BlackRock Capital Investment Corporation

Good morning, my name is Jennifer and I will be your conference facilitator today for the BlackRock Capital Investment Corporation fourth quarter 2021 earnings call. Hosting the call will be James Keenan, Chairman and Interim Chief Executive Officer, Nick Singel, President, Abby Miller, Chief Financial Officer and Treasurer, Lawrence Paredes, General Counsel and Corporate Secretary, Marshall Merriman, Managing Director and member of the Companies Investment Committee, and Jason Merring, Managing Director and member of the Companies Investment Committee. Lines have been placed on mute. After the speakers complete their update, they will open the line for a question and answer session. In order to ask a question, you can press star one on your touch-tone telephone. Thank you, Mr. Paredes. You may begin the conference.

Good morning and welcome to the fourth quarter 2021 earnings conference call of BlackRock Capital Investment Corporation, or BCIC. Before we begin our remarks today, I would like to point out that certain comments made during this conference call and within corresponding documents contain forward-looking statements subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, and similar expressions. Recall to your attention the fact that BCIC's actual results may differ from these statements. As you know, BCIC has filed with the SEC reports which list some of the factors which may cause BCIC's results to differ materially from these statements. BCIC assumes no duty to and does not undertake to update any forward-looking statements. Additionally, Certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, BCIC makes no representation or warranty with respect to such information. Please note we've posted to our website an investor presentation that complements this call. Shortly, Jim will highlight some of the information contained in the presentation. The presentation can be accessed by going to our website at www.blackrockbkcc.com, and clicking the March 2022 investor presentation link in the presentation section of the investors page. I would now like to turn the call over to Jim.

Thank you, Larry. Good morning, and thanks to all of you for joining our fourth quarter and full year 2021 earnings call. I'll provide a company update as well as highlights from our 2021 performance, Nick will then give an update on our portfolio activity and status, and Abby will follow with a discussion of our financial results in more detail. We will then open the call to questions. 2021 was a strong year in which we completed our strategic rotation out of non-core legacy assets. We repositioned the portfolio with well-diversified income-producing investments. And we culminated a very active year by deploying $275 million for the full year on a gross basis, including $68 million in the fourth quarter. We focused on senior secured debt, first lien loans in particular. For all of 2021, 82% of our deployment dollars were in first lien term loans. Approximately 74 percent of the portfolio now consists of first lien investments, up from 50 percent at the end of 2020 and 34 percent at the close of 2019. In 2021, we exited $124 million of junior capital and non-core investments, including $32 million in the fourth quarter. Junior Capital now comprises only 7% of our portfolio, down from 23% at the end of 2020 and 43% at the end of 2019. We ended the year with a modest leverage ratio of 0.56 times. This gives us significant operating flexibility to continue to build our portfolio in a disciplined manner. which could be accretive to NII and ROE and provide increased dividend coverage for our stockholders. Given the breadth of the BlackRock platform and the extensive middle market expertise of our investment team, we are confident that we can identify compelling new opportunities with solid risk-adjusted returns into the year ahead. And we intend to further diversify the portfolio to capitalize on a broader range of sectors and opportunities, building on the momentum we generated in 2021. We ended the year with 86 portfolio companies, up from 55 at the end of 2020. We've seeded the target we set two years ago. The overall size of the portfolio also grew in 2021, increasing by 15% at fair value to $553 million at year end. I would also like to touch upon the stable credit quality of our portfolio. We did not have any new non-accrual positions during 2021. The weighted average internal rating of our portfolio improved from 1.9 at the beginning of 2021 to 1.21 at year end. Our underwriting approach focuses on credit analysis through the economic cycle. We generally avoid businesses that have material exposure to commodity prices or have inability to pass through cost inflation, whether they're on the material side or on the labor front. We monitor our companies to evaluate inflationary and supply chain impacts. And overall, we believe that our portfolio is well positioned to withstand the current inflationary environment. We expect rising interest rates to be accretive to the earning power of our portfolio. 99% of the debt investments in our portfolio have a floating rate coupon, of which 93% have a LIBOR or SOFR floor with a weighted average floor of 1%. While we cannot predict the timing and magnitude of rate hikes by the Fed, we anticipate rate increases in excess of approximately 80 basis points to be accretive to our NII. Lastly, as we have sufficient flexibility on our credit facility, and as we may approach the capital markets for a new bond issuance, we believe we are well positioned to redeem or refinance our existing convertible bonds on or prior to their June 2022 maturity. I'll now turn the call over to Nick to discuss our portfolio activity in further detail.