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 March 6, 2019

BLACKROCK CAPITAL INVESTMENT

CORPORATION

Date: March 6, 2019

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 $0.17 per share providing fourth quarter distribution coverage of approximately 94%  

•

Net Asset Value (NAV) per share declined 7.7% or $0.59 per share to $7.07 per share on a quarter-over-quarter basis primarily due to net unrealized depreciation on certain legacy assets

•

Net leverage of 0.36x was down reflecting a net reduction in investments. Total liquidity for portfolio company investments, including cash, was approximately $252 million, subject to leverage and borrowing base restrictions

•

Waiver of incentive management fees based on income extended until June 30, 2019

•

Under our existing share repurchase program, we repurchased 1,986,014 shares of common stock for $11.2 million at an average price of $5.62, including brokerage commissions, via open market purchases in the fourth quarter.

Q4 2018

Q3 2018

Q4 2017

Total

Per

Total

Per

Total

Per

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

Amount

Share

Amount

Share

Amount

Share

Net Investment Income/(loss)

$

11.8

$

0.17

$

12.5

$

0.18

$

14.5

$

0.20

Net realized and unrealized gains/(losses)

$

(46.4

)

$

(0.66

)

$

7.9

$

0.11

$

(16.4

)

$

(0.22

)  

Deferred taxes

$

2.2

$

0.03

$

(0.4

)

$

(0.01

)

$

5.3

$

0.07

Realized losses on extinguishment of debt

—

—

—

—

—

—

Basic earnings/(losses)

$

(32.4

)

$

(0.46

)

$

20.0

$

0.28

$

3.3

$

0.05

Distributions declared

$

12.6

$

0.18

$

12.8

$

0.18

$

13.2

$

0.18

Net Investment Income/(loss), as adjusted¹

$

11.8

$

0.17

$

12.5

$

0.18

$

14.5

$

0.20

Basic earnings/(losses), as adjusted¹

$

(32.4

)

$

(0.46

)

$

20.0

$

0.28

$

3.3

$

0.05

2018 Totals

2017 Totals

Total

Per

Total

Per

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

Amount

Share

Amount

Share

Net Investment Income/(loss)

$

47.4

$

0.66

$

55.1

$

0.75

Net realized and unrealized gains/(losses)

$

(56.6

)

$

(0.79

)  

$

(32.9

)

$

(0.44

)

Realized losses on extinguishment of debt

—

—

$

(1.3

)

$

(0.02

)  

Basic earnings/(loss)

$

(9.2

)

$

(0.13

)

$

20.9

$

0.29

Distributions declared

$

51.3

$

0.72

$

52.5

$

0.72

Net Investment Income/(loss), as adjusted¹

$

47.4

$

0.66

$

55.1

$

0.75

Basic earnings/(loss), as adjusted¹

$

(9.2

)

$

(0.13

)

$

20.9

$

0.29

As of

As of

As of

December 31,

September 30,

December 31,

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

2018

2018

2017

Total assets

$

693.6

$

799.5

$

799.9

Investment portfolio, at fair market value

$

671.7

$

780.6

$

757.9

Debt outstanding

$

186.4

$

233.0

$

206.7

Total net assets

$

487.0

$

543.2

$

571.1

Net asset value per share

$

7.07

$

7.66

$

7.83

Net leverage ratio²

0.36x

0.43x

0.32x

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, and (B) net asset value.

•

Under our existing share repurchase program, during the fourth quarter of 2018, 1,986,014 shares were repurchased for $11.2 million at an average price of $5.62 per share, including brokerage commissions. The cumulative repurchases since BlackRock entered into the investment management agreement with the Company in early 2015 totaled approximately 7.2 million shares for $49.9 million, representing 80.3% of total share repurchase activity, on a dollar basis, since inception.  Since the inception of our share repurchase program through December 31, 2018, we have purchased 8.9 million shares at an average price of $6.96 per share, including brokerage commissions, for a total of $62.2 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.

•

The non-core legacy asset book comprised 33% of our total portfolio by fair market value as of December 31, 2018. This is further broken down into income-producing investments, non-earning equities and non-accrual investments at 25%, 7% and 1% of the total portfolio, respectively by fair market value. Our investments in Vertellus Holdings, AGY Holding, Sur La Table, US Well Services and related issuers comprise 73% of the non-core book by fair market value.

•

Waiver of our incentive management fee based on income, which previously ran through December 31, 2018, has been extended to June 30, 2019.

Three months

Three months

($’s in millions)

ended

ended

Year ended

Year ended

December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Investment deployments

$

32.0

$

63.3

$

308.6

$

243.4

Investment exits

$

94.7

$

124.3

$

338.4

$

386.4

Number of portfolio company investments at the end of period

27

30

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

11.5%

10.8%

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

47%

56%

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

23%

17%

% of Portfolio invested in Equity, at fair market value

30%

27%

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

$

34.1

$

33.0

•

We deployed $32.0 million during the quarter while exits of investments totaled $94.7 million, resulting in a $62.7 million net decrease in our portfolio due to investment activity.  

▪

Our deployments were primarily concentrated in one new portfolio company investment and two investments into existing portfolio companies.

▪

$15.0 million funded L+7.50% second lien term loan to Outcomes Group Holdings, which is a specialized care management provider in the workers’ compensation industry;

▪

$11.9 million of incremental L + 11.0% unsecured debt as well as $0.4 million of preferred stock at 13.5% to Gordon Brothers Finance Company (“GBFC”) to fund portfolio growth; and

▪

$2.5 million of incremental L + 6.00% first lien delayed draw term loan to United PF Holdings, LLC.

▪

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

▪

$19.0 million and $8.2 million repayments of Pathway Partners Vet Management Company, LLC second lien term loan and second lien delayed draw term loan, respectively;

▪

$12.9 million repayment of K2 Pure Solutions Nocal, LP first lien term loan;

▪

$31.2 million and $7.9 million cash repayments of U.S. Well Services, LLC first lien term loan and revolver, respectively; and

▪

$15.0 million partial repayment of unsecured debt to GBFC.

•

Our $96.3 million equity investment in Senior Loan Partners is generating a yield of approximately 11%. During the fourth quarter, Senior Loan Partners made investments into four new portfolio companies and four existing portfolio companies totaling $57.5 million of new capital deployments during the quarter. Total committed capital and outstanding investments, at par, amounted to $363.5 million and $343.6 million, respectively, to 27 borrowers. The four new investments at par were (i) a $12.0 million first lien term loan to Achilles Acquisition, LLC, a national employee benefits agency specializing in insurance for small-to-medium sized businesses, (ii) a $10.0 million first lien term loan to NGS US Finco, LLC, an operation and maintenance provider of natural gas transmission networks in the US, (iii) an $8.9 million first lien term loan to F.M.I. Intermediate Holdings, LLC, a vertically integrated provider of flight critical, complex structural assemblies and related manufacturing services for global commercial, military and business aircraft, and (iv) a $8.0 million first lien term loan and a $2.0 million unfunded delayed draw term loan to TLE Holdings, LLC, a developer of care and early education programs throughout the US. Incremental investments to existing portfolio companies primarily included (i) an additional $8.5 million investment Crown Paper Group Inc., and (ii) an additional $8.6 million investment in Digital Room, LLC.

•

As of December 31, 2018, there were three non-accrual investment positions, representing approximately 1.6% and 7.1% 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 December 31, 2018 was 1.44 as compared to 1.31 as of the prior quarter end.

•

During the quarter ended December 31, 2018, net realized and unrealized losses before tax were $(46.4) million, primarily due to depreciation in portfolio valuations during the quarter. For the three months ended December 31, 2018, unrealized gains in a consolidated taxable subsidiary resulted in a decrease to our deferred tax liability of $2.2 million.

•

GAAP net investment income (“NII”) was $11.8 million, or $0.17 per share, and $47.4 million, or $0.66 per share, respectively, for the three months and year ended December 31, 2018. Relative to distributions declared of $0.18 per share, our NII distribution coverage was 94% for the quarter. For the full year 2018, relative to distributions declared of $0.72 per share, our NII distribution coverage was 93%.

•

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 year ended December 31, 2018, $8.5 million of incentive management fees based on income were earned by our investment adviser; however, as previously disclosed, any such fees earned until December 31, 2018 were waived by our investment adviser. This waiver has now been extended to June 30, 2019. Pursuant to the waiver, $16.5 million of incentive management fees have been waived on a cumulative basis. During the year, there was no accrual for incentive management fees based on gains.

•

The Company holds certain portfolio investments through taxable subsidiaries as pass through entities. Income earned and gains realized on the investment held by the taxable subsidiary are taxable to such subsidiary. For the three months ended December 31, 2018, a reversal of a deferred tax liability of $2.2 million was included in net realized and unrealized gain (loss), primarily due to a depreciation in valuations on the portfolio investments held in a taxable subsidiary. For the year ended December 31, 2018, deferred tax had no impact to the Consolidated Statement of Operations.

•

Tax characteristics of all 2018 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2018 distributions of $0.72 per share were comprised of $0.70 per share from various sources of income and $0.02 per share of return of capital. Our return of capital distributions totaled $1.98 per share from inception to December 31, 2018. 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 2018.

•

At December 31, 2018, we had $13.5 million in cash and cash equivalents and $238.6 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $252.1 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, stood at 0.36x at quarter-end, and our 354% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $293.4 million. Further, as of quarter-end, approximately 78% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

December 31,

2018

December 31,

2017

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $233,331,450 and $311,938,762)

$

200,569,644

$

261,683,202

Non-controlled, affiliated investments (cost of $130,892,674 and $195,354,637)

111,727,234

215,779,077

Controlled investments (cost of $388,870,375 and $321,999,526)

359,356,068

280,478,528

Total investments at fair value (cost of $753,094,499 and $829,292,925)

671,652,946

757,940,807

Cash and cash equivalents

13,497,320

29,014,645

Receivable for investments sold

1,691,077

1,344,918

Interest, dividends and fees receivable

4,084,001

8,342,780

Prepaid expenses and other assets

2,707,036

3,236,819

Total Assets

$

693,632,380

$

799,879,969

Liabilities

Debt (net of deferred financing costs of $3,227,965 and $4,209,445)

$

186,397,728

$

206,661,272

Interest and credit facility fees payable

722,841

1,820,971

Distributions payable

12,552,212

13,152,924

Base management fees payable

3,494,520

3,734,655

Payable for investments purchased

989,460

479,297

Accrued administrative services

376,507

114,995

Other accrued expenses and payables

2,078,958

2,815,923

Total Liabilities

206,612,226

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 68,921,798 and 72,946,910 outstanding

77,861

77,723

Paid-in capital in excess of par

853,248,794

858,087,822

Distributable earnings (losses)

(304,106,473)

(249,331,111)

Treasury stock at cost, 8,939,489 and 4,776,854 shares held

(62,200,028)

(37,734,502)

Total Net Assets

487,020,154

571,099,932

Total Liabilities and Net Assets

$

693,632,380

$

799,879,969

Net Asset Value Per Share

$

7.07

$

7.83

Three

Three

months

months

Ended

ended

12/31/18

12/31/17

Year ended

Year ended

(Unaudited)

(Unaudited)

12/31/18

12/31/17

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$

6,458,180

$

9,751,698

$

28,138,255

$

42,597,334

PIK interest income

231,517

202,494

516,904

3,340,360

Cash dividend income

—

—

—

404,780

PIK dividend income

—

—

—

65,944

Fee income

366,042

2,708,371

1,428,852

3,213,513

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

7,055,739

12,662,563

30,084,011

49,621,931

Non-controlled, affiliated investments:

Cash interest income

1,937,189

2,954,495

9,401,715

10,540,239

PIK interest income

374,151

986,653

1,784,118

4,054,626

PIK dividend income

254,555

917,861

827,934

2,997,385

Fee income

—

156,716

35,000

506,632

Total investment income from non-controlled, affiliated investments

2,565,895

5,015,725

12,048,767

18,098,882

Controlled investments:

Cash interest income

7,064,876

4,119,450

24,490,257

18,714,928

PIK interest income

—

143,484

1,474,466

1,463,401

Cash dividend income

3,968,845

2,456,399

14,264,703

8,814,639

PIK dividend income

—

—

731,516

—

Fee income

13,855

—

725,643

25,000

Total investment income from controlled investments

11,047,576

6,719,333

41,686,585

29,017,968

Other income

48,231

—

48,231

590,429

Total investment income

20,717,441

24,397,621

83,867,594

97,329,210

Expenses:

Base management fees

3,494,520

3,734,655

14,138,788

16,391,532

Incentive management fees

2,356,899

2,903,436

8,510,866

7,980,098

Interest and credit facility fees

3,786,153

4,149,211

15,228,062

18,205,912

Professional fees

864,500

1,026,921

2,428,850

2,708,262

Administrative services

376,507

114,995

1,702,723

1,039,221

Director fees

181,000

193,250

727,000

668,500

Investment advisor expenses

87,500

87,500

350,000

350,004

Other

142,768

573,908

1,860,696

2,874,087

Total expenses, before incentive management fee waiver

11,289,847

12,783,876

44,946,985

50,217,616

Incentive management fee waiver

(2,356,899

)

(2,903,436

)

(8,510,866

)

(7,980,098

)

Expenses, net of incentive management fee waiver

8,932,948

9,880,440

36,436,119

42,237,518

Net Investment Income

11,784,493

14,517,181

47,431,475

55,091,692

Realized and Unrealized Gain (Loss):

Net realized gain (loss):

Non-controlled, non-affiliated investments

3,237

(859,750

)

(46,104,588

)

(54,814,358

)

Non-controlled, affiliated investments

28,550,295

—

28,550,295

—

Controlled investments

375,000

—

(28,384,662

)

2,375,534

Net realized gain (loss)

28,928,532

(859,750

)

(45,938,955

)

(52,438,824

)

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

(6,923,226

)

(8,065,434

)

17,493,755

23,612,802

Non-controlled, affiliated investments

(52,063,236

)

346,794

(35,110,643

)

23,722,730

Controlled investments

(16,012,774

)

(7,814,577

)

7,527,453

(28,225,914

)

Foreign currency translation

(356,834

)

(23,380

)

(565,247

)

463,413

Net change in unrealized appreciation (depreciation)

(75,356,070

)

(15,556,597

)

(10,654,682

)

19,573,031

Deferred Taxes

2,220,156

5,257,916

—

—

Net realized and unrealized gain (loss)

(44,207,382

)

(11,158,431

)

(56,593,637

)

(32,865,793

)

Realized losses on extinguishment of debt

—

(10,723

)

—

(1,323,442

)

Net Increase (Decrease) in Net Assets Resulting from Operations

$

(32,422,889

)

$

3,348,027

$

(9,162,162

)

$

20,902,457

Net Investment Income Per Share—basic

$

0.17

$

0.20

$

0.66

$

0.75

Earnings (Loss) Per Share—basic

$

(0.46

)

$

0.05

$

(0.13

)

$

0.29

Average Shares Outstanding—basic

69,835,855

73,145,321

71,373,570

72,983,354

Net Investment Income Per Share—diluted

$

0.16

$

0.19

$

0.64

$

0.73

Earnings (Loss) Per Share—diluted

$

(0.46

)

$

0.05

$

(0.13

)

$

0.29

Average Shares Outstanding—diluted (NII only)

86,829,592

94,875,804

88,367,307

90,927,689

Distributions Declared Per Share

$

0.18

$

0.18

$

0.72

$

0.72

Three months

ended

Three months

ended

Year ended

Year ended

December 31,

2018

December 31,

2017

December 31,

2018

December 31,

2017

GAAP Basis:

Net Investment Income

$

11,784,493

$

14,517,181

$

47,431,475

$

55,091,692

Net Investment Income per share

0.17

0.20

0.66

0.75

Addback:  GAAP incentive management fee expense based on Gains

—

—

—

—

Addback:  GAAP incentive management fee expense based on Income

—

—

—

—

Pre-Incentive Fee¹:

Net Investment Income

$

11,784,493

$

14,517,181

$

     47,431,475

$

55,091,692

Net Investment Income per share

0.17

0.20

0.66

0.75

Less: Incremental incentive management fee expense based on Income

—

—

—

—

As Adjusted²:

Net Investment Income

$

11,784,493

$

14,517,181

$

47,431,475

$

55,091,692

Net Investment Income per share

0.17

0.20

0.66

0.75