BlackRock Capital Investment Corporation Reports Financial Results for the Quarter Ended June 30, 2020, Declares Quarterly Distribution of $0.10 Per Share
-
GAAP Net Investment Income (“NII”) of
$0.13 per share, or$8.8 million , provided second quarter distribution coverage of 129%. -
Net Asset Value (“NAV”) per share decreased 9.5% or
$0.51 per share to$4.84 per share on a quarter-over-quarter basis, largely driven by fair value declines in two portfolio companies. -
Continued progress toward reducing non-core portfolio exposure, including exiting two positions. As a result, non-core positions represented 11% of the portfolio as of
June 30, 2020 , which was down from 28% a year ago. -
Net leverage of 0.95x was up from 0.85x in comparison to the previous quarter, driven primarily by a decrease in NAV. Total liquidity for portfolio company investments, including cash, was approximately
$124 million , subject to leverage and borrowing base restrictions. -
On
May 1, 2020 , shareholders approved a reduction of the minimum asset coverage ratio requirement to 150%. In conjunction with the reduction in the asset coverage ratio requirement, the management fee was reduced to 1.5% and the incentive fee rate was reduced to 17.5% subject to a 7% hurdle. -
The Company amended its credit facility and extended the maturity by one year to
June 5, 2023 .
“During the second quarter of 2020, our investment teams remained fully focused on managing and monitoring existing investments. In the midst of the pandemic-driven uncertainty, our newer, core investments have proven to be relatively resilient. Our investment in
“We achieved further progress during the quarter on our stated goal of reducing exposure to non-core assets by selling and fully exiting the legacy positions in
“We have taken the prudent step of paying a portion of the distribution in stock to bolster net asset value in the current operating environment. However, our goal remains to transition to an all cash dividend in the coming quarters. Our liquidity remains strong and unfunded commitments are small relative to the available liquidity as well as to the size of the overall portfolio. To further bolster NAV, BlackRock has elected to fully waive its incentive fee for the quarter which totaled
Financial Highlights
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Q2 2020 |
Q1 2020 |
Q2 2019 |
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($'s in millions, except per share data) |
Total
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Per Share |
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Total
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Per Share |
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Total
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Per Share |
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Net Investment Income/(loss) |
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Net realized and unrealized gains/(losses) |
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Basic earnings/(losses) |
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Distributions declared |
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Net Investment Income/(loss), as adjusted1 |
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Basic earnings/(losses), as adjusted1 |
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($'s in millions, except per share data) |
As of |
As of |
As of |
As of |
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Total assets |
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Investment portfolio, at fair market value |
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Debt outstanding |
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Total net assets |
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Net asset value per share |
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Net leverage ratio2 |
0.95x |
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0.85x |
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0.70x |
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0.53x |
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____________________ | |
1 |
Non-GAAP basis financial measure. See Supplemental Information on page 8. |
2
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Calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and receivable for investments sold, plus payables for investments purchased, and (B) NAV. |
Business Updates
-
Revolving Credit Facility Amendment: On
May 22, 2020 , the Company entered into a Fifth Amendment to the Credit Facility which (i) extends the maturity date on loans made under the Credit Facility fromJune 5, 2022 toJune 5, 2023 , (ii) changes the interest rate applicable to borrowings to LIBOR plus an applicable margin equal to either 2.00% or 2.25% depending on a ratio of the borrowing base to certain indebtedness, (iii) reduces the aggregate commitment under the Credit Facility from$340,000,000 to$300,000,000 , (iv) makes certain changes to the calculation of the borrowing base, and (v) reduces the amount that the Company’s commitment may increase in size, under certain circumstances, from$750,000,000 to$375,000,000 . The most recent amendment also modifies the financial covenants under the Credit Facility to (i) reduce the amount of shareholders’ equity required under the Credit Facility from$375,000,000 to$275,000,000 , plus 25% of net proceeds from the sale of equity interests by the Company and its subsidiaries, (ii) reduce the minimum asset coverage ratio from 200% to 150% and (iii) incorporate a new senior coverage ratio to be maintained by the Company.
-
Reduced Exposure in Non-core Legacy Portfolio: We fully exited the investments in
Sur La Table and US Well during the quarter. Sur La Table’s performance continued to be impacted by the prolonged pandemic-driven store closures. We sold our position in June prior to Sur La Table’s bankruptcy filing with the net proceeds resulting in a recovery at approximately$5 million below its prior quarter mark. US Well stock was sold with recoveries at approximately$1 million higher than its prior quarter mark. The non-core legacy asset book comprised 11% of our total portfolio by fair market value (7 portfolio companies) as ofJune 30, 2020 , as compared to 14% at the end of the prior quarter. This is comprised of 9% in income-producing investments and 2% in non-accrual investments and equity, by fair market value, respectively. Our investments in Red Apple and AGY comprise 53% of the non-core book by fair market value.
-
Gordon Brothers Finance Company : As ofJune 30, 2020 , BCIC’s investment in GBFC was$175.6 million at cost, up from$158.5 million at the prior quarter end. It consists of$130.7 million in unsecured notes,$34.3 million in preferred stock and$10.6 million in common stock (each at cost). The investment assets owned by GBFC mainly consist of asset-backed loans. The impact of the pandemic on the underlying performance of its portfolio remained relatively contained. However, Covid-related concessions requested by some of its underlying borrowers led GBFC’s senior secured lenders to require de-leveraging of its revolving credit facility. During the quarter, BCIC invested$17 million in GBFC’s unsecured notes, which are senior to the preferred and common stock in the capital structure. These proceeds, along with additional cash from the balance sheet, were used by GBFC to reduce the amount outstanding under its credit facility pursuant to its senior lenders’ requirement. As a portion of the lower priced revolver is replaced with increased borrowings on its higher priced junior capital, the cost of capital for GBFC increases. This, along with some impact of Covid on the portfolio, has reduced expected returns on our investment in GBFC equity. The fair market value in our preferred and common stock investments in GBFC declined by$23 million in the second quarter.
-
Share Repurchase Program: Under our existing share repurchase program, during the second quarter of 2020, no shares were repurchased. Cumulative repurchases since BlackRock entered into the investment management agreement with the Company in early 2015 total approximately 8.3 million shares for
$54.0 million . Since the inception of our share repurchase program throughJune 30, 2020 , we have purchased over 10.0 million shares at an average price of$6.62 per share, including brokerage commissions, for a total of$66.3 million . As ofJune 30, 2020 , 4,013,446 shares remained authorized for repurchase.
Second Quarter Financial Updates
-
NII was
$8.8 million , or$0.13 per share, for the three months endedJune 30, 2020 . Relative to distributions declared of$0.10 per share, our NII distribution coverage was 129% for the quarter. Total investment income declined by 6.4% compared to previous quarter mainly driven by one new non-accrual investment (AGY Holding Corp. , first lien). Subsequent toJune 30, 2020 throughJuly 29, 2020 , we have had no additional non-accruals.
-
NAV per share decreased 9.5% or
$(0.51) per share to$4.84 per share on a quarter-over-quarter basis, primarily due to the decline in FMV and realized losses on investments during the quarter totaling approximately 5.3%. The decline was largely concentrated in two investments – GBFC and AGY.
-
For the quarter ended
June 30, 2020 , we incurred base management fees of$2.7 million , and incentive management fees based on income of$1.6 million . Our advisor has voluntarily waived the incentive fees based on income of$1.6 million , resulting in no net incentive fees for the period. SinceMarch 2017 ,$26.9 million of incentive management fees have been waived by the advisor on a cumulative basis. For incentive management fees based on gains, there was no accrual or payment as ofJune 30, 2020 .
-
Tax characteristics of all 2019 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2019 distributions of
$0.64 per share were comprised of$0.63 per share from various sources of income and$0.01 per share of return of capital. Our return of capital distributions totaled$1.99 per share from inception toDecember 31, 2019 . At our discretion, we may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2019.
Portfolio and Investment Activity*
($’s in millions) |
Three Months
Ended
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Three Months
Ended
|
Three Months
Ended
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Investment deployments |
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Investment exits |
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Number of portfolio company investments at the end of period |
52 |
|
52 |
|
38 |
|
Weighted average yield of debt and income producing equity securities, at fair market value |
9.9% |
|
10.3% |
|
11.7% |
|
% of Portfolio invested in Secured debt, at fair market value |
59% |
|
60% |
|
53% |
|
% of Portfolio invested in Unsecured debt, at fair market value |
27% |
|
23% |
|
21% |
|
% of Portfolio invested in Equity, at fair market value |
14% |
|
17% |
|
26% |
|
Average investment by portfolio company, at amortized cost
(excluding investments below |
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*Balance sheet amounts above are as of period end |
-
We deployed
$21.5 million during the quarter while exits of investments totaled$22.6 million , resulting in a$1.1 million net decrease in our portfolio due to investment activity.
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New Portfolio Companies |
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Incremental Investments |
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-
Total committed capital and outstanding investments of
BCIC Senior Loan Partners (“SLP”), at par, amounted to$230.2 million and$229.7 million , respectively, to 22 borrowers. During the second quarter, there were no deployments, and repayments were approximately$0.5 million . As ofJune 30, 2020 , SLP had one investment on non-accrual status. -
As of
June 30, 2020 , there were five non-accrual investment positions, representing approximately 2.7% and 10.7% of total debt and preferred stock investments, at fair value and cost, respectively, as compared to four non-accrual investment positions of approximately 2.4% and 6.9% of total debt and preferred stock investments at fair value and cost, respectively, atDecember 31, 2019 . The Company’s non-core investment inAGY Holding Corp. first lien loan was a new non-accrual this quarter, whileSur La Table , a prior non-accrual, was exited. The average internal investment rating of the portfolio at fair market value atJune 30, 2020 was 1.93 as compared to 1.86 as of the prior quarter end. -
During the quarter ended
June 30, 2020 , net realized and unrealized losses were$36.2 million , primarily due to depreciation in portfolio valuations during the quarter.
Liquidity and Capital Resources
-
At
June 30, 2020 , we had$3.1 million in cash and cash equivalents and$120.8 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately$123.9 million of availability for portfolio company investments. The committed but unfunded portfolio obligations atJune 30, 2020 were$4.5 million (excluding the$11.6 million LP commitment to SLP, which is completely discretionary). We believe that there is sufficient liquidity to meet all of the Company’s obligations and selectively deploy new capital. -
Net leverage, adjusted for available cash, receivables for investments sold, payables for investments purchased and unamortized debt issuance costs, was 0.95x at quarter-end, and our 201% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of
$164.3 million . Further, as of quarter-end, approximately 82% of our assets were invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company. -
On
July 7, 2020 , the Company paid a dividend of$0.10 per share, or$6.81 million , to stockholders of record onJune 1, 2020 , as announced onMay 6, 2020 . Out of the total dividend of$6.81 million , approximately$1.36 million was paid in cash and$5.45 million was paid in approximately 2.03 million shares of the Company’s common stock issued at a price of$2.68200 per share (representing the average closing stock price for the Company’s stock on the five trading days beginning withJune 23, 2020 and ending withJune 29, 2020 (both days inclusive)). As a result, subsequent to the quarter (onJuly 7, 2020 ) our NAV has increased by approximately$5.45 million , attributable to the portion of dividend paid in shares.
Conference Call
Both the teleconference and webcast will be available for replay by
Prior to the webcast/teleconference, an investor presentation that complements the earnings conference call will be posted to BlackRock Capital Investment Corporation’s website within the Presentations section of the Investors page (http://www.blackrockbkcc.com/news-and-events/disclaimer).
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 |
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Assets |
|
|
|
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Investments at fair value: |
|
|
|
|
Non-controlled, non-affiliated investments (cost of |
|
|
|
|
Non-controlled, affiliated investments (cost of |
10,787,073 |
|
22,473,524 |
|
Controlled investments (cost of |
284,423,232 |
|
350,249,163 |
|
Total investments at fair value (cost of |
644,286,586 |
|
749,859,081 |
|
Cash and cash equivalents |
3,087,966 |
|
14,678,878 |
|
Receivable for investments sold |
5,828,007 |
|
1,871,435 |
|
Interest, dividends and fees receivable |
8,111,557 |
|
5,708,324 |
|
Prepaid expenses and other assets |
2,516,649 |
|
1,945,709 |
|
Total Assets |
|
|
|
|
Liabilities |
|
|
|
|
Debt (net of deferred financing costs of |
|
|
|
|
Interest and credit facility fees payable |
496,576 |
|
757,472 |
|
Distributions payable |
6,813,994 |
|
9,637,075 |
|
Base management fees payable |
2,708,862 |
|
3,251,194 |
|
Incentive management fees payable |
1,849,597 |
|
1,849,597 |
|
Payable for investments purchased |
236,250 |
|
7,312,500 |
|
Accrued administrative services |
375,704 |
|
372,407 |
|
Other accrued expenses and payables |
2,400,691 |
|
1,704,507 |
|
Total Liabilities |
334,156,719 |
|
338,454,446 |
|
Net Assets |
|
|
|
|
Common stock, par value |
78,152 |
|
77,861 |
|
Paid-in capital in excess of par |
849,878,667 |
|
849,240,398 |
|
Distributable earnings (losses) |
(453,985,914) |
|
(351,040,023) |
|
|
(66,296,859) |
|
(62,669,255) |
|
Total Net Assets |
329,674,046 |
|
435,608,981 |
|
Total Liabilities and Net Assets |
|
|
|
|
Net Asset Value Per Share |
|
|
|
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|
||||||||
|
|
Three Months
|
|
Three Months
|
|
Six Months
|
|
Six Months
|
Investment Income: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
|
|
|
|
|
|
|
PIK interest income |
|
1,358,694 |
|
255,924 |
|
2,454,125 |
|
496,108 |
Fee income |
|
17,087 |
|
437,339 |
|
63,254 |
|
912,746 |
Total investment income from non-controlled, non-affiliated investments |
|
8,976,512 |
|
7,506,415 |
|
18,240,033 |
|
14,164,023 |
Non-controlled, affiliated investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
118,000 |
|
1,204,631 |
|
243,474 |
|
2,426,882 |
PIK interest income |
|
112,958 |
|
14,401 |
|
221,789 |
|
14,401 |
PIK dividend income |
|
— |
|
— |
|
— |
|
220,480 |
Fee income |
|
1,436 |
|
— |
|
2,871 |
|
— |
Total investment income from non-controlled, affiliated investments |
|
232,394 |
|
1,219,032 |
|
468,134 |
|
2,661,763 |
Controlled investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
5,486,595 |
|
5,859,065 |
|
10,902,430 |
|
12,759,803 |
PIK interest income |
|
180,156 |
|
960,266 |
|
1,053,664 |
|
960,266 |
Cash dividend income |
|
2,566,148 |
|
4,103,165 |
|
5,473,651 |
|
8,294,868 |
Fee income |
|
61,153 |
|
3,238 |
|
64,340 |
|
125,100 |
Total investment income from controlled investments |
|
8,294,052 |
|
10,925,734 |
|
17,494,085 |
|
22,140,037 |
Other Income |
|
— |
|
5,075 |
|
— |
|
5,075 |
Total investment income |
|
17,502,958 |
|
19,656,256 |
|
36,202,252 |
|
38,970,898 |
Expenses: |
|
|
|
|
|
|
|
|
Base management fees |
|
2,708,862 |
|
3,020,614 |
|
6,004,549 |
|
5,943,762 |
Incentive management fees |
|
1,608,740 |
|
2,245,935 |
|
3,533,138 |
|
4,526,771 |
Interest and credit facility fees |
|
4,359,441 |
|
3,761,328 |
|
8,571,715 |
|
7,153,762 |
Professional fees |
|
544,845 |
|
495,474 |
|
1,069,857 |
|
968,517 |
Administrative services |
|
375,704 |
|
337,634 |
|
689,265 |
|
700,939 |
Director fees |
|
152,500 |
|
175,000 |
|
337,250 |
|
368,000 |
Investment advisor expenses |
|
87,500 |
|
87,500 |
|
175,000 |
|
175,000 |
Other |
|
507,916 |
|
549,031 |
|
966,439 |
|
1,027,059 |
Total expenses, before incentive management fee waiver |
|
10,345,508 |
|
10,672,516 |
|
21,347,213 |
|
20,863,810 |
Incentive management fee waiver |
|
(1,608,740) |
|
(2,245,935) |
|
(3,533,138) |
|
(4,526,771) |
Expenses, net of incentive management fee waiver |
|
8,736,768 |
|
8,426,581 |
|
17,814,075 |
|
16,337,039 |
Net Investment Income |
|
8,766,190 |
|
11,229,675 |
|
18,388,177 |
|
22,633,859 |
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss): |
|
|
|
|
|
|
|
|
Net realized gain (loss): |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
(12,316,751) |
|
(23,721,329) |
|
(12,311,266) |
|
(23,395,840) |
Non-controlled, affiliated investments |
|
(42,238,921) |
|
— |
|
(43,774,013) |
|
(269,226) |
Net realized gain (loss) |
|
(54,555,672) |
|
(23,721,329) |
|
(56,085,279) |
|
(23,665,066) |
Net change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
11,084,426 |
|
23,828,458 |
|
(15,942,530) |
|
21,144,405 |
Non-controlled, affiliated investments |
|
42,458,272 |
|
(13,791,497) |
|
34,178,158 |
|
(9,230,583) |
Controlled investments |
|
(35,387,880) |
|
(8,277,465) |
|
(66,790,209) |
|
(3,780,398) |
Foreign currency translation |
|
239,587 |
|
142,737 |
|
(337,060) |
|
277,067 |
Net change in unrealized appreciation (depreciation) |
|
18,394,405 |
|
1,902,233 |
|
(48,891,641) |
|
8,410,491 |
Net realized and unrealized gain (loss) |
|
(36,161,267) |
|
(21,819,096) |
|
(104,976,920) |
|
(15,254,575) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
|
|
|
|
|
|
|
Net Investment Income Per Share—basic |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share—basic |
|
|
|
|
|
|
|
|
Average Shares Outstanding—basic |
|
68,117,628 |
|
68,836,255 |
|
68,365,792 |
|
68,836,930 |
Net Investment Income Per Share—diluted |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share—diluted |
|
|
|
|
|
|
|
|
Average Shares Outstanding—diluted |
|
85,111,365 |
|
85,829,992 |
|
85,359,529 |
|
85,830,667 |
Distributions Declared Per Share |
|
|
|
|
|
|
|
|
Supplemental Information
The Company reports its financial results on a generally accepted accounting principles (“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.
After
Computations for the periods below are derived from the Company's financial statements as follows:
|
Three Months Ended
|
Three Months Ended
|
Six Months Ended
|
Six Months Ended
|
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GAAP Basis: |
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|
|
|
|
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Net Investment Income |
|
|
|
|
|
|
|
|
Net Investment Income per share |
0.13 |
|
0.16 |
|
0.27 |
|
0.33 |
|
Addback: GAAP incentive management fee expense based on Gains |
— |
|
— |
|
— |
|
— |
|
Addback: GAAP incentive management fee expense based on Income net of incentive management fee waiver |
— |
|
— |
|
— |
|
— |
|
Pre-Incentive Fee1: |
|
|
|
|
|
|
|
|
Net Investment Income |
|
|
|
|
|
|
|
|
Net Investment Income per share |
0.13 |
|
0.16 |
|
0.27 |
|
0.33 |
|
Less: Incremental incentive management fee expense based on Income net of incentive management fee waiver |
— |
|
— |
|
— |
|
— |
|
As Adjusted2: |
|
|
|
|
|
|
|
|
Net Investment Income |
|
|
|
|
|
|
|
|
Net Investment Income per share |
0.13 |
|
0.16 |
|
0.27 |
|
0.33 |
|
Note: The NII amounts for the three and six 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
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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
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
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