BlackRock TCP Capital Corp. (TCPC) Q4 2022 Earnings Call Transcript

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BlackRock TCP Capital Corp. (NASDAQ:TCPC) Q4 2022 Earnings Conference Call February 28, 2023 1:00 PM ET

Company Participants

Katie McGlynn - Director of Investor Relations

Raj Vig - Chairman & Chief Executive Officer

Phil Tseng - President & Chief Operating Officer

Erik Cuellar - Chief Financial Officer

Conference Call Participants

Robert Dodd - Raymond James

Kevin Fultz - JMP Securities

Christopher Nolan - Ladenburg Thalmann


Ladies and gentlemen, bully afternoon. Welcome, everyone, to BlackRock TCP Capital Corp.'s Fourth Quarter 2022 Earnings Conference Call. Today's convention telephone is being recorded for replay purposes. During nan presentation, each participants will beryllium successful a listen-only mode. A question-and-answer convention will travel nan Company's general remarks. [Operator instructions]

And now, I would for illustration to move nan telephone complete to Katie McGlynn, Director of BlackRock TCP Capital Corp. Investment [ph] Relations team. Katie, please proceed.

Katie McGlynn

Thank you, Tia. Before we begin, I'll statement that this convention telephone whitethorn incorporate forward-looking statements based connected nan estimates and assumptions of guidance astatine nan clip of specified statements and are not guarantees of early performance. Forward-looking statements impact risks and uncertainties and existent results could disagree materially from those projected. Any forward-looking statements made connected this telephone are made arsenic of today, and are taxable to alteration without notice.

Additionally, definite accusation discussed and presented whitethorn person been derived from third-party sources and has not been independently verified. Accordingly, we make nary practice of warranty pinch respect to specified information.

Earlier today, we issued our net merchandise for nan 4 4th and afloat twelvemonth ended December 31, 2022. We besides posted a supplemental net position to our website astatine www. To position nan descent presentation, which we will mention to connected today's call, please click connected nan Investor Relations nexus and prime Events and Presentations. These documents should beryllium reviewed successful conjunction pinch nan company's Form 10-Q which was revenge pinch nan SEC earlier today.

I will now move nan telephone complete to our Chairman and CEO, Raj Vig.

Raj Vig

Thanks, Katie, and convey you each for joining america for TCPC's 4th fourth and year extremity 2022 net call. I will statesman today's telephone pinch a fewer comments connected nan marketplace situation and supply an overview of our 4th fourth and afloat twelvemonth results.

I will past move nan telephone complete to our President and Chief Operating Officer, Phil Tseng, who will supply an update connected our portfolio and finance activity. Our CFO, Erik Cuellar, will reappraisal our financial results, arsenic good arsenic our superior and liquidity positioning successful greater detail. I will past reason pinch a fewer closing remarks, earlier we return your questions.

2022 was a twelvemonth successful which nan equity and fixed income markets knowledgeable important volatility, peculiarly successful nan second half of nan year. This was driven by a operation of geopolitical uncertainty and nan Federal Reserve's ongoing actions to aggressively raise liking rates successful bid to curb inflation, an effort that appears will proceed for nan foreseeable future.

This volatility persisted successful nan 4th fourth and adversely impacted spreads crossed fixed income markets, including mediate marketplace indebtedness spreads. No assemblage aliases plus people was immune to nan marketplace volatility and successful nan 4th quarter, we knowledgeable a diminution successful NAV owed successful portion to nan marketplace volatility, but mostly owed to little valuations connected 3 circumstantial portfolio companies and company-specific items. I will touch connected these successful much item later. Excluding nan effect of these 3 names, our NAV diminution would beryllium person to 3%.

In this environment, our squad has much than 2 decades of acquisition lending done aggregate marketplace cycles, and our expertise to activity pinch our portfolio companies to negociate done challenging operating environments is peculiarly valuable. We are besides reminded of nan benefits of nonstop lending that person historically delivered premium yields to nan liquid markets and importantly, amended downside protection successful periods of marketplace turbulence.

One facet of our finance strategy has led to beardown downside protection and very debased nonaccomplishment rates passim our history has been our beardown portfolio guidance and monitoring procedures.

In summation to nan ongoing monitoring our woody squad to execute complete investments successful their individual portfolios, connected a quarterly basis, TCPC's Investment Committee besides performs a respective reappraisal of each institution successful nan portfolio. As portion of this process, nan aforesaid Deal squad members that originated and underwrote these investments reappraisal nan company's astir caller financial capacity and prosecute successful speech pinch nan business owners and operators to measure some existent and projected capacity comparative to our original underwriting assumptions. All of this is conducted wrong nan discourse of our heavy manufacture expertise.

We measure each borrower's expertise to negociate successful times of stress, utilizing some a forward-looking and humanities lens. Additionally, our manufacture expertise has ever enabled america to underwrite loans pinch beardown lender protections successful nan shape of covenants specifically tailored to contemplate some institution and industry-specific dynamics. As you tin imagine, these existing protections are much important coming fixed nan marketplace situation arsenic they let america to return immoderate actions required to protect our capital.

Before providing highlights from our 4th fourth and afloat twelvemonth financial results, I'd for illustration to supply immoderate much discourse to nan sequential alteration successful our NAV. In summation to nan much normative valuation adjustments crossed nan portfolio owed to wider marketplace spreads successful nan quarter, two-third of nan full unrealized losses recorded successful nan 4th fourth was attributable to 3 portfolio companies. Edmentum, Razor and AutoAlert.

Each of these write-downs was driven by a unsocial group of circumstances impacting nan institution and/or nan manufacture unless they operate. It is important to stress that nan issues driving these valuation impacts are isolated. And successful nan lawsuit of Edmentum and Razor driven by vulnerability to well-performing equity investments, which thin to person much mark-to-market volatility. Importantly, nan in installments value of our portfolio remains successful fantabulous shape.

In nan lawsuit of Edmentum, arsenic galore are aware, nan institution has delivered very beardown capacity complete nan past respective years, driven successful portion by nan ongoing displacement to online running, which led to important write-ups and important realized gains connected our investment. While Edmentum’s capacity continues to beryllium strong, nan gait of maturation and request for online learning devices coming retired of COVID has slowed but continues.

Given nan normalization of maturation successful nan sector, mixed pinch a much mean outlook and wide nationalist marketplace valuation declines, nan worth of our finance was marked down successful nan 4th quarter. However, nan wide capacity of our finance has been very positive, and we stay assured successful nan semipermanent capacity of Edmentum.

Razor Group is nan consolidator of mini to medium-sized brands that waste done Amazon's third-party platform. While we proceed to position our indebtedness to Razor arsenic good covered, nan company's endeavor worth has been pressured by nan challenges facing nan broader Amazon ecosystem, which resulted successful a simplification of nan worth of our warrants arsenic good arsenic a humble diminution connected nan worth of our first lien level.

Finally, Auto Alert is simply a institution that provides trading package to car dealerships. Auto Alert was severely impacted astatine nan commencement of nan pandemic erstwhile different dealerships were closed and it has subsequently been impacted by nan proviso concatenation issues that person resulted successful constricted adjacent -- constricted caller car inventory.

We are moving pinch guidance and nan sponsor connected adjacent steps. We are encouraged by nan truth that immoderate of nan macro issues look to beryllium abating and caller results bespeak improving performance.

Now turning to our 4th fourth and afloat twelvemonth 2022 highlights. We delivered beardown nett finance income of $0.40 per stock successful nan 4th fourth and $1.53 for nan afloat year. Given nan floating complaint quality of our portfolio, our nett finance income benefited from nan summation successful guidelines rates successful 2022, arsenic good arsenic wider spreads connected caller investments made passim nan year.

As an acknowledgment of nan higher ongoing net powerfulness of our portfolio, chiefly driven by higher guidelines rates, we announced a $0.02 per stock summation successful our dividend opening pinch nan 4th fourth dividend that was paid connected December 31. And our Board of Directors coming announced a $0.32 per stock dividend distribution for nan first quarter, payable connected March 31 to shareholders of grounds connected March 16, this, successful summation to nan $0.05 per stock typical dividend that was announced successful December and paid past period to shareholders of grounds arsenic of December 31.

As a reminder, we person ever emphasized nan stableness of nan dividend and nan sum done our recurring nett finance income. Throughout TCPC's history, we person consistently covered our dividends, we're recurring nett finance income, a committedness that remains important to america moreover pinch nan caller dividend increase.

Phil will talk our 4th fourth and afloat twelvemonth finance activity successful much detail. But successful summary, we are being disciplined successful deploying caller superior successful this uncertain environment, while besides taking advantage of nan much lender-friendly finance environment. We reviewed a important number of transactions during nan twelvemonth and selectively deploy superior successful a mini percent of those opportunities.

Looking backmost astatine our humanities capacity arsenic a nationalist company, since 2012, and we person generated a 10.3% annualized return connected invested assets and a full annualized rate return of 9.3%. We judge our capacity remains astatine nan precocious extremity of our adjacent group, demonstrating our expertise to consistently place charismatic opportunities, adhd premium yields and present exceptional returns to our shareholders crossed marketplace cycles.

Now I will move it complete to Phil to talk our finance activity and portfolio positioning.

Phil Tseng

Thanks, Raj. The nationalist marketplace volatility and uncertainty successful nan superior markets mostly drove a slowdown successful activity successful 2022 versus nan grounds levels successful 2021. Positively though, we saw a meaningful displacement toward a much lender-friendly finance situation marked by wider spreads and little pushback connected woody terms.

Against this backdrop, we proceed to place and reappraisal a important number of imaginable finance opportunities arsenic we capitalize connected nan standard of nan broader BlackRock US backstage superior level and nan breadth of our team's experience. At year-end, our portfolio had a adjacent marketplace worth of astir $1.6 billion. 88% of our investments were elder secured indebtedness dispersed crossed a wide scope of industries, providing portfolio diversity, and minimizing attraction risk.

We besides judge our portfolio is good positioned to execute amidst marketplace uncertainty, fixed our accent connected companies pinch established business models successful little cyclical industries. The portfolio astatine 4th extremity consisted of investments successful 136 companies an all-time high.

As nan floor plan connected Slide 6 of nan position illustrates, our recurring income is distributed broadly crossed our portfolio and is not reliant connected income from immoderate 1 company. In fact, much than 90% of our portfolio companies each lend little than 2% to our recurring income.

85% of our indebtedness investments are first lien, providing important downside protection and 94% of our indebtedness investments are floating rate, proving an important use successful this rising complaint environment.

Moving connected to our finance activity. We judge our woody root channel-agnostic attack and our manufacture specialization provides an advantage, peculiarly astatine a clip that we're seeing a slowdown successful accepted sponsor-backed activity. Our industry-focused woody teams proceed to place unsocial finance opportunities from a wide scope of sources, including straight done our manufacture discourse and guidance teams, successful summation to our accepted sponsor relationships.

In reviewing these opportunities, we stress transactions wherever we enactment arsenic nan lender of influence, which enables america to discuss woody position and conditions that we judge supply meaningful downside protection. These see important collateral and tailored covenant packages that are peculiarly important successful periods of economical volatility for illustration we are successful today.

In addition, our manufacture specialization, which our borrowers value, bolsters our expertise to measure and efficaciously mitigate consequence successful our underwriting and erstwhile we discuss position successful nan in installments documentation. Despite nan slowdown successful activity successful 2022, TCPC invested $338 million, including $75 cardinal successful nan 4th quarter. The deployment successful nan 4th fourth included loans to 7 caller and six existing portfolio companies. Following investments successful existing holdings proceed to beryllium an important root of opportunity for us.

In position of dollars invested, 50% of full investments successful nan 4th fourth and 44% successful nan afloat twelvemonth of 2022 were successful existing portfolio companies. We judge this incumbency is an important advantage, wherever we root investments fixed these are companies who already cognize and understand well, we've seen them execute connected their finance thesis and person a patient existing speech pinch nan guidance team.

TCPC's largest finance during nan 4th fourth was a elder secured first lien indebtedness to Madison Logic, a supplier of account-based and a contented trading services to B2B marketers. We position this arsenic an opportunity to put successful an manufacture leader that is benefiting from tailwinds successful account-based trading sector.

We besides judge that nan precocious ROI connected account-based trading versus different trading services will beryllium much resilient successful periods of economical stress. BlackRock's anterior acquisition and expertise successful nan analyzable account-based trading sector, allowed america to understand nan existent merits of nan in installments and get a blimpish woody building astatine an charismatic risk-adjusted return.

Our 2nd largest finance successful nan 4th was a elder secured first lien word indebtedness to Integrity Marketing, nan starring independent supplier of life and wellness security products successful nan US. During nan 4th quarter, fixed our familiarity pinch nan business model, nan manufacture and our narration pinch nan sponsor, we led an incremental first lien word indebtedness to nan institution to support ongoing M&A. Integrity operates successful a unchangeable and increasing conception of nan security market. It has demonstrated a way grounds of beardown integrated and inorganic growth.

New investments successful nan 4th fourth were offset by full dispositions of $75 million. The wide effective output connected our indebtedness portfolio accrued from 9.2% astatine nan extremity of 2021 to 12.7% astatine nan extremity of 2022, reflecting nan use of higher guidelines rates, arsenic good arsenic higher spreads. Investments successful caller portfolio companies during nan 4th had a weighted mean effective output of 12.2%, exceeding nan 9.9% weighted mean effective output connected exited positions.

As I noted earlier, we are seeing a displacement toward a much lender-friendly situation pinch improvements successful some pricing and position comparative to 12 and moreover six months ago.

Year-to-date, we person seen a humble pickup successful activity and person been investing selectively, maintaining our underwriting subject and being mindful of nan inflationary environment. We stress companies that person important pricing powerfulness to walk connected higher input costs, including increases successful their costs of capital.

It's besides important to statement that we did not underwrite to perfection, but we do build successful capable buffers to guarantee companies tin withstand higher costs and changes successful nan marketplace situation without impairing their expertise to work our loans.

Our pipeline continues to stay patient and nan yields connected investments successful our pipeline are mostly successful statement pinch our existent portfolio. To-date, we person had constricted prepayment income successful nan first quarter.

Let maine now move it complete to Erik to locomotion done our financial results arsenic good arsenic our superior and liquidity positioning.

Erik Cuellar

Thank you, Phil. As Raj noted, our nett finance income successful nan 4th fourth benefited from nan increases successful guidelines rates successful 2022. Net finance income of $0.40 was up astir 30% versus nan 4th fourth of 2021, and it exceeded nan 4th fourth dividend of $0.32 per share. On an yearly basis, nett finance income was $1.53, an summation of astir 22% complete 2021.

Today, arsenic Raj noted, we declared a first 4th dividend of $0.32 per share. We stay committed to paying a sustainable dividend that is afloat covered by nett finance income arsenic we person done consistently complete nan past 10-plus years.

Investment income successful nan 4th fourth was $0.81 per share. This included recurring rate liking of $0.68, recurring discount and interest amortization of $0.02, and fixed income of $0.05. Investment income besides included $0.02 of dividend income, $0.01 of different income, and $0.03 from accelerated O&D and exit payment.

As a reminder, we amortize upfront economics complete nan life of an finance alternatively than recognizing each of it astatine nan clip of nan finance successful May. Operating expenses for nan 4th fourth were $0.33 per stock and included liking and different indebtedness expenses of $0.18 per share. Incentive fees successful nan 4th totaled $4.9 cardinal aliases $0.08 per share.

Net unrealized losses successful nan 4th fourth totaled $71 cardinal aliases $1.22 per share. As Raj discussed earlier, unrealized losses were chiefly driven by 3 items; a $21.5 cardinal unrealized nonaccomplishment connected our indebtedness to -- and unrealized losses successful our investments successful Edmentum and Razor Crew of $18.6 cardinal and $6.3 million, respectively, arsenic good arsenic unrealized losses crossed nan portfolio from wider marketplace spreads.

Net realized losses for nan 4th were only $46,000. The nett summation successful nett assets for nan 4th was $47.8 cardinal aliases $0.83 per share. We person a robust valuation process and substantially each of our investments are weighted each 4th utilizing prices provided by independent third-party sources. These see quotation services and independent valuation services. And this process is besides subjected to rigorous oversight, including backmost testing of each disposition against our valuation.

The in installments value of our wide portfolio remains strong. We placed our loans to AutoAlert connected non-accrual during nan 4th quarter. A full of 3 portfolio companies are now connected non-accrual, representing only 2.0% of nan portfolio astatine adjacent worth and 4.2% astatine cost.

Turning now to our liquidity. Our equilibrium expanse position remains strong, and we ended nan 4th pinch full liquidity of $367 million, comparative to our full finance of $1.6 billion. This included disposable leverage of $286 cardinal and rate of $82 million.

Unfunded indebtedness commitments to portfolio companies astatine quarter-end equaled 8% of full investments aliases astir $127 million, of which only $28 cardinal were revolver commitment. Our divers and elastic leverage programme includes 2 debased costs in installments facilities, 2 unsecured statement issuances and an SBA program.

Notably, our unsecured indebtedness continues to beryllium finance people rated by some Moody’s and Fitch. Given nan humble size of each of our indebtedness issuances, we are not overly reliant connected immoderate azygous root of financing and our maturities stay good added. Additionally, we are comfortable pinch our existent operation of secured and unsecured financing, and do not person immoderate contiguous financing needs.

Combined, nan weighted mean liking complaint connected our outstanding borrowings, accrued modestly to 3.9% from 3.26% astatine nan extremity of 2021. That is an summation of only 64 ground points while guidelines rates accrued astir 4.25%. This is nan consequence of presently having complete 75% of our borrowings from fixed complaint sources.

Now, I'll move nan telephone backmost complete to Raj.

Raj Vig

Thanks, Eric. While nan economical outlook whitethorn beryllium uncertain, our squad is focused connected delivering nan results our shareholders person travel to expect from TCPC. We stay highly disciplined successful our underwriting. We make finance decisions based connected a broad study of each company, its guidance squad and strategy and applicable manufacture dynamics.

Our finance committee evaluates each finance and regularly monitors nan financial capacity of each of our holdings. From our perspective, wherever we are successful nan in installments cycle, that is little than our expertise to selectively seizure opportunities passim nan cycle.

To that end, we tie upon our team's 2 decades of acquisition and BlackRock's extended resources to prudently place opportunities that align pinch our selective finance attack while providing our borrowers pinch financing solutions to thief turn their businesses.

We proceed to root beardown elder secured in installments opportunities, which person historically outperformed equities, bonds and different unsecured indebtedness done economical downturns. While underweight highly cyclical industries, we will besides proceed to support a broadly diversified portfolio.

In closing, while 2022 presented challenges, we successfully navigated nan evolving situation and are cautiously optimistic astir nan twelvemonth ahead. We stay focused connected generating beardown adjusted returns for our shareholders.

And pinch that, operator, please unfastened nan telephone for questions.

Question-and-Answer Session


We will now statesman nan Q&A session. [Operator Instructions] The first mobility comes from nan statement of Robert Dodd pinch Raymond James. Please proceed.

Robert Dodd

Hi guys. Couple of questions astir nan NAV, connected AutoAlert and past nan equity pieces successful a second. I mean, to your point, it was impacted successful nan opening of nan pandemic, and past proviso concatenation and getting caller vehicles, et cetera. I mean, nary of those trends look to beryllium peculiarly caller yet nan markdown this 4th was evidently beautiful significant, I mean, $21.5 million. Can you springiness america immoderate much -- what was nan truth that it was primitively meant to mature successful January? Obviously, it hasn’t, aliases tin you springiness america what was nan driver of that being truthful large, nan markdown being truthful comparatively ample erstwhile nan trends you described don't look to beryllium peculiarly caller aliases caller successful nan 4th fourth 2022?

Raj Vig

Hey, Robert, it's Raj. Thank you. I'll effort to reply that successful nan measurement I can, and there's astir apt immoderate elements that I can't reside directly. But I would opportunity that nan trends aren't new. I work together pinch that. The compound effect -- I mean, but nan trends are neither a 1 4th trend. And you person accumulating and compounding effect of things coming retired of nan pandemic that are apical statement oriented, either dealership shutting down.

And past arsenic they are opening up, you person an inability to really get nan inventory because nan proviso concatenation issues that inhibit nan worth proposition of nan business, nan applicability of it. So I deliberation you had a bid of things that compound that led to yet non-accrual, and I guess, an acquiescence if you will, connected -- successful position of wherever nan institution is and wherever they request to go.

Ironically, coming retired of Q4, mates of different things that really abated. The proviso concatenation issues are loosening up. We are seeing immoderate early signs of recovery. But I deliberation to reply your question, you're capturing nan wood saw effect of things that are creeping done nan anterior mates of years, accumulating successful a measurement successful this 4th connected a institution basis, and past location are immoderate outer information points that we conscionable person to return into relationship that I deliberation really brought nan valuation into thing successful nan scope that we're talking astir here. And I deliberation there'll beryllium much item that we tin supply successful consequent quarters. But I would effort to time off nan reply astatine that, hopefully it addresses your question.

Robert Dodd

It does reply that portion of nan question. I mean, obviously, nan maturity connected nan indebtedness was February 15th, which has already passed. I deliberation if they did repay since 4th end, you would person astir apt said so. So I'm going to presume that it hasn't. Was each of that taken into relationship immoderate nan business really is coming astatine nan clip nan adjacent worth was wished astatine 12/31 aliases we sewage -- is Q1 going to beryllium different information fixed it probably, I'm guessing, I missed nan maturity there?

Phil Tseng

Yeah, Robert, this is Phil. Thanks for that follow-up. So you're right, nan maturity is imminent, and that has precipitated deeper discussions pinch nan guidance squad and nan backstage sponsor connected adjacent steps. We can't supply excessively galore specifications astatine this point, but we're eager to possibly adjacent quarter. But I deliberation it's important to statement that what Raj had mentioned, which is nan signs of improving capacity connected nan business. And possibly it's worthwhile giving a speedy reminder. AutoAlert, a package and information analytics business utilized by car dealerships to thrust income growth, but successful nan past respective years, pinch inventory levels being truthful debased owed to proviso chain, arsenic we've discussed, and user request being truthful robust benignant of station pandemic, nan dealerships conscionable couldn't support cars connected nan lots, truthful nan request for income optimization package pinch little of a parity.

Obviously, we're seeing a reversal of those dynamics higher rates are intelligibly impacting request for cars, which requires a request for much income and analytics devices and inventory connected nan dealers' tons are returning to much normalized levels. So support successful mind, nan people is simply a reflection of financial capacity done 2022. It does not bespeak what we've been witnessing successful nan past months aliases year-to-date. So do I deliberation adjacent 4th is going to beryllium nan aforesaid successful position of a decline, we're not seeing size of that.

Raj Vig

Yeah. And Robin, conscionable to wrap it up connected your mobility astir if nan maturity is taking into relationship and thing regarding nan contractual elements that are known astatine nan clip of nan valuation is surely taken into relationship by nan valuation providers. So that would see maturity, capacity done that play and truthful forth. So it would person been taken into account. I deliberation there's a big of much things that are going to travel to play here. As Phil mentioned, we dream to talk astir that successful nan early quarters. The bully news is successful a consciousness that we're successful ironically a amended situation for this business, moreover though it's an ongoing challenging economical environment.

Robert Dodd

Got it. Got it. I admit each that color. If I can, connected nan different two, Edmentum and Razor. Successful equity investments. So it's not a -- I presume wholly different perspective from AutoAlert, Edmentum is benignant of 3 quarters of nan mixed for that, which has been a successful plus for you, tin you springiness america connected nan markdown, I mean you talked astir Edmentum nan outlook to nan marketplace et cetera possibly could you conception really overmuch of nan markdown was marketplace comps aliases volatility inputs for measurement worth successful warrants aliases thing for illustration that versus existent outlook adjustment?

Raj Vig

I don't cognize if I tin springiness a quantitative breakdown, I would say, some applied. Certainly, if you deliberation astir some Edmentum and Razor, if you person to categorize these businesses, they'd beryllium considered maturation equity aliases maturation aliases equity, higher aggregate businesses that are still precocious multiple. It conscionable happens to beryllium a reset successful nan nationalist markets.

In nan lawsuit of Edmentum, -- and some speech from nan marketplace multiples, location is conscionable a tempered maturation successful nan lawsuit of Edmentum, there's a spot of digestion, if you will, from nan monolithic walk coming retired of – coming done COVID connected nan online school, and I deliberation it's conscionable much of a – it's still a increasing outlook. It's astir apt a much inflection of a bump and past a continued semipermanent secular affirmative that that has an effect today.

I deliberation that will – I don't deliberation that's going to proceed necessarily, because nan outlook is still affirmative and wherever nan markets spell – nan nationalist markets go, anyone knows, but I don't want to quantify, because I don't deliberation – I person that breakdown, but some are applicable. In nan lawsuit of Razor, conscionable nan broader Amazon ecosystem, arsenic we mentioned, has – dealing pinch proviso concatenation issues. Those akin to nan car alert business are abating. There's – group person a batch of money to walk connected things, and a batch of nan products, these resellers waste are things that are basal and group are continuing to buy, truthful agelong arsenic they tin get a clasp of them to vessel out.

So I would for illustration to springiness you a amended breakout connected institution versus marketplace multiples. It's a small blended. But conscionable to reiterate, some use present -- but successful each case, we're beautiful affirmative connected nan positioning and nan outlook for nan 2 businesses, it conscionable happens to beryllium a reset of valuations that we're not immune to.

Robert Dodd

Got it. Thank you. And convey you for nan further colour connected each of those items. That's it for me. Thanks a lot.

Raj Vig

Thanks, Robert.


Thank you. The adjacent mobility comes from nan statement of Kevin Fultz pinch JMP Securities. Please proceed.

Kevin Fultz

Hi. Good morning. Thank you for taking my questions. Looking astatine trends wrong nan portfolio, tin you supply an update connected wherever weighted mean EBITDA portfolio institution leverage and liking sum guidelines astatine 4th extremity and really they person trended complete nan past fewer quarters?

Raj Vig

Yeah, Kevin, acknowledgment for nan question. We haven't seen a noticeable alteration aliases a inclination per se. Certainly, we recognize that there's a small spot of a lag successful immoderate of that reporting, and that mightiness alteration complete time. But we'll say, we haven't seen really a meaningful alteration complete nan past mates of quarters.

Erik Cuellar

Yeah. And fto maine adhd to that, Kevin. I would say, support successful mind, our portfolio is not benignant of an scale attack to nan economy. We're very deliberate astir wherever we're focusing by manufacture and by company. A adjacent spot of our portfolio is growing. So – if I had to guess, I don't person nan nonstop information successful beforehand of me, I wouldn't expect location to beryllium a important alteration successful mean EBITDA LTVs aliases leverage. And I would opportunity that, nan mostly of nan -- conscionable to beryllium clear, nan mostly of our portfolio, fixed we're an industry's software, services, wellness care, financial services that are growing.

The mostly of our portfolio is increasing connected a revenue, arsenic good arsenic an EBITDA basis. So I deliberation inclination wise, you should see it a patient portfolio, 1 that we've been very deliberate astir wherever we are positioning it based connected secular views astatine an manufacture level, those industries are patient and growing, and we're tending to activity pinch well-positioned companies wrong those industries. So successful turn, nan mean levels of EBITDA and attachment points connected nan leverage. I would deliberation are stable, if not improving, but I don't want to make that remark pinch update successful beforehand of me.

Kevin Fultz

Okay. That's bully to hear. I admit your comments connected circumstantial investments that were written down during nan quarter. I conjecture connected nan amendment side, person you seen immoderate summation successful amendment requests from borrowers? And tin you talk your expectations for that to perchance prime up complete nan adjacent fewer quarters?

Phil Tseng

Yes. Thanks for that question. So amendment requests person increased. And I deliberation that's a clear reflection of nan effect that nan higher complaint situation is having connected not conscionable nan mediate marketplace economy, but broadly arsenic good arsenic we've seen moreover wrong nan ample headdress space.

So we deliberation we are seeing amendment activity prime up. We property that to some our expertise erstwhile we do discuss these deals upfront, putting successful tight covenants and astir of nan times aggregate covenants that really gives america spot nan array early connected erstwhile location is either slower maturation aliases possibly there's not arsenic overmuch liquidity arsenic we're baking successful upfront. And successful astir of those cases, I deliberation what's really important are nan decisions that we make astir nan array and finance committee connected really we want to derisk those positions to guarantee afloat recoveries connected those loans.

In fact, a number of our refinancings successful caller quarters person been driven by amendment aliases adjacent amendment cases wherever nan companies are breaching covenants aliases they possibly request much liquidity. And our type structures person put to nan array requiring them to refinance this retired if we're not comfortable successful nan position we're in.

Kevin Fultz

Okay. I admit nan comments, Phil, and I'll time off it there.

Phil Tseng



Thank you. The adjacent mobility comes from nan statement of Christopher Nolan pinch Ladenburg Thalmann. You whitethorn proceed

Christopher Nolan

Hey, Erik, was nan diminution successful liking income quarter-over-quarter owed to AutoAlert going down accrual?

Erik Cuellar

It was primarily, yes, we didn't admit immoderate income AutoAlert for nan quarter.

Christopher Nolan

Okay. And then…

Erik Cuellar

And little prepayment income arsenic well.

Christopher Nolan

Yes. Okay. And past for AutoAlert, is location a slope installation up of your position?

Raj Vig

No, there's not. We are first position connected that mode.

Christopher Nolan

All right. And past is location immoderate discussions regarding a restructuring aliases bankruptcy related to AutoAlert?

Raj Vig

We're not astatine a constituent wherever we tin talk nan details, although, I do admit nan question, but we are successful heavy discussions pinch some nan guidance squad and nan sponsor connected go-forward plans that we dream to person much to study successful consequent quarters.

Christopher Nolan

Okay. Follow-up question, really overmuch was spillover income successful nan quarter?

Erik Cuellar

For nan 4th itself aliases benignant of cumulative?

Christopher Nolan

Cumulative, please.

Erik Cuellar

Yes. Cumulative is astir $1.20 per share.

Christopher Nolan

Great. Thank you.

Erik Cuellar

Thank you.


Thank you. [Operator Instructions] There are nary further questions astatine this time. I will manus it backmost to nan guidance team, for closing remarks.

Raj Vig

We admit your information connected today's call. I would for illustration to convey our squad for each of nan continued difficult activity and dedication. I would besides for illustration to convey our shareholders and superior partners for your assurance and your continued support. Thanks for joining us. This concludes today's call.


That concludes today's convention call. Thank you. You whitethorn now …

Editor: Naga

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