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spk06: Moving on slide four, our portfolio continues to perform well despite the significant headwinds caused by the pandemic. Our third quarter results reflect further improvement in credit markets and spreads following the significant dislocation that occurred in the spring. Our net asset value increased 4.1% from the prior quarter, reflecting a 1.8% net market value gain on our investments, driven by spread narrowing on middle market private credit transactions as well as improved financial results for several portfolio companies. Importantly, the overall credit quality of our portfolio remains strong. As of September 30, total non-accruals were only 0.6% of the portfolio at fair value. This is a testament to our disciplined approach to underwriting, our more than 20 years of experience lending to middle market companies, and the strength and breadth of the BlackRock platform. Also during the quarter, we further strengthened our capital and liquidity position by opportunistically issuing a $50 million add-on offering to our outstanding 3.9 percent notes due in 2024. This complements the actions we took earlier in the quarter to enhance our credit facilities by replacing our funding facility one with a new facility on more favorable terms, as well as adding $150 million in aggregate accordion commitments. We truly value and appreciate the strong, longstanding relationships we have with our lenders. Today, we declared a fourth quarter dividend of 30 cents per share payable on December 31, 2020 to shareholders of record as of December 17, and in line with the third quarter dividend of 30 cents per share paid on September 30th. We are committed to paying sustainable dividends and continuing our track record of having covered our dividend every quarter as a public company. In the third quarter, our dividend coverage ratio was 117 percent. Turning to slide six and an update on our portfolio positioning. At quarter end, our portfolio had a fair market value of approximately $1.6 billion, substantially unchanged from the prior quarter. Ninety-one percent of our investments are senior secured debt and are spread across a wide variety of industries. We have a diverse portfolio of companies with an emphasis on less cyclical businesses with limited direct exposure to sectors that have been more severely affected by the pandemic. Furthermore, our loans to companies in more impacted industries, including retail and airlines, are generally supported by strong collateral protections, and most of our investments in these industries continue to perform well. As an example, the value of our investment in OneSky, the second largest provider of private jet aviation services in the country, appreciated during the quarter based on strong performance resulting from increased charter flight activity. At the end of the third quarter, our diverse portfolio included 101 companies. Our largest position, which represented only 4.5% of the portfolio, is an equipment leasing company that itself has a highly diversified underlying portfolio of lease assets. As the chart on the left side of slide seven illustrates, our recurring income is not reliant on income from any one portfolio company. In fact, over half of our individual portfolio companies contribute less than 1% to our recurring income. As of September 30th, 92% of our debt investments were floating rate. 82% of these were subject to interest rate floors, all of which are now in effect. Additionally, 82% of our debt investments are first lien, as demonstrated on slide eight. Moving on to our investment activity, we continue to prudently deploy capital in the third quarter. We invested $79 million, including investments and eight new loans, half of which were with existing borrowers. Follow-on investments in existing portfolio companies continue to be an important source of opportunities. From a risk management perspective, these are companies we know and understand well. Dispositions in the quarter were $89 million for net dispositions of $10 million. As we analyze new investment opportunities, we continue to emphasize seniority in the capital structure, industry diversity, and transactions where we act as a lead or co-lead. Our largest investment during the third quarter, a senior secured first lien term loan to MetricStream, demonstrates this emphasis on transactions where BlackRock teams act as a lead lender. as well as our team's deep industry knowledge and experience investing in software companies. MetricStream is a leading software provider of integrated governance, risk management, and compliance solutions. The company has strong equity sponsorship and is benefiting from the increased awareness and emphasis on managing risk in response to the global pandemic. MetricStream reached out to BlackRock directly based on our reputation in the market and experience investing in similar companies. As a result, our team acted as the sole lender in the transaction. Our investment activity in the fourth quarter to date has been selective and focused on companies that are minimally impacted by the pandemic or are beneficiaries of the COVID-impacted operating environment. Dispositions in the third quarter included payoffs of our $29 million loan to InMobi our $16 million loan to American Broadband, and the refinancing of our $11 million loan to Pulse Secure. We also restructured our investment in AGRY, which monetized a portion of our loans while maintaining ongoing upside potential through a small preferred equity position. Investments in new portfolio companies during the quarter had a weighted average effective yield of 9.5%. Investments we exited had a weighted average effective yield of 8.8%. the overall effective yield on our debt portfolio increased to 10%, primarily reflecting amendments made on several loans coupled with the higher yield on originations versus exits. Since the end of 2018, LIBOR declined 257 basis points, or by 92%, which put pressure on our portfolio yield over this period. However, our portfolio is largely protected from any further declines in interest rates as over 80 percent of our floating rate loans are currently operating with LIBOR floors, as demonstrated on slide nine. Finally, while we are cognizant of the impact that the current environment has had on industry-wide BDC stock price performance, our focus has always been on delivering consistent returns to TCPC shareholders across market cycles and over the long term. As you can see on slide 14, TCPC has returned in excess of $12 per share in dividends over the last eight and a half years, which translates to an annualized cash return to investors of 9.9 percent and is reflective of our return on invested assets of 10.3 percent. Since our IPO, TCPC has consistently outperformed the Wells Fargo BDC in the index. Now, I will turn the call over to Paul, who will discuss our financial results in more detail. Paul?
spk04: Thanks, Howard, and hello, everyone. During the third quarter, as Howard noted, we continued to enhance our strong capital liquidity position. First, in August, we replaced our funding facility with a new $200 million facility with improved terms, a two-year maturity extension to 2025, and a $50 million accordion commitment, while again maintaining our low rate of LIBOR plus 200 basis points. Combined, we now have accordion commitments totaling $150 million. Additionally, in September, we opportunistically raised an additional $50 million of our 3.9% notes due 2024, bringing the total issuance to $250 million. With the new unsecured notes, 82% of our assets were supported by unsecured debt, equity, and our SBA debentures, which are excluded from regulatory leverage calculations. This allows our secured credit facilities to be significantly over-collateralized, which helps ensure that we have ample liquidity in a broad range of market conditions. At September 30, we had available liquidity of $253 million and a regulatory leverage ratio of 1.05 times debt to equity, net of cash of $35 million and pending trades, which was down from 1.10 times at times at June 30, and is well within our two to one regulatory limit. Our unsecured debt continues to be investment grade rated by both Fitch and Moody's. Turning to slide 18, we generated net investment income in the third quarter of 35 cents per share, which exceeded our third quarter dividend of 30 cents per share paid on September 30. This extends our continuous track record of covering our regular dividend every quarter. Investment income for the third quarter was 74 cents per share. This included recurring cash interest of 54 cents, recurring discount and fee amortization of 6 cents, and PIC income of 6 cents. We had modest prepayments in the quarter that contributed 3 cents per share, including both prepayment fees and unamortized OID. Investment income also included 3 cents of other income and 2 cents of dividend income. Our income recognition follows our conservative policy of generally amortizing upfront economics over the life of an investment, rather than recognizing all of it at the time the investment is made. Operating expenses for the third quarter were 31 cents per share and included interest and other debt expenses of 17 cents per share. Incentive fees in the third quarter included $600,000 of catch-up fees, and totaled $5.0 million, or 9 cents per share, for total net investment income of 35 cents per share. As noted in last quarter's earnings call, five-sixths of the catch-up portion of incentive fees earned in the second quarter were deferred over the subsequent five quarters, subject to our performance remaining over our total return hurdle. We believe this further aligns our interests with our shareholders and demonstrates our confidence in the strength of our portfolio and its earnings capacity over time. Our net increase in net assets for the quarter was $49 million, or 85 cents per share, which included net unrealized gains of $48.6 million and net realized losses of $18 million. Net realized losses during the quarter were comprised primarily of the restructuring of our investment in AGY, as Howard noted earlier. Unrealized gains in the quarter included spread tightening during the quarter, following the dramatic spread widening in volatility that occurred during the spring, as well as improved performance at several portfolio companies. Unrealized gains included $6.9 million of appreciation in the value of our investment in Adventum and $4.4 million of appreciation on our investment in OneSky. Howard discussed the strong performance at OneSky as charter flight activity has outpaced expectations. And Admentum continues to benefit from a shift toward online learning that is accelerated in the current environment. Substantially, all of our investments are valued every quarter using prices provided by independent third-party sources, including quotation services and independent valuation services. And our process is subject to rigorous oversight, including backtesting of every position disposition against our valuations. Our highly diversified portfolio continues to perform well, even in this challenging market environment, and our overall credit quality is sound. We have loans to just three portfolio companies on non-accrual, Glass Point, CIBT, and Avanti, which together represented only 0.6% of the portfolio at fair value and 1.2% at cost. CIBT, which is new this quarter, is a leading global provider of immigration and visa services for corporations and individuals. and the company has been challenged given the current slowdown in international travel. Turning to slide 15, we had total liquidity of $253 million at quarter end. This included available leverage of $224 million and cash of $35 million, less net pending settlements of $6 million. Additionally, our investments in delayed draw term loans and unfunded credit facilities to portfolio companies totaled just $51 million in quarter end, or 3 percent of total investments, of which only $19.8 million was revolver commitments. With our new lower-cost funding facility, increased accordion commitments, and additional unsecured notes, our diverse and flexible leverage program is stronger than ever. As of September 30, this program included two low-cost credit facilities, a convertible note issuance, two straight unsecured note issuances, and an SBA program. Given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing, and our leverage program is well-laddered with no near-term maturities. Our nearest maturity is March of 2022, and this represents less than 15% of outstanding liabilities as of September 30th. Combined, our outstanding liabilities had a weighted average interest rate of 3.3 percent, down from 3.8 percent, or 51 basis points since the end of 2019. I'll now turn the call back over to Howard. Howard McLeod Thanks, Paul.
spk06: While the economic outlook is uncertain, our team is focused on delivering the results our shareholders have come to expect from TCPC. The overall market environment has continued to improve following the significant dislocation that occurred in March. and middle market companies overall have performed better than market expectations. While deal volumes remain below pre-COVID levels, we are seeing a pickup in activity, and the deals in our pipeline are generally on more attractive terms. We remain extremely selective in this environment, executing on only a small number of opportunities we review and focusing on companies we believe have minimal COVID exposure or those that are positioned to outperform in this environment. We also remain focused on companies and industries we know well and on transactions where our team leads or co-leads negotiations to ensure deal teams and structures include appropriate creditor protections. Our performance to date and our confidence and our ability to succeed in this environment are driven by our team's two decades of experience in both performing and distressed credit, the strength of our underwriting platform, as well as the depth and breadth of the firm-wide resources of BlackRock. In closing, while these are challenging times for everyone, our entire team is focused on generating strong risk-adjusted returns for shareholders. And with that, operator, please open the call for questions.
spk00: Certainly. Ladies and gentlemen, if you have a question at this time, please press the start and the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the count key. Your first question comes from the line of Chris Katowski from Oppenheim. Your line is open.
spk07: Thanks for taking my question. Hold on. Is that better? Can you hear me?
spk08: It's good. Yes, clearly.
spk07: Good. First of all, I guess I was wondering on the relatively outside levels of dividends and and other income. Is there any story there, or should we just expect that to kind of normalize next quarter?
spk06: Chris, thanks for the question. As I think you and others who have followed us for a long time are aware, our other income is lumpy. It comes from different sources. We do have income in connection with some amendments of of relationships with portfolio companies. In this case, its biggest contributor was from a company that's performing well, in fact, and requested an extension of the credit agreement. We also have dividend income that we get from portfolio companies as well.
spk07: Okay. And then I know you've had the slide in there. I just wanted to make sure I'm interpreting it correctly, but slide nine on your interest rate sensitivity where you say that the cumulative decline in LIBOR amounts to $0.09 per share before incentive fees. So, I mean, just to kind of get the bottom line NII impact, I would just take that number and multiply by 0.8, right? So it would be like $0.07.
spk04: Yeah, that's correct. Eight cents.
spk07: Yeah, seven, eight cents, something like that. Okay. And then lastly, I guess the one new non-accrual CIBT, I don't know what you can say about it, but it had been significantly marked last time. Was there an event or what color can you give us on that? the um you know decline there and then i guess on the flip side um you said you took a preferred holding for agy does and that it has upside does does that have a convertible feature or is it just straight preferred sure uh in in reverse order with respect to agy there is upside
spk06: in our remaining position in AGY. It is a small position, though, for clarity. With respect to CIBT, it's a very good business, but it is dependent on global travel and in connection with the company's performance, which is significantly dependent on the level of global travel, particularly in and out of Asia and China more specifically. we reached the conclusion that it was appropriate for it to go on non-accrual.
spk07: Okay. And then just in general, any thoughts on, you know, significant deal activity coming back and driving volumes? I mean, you know, kind of We can see deal logic numbers for announced M&A. They seem to have picked up in the last couple of weeks or months. Are you seeing that in your market as well?
spk03: Yeah. Hey, Chris, it's Raj. I'll take that one. We are seeing a pickup in deal activity. I think we also are, as I commented on the last call, seeing good competition out there. The private capital asset class is I think generally has navigated this environment well. I think it's a testament to the business model. But we also are not saying, you know, we're saying no a lot. I think terms are competitive. For certain companies, people are, whether it's pricing or structures, you know, doing things that we're not ready to sign up for. So while the inbound activity has certainly picked up, as well as the deployment, you know, I don't know that they're necessarily one-to-one correlation. And that's not a bad thing. We're maintaining discipline and we're doing what we feel comfortable with. And hopefully as we make it through the election cycle and the end of this year, we'll see that continuing. But to answer your question, yes, there has been a pickup in deal activity from our perspective.
spk07: Okay. And I guess I'll leave it there and let somebody else ask some questions. Thank you.
spk06: Chris, thanks for the questions.
spk00: Thank you. And your next question comes from the line of Simeon O'Shea from Wells Fargo Securities. Your line is open.
spk08: Hi, thanks. Good afternoon. Just first a follow-on for the AGY reorg or restructuring. Was there any money in or money out there? Did that company receive another investor or did you just reorg your debt into equity? or any color you can provide there.
spk06: Sure. AGY is a fundamentally good business, but it has struggled with the cost of one of its major inputs, rhodium. And we reached the conclusion that it was more appropriate to let a third party come into the business and pay down our position and sell down a significant part of our economics and retain a small preferred upside.
spk08: Okay, that's helpful. And then just for Howard or Paul, on the unsecured issue, I think closed post-quarter, any comment on, you know, obviously this is sort of an opportunistic availability to you, as you may see it. Any comment on how much more unsecured you might do given that availability and that being a large portion of your capital structure? Should we expect more to come if the market stays this way?
spk06: Yeah. Finn, thanks for the question. We have been very careful in how we think about building out the liability side of our balance sheet, as I think you're aware. We added to the note issue you just referenced. We have two other unsecured note issues. We have a long-term SBA facility, and we have two distinct credit facilities, one of which we increased in the spring, the other of which we replaced. They both have accordion features. It is by intent that we fund the balance sheet with six different sources, no one of them very large in relationship to our asset base. We think it's important to have staggered funding by maturity and sources as a way of managing our balance sheet and positioning us so that we can be opportunistic in as we invest and deploy capital without having to be overly concerned about any given tests from particular lenders.
spk08: Okay, that's helpful. Thanks for taking my questions. Thank you.
spk00: Thank you. Your next question comes from the line of Christopher Nolan from Latinburg, Salomon. Your line is open, sir.
spk02: Hey, guys. Um, Kala Solar Holdings, um, it matured on 9-30-20. Were those loans paid off?
spk03: Uh, Kala Solar Holdings is part of a larger, um, series of securities, including Conergy, and the answer is nuanced, because some of the loans in certain regions were paid off, uh, the Conergy loans. The COBA loans, I believe, were also paid off, and then what's remaining is some of the equity that was converted in the APAC region, which is the outstanding position. So the loans that were paid off are no longer on the balance sheet, and there were a number that were successfully completed. What remains is simply the equity position as part of a conversion in Asia. That's in a runoff mode that we talked about a few times in the past. But the primary asset is also an operating facility that we expect to exit at some point in the near future as we're going through a process there.
spk02: And, Raj, is that Asian-affiliated ConEnergy Asia? Correct. Okay. Correct. Last quarter, that particular credit had a spread of 10%, total coupon of zero. Now the spread is zero, the total coupon is zero. And there's $2 million on the cost basis, but why have a jet with a zero coupon?
spk03: Essentially, the collateral of that business is the asset. So the way we think about it is we have a preferred position on the remaining business. We have the sole lender with the asset that's marketed for sale. So I think at some level it's form over substance in how, you know, we are the sole capital party there. I think the zero interest really just, you should look at it as something that's essentially held for sale, you know, in that form of the security.
spk02: Got it. Okay. Thank you for the clarification.
spk00: Thank you. Your next question comes from the line of Brian Lynch from KBW. Your line is open.
spk09: Hey, good afternoon. Thanks for taking my questions. The first one, you said you had eight new loans this quarter, about half of new borrowers. You mentioned Metric, Stream, the software provider. When you guys are sourcing deals for new companies in this environment, as deal activity starts to pick up, are you focusing more on really defensively positioned businesses that are really COVID-resistant? or are you guys looking to add on additional risk at this point in the cycle? It's still very uncertain out there, but there's a little more certainty about how the economy is today.
spk03: Yeah, I'll take that one, and others may add on to the comment. So we are generally, even pre-COVID, have always viewed our efforts as being focused on companies that are more defensive, less cyclical or acyclical, and sometimes we'll focus on really an asset-collateralized business or a loan, for instance, in the aircraft financings or some of the asset-backed loans we've done in the retail area if there is, in fact, a more cyclical, broader business. That has not changed through COVID. If anything, the approach, you know, as we've taken it historically, I think in many ways is validated through COVID. You have seen a very stable portfolio, quarter over quarter. I think the lens perhaps tightens because there's some businesses at the margin are performing better or benefiting from COVID, some are more neutral. But overall, our approach has always been to be focusing on defensive businesses where we have good revenue and earnings visibility. Those happen to be businesses that, you know, I wouldn't say necessarily benefit, but are more defensive in COVID as well. And so that approach and that philosophy will continue. We also agree that things are relatively uncertain, you know, in various ways. And we're more inclined to be defensive, both in structure and where we want to be in a capital structure versus venturing out on the risk curve. And I think that is, you know, you know, That has done well for us through this point in time, and we're going to continue that approach until such time we feel that stretching on the risk curve makes sense. But given the uncertainty, we're generally the same mindset as your comment about the environment.
spk09: Okay. I mean, given the level of uncertainty that you guys certainly feel about the economic environment, adding on some more unsecured debt, I would say that's a way to to build up the durability and diversification of your liability structure, which is probably, you know, something you can do to a little bit more on the defensive side. You guys talked about deal activity picking up as we've heard other BDCs say for pent up demand, potentially some stuff around the election. Is it your anticipation that if you guys do have a robust pipeline of deal flow, Would you guys want to and intend to grow the portfolio further from here and increase the leverage levels if you guys are seeing the right amount of deals? Or is it the intent, despite what the deal volume shows, that you guys are trying to have a more conservative balance sheet and keep leverage here or even push it lower?
spk06: Yeah, so thank you for the question. The conservatism starts with the assets themselves. And as Raj talked about, although we reserve some room to do some things that may be, you know, slightly, you know, more impacted, the focus of building the assets in our portfolio loan by loan is in durable businesses and structures. And we have a liability structure that gives us a lot of flexibility. It gives us the ability to add and reduce leverage. And so the way we think about it is we're doing good loans when they come to us, not trying to hit some artificial target for the amount of leverage we have on the portfolio, but always mindful of maintaining significant cushions. We've been running... DCPC has been public for eight and a half years, but we've been running leveraged funds for over two decades, and we're very mindful of the benefits of having leverage and respectful of making sure that we use it in a prudent fashion. And so we have the flexibility to put on more assets, and we do do that from time to time, but the way we think about it is we really look at it on a deal-by-deal basis first.
spk09: Sure. Okay, fair enough. One last one from me. You gave some good commentary on OneSky, you know, the increased demand for charter flight is making that business a more favorable business to be in. I was wondering if you can just give a quick update on Mesa Air. I believe that's in a different business subset of the airline space. It looks like the valuation, you know, held up pretty well this quarter. But just given the backdrop of that industry, any update on that?
spk06: Yeah, thanks for the question. We continue to be very comfortable with Mesa. Clearly, the airline industry has been dramatically impacted. But the way we underwrote that loan was to focus on what we thought were durable assets and at good attachment points. They have gotten a significant aid from the government. We think they continue to be important to the functioning of the major carriers whose hubs they serve. Clearly the whole industry is under a fair amount of stress as are valuations in the industry. but our loans are structured to amortize, and we've been pleased to date with the company's performance in a remarkably tough environment.
spk09: Okay. Thanks for that. I appreciate you guys taking my questions this afternoon, and congrats on a really nice quarter.
spk06: Thank you very much, and thank you for your questions.
spk00: Thank you. And your next question comes from the line of Matt Jaden from Raymond James. Your line is open.
spk05: Hi, all afternoon, and thanks for taking my questions. Howard, I appreciate the commentary on deal flow towards the end of the call. Just to clarify, when you say terms are more attractive than kind of pre-COVID levels, is that on all fronts, say, if we look at covenant quality, underlying leverage, and spreads? Are all of those improved versus pre-COVID levels, or is it just kind of one or another?
spk06: Look, there's variability. Generally speaking, we're finding terms more attractive and more ability to drive stronger documents and better protective packages. With respect to pricing, In general, deals are a bit wider. You can see from our additions versus exits last quarter, there's a bit of a pickup. We always caution, don't read too much into one quarter or the fairly small number of investments that are coming on or off the balance sheet. At the same time, there are some deals in the market that are remarkably competitive and tight pricing. And I think you can see that in both the public markets and our markets where you've got some tightening on some, you know, companies that people are really chasing after. And at the same time, you're starting to see some deals get pulled and lender pushback in the public markets. And that same dynamic is going on in the private markets where we believe we have the ability to, you know, continue to push back on things. and drive some overall better terms than we were seeing before going into the crisis.
spk05: Great. I guess second one for me then. So kind of the second quarter that prepayment fees have been lower than that historic four to five cent range. Any visibility you can provide on kind of when we might expect prepayment activity to pick up more in line with that historic range?
spk06: We appreciate the desire to project it and model it. It is lumpy, including in a way Immobi, which paid off this past quarter, was supposed to pay off the two quarters prior to that. If 331 was disruptive, it paid off the first week of July instead of 630. I use that as an example. It's a company we knew was refinancing, and it took three quarters on a reporting basis to get there. And so we have that across the portfolio, and it's not uncommon. We've had years where we've had multiple credits repay on the last business day of year end, including some we weren't sure whether they were going to make it into the present year or the next year. It's the nature of the business. At least that's the way, you know, these are bespoke transactions with individual borrowers. They're not capital markets transactions. So often when they're refinancing us, there's a counterparty on the other side who may or may not get there with respect to their timing in a given timeframe, and people aren't trying to manage it to hit the quarter necessarily. So we think if you look back over a long period of time, that's probably a pretty good indication. But there's a seasonality to some small extent, and clearly in a COVID environment, there are other externalities that are impacting people's decision-making as well.
spk05: Okay, and then just a quick one lastly for me. Howard, I know you said last quarter there was about 11 portfolio companies that took loan amendments over the quarter. Would you be willing to say what it was for 3Q?
spk06: Yeah, it was remarkably similar this quarter by coincidence.
spk05: That is it for me. I appreciate it.
spk06: Thanks for the questions.
spk00: Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Howard Lefkowitz for any closing remarks.
spk06: Thank you. I'd like to thank all of our shareholders for your confidence and your continued support. I'd also like to thank our experienced and talented team of professionals at BlackRock TCP Capital Corp for your continued hard work and dedication in these challenging times. Thanks again for joining us. This concludes today's call.
spk00: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for joining Humana All Disconnect. Thank you. Thank you. Thank you. Thank you. Thank you. you Thank you. Thank you. Thank you.
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