BlackRock TCP Capital Corp.

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock PCP Capital Corp's first quarter 2021 earnings conference call. Today's conference call is being recorded for replay purposes. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, please press the star key followed by the digit 1. I will repeat these instructions before we begin the Q&A session. And now I would like to turn the call over to Katie McGlynn, Director of the BlackRock CCP Capital Corp Global Investor Relations Team. Katie, please proceed.

Katie McGlynn Thank you, Rocco. Before we begin, I'll note that this conference call may contain forward-looking statements based on the estimates and assumptions of management at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. Any forward-looking statements made on this call are made as of today and are subject to change without notice. Earlier today, we issued our earnings release for the first quarter ended March 31, 2021. We also posted a supplemental earnings presentation to our website at tcpcapitals.com. To view the slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today. I will now turn the call over to our Chairman and CEO, Howard Lovequist.

Thanks, Katie, and thank you all for joining us today. We appreciate your continued interest in TCPC and hope that you are safe and well. There are several members of the TCPC team on the call with me, including our president and COO Raj Vig, our CFO Paul Davis, and our controller Eric Cuellar. I will start with a few comments on our performance in the first quarter and an update on our portfolio. Next. Paul will review our financial results as well as our capital and liquidity positioning. After that, I will provide some closing comments before opening the call to your questions. Beginning with the highlights from our first quarter, we delivered another robust quarter of results that included further NAV appreciation, continued strong credit quality, steady originations, and strong investment income. Our consistent results were driven in part by our focus on established middle market companies with resilient business models in less cyclical industries. Despite the significant market volatility in 2020, our NAV ended the year higher than it was at the end of 2019, and our NAV further appreciated 2.4% in the first quarter of this year. NAV appreciation in the first quarter reflected further spread narrowing on middle market private credit transactions, as well as strong financial performance across most of our portfolio companies. Our credit quality remained solid with loans to two portfolio companies on non-accrual, totaling just 0.4% of the portfolio at fair value at quarter end. We also took advantage of the favorable bond market during the quarter to lower our borrowing costs. We issued an additional $175 million of unsecured notes in an attractive rate of 2.85%, which was record pricing for sub-index eligible BDC bond issuance. In February, both Moody's and Fitch also reaffirmed our investment grade rating with stable outlook. Turning to our portfolio positioning, at quarter end, our portfolio had a fair market value in excess of $1.7 billion, an increase of over 100 million from the prior quarter. 89% of our investments are senior secured debt and are spread across a range of industries, providing portfolio diversity and minimizing concentration risk. Our portfolio is also weighted towards 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 those in the retail and airline sectors, are generally supported by strong collateral protections, and most of our investments in these industries continue to perform well. During the quarter, we successfully exited our equity in OneSky, the second largest provider of private jet aviation services in the country, and our loan to Dealer FX, a technology solutions provider for automotive dealership service departments, which was repaid. Our diverse portfolio, including 98 companies a quarter end, our largest position, 36th Street Capital, represents 4.2% of the portfolio and provides further diversification given its underlying portfolio of lease assets. As the chart on the left side of slide six of the presentation illustrates, our recurring income is spread broadly across our portfolio and is not reliant on income from any one portfolio company. In fact, over half of our portfolio companies each contribute less than 1% to our recurring income. 94% of our debt investments are floating rate. Additionally, 86% of our debt investments are first lane. Moving on to our investment activity, market origination volumes were significant in the first quarter. While we have been actively deploying capital in this market, we are also leveraging the breadth and depth of the BlackRock platform, selecting from a wide range of opportunities to maintain our disciplined approach to investing. We continue to review a significant number of potential investment opportunities, but invest in only a small percent of them. During the first quarter, we invested $183 million, including investments in 15 new loans, six of which were 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. As we analyze new investment opportunities, we continue to emphasize seniority in the capital structure, industry diversity, and transactions where we act as lead or co-lead. Our largest new investment during the first quarter was a senior secured first lean term loan to World Remit. World Remit. is a leading global money transfer platform that facilitates international transfers using a computer or mobile device, enabling users to send money more easily and securely. The portfolio company is well positioned to gain market share as the volume of global remittances conducted through digital transactions is expected to continue to increase. We are pleased that World Remit chose our team to lead their first lien financing in support of their M&A strategy. New investments in the first quarter were partially offset by dispositions totaling $96 million. These included the sale of our equity investment in OneSky and DealerFX, as I noted earlier, as well as repayments of our loans to Web.com and PatientPoint. The overall effective yield on our debt portfolio was 9.5% as of March 31. Investments in new portfolio companies during the quarter had a weighted average yield of 9.3%, modestly above the 9% weighted average effective yield on investments we exited in the quarter. Since December 31, 2018, LIBOR has declined 261 basis points, or by 94%, which has put pressure on our portfolio yield. However, our portfolio is largely protected from any further declines in interest rates as 84% of our floating rate loans are currently operating with LIBOR floors. We continue to invest selectively, focusing on companies that are minimally impacted by the pandemic or are beneficiaries of the current economic environment. Our investment activity in the second quarter to date totals approximately $100.6 million, primarily in seven senior secured loans, with a combined effective yield of approximately 8.9%. The yields on investments in our pipeline are generally in line with our current portfolio today. To date, we have had limited prepayment activity in the second quarter. Before turning the call over to Paul, I would like to thank him for his tremendous contributions over the past 17 years. As we announced last month, Paul will be leaving on June 3rd to pursue new opportunities. He built a first-class operation over nearly two decades with our team, and we would like to acknowledge him for his dedication and his partnership. I would also like to congratulate Eric Cuellar on his promotion to CFO. Eric has been an instrumental part of the finance team, working alongside Paul and serving as TCPC's controller. Eric has extensive experience in the BDC sector and in asset management more broadly, making him highly qualified to succeed Paul. Eric, would you like to say a few quick words?