BlackRock TCP Capital Corp.

ladies and gentlemen good afternoon welcome everyone to blackrock tcp capital corps third quarter 2022 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 one i will repeat these instructions before we begin the q a session and now i would like to turn the call over to katie mcglenn Director of the BlackRock PCP Capital Corp Investor Relations Team. Katie, please proceed.

Thank you, Tamiya. 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. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the third quarter ended September 30, 2022. We also posted a supplemental earnings presentation to our website at www.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, Raj Vig.

Thanks, Katie, and thank you all for joining us today for TCPC's third quarter 2022 earnings call. As usual, I will begin today's call with a few comments on the market environment, as well as highlights from our third quarter results. I will then turn the call over to our President and Chief Operating Officer, Phil Tseng, who will provide an update on our portfolio and investment activity. Our CFO, Eric Cuellar, will review our financial results, as well as our capital and liquidity positioning in greater detail. I will then conclude with a few closing remarks before we take your questions. The third quarter closed with a continuation of the public market turbulence we have seen across global financial markets this year. It isn't often that both equity and bond markets trade negatively in the same year. However, a combination of geopolitical uncertainty and central banks' move to raise interest rates to curb the highest levels of inflation in more than 40 years is driving significant volatility. In this environment, direct lending continues to provide a strong value proposition for both investors and borrowers in terms of safer visible returns and availability of capital solutions respectively. While we are increasingly cautious in this environment, we take comfort in the fact that the investments in our portfolio are structurally senior. Our loans are primarily first lien and are underwritten with meaningful covenants that provide us with an avenue to constructively engage with our borrowers as challenges are foreseen. This proactive approach combined with structural seniority are hallmarks of our strategy and longstanding commitment to strong product quality and principled protection. Our strategy has always focused on core middle market businesses in diverse, resilient, and less cyclical industries. Although large public companies are often perceived to be less risky, the middle market has historically proved to be nimble and resilient during economic downturns. To date, we are seeing our portfolio companies take actions to address the more challenging market environments. We are observing companies reduce marketing budgets and other discretionary spending. Certain companies are also raising capital where needed and focusing on acquisitions that continue to drive scale and reduce costs. Turning to our portfolio, we continuously monitor all of our investments and are actively doing so in this environment. While we are seeing some margin pressure as a result of the inflationary environment and a generally tempered growth outlook, we are very comfortable with our typical position as a senior secured lender and believe our loans are very well covered. We are also seeing a general ability to pass along cost increases to end customers given inelastic demand for our portfolio company's products and services. Regardless of the market environment, we have always been disciplined with our underwriting standards. We evaluate each borrower's ability to manage in times of duress through both a forward-looking and a historical lens of performance through prior periods of stress or dislocation. Ultimately, we have confidence in our underwriting, our team, and the strength of our diverse portfolio to continue to withstand periods of economic volatility. Let's now turn to our third quarter performance and a few highlights from the quarter. First, we delivered strong net investment income of 42 cents per share. Given the floating rate nature of our portfolio, our net investment income continued to benefit from the increase in base rates through this year. Our net investment income again exceeded our third quarter dividend of $0.30 per share, and we are pleased to announce today our Board of Directors declared a fourth quarter dividend of $0.32 per share, an increase of $0.02 payable on December 30th to shareholders of record on December 16th. We have always emphasized the stability of the dividend and coverage through our recurring net investment income, and our Board's decision to increase the dividend is an acknowledgment of the increase in the ongoing earnings power of the portfolio. and confidence in maintaining our continuous track record of dividend coverage. Second, NAV increased 1.1 percent during the quarter driven by net unrealized gains in the portfolio and net investment income in excess of the dividend. Net unrealized gains were primarily driven by an increase in the value of our investment in 36th Street and partially offset by decreases in the value of our investments in Auto Alert and Securus, as well as the impact of wider market spreads across the portfolio. Third, our portfolio credit quality remained strong, and we had no new non-accruals in the quarter. As of September 30th, non-accruals were just 0.3% of the portfolio at fair value. Our excellent asset quality is both a function of our disciplined and consistent underwriting practices and our vigilant credit monitoring. Fourth, and as Phil will discuss in more detail, the strength of our underwriting platform continued to drive solid investment opportunities that resulted in a total of 17 new investments totaling $48 million. We also had several prepayments that occurred at the end of the quarter, including the full repayment at par plus accrued of our loan to JUUL. As a result, repayments during the third quarter totaled $170 million, resulting in net dispositions of $122 million. Finally, we are excited to welcome Karen Leitz to TCP's Board of Directors, expanding our board to seven members, including six independent directors. Karen is a Senior Vice President and Treasurer of Baxter International, a multinational healthcare company, and she brings a distinguished background and a wealth of governance experience that will further strengthen our board on behalf of shareholders. TCPC continues to deliver strong results for shareholders. Our total return remains above our cumulative total return hurdle. As a reminder, TCPC maintains a 7% hurdle rate, based on total returns including realized and unrealized gains and losses on both the income and capital gains component of the incentive fee with a cumulative look back. Since 2012, when we took TCPC public, we have generated a 10.7% annualized return on invested assets and a total annualized cash return of 9.4%, demonstrating our ability to consistently identify attractive opportunities at premium yields and deliver strong and consistent returns to our shareholders across market cycles. Now, I will turn it over to Phil to discuss our investment activity and portfolio positioning. Thanks, Raj.