BlackRock Capital Investment Corporation Declares Quarterly Distribution of $0.18 Per Share, Announces March 31, 2017 Quarterly Financial Results
-
GAAP net investment income of
$0.20 per share providing distribution coverage of 111% -
Net leverage and total liquidity relatively unchanged
quarter-over-quarter, at 0.56x and
$253 million , respectively -
No investments on non-accrual status as of
March 31, 2017 , a decline from 5.4% of our debt investments at amortized cost and 0.7% at fair market value atDecember 31, 2016 -
Increase of
$0.01 in NAV per share on a quarter-over-quarter basis -
Monetization of nearly
$30 million of non-interest bearing legacy equity investments
“During the first quarter, we made important strides in achieving our
objective of monetizing non-interest earning legacy equity investments.
As previously stated, our focus is to build a diversified portfolio that
generates a more stable stream of net investment income. Our
“Through our team’s diligent efforts over the past several months, our non-accrual rate has declined to zero primarily due to the restructuring of various underperforming legacy investments. Although ultimate outcomes remain uncertain around these restructured investments, we have worked constructively with the various stakeholders in these companies to right size their respective balance sheets, in order to better position each of them for potential growth while helping us to maximize recoveries. We remain focused on prudent risk management and we continue to be highly selective of new investment opportunities.
“BCIC Senior Loan Partners (“Senior Loan Partners”), our joint venture
with
Financial Highlights
Q1 2017 | Q4 2016 | Q1 2016 | ||||||||||||||||||||||
Total | Per | Total | Per | Total | Per | |||||||||||||||||||
($'s in millions, except per share data) | Amount | Share | Amount | Share | Amount | Share | ||||||||||||||||||
Net Investment Income/(loss) | $ | 14.6 | $ | 0.20 | $ | 17.1 | $ | 0.24 | $ | 17.5 | $ | 0.24 | ||||||||||||
Net realized and unrealized gains/(losses) | $ | (0.2 | ) | $ | (0.00 | ) | $ | (14.6 | ) | $ | (0.20 | ) | $ | (55.7 | ) | $ | (0.76 | ) | ||||||
Basic earnings/(loss) | $ | 14.3 | $ | 0.20 | $ | 2.5 | $ | 0.03 | $ | (38.2 | ) | $ | (0.52 | ) | ||||||||||
Distributions declared | $ | 13.1 | $ | 0.18 | $ | 15.3 | $ | 0.21 | $ | 15.3 | $ | 0.21 | ||||||||||||
Net Investment Income/(loss), as adjusted1 | $ | 14.6 | $ | 0.20 | $ | 17.1 | $ | 0.24 | $ | 17.5 | $ | 0.24 | ||||||||||||
Basic earnings/(loss), as adjusted1 |
$ | 14.3 | $ | 0.20 | $ | 2.5 | $ | 0.03 | $ | (38.2 | ) | $ | (0.52 | ) |
As of | As of | As of | |||||||
March 31, | December 31, | March 31, | |||||||
($'s in millions, except per share data) | 2017 | 2016 | 2016 | ||||||
Total assets | $ | 990.9 | $ | 957.1 | $ | 1,155.2 | |||
Investment portfolio, at fair market value | $ | 938.8 | $ | 931.1 | $ | 1,126.4 | |||
Debt outstanding | $ | 370.9 | $ | 335.7 | $ | 440.8 | |||
Total net assets | $ | 598.4 | $ | 596.3 | $ | 689.3 | |||
Net asset value per share | $ | 8.22 | $ | 8.21 | $ | 9.46 | |||
Net leverage ratio2 |
0.56x | 0.55x | 0.63x |
__________ |
||
1 |
Non-GAAP basis financial measure. See Supplemental Information on page 7. | |
2 | Calculated less available cash and receivable for investments sold, plus payable for investments purchased and unamortized debt issuance costs. | |
Business Updates
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Advanced Lighting Technologies, Inc. (“Advanced Lighting”) andShoreline Energy LLC (“Shoreline”) were both removed from non-accrual status during the quarter, leaving no investments on non-accrual status as ofMarch 31, 2017 . With respect toAdvanced Lighting , an amendment was completed which resulted in a lower, more achievable cash pay rate for the borrower. Regarding Shoreline, all assets of value have been sold in a bankruptcy court approved sale process leaving remaining assets in a liquidating trust. As we do not anticipate any recovery from the liquidating trust, we wrote-off the investment during the quarter with no incremental net realized or unrealized loss as this investment was previously marked at zero. -
As previously disclosed, a comprehensive restructuring of
U.S. Well Services, LLC (“USWS”) was completed during the quarter which provided the borrower with liquidity and added financial flexibility through a PIK feature on the reinstated debt. Post restructuring, we hold (i)$7.2 million of revolving loan commitment at L + 600 ($4.5 million drawn as ofMarch 31, 2017 ), (ii)$29.9 million of first lien term loan at L + 900 cash (or L + 1100 PIK at borrower’s option), and (iii) a portion of the restructured equity. Additionally, we have the right to appoint one member to USWS’s board of directors. -
Bankruptcy Management Solutions, Inc. (“BMS”) was sold during the quarter at an enterprise value that resulted in a$0.5 million incremental gain above the prior quarter mark on the various securities previously held. We provided a$3.0 million funded revolver and a$52.0 million first lien term loan, initially priced at L + 550, to partially finance the transaction for the new private equity owner. -
Senior Loan Partners made investments into four new portfolio companies during the quarter, bringing committed and outstanding amounts to$92.7 million and$89.2 million , respectively. The four new investments at par are (i) a$10.0 million first lien term loan B toQ Holding Company , a leading manufacturer of low-cost, precision molded silicone rubber components used in a diverse array of end markets, (ii) a$10.0 million first lien term loan toENC Holding Corporation , a leading asset-light logistics platform which provides business process outsourcing services, (iii) a$3.0 million and$5.0 million first lien term loan A-1 and A-2, respectively, toAlaska Communications Systems Holdings, Inc. , a provider of internet connectivity, voice and managed IT services and (iv) a$6.4 million first lien term loan and a$0.3 million delayed draw term loan toMHE Intermediate Holdings, LLC (“MHE”), a leading provider of material handling equipment and facility services. Additionally,Senior Loan Partners had remaining unfunded commitments of approximately$1.9 million under the MHE delayed draw term loan. -
Since the inception of our share repurchase program through
March 31, 2017 , we have purchased 4.6 million shares at an average price of$7.98 per share, including brokerage commissions, for a total of$36.3 million . There were no share repurchases during the first quarter of 2017. The cumulative repurchases sinceBlackRock entered into the investment management agreement with the Company totaled approximately 2.8 million shares for$24.0 million , representing 66% of total share repurchase activity, on a dollar basis, since inception. As ofMarch 31, 2017 , the Company had approximately 2.0 million additional shares authorized for repurchase.
Recent Developments
-
On
April 17, 2017 , we redeemed$17.0 million aggregate principal amount of 6.60% senior secured notes due 2018 (“6.60% Notes”), using proceeds from our senior secured revolving credit facility. The notes were prepaid at 100% of the principal amount, plus accrued and unpaid interest through the prepayment date, as well as a$0.7 million make-whole premium. Pursuant to this redemption, we have no more 6.60% Notes outstanding as of such date.
Portfolio and Investment Activity* |
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Three months |
Three months |
Three months |
|||||||
Commitments | $ | 122.3 | $ | 107.8 | $ | 97.5 | |||
Investment exits | $ | 114.4 | $ | 109.2 | $ | 32.9 | |||
Number of portfolio company investments at the end of period | 35 | 38 | 47 | ||||||
Weighted average yield of debt and income producing equity securities, at fair market value | 11.1% | 11.7% | 10.8% | ||||||
% of Portfolio invested in Secured debt, at fair market value | 67% | 66% | 75% | ||||||
% of Portfolio invested in Unsecured debt, at fair market value | 17% | 17% | 14% | ||||||
% of Portfolio invested in Equity, at fair market value | 16% | 17% | 11% | ||||||
Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million) | $ | 33.6 | $ | 31.8 | $ | 32.5 | |||
*balance sheet amounts above are as of period end |
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-
We invested
$122.3 million during the quarter, while sales, repayments and other exits of investments totaled$114.4 million , resulting in$8.0 million of net capital deployed. Excluding the impact of non-cash transactions relating to the USWS restructuring and theAdvanced Lighting amendment, commitments and exits were$71.6 million and$63.6 million , respectively. Approximately 77% of our deployments during the quarter were represented by our$55.0 million of debt provided to partially finance the BMS acquisition. Approximately 93% of proceeds from exits during the quarter were represented by three transactions: (i)$32.2 million of total proceeds on our debt and equity investments in BMS, (ii) a repayment at par of our$18.9 million investment inAccriva Diagnostics, Inc. and (iii) a repayment of our$7.8 million preferred equity interest inUSI Senior Holdings, Inc. -
As of
March 31, 2017 , our non-accrual rate declined to zero at both fair market value and amortized cost as compared with non-accruals at 0.7% of our total debt investments at fair market value, and 5.4% at amortized cost, as of the prior quarter-end. Our average internal investment rating at fair market value atMarch 31, 2017 was 1.31 as compared to 1.35 as of the prior quarter-end. -
During the quarter, gross unrealized depreciation of
$9.2 million was partially offset by$7.8 million of gross unrealized appreciation due to portfolio valuations. Further, there was$52.8 million of unrealized appreciation during the quarter due primarily to the reversal of previously recognized unrealized depreciation on Shoreline, USWS andAdvanced Lighting . -
Fee income earned on capital structuring, prepayments and
administration during the current quarter totaled
$0.6 million , as compared to$2.6 million earned during the preceding quarter, and$0.8 million earned during the prior year quarter. Excluding fee income, investment income decreased approximately 4% compared to the prior quarter, and 16% as compared to this quarter one year ago.
First Quarter Financial Updates
-
GAAP net investment income (“NII”) was
$14.6 million , or$0.20 per share, for the three months endedMarch 31, 2017 . Relative to distributions declared of$0.18 per share, our NII distribution coverage was 111% for the quarter. -
As previously disclosed, our base management fee rate went down from
an annual rate of 2.00% of total assets to 1.75% effective
March 7, 2017 . No incentive management fees based on income were earned and payable for the pro-rated period untilMarch 6, 2017 , as the distributable income amount was reduced below the hurdle by the net realized and unrealized losses in the portfolio for the trailing four quarter period. AfterMarch 6, 2017 ,$0.8 million of incentive management fees based on income were earned for the partial quarter, however, as previously disclosed, any such fees earned untilDecember 31, 2018 have been waived. During the quarter, there was no accrual for incentive management fees based on gains due largely to the net unrealized depreciation in the portfolio as ofMarch 31, 2017 . A hypothetical liquidation is performed each quarter end resulting in an additional accrual if the amount is positive or a reversal to the existing accrual if the amount is negative. However, the resulting fee accrual is not due and payable untilJune 30 , if at all. There is currently no balance accrued for incentive management fees based on gains as of the measurement period endingMarch 31, 2017 . - As compared to full fiscal year 2016, our weighted average cost of debt increased 26 basis points to 4.63% during Q1 2017. This was primarily driven by higher Libor rates.
-
Tax characteristics of all 2016 distributions were reported to
stockholders on Form 1099 after the end of the calendar year. Our 2016
tax distributions of
$0.73 per share were comprised of ordinary income. Our return of capital distributions since inception totaled$1.96 per share. At our discretion, we may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2016. For more information on our GAAP distributions, please refer to the Section 19 Notice that may be posted within the Distribution History section of our website.
Liquidity and Capital Resources
-
At
March 31, 2017 , we had total liquidity of$253.5 million , consisting of$38.5 million in cash and cash equivalents and$215.0 million of availability under our credit facility, subject to leverage and borrowing base restrictions. -
Net leverage, adjusted for available cash, receivables for investments
sold, payables for investments purchased and unamortized debt issuance
costs, stood at 0.56x at year-end, and our 260% asset coverage ratio
provided the Company with available debt capacity under its asset
coverage requirements of
$225.2 million . Further, as of quarter-end, 87% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.
Conference Call
Prior to the webcast/teleconference, an investor presentation that
complements the earnings conference call will be posted to
BlackRock Capital Investment Corporation Consolidated Statements of Assets and Liabilities (Unaudited) |
||||||||
March 31,
2017 |
December 31,
2016 |
|||||||
Assets | ||||||||
Investments at fair value: | ||||||||
Non-controlled, non-affiliated investments (cost of $516,840,220 and $586,176,755) | $ | 499,672,950 | $ | 512,308,390 | ||||
Non-controlled, affiliated investments (cost of $163,687,457 and $112,640,458) | 157,700,576 | 109,342,171 | ||||||
Controlled investments (cost of $297,471,394 and $322,768,014) | 281,471,923 | 309,472,929 | ||||||
Total investments at fair value (cost of $977,999,071 and $1,021,585,227) | 938,845,449 | 931,123,490 | ||||||
Cash and cash equivalents | 38,454,730 | 10,707,834 | ||||||
Receivable for investments sold | 1,068,403 | 449,578 | ||||||
Interest, dividends and fees receivable | 8,821,918 | 10,750,723 | ||||||
Prepaid expenses and other assets | 3,750,794 | 4,035,866 | ||||||
Total Assets | $ | 990,941,294 | $ | 957,067,491 | ||||
Liabilities | ||||||||
Debt | 370,942,454 | 335,667,906 | ||||||
Interest payable | 1,164,381 | 3,041,680 | ||||||
Distributions payable | 13,105,358 | 15,262,010 | ||||||
Base management fees payable | 4,523,857 | 4,860,614 | ||||||
Accrued administrative services | 334,926 | — | ||||||
Other accrued expenses and payables | 2,422,593 | 1,914,912 | ||||||
Total Liabilities | 392,493,569 | 360,747,122 | ||||||
Net Assets | ||||||||
Common stock, par value $.001 per share, 200,000,000 common shares authorized, 77,359,512 and 77,228,207 issued and 72,807,547 and 72,676,242 outstanding | 77,359 | 77,228 | ||||||
Paid-in capital in excess of par | 878,203,006 | 877,300,709 | ||||||
Undistributed / (Distributions in excess of) net investment income | (6,505,710 | ) | (7,965,655 | ) | ||||
Accumulated net realized loss | (196,144,003 | ) | (144,527,577 | ) | ||||
Net unrealized (depreciation) | (40,880,106 | ) | (92,261,515 | ) | ||||
Treasury stock at cost, 4,551,965 and 4,551,965 shares held | (36,302,821 | ) | (36,302,821 | ) | ||||
Total Net Assets | 598,447,725 | 596,320,369 | ||||||
Total Liabilities and Net Assets | $ | 990,941,294 | $ | 957,067,491 | ||||
Net Asset Value Per Share | $ | 8.22 | $ | 8.21 | ||||
Three months | Three months | |||||||
BlackRock Capital Investment Corporation | ended | ended | ||||||
Consolidated Statements of Operations (Unaudited) | March 31, 2017 | March 31, 2016 | ||||||
Investment Income: | ||||||||
Interest income: | ||||||||
Non-controlled, non-affiliated investments | $ | 12,761,717 | $ | 21,739,442 | ||||
Non-controlled, affiliated investments | 3,661,681 | 1,385,267 | ||||||
Controlled investments | 5,836,468 | 4,355,621 | ||||||
Total interest income | 22,259,866 | 27,480,330 | ||||||
Fee income: | ||||||||
Non-controlled, non-affiliated investments | 298,897 | 786,283 | ||||||
Non-controlled, affiliated investments | 286,295 | — | ||||||
Controlled investments | 32,249 | 25,000 | ||||||
Total fee income | 617,441 | 811,283 | ||||||
Dividend income: | ||||||||
Non-controlled, non-affiliated investments | 470,724 | 202,083 | ||||||
Non-controlled, affiliated investments | 189,026 | 541,188 | ||||||
Controlled investments | 1,397,351 | 802,285 | ||||||
Total dividend income | 2,057,101 | 1,545,556 | ||||||
Total investment income | 24,934,408 | 29,837,169 | ||||||
Expenses: | ||||||||
Base management fees | 4,523,857 | 5,690,490 | ||||||
Interest and credit facility fees | 3,987,080 | 4,655,999 | ||||||
Incentive management fees (See Note 3) | 809,183 | — | ||||||
Professional fees | 565,110 | 544,625 | ||||||
Administrative services | 334,926 | 470,000 | ||||||
Director fees | 172,500 | 173,500 | ||||||
Investment advisor expenses | 87,500 | 87,500 | ||||||
Other | 698,135 | 736,806 | ||||||
Total expenses, before incentive management fee waiver | 11,178,291 | 12,358,920 | ||||||
Incentive management fee waiver (See Note 3) | (809,183 | ) | — | |||||
Total expenses, net of incentive management fee waiver | 10,369,108 | 12,358,920 | ||||||
Net Investment Income | 14,565,300 | 17,478,249 | ||||||
Realized and Unrealized Gain (Loss): | ||||||||
Net realized gain (loss): | ||||||||
Non-controlled, non-affiliated investments | (53,991,961 | ) | 34,884 | |||||
Non-controlled, affiliated investments | — | — | ||||||
Controlled investments | 2,375,535 | — | ||||||
Net realized gain (loss) | (51,616,426 | ) | 34,884 | |||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Non-controlled, non-affiliated investments | 56,701,095 | (56,989,762 | ) | |||||
Non-controlled, affiliated investments | (2,688,594 | ) | 6,238,926 | |||||
Controlled investments | (2,704,387 | ) | (5,380,163 | ) | ||||
Foreign currency translation | 73,295 | 443,097 | ||||||
Net change in unrealized appreciation (depreciation) | 51,381,409 | (55,687,902 | ) | |||||
Net realized and unrealized gain (loss) | (235,017 | ) | (55,653,018 | ) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 14,330,283 | $ | (38,174,769 | ) | |||
Net Investment Income (Loss) Per Share | ||||||||
Basic | $ | 0.20 | $ | 0.24 | ||||
Diluted | $ | 0.20 | $ | 0.23 | ||||
Earnings (Loss) Per Share | ||||||||
Basic | $ | 0.20 | $ | (0.52 | ) | |||
Diluted | $ | 0.20 | $ | (0.52 | ) | |||
Average Shares Outstanding | ||||||||
Basic | 72,804,629 | 73,106,678 | ||||||
Diluted | 82,701,357 | 73,106,678 | ||||||
Distributions Declared Per Share | $ | 0.18 | $ | 0.21 | ||||
Supplemental Information
The Company reports its financial results on a GAAP basis; however, management believes that evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company’s financial performance over time. The Company’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Until
Computations for the periods below are derived from the Company's financial statements as follows:
Three months
ended |
Three months
ended |
|||||
GAAP Basis: | ||||||
Net Investment Income/(Loss) | $ | 14,565,300 | $ | 17,478,249 | ||
Net Investment Income/(Loss) per share | 0.20 | 0.24 | ||||
Addback: GAAP incentive management fee expense based on Gains | — | — | ||||
Addback: GAAP incentive management fee expense based on Income | — | — | ||||
Pre-Incentive Fee1: | ||||||
Net Investment Income/(Loss) | $ | 14,565,300 | $ | 17,478,249 | ||
Net Investment Income/(Loss) per share | 0.20 | 0.24 | ||||
Less: Incremental incentive management fee expense based on Income | — | — | ||||
As Adjusted2: | ||||||
Net Investment Income/(Loss) | $ | 14,565,300 | $ | 17,478,249 | ||
Net Investment Income/(Loss) per share | 0.20 | 0.24 |
Note: The current period Net Investment Income amount is net of
incentive management fees and a corresponding incentive management fee
waiver in the amount of
1 |
Pre-Incentive Fee: Amounts are adjusted to remove all incentive management fees. Such fees are calculated but not necessarily due and payable at this time. |
|
2 |
As Adjusted: Amounts are adjusted to remove the incentive management fee expense based on gains, as required by GAAP, and to include only the incremental incentive management fee expense based on Income. The incremental incentive management fee is calculated based on the current quarter's incremental earnings, and without any reduction for incentive management fees paid during the prior calendar quarters. Amounts reflect the Company's ongoing operating results and reflect the Company's financial performance over time. |
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About
The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.
Forward-looking statements
This press release, and other statements that
In addition to factors previously disclosed in
BlackRock Capital Investment Corporation’s Annual Report on Form 10-K
for the year ended
Available Information
BlackRock Capital Investment Corporation’s filings with the
View source version on businesswire.com: http://www.businesswire.com/news/home/20170503006009/en/
Source:
BlackRock Capital Investment Corporation
Investors:
Nik
Singhal, 212-810-5427
or
Press:
Brian Beades,
212-810-5596