BlackRock TCP Capital Corp. Q2 FY2025 earnings call

• Phil Tseng provided an overview of second quarter performance, noting progress in reducing nonaccruals but NAV decline due to marks on restructured portfolio companies. - Jason Mehring discussed portfolio and investment activity, with $178 million invested in 13 new and 11 existing portfolio companies since the start of the year, all first lien loans, focusing on resilient businesses with long-term growth drivers. - Eric Cuellar reviewed financial results: adjusted net investment income $0.31 per share, gross investment income $0.61 per share in Q2; operating expenses $0.28 per share; net realized losses $66 million or $0.78 per share; net unrealized gains $23 million or $0.27 per share; net decrease in net assets $16 million or $0.19 per share. - Phil Tseng provided update on BlackRock's acquisition of HPS, creating PFS platform, with TCPC expected to benefit from enhanced sourcing, investment expertise, and ability to lead large credit transactions.

Nonaccruals declined to 3.7% of the portfolio's fair market value, down from 4.4% last quarter and 5.6% at the end of 2024. 4 large investments were removed from nonaccrual status, including InMoment, SellerX, Lithium and Renovo. 4 investments were added to nonaccrual: Thrasio, Fishbowl, Brook & Whittle and 48forty. Marked down position in AutoAlert due to broader market trends. Substantially marked up several portfolio companies, largest gain on Domo. Board declared a second quarter dividend of $0.25 and a special dividend of $0.04 per share, and repurchased 40,830 shares of TCPC stock. Portfolio had a fair market value of approximately $1.8 billion, invested across 153 companies in more than 20 industry sectors, with 89% in senior secured debt, floating rate instruments. Weighted average annual effective yield of portfolio was 12% in Q2 compared to 12.2% in prior quarter. New investments had a weighted average yield of 10.8%, and exited investments had an average yield of 10.5%.

• Expect third quarter leverage to return to levels reported in Q1. - Taking proactive steps to manage capital structure, including evaluating refinancing options for 2026 notes. - BlackRock and HPS created PFS platform to capitalize on private credit opportunities, with TCPC leveraging PFS for expanded deal sourcing and enhanced capabilities.

• Nonaccrual situations can be dynamic as companies implement turnaround plans. - Market uncertainties, such as tariff policy changes and potential softening in consumer confidence, can impact portfolio companies. - Broader market trends can lead to valuation declines for portfolio companies, as seen with AutoAlert. - Macro-economic factors like inflation and changes in consumer purchasing behavior can affect portfolio companies' performance.

Q: Paul Johnson asked about changes in the investment process with the HPS acquisition and ensuring TCPC gets proper resources.

A: Phil Tseng said PFS is centralizing originations to leverage resources, HPS professionals supplement investment and portfolio management processes, including restructuring expertise.

Q: Robert Dodd asked about TCPC being a lender of influence and deal sizes.

A: Phil Tseng said TCPC gets allocations to deals where PFS is a lender of influence, with at least 90% of recent deals being co-lead.

Q: Robert Dodd asked about restructurings and workout approaches.

A: Phil Tseng said it's case-by-case, with macro conditions impacting, and they're working hard with management teams to improve performance.