BlackRock Capital Investment Corporation Reports Financial Results for the Quarter Ended March 31, 2018, Declares Second Quarter 2018 Distribution of $0.18 per Share
-
GAAP Net Investment Income (NII) of
$0.16 per share providing first quarter distribution coverage of approximately 88% -
Net Asset Value (NAV) per share declined 2.3% or
$0.18 per share to$7.65 per share on a quarter-over-quarter basis primarily due to net realized depreciation on legacy assets -
No investments on non-accrual status as of
March 31, 2018 , a decrease from 15.5% of our debt investments at amortized cost, or 4.0% at fair market value, atDecember 31, 2017 -
Net leverage of 0.56x was up, reflecting an increase in investment
deployment. Total liquidity for portfolio company investments was
approximately
$228 million , subject to leverage and borrowing base restrictions - Under our existing share repurchase program, we repurchased 799,803 shares of common stock via open market purchases in the first quarter
“We saw significant deployment activity in the first quarter, which
included two new portfolio companies as well as add-on investments in
existing portfolio companies including
“Generally speaking, the loan market remains issuer friendly with
tighter spreads, higher leverage levels and weaker structures, which is
a continuation of market conditions seen over the last 12-18 months. As
such, we continue to be highly selective in new investment opportunities
and focused on opportunities with strong underlying credit metrics.
Additionally, we continue to pursue exposure to first lien assets
through our portfolio investment in
“Under our existing share repurchase program, during the quarter, we
invested approximately
Financial Highlights
Q1 2018 | Q4 2017 | Q1 2017 | ||||||||||||||||
Total | Per | Total | Per | Total | Per | |||||||||||||
($'s in millions, except per share data) | Amount | Share | Amount | Share | Amount | Share | ||||||||||||
Net Investment Income | $ | 11.6 | $ | 0.16 | $ | 14.5 | $ | 0.20 | $ | 14.6 | $ | 0.20 | ||||||
Net realized and unrealized gains/(losses) | $ | (12.5) | $ | (0.17) | $ | (16.4) | $ | (0.22) | $ | (0.3) | $ | (0.00) | ||||||
Deferred taxes | — | — | $ | 5.3 | $ | 0.07 | — | — | ||||||||||
Basic earnings/(loss) | $ | (0.9) | $ | (0.01) | $ | 3.3 | $ | 0.05 | $ | 14.3 | $ | 0.20 | ||||||
Distributions declared | $ | 13.2 | $ | 0.18 | $ | 13.2 | $ | 0.18 | $ | 13.1 | $ | 0.18 | ||||||
Net Investment Income/(loss), as adjusted1 | $ | 11.6 | $ | 0.16 | $ | 14.5 | $ | 0.20 | $ | 14.6 | $ | 0.20 | ||||||
Basic earnings/(loss), as adjusted1 |
$ | (0.9) | $ | (0.01) | $ | 3.3 | $ | 0.05 | $ | 14.3 | $ | 0.20 | ||||||
March 31, | December 31, | March 31, | |||||||
($'s in millions, except per share data) | 2018 | 2017 | 2017 | ||||||
Total assets | $ | 887.1 | $ | 799.9 | $ | 990.9 | |||
Investment portfolio, at fair market value | $ | 870.1 | $ | 757.9 | $ | 938.8 | |||
Debt outstanding | $ | 310.1 | $ | 206.7 | $ | 370.9 | |||
Total net assets | $ | 553.1 | $ | 571.1 | $ | 598.4 | |||
Net asset value per share | $ | 7.65 | $ | 7.83 | $ | 8.22 | |||
Net leverage ratio2 |
0.56x | 0.32x | 0.56x | ||||||
1 Non-GAAP basis financial measure. See Supplemental Information on page 7.
2 Calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and receivable for investments sold, and (B) net asset value.
Business Updates
-
Under our existing share repurchase program, during the first quarter
of 2018, 799,803 shares were repurchased for
$4.8 million at an average price of$5.98 per share, including brokerage commissions. The cumulative repurchases sinceBlackRock entered into the investment management agreement with the Company totaled approximately 3.8 million shares for$30.2 million , representing 71.1% of total share repurchase activity, on a dollar basis. Since the inception of our share repurchase program throughMarch 31, 2018 , we have purchased 5.6 million shares at an average price of$7.62 per share, including brokerage commissions, for a total of$42.5 million . InMay 2017 , our Board of Directors approved an increase to the remaining amount of shares authorized to be repurchased to a total of 2.5 million shares effectiveJuly 1, 2017 , and an extension to the plan until the earlier ofJune 30, 2018 or such time that all of the authorized shares have been repurchased. As ofMarch 31, 2018 , the total number of remaining shares authorized for repurchase was 1,475,308. Any amount of shares authorized for repurchase by the Board of Directors inMay 2017 that remains unpurchased afterJune 30, 2018 will no longer be authorized for repurchase. InApril 2018 , our Board of Directors authorized a total of 2.5 million shares for repurchase, effectiveJuly 1, 2018 until the earlier ofJune 30, 2019 or until such time that all of the authorized shares have been repurchased. -
On
February 15, 2018 , the Company repaid the remaining$55.0 million in aggregate principal amount of its 5.50% unsecured convertible senior notes due 2018 upon maturity at par using borrowings under the credit facility and cash on hand. -
On
March 15, 2018 , the Company entered into a Third Amendment to the Second Amended and Restated Senior Secured Revolving Credit Facility which (i) permanently reduces the aggregate amount of multicurrency commitments under the Credit Facility from$440,000,000 to$400,000,000 and (ii) reduces the amount of shareholders’ equity required under the Credit Facility from$500,000,000 plus any proceeds from the sale of equity interests to$450,000,000 plus any proceeds from the sale of equity interests. -
On
April 16, 2018 , the Company increased its equity commitment inSenior Loan Partners from$85.0 million to $113.3 million . Concurrently,Windward Investments LLC , our joint venture partner, increased their equity commitment in a pro rata manner from$15.0 million to $20.0 million .
Portfolio and Investment Activity*
($’s in millions) | Three months | Three months | Three months | ||||||
ended | ended | ended | |||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||
Investment deployments | $ | 144.6 | $ | 63.3 | $ | 122.3 | |||
Investment exits | $ | 17.2 | $ | 124.3 | $ | 114.4 | |||
Number of portfolio company investments at the end of period | 31 | 30 | 35 | ||||||
Weighted average yield of debt and income producing equity securities, at fair market value | 11.3% | 10.8% | 11.1% | ||||||
% of Portfolio invested in Secured debt, at fair market value | 59% | 56% | 67% | ||||||
% of Portfolio invested in Unsecured debt, at fair market value | 16% | 17% | 17% | ||||||
% of Portfolio invested in Equity, at fair market value | 25% | 27% | 16% | ||||||
Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million) | $ | 33.6 | $ | 33.0 | $ | 33.6 | |||
*balance sheet amounts above are as of period end
-
We deployed
$144.6 million during the quarter while exits of investments totaled$17.2 million , resulting in a$127.4 million net increase in our portfolio due to investment activity.-
Our deployments were primarily concentrated in two new portfolio
company investments, and incremental investments in six existing
portfolio companies:
$72.7 million funded L+9.38% first lien, last out, term loan toSt. George Warehousing & Trucking Co. of California , Inc., which is the largest provider of outsourced container freight station inNorth America (this position was reduced to$40 million inApril 2018 via a partial sale to third parties);$25.0 million funded L+7.50% second lien term loan toZest Acquisition Corp. , which is the leading designer, manufacturer, and marketer of denture attachment systems;$19.2 million of incremental L+11.00% unsecured debt as well as$10.5 million preferred stock toGordon Brothers Finance Company to fund portfolio growth;$4.2 million of incremental 12.00% unsubordinated debt and$1.0 million equity investment inFirst Boston Construction Holdings, LLC ;$4.0 million L+6.25% first lien delayed draw term loan toVetCor Professional Practices, LLC ;$2.4 million of incremental equity toSenior Loan Partners ;$2.2 million of incremental 12.00% unsecured debt toCB-HDT Holdings, Inc. ; and$1.7 million L+8.00% second lien delayed draw term loan toPathway Partners Vet Management Company, LLC
-
Our repayments were primarily driven by
$14.1 million escrow release in connection with the previously disclosed recapitalization ofMBS Group Holdings .
-
Our deployments were primarily concentrated in two new portfolio
company investments, and incremental investments in six existing
portfolio companies:
-
Our
$74.8 million equity investment inSenior Loan Partners is now generating a yield of approximately 11%.Senior Loan Partners made investments into four new portfolio companies and three existing portfolio companies totaling$49.8 million of new capital deployments during the quarter, bringing committed and outstanding amounts, at par, to$266.8 million and$258.1 million , respectively, and a total of 23 borrowers. The four new investments, at par, were (i) a$15.0 million first lien term loan toDigital Room, LLC , a leading e-commerce marketing business, (ii) a$10.0 million first lien term loan toCommunity Care Health Network, LLC , a leading provider of health risk assessments, (iii) a$9.5 million first lien term loan toZenith Home Corp. , a leading designer, manufacturer and marketer for bath accessories and other home products, and (iv) a$9.4 million first lien term loan toProtective Industrial Products, Inc. , a leading importer, marketer, designer and manufacturer of hand protection and adjacent personal protection equipment. -
As of
March 31, 2018 , there were no non-accrual investment positions, as compared to non-accrual investment positions of 4.0% of our total debt investments at fair market value, and 15.5% at amortized cost, atDecember 31, 2017 . Our average internal investment rating at fair market value atMarch 31, 2018 was 1.24 as compared to 1.35 atDecember 31, 2017 . -
During the quarter ended
March 31, 2018 , net realized loss was$76.6 million , as a result of restructurings or write offs of our debt investment inMBS Group Holdings, Inc. andSVP Worldwide Ltd. ; net unrealized depreciation decreased$64.1 million , primarily due to the reversal of previously recognized depreciation of$76.3 million after the restructurings or write off mentioned above, offset partially by$12.2 million net decrease in valuation of certain portfolio companies.
First Quarter Financial Updates
-
GAAP net investment income (“NII”) was
$11.6 million , or$0.16 per share, for the three months endedMarch 31, 2018 . Relative to distributions declared of$0.18 per share, our NII distribution coverage was 88% for the quarter. -
As previously disclosed, our base management fee rate was reduced from
an annual rate of 2.00% of total assets to 1.75% effective
March 7, 2017 . For the quarter endedMarch 31, 2018 ,$1.7 million of incentive management fees based on income was earned by our investment adviser; however, as previously disclosed, any such fees earned untilDecember 31, 2018 have been waived by our investment adviser. Pursuant to the waiver,$9.7 million of incentive management fees have been waived on a cumulative basis. During the quarter, there was no accrual for incentive management fees based on gains. -
Tax characteristics of all 2017 distributions were reported to
stockholders on Form 1099 after the end of the calendar year. Our 2017
tax distributions of
$0.72 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 2017. For more information on our GAAP distributions, please refer to any Section 19 Notices that may be posted within the Distribution History section of our website, as necessary.
Liquidity and Capital Resources
-
At
March 31, 2018 , we had$1.6 million in cash and cash equivalents and$226 million of availability under our credit facility based upon ourMarch 31, 2018 borrowing base calculation, subject to leverage restrictions, resulting in approximately$227.6 million of availability for portfolio company investments. -
Net leverage, adjusted for available cash, receivables for investments
sold and unamortized debt issuance costs, was 0.56x at quarter-end,
and our 273% asset coverage ratio provided the Company with available
debt capacity under its asset coverage requirements of
$232.3 million which exceeds the undrawn amount of$226 million under our credit facility. Further, as of quarter-end, 85% 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
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.
Consolidated
Statements of Assets and Liabilities
(Unaudited)
March 31, 2018 |
December 31, 2017 |
|||||
Assets | ||||||
Investments at fair value: | ||||||
Non-controlled, non-affiliated investments (cost of $361,376,464 and $311,938,762) | $ | 354,811,421 | $ | 261,683,202 | ||
Non-controlled, affiliated investments (cost of $140,588,866 and $195,354,637) | 157,956,644 | 215,779,077 | ||||
Controlled investments (cost of $375,176,398 and $321,999,526) | 357,291,181 | 280,478,528 | ||||
Total investments at fair value (cost of $877,141,728 and $829,292,925) | 870,059,246 | 757,940,807 | ||||
Cash and cash equivalents | 1,569,618 | 29,014,645 | ||||
Receivable for investments sold | 4,186,125 | 1,344,918 | ||||
Interest, dividends and fees receivable | 8,378,337 | 8,342,780 | ||||
Prepaid expenses and other assets | 2,940,895 | 3,236,819 | ||||
Total Assets | $ | 887,134,221 | $ | 799,879,969 | ||
Liabilities | ||||||
Debt (net of deferred financing costs of $3,932,481 and $4,209,445) | $ | 310,092,968 | $ | 206,661,272 | ||
Interest and credit facility fees payable | 2,822,292 | 1,820,971 | ||||
Distributions payable | 13,150,684 | 13,152,924 | ||||
Base management fees payable | 3,312,369 | 3,734,655 | ||||
Payable for investments purchased | 754,153 | 479,297 | ||||
Accrued administrative services | 553,764 | 114,995 | ||||
Other accrued expenses and payables | 3,383,066 | 2,815,923 | ||||
Total Liabilities | 334,069,296 | 228,780,037 | ||||
Net Assets | ||||||
Common stock, par value $.001 per share, 200,000,000 common shares authorized, 77,861,287 and 77,723,764 issued and 72,284,630 and 72,946,910 outstanding | 77,861 | 77,723 | ||||
Paid-in capital in excess of par | 858,904,233 | 858,087,822 | ||||
Undistributed / (Distributions in excess of) net investment income | (15,446,576) | (13,918,838) | ||||
Accumulated net realized loss on investments and extinguishment of debt | (239,358,178) | (162,723,790) | ||||
Net unrealized (depreciation), net of tax | (8,592,758) | (72,688,483) | ||||
Treasury stock at cost, 5,576,657 and 4,776,854 shares held | (42,519,657) | (37,734,502) | ||||
Total Net Assets | 553,064,925 | 571,099,932 | ||||
Total Liabilities and Net Assets | $ | 887,134,221 | $ | 799,879,969 | ||
Net Asset Value Per Share | $ | 7.65 | $ | 7.83 | ||
Consolidated
Statements of Operations
(Unaudited)
Three months | Three months | ||||||
ended | ended | ||||||
March 31, 2018 | March 31, 2017 | ||||||
Investment Income: | |||||||
Non-controlled, non-affiliated investments: | |||||||
Cash interest income | $ | 7,144,027 | $ | 11,284,329 | |||
PIK interest income | — | 1,477,388 | |||||
Cash dividend income | — | 404,781 | |||||
PIK dividend income | — | 65,943 | |||||
Fee income | 465,206 | 298,897 | |||||
Total investment income from non-controlled, non-affiliated investments | 7,609,233 | 13,531,338 | |||||
Non-controlled, affiliated investments: | |||||||
Cash interest income | 2,214,613 | 2,464,836 | |||||
PIK interest income | 690,960 | 1,196,845 | |||||
PIK dividend income | 189,026 | 189,026 | |||||
Fee income | 35,000 | 286,295 | |||||
Total investment income from non-controlled, affiliated investments | 3,129,599 | 4,137,002 | |||||
Controlled investments: | |||||||
Cash interest income | 5,085,705 | 5,703,987 | |||||
PIK interest income | 766,466 | 132,481 | |||||
Cash dividend income | 3,126,861 | 1,397,351 | |||||
PIK dividend income | 731,516 | — | |||||
Fee income | 387,058 | 25,000 | |||||
Total investment income from controlled investments | 10,097,606 | 7,258,819 | |||||
Total investment income | 20,836,438 | 24,927,159 | |||||
Expenses: | |||||||
Base management fees | 3,312,369 | 4,523,857 | |||||
Incentive management fees | 1,735,195 | 809,183 | |||||
Interest and credit facility fees | 3,708,958 | 3,987,080 | |||||
Professional fees | 733,164 | 565,110 | |||||
Administrative services | 553,764 | 327,677 | |||||
Director fees | 187,000 | 172,500 | |||||
Investment advisor expenses | 87,500 | 87,500 | |||||
Other | 630,737 | 698,135 | |||||
Total expenses, before incentive management fee waiver | 10,948,687 | 11,171,042 | |||||
Incentive management fee waiver | (1,735,195) | (809,183) | |||||
Expenses, net of incentive management fee waiver | 9,213,492 | 10,361,859 | |||||
Net Investment Income | 11,622,946 | 14,565,300 | |||||
Realized and Unrealized Gain (Loss): | |||||||
Net realized gain (loss): | |||||||
Non-controlled, non-affiliated investments | (50,515,956) | (53,991,961) | |||||
Controlled investments | (26,118,432) | 2,375,535 | |||||
Net realized gain (loss) | (76,634,388) | (51,616,426) | |||||
Net change in unrealized appreciation (depreciation) on: | |||||||
Non-controlled, non-affiliated investments | 43,690,517 | 56,701,095 | |||||
Non-controlled, affiliated investments | 1,422,575 | (2,688,594) | |||||
Controlled investments | 19,156,544 | (2,704,387) | |||||
Foreign currency translation | (173,911) | 73,295 | |||||
Net change in unrealized appreciation (depreciation) | 64,095,725 | 51,381,409 | |||||
Net realized and unrealized gain (loss) | (12,538,663) | (235,017) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (915,717) | $ | 14,330,283 | |||
Net Investment Income Per Share—basic | $ | 0.16 | $ | 0.20 | |||
Earnings (Loss) Per Share—basic | $ | (0.01) | $ | 0.20 | |||
Average Shares Outstanding—basic | 72,991,828 | 72,804,629 | |||||
Net Investment Income Per Share—diluted | $ | 0.15 | $ | 0.20 | |||
Earnings (Loss) Per Share—diluted | $ | (0.01) | $ | 0.20 | |||
Average Shares Outstanding—diluted (Net Investment Income only for March 31, 2018) | 89,985,565 | 82,701,357 | |||||
Distributions Declared Per Share | $ | 0.18 | $ | 0.18 | |||
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 | $ | 11,622,946 | $ | 14,565,300 | ||
Net Investment Income per share | 0.16 | 0.20 | ||||
Addback: GAAP incentive management fee expense based on Gains | — | — | ||||
Addback: GAAP incentive management fee expense based on Income | — | — | ||||
Pre-Incentive Fee1: | ||||||
Net Investment Income | $ | 11,622,946 | $ | 14,565,300 | ||
Net Investment Income per share | 0.16 | 0.20 | ||||
Less: Incremental incentive management fee expense based on Income | — | — | ||||
As Adjusted2: | ||||||
Net Investment Income | $ | 11,622,946 | $ | 14,565,300 | ||
Net Investment Income per share | 0.16 | 0.20 | ||||
Note: The Net Investment Income amounts for the three months ended
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. Until
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: https://www.businesswire.com/news/home/20180502006611/en/
Source:
For BlackRock Capital Investment Corporation:
Investors:
Nik
Singhal, 212-810-5427
or
Press:
Brian Beades,
212-810-5596