Delaware

814-00712

20-2725151

(State or other jurisdiction of

(Commission

(IRS Employer

incorporation or organization)

File Number)

Identification Number)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

ITEM 7.01.

REGULATION FD DISCLOSURE.

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit

Number

Description

99.1

Press Release, dated as of October 31, 2018

BLACKROCK CAPITAL INVESTMENT CORPORATION

Date:  October 31, 2018

By:

/s/ Michael Pungello

Name:

Michael Pungello

Title:

Interim Chief Financial Officer and Interim Treasurer

Investor Contact:

Press Contact:

Nik Singhal

Brian Beades

212.810.5427

212.810.5596

•

GAAP Net Investment Income (NII) of approximately $0.18 per share providing third quarter distribution coverage of 98%  

•

Net Asset Value (NAV) per share increased 1.3% or $0.10 per share to $7.66 per share on a quarter-over-quarter basis

•

Net leverage of 0.43x remained level quarter-over-quarter. Total liquidity for portfolio company investments, including cash, was approximately $233 million, subject to leverage and borrowing base restrictions

•

Under our existing share repurchase program, we repurchased 108,134 shares of common stock for $0.6 million, including brokerage commissions, via open market purchases in the third quarter; in October 2018, we repurchased an additional 1,173,289 shares of common stock for $6.8 million, including brokerage commissions.

Q3 2018

Q2 2018

Q3 2017

Total

Per

Total

Per

Total

Per

($'s in millions, except per share data)

Amount

Share

Amount

Share

Amount

Share

Net Investment Income/(loss)

$

12.5

$

0.18

$

11.5

$

0.16

$

12.1

$

0.17

Net realized and unrealized gains/(losses)

$

7.9

$

0.11

$

(5.5

)

$

(0.08

)

$

(19.3

)

$

(0.27

)

Deferred taxes

$

(0.4

)

$

(0.01

)

$

(1.8

)

$

(0.02

)

$

(5.3

)

$

(0.07

)

Realized losses on extinguishment of debt

—

—

—

—

$

(1.3

)

$

(0.02

)

Basic earnings/(losses)

$

20.0

$

0.28

$

4.2

$

0.06

$

(13.8

)

$

(0.19

)

Distributions declared

$

12.8

$

0.18

$

12.8

$

0.18

$

13.1

$

0.18

Net Investment Income/(loss), as adjusted¹

$

12.5

$

0.18

$

11.5

$

0.16

$

12.1

$

0.17

Basic earnings/(losses), as adjusted¹

$

20.0

$

0.28

$

4.2

$

0.06

$

(13.8

)

$

(0.19

)

September 30,

June 30,

December 31,

September 30,

($'s in millions, except per share data)

2018

2018

2017

2017

Total assets

$

799.5

$

800.0

$

799.9

$

855.0

Investment portfolio, at fair market value

$

780.6

$

776.3

$

757.9

$

833.9

Debt outstanding

$

233.0

$

241.5

$

206.7

$

246.1

Total net assets

$

543.2

$

536.6

$

571.1

$

581.5

Net asset value per share

$

7.66

$

7.56

$

7.83

$

7.96

Net leverage ratio²

0.43x

0.43x

0.32x

0.42x

•

Equity investments in CB-HDT Holdings, Inc. (“Hunter”) were sold during the quarter at the prior quarter fair value of $15.0 million and $4.8 million for the preferred stock and common stock previously held, respectively. We continued to hold unsecured debt in Hunter with 12% PIK interest at September 30, 2018.

•

In July 2018, Senior Loan Partners, as Servicer, and its wholly-owned subsidiary BCIC Senior Loan Funding II, LLC (a newly formed entity), as Borrower, entered into a $270 million Loan and Servicing Agreement with Morgan Stanley Senior Funding, Inc. acting as Administrative Agent and The Bank of New York Mellon Trust Company acting as Collateral Agent. Proceeds from this credit facility refinanced the outstanding balances under the existing $200 million credit facility to BCIC Senior Loan Funding, LLC (a wholly-owned subsidiary of Senior Loan Partners). As previously disclosed, with the increase in the size of equity commitments and the credit facility, the investing capacity of Senior Loan Partners has increased from $300 million to approximately $400 million.

•

Under our existing share repurchase program, during the third quarter of 2018, 108,134 shares were repurchased for $0.6 million at an average price of $6.00 per share, including brokerage commissions. In October 2018, we repurchased an additional 1,173,289 shares of common stock for $6.8 million, including brokerage commissions. The cumulative repurchases since BlackRock entered into the investment management agreement with the Company in early 2015 totaled approximately 5.2 million shares for $38.8 million at September 30, 2018, representing 76% of total share repurchase activity, on a dollar basis.  Since the inception of our share repurchase program through September 30, 2018, we have purchased 7.0 million shares at an average price of $7.34 per share, including brokerage commissions, for a total of $51.0 million. In April 2018, our Board of Directors authorized an additional 2.5 million shares for repurchase, effective July 1, 2018 until the earlier of June 30, 2019 or until such time that all of the authorized shares have been repurchased. Furthermore, in October 2018, an additional 3 million shares were authorized for repurchases, effective November 5, 2018 until the earlier of October 28, 2019 or until such time that all of the authorized shares have been repurchased.

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.

Three months

Three months

Three months

($’s in millions)

ended

ended

ended

September 30, 2018

June 30, 2018

September 30, 2017

Investment deployments

$

70.7

$

61.3

$

34.9

Investment exits

$

74.5

$

152.1

$

75.7

Number of portfolio company investments at the end of period

28

29

32

Weighted average yield of debt and income producing equity securities, at fair market value

11.2%

11.5%

10.8%

% of Portfolio invested in Secured debt, at fair market value

49%

52%

59%

% of Portfolio invested in Unsecured debt, at fair market value

21%

18%

17%

% of Portfolio invested in Equity, at fair market value

30%

30%

24%

Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million)

$

34.1

$

32.9

$

34.1

•

We deployed $70.7 million during the quarter while exits of investments totaled $74.5 million, resulting in a $3.8 million net decrease in our portfolio due to investment activity.  

▪

Our deployments were primarily concentrated in one new portfolio company investment, and incremental investments in three existing portfolio companies:

▪

$19.4 million funded L+6.00% first lien term loan and $10.6 million unfunded delayed draw term loan to United PF Holdings, LLC, which is a leading fitness club franchisor with 59 clubs throughout the United States;

▪

$38.8 million of incremental L+11.00% unsecured debt as well as $2.5 million of preferred stock to GBFC to fund portfolio growth;

▪

$5.4 million incremental L+8.00% second lien delayed draw term loan to Pathway Partners Vet Management Company, LLC; and

▪

$4.2 million of incremental equity to Senior Loan Partners.

▪

Our repayments were primarily concentrated in two portfolio company investment exits, two dispositions and one partial repayment:

▪

$27.5 million repayment of Pomeroy Group, LLC, second lien term loan;

▪

$7.0 million and $4.0 million repayment of VetCor Inc.’s first lien term loan and delayed draw term loan, respectively;

▪

$15.0 million and $4.8 million sale of preferred stock and common stock of CB-HDT Holdings, Inc., respectively; and

▪

$15.0 million partial repayment of unsecured debt in GBFC.

•

Our $96.3 million equity investment in Senior Loan Partners is generating a yield of approximately 11%. During the third quarter, Senior Loan Partners made investments into four new portfolio companies and five existing portfolio companies totaling $67.8 million of new capital deployments, bringing committed and outstanding amounts, at par, to $313.6 million and $297.7 million, respectively, with a total of 24 borrowers.  The four new investments, at par, were (i) a $20.0 million first lien term loan to On Location Events, LLC, a leader in premium experiential hospitality, (ii) a $15.0 million first lien term loan to KC Culinarte Intermediate, LLC, a manufacturer of fresh, clean label soups prepared in refrigerated and frozen formats, (iii) a $10.6 million first lien term loan and a $1.4 million unfunded delayed draw term loan to PVHC Holding Corp., a leading provider of pressurized dispensing components including aerosol container valves and actuators, and (iv) a $7.2 million first lien term loan and a $0.6 million unfunded delayed draw term loan to Premise Health Holding Corp., the number one provider of employer-sponsored onsite health and wellness clinics and pharmacies in the US.

•

As of September 30, 2018, there was one non-accrual investment position, representing approximately 1.7% and 1.8% of total debt and preferred stock investments, at fair value and cost, respectively, as compared to non-accrual investment positions of approximately 3.6% and 14.3% of total debt and preferred stock investments at fair value and cost, respectively, at December 31, 2017.  Our average internal investment rating at fair market value at September 30, 2018 was 1.31 as compared to 1.23 as of the prior quarter end.

•

During the quarter ended September 30, 2018, net realized loss was $2.2 million, primarily resulting from the sale of common stock investment in CB-HDT Holdings, Inc., partially offset by a gain relating to Bankruptcy Management Solutions, Inc.; net unrealized depreciation decreased $10.1 million before deferred taxes, primarily due to appreciation on our legacy investments, as well as the reversal of previously recognized unrealized depreciation due

to dispositions. For the three months ended September 30, 2018, unrealized gains in a consolidated taxable subsidiary resulted in an increase to our deferred tax liability of $0.4 million.

•

GAAP net investment income (“NII”) was $12.5 million, or $0.18 per share, for the three months ended September 30, 2018.  Relative to distributions declared of $0.18 per share, our NII distribution coverage was 98% 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 ended September 30, 2018, $2.5 million of incentive management fees based on income was earned by our investment adviser; however, as previously disclosed, any such fees earned until December 31, 2018 have been waived by our investment adviser. Pursuant to the waiver, $14.1 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 totaled $1.96 per share from inception to December 31, 2017.  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 distributions, please refer to Section 19 Notices posted within the Distribution History section of our website, as necessary.

•

At September 30, 2018, we had $4.5 million in cash and cash equivalents and $228.6 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $233 million of availability for portfolio company investments.

•

Net leverage, adjusted for available cash, receivables for investments sold and unamortized debt issuance costs, was 0.43x at quarter-end, and our 326% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $301 million which exceeds the available amount of $233 million for portfolio company investments.  Further, as of quarter-end, 80% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

September 30,

2018

December 31,

2017

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $254,620,448 and $311,938,762)

$

228,781,869

$

261,683,202

Non-controlled, affiliated investments (cost of $140,570,979 and $195,354,637)

173,468,776

215,779,077

Controlled investments (cost of $391,897,996 and $321,999,526)

378,396,463

280,478,528

Total investments at fair value (cost of $787,089,423 and $829,292,925)

780,647,108

757,940,807

Cash and cash equivalents

4,462,864

29,014,645

Receivable for investments sold

1,312,840

1,344,918

Interest, dividends and fees receivable

10,177,605

8,342,780

Prepaid expenses and other assets

2,872,380

3,236,819

Total Assets

$

799,472,797

$

799,879,969

Liabilities

Debt (net of deferred financing costs of $3,463,658 and $4,209,445)

$

232,959,766

$

206,661,272

Interest and credit facility fees payable

2,259,432

1,820,971

Distributions payable

12,782,869

13,152,924

Deferred tax liability

2,220,156

—

Base management fees payable

3,481,000

3,734,655

Payable for investments purchased

311,334

479,297

Accrued administrative services

355,238

114,995

Other accrued expenses and payables

1,948,431

2,815,923

Total Liabilities

256,318,226

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 70,907,812 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

(16,988,281

)

(13,918,838

)

Accumulated net realized loss on investments and extinguishment of debt

(237,591,277

)

(162,723,790

)

Net unrealized (depreciation), net of tax

(10,207,250

)

(72,688,483

)

Treasury stock at cost, 6,953,475 and 4,776,854 shares held

(51,040,715

)

(37,734,502

)

Total Net Assets

543,154,571

571,099,932

Total Liabilities and Net Assets

$

799,472,797

$

799,879,969

Net Asset Value Per Share

$

7.66

$

7.83

Three months

Three months

Nine months

Nine months

ended

ended

ended

ended

September 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$

6,355,510

$

9,312,179

$

21,680,075

$

32,845,636

PIK interest income

285,387

146,950

285,387

3,137,866

Cash dividend income

—

—

—

404,780

PIK dividend income

—

—

—

65,944

Fee income

314,103

164,464

1,062,810

505,141

Total investment income from non-controlled, non-affiliated investments

6,955,000

9,623,593

23,028,272

36,959,367

Non-controlled, affiliated investments:

Cash interest income

2,341,479

2,598,036

7,464,526

7,585,744

PIK interest income

719,007

952,864

1,409,967

3,067,974

PIK dividend income

193,227

1,613,379

573,379

2,079,524

Fee income

—

—

35,000

349,916

Total investment income from non-controlled, affiliated investments

3,253,713

5,164,279

9,482,872

13,083,158

Controlled investments:

Cash interest income

6,608,904

4,979,940

17,425,381

14,595,478

PIK interest income

191,253

143,484

1,474,466

1,319,917

Cash dividend income

3,678,572

2,849,738

10,295,858

6,358,240

PIK dividend income

—

—

731,516

—

Fee income

321,463

—

711,788

25,000

Total investment income from controlled investments

10,800,192

7,973,162

30,639,009

22,298,635

Other Income

—

—

—

590,429

Total investment income

21,008,905

22,761,034

63,150,153

72,931,589

Expenses:

Base management fees

3,481,000

3,993,673

10,644,268

12,656,877

Incentive management fees

2,497,266

1,493,619

6,153,967

5,076,662

Interest and credit facility fees

3,743,694

4,808,533

11,441,909

14,056,698

Professional fees

212,430

323,949

1,564,350

1,681,342

Administrative services

355,238

292,767

1,326,216

924,226

Director fees

181,000

157,500

546,000

475,249

Investment advisor expenses

87,500

87,504

262,500

262,505

Other

461,711

957,192

1,717,928

2,300,180

Total expenses, before incentive management fee waiver

11,019,839

12,114,737

33,657,138

37,433,739

Incentive management fee waiver

(2,497,266

)

(1,493,619

)

(6,153,967

)

(5,076,662

)

Expenses, net of incentive management fee waiver

8,522,573

10,621,118

27,503,171

32,357,077

Net Investment Income

12,486,332

12,139,916

35,646,982

40,574,512

Realized and Unrealized Gain (Loss):

Net realized gain (loss):

Non-controlled, non-affiliated investments

488,772

28,990

(46,107,825

)

(53,954,609

)

Controlled investments

(2,644,230

)

—

(28,759,662

)

2,375,535

Net realized gain (loss)

(2,155,458

)

28,990

(74,867,487

)

(51,579,074

)

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

(4,724,274

)

(22,325,607

)

24,416,981

31,678,241

Non-controlled, affiliated investments

1,795,922

19,838,552

16,952,593

23,375,933

Controlled investments

12,895,555

(17,130,664

)

23,540,227

(20,411,338

)

Foreign currency translation

116,642

268,222

(208,413

)

486,793

Net change in unrealized appreciation (depreciation)

10,083,845

(19,349,497

)

64,701,388

35,129,629

Net realized and unrealized gain (loss) before taxes

7,928,387

(19,320,507

)

(10,166,099

)

(16,449,445

)

Deferred taxes

(409,765

)

(5,257,916

)

(2,220,156

)

(5,257,916

)

Net realized and unrealized gain (loss) after taxes

7,518,622

(24,578,423

)

(12,386,255

)

(21,707,361

)

Realized losses on extinguishment of debt

—

(1,312,719

)

—

(1,312,719

)

Net Increase (Decrease) in Net Assets Resulting from Operations

$

20,004,954

$

(13,751,226

)

$

23,260,727

$

17,554,432

Net Investment Income Per Share—basic

$

0.18

$

0.17

$

0.50

$

0.56

Earnings (Loss) Per Share—basic

$

0.28

$

(0.19

)

$

0.32

$

0.24

Average Shares Outstanding—basic

71,008,615

73,049,648

71,892,278

72,928,772

Net Investment Income Per Share—diluted

$

0.17

$

0.16

$

0.48

$

0.54

Earnings (Loss) Per Share—diluted

$

0.25

$

(0.19

)

$

0.32

$

0.24

Average Shares Outstanding—diluted

88,002,352

73,049,648

88,886,015

72,928,772

Distributions Declared Per Share

$

0.18

$

0.18

$

0.54

$

0.54

Three months

ended

September 30,

2018

Three months

ended

September 30, 2017

Nine months

ended

September 30, 2018

Nine months

ended

September 30, 2017

GAAP Basis:

Net Investment Income

$

12,486,332

$

12,139,916

$

35,646,982

$

40,574,512

Net Investment Income per share

0.18

0.17

0.50

0.56

Addback:  GAAP incentive management fee expense based on Gains

—

—

—

—

Addback:  GAAP incentive management fee expense based on Income

—

—

—

—

Pre-Incentive Fee¹:

Net Investment Income

$

12,486,332

$

12,139,916

$

35,646,982

$

40,574,512

Net Investment Income per share

0.18

0.17

0.50

0.56

Less: Incremental incentive management fee expense based on Income

—

—

—

—

As Adjusted²:

Net Investment Income

$

12,486,332

$

12,139,916

$

35,646,982

$

40,574,512

Net Investment Income per share

0.18

0.17

0.50

0.56