BlackRock TCP Capital Corp.

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's third quarter 2024 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 Michaela Murray, a member of the BlackRock TCP Capital Corp Investor Relations Team. Michaela, please proceed.

Thank you. 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, 2024. We also posted a supplemental earnings presentation to our website at tcpcapital.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, Michaela, and thank you all for joining TCPC's third quarter 2024 earnings call. I'm here today with our President, Phil Tseng, our CFO, Eric Cuellar, as well as Jason Merring, our COO. Today, I will provide an overview of our third quarter results. Phil will discuss our portfolio and investment activity, and Eric will then review our financial results, as well as our capital and liquidity position. We'll all be available to answer questions, and before opening the call up for Q&A, I will wrap up with some closing comments. By now, I expect that many of you saw our press release in September announcing leadership changes at TCPC, including my decision to leave BlackRock and the accompanying resignation as CEO and chairman of TCPC. It has been an honor to lead BlackRock TCPC Capital Corp and to have played a key role in the development and growth of the company for almost two decades since 2006. And I am excited for the next chapter. Following my departure, Phil Seng will succeed me as CEO and chairman of the board And having partnered closely with Phil and other members of the management team, I believe you are in very good hands and the TCPC is well positioned for long-term success. Now turning to the highlights for the third quarter of 2024, we delivered adjusted net income of 36 cents per share and our annualized net investment income return on average equity was approximately 14%, which is at the high end of historical levels. Our board of directors declared a fourth quarter dividend of $0.34 per share, which implies dividend coverage of 106% based on our third quarter adjusted NII. In addition, for the fourth quarter, our board declared a special dividend of $0.10 per share. The fourth quarter dividend, along with the special dividend, is payable on December 31, 2024 to shareholders of record on December 17, 2024. We continue to take a disciplined approach to our dividend with an emphasis on stability and strong coverage from recurring net investment income. As a reminder, throughout TCPC's 12-year history as a public company, we have consistently covered our dividends with recurring NII and have also paid several special dividends. Further, on October 30th, our Board of Directors reapproved our authorization to repurchase up to $50 million of our common stock in the aggregate at prices in accordance with certain thresholds below our net asset value per share. As always, we continue to maintain a thoughtful approach to share repurchases in order to maximize shareholder value. Overall, non-approval decreased since last quarter. However, one additional non-approval loan and certain markdowns resulted in a slight 0.9% reduction to NAV. This reflects the removal of one portfolio company, Pluralsight, from non-accrual status and the addition of Razor Group's preferred equity to non-accrual status. As a result, loans on non-accrual status declined from 4.9% to 3.8% of portfolio fair value. While this level of non-accruals may be higher than historical levels, it is clearly moving in the right direction. Turning to specifics, we've removed Pluralsight from non-accrual status following its restructuring in August. The lender group and sponsor agreed to a consensual change of control where the lender group took control of the business, followed by an additional investment as part of the recapitalization that strengthened the balance sheet and provided over $200 million of capital to accelerate growth initiatives and support long-term strategic goals. As part of this recap, TCPC now owns a portion of the equity as well as the debt. We continue to closely monitor Pluralsight's performance alongside the remainder of the lender group. As you may recall, Razor Group, which is in the Amazon aggregator industry, chose to address some of their challenges via consolidation and acquired perch in March of this year. We believe this strategic combination will ultimately create a more efficient company. This will take time. We chose to place Razor's preferred equity on non-accrual in the third quarter as the company has not performed in line with our expectations. During the third quarter, we marked down positions in several portfolio companies The larger largest of which were Gordon brothers finance company seller X and in moment other than seller X, which is an Amazon aggregator. We've discussed in the past, the circumstances of each of these portfolio companies were unique and company specific. The first is Gordon brothers, a commercial finance company that originated structured and invested in specialized asset based loans to middle market companies. The company sold substantially all of its loan assets to an unaffiliated third party. in November of 2020. The investment originated at BCIC and transitioned to TCPC as a result of the TCPC-BCIC merger. At the time of the merger, this investment was on non-accrual and it has maintained that classification since the merger. The value of our current position in Gordon Brothers is largely related to residual claims associated with the sale of the firm's assets. During the third quarter, Certain developments led our deal team and third-party valuation providers to believe there would likely be a decrease in the proceeds TCPC ultimately realizes from those claims. The second is Seller X, which following the combined impact of a stretched balance sheet and a slowdown in online consumer spending, we decided to place on non-accrual status in the second quarter. As you may have seen in the news, we have been actively engaged with the company management the rest of the lender group, and owners to effectuate an agreement to address the company's capital structure and liquidity, and we will provide additional detail when we can. Regarding the Amazon aggregator space, we believe we are invested in the leaders at this point. While the sector has evolved over the past three years, we continue to see a path forward for successful investment outcomes for those aggregators with the appropriate capital structures, liquidity, and strategies to compete in this new environment. Over the medium to longer term, we believe these businesses will benefit from continued consolidation, improved capital structures, and lower operating costs. The third is InMoment, which provides customer experience management software and analytical solutions. InMoment's financial performance has experienced softness, resulting in an unrealized loss for the third quarter. As a result of this underperformance, The management team has taken several steps to improve product and service quality to expand growth. At the end of the third quarter, debt investments in 10 of our 156 portfolio companies were on non-accrual status, representing 9.3% of the portfolio at cost and 3.8% at fair value. Net realized losses for the quarter were $31.4 million due to the restructuring of our investments in Pluralsight and McAfee. Net unrealized gains were $19.2 million, driven primarily by the reversal of previously unrealized losses from the restructuring of Pluralsight and McAfee and unrealized gains in Securus and Domo, offset by unrealized losses in Gordon Brothers, Seller X, and in Moment. We are actively monitoring our portfolio companies with respect to their businesses and markets, capital structures, and the impact of higher rates and inflation on their performance. As of September 30, 2024, our weighted average internal risk rating was 1.55 compared to 1.5 on June 30, 2024. Our average internal risk rating continues to indicate that our portfolio companies are generally performing in line with or exceeding our base expectations. Now, let me turn it over to Phil to discuss our investment activity and portfolio.

Thanks, Raj. Before I begin, I want to say it's been a privilege to work alongside Raj for many years, and I appreciate the board's vote of confidence in appointing me chairman and chief executive officer. I'm excited to lead TCPC going forward with the support of my longtime colleagues, Jason Merring, who was appointed president, Patrick Wolfe, who was appointed COO, and Dan Worrell, who was appointed co-CIO, effective November 7th. We have a tremendous opportunity ahead and look forward to collaborating with our talented team as we continue to leverage the strength of the BlackRock platform to create value for our shareholders and our borrowers. I want to thank Raj for his partnership over many years and his contributions to TCPC and wish him the very best in his future endeavors. Now, I'll begin with a few thoughts on the broader market environment and discuss our new investments for the quarter and our portfolio performance. Starting with the market environment. Potential for rate cuts has been a topic of speculation for some time now, and with the Fed's announcement in September, they have finally arrived. Last night's election results may change the course of the Fed's previously messaged accommodative stance, although rates still remain high relative to recent history, and higher for longer may truly be higher for longer now, if inflation ramps up. The recent rate cut does provide some relief to borrowers who have endured higher floating rate debt burdens over the past few years. If shorter-term base rates continue to decline, key indicators of portfolio health, such as interest coverage and debt ratios, should improve. We believe the long-anticipated rate cutting cycle and certainty on the election outcome will serve as important catalysts for M&A, which has been sluggish for the past year. As we have previously said, we continue to see meaningful pickup in activity across our platform, reflecting the return of M&A and refinancing activity, and we are very excited about what we're seeing in the pipeline. Turning to our investment activity, during the third quarter, we invested $73 million primarily into six new and three existing portfolio companies. All the new debt investments in the third quarter were first lien loans, which continue to be our primary area of focus. Investing in incumbent portfolio companies is an important part of our strategy and a competitive advantage that allows us to invest additional capital in companies and industries we know well. However, we've seen a marked uptick in new platform activity and have continued to identify compelling opportunities to invest in these new companies. Our pipeline of new opportunities has grown due to an increase in overall MA activity as well as continue the demand from borrowers for incremental or growth capital, as well as refinancing activity. We continue to source attractive investment opportunities from the direct relationships of our dedicated deal sourcing professionals, as well as from the broader BlackRock platform. During the third quarter, these included a first lane investment in a new portfolio company, iLobby, which is an enterprise facility and visitor management software company that serves 1,200 clients across 55 countries, including several in the Fortune 500. iLobby's solutions are focused on tracking, monitoring, reporting, and providing access control to human and physical assets within a specific work perimeter. iLobby is a leading niche vertical software business, and we were pleased to be the sole lender in this transaction to support the acquisition of a complementary asset. Another new portfolio company we invested in this quarter is DocuPace, a provider of cloud-based software-as-a-service solutions that streamline back-office administrative and operational tasks for wealth managers. DocuPace is a category leader with a strong market reputation in back-office workflow for the non-wirehouse and RIA channels. We sourced this opportunity by leveraging our strong relationship with the sponsor. And we believe DocuPage represents an attractive investment opportunity as they maintain a stable customer base and an industry that is benefiting from multiple secular growth trends as RIAs and independent broker dealers continue to gain share in the market. We believe our channel agnostic approach to deal sourcing is an advantage that reduces risks associated with single channel sourcing concentration. And when combined with our industry focused underwriting approach allows us to be selective in choosing the best possible investments from a robust pipeline of opportunities at any point in time. At the end of the third quarter, the weighted average annual effective yield of our performing debt portfolio is 13.4% compared to 13.7% last quarter. We received $139 million in proceeds from the sale or repayment of investments during the quarter. New investments had a weighted average yield of 11.3%, while investments we exited had a weighted average yield of 13.4%, which explains some of the yield compression we experienced this quarter. In an environment where spreads have tightened, we remain disciplined with regard to our underwriting standards and our focus on structuring deals with lender-friendly terms. In several instances, we chose not to refinance or reprice existing loans at lower yields or weaker structures that simply did not align with our risk-reward analysis. At quarter end, our well-diversified portfolio was comprised of investments in 156 companies, with a total fair market value of approximately $1.9 billion and an average position size of $4.2 billion. Ninety-one percent of our portfolio was invested in senior secured loans, and 81 percent were in first lien loans. 93% of our debt investments were in floating rate loans. Recurring income was distributed broadly across our diverse portfolio with more than 70% of our portfolio companies each contributing less than 1% to the total. Now, I'll turn it over to Eric to discuss our financial results in capital and liquidity position.

Thank you, Phil. As Raj noted, our net investment income for the quarter was $0.36 per share on an adjusted basis. As detailed in our earnings press release, adjusted NII excludes amortization of the purchase accounting discount resulting from the merger with BCIC and is calculated in accordance with GAAP. A full reconciliation of adjusted net investment income to GAAP net investment income as well as other non-GAAP financial metrics is included in an earnings release and 10Q. Gross investment income for the third quarter was 83 cents per share. This included recurring cash interest of 65 cents, non-recurring interest of 5 cents, recurring discount and fee amortization of 4 cents, and PIC income of 5 cents. Thick interest income remains low at about 6% of total investment income. Investment income also included $0.02 of dividend income. Operating expenses for the third quarter were $0.43 per share, including $0.25 of interest and other debt expenses. Incentive fees for the quarter were $6.5 million or $0.08 per share. Net realized losses for the quarter were $31.4 million, or 37 cents per share, primarily from the restructurings of our investments in Pluralsight and McAfee, which were already reflected in our prior net asset value. Net unrealized gains totaled $19.2 million, or 22 cents per share, primarily reflecting the reversal of previously unrealized losses from the restructuring of Pluralsight and McAfee, which we discussed earlier. The net increase in net assets for the quarter was $21.6 million, or 25 cents per share. At the end of the third quarter, our available liquidity was $582 million and included $478 million in available capacity under our leverage program, and 104 million of cash and cash equivalents. Unfunded loan commitments to portfolio companies were 5% of total investments, or approximately $100 million, of which only 58 million were revolver commitments. Net leverage at the end of the quarter was 1.08 times, which is well within our target range of 0.9 times to 1.2 times. As a reminder, gross leverage excluding SBIC debt was 1.35 times as of the end of the second quarter. This was higher than past quarters as we increased cash by issuing new debt in May of 2024 and elected not to immediately prepay the prior notes outstanding as we were earning a higher return on the cash held than what we were paying on those notes that were coming due. In August 2024, we repaid the outstanding notes and gross leverage declined to 1.20 times. We continue to have ample financing options with our diverse and flexible program that includes three low-cost credit facilities, three unsecured note issuances, and an SBA program. The weighted average interest rate on debt outstanding at the end of the quarter was 5.4%. Now, I'll turn the call back over to Raj.

Thanks, Eric. Before taking your questions, I'd like to wrap up with some closing comments. Overall, non-accruals decreased since last quarter as we continue to focus our resources on working diligently with our borrowers, their lenders, and sponsors to resolve credit issues with the goal of also achieving the best possible outcome for our investors. Over our history, we have experienced challenges and the team is taking the same approach we always have, reviewing every company in our portfolio with an eye toward identifying potential issues and acting as early as possible. As we head into the final quarter of 2024, we have a strong capital position and a robust pipeline of investment opportunities. We continue to take a highly selective and disciplined approach to deploying capital with a credit first downside protected mindset. We remain focused on the core middle market where there is less competition, more covenant protection, and attractive pricing. We continue to invest in great companies that have the business models and management teams to successfully operate in the current environment, and we are passing on transactions that do not meet our underwriting standards and leveraging our experience in special situations lending to structure deals with strong financial covenants and asset-based deal structures. We remain committed to creating value for our shareholders and look forward to keeping you updated on the progress. And with that, operator, please open the call for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If your question has been answered or you wish to remove your question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from the line of Finian O'Shea with Wells Fargo. And your line is now open.

Hey, everyone. Good afternoon. Congrats, Raj, Phil, and the rest of the team on the changes. Raj, I wanted to go to one of your opening remarks on the NII return being on the high end and seeing what you could unpack for us there. There's obviously the SOFR curve that moves around. We can gauge that. but sort of the other inputs that you would anticipate as they relate to spread and leverage on the book return for TCP.

Yeah. Hi, Finn. It's Eric. As you noted, yeah, our NII return has been on the higher end of our historical levels. We certainly have benefited from the higher base rates over the last year and a half. We see that reversing a little bit and that's in part that has led us to maintain the dividend level where it has been. I'll point out that even with the increased level of non-accruals over the last couple of quarters, we continue to maintain that level of dividend and a significant higher level of NII return. But we do see that reversing a little bit as expected. And part of the reason why we're maintaining the dividend level where it's at today.

Okay, that's helpful. And then on the management changes, there were, you know, this also came with some maybe reorganization or just other management changes at BlackRock to parent with the higher ups in credit or private credit and seeing if there's anything there, maybe resource-wise, style-wise, a effort to go upper middle market like everyone wants to do, or anything you would expand on there in that regard would be helpful. And that's all for me. Thank you.

Yeah. Hey, Finn. It's Phil. Thanks for the question. So I think what you're referring to is is here at BlackRock, we've put together our direct lending group in the US, Europe, and Asia into a single global direct lending business unit. And I think that is just the natural evolution of our business, having strong franchises in each of those geographies, and really trying to drive the right kind of business collaboration and synergies across the entire franchise. As you know, The real tangible benefits that we see from being part of the BlackRock platform and by consolidating the groups into a single business unit provides a lot of focus around the strategy and around achieving those benefits. So we see it as an ongoing opportunity for us to keep growing our business, continue to optimize our investment process, get the benefits of the platform. It is not an indication of a strategy shift. I think you referenced moving it to the upper market. That is not a purpose or goal of ours. We think that the core middle market, which is our focus, as you know, continues to present tremendous amount of opportunity where we can get differentiated origination, differentiated structures, including covenants, and certainly premium yields.

Thanks so much.

Thank you. Our next question comes from the line of Robert Dodd with Raymond James. Robert, your line is now open.

Hi, guys. And yeah, congrats, Raj, and good luck in wherever you're heading. And congrats, Phil and the rest of the team for the new role. One of these, just first to follow up to Finn's question, I mean, given you've now put the things together into a global direct lending program, should we expect a greater incidence of maybe international deals making their way into PCPC or any, is that going to have any impact on portfolio mix, both geographic or asset type of styles with with the new format of the overall global direct funding?

Yeah. Hey, Robert. It's Phil. Thanks for the question. So it's not really to change the mix of the portfolio. We don't expect the mix to change much because we are a global platform. I think what we do expect are the benefits, like I was mentioning, around, you know, our investment processes, ideas, synergies around all the other areas, both on origination as well as the other platform resources, whether they be around legal transactions, compliance, and so on. But one thing that's important to reiterate is that we do source deals today for TCPC across the BlackRock platform. So we have been seeing the benefit of having a global Sourcing effort, so there are some deals that are in the portfolio absolutely that are coming in through the benefits of having feet on the ground, you know, in various markets outside the US.

Got it, thank you. On the dividend question, right, I mean, can you give us An update, what's the estimated spillover position? And can you give us any thoughts on that too? I don't think that's particularly high from what I recall, but if you could update us on that. And what was the thought process of the board, but the 10 cent special, is it kind of an indication that you want to keep spillover very low to minimize excise tax or any kind of all that? mesh into the decision-making on that dividend.

Yeah, Robert, I'll try to kick that off and then Eric, I think we'll add some more color. I think with the spillover, obviously it's a function of, you know, that we've out-earned. I think we always weigh the, I mean, I view the excise tax as kind of a low cost loan. And as we approach the end of the year and we have more visibility, we can weigh that off with opportunities in the pipeline I think we'll start weighing that with share buyback opportunities. So there's just a variety of trying to assess the cost and the opportunity cost and making the best general decision. When you have the specials, we are trying to mitigate the excise tax as we get to the end of the year based on having that spillover being a function of good out-earning return on the assets. and then maybe I can turn over to Eric to add any other color, but it really is a capital allocation decision at its core with the special being a partial decision in the latter part of the year.

Yeah, and Rob, I'll just add that it is a balance between the amount that we're required to distribute versus the amount that's required to avoid excise taxes. As Raj noted, we're fine incurring the excess tax as it's a cheap cost of capital. However, we do have minimum distribution requirements and part of that, we need to ensure that we are meeting those requirements.

Got it. Got it. And then going back to kind of the longer term question, I mean, this quarter, I mean, you're at 37, you had $0.08 of prepaid fees, which is, pretty elevated prepay and everything associated with that, which is pretty elevated by recent quarter standards. I mean, it ramped up last quarter, but $0.08 is pretty high. Is it the expectation that prepay activity is going to stay elevated? Because if not, with obviously lower base rates for Q4, maybe it's not $0.08. I mean, there's some, you mentioned you expect the NII return to reverse a little bit with rates coming down, but Pre-pay activity is also a component of that. And looking into next year, yeah, the earnings that pre-pay normalizes and rates come down, you know, it's going to get a little tight.

Yeah, let me just add some, I'll start and I'm sure if anyone else has any comments they can add to it. I would just say historically speaking, you know, I'm referring to being here almost two decades, $0.08 is not necessarily out of the range from, if you go back historically, I think as we went into a higher rate environment, uh, you know, the, and maybe a less active MNA environment, um, you know, that naturally cooled off a little bit. People, the duration of the loans got longer. The nice thing was rates were higher, so you're getting higher yield. But if you really go back quarterly over the last, I don't know, 10 plus years, we had many quarters with, with, uh, uh, prepays in that level. I think to echo Phil's comment and his prepared comments, rates are coming down. The election is behind us. There is an anticipation that there'll be more M&A activity. There certainly is a pickup in refinance activity through this year. So without speculating or projecting, it's not illogical to think prepays can be picking back up, but it's always been very hard to predict and very episodic. so we don't forecast it, but the conditions that we're kind of in and moving forward in do feel a lot more like the conditions in some of the prior years where we generated higher prepay. So it's time will tell. The nice thing is the structures that we focus on, we always focus on having some prepayment rights. It's very important to us. And then I would also echo that we've had most of our history in a lower yield environment where even if rates come down, they're not low relative to the, you know, the history of the business. So I think there's a, there's, you know, good conditions on the, on the go forward without being able to answer that question specifically.

Got it. I appreciate that. And then one last one, if I can just on the, I mean, you gave us an update, you know, where the light downs are, et cetera, and all these people on site was restructured, et cetera. I mean, has there been any? Yeah, I mean, I think last quarter at large, you know, I mean, we're talking a multi-year cycle on resolving these issues, resolving those particular restructured companies, right? Is any change on that? Is it still that kind of the expectation that it's going to take a while? Or is there anything on Robert Hechtman, Jr.: : You know, if the DNA activity market kicks up is it potentially is that potential that you could resolve those things faster in terms of recycling capital, if not having the businesses recover if you understand what.

James Forrest, Norcal PTACC, yeah I think you're asking I think you're asking Robert is. you know, does the pickup and M&A activity allow us to exit some of these restructuring situations, you know, earlier than we would otherwise if that M&A market didn't pick up? And I think the answer is that it depends on the situation. We feel quite confident that, you know, we're undertaking the appropriate steps and processes to optimize the outcomes for these borrowers undergoing restructurings. They are multi-year processes, but they can be multi-year processes, as you mentioned. And sometimes getting the best outcome for shareholders does require time and patience. If there are scenarios where the market or an interested bidder comes in, or we feel like the market is ripe for our borrower to get the best value, then we would undertake an M&A process and evaluate those situations. I will say that that does come up and that has come up in some of our restructuring situations or where we have restructured and we own the, you know, control the company post reorg. So we're very much open-minded. Whether that really accelerates some of these exits, I think that's still TBD, broadly speaking. Got it.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Paul Johnson with KBW. Paul, your line is now open.

Yeah, thanks for taking my questions. On the Amazon aggregators, just with the change in Razor for part of the investment going on on Aquil, can you just tell us how much at this point in the portfolio is of less than these amazon various amazon aggregator names and i'd also be just curious to get your thoughts on um you know the the industry and that's business you know patients and challenges even under validation um you're saying you know it's probably going to take time to realize some of these efficiencies so i guess what kind of gives you that optimism you know that you'll eventually these companies will perform and be able to capture these efficiencies.

Hey, thanks, Paul. It's Phil. So the loans to the aggregators currently comprise about 5.9% of the fair market value of the portfolio. That's Thrasio, Razor, and Celerex. You know, with regards to the aggregator space, we believe we're invested in the leaders at this point. The sector has obviously evolved quite a bit over the past three years, as you've noticed, and I think we believe there's still a path to successful investment outcomes for these aggregators with the appropriate capital structures and, of course, the liquidity and their evolving strategies to compete in this newer environment. Over the medium to longer term, these businesses will benefit from ongoing consolidation. As you know, we've been Um, a key player in effecting those, um, uh, that consolidation and as well as, you know, improving the capital structures and really trying to drive lower operating costs to drive cashflow for these businesses. So, um, so we're working hard at it, at them, um, you know, at, at the 5.9% of our portfolio. Um, you know, we still think that, uh, there's tremendous value that's remains in these names and, and that can certainly increase. over time as they focus on their key products, their best sellers, and reduce costs and consolidate to drive further cost reduction.

Thanks. Appreciate that, Phil. And then, you know, I guess moving on to the cost of your debt this quarter. It was a little bit higher, I think, than we were kind of estimating. I think all in the annualized cost of debt was around 6.8%. But, you know, if I'm looking at your presentation, there's a weighted average interest rate of about 5.4% for your liability structure. So was there anything that was going through the cost of debt this quarter in your liabilities that just drove that a little higher?

Yes, a couple of things. One is We did refi our 2024 notes, which had a coupon of 3.9 versus our current incremental borrowing costs, which are quite a bit higher. So there was a step up there. Then the second factor is that interest expense was higher than what you would normally expect as a run rate, simply because we were carrying additional cash versus the debt outstanding, as we mentioned, we were earning higher interest on the cash versus the notes that were coming due with a coupon of 3.9. So there's higher interest expense, but even higher incremental interest income on the other side. But you, I guess you should see that normalized in Q4.

And then do you have any remaining questions capacity under the current SBA license? And is there any kind of plans, I guess, in the works to potentially apply for any more?

Yes, both. We do currently have 10 million remaining that we can draw down under our current license. In addition to that, we also are Within that subsidiary, we have had some repayments, so we have capital to redeploy there and continue to, in essence, use the notes that we've already drawn from the SBIC. And as we see more deals coming through that pipeline, we do have the ability to get a second license from the SBA.

Thanks for that. That's all for me. Thank you, Paul. Thank you, Paul.

Thank you. Before our next question, reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Christopher Nolan with Sladenburg-Fallman. Chris, your line is now open.

Thanks. Phil, congrats. And Raj, good working with you. And I wish you well going forward. Phil, given that you're now in the chair, could you articulate what you see as the major challenges facing TCPC and what you would like to change?

Thanks, Chris. That's a great question. You know, obviously, myself, as well as Jason, our new president, Patrick Wolf, our COO, and Dan Worrell, our co-CIO, We are laser focused on the portfolio and ensuring that we manage the non-accruals and the restructurings in a way that optimizes the outcome. We are deploying tremendous amount of resources and attention on those names. As you know, historically, we have had very positive outcomes in coming out of these cycles. And, you know, when our portfolio does hit these bumps, and we expect that to occur again. At least our processes, you know, are certainly focused on that. Our investment committees are very robust in their discussions, and every single action are highly evaluated and debated. So we expect, you know, our... our 20 plus year track record in managing these situations to manifest in the same way. And we're optimistic, but we do ask for patience because as previously, the prior comments, they do take time. So I think that's what I'm absolutely focused on. Sorry, go ahead.

Chris, thank you. you know, just looking at the stock price, and the stock price is now mining new lows. And, you know, 2024 has not been kind to the company who did the acquisition, or the merger, I should say. And in the first quarter, in the second quarter, the asset quality really fell off. And this third quarter results actually were reasonably okay. I mean, trying to write the ship, but then you have a change in senior management, a lot of stuff is just happening. and it does not feel like a very stable platform, whatever. What would you say to people? I mean, anyone looking at, you know, what's going on in the company while you're to date, you know, like give pause and why would I not have pause?

Yeah, well, I think, um, I think that's a fair comment and we, we've observed the same on the stock price. I think a couple of things. Um, first of all, um, You know, I have been here along with Jason, Dan, and Patrick for some time now, you know, this being in many of our cases, you know, 15 to 20 years as a team together. So there is tremendous amount of stability in the team. Obviously, we will miss Roger's partnership, but we believe that, you know, we have a deep bench and, again, Everyone mentioned our voting members of the IC and have been with us for quite some time. I'll also point to the consistency on our dividend. You'll see that this is the 50th time that we've consistently met or exceeded the dividend. And it continues to be an important part of our capital allocation strategy. And there's total shareholder returns that we provide to our shareholders.

have a long track record there about earning our dividend and you know paying specials like like we've announced so you know we're very much intently focused on on that as well great and i appreciate the patient explanation that's so nicely done um final question on the dividend um i couldn't help but notice that the new investments have a much lower coupon if i'm reading it right than the you know, their general portfolio. And to what extent would management support the dividend? I mean, would you start doing waivers, management fee waivers and things like that? Just try to get an idea in terms of how management's viewing supporting the dividend beyond, you know, from normal APS.

Yeah. So our, you know, our board makes decisions about our dividend each quarter. You know, The dividend is clearly, like I said previously, it's an important part of our total shareholder returns. And we have a long track record of earning that. And we don't expect that to change. As part of the merger with BCIC, Chris, you probably recall that our advisor has agreed to waive all or a portion of its advisory fees if NAI per share fell below $0.32 a share. So there's a history of BlackRock being supportive. But the dividend is not something that we'll discuss in this call, except that we continue to expect to meet or exceed that.

Great. That's it for me. Thank you.

Yeah. I also mentioned that the yield on our even though some of the added deal the yields were you know somewhat less than our exited deal you know that's that's natural in a declining rate environment where a lot of those deals were you know that we got we're exiting came on a couple years ago in a higher rate environment but if you look at our overall yields are still they're still quite high i think at 13.4 percent okay and i would also note that the current dividend excluding the supplement is yielding roughly the same

on NAV on the current book value, so it's just getting up there. Okay, thank you very much for taking the time to answer. Thank you, Chris.

Thank you. That will conclude the question and answer session. I would now like to pass the call back over to the management team for any closing remarks.

Thank you all for your participation on today's call. I would like to thank our shareholders and capital partners for your continued support and our team for all their hard work and dedication. This concludes today's call. Thank you.

That concludes today's call. Thank you for your participation. You may now disconnect your line.