UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
__________________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date
of Report (Date of Earliest Event Reported): May 8, 2008
BLACKROCK
KELSO CAPITAL CORPORATION
(Exact
name of registrant as specified in its charter)
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Delaware
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001-33559
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20-2725151
|
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(State
or other jurisdiction of
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(Commission
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(IRS
Employer
|
|
incorporation
or organization)
|
File
Number)
|
Identification
Number)
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40 East 52nd Street
New York, NY 10022
(Address
of principal executive offices)
(212)
810-5800
(Registrant’s
telephone number, including area code)
Not Applicable
(Former name or former address, if
changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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[
]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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__________________________________
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ITEM
2.02.
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RESULTS
OF OPERATIONS AND FINANCIAL
CONDITION.
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On
May 8, 2008, the Registrant issued a press release announcing its financial
results for the quarter ended March 31, 2008. The text of the press
release is included as Exhibit 99.1 to this Form 8-K.
The
information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is
being furnished and shall not be deemed “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934 and shall not be deemed incorporated by
reference into any filing made under the Securities Act of 1933, except as
expressly set forth by specific reference in such filing.
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ITEM
7.01.
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REGULATION
FD DISCLOSURE.
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The
Registrant issued a press release, filed herewith as Exhibit 99.1, and by this
reference incorporated herein, on May 8, 2008 announcing the declaration of a
second quarter dividend of $0.43 per share. The dividend is payable on
June 30, 2008 to stockholders of record as of June 16, 2008.
The information disclosed under this
Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be
deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934
and shall not be deemed incorporated by reference into any filing made under the
Securities Act of 1933, except as expressly set forth by specific reference in
such filing.
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ITEM
9.01.
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FINANCIAL
STATEMENTS AND EXHIBITS.
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(d)
Exhibits.
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Exhibit
Number
|
Description
|
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99.1
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Press
Release, dated as of May 8, 2008
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SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
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BLACKROCK
KELSO CAPITAL CORPORATION
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|||
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Date: May
8, 2008
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By:
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/s/
Frank D. Gordon
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Name:
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Frank
D. Gordon
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||
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Title:
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Chief
Financial Officer
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||
EXHIBIT
INDEX
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Exhibit
Number
|
Description
|
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99.1
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Press
Release, dated as of May 8, 2008
|
|
Investor
Contact:
|
Press
Contact:
|
|
Frank
Gordon
|
Brian
Beades
|
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212.810.5858
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212.810.5596
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BlackRock
Kelso Capital Corporation Declares Regular Second Quarter Dividend of $0.43 per
Share,
Announces
March 31, 2008 Quarterly Financial Results
New York, May 8, 2008 -
BlackRock Kelso Capital Corporation (NASDAQ:BKCC) (“BlackRock Kelso” or the
“Company”) announced today that its Board of Directors has declared a second
quarter dividend of $0.43 per share payable on June 30, 2008 to stockholders of
record as of June 16, 2008.
BlackRock
Kelso also announced financial results for the quarter ended March 31,
2008.
HIGHLIGHTS:
Investment
Portfolio: $1.1 billion
Net
Assets: $671 million
Net
Asset Value per share: $12.60
Portfolio
Activity for the Quarter Ended March 31, 2008:
Cost
of investments during period: $94.6 million
Sales,
repayments and other exits during period: $28.0 million
Number
of new portfolio companies invested: 4
Number
of portfolio company exits: 2
Number
of portfolio companies at end of period: 62
Operating
Results for the Quarter Ended March 31, 2008 (in thousands, except per share
amounts):
Net
investment income: $23,214
Net
investment income per share: $0.44
Net
realized and unrealized losses: ($62,688)
Net
realized and unrealized losses per share: ($1.19)
Net
decrease in net assets from operations: ($39,474)
Net
decrease in net assets from operations per
share: ($0.75)
Portfolio
and Investment Activity
During
the three months ended March 31, 2008, we invested $94.6 million across 4 new
and 4 existing portfolio companies. This compares to investing $213.9
million across 9 new and 2 existing portfolio companies for the three months
ended March 31, 2007. Additionally, we received proceeds from sales
and repayments of principal of approximately $28.0 million during the three
months ended March 31, 2008, versus $16.5 million for the three months ended
March 31, 2007.
At
March 31, 2008, our net portfolio consisted of 62 portfolio companies and was
invested 63% in senior secured loans, 28% in unsecured or subordinated debt
securities, 5% in senior secured notes, 4% in equity investments and less than
1% in cash, cash equivalents and foreign currency. This compares to
67% in senior secured loans, 24% in unsecured or subordinated debt securities,
5% in equity investments, 3% in senior secured notes and 1% in cash, cash
equivalents and foreign currency at March 31, 2007. Our average
portfolio company investment by value was approximately $17.8 million at March
31, 2008, versus $17.4 million at March 31, 2007. Overall portfolio
credit quality remains strong, with approximately $9.3 million par amount of
loans on non-accrual status at March 31, 2008.
Our
weighted average yield on invested capital was 11.5% at March 31, 2008 and 12.6%
at March 31, 2007, respectively. The weighted average yields on our
senior secured loans and other debt securities were 10.6% and 13.2%,
respectively, at March 31, 2008, versus 12.3% and 13.7%, respectively, at March
1
31,
2007. Yields on invested capital exclude common equity investments,
preferred equity investments with no stated dividend rate, short-term
investments, cash and cash equivalents.
We
continue to have substantial capital resources available to fund additional
investments. At March 31, 2008, we had $155.1 million available under
our amended and restated senior secured, multi-currency credit
facility.
Since
our inception of operations in July 2005, we have invested in excess of $1.6
billion across more than 100 portfolio companies in transactions involving more
than 60 financial sponsors.
Results
of Operations
Results
comparisons are for the three months ended March 31, 2008 and March 31,
2007.
Investment
Income
For
the three months ended March 31, 2008 and March 31, 2007, investment income
totaled $35.7 million and $25.1 million, respectively. The increase
in investment income for the three months ended March 31, 2008 reflects the
growth of our portfolio as a result of the deployment of debt capital under our
credit facility and equity capital from our initial public offering in July
2007. Origination, closing and/or commitment fees associated with
investments in portfolio companies are accreted into interest income over the
respective terms of the applicable loans.
Expenses
Net
expenses for the three months ended March 31,
2008 and March 31, 2007 were $12.5 million and $11.0 million,
respectively. Of these totals, for the three months ended March 31,
2008 and March 31, 2007, $5.2 million and $3.7 million, respectively, were
interest and other credit facility expenses. In addition, $3.7
million of performance-based incentive fees were included in these totals for
the three months ended March 31, 2007. There were no incentive fees
for the three months ended March 31, 2008. Expenses net of
performance-based incentive fees and interest and other credit facility expenses
for the three months ended March 31, 2008 and March 31, 2007 were $7.3 million
and $4.6 million, respectively. Net expenses for the three months
ended March 31, 2007 were net of $0.9 million of base management fee waivers,
which terminated upon the completion of our IPO in 2007. These net
expenses consist of base management fees (net of waivers), administrative
services expenses, professional fees, director fees, investment advisor
expenses, insurance expenses, amortization of debt issuance costs and
miscellaneous other expenses. The increase in expenses was driven
primarily by an increase in base management fees resulting from the growth of
our portfolio, an increase in other general and administrative expenses and the
incurrence of borrowing costs under our credit facility.
Net
Investment Income
Net
investment income totaled $23.2 million and $14.0 million, or $0.44 per share
and $0.36 per share, respectively, for the three months ended March 31, 2008 and
March 31, 2007.
Net
Realized Gains (Losses)
Total
net realized gains (losses) for the three months ended March 31, 2008 and March
31, 2007 were $0.2 million and ($0.2) million, respectively.
Net
Unrealized Appreciation (Depreciation)
For
the three months ended March 31, 2008 and March 31, 2007, the net change in
unrealized appreciation (depreciation) on our investments, foreign currency
translations and cash equivalents was ($62.9) million and $3.2 million,
respectively. Net unrealized appreciation (depreciation) was ($120.5)
million and $4.6 million, respectively, at March 31, 2008 and March 31,
2007. The net change in
2
unrealized
depreciation was primarily a result of declines in market quotations for the
quoted investments in our portfolio, as well as reductions in the valuations of
several unquoted investments, including Tygem Holdings, Inc. We
believe the declines in valuations of our investments are due primarily to
instability of the credit markets and changes in the current interest rate
environment. The unrealized depreciation on investments does not have
an impact on our current ability to pay distributions to
stockholders.
Net
Change in Net Assets from Operations
For
the three months ended March 31, 2008 and March 31, 2007, the net change in net
assets from operations was ($39.5) million and $17.0 million, or ($0.75) per
share and $0.44 per share, respectively.
Liquidity
and Capital Resources
At
March 31, 2008, we had $444.9 million in borrowings outstanding and $155.1
million available for use under our credit facility, which matures in December
2010. Today, the amount available under the $545 million facility
stands at $104.0 million.
On
January 14, 2008, we filed a Form N-2 registration statement with the SEC that
would permit us, after it is declared effective by the SEC, to offer, from time
to time, up to $1 billion of our common stock, preferred stock, debt securities,
warrants representing rights to purchase shares of our common stock, preferred
stock or debt securities and subscription rights.
In
the future, we may raise additional equity or debt capital in the public or
private markets or may securitize a portion of our investments. The
primary use of such funds is expected to be investments in portfolio companies,
cash distributions to common stockholders and for other general corporate
purposes.
Dividends
Dividends
paid to stockholders for the three months ended March 31, 2008 and March 31,
2007 totaled $22.7 million, or $0.43 per share, and $16.4 million, or $0.42 per
share, respectively. Tax characteristics of all dividends will be
reported to stockholders on Form 1099 after the end of the calendar
year.
We
have elected to be taxed as a regulated investment company under Subchapter M of
the Internal Revenue Code. To maintain our status as a regulated investment
company, we must distribute annually to our stockholders at least 90% of our
investment company taxable income and at least 98% of our income (both ordinary
income and net capital gains) to avoid an excise tax. We intend to
make distributions to our stockholders on a quarterly basis of substantially all
of our taxable net investment income. We also intend to make
distributions of net realized capital gains, if any, at least
annually.
We
maintain an “opt out” dividend reinvestment plan for our common stockholders. As
a result, if we declare a dividend, stockholders’ cash dividends will be
automatically reinvested in additional shares of our common stock, unless they
specifically “opt out” of the dividend reinvestment plan so as to receive cash
dividends.
We
may not be able to achieve operating results that will allow us to make
dividends and distributions at a specific level or to increase the amount of
these dividends and distributions from time to time. In addition, we may be
limited in our ability to make dividends and distributions due to the asset
coverage test for borrowings when applicable to us as a business development
company under the Investment Company Act of 1940 and due to provisions in our
credit facilities. If we do not distribute a certain percentage of our income
annually, we will suffer adverse tax consequences, including possible loss of
our status as a regulated investment company. We cannot assure stockholders that
they will receive dividends and distributions at any particular level or at
all.
3
With
respect to the dividends paid to stockholders, income from origination,
structuring, closing, commitment and other upfront fees associated with
investments in portfolio companies in which our investment advisor on our behalf
provides significant services to the portfolio company in connection with making
the investment is treated as taxable income and accordingly, distributed to
stockholders. For the three months ended March 31, 2008 and March 31, 2007,
these fees totaled $0.8 million and $1.3 million, respectively.
Conference
Call
BlackRock
Kelso will host a web cast/teleconference call at 4:30 p.m. (Eastern Time)
today, Thursday, May 8, 2008, to discuss its first quarter 2008 financial
results. All interested parties are welcome to
participate. You can access the teleconference by dialing, from the
United States, (800) 374-0176, or from outside the United States, (706)
679-3431, shortly before 4:30 p.m. and referencing the BlackRock Kelso Capital
Corporation Conference Call (ID Number 46356507). A live, listen-only
web cast will also be available via the investor relations section of
www.blackrockkelso.com.
Both
the teleconference and web cast will be available for replay by 8:00 p.m.
(Eastern Time) today and ending at midnight on Thursday, May 15,
2008. To access the replay of the teleconference, callers from the
United States should dial (800) 642-1687 and callers from outside the United
States should dial (706) 645-9291 and enter the Conference ID Number
46356507. To access the web cast, please visit the investor relations
section of www.blackrockkelso.com.
4
BlackRock
Kelso Capital Corporation
Statements
of Assets and Liabilities (Unaudited)
|
March
31,
2008
(Unaudited)
|
December 31,
2007
|
|||||||
|
Assets:
|
||||||||
|
Investments
at fair value:
|
||||||||
|
Non-controlled/non-affiliated
investments (amortized cost of $1,113,727,067 and
$1,049,585,229)
|
$ | 1,032,233,001 | $ | 1,018,013,709 | ||||
|
Controlled
investments (amortized cost of $41,905,183 and
$38,881,854)
|
12,509,254 | 14,834,395 | ||||||
|
Affiliated
investments (amortized cost of $67,028,179 and
$66,907,657)
|
58,797,089 | 65,412,682 | ||||||
|
Total
investments at fair value
|
1,103,539,344 | 1,098,260,786 | ||||||
|
Cash
and cash equivalents
|
1,941,082 | 5,077,695 | ||||||
|
Foreign
currency at fair value (cost of $518,219 and $10,291)
|
508,556 | 10,864 | ||||||
|
Interest
receivable
|
14,266,324 | 14,260,266 | ||||||
|
Dividends
receivable
|
2,566,711 | 1,796,615 | ||||||
|
Prepaid
expenses and other assets
|
2,139,261 | 2,414,954 | ||||||
|
Total
Assets
|
$ | 1,124,961,278 | $ | 1,121,821,180 | ||||
|
Liabilities:
|
||||||||
|
Unrealized
depreciation on forward foreign currency contracts
|
$ | 1,339,002 | $ | 451,944 | ||||
|
Credit
facility payable
|
444,900,000 | 381,300,000 | ||||||
|
Interest
payable on credit facility
|
387,561 | 1,508,277 | ||||||
|
Dividend
distributions payable
|
— | 3,310,606 | ||||||
|
Base
management fees payable
|
5,566,860 | 5,606,213 | ||||||
|
Accrued
administrative services expenses
|
361,450 | 361,118 | ||||||
|
Other
accrued expenses and payables
|
1,299,642 | 1,091,153 | ||||||
|
Total
Liabilities
|
453,854,515 | 393,629,311 | ||||||
|
Net
Assets:
|
||||||||
|
Common
stock, par value $.001 per share, 100,000,000 and 40,000,000 common shares
authorized, 53,275,008 and
52,825,109
issued and outstanding
|
53,275 | 52,825 | ||||||
|
Paid-in
capital in excess of par
|
795,480,856 | 790,378,102 | ||||||
|
Distributions
in excess of net investment income
|
(4,912,142 | ) | (5,411,353 | ) | ||||
|
Accumulated
net realized gain
|
935,150 | 729,635 | ||||||
|
Net
unrealized depreciation
|
(120,450,376 | ) | (57,557,340 | ) | ||||
|
Total
Net Assets
|
671,106,763 | 728,191,869 | ||||||
|
Total
Liabilities and Net Assets
|
$ | 1,124,961,278 | $ | 1,121,821,180 | ||||
|
Net
Asset Value Per Share
|
$ | 12.60 | $ | 13.78 | ||||
5
|
BlackRock
Kelso Capital Corporation
Statements
of Operations (Unaudited)
|
||||||||
|
Three
months
ended
March
31, 2008
|
Three
months
ended
March
31, 2007
|
|||||||
|
Investment
Income:
|
||||||||
|
Interest
|
$ | 34,818,337 | $ | 24,778,258 | ||||
|
Dividends
|
875,634 | 260,477 | ||||||
|
Other
income
|
546 | 13,495 | ||||||
|
Total investment income
|
35,694,517 | 25,052,230 | ||||||
|
Expenses:
|
||||||||
|
Base
management fees
|
5,566,860 | 3,693,075 | ||||||
|
Incentive
management fees
|
— | 3,692,649 | ||||||
|
Administrative
services
|
293,435 | 218,703 | ||||||
|
Professional
fees
|
598,330 | 146,591 | ||||||
|
Director
fees
|
2,000 | 63,505 | ||||||
|
Investment
advisor expenses
|
274,898 | 196,093 | ||||||
|
Insurance
|
137,583 | 40,931 | ||||||
|
Interest
and credit facility fees
|
5,214,057 | 3,714,805 | ||||||
|
Amortization
of debt issuance costs
|
166,195 | 62,705 | ||||||
|
Other
|
227,152 | 132,069 | ||||||
|
Expenses before management fee waiver
|
12,480,510 | 11,961,126 | ||||||
|
Base
management fee waiver
|
— | (923,269 | ) | |||||
|
Net expenses
|
12,480,510 | 11,037,857 | ||||||
|
Net
Investment Income
|
23,214,007 | 14,014,373 | ||||||
|
Realized
and Unrealized Gain (Loss):
|
||||||||
|
Net
realized gain (loss) on:
|
||||||||
|
Investments
|
28,363 | 22,027 | ||||||
|
Foreign currency
|
177,152 | (214,902 | ) | |||||
|
Net
realized gain (loss)
|
205,515 | (192,875 | ) | |||||
|
Net
change in unrealized appreciation (depreciation) on:
|
||||||||
|
Investments and cash equivalents
|
(62,007,133 | ) | 3,177,312 | |||||
|
Foreign currency translations
|
(885,903 | ) | 29,470 | |||||
|
Net
change in unrealized appreciation (depreciation)
|
(62,893,036 | ) | 3,206,782 | |||||
|
Net
realized and unrealized gain (loss)
|
(62,687,521 | ) | 3,013,907 | |||||
|
Net
Increase (Decrease) in Net Assets Resulting from
Operations
|
$ | (39,473,514 | ) | $ | 17,028,280 | |||
|
Net
Investment Income Per Share
|
$ | 0.44 | $ | 0.36 | ||||
|
Earnings
(Loss) Per Share
|
$ | (0.75 | ) | $ | 0.44 | |||
|
Basic
and Diluted Weighted-Average Shares Outstanding
|
52,830,053 | 38,501,302 | ||||||
6
About
BlackRock Kelso Capital Corporation
BlackRock
Kelso Capital Corporation is a business development company formed in early 2005
by its management team, BlackRock, Inc. and principals of Kelso & Company,
to provide debt and equity capital to middle-market companies.
The
Company's investment objective is to generate both current income and capital
appreciation through debt and equity investments. The Company invests
primarily in middle-market companies in the form of senior and junior secured
and unsecured debt securities and loans, each of which may include an equity
component, and by making direct preferred, common and other equity investments
in such companies.
Forward-Looking
Statements
This
press release, and other statements that BlackRock Kelso Capital may make, may
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act, with respect to BlackRock Kelso Capital’s future
financial or business performance, strategies or expectations. Forward-looking
statements are typically identified by words or phrases such as “trend,”
“potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,”
“anticipate,” “current,” “intention,” “estimate,” “position,” “assume,”
“outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and
similar expressions, or future or conditional verbs such as “will,” “would,”
“should,” “could,” “may” or similar expressions. The information contained on
our website is not a part of this press release.
BlackRock
Kelso Capital cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time. Forward-looking
statements speak only as of the date they are made, and BlackRock Kelso Capital
assumes no duty to and does not undertake to update forward-looking statements.
Actual results could differ materially from those anticipated in forward-looking
statements and future results could differ materially from historical
performance.
In
addition to factors previously disclosed in BlackRock Kelso Capital's Securities
and Exchange Commission ("SEC") reports and those identified elsewhere in this
press release, the following factors, among others, could cause actual results
to differ materially from forward-looking statements or historical performance:
(1) our future operating results; (2) our business prospects and the prospects
of our portfolio companies; (3) the impact of investments
that we expect to make; (4) our contractual arrangements and relationships with
third parties; (5) the dependence of our future success on the general
economy and its impact on the industries in which we invest; (6) the ability of
our portfolio companies to achieve their objectives; (7) our expected financings
and investments; (8) the adequacy of our cash resources and working capital;
(9) the timing of cash flows, if any, from the operations of our portfolio
companies; (10) the ability of the Advisor to locate suitable investments for us
and to monitor and administer our investments; (11) the ability of the Advisor
to attract and retain highly talented professionals; (12) fluctuations in
foreign currency exchange rates; and (13) the impact of changes to tax
legislation and, generally, our tax position.
BlackRock
Kelso Capital’s Annual Report on Form 10-K for the year ended December 31, 2007
filed with the SEC identifies additional factors that can affect forward-looking
statements.
Available
Information
BlackRock
Kelso Capital’s filings with the SEC, press releases, earnings releases and
other financial information are available on its website at www.blackrockkelso.com
#
# #
7