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))

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 9.01.

FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit

Number

Description

99.1

Press Release, dated as of July 29, 2020

BLACKROCK CAPITAL INVESTMENT

CORPORATION

Date: July 29, 2020

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 $0.13 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.

Q2 2020

Q1 2020

Q2 2019

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

Total Amount

Per Share

Total Amount

Per Share

Total Amount

Per Share

Net Investment Income/(loss)

$8.8

$0.13

$9.6

$0.14

$11.2

$0.16

Net realized and unrealized gains/(losses)

$(36.2)

$(0.53)

$(68.8)

$(1.00)

$(21.8)

$(0.31)

Basic earnings/(losses)

$(27.4)

$(0.40)

$(59.2)

$(0.86)

$(10.6)

$(0.15)

Distributions declared

$6.8

$0.10

$9.5

$0.14

$12.4

$0.18

Net Investment Income/(loss), as adjusted¹

$8.8

$0.13

$9.6

$0.14

$11.2

$0.16

Basic earnings/(losses), as adjusted¹

$(27.4)

$(0.40)

$(59.2)

$(0.86)

$(10.6)

$(0.15)

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

As of June 30, 2020

As of March 31, 2020

As of December 31, 2019

As of June 30, 2019

Total assets

$663.8

$691.3

$774.1

$756.7

Investment portfolio, at fair market value

$644.3

$681.3

$749.9

$718.7

Debt outstanding

$319.3

$308.0

$313.6

$252.7

Total net assets

$329.7

$363.2

$435.6

$469.1

Net asset value per share

$4.84

$5.35

$6.33

$6.82

Net leverage ratio²

0.95x

0.85x

0.70x

0.53x

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.

•

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 from June 5, 2022 to June 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 of June 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 of June 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 through June 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 of June 30, 2020, 4,013,446 shares remained authorized for repurchase.

•

NII was $8.8 million, or $0.13 per share, for the three months ended June 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 to June 30, 2020 through July 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. Since March 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 of June 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 to December 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.

($’s in millions)

Three Months

Ended

June 30, 2020

Three Months

Ended

March 31, 2020

Three Months

Ended

June 30, 2019

Investment deployments

$21.5

$37.3

$105.6

Investment exits

$22.6

$37.3

$45.6

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 $5.0 million)

$21.8

$21.2

$25.0

•

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.  

▪

Our deployments consisted of two new portfolio companies and two investments into existing portfolio companies, which consisted of the following:

▪

$1.0 million 9.75% first lien senior secured note and $0.3 million funded L + 5.50% first lien term loan to Calceus Acquisition, Inc. (Cole Haan), a brand apparel and shoe retailer; and

▪

$0.8 million funded L + 8.50% first lien term loan (with an additional $0.3 million unfunded at close) to Puppet, Inc., a software solution provider focusing on infrastructure and application workflow;

▪

$17.0 million of incremental L + 11.00% unsecured debt to GBFC; and

▪

$0.8 million of incremental 12.00% first lien term loans to AGY Holding Corp.

▪

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

▪

$21.2 million full sale of our first lien term loan in Sur La Table, Inc., a non-core legacy position, resulting in proceeds received of $8.7 million;

▪

Sale of approximately 4.3 million common shares in U.S. Well Services Inc., a non-core legacy position, resulting in proceeds received of $2.2 million;

▪

$4.4 million partial sale of our investment in Kaseya Traverse Inc., consisting of $4.0 million in first lien term loan, $0.3 million in revolving term loan, and $0.1 million in delayed draw term loan;

▪

$2.7 million partial repayment of First Boston Construction Holdings, LLC, consisting of $2.2 million in subordinated debt and a return of capital of $0.5 million in LLC units; and

▪

$2.5 million partial sale of Bluefin Holding, LLC second lien term loan.

•

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 of June 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, at December 31, 2019. The Company’s non-core investment in AGY Holding Corp. first lien loan was a new non-accrual this quarter, while Sur La Table, a prior non-accrual, was exited. The average internal investment rating of the portfolio at fair market value at June 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.

•

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 at June 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 on June 1, 2020, as announced on May 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 with June 23, 2020 and ending with June 29, 2020 (both days inclusive)). As a result, subsequent to the quarter (on July 7, 2020) our NAV has increased by approximately $5.45 million, attributable to the portion of dividend paid in shares.

June 30,

2020

December 31,

2019

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $377,024,167 and $389,156,775)

$349,076,281

$377,136,394

Non-controlled, affiliated investments (cost of $19,960,866 and $65,825,475)

10,787,073

22,473,524

Controlled investments (cost of $401,862,889 and $400,561,551)

284,423,232

350,249,163

Total investments at fair value (cost of $798,847,922 and $855,543,801)

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

$663,830,765

$774,063,427

Liabilities

Debt (net of deferred financing costs of $1,831,742 and $2,298,004)

$319,275,045

$313,569,694

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 $.001 per share, 200,000,000 common shares authorized, 78,151,541 and 77,861,287 issued and 68,139,955 and 68,836,255 outstanding

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)

Treasury stock at cost, 10,011,586 and 9,025,032 shares held

(66,296,859)

(62,669,255)

Total Net Assets

329,674,046

435,608,981

Total Liabilities and Net Assets

$663,830,765

$774,063,427

Net Asset Value Per Share

$4.84

$6.33

Three Months Ended

June 30, 2020 (Unaudited)

Three Months Ended

June 30, 2019 (Unaudited)

Six Months Ended

June 30, 2020 (Unaudited)

Six Months Ended

June 30, 2019 (Unaudited)

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$7,600,731

$6,813,152

$15,722,654

$12,755,169

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

$(27,395,077)

$(10,589,421)

$(86,588,743)

$7,379,284

Net Investment Income Per Share—basic

$0.13

$0.16

$0.27

$0.33

Earnings (Loss) Per Share—basic

$(0.40)

$(0.15)

$(1.27)

$0.11

Average Shares Outstanding—basic

68,117,628

68,836,255

68,365,792

68,836,930

Net Investment Income Per Share—diluted

$0.13

$0.16

$0.27

$0.32

Earnings (Loss) Per Share—diluted

$(0.40)

$(0.15)

$(1.27)

$0.11

Average Shares Outstanding—diluted

85,111,365

85,829,992

85,359,529

85,830,667

Distributions Declared Per Share

$0.10

$0.18

$0.24

$0.36

Three Months

Ended

June 30, 2020

Three Months

Ended

June 30, 2019

Six Months

Ended

June 30, 2020

Six Months

Ended

June 30, 2019

GAAP Basis:

Net Investment Income

$8,766,190

$11,229,675

$18,388,177

$22,633,859

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

$8,766,190

$11,229,675

$18,388,177

$22,633,859

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

$8,766,190

$11,229,675

$18,388,177

$22,633,859

Net Investment Income per share

0.13

0.16

0.27

0.33