BlackRock Kelso Capital's CEO Discusses Q2 2012 Results - Earnings Call Transcript

BlackRock Kelso Capital Corporation (BKCC)

Q2 2012 Earnings Call

August 2, 2012 4:30 pm ET


James Maher - Chairman and CEO

Michael Lazar - COO

Corinne Pankovcin - CFO

Laurence Paredes - Secretary, General Counsel


Troy Ward - Stifel Nicolaus

Arren Cyganovich - Evercore Partners

Rick Shane - JPMorgan Securities



At this time, I would like to welcome everyone to the BlackRock Kelso Capital Corporation investor teleconference. Our host for today's call will be Chairman and Chief Executive Officer, James R. Maher; Chief Operating Officer, Michael B. Lazar; Chief Financial Officer, Corinne Pankovcin; and the Secretary of the Company and General Counsel and the Advisor, Laurence D. Paredes.

(Operator Instructions) Thank you. Mr. Maher, you may now begin your conference.

James Maher

Welcome to our second quarter conference call. Before we begin, Larry will review some general conference call information.

Laurence Paredes

Thank you, Jim. Before we begin our remarks today, I would like to point out that certain comments made during the course of this conference call and within corresponding documents contain forward-looking statements subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of word such as anticipates, believes, expects, intends, will, should, may and similar expressions. We call to your attention the fact that BlackRock Kelso Capital Corporation's actual results may differ from these statements.

As you know, BlackRock Kelso Capital Corporation has filed with the SEC reports which list some of the factors which may cause BlackRock Kelso Capital Corporation's results to differ materially from these statements. BlackRock Kelso Capital Corporation assumes no duty to and does not undertake to update any forward-looking statements.

Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, BlackRock Kelso Capital Corporation makes no representation or warranty with respect to such information.

Please note, that we've posted to our website an investor presentation that compliments this call. Shortly, Jim and Mike will highlight some of the information contained in the presentation. At this time, we would like to invite participants to access the presentation by going to our website at, www. and clicking the August 2012 Investor Presentation link in the presentation section of the Investor Relations page.

With that, I would now like to turn the call back over to Jim.

James Maher

Thanks, Larry. Good afternoon and thank you for joining our call today. We're pleased to report that we had another productive quarter and first half at BlackRock Kelso Capital.

In the second quarter, we made new investments aggregating $148.2 million. On a net basis, the portfolio grew by nearly $70 million. Total investments at their current fair market value of $1.166 billion at June 30 compared to $1.095 billion at the end of the first quarter.

Our leverage stands at 0.64 times at the end of the second quarter. The funds that were used during the quarter to increase our investment portfolio were provided by borrowings under our revolving credit facility. Weighted average yields increased during the second quarter and our portfolio company performance remained strong with only one investment on non-accrual.

We continued to deliver sequential net portfolio growth consistent with our goals. We remain pleased with our investment opportunities. The second quarter exhibited an increase in opportunities we tracked relative to the first quarter and the same period a year ago.

Our relationships with a broad group of private equity firms, commercial banking firms, investment banks and management teams continues to provide us with substantial deal flow. We have sufficient debt capacity to grow our portfolio. Net debt as of June 30 was equal to $438 million relative to the $1.2 billion fair market value of our assets.

At quarter end, we had more than $100 million available under our existing revolving credit facility and $251 million of statutory availability under the BDC leverage rules. Using our available debt capacity, we are able to increased net investment income without raising additional equity capital.

We continue to invest in transactions with appropriate risk adjusted return. Market conditions remained somewhat volatile, dominated by macro factor and fragile general economic conditions.

We remain focused on dividend coverage. For the quarter, we had net investment income of $0.30 per share and $0.25 per share adjusted for pro forma incentive fees. Our adjusted NII is consistent with our first quarter adjusted results and in line with our expectations.

On August 1, our board of directors declared a quarterly dividend of $0.26 per share, payable on October 3 to stockholders of record on September 19, 2012. Based upon our portfolio performance and our adjusted net investment income run rate, we remain confident that we would be able to continue to earn our dividend.

So far the third quarter of 2012 is off to a slow, but solid start, consistent with the seasonal transaction slowdown, we typically witnessed in the summer quarter. Although, Europe continues to be issue for the global economy, domestic economic conditions remain relatively stable.

We expect that the macro headwinds will continue to persist in the global markets contributing to continued market volatility. We remain optimistic for our business as volatile liquid leverage finance markets tend to benefit like BlackRock Kelso Capital. Relationship transactions continued to deliver even greater value to our transaction partners, now they do in overheated markets.

Mike will now discuss our portfolio activity and market conditions in more detail.

Michael Lazar

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