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))

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

BKCC

NASDAQ Global Select Market

ITEM 2.02.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

ITEM 7.01.

REGULATION FD DISCLOSURE.

ITEM 8.01.

OTHER EVENTS.

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit

Number

Description

99.1

Press Release, dated as of October 30, 2019

BLACKROCK CAPITAL INVESTMENT

CORPORATION

Date: October 30, 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 $0.14 per share providing third quarter distribution coverage of 100%.  

•

Net Asset Value (“NAV”) per share decreased 4.8% or $0.33 per share to $6.49 per share on a quarter-over-quarter basis.

•

Net leverage of 0.61x was up, driven by increased pace of investment deployment. Total liquidity for portfolio company investments, including cash, was approximately $206 million, subject to leverage and borrowing base restrictions.

•

Board approval obtained to reduce the applicable minimum asset coverage ratio from 200% to 150% effective October 29, 2020.

•

Gross deployments of $230 million included first or second lien loans to 20 new portfolio companies

•

Number of portfolio companies increased from 27 to 43

•

First lien investments increased from 24% of the portfolio by FMV to 33%

•

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 0.61x

Q3 2019

Q2 2019

Q3 2018

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

Total Amount

Per Share

Total Amount

Per Share

Total Amount

Per Share

Net Investment Income/(loss)

$9.6

$0.14

$11.2

$0.16

$12.5

$0.18

Net realized and unrealized gains/(losses)

$(22.3)

$(0.33)

$(21.8)

$(0.31)

$7.9

$0.11

Deferred taxes

—

—

—

—

$(0.4)

$(0.01)

Basic earnings/(losses)

$(12.7)

$(0.18)

$(10.6)

$(0.15)

$20.0

$0.28

Distributions declared

$9.6

$0.14

$12.4

$0.18

$12.8

$0.18

Net Investment Income/(loss), as adjusted¹

$9.6

$0.14

$11.2

$0.16

$12.5

$0.18

Basic earnings/(losses), as adjusted¹

$(12.7)

$(0.18)

$(10.6)

$(0.15)

$20.0

$0.28

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

September 30, 2019

June 30,

2019

December 31,

2018

September 30,

2018

Total assets

$742.7

$756.7

$693.6

$799.5

Investment portfolio, at fair market value

$725.9

$718.7

$671.7

$780.6

Debt outstanding

$276.1

$252.7

$186.4

$233.0

Total net assets

$446.8

$469.1

$487.0

$543.2

Net asset value per share

$6.49

$6.82

$7.07

$7.66

Net leverage ratio²

0.61x

0.53x

0.36x

0.43x

•

On August 30, 2019, the Company entered into a Fourth 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 $400,000,000 to $340,000,000 and (ii) reduces the amount of shareholders’ equity required under the Credit Facility from $450,000,000 plus 25% of net proceeds from the sale of equity interests to $375,000,000 plus 25% of net proceeds from the sale of equity interests after August 30, 2019.

•

The non-core legacy asset book comprised 18% of our total portfolio by fair market value as of September 30, 2019, an improvement from 28% at the end of the prior quarter. This includes 13% in income-producing investments, 1% in non-earning equities and 4% in non-accrual investments by fair market value. Our investments in AGY Holding, Red Apple, US Well Services and related issuers comprise 53% of the non-core book by fair market value.

•

Under our existing share repurchase program, during the third 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 through September 30, 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.  As of September 30, 2019, 3,320,309 shares remained authorized for repurchase. On October 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 of November 3, 2020 or such time that all of the authorized shares have been repurchased. Also on October 29, 2019, the 3,320,309 shares unpurchased from the October 30, 2018 authorization expired.

•

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 on October 29, 2020 (unless the Company receives earlier stockholder approval), the Company’s asset coverage requirement will be reduced from 200% to 150%. Additionally, upon the effectiveness of the reduced asset coverage ratio on October 29, 2020 (or earlier if stockholder approval is obtained), the Advisor intends to reduce the annual rate of its base management fees charged to the Company from 1.75% to 1.50%, with a further reduction to 1.00% on assets that exceed 200% of NAV. Simultaneous with such reduction in base management fee rate, the Advisor intends to reduce (i) the rate of incentive fee based on income other than capital gains from 20% over a 7% annualized hurdle rate to 17.5% over a 7% annualized hurdle rate and (ii) the rate of incentive fee based on capital gains from 20% to 17.5%.

($’s in millions)

Three Months

ended

September 30, 2019

Three Months

ended

June 30, 2019

Three Months

ended

September 30, 2018

Investment deployments

$66.8

$105.6

$70.7

Investment exits

$37.4

$45.6

$74.5

Number of portfolio company investments at the end of period

43

38

28

Weighted average yield of debt and income producing equity securities,

at fair market value

11.0%

11.7%

11.2%

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

57%

53%

49%

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

21%

21%

21%

% of Portfolio invested in Equity, at fair market value

22%

26%

30%

Average investment by portfolio company, at amortized cost

(excluding investments below $5.0 million)

$22.8

$25.0

$34.1

•

We deployed $66.8 million during the quarter while exits of investments totaled $37.4 million, resulting in a $29.4 million net increase in our portfolio due to investment activity.  

▪

Our deployments consisted of five new portfolio companies and six investments into existing portfolio companies, which primarily consisted of the following five new portfolio company investments and one existing portfolio company investment:

▪

$17.5 million funded L + 7.00% first lien term loan to Juul Labs, Inc., an electronic cigarette company;

▪

$15.3 million funded L + 6.75% first lien term loan to WH Buyer, LLC, a retail brand that sells women’s apparel;

▪

$7.8 million funded L + 8.43% first lien term loan to Winshuttle, LLC, a provider of data automation and data process management;

▪

$7.3 million funded L + 7.75% second lien term loan to Bluefin Holding, LLC, a provider of software solutions for asset managers;

▪

$4.5 million funded L + 6.00% first lien term loan (with a $0.5 million unfunded revolving term loan) to Sandata Technologies, LLC, a provider of home care solutions; and

▪

$4.7 million of incremental L + 8.09% first lien term loan to Diamondback Acquisition.

▪

Our repayments were primarily concentrated in significant reduction in credit exposure in one non-core legacy portfolio company:

▪

Full exit of our second lien debt and equity investments in Vertellus Holdings, LLC or V Global LLC (“Vertellus”) and the partial sale of first lien debt investment in Vertellus, resulting in net proceeds received of approximately $32.0 million.

•

Our $96.3 million equity investment in BCIC Senior Loan Partners (“SLP”) is generating a yield of greater than 11%. Total committed capital and outstanding investments, at par, amounted to $296.0 million and $290.9 million, respectively, to 24 borrowers. During the third quarter, SLP made incremental investments to two existing portfolio companies totaling $1.2 million, which consisted of investment from capital commitments pertaining to delayed draw and revolving loans. During the third quarter, SLP’s exits and repayments were approximately $13.9 million, which primarily consisted of an exit to our investment in New Era Technology, Inc., and partial disposition of our investment in F.M.I. Intermediate Holdings, LLC.

•

As of September 30, 2019, there were four non-accrual investment positions, representing approximately 4.3% and 7.6% 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, at December 31, 2018. Our average internal investment rating at fair market value at September 30, 2019 was 1.38 as compared to 1.43 as of the prior quarter end.

•

During the quarter ended September 30, 2019, net realized and unrealized losses were $22.3 million, primarily due to depreciation in portfolio valuations during the quarter. Legacy non-core assets in the portfolio contributed to 85% of this loss.

•

NII was $9.6 million, or $0.14 per share, for the three months ended September 30, 2019. Relative to distributions declared of $0.14 per share, our NII distribution coverage was 100% for the quarter.

•

For the quarter ended September 30, 2019, we incurred base management fees of $3.2 million, and incentive management fees based on income of $2.1 million, of which our advisor has voluntarily and partially waived incentive fees of $1.2 million, resulting in net incentive fees of $0.9 million for the period. The payment of the $0.9 million net incentive fees based on income was deferred pursuant to our investment management agreement. Including this voluntary partial waiver, $22.2 million of incentive management fees have been waived on a cumulative basis. For incentive management fees based on gains, there was no accrual or payment as of September 30, 2019.

•

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 September 30, 2019, we had $3.4 million in cash and cash equivalents and $202.1 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $205.5 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 0.61x at quarter-end, and our 258% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $163.0 million. Further, as of quarter-end, approximately 78% of our assets were invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

September 30,

2019

December 31,

2018

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $368,883,039 and $233,331,450)

$355,908,897

$200,569,644

Non-controlled, affiliated investments (cost of $68,533,450 and $130,892,674)

26,915,558

111,727,234

Controlled investments (cost of $383,997,209 and $388,870,375)

343,107,836

359,356,068

Total investments at fair value (cost of $821,413,698 and $753,094,499)

725,932,291

671,652,946

Cash and cash equivalents

3,407,997

13,497,320

Receivable for investments sold

585,968

1,691,077

Interest, dividends and fees receivable

10,553,452

4,084,001

Prepaid expenses and other assets

2,170,461

2,707,036

Total Assets

$742,650,169

$693,632,380

Liabilities

Debt (net of deferred financing costs of $2,533,696 and $3,227,965)

$276,120,037

$186,397,728

Interest and credit facility fees payable

2,674,247

722,841

Distributions payable

9,637,075

12,552,212

Base management fees payable

3,230,147

3,494,520

Incentive fee payable

872,695

—

Payable for investments purchased

—

989,460

Accrued administrative services

330,073

376,507

Other accrued expenses and payables

2,965,956

2,078,958

Total Liabilities

295,830,230

206,612,226

Net Assets

Common stock, par value $.001 per share, 200,000,000 common shares authorized,

77,861,287 and 77,861,287 issued and 68,836,255 and 68,921,798 outstanding

77,861

77,861

Paid-in capital in excess of par

853,248,794

853,248,794

Distributable earnings (losses)

(343,837,461)

(304,106,473)

Treasury stock at cost, 9,025,032 and 8,939,489 shares held

(62,669,255)

(62,200,028)

Total Net Assets

446,819,939

487,020,154

Total Liabilities and Net Assets

$742,650,169

$693,632,380

Net Asset Value Per Share

$6.49

$7.07

Three Months Ended

September 30, 2019

Three Months Ended

September 30, 2018

Nine Months

Ended

September 30, 2019

Nine Months

Ended

September 30, 2018

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$8,167,397

$6,355,510

$20,922,567

$21,680,075

PIK interest income

362,757

285,387

858,865

285,387

Fee income

441,537

314,103

1,354,283

1,062,810

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

8,971,691

6,955,000

23,135,715

23,028,272

Non-controlled, affiliated investments:

Cash interest income

937,710

2,341,479

3,364,592

7,464,526

PIK interest income

114,221

719,007

128,622

1,409,967

PIK dividend income

—

193,227

220,480

573,379

Fee income

1,604

—

1,604

35,000

Total investment income from non-controlled, affiliated investments

1,053,535

3,253,713

3,715,298

9,482,872

Controlled investments:

Cash interest income

4,967,220

6,608,904

17,727,023

17,425,381

PIK interest income

1,057,151

191,253

2,017,417

1,474,466

Cash dividend income

3,878,092

3,678,572

12,172,960

10,295,858

PIK dividend income

—

—

—

731,516

Fee income

3,199

321,463

128,299

711,788

Total investment income from controlled investments

9,905,662

10,800,192

32,045,699

30,639,009

Other income

25,296

—

30,371

—

Total investment income

19,956,184

21,008,905

58,927,083

63,150,153

Expenses:

Base management fees

3,230,146

3,481,000

9,173,908

10,644,268

Incentive management fees

2,101,954

2,497,266

6,628,725

6,153,967

Interest and credit facility fees

4,312,944

3,743,694

11,466,706

11,441,909

Professional fees

814,820

212,430

1,783,336

1,564,350

Administrative services

330,072

355,238

1,031,012

1,326,216

Director fees

185,250

181,000

553,250

546,000

Investment advisor expenses

87,500

87,500

262,500

262,500

Other

485,682

461,711

1,512,742

1,717,928

Total expenses, before incentive management fee waiver

11,548,368

11,019,839

32,412,179

33,657,138

Incentive management fee waiver

(1,229,259)

(2,497,266)

(5,756,030)

(6,153,967)

Expenses, net of incentive management fee waiver

10,319,109

8,522,573

26,656,149

27,503,171

Net Investment Income

9,637,075

12,486,332

32,270,934

35,646,982

Realized and Unrealized Gain (Loss):

Net realized gain (loss):

Non-controlled, non-affiliated investments

—

488,772

(23,395,840)

(46,107,825)

Non-controlled, affiliated investments

(76,161)

—

(345,387)

—

Controlled investments

—

(2,644,230)

—

(28,759,662)

Net realized gain (loss)

(76,161)

(2,155,458)

(23,741,227)

(74,867,487)

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

(1,013,109)

(4,724,274)

20,131,296

24,416,981

Non-controlled, affiliated investments

(13,565,504)

1,795,922

(22,796,087)

16,952,593

Controlled investments

(7,594,669)

12,895,555

(11,375,067)

23,540,227

Foreign currency translation

(79,775)

116,642

197,292

(208,413)

Net change in unrealized appreciation (depreciation)

(22,253,057)

10,083,845

(13,842,566)

64,701,388

Net realized and unrealized gain (loss) before taxes

(22,329,218)

7,928,387

(37,583,793)

(10,166,099)

Deferred taxes

—

(409,765)

—

(2,220,156)

Net realized and unrealized gain (loss) after taxes

(22,329,218)

7,518,622

(37,583,793)

(12,386,255)

Net Increase (Decrease) in Net Assets Resulting from Operations

$(12,692,143)

$20,004,954

$(5,312,859)

$23,260,727

Net Investment Income Per Share—basic

$0.14

$0.18

$0.47

$0.50

Earnings (Loss) Per Share—basic

$(0.18)

$0.28

$(0.08)

$0.32

Average Shares Outstanding—basic

68,836,255

71,008,615

68,836,702

71,892,278

Net Investment Income Per Share—diluted

$0.14

$0.17

$0.45

$0.48

Earnings (Loss) Per Share—diluted

$(0.18)

$0.25

$(0.08)

$0.32

Average Shares Outstanding—diluted

85,829,992

88,002,352

85,830,439

88,886,015

Distributions Declared Per Share

$0.14

$0.18

$0.50

$0.54

Three months

ended

September 30, 2019

Three months

ended

September 30, 2018

Nine months

ended

September 30, 2019

Nine months

ended

September 30, 2018

GAAP Basis:

Net Investment Income

$9,637,075

$12,486,332

$32,270,934

$35,646,982

Net Investment Income per share

0.14

0.18

0.47

0.50

Addback: GAAP incentive management fee expense based on Gains

—

—

—

—

Addback: GAAP incentive management fee expense based on Income net of incentive management fee waiver

$872,695

—

$872,695

—

Pre-Incentive Fee¹:

Net Investment Income

$10,509,770

$12,486,332

$33,143,629

$35,646,982

Net Investment Income per share

0.15

0.18

0.48

0.50

Less: Incremental incentive management fee expense based on Income net of incentive management fee waiver

$(872,695)

—

$(872,695)

—

As Adjusted²:

Net Investment Income

$9,637,075

$12,486,332

$32,270,934

$35,646,982

Net Investment Income per share

0.14

0.18

0.47

0.50