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 November 4, 2020

BLACKROCK CAPITAL INVESTMENT

CORPORATION

Date: November 4, 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 $0.12 per share, or $8.5 million, provided third quarter distribution coverage of 122%.  

•

Considerable progress towards reducing non-core and junior capital portfolio exposure during and subsequent to the third quarter. Non-core investment in AGY was substantially exited. Subsequent to quarter-end, portfolio exposure to Gordon Brothers Finance Company (“GBFC”) was significantly reduced. Both transactions in aggregate netted $62 million in cash proceeds.

•

Net Asset Value (“NAV”) per share decreased 12.4% or $0.60 per share to $4.24 per share on a quarter-over-quarter basis, primarily driven by realized losses on AGY and fair market value decline in GBFC exposure.

•

Net leverage of 0.98x, up slightly from 0.95x in comparison to the previous quarter, driven primarily by the decrease in NAV.

•

Total liquidity for portfolio company investments, including cash, was approximately $134 million, subject to leverage and borrowing base restrictions.

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

Q3 2020

Q2 2020

Q3 2019

Total Amount

Per Share

Total Amount

Per Share

Total Amount

Per Share

Net Investment Income/(loss)

$8.5

$0.12

$8.8

$0.13

$9.6

$0.14

Net realized and unrealized gains/(losses)

$(35.7)

$(0.51)

$(36.2)

$(0.53)

$(22.3)

$(0.33)

Basic earnings/(losses)

$(27.2)

$(0.39)

$(27.4)

$(0.40)

$(12.7)

$(0.18)

Distributions declared

$7.0

$0.10

$6.8

$0.10

$9.6

$0.14

Net Investment Income/(loss), as adjusted¹

$8.5

$0.12

$8.8

$0.13

$9.6

$0.14

Basic earnings/(losses), as adjusted¹

$(27.2)

$(0.39)

$(27.4)

$(0.40)

$(12.7)

$(0.18)

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

September 30, 2020

June 30, 2020

December 31, 2019

September 30, 2019

Total assets

$621.4

$663.8

$774.1

$742.7

Investment portfolio, at fair market value

$609.0

$644.3

$749.9

$725.9

Debt outstanding

$305.0

$319.3

$313.6

$276.1

Total net assets

$306.6

$329.7

$435.6

$446.8

Net asset value per share

$4.24

$4.84

$6.33

$6.49

Net leverage ratio²

0.98x

0.95x

0.70x

0.61x

¹

Non-GAAP basis financial measure. See Supplemental Information on page 9.

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.

•

Reduced Exposure in Non-core Legacy Portfolio: We significantly reduced our exposure to AGY, a non-core legacy asset, as a result of AGY’s recapitalization during the quarter. Our debt investments in AGY were fully exited and we received cash proceeds of approximately $8.9 million. We retained a preferred stock exposure of $1.1 million in AGY at fair market value. The transaction resulted in a realized loss of approximately $9.4 million. Non-core legacy assets comprised 9% of our total portfolio at fair market value (7 portfolio companies) as of September 30, 2020, as compared to 11% at the end of the prior quarter and 18% a year ago. Non-core positions consist of income-producing investments across 5 portfolio companies, representing 8% of the total portfolio at fair market value, with the remaining 1% in non-accrual investments and equity positions.

•

Reduced Exposure in GBFC: As of September 30, 2020, BCIC’s aggregate investment in GBFC was $121.8 million at fair value, making it our largest portfolio holding. On November 3, 2020, GBFC entered into a definitive agreement with Callodine, whereby Callodine would acquire the loan portfolio and assume the employees and certain operating costs of GBFC (collectively, the “Transaction”). The Transaction was completed on November 3, 2020. As a result of the Transaction, the Company received a partial principal repayment of $77.7 million on the unsecured debt of GBFC held by the Company. BCIC retained a $5.0

million investment made during the third quarter via a senior secured bank facility to Gordon Brothers Finance Company, LLC, a subsidiary of GBFC, which entity was acquired by Callodine in the Transaction. The Company’s equity ownership of GBFC was unaffected by the Transaction, and GBFC retained certain assets in the Transaction, primarily consisting of:

o

An “acquired portfolio” note in the notional amount of $40.0 million linked to the future performance of the loan portfolio assets acquired by Callodine;

o

A warrant to purchase equity, issued by a borrower in GBFC’s pre-Transaction loan portfolio;

o

An earnout note issued by an affiliate of Callodine with a maximum capped payout, subject to future contingencies, of $15.0 million;

o

Any amounts to be released to GBFC from an indemnity escrow account in the amount of $5.0 million established in connection with the Transaction; and

o

Cash in the amount of $9.4 million.

•

Share Repurchase Program: No shares were repurchased under our existing share repurchase program, during the third quarter of 2020. 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 September 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 September 30, 2020, 4,013,446 shares remained authorized for repurchase. On November 3, 2020, the 4,013,446 shares that remained unpurchased from the October 29, 2019 authorization expired.  On November 3, 2020, the Company’s Board of Directors authorized the Company to purchase up to a total of 7,500,000 shares, effective until the earlier of November 2, 2021 or such time that all the authorized shares have been repurchased.

•

NII was $8.5 million, or $0.12 per share, for the three months ended September 30, 2020. Relative to distributions declared of $0.10 per share, our NII distribution coverage was 122% for the quarter. Total investment income declined by 6.9% compared to previous quarter mainly driven by GBFC preferred stock being put on non-accrual status during the third quarter. Subsequent to quarter end through November 4, 2020, $52.9 million par value of GBFC unsecured debt remaining after the sale of assets has been put on non-accrual.

•

NAV per share decreased 12.4% or $(0.60) per share to $4.24 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 5.5% of portfolio FMV at June 30, 2020. The decline was largely concentrated in two investments – GBFC and AGY.

•

For the quarter ended September 30, 2020, we incurred base management fees of $2.5 million, and incentive management fees based on income of $1.5 million. Our advisor has voluntarily waived the incentive fees based on income of $1.5 million, resulting in no net incentive fees for the period. Since March 2017, the adviser has waived $28.4 million of incentive management fees on a cumulative basis. For incentive management fees based on gains, there was no accrual or payment as of September 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

September 30, 2020

Three Months

Ended

June 30, 2020

Three Months

Ended

September 30, 2019

Investment deployments

$24.8

$21.5

$66.8

Investment exits

$24.6

$22.6

$37.4

Number of portfolio company investments at the end of period

55

52

43

Weighted average yield of debt and income producing equity securities,

at fair market value

9.8%

9.9%

11.0%

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

61%

59%

57%

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

27%

27%

21%

% of Portfolio invested in Equity, at fair market value

12%

14%

22%

Average investment by portfolio company, at amortized cost

(excluding investments below $5.0 million)

$20.5

$21.8

$22.8

•

We deployed $24.8 million during the quarter while exits and repayments totaled $24.6 million, resulting in a $0.2 million net increase in our portfolio due to investment activity.  

▪

Our deployments consisted of four new portfolio companies and two investments into existing portfolio companies, which are outlined as follows:

▪

$9.5 million L + 8.00% first lien term loan to MetricStream Inc., an enterprise platform and cloud software provider that monitors governance, risk, and compliance;

▪

$2.7 million L + 6.50% first lien term loan and $0.3 million unfunded revolving term loan to Pulse Secure, LLC, a provider of IT secure access solutions;

▪

$2.3 million P + 7.00% first lien term loan and $0.3 million unfunded revolving term loan to Superman Holdings, LLC, a provider of accounting software, project management solutions and payroll services for specialty subcontractors; and

▪

$0.9 million L + 8.00% first lien term loan to Syntellis Performance Solutions, Inc., an enterprise performance management company that provides consulting services and software;

▪

$5.0 million of incremental L + 8.50% subordinated debt to GBFC; and

▪

$1.1 million of incremental 12.00% first lien term loans to AGY Holding Corp. prior to its restructure.

▪

Our sales, exits, and repayments were primarily concentrated in one portfolio company exit, one legacy portfolio company recapitalization, and three partial repayments:

▪

$11.0 million full repayment of our second lien term loan in NorthStar Financial Services Group, LLC et al;

▪

$8.9 million of proceeds received from our first lien debt positions in AGY Holding Corp., a non-core legacy position, as part of its restructuring during the quarter;

▪

$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;

▪

$0.8 million partial repayment of Barri Financial Group, LLC first lien term loan; and

▪

$0.7 million partial repayment of WH Buyer, LLC first lien term loan.

•

Total committed capital and outstanding investments of SLP, at par, amounted to $217.9 million each, across 22 portfolio companies. During the third quarter, there were no new deployments, and repayments were approximately $0.5 million. As of September 30, 2020, SLP had no investments on non-accrual status.

•

As of September 30, 2020, there were three non-accrual investment positions, representing approximately 1.0% and 7.7% 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 preferred stock investment in GBFC became a new non-accrual investment during the quarter and we exited three prior non-accrual investments (AGY second lien notes, first lien term loan and preferred stock held prior to the AGY restructuring). The average internal investment rating of the portfolio at fair market value at September 30, 2020 was 1.78 as compared to 1.93 as of the prior quarter end.

•

During the quarter ended September 30, 2020, net realized and unrealized losses were $35.7 million, primarily due to the recapitalization of AGY Holding Corp., and depreciation in GBFC.

•

At September 30, 2020, we had $5.4 million in cash and cash equivalents and $128.4 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $133.9 million of availability for portfolio company investments. Committed but unfunded portfolio obligations at September 30, 2020 were $5.3 million (excluding the $11.5 million LP commitment to SLP, which is completely discretionary). We believe 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 0.98x at quarter-end, and our 198% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $148.0 million. Further, as of quarter-end, approximately 81% of our assets were invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

•

On September 29, 2020, the Company paid a dividend of $0.10 per share, or $7.02 million, to stockholders of record on August 18, 2020, as announced on July 29, 2020. Of the total $7.02 million dividend, approximately $1.41 million was paid in cash and $5.61 million was paid in approximately 2.14 million shares of the Company’s common stock issued at a price of $2.624 per share (representing the average closing stock price for the Company’s stock on the five trading days beginning on September 15, 2020 and ending on September 21, 2020 (both days inclusive)). Due to the portion of dividends paid in common stock, our NAV has increased by approximately $5.61 million on September 29, 2020, and has increased by a total of approximately $11.1 million during the third quarter when accounting for the distribution paid on July 7, 2020 as previously disclosed.

September 30,
2020

December 31,

2019

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $380,462,039 and $389,156,775)

$360,354,615

$377,136,394

Non-controlled, affiliated investments (cost of $21,209,854 and $65,825,475)

12,532,729

22,473,524

Controlled investments (cost of $338,357,722 and $400,561,551)

236,103,026

350,249,163

Total investments at fair value (cost of $740,029,615 and $855,543,801)

608,990,370

749,859,081

Cash and cash equivalents

5,439,064

14,678,878

Receivable for investments sold

885,968

1,871,435

Interest, dividends and fees receivable

3,915,970

5,708,324

Prepaid expenses and other assets

2,161,437

1,945,709

Total Assets

$621,392,809

$774,063,427

Liabilities

Debt (net of deferred financing costs of $1,596,049 and $2,298,004)

$305,036,006

$313,569,694

Interest and credit facility fees payable

2,385,240

757,472

Distributions payable

—

9,637,075

Base management fees payable

2,481,836

3,251,194

Incentive management fees payable

1,849,597

1,849,597

Payable for investments purchased

—

7,312,500

Accrued administrative services

379,650

372,407

Other accrued expenses and payables

2,703,310

1,704,507

Total Liabilities

314,835,639

338,454,446

Net Assets

Common stock, par value $.001 per share, 200,000,000 common shares authorized, 82,323,090 and 77,861,287 issued and 72,311,504 and 68,836,255 outstanding

82,323

77,861

Paid-in capital in excess of par

860,938,515

849,240,398

Distributable earnings (losses)

(488,166,809)

(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

306,557,170

435,608,981

Total Liabilities and Net Assets

$621,392,809

$774,063,427

Net Asset Value Per Share

$4.24

$6.33

Three Months Ended

September 30, 2020 (Unaudited)

Three Months Ended

September 30, 2019 (Unaudited)

Nine Months Ended

September 30, 2020 (Unaudited)

Nine Months Ended

September 30, 2019 (Unaudited)

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$7,543,251

$8,167,397

$23,265,815

$20,922,567

PIK interest income

1,303,323

362,757

3,757,448

858,865

Fee income

14,139

441,537

77,393

1,354,283

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

8,860,713

8,971,691

27,100,656

23,135,715

Non-controlled, affiliated investments:

Cash interest income

114,250

937,710

357,724

3,364,592

PIK interest income

118,529

114,221

340,318

128,622

PIK dividend income

—

—

—

220,480

Fee income

1,451

1,604

4,322

1,604

Total investment income from non-controlled, affiliated investments

234,230

1,053,535

702,364

3,715,298

Controlled investments:

Cash interest income

5,707,147

4,967,220

16,609,577

17,727,023

PIK interest income

—

1,057,151

1,053,664

2,017,417

Cash dividend income

1,496,818

3,878,092

6,970,469

12,172,960

Fee income

3,186

3,199

67,526

128,299

Total investment income from controlled investments

7,207,151

9,905,662

24,701,236

32,045,699

Other income

—

25,296

—

30,371

Total investment income

16,302,094

19,956,184

52,504,256

58,927,083

Expenses:

Base management fees

2,481,836

3,230,146

8,486,385

9,173,908

Incentive management fees

1,492,248

2,101,954

5,025,386

6,628,725

Interest and credit facility fees

3,668,242

4,312,944

12,239,957

11,466,706

Professional fees

461,851

814,820

1,531,708

1,783,336

Administrative services

379,650

330,072

1,068,915

1,031,012

Director fees

157,500

185,250

494,750

553,250

Investment advisor expenses

87,500

87,500

262,500

262,500

Other

538,380

485,682

1,504,819

1,512,742

Total expenses, before incentive management fee waiver

9,267,207

11,548,368

30,614,420

32,412,179

Incentive management fee waiver

(1,492,248)

(1,229,259)

(5,025,386)

(5,756,030)

Expenses, net of incentive management fee waiver

7,774,959

10,319,109

25,589,034

26,656,149

Net Investment Income

8,527,135

9,637,075

26,915,222

32,270,934

Realized and Unrealized Gain (Loss):

Net realized gain (loss):

Non-controlled, non-affiliated investments

(18,151)

—

(12,329,417)

(23,395,840)

Non-controlled, affiliated investments

—

(76,161)

(43,774,013)

(345,387)

Controlled investments

(59,194,744)

—

(59,194,744)

—

Net realized gain (loss)

(59,212,895)

(76,161)

(115,298,174)

(23,741,227)

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

7,840,464

(1,013,109)

(8,101,976)

20,131,296

Non-controlled, affiliated investments

496,668

(13,565,504)

34,674,826

(22,796,087)

Controlled investments

15,037,776

(7,594,669)

(51,752,433)

(11,375,067)

Foreign currency translation

147,185

(79,775)

(189,875)

197,292

Net change in unrealized appreciation (depreciation)

23,522,093

(22,253,057)

(25,369,458)

(13,842,566)

Net realized and unrealized gain (loss)

(35,690,802)

(22,329,218)

(140,667,632)

(37,583,793)

Net Increase (Decrease) in Net Assets Resulting from Operations

$(27,163,667)

$(12,692,143)

$(113,752,410)

$(5,312,859)

Net Investment Income Per Share—basic

$0.12

$0.14

$0.39

$0.47

Earnings (Loss) Per Share—basic

$(0.39)

$(0.18)

$(1.65)

$(0.08)

Average Shares Outstanding—basic

70,086,236

68,836,255

68,943,459

68,836,702

Net Investment Income Per Share—diluted

$0.12

$0.14

$0.39

$0.45

Earnings (Loss) Per Share—diluted

$(0.39)

$(0.18)

$(1.65)

$(0.08)

Average Shares Outstanding—diluted

87,079,973

85,829,992

85,937,196

85,830,439

Distributions Declared Per Share

$0.10

$0.14

$0.34

$0.50

Three Months

Ended

September 30, 2020

Three Months

Ended

September 30, 2019

Nine Months

Ended

September 30, 2020

Nine Months

Ended

September 30, 2019

GAAP Basis:

Net Investment Income

$8,527,135

$9,637,075

$26,915,222

$32,270,934

Net Investment Income per share

0.12

0.14

0.39

0.47

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

$8,527,135

$10,509,770

$26,915,222

$33,143,629

Net Investment Income per share

0.12

0.15

0.39

0.48

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

—

(872,695)

—

(872,695)

As Adjusted²:

Net Investment Income

$8,527,135

$9,637,075

$26,915,222

$32,270,934

Net Investment Income per share

0.12

0.14

0.39

0.47