhawk T C. P capsule Corp, fourth quarter and year ended 2024 earnings conference call.
Unknown Executive: Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's fourth quarter and year ended 2024 earnings conference call.
Unknown Executive: Today's conference call is being recorded for replay purpose. 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 one. I will repeat these instructions before we begin the Q&A session.
Today's conference call is being recorded for replay purposes.
During the presentation, all participants will be in a listen only mode.
Question and answer session will follow the Companys formal remarks.
To ask a question. Please press the star key followed by the digit one I will repeat these instructions before we begin the Q&A session.
Michaela Murray: And now I would like to turn the call over to Michaela Murray, a member of the BlackRock TCP Capital Corp Investor Relations team. Michaela, please proceed. Thank you.
And now I would like to turn the call over to Michela Murray and member of the Blackrock TCP Capital Corp, Investor Relations team Makayla. Please proceed.
Speaker Change: 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 guarantees of future performance.
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 a statement 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 change without notice.
Speaker Change: Forward looking statements involve risks and uncertainties and actual results could differ materially from those projected.
Speaker Change: Any forward looking statements made on this call are made as of today and are subject to change without notice.
Unknown Executive: 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.
Speaker Change: Certain information discussed and presented May have been derived from third party sources and has not been independently verified.
Speaker Change: Accordingly, we make no representation or warranty with respect to such information.
Unknown Executive: Earlier today, we issued our earnings release for the fourth quarter and year ended December 31st, 2020. We also posted a supplemental earnings presentation to our website at tcpcapital.com To view the slide presentation, which we referred to on today's call, please click on Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company's form 10-K, which we filed with the SEC earlier today.
Speaker Change: Earlier today, we issued our earnings release for the fourth quarter and year ended December 31, 2024, we also posted a supplemental earnings presentation to our website at TCP capital Dotcom.
Speaker Change: Cause you the slide presentation, which will be referred to on today's call. Please click on Investor Relations link and select events and presentations.
Speaker Change: These documents should be reviewed in conjunction with the company's Form 10-K, which we filed with the SEC earlier today. Please note that we will shortly issue a corrected earnings release due to a typographical error. The third sentence of the third paragraph under consolidated results of operations has been corrected to referred to unrealized losses rather than unreal.
Unknown Executive: Please note that we will shortly issue a corrected earnings release due to a typographical error.
Unknown Executive: The third sentence of the third paragraph under consolidated results of operations has been corrected to refer to unrealized losses rather than unrealized gains. Our NAV and other statistics are presented correctly throughout.
Speaker Change: Unrealized gains are N V and other statistics are presented correctly threw out I will now turn the call over to our chairman and CEO Phil thing.
Philip Tseng: I will now turn the call over to our chairman and CEO, Philip Tseng. Thank you, Michaela. And thank you all for joining our call today. I will discuss our results for the fourth quarter and full year 2024.
Speaker Change: Thank you Mikael and thank you all for joining our call today.
Speaker Change: I will discuss our results for the fourth quarter and full year 2024, I will also describe how we are approaching our portfolio construction and investments to return the portfolio to historical above market returns as well as outline as shareholder friendly change we have implemented.
Philip Tseng: I will also describe how we are approaching our portfolio construction and investments to return the portfolio to historical above market returns, as well as outline the shareholder friendly change we have implemented.
Philip Tseng: I'll then turn the call over to our President, Jason Moehring, to review details of our investment activity and provide comments on the market environment.
Speaker Change: I will then turn the call over to our President Jason Mary to review details of our investment activity and provide comments on the market environment.
Philip Tseng: Last, Erik Cuellar, our CFO, will provide financial results before we open the call up for questions. We're also joined today by Dan Worrell, our co-CIO. We are optimistic about our future and confident in our strategic plan to successfully navigate the challenges presented in 2024.
Speaker Change: Eric <unk>, our CFO will provide financial results before we open the call up for questions.
Dan <unk>: Also joined today by Dan <unk>, our co CIO.
Dan <unk>: We are optimistic about our future and confident in our strategic plan to successfully navigate the challenges presented in 2024.
Dan <unk>: Full year 2024, adjusted net investment income was $1 52 per share as compared to $1 84 per share in 2023.
Philip Tseng: Full year 2024 adjusted net investment income was $1.52 per share as compared to $1.84 per share in 2023. annualized net investment income ROE for the year was 14.5%. Declines in net investment income and ROE primarily reflect the impact from lower base rates and an increase in non-accruals and expenses versus the prior year. Fourth quarter adjusted net investment income per share was flat with last quarter at $0.36. At the end of the quarter, non-accruals represented 5.6% of the portfolio at fair market value as compared to 3.8% in the previous quarter. NAV per share was $9.23 compared to $10.11 per share, reflecting incremental investment portfolio markdowns, the largest of which were Razor, Seqirus, and Astra.
Dan <unk>: Annualized net investment income ROE for the year was 14, 5%.
Dan <unk>: The declines in net investment income and ROE, primarily reflect the impact from lower base rates and an increase in non accruals and expenses versus the prior year.
Dan <unk>: Fourth quarter adjusted net investment income per share was flat with last quarter at 36.
Dan <unk>: At the end of the quarter non accruals represented five 6% of the portfolio at fair market value as compared to three 8% in the previous quarter.
Dan <unk>: NAV per share was $9 23, compared to $10 11 per share, reflecting incremental investment portfolio markdowns, the largest of which were razor so curious and Astra.
Dan <unk>: Our results were also impacted by market conditions, including tighter spreads as a result of the continued slower deal environment and declining interest rates.
Philip Tseng: Our results were also impacted by market conditions, including tighter spreads as a result of the continued slower deal environment and declining interest rates. The vast majority of our portfolio continues to perform well and in a way that is reflective of our 12 year history of consistently delivering attractive returns as a public company. That said, we are not pleased with the markdowns and non-accruals that have impacted our performance in recent quarters, and we remain laser-focused on working with our borrowers and sponsors to resolve these issues. Based on our team's substantial experience in direct lending, we are confident that we will make the right decisions to resolve these issues.
Dan <unk>: The vast majority of our portfolio continues to perform well and in a way that is reflective of our 12 year history of consistently delivering attractive returns as a public company.
Dan <unk>: That said, we are not pleased with the markdowns and non accruals that have impacted our performance in recent quarters and we remain laser focused on working with our borrowers and sponsors to resolve these issues.
Dan <unk>: Based on our team's substantial experience in direct lending we are confident that we will make the right decisions to resolve these issues.
Philip Tseng: We know from experience that resolving credit issues quickly does not always produce the best results for shareholders, and that shareholder returns are often optimized through thoughtful solutions that may take some time to execute.
Dan <unk>: We know from experience that resolving credit issues quickly does not always produce the best results for shareholders and the shareholder returns are often optimize through thoughtful solutions that may take some time to execute.
Dan <unk>: Now, let me provide a few high level updates on markdowns in non accruals during the quarter.
Philip Tseng: Now, let me provide a few high-level updates on markdowns and non-accruals during the quarter. We mark down our positions in Razor, Securus, and Astra, each of which we've addressed on prior calls. We remain actively engaged with the management teams of each of these companies on the best path forward, and we'll provide additional detail when we can.
Dan <unk>: We marked down our positions and razor secures and Astra each of which we have addressed on prior calls.
Dan <unk>: We remain actively engaged with the management teams of each of these companies on the best path forward and we will provide additional detail when we can.
Dan <unk>: I'll quickly share an update on the Amazon Aggregators.
Philip Tseng: I'll quickly share an update on the Amazon aggregator. versus Razor, which accounted for roughly 70% of our total markdowns this quarter. It continues to struggle with inventory issues that have impacted its profitability and liquidity. We're working closely with Razor to resolve these challenges, which may include consolidation to drive improved cash flow and provide runway for its turnaround. Again, these resolutions are not always linear and can take time to complete.
Dan <unk>: First is razor, which accounted for roughly 70% of our total markdowns this quarter.
It continues to struggle with the inventory issues that have impacted its profitability and liquidity.
Dan <unk>: We're working closely with razor to resolve these challenges, which may include consolidation to drive improved cash flow and provide runway for its turnaround.
Dan <unk>: Again these resolutions are not always linear and can take time to complete.
Dan <unk>: On the other hand, celebrex, which experienced a marked up for the quarter is further along in its transformation, having simplify this business by reducing overstock and investing in its growing brands, while trimming unprofitable products.
Philip Tseng: On the other hand, CellarX, which experienced a markup for the quarter, is further along in its transformation, having simplified its business by reducing overstock and investing in its growing brands while trimming unprofitable products. Notably, the company's top brand nearly doubled in revenue year over year as it diversified its sales channels into brick and mortar. This progress is emblematic of the fact that improvements may take time and effort for our challenged borrowers.
Dan <unk>: Notably the company's top brand nearly doubled in revenue year over year as a diversified sales channels into brick and mortar.
Dan <unk>: This progress is emblematic of the fact that improvement may take time and effort for our challenged borrowers.
Dan <unk>: During the quarter, we added two new names, where novo and enrolment to nonaccrual status.
Philip Tseng: During the quarter, we added two new names, Renovo and InMoment to non-accrual status.
Philip Tseng: On our last call, we mentioned that InMoment, which provides customer experience management software and solutions that help businesses understand and improve their customer experiences. experienced a slowdown in growth due to industry dynamics and is transitioning its focus towards multi-signal products, which we believe has a long-term growth potential.
Dan <unk>: On our last call, we mentioned that in moment, which provides customer experience management software and solutions to help businesses understand and improve their customer experiences.
Dan <unk>: Experienced a slowdown in growth due to industry dynamics. It is transitioning its focus towards multi signal product, which we believe is a long term growth potential.
Philip Tseng: This slowdown in growth has continued into the fourth quarter, resulting in our decision to place the company on non-accrual. We will continue to monitor InMoment closely and to collaborate and support the management.
Dan <unk>: This slowdown in growth has continued into the fourth quarter, resulting in our decision to place the company on non accrual we will continue to monitor enrollment closely and to collaborate and support the management team.
Dan <unk>: Renova the other company, we placed on non accrual this quarter is a direct to consumer home remodeling company.
Philip Tseng: Renovo, the other company we placed on non-accrual this quarter, is a direct-to-consumer home remodeling company.
Philip Tseng: Renova's performance has declined as the company worked to integrate acquisitions while demand for residential repair and remodel services softened due to persistent inflation, resulting in deferred home repair and remodeling spend. We remain actively engaged with Renovo and its management team on both performance and financing considerations.
Dan <unk>: <unk> performance has declined as the company worked to integrate acquisitions, while demand for residential repair and remodel services softened due to persistent inflation, resulting in deferred home repair and remodeling spend.
Dan <unk>: We remain actively engaged with <unk> and its management team on both performance and financing considerations.
Dan <unk>: Given our recent financial performance our board made the decision to reduce our regular dividend to <unk> 25 per share for the first quarter.
Philip Tseng: Given our recent financial performance, our board made the decision to reduce our regular dividend to $0.25 per share for the first quarter. While net investment income exceeded our dividend in the fourth quarter, we believe the revised level is sustainable.
Dan <unk>: Net investment income exceeded our dividend in the fourth quarter, we believe the revised level is sustainable.
Philip Tseng: In addition, our board declared a $0.04 special dividend for the first quarter, and we intend to declare a special dividend of at least $0.02 in each of the second and third quarters of 2025, subject to board approval.
Dan <unk>: In addition, our board declared a <unk> <unk> special dividend for the first quarter and we intend to declare a special dividend.
Dan <unk>: <unk> <unk> in each of the second and third quarters of 2025 subject to board approval.
Dan <unk>: Next I want to discuss actions, we're taking to support our shareholders.
Philip Tseng: Next, I want to discuss actions we're taking to support our shareholder. We appreciate your continued trust and patience and believe these are examples of how we continue to align with you. First, on February 25th, 2025, our advisor voluntarily agreed to waive one-third of our base management fee for three calendar quarters beginning on January 1st, 2025 and ending on September 30th, 2025. These fees cannot be earned back at a later date. We are taking this action as we acknowledge the decline in the portfolios now.
Dan <unk>: We appreciate your continued trust in patients and believe these are examples of how we continue to align with you.
Dan <unk>: First on February 25, 2025, our adviser voluntarily agreed to waive one third of our base management fee for three calendar quarters, beginning on January one 2025 and ending on September 32025.
Dan <unk>: These fees cannot be earned back at a later date.
Dan <unk>: We're taking this action as we acknowledged the decline in the portfolio's NAV.
Dan <unk>: Second during the fourth quarter, we purchased repurchased 510687 shares at a weighted average price per share of $8 86.
Philip Tseng: Second, during the fourth quarter, we repurchased 510,687 shares at a weighted average price per share of $8.86, pursuant to the plan our Board of Directors re-approved on April 24, 2024. And third, as you know, our shareholder friendly incentive structure. Incentive fee structure ensures that we earn incentive fees only when our total return exceeds the hurdle rate. This fee structure was intentionally designed to align management and shareholder interests. when our shareholders do well. We do well, and only then.
Dan <unk>: Pursuant to the plan our board of Directors Reapproved on April 24, 2024.
Dan <unk>: And third as you know our shareholder friendly incentive structure.
Dan <unk>: Incentive fee structure ensures that we earn incentive fees only when our total return exceeds our hurdle rate.
Dan <unk>: This fee structure was intentionally designed to align management and shareholder interests.
Dan <unk>: When our shareholders do well.
Dan <unk>: We do well and only then.
Speaker Change: As the new management team, we have a clear path to position <unk> in a way that results in consistent attractive long term returns.
Philip Tseng: As the new management team, we have a clear path to position TCPC in a way that results in consistent, attractive, long-term returns. First, we will continue to focus primarily on the core middle market with an industry driven, proactive approach to sourcing and underwriting. We will also opportunistically invest in companies in both the lower and upper middle market that align with our strategy, are relationship-driven, and ensure an efficient use of available capital. There are many benefits to lending in the middle market. It's an attractive and underserved segment with less competition than the broadly syndicated market that has historically delivered strong risk-adjusted returns.
Speaker Change: First we will continue to focus primarily on the core middle market with an industry driven proactive approach to sourcing and underwriting.
Speaker Change: We will also opportunistically invest in companies that both the lower and upper middle market that align with our strategy our relationship driven and ensure an efficient use of available capital.
Speaker Change: There are many benefits to lending in the middle market.
Speaker Change: An attractive and underserved segment with less competition than the broadly syndicated market that has historically delivered strong risk adjusted returns it.
Philip Tseng: It's also an area where our direct relationships and our deep industry knowledge and deal structuring expertise are highly valued in creating customized financing solutions for companies that need growth capital.
Speaker Change: It's also an area, where our direct relationships and our deep industry knowledge and deal structuring expertise are highly valued and creating customized financing solutions for companies that need growth capital.
Speaker Change: Second we will maintain a highly diversified portfolio and limit exposure to industry sub sectors.
Philip Tseng: Second, we will maintain a highly diversified portfolio and limit exposure to industry subsets. We have always focused on maintaining a diverse portfolio in industries we know well, and where we have an established ecosystem of referral sources and borrower relationships, including verticals like healthcare, technology, and fintech. Going forward, we will also avoid meaningful concentrations in any one industry subsector, such as Amazon aggregators. Third, we will continue to prioritize investing in first lien loans, and where we consider second lien loans, we will emphasize those where we are a lender in first lien loans. We know that having a direct relationship, or at least a seat at the table with borrowers, provides significant downside protection.
Speaker Change: We have always focused on maintaining a diverse portfolio of industries, we know well and where we have an established ecosystem of referral sources and borrower relationships, including verticals like health care technology and Fintech.
Speaker Change: Going forward, we will also avoid meaningful concentrations in any one industry sub sector, such as Amazon Aggregators.
Speaker Change: Third we will continue to prioritize investing in first lien loans and where we consider second lien loans, we will emphasize those where we are a lender influence.
Speaker Change: They are having a direct relationship or at least a seat at the table with borrowers provides significant downside protection.
Speaker Change: Finally, we will continue to deepen our connections to and leverage the broader Blackrock platform.
Philip Tseng: Finally, we will continue to deepen our connections to and leverage the broader BlackRock platform. Our ability to draw on the extensive resources and relationships of the full platform is a distinct competitive advantage. As part of BlackRock, we have access to a broader origination platform and investment team, as well as substantial resources. In addition, we see a significant amount of proprietary deal flow that allows us to be highly selective in the investments we make.
Speaker Change: Our ability to draw on the extensive resources and relationships of the full platform is a distinct competitive advantage.
Speaker Change: As part of Blackrock, we have access to a broader origination platform and investment team as well as substantial resources. In addition, we see a significant amount of proprietary deal flow that allows us to be highly selective in the investments we make.
Speaker Change: With our talented experienced team and the unparalleled resources of the Blackrock platform I am confident that we will successfully worked through our current challenges and return the portfolio to historical performance levels.
Philip Tseng: With our talented, experienced team and the unparalleled resources of the BlackRock platform, I am confident that we will successfully work through our current challenges and return the portfolio to historical performance levels. We believe that we have the right team and the right plan. We appreciate our shareholders' continued patience throughout this process.
Speaker Change: We believe that we have the right team and the right plan.
Speaker Change: We appreciate our shareholders' continued patience throughout this process.
Speaker Change: Now I'll turn it over to Jason who will review our investment activity during the quarter and the market environment.
Jason Moehring: Now I'll turn it over to Jason who will review our investment activity during the quarter and the market environment. Thanks, Phil. I'll start my comments with a brief overview of our portfolio. At year-end, our portfolio had a fair market value of approximately $1.8 billion, invested across 154 companies in more than 20 industry sectors, and with an average position size of $11.7 million. 91.2% of our portfolio was invested in senior secured loans. 94.5% of which were floating rate. Investment income was distributed broadly across our diverse portfolio, with more than 77 of our portfolio companies each contributing less than 1% to the total.
Jason Mary: Thanks, Phil I'll start my comments with a brief overview of our portfolio.
Speaker Change: At year end, our portfolio had a fair market value of approximately $1 8 billion invest.
Speaker Change: Invested across 154 companies and more than 20 industry sectors, and with an average position size of $11 $7 million.
Speaker Change: 91, 2% of our portfolio was invested in senior secured loans.
Speaker Change: 94, 5% of which were floating rate.
Speaker Change: Investment income was distributed broadly across our diverse portfolio with more than 77 of our portfolio companies each contributing less than 1% to the total.
At quarter end, the weighted average effective yield of our portfolio was 12, 4% compared to 13, 4% last quarter.
Jason Moehring: At quarter end, the weighted average effective yield of our portfolio was 12.4% compared to 13.4% last quarter. New investments had a weighted average yield of 10.8%, while those that we exited had a weighted average yield of 14%. These statistics reflect decline in base rates and some spread reduction during the period. In addition, a portion of our repayments in the quarter were from higher priced second lien deals that we have not emphasized more recently. While overall M&A volumes remained below expectations, we continued to see a healthy flow of new investment opportunities in the quarter and took a highly selective approach to investing, emphasizing seniority in the capital structure, portfolio diversity, and transactions where we are a lender of influence.
Speaker Change: New investments had a weighted average yield of 10, 8%, while those that we exited had a weighted average yield of 14%.
Speaker Change: These statistics reflect the decline in base rates and some spread reduction during the period.
Speaker Change: In addition, a portion of our repayments in the quarter were from higher priced second lien deals that we have not emphasized more recently.
Speaker Change: While overall M&A volumes remained below expectations, we continue to see a healthy flow of new investment opportunities in the quarter and took a highly selective approach to investing emphasizing seniority in the capital structure portfolio diversity and transactions, where we are a lender of influence.
Speaker Change: We deployed a total of $121 million of capital during the quarter into nine new and nine existing portfolio companies.
Jason Moehring: We deployed a total of $121 million of capital during the quarter into nine new and nine existing portfolio companies. All of our new investments were first lien loans and at quarter end 83.6% of the portfolio was in first lien loans up from 81.3% in the prior quarter. In several instances, we chose not to maintain our involvement in deals that were repriced at lower yields or that were amended to include weaker covenants where we believe the risk outweighed the potential reward. As a result of our focus on direct origination and bar work relationships, incumbency remains an important competitive advantage for TCP.
All of our new investments were first lien loans and at quarter end.
Speaker Change: 83, 6% of the portfolio was in first lien loans up from 81 three in the prior quarter.
Speaker Change: In several instances, we chose not to maintain our involvement in deals that were repriced at lower yields.
Speaker Change: Were amended to include weaker covenants, where we believe the risk outweighs the potential reward.
As a result of our focus on direct origination and borrower relationships incumbency remains an important competitive advantage for TCP C. <unk>.
Jason Moehring: Investments in existing portfolio companies accounted for nearly 45% of our fourth quarter activity. From a risk management perspective, allocating additional capital to businesses and industries we know well and understand deeply is beneficial. At the same time, we have seen a healthy level of opportunities from new borrowers that are aligned with our investment strategy.
Speaker Change: Investments in existing portfolio companies accounted for nearly 45% of our fourth quarter activity.
Speaker Change: From a risk management perspective, allocating additional capital to businesses and industries, we know well and understand deeply is beneficial.
Speaker Change: At the same time, we have seen a healthy level of opportunities from new borrowers that are aligned with our investment strategy.
Speaker Change: Now I will discuss two specific investments from the quarter.
Jason Moehring: Now I'll discuss two specific investments from the quarter. Our largest investment in a new portfolio company was a $14.7 million first lien loan to Global Experience Specialists, or GES. Founded in 1926, GES is a global exhibition and trade show management company that provides end-to-end services for exhibitions, conferences, and live events. Services include strategy, creative, design, production, and logistics.
Speaker Change: Our largest investment in a new portfolio company was a $14 $7 million first lien loan to global experience specialists or ges.
Speaker Change: <unk> founded 1926, Ges as a global exhibitions exhibition in trade show management company that provides end to end services for exhibitions conferences and live events.
Speaker Change: Its services include strategy creative design production and logistics.
Jason Moehring: We view this as a highly attractive opportunity to invest in a global leader with high levels of recurring revenue from long-term client contracts within the $15-plus billion exhibition industry.
Speaker Change: We view this as a highly attractive opportunity to invest in a global leader with high levels of recurring revenue from long term client contracts within the 15 plus billion exhibition industry.
Jason Moehring: Our largest investment into an existing portfolio company during the quarter was a $12.8 million loan to Applause, a crowd-testing company that connects software developers with a global community of digital experts to test and ensure the quality of applications before they are released to consumers. We have been a long-time financing partner to Applause. We originally invested in the company to support its leveraged buyout in 2017 and led a subsequent transaction in October of last year. Since our initial investment, Applause has performed well and has significantly expanded annual recurring revenue driven by growth in AI advancements, strategic partners, and customer expansion.
Speaker Change: Our largest investment into an existing portfolio company during the quarter was $12 $8 million loan to applause crowd testing company that connects software developers with a global community of digital experts to test and ensure the quality of applications before they're released to consumers.
Speaker Change: We've been a longtime financing partner to applause. We originally invested in the company to support its leveraged buyout in 2017, and let a subsequent transaction in October of last year.
Speaker Change: Since our initial investment applause has performed well and has significantly expanded annual recurring revenue driven by growth in AI advancements strategic partners and customer expansion.
Speaker Change: As it relates to the overall market and our pipeline we have not seen the level of increase in M&A activity than most expected heading into 2024.
Jason Moehring: As it relates to the overall market and our pipeline, we have not seen the level of increase in M&A activity that most expected heading into 2024. This has been driven in part by interest rates. While the Fed has cut rates, the pace and overall level of reductions has been less than many had hoped. Our view is that the market is digesting the implied rate outlook for 2025 and that there's likely to be some lift in overall activity as expectations are adjusted. While rates clearly have significant influence on deal activity, the potential for other policy shifts following the U.S.
Speaker Change: This has been driven in part by interest rates, while the fed has cut rates the pace and overall level of reductions has been less than many had hoped for.
Speaker Change: Our view is that the market is digesting the implied rate outlook for 2025.
Speaker Change: There's likely to be some lift in overall activity as expectations are adjusted.
Speaker Change: While rates clearly have significant influence on deal activity.
Speaker Change: <unk> for other policy shifts following the U S election cannot be ignored.
Jason Moehring: election cannot be ignored. There's much that is to be determined on this front, but it's reasonable to think that a more favorable regulatory environment may contribute to activity as buyers and sellers endeavor to narrow the valuation gaps that have existed more recently. It's also worth noting that many private equity sponsors continue to hold record levels of dry powder, which should further drive transaction volume. As it relates to spread compression, which both Phil and I have mentioned previously, this has been an ongoing theme driven by increased competition between private credit and traditional lending sources. With that said, many companies have repriced or refinanced their debt at this point, suggesting a level of stabilization ahead.
Speaker Change: Theres much to do is to be determined on this front, but it's reasonable to think that a more favorable regulatory environment may contribute to activity as buyers and sellers endeavor to narrow the valuation gaps that have existed more recently.
Speaker Change: Also worth noting that many private equity sponsors continue to hold record levels of dry powder, which should further drive transaction volumes.
Speaker Change: As it relates to spread compression, which both Phil and I have mentioned previously this has been an ongoing theme driven by increased competition between private credit and traditional lending sources with that said many companies have repriced or refinance their debt at this point, suggesting a level of stabilization ahead.
Jason Moehring: Overall, while it's difficult to predict specifics related to deal activity, we continue to think the middle market economy is strong and that we're well positioned to provide capital to borrowers in our core segment of that market.
Speaker Change: Overall, while its difficult to predict specifics related to deal activity. We continue to think the middle market economy is strong and that we are well positioned to provide capital to borrowers in our core segment of that market.
Erik Cuellar: Now, I'll turn the conversation over to Erik, who will discuss our financial results, capital and liquidity position. Thank you, Jason. Let me begin with our financial results for the quarter. As Phil noted, adjusted net investment income was $0.36 per share for the fourth quarter and $1.52 per share for the full year 2024. As detailed in our earnings press release, adjusted net investment income excludes amortization of the purchase accounting discount resulting from our merger with BCIC and is calculated in accordance with GAAP. The full reconciliation of Adjusted Net Investment Income to Gap Net Investment Income, as well as other non-gap financial metrics, is included in our earnings release and 10-K.
Speaker Change: Now I will turn the conversation over to Eric who will discuss our financial results capital and liquidity position.
Eric: Thank you Jason.
Eric: Let me begin with our financial results for the quarter.
Eric: As Phil noted adjusted net investment income was 36 per share for the fourth quarter.
And a $1 52 per share for the full year 2024.
Eric: As detailed in our earnings press release.
Eric: <unk> net investment income excludes amortization of the purchase accounting discount.
Eric: Resulting from our merger with BCC and is calculated in accordance with GAAP.
Eric: A full reconciliation of adjusted net investment income to GAAP net investment income.
Eric: As well as other non-GAAP financial metrics is included in our earnings release and 10-K.
Eric: Gross investment income for the fourth quarter was 72 per share.
Erik Cuellar: Gross investment income for the fourth quarter was $0.72 per share. This amount included recurring cash interest of $0.52. nonrecurring income of $0.06 recurring discount and fee amortization of three cents. pick income of $0.08 and dividend income of three cents per share. Pick interest income for the quarter was 10.5% of total investment income. Operating expenses for the fourth quarter were $0.32 per share and included $0.21 per share of interest and other debt expenses. As of December 31st, 2024, the company's cumulative total return did not exceed the total return hurdle. And as a result, no incentive compensation was accrued for the three months ended December 31st, 2024.
Eric: This amount included recurring cash interest of 52.
Eric: Nonrecurring income of <unk> <unk>.
Eric: Recurring discount and fee amortization of <unk>.
Eric: Pik income of <unk>.
Eric: And dividend income of <unk> <unk> per share.
Eric: Pik interest income for the quarter was 10, 5% of total investment income.
Eric: Operating expenses for the fourth quarter were <unk> 32 per share and included <unk> 21 per share of interest and other debt expenses.
Eric: As of December 31, 2024, the company's cumulative total return did not exceed the total return hurdle.
Eric: And as a result, no incentive compensation was accrued for the three months ended December 31 2024.
Eric: Additionally, as Phil mentioned, our advisor has agreed to waive one third of our base management fees.
Erik Cuellar: Additionally, as Phil mentioned, our advisor has agreed to waive one third of our base management fees for three quarters, beginning on January 1st, 2025, and ending on September 30th, 2025.
Eric: Three quarters, beginning on January one 2025 and ending on September 32025.
Eric: Net realized losses for the quarter were approximately $3000 or less than one penny per share.
Erik Cuellar: Net realized losses for the quarter were approximately $3,000 or less than one penny per share.
Eric: Net unrealized losses in the fourth quarter totaled $72 million or <unk> 85 per share.
Erik Cuellar: that unrealized losses in the fourth quarter totaled $72 million or $0.85 per share. primarily reflecting unrealized markdowns on the three investments Phil discussed earlier. The net decrease in net assets for the quarter was $80 million or $0.89 per share.
Merrily, reflecting unrealized markdowns on the three investments Phil discussed earlier.
Eric: The net decrease in net assets for the quarter was $80 million or <unk> 89 per share.
Eric: As of December 31, two.
Erik Cuellar: As of December 31st, 12 portfolio companies were on non-accrual status. representing 5.6% of the portfolio at fair value and 14.4% at cost. As Phil noted, we are working closely with our borrowers, their creditors, and sponsors to resolve issues with the best possible outcomes for our shareholders.
Eric: 12 portfolio companies were on nonaccrual status.
Eric: Representing five 6% of the portfolio at fair value.
Eric: And 14, 4% at cost.
Speaker Change: As Phil noted, we are working closely with our borrowers their creditors and sponsors to resolve issues with the best possible outcomes for our shareholders.
Speaker Change: The remainder of our portfolio is performing well.
Erik Cuellar: The remainder of our portfolio is performing well.
Speaker Change: Turning to our liquidity.
Erik Cuellar: Turning to our liquidity. Our balance sheet position remains solid, and our total liquidity increased to $615 million a quarter end. with $519 million of available leverage and $92 million in cash. Unfunded loan commitments to portfolio companies at year-end were 8% of our $1.8 billion investment portfolio. or approximately $144 million. including only $62 million of Revolver commitment. Net regulatory leverage at the end of the quarter was 1.14 times. which is within our target range of 0.9 to 1.2 times.
Speaker Change: Our balance sheet position remains solid and our total liquidity increased to $615 million at quarter end.
With $519 million of available leverage and $92 million in cash.
Speaker Change: Unfunded loan commitments to portfolio companies at year end.
Speaker Change: 8% of our one 8 billion investment portfolio.
Speaker Change: Or approximately $144 million.
Speaker Change: Including only $62 million of revolver commitments.
Speaker Change: Net regulatory leverage at the end of the quarter was 114 times.
Speaker Change: Which is within our target range of 0.9 to one two times.
Erik Cuellar: We have ample financing options to fund new investments with our diverse and flexible leverage program, which includes three low-cost credit facilities, three unsecured note issuances, and an SBA program. The weighted average interest rate on debt outstanding at the end of the quarter was 5.2% down from 5.4% at the end of the prior quarter.
Speaker Change: We have ample financing options to fund new investments with our diverse and flexible leverage program, which includes three low cost credit facilities.
Unsecured note issuances and an SBA program.
The weighted average interest rate on debt outstanding at the end of the quarter was five 2%.
Speaker Change: Down from five 4% at the end of the prior quarter.
Speaker Change: Now I'll turn the call back over to the operator to open the lineup for questions.
Unknown Executive: Now I'll turn the call back over to the operator to open the line up for questions. Thank you.
Speaker Change: Thank you we will now begin the question and answer session.
Unknown Executive: We will now begin the question and answer session. As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by two to withdraw yourself from the queue.
Speaker Change: As a reminder, if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.
Speaker Change: If you change your mind or do you feel like your question has already been answered you can press star followed by two to withdraw yourself from Nicky.
Speaker Change: Our first question today comes from Simeon O'shea with Wells Fargo Securities.
Finian O'shea: Our first question today comes from Finian O'Shea with Wells Fargo Securities. Please go ahead, Finian. Hey, everyone. Good morning.
Speaker Change: Please go ahead Simeon.
Simeon O'Shea: Hey, everyone. Good morning.
Speaker Change: Okay.
Finian O'shea: On the dividend and the specials, can you give some color on your spillover? Now apologize if you gave that already and what the target level will be. Yeah, Finn, I'll address first the spillover. We, as you recall, we declared a special of 10 cents in Q4 of 2024. We did not distribute the full amount. We probably have about 10 cents or so of carryover from the prior quarter into this this quarter.
Speaker Change: On the dividend and the specials can you give some color on your your spillover.
Speaker Change: Now I apologize if you gave them already and what the.
Speaker Change: Target level will be.
Speaker Change: Yes.
First the spillover.
Speaker Change: We as you recall, we declared a special of <unk> and.
Speaker Change: And Q4 of 2024.
Speaker Change: We did not distribute the full amount.
Speaker Change: We probably have about 10 or so of carryover from the prior quarter.
Speaker Change: Into this this quarter.
Philip Tseng: but I let Phil address the dividend level. Yeah, Finn, you know, we really try to be very thoughtful here on the regular div in level. You know, our approach was to really think about a sustainable level, based on the earnings power of the portfolio today. But you know, there are a number of considerations, right, that we had to make and come up to this decision. You know, obviously, the ongoing impact of base rates coming down, you know, they're lower today than they have been over the past few years. And of course, the current spread environment, it's been tightening, I think, as most industry have come to recognize.
Speaker Change: But I'll, let Phil address the dividend level.
Phil Thing: Yes, Ben we really.
Speaker Change: Tried to be very thoughtful here on the regular dividend level.
Phil Thing: Our approach was to really think about a sustainable level.
Phil Thing: Based on the earnings power of the portfolio today.
Phil Thing: But there are a number of considerations right that we had to make in and commit to this decision.
Phil Thing: Obviously, the ongoing impact of base rates coming down.
Phil Thing: They're lower today than they have been.
Phil Thing: Over the past few years.
Phil Thing: And of course, the current spread environment. It's been tightening I think is most of the industry has.
Phil Thing: Come to recognize and so as we rotate the portfolio.
Unknown Executive: And so as we rotate the portfolio, Unknown Executive, Christopher Nolan, Rajneesh Vig, Michaela Murray, TCP Capital Corp. and the guidance, accordingly, for Q2. you know, TCP will be a unit or roll up to HPS. And, you know, that means your, your investment Portfolio Management, etc. function becomes part of theirs.
Phil Thing: Over time from repayments into new deployments, we are seeing some spread compression there.
Phil Thing: Of course, our non accruals.
Phil Thing: We will end up yielding less interest income so what we really wanted to do is try and be thoughtful here around.
Phil Thing: A true sustainable.
Phil Thing: Regular dividend level, and that's where we arrived but of course, we understand that we do want to provide strong total shareholder returns here and in their lives that our approach around the specials.
Phil Thing: And the guidance accordingly.
Phil Thing: Q2 and Q3.
Phil Thing: Okay. That's helpful. Thanks, and then just.
Phil Thing: Sort of.
Speaker Change: Platform question not sure to what extent you can discuss but we've all seen the Blackrock hps.
Speaker Change: Acquisition and it appears that.
Speaker Change: TCP will be a unit.
Speaker Change: Roll up too.
Speaker Change: EPS.
That means your your investments.
Speaker Change: The portfolio management et cetera function becomes part of theirs.
Philip Tseng: So do you have any like, should we brace for any strategic change and in, you know, say your investment strategy or anything like that? Yeah, that's a fair question. You know, the HPS headline has been out there since BlackRock agreed to the acquisition of HPS, you know, back in December. You know, I don't expect there to be meaningful change. I can't really go into much detail around the transaction, given that it hasn't closed yet. And we expect it to close at some point in the middle of this year, subject to regulatory approvals. But our team is.
Speaker Change: Do you have any like should we brace for any strategic change in in <unk>.
Speaker Change: So your investment strategy or anything like that.
Yes, that's a fair question.
Speaker Change: Yes.
Speaker Change: Headline has been out there since Blackrock agreed to the acquisition of <unk> back in December.
I don't expect there to be meaningful change I can't really go into much detail around around the transaction given that it hasn't closed yet.
Speaker Change: And we expect it to close at some point in the middle of this year subject to regulatory approvals.
Speaker Change: But our team is.
Philip Tseng: Laser focused on business as usual, particularly our existing portfolio and seeing this portfolio through some of these performance related issues.
Speaker Change: Laser focused on business as usual.
Speaker Change: Particularly our existing portfolio and seeing this portfolio through through some of these performance related issues.
Philip Tseng: But, you know, I think importantly, Finn, the acquisition of HPS does highlight BlackRock's deep growing commitment to private credit and direct lending, particularly in the U.S., as you know, given their scale, and I think it'll bringing very much expanded resources to our business, including a network of borrower relationships and enhanced sourcing capabilities. as well as just broader private credit expertise per platform. So we're very excited. I think one of the compelling aspects of the transaction is how complimentary the HPS, U.S. Direct Lending business, as well as the BlackRock private market businesses are. So I know we're excited, our team's excited.
Speaker Change: But I think importantly, and the acquisition of HTS does highlight Blackrock deepen growing commitment to private credit.
Speaker Change: And direct lending, particularly in the U S. As you know given their scale.
Speaker Change: And I think it will bring very much expanded resources.
Speaker Change: To our business, including a network of borrower relationships and enhanced sourcing capabilities.
Speaker Change: As well as just broader private credit expertise of our platform. So so we're very excited I think one of the compelling aspects of the transaction is how complementary.
Speaker Change: The Hps U S direct lending business as well as.
Speaker Change: The Blackrock private market businesses are so I know we're excited our team is excited.
Philip Tseng: And I think if... understanding how to get the benefits of a larger platform that we've experienced, you know, today as being part of the BlackRock platform as any indication, we're very much looking forward to to having HPS as part of that.
Speaker Change: And I think if if.
Speaker Change: Understanding how to get the benefits of a larger platform that we've experienced to date as being part of the Blackrock platform has any indication.
Speaker Change: Very much looking forward to having <unk> as part of that.
Philip Tseng: And is your like, just to sort of follow up there, you know, the when when BlackRock acquired TCP I think you're in some blanket co-invest order where you're you see everything and your board's entitled to claim everything that fits the mandate. Is that, should we assume that that applies? that, you know, for example, you're in your funds and the HPS funds will be together in a co-invest order.
Speaker Change: And as you're like just sort of follow up there.
Speaker Change: The.
Speaker Change: When when Blackrock acquired TCP.
Speaker Change: <unk>.
Speaker Change: I think you are in some blanket co invest order.
Speaker Change: Where.
Speaker Change: Where you're you see everything in your board's entitled to claim everything that fits the mandate.
Speaker Change: Is that should we assume that that applies.
Speaker Change: That for example, you're in your funds and the Hps funds will be together in a co invest order.
Speaker Change: But perhaps as you point out like to be determined if.
Philip Tseng: But perhaps as you point out, like to be determined if, if, you know, there's cross pollination of deals. Yeah, thanks for that question, Finn.
Speaker Change: Yes.
Speaker Change: There is cross pollination of deals.
Speaker Change: Yes, thanks for that question.
Speaker Change: We look forward to providing more details.
Finian O'shea: We look forward to providing more details at a later date, you know, closer to when the deal comes to a close, but at this time we can't make comments. Okay, appreciate that. Thanks so much. Thank you.
Speaker Change: At a later date closer to when the deal comes to come to a close but at this time, we can and can't make comments.
Speaker Change: Okay I appreciate that thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Robert Dodd with Raymond James.
Robert Dodd: Our next question comes from Robert Dodd with Raymond James. Please go ahead, Robert. Hi, guys. And I understand you're being as open as you can on the assets, but I mean, what... What level of confidence should we have that this is it, so to speak, in terms of the write downs, right? I mean, obviously, the Amazon aggregators have been a problem for a while. and you know, Seller X might be improving, but Razer was a big markdown. So I mean, how, how much confidence should we have that the nav, while there can be volatility to your point, it's not an even pathway, right?
Speaker Change: Please go ahead Robert.
Robert Dodd: Hi, guys.
Speaker Change: I understand you being as open as you can on the assets, but I mean.
Robert Dodd: <unk>.
Robert Dodd: What confidence should we have this so to speak in terms of the write downs.
Robert Dodd: The Amazon Aggregators have been a problem for a while.
Robert Dodd: And.
Robert Dodd: Hello X might be improving raise it was a big bump down.
Robert Dodd: How how much confidence should we have.
Robert Dodd: While there can be volatility to your point, it's not uneven pathway, but this is a realistic.
Robert Dodd: But that this is a realistic you know, floor level? Or is there just more things we should be worried about in the portfolio?
Robert Dodd: Floor level or is that just.
Robert Dodd: More things, we should be worried about the portfolio.
Robert Dodd: Okay.
Robert Dodd: Yes, Robert that's a fair question.
Philip Tseng: Yeah, Robert, that's a fair question. You know, we're obviously, you know, laser focused on on trying to manage the existing non accruals and the positions that have shown meaningful markdowns. you know, the razor markdown, you know, which was The vast majority of the markdowns for the quarter, you know, did come as a surprise to us, you know, partly there was an expectation that The recent equity investor that came in just about two quarters ago Which was was going to continue supporting the business, but that went into different direction and the meaningful markdown Aside from that most of the markdowns came from the existing cohort of Assets that that have been on the list so to speak on the non accrual list in particular.
Robert Dodd: We're obviously.
Robert Dodd: Laser focused on trying to manage.
Robert Dodd: The existing non accruals and the positions that have shown meaningful markdowns.
Robert Dodd: The razor markdown, which was.
Robert Dodd: The vast majority of the markdowns for the quarter did come as a surprise to us.
Robert Dodd: Partly there was.
Robert Dodd: And expectation that.
Robert Dodd: The recent equity Investor that came in just about two quarters ago.
Robert Dodd: What's going to continue supporting the business, but that went into different direction, hence the meaningful markdown.
Robert Dodd: Aside from that most of the markdowns came from the existing cohort of of assets that.
Robert Dodd: That had been on the list so to speak on the nonaccrual list in particular.
Robert Dodd: So outside of those names, you know, will there be ongoing markdowns or potential non accruals? There may be, but I think it's largely been centered around the assets that we've been discussing. I have to assume that there's exposure to lumber tariffs and maybe, you know, remodeling products from China and maybe China tariffs as well. But so what's the, you know, it was seeing slower demand but now maybe faces tariffs going forward as well. So, I mean, what's the risk on something like that, that there's.
Robert Dodd: No.
Robert Dodd: Outside of those names will there be ongoing.
Robert Dodd: Markdowns or potential non accruals there may be but I think it's largely been.
Robert Dodd: Centered around.
Robert Dodd: The assets that we've been discussing.
Robert Dodd: Don.
Robert Dodd: I appreciate it.
Robert Dodd: If I look.
Robert Dodd: One of the new ones maneuver.
Robert Dodd: Sure.
Robert Dodd: Remodeling.
Robert Dodd: I have to assume that thats exposed to the lumber tariffs and maybe re modeling products from China, and maybe John Thomas as well, but so what's the.
Robert Dodd: It was it was seeing slower demand, but now maybe faces kind of legs going forward as well, so I mean whats the risk on something like that.
Robert Dodd: incremental deterioration and that's just obviously a new non-equivalent rather than the existing group to your point that a lot of the issues have been restricted to that but there are some new ones.
Robert Dodd: Incremental deterioration.
Robert Dodd: And Thats, just obviously a new normal.
Robert Dodd: The existing group to your point.
Robert Dodd: A lot of the issues has been restricted to that but that also new ones.
Robert Dodd: Sure. This is Jason I'm happy to try and ticket swing at the renewable answer and I think on that front.
Jason Moehring: Sure, this is Jason. I'm happy to try and take a swing at the Renovo answer. And I think on that front, you know, the underlying issues there have certainly been in part because of issues with inflation and sort of consumer appetite to bite off home projects. But there also have been some just operational sort of execution issues, which are probably easier to address.
Robert Dodd: The underlying issues there have certainly been in part because of issues with inflation sort of consumer appetite to bite off home projects, but there also have been some just operational sort of execution issues, which are probably easier to address the one thing about this particular platform thats something we thought about at the time of our initial investment.
Jason Moehring: The one thing about this particular platform, and it's something we thought about at the time of our initial investment, is that the sorts of projects that they focus on are smaller dollar amount, as opposed to comprehensive home redos or remodels. So number one, it ought to be a little less volatility based on our work and our experience within that market as there is elsewhere. And then secondarily, a lot of the things that they focus on come from, like Windows, for example, come from supply chains that are domestic as opposed to coming from abroad. Now, that doesn't mean that they're 100% insulated from what might happen with commodity or material prices broadly, but our current read right now is that they're not necessarily specifically in the crosshairs of trouble because of where they're getting the underlying materials.
Robert Dodd: It's a project that they focus on our smaller dollar amount as opposed to comprehensive home reducer Remodels.
Robert Dodd: Number one ought to be a little less volatility based on our work and our experience with within that market is there is elsewhere and then secondarily a lot of the things that they focus on are come from Windows. For example come from supply chains that are domestic as opposed to coming from abroad.
Robert Dodd: It doesn't mean that there are 100% insulated from what might happen with commodity and material prices broadly, but our current read right now is that theyre not necessarily specifically in the crosshairs of trouble because of where they're getting the underlying materials.
Robert Dodd: Obviously everything related to tariffs continues to move around.
Robert Dodd: Obviously, everything related to tariffs continues to move around, and we're staying on top of it. But at the moment, we don't think that tariffs are necessarily a significant new issue in the context of that specific name. Got it, got it. Thank you. I appreciate the color on that.
Robert Dodd: And we're staying on top of it but at the moment, we don't think that tariffs are unnecessarily significant new issue in the context of that specific name.
Robert Dodd: At the moment.
Robert Dodd: Got it got it. Thank you I appreciate the color on that one more if I can.
Robert Dodd: One more if I can, and I'm going to keep my tinfoil hat in the box at the moment. But the decision to waive one third of base management fees through the first three quarters of the year, positive for shareholders, so of that. It's, you know, maybe I'm reading too much into it, but at the same time, roughly the time that's expiring is the time that the HPS acquisition is supposed to, you know, close. So, you know, I mean, is that, is it just coincidental or is it waiving some management fees until that close and then review the new landscape?
Robert Dodd: Im going to keep my pinfall happened the bulks at the moment, but the decision to wave.
Robert Dodd: One set of base management fees.
Robert Dodd: Yes.
Robert Dodd: Three quarters of the year positive for shareholders.
Robert Dodd: A pullback.
Robert Dodd: Yes.
Robert Dodd: Im reading too much into it but at the same time roughly the time that's expiring.
Robert Dodd: Is the time.
Robert Dodd: The HPA acquisition as opposed to.
Robert Dodd: Supposed to close.
Robert Dodd: I mean is that is it.
Robert Dodd: Just coincidental or is it waving some management fees until that close and then my view.
Robert Dodd: Is that kind of what's being laid out?
Robert Dodd: The new landscape is that kind of whats being laid out.
Robert Dodd: Yeah.
Philip Tseng: I think, Robert, I appreciate your your insightfulness and creativity, but I think that is looking into it a little bit too much. It's not coincidental. We did try and take a thoughtful approach to really acknowledge the NAV decline. You know, the management fee waiver is one of, you know, several things that the advisor's done to really try and, you know, support TCPC. As you know, there was a reduction in our management fee last year from one and a half to one and a quarter, to really be more aligned with our, you know, with the peer universe.
Speaker Change: I think Robert I appreciate your insightful that in creativity, but I think that is looking into it a little bit too much.
Robert Dodd: Not coincidental.
We did we did try and take a thoughtful approach to really acknowledge the NAV decline and in.
Robert Dodd: The management fee waiver is one of.
Robert Dodd: Several things that.
Robert Dodd: That the advisors done too.
Robert Dodd: To really try and <unk>.
Robert Dodd: Support <unk> as you know.
There is a reduction in our management fee last year from one five to one and a quarter two.
Robert Dodd: To really be more aligned with our with the peer universe.
Philip Tseng: And then our shareholder friendly incentive structure, you know, I think that that showed that showed its merits this past quarter. So, so I think it's a, it's a collection of a way that, you know, the advisors trying to support TCPC here, but there's nothing coincidental about.
Robert Dodd: And then our shareholder friendly incentive structure I think that that showed.
Robert Dodd: That showed its merits this past quarter.
Robert Dodd: So I think it's a collection of.
Robert Dodd: Wave that.
Robert Dodd: The advisors trying to support TCP see here, but theres nothing coincidental about.
Robert Dodd: Oh, sorry, there's nothing specific to the timing or on HPS or any other matters. Got it. Thank you. Appreciate it. Yeah, thank you.
Robert Dodd: Oh, sorry, there is nothing specific to the timing or on <unk> or any other matters.
Speaker Change: Got it. Thank you appreciate it.
Robert Dodd: Yes. Thank you.
Christopher Nolan: Our next question comes from Christopher Nolan with Ladenburg Thalmann.
Christopher Nolan: Our next question comes from Christopher Nolan with Leidenberg Fountain. Please come ahead. Hi, I applaud the I echo Robert and Trump.
Robert Dodd: Please go ahead.
Speaker Change: I applaud the echo Robert in terms of.
Robert Dodd: We think the management fee and also reduction of the dividend.
Christopher Nolan: Unknown Managing Director, Microsoft Office Word Unknown Managing Director, Microsoft Given everything that's going on, and I appreciate you guys are handling a pretty hairy situation. And you have a really large debt maturity in 2026, $325 million, that's a $2.85 billion debt. as I recall this. I presume you want to keep the investment grade, if you're able to, Bo, should we look for lower leverage? going through the year or so or what steps should we take? Watch as you prepare for that. Yeah, yes, as you pointed out, that really is our next large maturity. We actually have a small piece coming due in December of 2025 as well.
Robert Dodd: Given everything that's going on and I. Appreciate you guys are handling a pretty hairy situation.
Robert Dodd: And you have a really large debt maturity in 2026 345 million Thats a 285% note.
Robert Dodd: As I recall, that's investment grade.
Robert Dodd: What.
Speaker Change: I presume you want to keep the investment grade if youre able to Bo should we look for lower leverage.
Going through the year, so or what steps should we take two.
Speaker Change: Watch as you prepare for that refinance.
Speaker Change: Yes, yes, as you pointed out that really is our next large maturity we actually have.
Speaker Change: Small piece coming due in December.
Speaker Change: 2025 as well.
Erik Cuellar: And certainly, we'll be looking to access the capital markets closer to that date. We're definitely focused on maintaining that investment rate rating from our rating agencies. Obviously, that helps with the process as well. But when we issue those notes, it's what we, on a combined basis post merger, we believe that we're going to be doing similar sizes in terms of issuing. Okay, so you you're currently anticipating maintaining the investment grade? Yes, we continue to have close discussions with our rating agencies and we have no reason to think otherwise.
Speaker Change: And certainly.
Speaker Change: We'll be looking to access the capital markets closer to that date.
Speaker Change: We are definitely focused on maintaining that investment grade rating from our rating agencies.
Speaker Change: Obviously that that helps with the process as well but.
Speaker Change: We when we issued those notes it's what we.
Speaker Change: On a combined basis post merger, we believe that we're going to be doing similar sizes in terms of issuances.
Speaker Change: Okay. So youre currently anticipating maintaining the investment grade.
Speaker Change: Yes, we continue to have close discussions with our rating agencies.
Speaker Change: And.
Speaker Change: We have no reason to think otherwise.
Speaker Change: Okay, and I guess.
Robert Dodd: And I guess, you know, kind of a pointed question here, NAFPA share decrease. 22% in 2020. versus 9% a year earlier. What has changed? I know there was the... Is there additional management overhead from being part of BlackRock? And if so, If that's the case, it may not be serving you guys well in terms of the performance. Yeah, I think it's, you know, I think it's the result of, you know, the broader factors that go into into these portfolios, you know, there was obviously a rapid increase in rates in the back half of 22 and through 2023.
Kind of a pointed question your NAV per share decreased.
Speaker Change: 22% in 2024.
Speaker Change: Versus 9% a year earlier.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: What has changed I know there was the acquisition.
Speaker Change: Is there additional management overhead from being part of Blackrock.
Speaker Change: So.
Speaker Change: If that's the case it may not be surfing, you guys well in terms of the performance.
Speaker Change: If you could comment on that would be helpful.
Speaker Change: Yes, I think it's.
Speaker Change: I think it's the result of of.
Speaker Change: The broader factors that go into into these portfolios.
Speaker Change: There was obviously a rapid increase in rates in the back half of 'twenty, two and through 2023, I think that is having a.
Philip Tseng: I think that is, you know, having a significant impact on borrowers who were levered, you Pre-rate rise Ford example, You know that coupled with a slower growth environment given the higher rates across you know Not just the US blood But but globally, you know It's putting pressure on on on a number of these operating companies and couple that with of course higher interest burden so So I think it's it's a lot of that that that's come to impact these businesses in different ways. And that's largely what we're saying. So you're right, as you mentioned, a lot of that was in, you know, 2024.
Speaker Change: Significant impact on borrowers who are levered.
Speaker Change: Pre rate rise.
Speaker Change: For example.
Speaker Change: Sure.
Speaker Change: That coupled with a slower growth environment, given the higher rates.
Speaker Change: Not just the U S, but but but globally.
Speaker Change: It's putting pressure on a number of these operating companies and couple that with of course higher interest burden. So.
Speaker Change: So I think it's a lot of that that's come to impact these businesses.
Speaker Change: In different ways, and that's largely what we're seeing so.
Right as you mentioned a lot of that was in.
Speaker Change: 2024, and I think that.
Unknown Executive: And I think that that is a reflection of that. Okay, thank you. Thank you.
Speaker Change: It is a reflection of that.
Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you at this time, we have no further questions. So I'll hand, the call back to Phil Tseng for closing remarks.
Philip Tseng: At this time we have no further questions until I hand the call back to Phil Tseng for closing remarks. In closing, I want to thank our entire team at BlackRock TCP Capital Corp for all their hard work and our investors and analysts for your continued trust and support. Please reach out to us with any questions.
Speaker Change: In closing I want to thank our entire team at Blackrock TCP Capital Corp for all their hard work and our investors and analysts for your continued trust and support.
Speaker Change: Please reach out to us with any questions. Thank you.
Unknown Executive: Thank you. Thank you everyone for joining us today.
Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
Unknown Executive: This concludes our call and you may now disconnect your lines.
Speaker Change: [music].
Sure.
Speaker Change: Yes.
Speaker Change: [music].
Sure.
Speaker Change: Okay.
Speaker Change: Yeah.