BlackRock Capital Investment Corporation Reports Financial Results for the Quarter and Year Ended December 31, 2019, Declares Quarterly Distribution of $0.14 per Share
-
GAAP Net Investment Income (“NII”) of
$0.14 per share providing fourth quarter distribution coverage of 100%. -
Net Asset Value (“NAV”) per share decreased 2.5% or
$0.16 per share to$6.33 per share on a quarter-over-quarter basis, primarily due to net unrealized depreciation on certain legacy assets. -
Net leverage of 0.70x was up from 0.61x in comparison to the previous quarter, driven by net new investment deployment. Total liquidity for portfolio company investments, including cash, was approximately
$187 million , subject to leverage and borrowing base restrictions.
“During 2019, we demonstrated significant progress towards achieving our stated strategy of re-shaping the portfolio to optimize NII and provide a stable stream of income with reduced volatility. This included a meaningful increase in income-producing senior secured investments accompanied with a reduction in non-core assets,” commented
“Specifically, the origination and portfolio composition metrics over the course of 2019 include:
-
Gross deployments of approximately
$304 million included first or second lien loans to 25 new portfolio companies - Number of portfolio companies increased from 27 to 47
- First lien investments increased from 24% of the portfolio by FMV to 34%
- First and second lien (i.e. secured) investments increased from 47% of the portfolio by FMV to 57%
- Net Leverage ratio: increased from 0.36x to 0.70x
“In the fourth quarter, the Company had gross and net deployments of
“In addition, we demonstrated further progress on exiting our legacy non-earning equity exposure through a partial redemption of approximately 22% of our previous holding in Advantage Insurance Inc.’s preferred stock. The non-core legacy portfolio reduced to 16% of the total portfolio by fair market value at
Financial Highlights
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Q4 2019 |
Q3 2019 |
Q4 2018 |
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($'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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Deferred taxes |
— |
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— |
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— |
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— |
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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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2019 Totals |
2018 Totals |
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($'s in millions, except per share data) |
Total
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Per Share |
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Total
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Per Share |
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Net Investment Income/(loss) |
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Net realized and unrealized gains/(losses) |
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Basic earnings/(losses) |
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Distributions declared |
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Net Investment Income/(loss), as adjusted1 |
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Basic earnings/(losses), as adjusted1 |
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($'s in millions, except per share data) |
As of |
As of |
As of |
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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 |
0.70x |
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0.61x |
|
0.36x |
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____________________ |
1 Non-GAAP basis financial measure. See Supplemental Information on page 8. |
2 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
-
On
October 29, 2019 , the Company’s Board of Directors approved the application of the modified asset coverage requirement set forth in Section 61(a)(2) of the Investment Company Act, as amended by the Small Business Credit Availability Act (“SBCAA”). As a result, effective onOctober 29, 2020 (unless the Company receives earlier stockholder approval), the Company’s asset coverage requirement will be reduced from 200% to 150% (in other words, regulatory cap on maximum leverage would increase from 1.00x to 2.00x). Additionally, the Company intends to seek stockholder approval to reduce the minimum asset coverage ratio of 150%, to become effective the date after the annual meeting of stockholders, to be held onMay 1, 2020 . If such stockholder approval is obtained, the reduced ratio shall become effective on the day after the annual meeting. Simultaneous with the 150% minimum asset coverage ratio becoming effective, our management fee and incentive fees will be reduced as follow: (i) our management fee will be reduced from 1.75% of our total assets to 1.50% of our total assets, provided that the rate will be further reduced to 1.00% on assets that exceed 200% of our net asset value; (ii) our incentive fee based on net investment income will be reduced from 20% over a 7% hurdle to 17.5% over a 7% hurdle; and (iii) our incentive fee based on net capital gains will be reduced from 20% to 17.5%. The Company expects that it would incrementally increase leverage to a range from 0.95x to 1.25x debt-to-equity. The Company will file a proxy statement relating to its 2020 annual meeting of stockholders within 120 days afterDecember 31, 2019 . -
The non-core legacy asset book comprised 16% of our total portfolio by fair market value as of
December 31, 2019 , an improvement from 18% at the end of the prior quarter and 33% at the end of the prior year. This includes 13% in income-producing investments, 1% in non-earning equities and 2% in non-accrual investments by fair market value. Our investments inAGY Holding ,Sur La Table and Red Apple comprise 61% of the non-core book by fair market value. -
Under our existing share repurchase program, during the fourth quarter of 2019, no shares were repurchased. Cumulative repurchases since BlackRock entered into the investment management agreement with the Company in early 2015 totals approximately 7.3 million shares for
$50.4 million , representing 80.4% of total share repurchase activity, on a dollar basis, since inception. Since the inception of our share repurchase program throughDecember 31, 2019 , we have purchased approximately 9.0 million shares at an average price of$6.94 per share, including brokerage commissions, for a total of$62.7 million . OnOctober 29, 2019 , the Company’s Board of Directors renewed the authorization for the Company to purchase up to a total of 5,000,000 shares, effective until the earlier ofNovember 3, 2020 or such time that all of the authorized shares have been repurchased. As ofDecember 31, 2019 , 5,000,000 shares remained authorized for repurchase.
Portfolio and Investment Activity*
($’s in millions) |
Three Months
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Three Months
|
Year
|
Year
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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 |
47 |
|
27 |
|
47 |
|
27 |
|
Weighted average yield of debt and income producing equity securities,
|
10.9% |
|
11.5% |
|
10.9% |
|
11.5% |
|
% of Portfolio invested in Secured debt, at fair market value |
57% |
|
47% |
|
57% |
|
47% |
|
% of Portfolio invested in Unsecured debt, at fair market value |
22% |
|
23% |
|
22% |
|
23% |
|
% of Portfolio invested in Equity, at fair market value |
21% |
|
30% |
|
21% |
|
30% |
|
Average investment by portfolio company, at amortized cost
(excluding investments below |
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*Balance sheet amounts above are as of period end |
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-
We deployed
$73.0 million during the quarter while exits of investments totaled$38.1 million , resulting in a$34.9 million net increase in our portfolio due to investment activity.
■ Our deployments consisted of five new portfolio companies and four investments into existing portfolio companies, which primarily consisted of the following: |
New Portfolio Companies |
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Incremental Investments |
|
■ Our repayments were primarily concentrated in one portfolio company exit, three partial repayments, and a partial redemption of one of our non-core legacy positions: |
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-
Our
$96.3 million equity investment inBCIC Senior Loan Partners (“SLP”) generated a yield of greater than 11% in 2019. Total committed capital and outstanding investments, at par, amounted to$271.2 million and$268.6 million , respectively, to 22 borrowers. During the fourth quarter, SLP’s exits and repayments were approximately$22.3 million , which primarily consisted of exits to our investments inNSM Sub Holdings Corp. andF.M.I. Intermediate Holdings, LLC , and one partial repayment fromAP Exhaust Acquisition, LLC . -
As of
December 31, 2019 , there were four non-accrual investment positions, representing approximately 2.4% and 6.9% of total debt and preferred stock investments, at fair value and cost, respectively, as compared to non-accrual investment positions of approximately 1.6% and 7.1% of total debt and preferred stock investments at fair value and cost, respectively, atDecember 31, 2018 . Our average internal investment rating at fair market value atDecember 31, 2019 was 1.39 as compared to 1.38 as of the prior quarter end. -
During the quarter ended
December 31, 2019 , net realized and unrealized losses were$11.2 million , primarily due to depreciation in portfolio valuations during the quarter.
Fourth Quarter Financial Updates
-
NII was
$9.6 million , or$0.14 per share, for the three months endedDecember 31, 2019 . Relative to distributions declared of$0.14 per share, our NII distribution coverage was 100% for the quarter. -
For the quarter ended
December 31, 2019 , we incurred base management fees of$3.3 million , and incentive management fees based on income of$2.1 million , of which our advisor has voluntarily and partially waived incentive fees of$1.1 million , resulting in net incentive fees of$1.0 million for the period. The payment of the$1.0 million net incentive fees based on income was deferred pursuant to our investment management agreement. Including this voluntary partial waiver,$23.4 million of incentive management fees have been waived on a cumulative basis sinceMarch 2017 . For incentive management fees based on gains, there was no accrual or payment as ofDecember 31, 2019 . -
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.
Liquidity and Capital Resources
-
At
December 31, 2019 , we had$14.7 million in cash and cash equivalents and$172.6 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately$187.3 million of availability for portfolio company investments. -
Net leverage, adjusted for available cash, receivables for investments sold, payables for investments purchased and unamortized debt issuance costs, was 0.70x at quarter-end, and our 235% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of
$112.1 million . Further, as of quarter-end, approximately 80% of our assets were invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.
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 |
||||
|
2019 |
2018 |
||
Assets |
|
|
|
|
Investments at fair value: |
|
|
|
|
Non-controlled, non-affiliated investments (cost of |
|
|
|
|
Non-controlled, affiliated investments (cost of |
22,473,524 |
|
111,727,234 |
|
Controlled investments (cost of |
350,249,163 |
|
359,356,068 |
|
Total investments at fair value (cost of |
749,859,081 |
|
671,652,946 |
|
Cash and cash equivalents |
14,678,878 |
|
13,497,320 |
|
Receivable for investments sold |
1,871,435 |
|
1,691,077 |
|
Interest, dividends and fees receivable |
5,708,324 |
|
4,084,001 |
|
Prepaid expenses and other assets |
1,945,709 |
|
2,707,036 |
|
Total Assets |
|
|
|
|
Liabilities |
|
|
|
|
Debt (net of deferred financing costs of |
|
|
|
|
Interest and credit facility fees payable |
757,472 |
|
722,841 |
|
Distributions payable |
9,637,075 |
|
12,552,212 |
|
Base management fees payable |
3,251,194 |
|
3,494,520 |
|
Incentive management fees payable |
1,849,597 |
|
— |
|
Payable for investments purchased |
7,312,500 |
|
989,460 |
|
Accrued administrative services |
372,407 |
|
376,507 |
|
Other accrued expenses and payables |
1,704,507 |
|
2,078,958 |
|
Total Liabilities |
338,454,446 |
|
206,612,226 |
|
Net Assets |
|
|
|
|
Common stock, par value |
77,861 |
|
77,861 |
|
Paid-in capital in excess of par |
849,240,398 |
|
853,248,794 |
|
Distributable earnings (losses) |
(351,040,023) |
|
(304,106,473) |
|
|
(62,669,255) |
|
(62,200,028) |
|
Total Net Assets |
435,608,981 |
|
487,020,154 |
|
Total Liabilities and Net Assets |
|
|
|
|
Net Asset Value Per Share |
|
|
|
|
Consolidated Statements of Operations |
||||||||
|
|
Three Months
|
|
Three Months
|
|
Year
|
|
Year
|
Investment Income: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
|
|
|
|
|
|
|
PIK interest income |
|
1,226,151 |
|
231,517 |
|
2,085,016 |
|
516,904 |
Fee income |
|
89,829 |
|
366,042 |
|
1,444,113 |
|
1,428,852 |
Total investment income from non-controlled, non-affiliated investments |
|
9,686,270 |
|
7,055,739 |
|
32,821,986 |
|
30,084,011 |
Non-controlled, affiliated investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
128,895 |
|
1,937,189 |
|
3,493,487 |
|
9,401,715 |
PIK interest income |
|
116,575 |
|
374,151 |
|
245,197 |
|
1,784,118 |
PIK dividend income |
|
— |
|
254,555 |
|
220,480 |
|
827,934 |
Fee income |
|
1,451 |
|
— |
|
3,055 |
|
35,000 |
Total investment income from non-controlled, affiliated investments |
|
246,921 |
|
2,565,895 |
|
3,962,219 |
|
12,048,767 |
Controlled investments: |
|
|
|
|
|
|
|
|
Cash interest income |
|
5,105,807 |
|
7,064,876 |
|
22,832,830 |
|
24,490,257 |
PIK interest income |
|
759,254 |
|
— |
|
2,776,671 |
|
1,474,466 |
Cash dividend income |
|
3,389,999 |
|
3,968,845 |
|
15,562,959 |
|
14,264,703 |
PIK dividend income |
|
— |
|
— |
|
— |
|
731,516 |
Fee income |
|
3,186 |
|
13,855 |
|
131,485 |
|
725,643 |
Total investment income from controlled investments |
|
9,258,246 |
|
11,047,576 |
|
41,303,945 |
|
41,686,585 |
Other income |
|
— |
|
48,231 |
|
30,371 |
|
48,231 |
Total investment income |
|
19,191,437 |
|
20,717,441 |
|
78,118,521 |
|
83,867,594 |
Expenses: |
|
|
|
|
|
|
|
|
Base management fees |
|
3,251,193 |
|
3,494,520 |
|
12,425,101 |
|
14,138,788 |
Incentive management fees |
|
2,122,796 |
|
2,356,899 |
|
8,751,521 |
|
8,510,866 |
Interest and credit facility fees |
|
4,091,942 |
|
3,786,153 |
|
15,558,648 |
|
15,228,062 |
Professional fees |
|
309,728 |
|
864,500 |
|
2,093,064 |
|
2,428,850 |
Administrative services |
|
372,407 |
|
376,507 |
|
1,403,419 |
|
1,702,723 |
Director fees |
|
176,500 |
|
181,000 |
|
729,750 |
|
727,000 |
Investment advisor expenses |
|
87,500 |
|
87,500 |
|
350,000 |
|
350,000 |
Other |
|
288,190 |
|
142,768 |
|
1,800,932 |
|
1,860,696 |
Total expenses, before incentive management fee waiver |
|
10,700,256 |
|
11,289,847 |
|
43,112,435 |
|
44,946,985 |
Incentive management fee waiver |
|
(1,145,894) |
|
(2,356,899) |
|
(6,901,924) |
|
(8,510,866) |
Expenses, net of incentive management fee waiver |
|
9,554,362 |
|
8,932,948 |
|
36,210,511 |
|
36,436,119 |
Net Investment Income |
|
9,637,075 |
|
11,784,493 |
|
41,908,010 |
|
47,431,475 |
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss): |
|
|
|
|
|
|
|
|
Net realized gain (loss): |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
(264,342) |
|
3,237 |
|
(23,660,181) |
|
(46,104,588) |
Non-controlled, affiliated investments |
|
(879,673) |
|
28,550,295 |
|
(1,225,060) |
|
28,550,295 |
Controlled investments |
|
— |
|
375,000 |
|
— |
|
(28,384,662) |
Net realized gain (loss) |
|
(1,144,015) |
|
28,928,532 |
|
(24,885,241) |
|
(45,938,955) |
Net change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
Non-controlled, non-affiliated investments |
|
953,491 |
|
(6,923,226) |
|
21,084,787 |
|
17,493,755 |
Non-controlled, affiliated investments |
|
(1,733,802) |
|
(52,063,236) |
|
(24,529,889) |
|
(35,110,643) |
Controlled investments |
|
(9,423,322) |
|
(16,012,774) |
|
(20,798,389) |
|
7,527,453 |
Foreign currency translation |
|
136,690 |
|
(356,834) |
|
333,982 |
|
(565,247) |
Net change in unrealized appreciation (depreciation) |
|
(10,066,943) |
|
(75,356,070) |
|
(23,909,509) |
|
(10,654,682) |
Deferred Taxes |
|
— |
|
2,220,156 |
|
— |
|
— |
Net realized and unrealized gain (loss) |
|
(11,210,958) |
|
(44,207,382) |
|
(48,794,750) |
|
(56,593,637) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
|
|
|
|
|
|
|
Net Investment Income Per Share—basic |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share—basic |
|
|
|
|
|
|
|
|
Average Shares Outstanding—basic |
|
68,836,255 |
|
69,835,855 |
|
68,836,590 |
|
71,373,570 |
Net Investment Income Per Share—diluted |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share—diluted |
|
|
|
|
|
|
|
|
Average Shares Outstanding—diluted |
|
85,829,992 |
|
86,829,592 |
|
85,830,326 |
|
88,367,307 |
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
|
Three Months
|
Year Ended
|
Year Ended
|
||||
GAAP Basis: |
|
|
|
|
|
|
|
|
Net Investment Income |
|
|
|
|
|
|
|
|
Net Investment Income per share |
0.14 |
|
0.17 |
|
0.61 |
|
0.66 |
|
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 |
0.15 |
|
0.17 |
|
0.64 |
|
0.66 |
|
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 |
0.14 |
|
0.17 |
|
0.61 |
|
0.66 |
|
Note: The NII amounts for the three months and year 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
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/20200304005760/en/
Investor Contact:
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