BlackRock TCP Capital Corp.

Welcome, everyone, to BlackRock TCP Capital Corp's first quarter 2023 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 prior to the Q&A session. And now, I would like to turn the call over to Katie McLynn, Director of BlackRock TCP Capital Corp Investor Relations Team. Katie, please proceed.

Thank you, Ciara. 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 first quarter ended March 31, 2023. 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 for TCPC's first quarter 2023 earnings call. I will begin today's call with a few comments on the market environment and provide an overview of our first 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 then 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. As you all observed, market indices were generally down across the board in 2022. However, even with the broader market weakness during the year, private credit assets generally held up well, further demonstrating the resiliency and stability of the asset class in different market environments. During the early part of 2023, we saw notable recoveries across most asset classes from their respective 2022 performances. Markets stabilized as we entered the year, but by the latter part of Q1, struggles that emerged in the banking sector understandably shook investor confidence and drove a volatility that continues today, with now several bank failures crystallized. Notwithstanding the broader social and economic implications, Weakness and even turmoil in the banking sector is hardly a new dynamic to establish private market participants. Rather, it is a dynamic we have benefited from for most of our nearly 23 years lending to middle market companies who continue to look in ever greater numbers for alternatives to traditional forms of financing. While it's too early to say when the current situation will be fully resolved, we believe the reaction to recent events in the banking sector will likely make it even less efficient and less economic for banks to lend to the middle market and therefore further support, if not accelerate, the opportunity for well-positioned private credit lenders such as ourselves. In addition, the swift collapse of several banks and ongoing concern with the sector has been a reminder to borrowers of the benefits of working with a direct lender like BlackRock. Direct lenders can act quickly when needed and have locked up or permanent capital that facilitates stable, long-term financing solutions to borrowers that remain available during periods of market dislocation. We have seen this firsthand many times, including during the early days of COVID and again more recently this past quarter with the few portfolio companies we have that had cash deposits with Silicon Valley Bank. When the news about the challenges that the bank started to spread and these companies had difficulty accessing their liquidity, our team was in position to provide short-term liquidity had it been required. Fortunately, the Fed stepped in to backstop their deposits, and ultimately our capital was not needed, but our ability to work directly with these borrowers and to act quickly were further reminders of the value that credit managers can provide. Now I'd like to turn to our first quarter highlights. We delivered strong net investment income of 44 cents per share in the first quarter. Given the floating rate nature of our portfolio, our net investment income continues to benefit from higher base rates as well as wider spreads on new investments, resulting in a run rate NII that is among the highest in TCP's history as a public company. In recognition of the higher ongoing earnings power of TCPC, primarily to provide the rate environment, our board of directors today announced an increase of two cents per share to the quarterly dividend distribution. The second quarter dividend of 34 cents per share will be payable on June 30th to shareholders of record on June 16th. As a reminder, our board has always taken a disciplined approach with regard to the dividend, given our emphasis on stability and strong coverage through our recurring net investment income. Throughout TCPC's history, we have consistently covered our dividends with recurring net investment income. This commitment remains important to us, and even accounting for the dividend increase declared for the second quarter, our first quarter dividend coverage ratio would have been approximately 129%. Phil will discuss our first quarter investment activity in more detail, but in summary, we are being disciplined in deploying new capital in this uncertain environment, while also selectively taking advantage of the more lender-friendly investment environment. We reviewed a substantial number of transactions during the quarter and deployed capital in a small percentage of those opportunities. Given the slowdown in private equity deal volumes, we are reminded of the benefits of our channel-agnostic approach to deal sourcing. Our pipeline remains healthy, and given our direct relationships with management teams and other industry participants, we continue to find attractive opportunities in the current environment. Finally, the credit quality of our portfolio remains solid, with loans to just two portfolio companies on non-accrual as of the end of the first quarter totaling just 0.3% of total investments at fair value, among the lowest non-accrual levels in TCPC's history as a public company. Auto Alert, which was placed on non-approval in Q4 of last year, was successfully restructured in Q1, and our loans are now back on approval status. While still early, it appears that some of the macro headwinds that had been facing the company since the onset of the pandemic appear to be abating, and we have been encouraged by Auto Alert's relative performance year-to-date and post the completed restructuring. Looking back at our historical performance as a public company since 2012, we have generated a 10.3% annualized return on invested assets and a total annualized cash return of 9.3%. We believe this performance remains at the high end of our peer group and reflects our ability to consistently identify attractive opportunities at premium yields and deliver exceptional returns to our shareholders across market cycles. Now, I will turn it over to Phil to discuss our investment activity and portfolio positioning.