|Q3 2016||Q2 2016||Q3 2015|
|($'s in millions, except per share data)||Amount||Share||Amount||Share||Amount||Share|
|Net Investment Income/(loss)||$||(2.1||)||$||(0.03||)||$||21.6||$||0.30||$||23.8||$||0.32|
|Net realized and unrealized gains/(losses)||$||(36.9||)||$||(0.51||)||$||(31.2||)||$||(0.43||)||$||(2.1||)||$||(0.03||)|
|Basic earnings/(loss) per share||$||(39.1||)||$||(0.54||)||$||(9.6||)||$||(0.13||)||$||21.7||$||0.29|
|Net Investment Income/(loss), as adjusted 1||$||(2.1||)||$||(0.03||)||$||21.6||$||0.30||$||17.7||$||0.24|
|Basic earnings/(loss) per share, as adjusted 1||$||(39.1||)||$||(0.54||)||$||(9.6||)||$||(0.13||)||$||15.7||$||0.21|
|As of||As of||As of||As of|
|September 30,||June 30,||December 31,||September 30,|
|($'s in millions, except per share data)||2016||2016||2015||2015|
|Total assets||$ 971.3||$ 1,036.8||$ 1,148.4||$ 1,194.3|
|Investment portfolio, at fair market value||$ 946.6||$ 1,011.9||$ 1,117.0||$ 1,149.8|
|Debt outstanding||$ 321.4||$ 348.1||$ 362.6||$ 374.2|
|Total net assets||$ 608.1||$ 661.4||$ 753.8||$ 790.7|
|Net asset value per share||$ 8.38||$ 9.13||$ 10.17||$ 10.66|
|Net leverage ratio 2||0.55x||0.52x||0.47x||0.45x|
- As previously disclosed, the Company has been named as a defendant, together with 52 nd Street Capital Advisors LLC ("52 nd Street"), our former investment adviser, and certain other defendants, in two wrongful death and personal injury actions that were filed by the families of the three decedents and certain injured persons (the "Plaintiffs") on June 22, 2012 and August 23, 2012, in the Circuit Court of Hancock County in West Virginia. The Company and 52 nd Street have reached an agreement in principle with the Plaintiffs to settle actions for $17.5 million (the "Settlement Payment"). Although a definitive settlement agreement remains subject to final documentation and Court approval, the Company has determined that it is reasonably likely to enter into a definitive settlement agreement with the Plaintiffs, and the Settlement Payment has been accrued as of September 30, 2016, and is expected to be paid during the fourth quarter using available cash and amounts available under its credit facility.
- The New Gulf Resources, LLC ("New Gulf") restructuring was finalized as the company emerged from bankruptcy and subsequently changed its name to ETX Energy, LLC. Our $21.0 million par senior secured notes, $4.5 million par senior subordinated PIK notes and 4,000 shares of equity warrants with a $1.6 million aggregate fair market value as of the prior quarter end, were exchanged for 5.1% combined ownership in ETX Energy, LLC and ETX Energy Management Company, LLC. The result was an incremental net realized and unrealized loss of $1.6 million during the quarter.
- BCIC Senior Loan Partners, LLC ("Senior Loan Partners"), a recently formed joint venture with Windward Investments LLC, began making investments during the quarter. During the third quarter, Senior Loan Partners made investments in three new portfolio companies with committed and outstanding amounts of $26.6 million and $24.5 million, respectively. The three new investments at par are (i) a $10.0 million first lien term loan to AP Plastics Group, LLC, a provider of high quality PVC compounds primarily used to make vinyl for building product applications, (ii) a $7.0 million first lien term loan to Pasternack Enterprises, Inc., a leading distributor of engineering-grade components for radio frequency equipment and (iii) a $7.5 million first lien in NSM Sub Holdings Corp., a provider of complex rehab technology solutions for patients with loss of mobility. Additionally, Senior Loan Partners had unfunded commitments of approximately $2.1 million to NSM Sub Holdings Corp.
- Since inception of our share repurchase program through September 30, 2016, we have purchased 4.6 million shares at an average price of $7.98 per share, including brokerage commissions, for a total of $36.3 million. There were no share repurchases during the third quarter. The cumulative repurchases since BlackRock entered into the investment management agreement with the Company totaled approximately 2.8 million shares for $24.0 million, representing 66% of total share repurchase activity, on a dollar basis, since inception. As of quarter-end, the Company had approximately 1.2 million additional shares authorized for repurchase.
|Portfolio and Investment Activity*($'s in millions)|
|Three months ended September 30, 2016||Three months ended June 30, 2016||Three months ended September 30, 2015|
|Number of portfolio company investments at the end of period||38||40||43|
|Weighted average yield of debt and income producing equity securities, at fair market value||11.4%||11.1%||11.6%|
|% of Portfolio invested in Secured debt, at fair market value||69%||72%||72%|
|% of Portfolio invested in Unsecured debt, at fair market value||16%||14%||18%|
|% of Portfolio invested in Equity, at fair market value||15%||14%||10%|
|Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million)||$||32.6||$||33.3||$||33.5|
- We invested $43.8 million during the quarter, while sales, repayments and other exits of investments totaled $73.6 million, resulting in a $29.8 million net decrease in our portfolio due to investment activity. Approximately 93% of our proceeds from exits during the quarter were represented by one portfolio company, MediMedia USA, Inc., while approximately 70% of our deployments during the quarter were through Senior Loan Partners and Gordon Brothers Finance Company, two existing portfolio companies that primarily invest in senior secured, first lien exposure with attractive risk-adjusted returns.
- Our non-accrual rate declined compared to the prior quarter as a result of the aforementioned restructuring of New Gulf. As of September 30, 2016, our non-accruals were 4.0% of our total debt investments at fair market value, and 11.1% at amortized cost, compared with 5.0% and 12.7%, respectively, for the prior quarter. Our average internal investment rating at fair market value declined to 1.40 at the end of this quarter, from 1.31 last quarter end.
- The portion of our portfolio invested in equity securities increased one percentage point during the quarter to 15% at quarter end, due primarily to the deployment of $21.0 million of equity capital into our newly formed joint venture, BCIC Senior Loan Partners, LLC. Our portfolio composition of secured debt, at fair market value, decreased three percentage points to 69% at quarter end, primarily resulting from the early repayment of MediMedia USA, Inc. during the quarter. Unsecured debt increased two percentage points to 16%, due to a combination of deployments during the quarter as well as net depreciation in our total portfolio resulting in a smaller overall portfolio at fair market value. Total portfolio yield increased 30 basis points sequentially, largely a result of New Gulf converting from non-accruing debt to equity during the current quarter.
- Net unrealized depreciation increased $10.4 million during the current quarter, bringing total balance sheet unrealized depreciation to $104.7 million. During the period, gross unrealized depreciation of $36.1 million primarily from legacy assets was partially offset by $3.0 million of gross unrealized appreciation. Further, there was $22.8 million of unrealized appreciation during the quarter due primarily to the reversal of previously recognized unrealized depreciation on the New Gulf investment.
- Fee income earned on capital structuring, prepayments, commitment, administration and amendments during the current quarter totaled $0.5 million, as compared to $4.1 million earned during the preceding quarter, and $1.9 million earned during the prior year quarter. Excluding fee income and the impact of a $2.9 million quarterly reduction to investment income due to non-accruals, investment income would have decreased approximately 11% versus the prior year quarter, as a result of a net reduction in the overall income producing assets over the comparable periods.
- Both GAAP Net Investment Income/(Loss) ("NII/NIL"), and NIL, as adjusted, were ($2.1) million, or ($0.03) per share, for the three months ended September 30, 2016, which included the impact of a one-time legal settlement expense of $17.5 million. Excluding this one-time expense, NII was $15.4 million, or $0.21 per share, for distribution coverage of 101%. As of quarter-end, our run rate NII, as adjusted, is $0.22 per share based on average fee income over the trailing twelve month period, and $0.20 per share excluding any fee income. These imply expected distribution coverages of 105% and 94%, respectively.
- During the quarter, there was no accrual for incentive management fees based on gains due largely to the net unrealized depreciation in the portfolio as of September 30, 2016. A hypothetical liquidation is performed each quarter end resulting in an additional accrual if the amount is positive or a reversal to the existing accrual if the amount is negative. However, the resulting fee accrual is not due and payable until June 30, if at all. There is currently no balance accrued for incentive management fees based on gains as of the measurement period ending September 30, 2016. Furthermore, no incentive management fees based on income were earned and payable for the quarter, as the distributable income amount was reduced below the hurdle by the net unrealized depreciation in the portfolio for the trailing four quarter period. As a result, there were no pro-forma incentive management fees based on income for the quarter causing our NIL, as adjusted, to equal our GAAP NIL of $(0.03) per share.
- As compared to the comparable 2015 period weighted average, our nine month 2016 weighted average cost of debt decreased approximately 100 bps to 4.35%. This was primarily driven by (i) refinancing our $158 million 6.5% senior secured notes with proceeds from our revolving credit facility and (ii) the subsequent lowering of the interest rate margin on the credit facility pursuant to the amendment and restatement earlier in the year. Borrowing costs for the nine month period of 2016, on a dollar basis, are more than 30% lower than that of the comparable 2015 period.
- Tax characteristics of all 2015 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2015 tax distributions of $1.05 per share were comprised of ordinary income. Our return of capital distributions since inception are $1.96 per share. At our discretion, we may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2015. For more information on our GAAP distributions, please refer to the Section 19 Notice that may be posted within the Distribution History section of our website.
- At September 30, 2016, we had total liquidity of $270.9 million, consisting of $6.9 million in cash and cash equivalents and $264.0 million of availability under our credit facility, subject to leverage and borrowing base restrictions. The credit facility was amended and extended during the first quarter to a February 2021 maturity.
- Our net leverage, adjusted for available cash, receivables for investments sold, payables for investments purchased, unamortized debt issuance costs and a legal settlement payable, stood at 0.55x at quarter-end, and our 288% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $284.4 million. Further, as of quarter-end, 88% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.
|BlackRock Capital Investment Corporation|
|Consolidated Statements of Assets and Liabilities|
|September 30,||December 31,|
|Investments at fair value:|
|Non-controlled, non-affiliated investments (cost of $691,723,702 and $876,732,386)||$||589,930,309||$||826,766,931|
|Non-controlled, affiliated investments (cost of $58,605,978 and $62,003,676)||59,048,465||67,163,896|
|Controlled investments (cost of $299,356,072 and $214,393,103)||297,615,553||223,065,737|
|Total investments at fair value (cost of $1,049,685,752 and $1,153,129,165)||946,594,327||1,116,996,564|
|Cash and cash equivalents||6,917,319||12,414,200|
|Receivable for investments sold||501,876||1,408,841|
|Prepaid expenses and other assets||6,210,311||4,040,147|
|Payable for investments purchased||$||88,789||$||—|
|Base management fees payable||5,188,116||5,986,455|
|Accrued administrative services||—||219,917|
|Legal settlement payable (See Note 9)||17,500,000||—|
|Other accrued expenses and payables||2,661,524||2,493,492|
|Common stock, par value $.001 per share, 200,000,000 common sharesauthorized, 77,106,093 and 76,747,083 issued and 72,554,128 and 74,099,182 outstanding||77,106||76,747|
|Paid-in capital in excess of par||876,341,036||873,338,049|
|Undistributed / (Distributions in excess of) net investment income||(8,807,961||)||(17,112||)|
|Accumulated net realized loss||(118,452,947||)||(60,922,258||)|
|Net unrealized appreciation (depreciation)||(104,738,746||)||(38,513,195||)|
|Treasury stock at cost, 4,551,965 and 2,647,901 shares held||(36,302,821||)||(20,209,616||)|
|Total Net Assets||608,115,667||753,752,615|
|Total Liabilities and Net Assets||$||971,276,382||$||1,148,391,501|
|Net Asset Value Per Share||$||8.38||$||10.17|
|Three months||Three months||Nine months||Nine months|
|BlackRock Capital Investment Corporation||September 30,||September 30,||September 30,||September 30,|
|Consolidated Statements of Operations (Unaudited)||2016||2015||2016||2015|
|Non-controlled, non-affiliated investments||$||17,139,313||$||24,580,626||$||60,619,008||$||71,305,161|
|Non-controlled, affiliated investments||1,253,797||1,403,530||3,885,738||4,425,767|
|Total interest income||23,652,715||30,408,722||78,893,439||89,487,000|
|Non-controlled, non-affiliated investments: prepayment fees||6,644||—||3,006,644||1,159,150|
|Non-controlled, non-affiliated investments: capital structuring fees||—||1,097,139||1,077,569||1,127,139|
|Non-controlled, non-affiliated investments: other||350,116||670,352||1,136,841||1,444,735|
|Total fee income||539,088||1,894,841||5,472,804||4,034,057|
|Non-controlled, non-affiliated investments||188,017||416,294||586,219||818,041|
|Non-controlled, affiliated investments||608,970||411,647||1,691,344||1,221,488|
|Total dividend income||1,961,649||1,636,465||5,053,166||4,106,044|
|Total investment income||26,153,452||33,940,028||89,419,409||97,627,101|
|Legal settlement (See Note 9)||17,500,000||—||17,500,000||—|
|Base management fees||5,188,115||5,784,734||16,600,294||18,691,632|
|Interest and credit facility fees||3,831,364||5,806,749||12,641,384||18,385,547|
|Incentive management fees||—||(4,224,731||)||—||(3,189,459||)|
|Investment advisor expenses||87,500||309,730||262,500||714,343|
|Net Investment Income (Loss)||(2,130,991||)||23,795,150||36,954,202||56,656,634|
|Realized and Unrealized Gain (Loss):|
|Net realized gain (loss):|
|Non-controlled, non-affiliated investments||(25,059,103||)||2,585,808||(55,998,664||)||26,448,361|
|Non-controlled, affiliated investments||—||—||—||121,381,408|
|Net realized gain (loss)||(26,591,127||)||2,585,808||(57,530,688||)||129,244,763|
|Net change in unrealized appreciation (depreciation) on:|
|Non-controlled, non-affiliated investments||(1,887,748||)||(10,758,801||)||(53,904,719||)||(27,727,694||)|
|Non-controlled, affiliated investments||(5,478,931||)||(398,513||)||(2,268,111||)||(117,257,791||)|
|Foreign currency translation||(74,783||)||(481,276||)||360,432||(1,024,639||)|
|Net change in unrealized appreciation (depreciation)||(10,351,063||)||(4,653,130||)||(66,225,551||)||(126,779,949||)|
|Net realized and unrealized gain (loss)||(36,942,190||)||(2,067,322||)||(123,756,239||)||2,464,814|
|Net Increase (Decrease) in Net Assets Resulting from Operations||$||(39,073,181||)||$||21,727,828||$||(86,802,037||)||$||59,121,448|
|Net Investment Income (Loss) Per Share|
|Earnings (Loss) Per Share|
|Average Shares Outstanding|
|Distributions Declared Per Share||$||0.21||$||0.21||$||0.63||$||0.63|
The Company records its liability for incentive management fees based on income as it becomes legally obligated to pay them, based on a hypothetical liquidation at the end of each reporting period. The Company's obligation to pay incentive management fees with respect to any fiscal quarter is based on a formula that reflects the Company's results over a trailing four-fiscal quarter period ending with the current fiscal quarter. The Company is legally obligated to pay the amount resulting from the formula less any cash payments of incentive management fees during the prior three quarters. The formula's requirement to reduce the incentive management fee by amounts paid with respect to such fees in the prior three quarters has caused the Company's incentive management fee expense to become, and currently is expected to be, concentrated in the fourth quarter of each year. Management believes that reflecting incentive management fees throughout the year, as the related investment income is earned, is an effective measure of the Company's profitability and financial performance that facilitates comparison of current results with historical results and with those of the Company's peers. The Company's "as adjusted" results reflect incentive management fees based on the formula the Company utilizes for each trailing four-fiscal quarter period, with the formula applied to the current quarter's incremental earnings and without any reduction for incentive management fees paid during the prior three quarters. The resulting amount represents an upper limit of each quarter's incremental incentive management fees that the Company may become legally obligated to pay at the end of the year. Prior year amounts are estimated in the same manner. These estimates represent upper limits because, in any calendar year, subsequent quarters' investment underperformance could reduce the incentive management fees payable by the Company with respect to prior quarters' operating results. Similarly, the Company records its liability for incentive management fees based on capital gains by performing a hypothetical liquidation at the end of each reporting period. The accrual of this hypothetical capital gains incentive management fee is required by GAAP, but it should be noted that a fee so calculated and accrued is not due and payable until the end of the measurement period, or every June 30. The incremental incentive management fees disclosed for a given period are not necessarily indicative of actual full year results. Changes in the economic environment, financial markets and other parameters used in determining such estimates could cause actual results to differ and such differences could be material. For a more detailed description of the Company's incentive management fee, please refer to the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2015, on file with the Securities and Exchange Commission ("SEC").
Computations for the periods below are derived from the Company's financial statements as follows:
|Three months ended September 30, 2016||Three months ended September 30, 2015||Nine months ended September 30, 2016||Nine months ended September 30, 2015|
|Net Investment Income/(Loss)||$ (2,130,991)||$ 23,795,150||$ 36,954,202||$ 56,656,634|
|Net Investment Income/(Loss) per share||(0.03)||0.32||0.51||0.76|
|Addback: GAAP incentive management fee expense based on Gains||—||(4,224,731)||—||(3,200,520)|
|Addback: GAAP incentive management fee expense based on Income||—||—||—||11,061|
|Pre-Incentive Fee 1 :|
|Net Investment Income/(Loss)||$ (2,130,991)||$ 19,570,419||$ 36,954,202||$ 53,467,175|
|Net Investment Income/(Loss) per share||(0.03)||0.26||0.51||0.72|
|Less: Incremental incentive management fee expense based on Income||—||1,821,960||—||3,180,456|
|As Adjusted 2 :|
|Net Investment Income/(Loss)||$ (2,130,991)||$ 17,748,459||$ 36,954,202||$ 50,286,719|
|Net Investment Income/(Loss) per share||(0.03)||0.24||0.51||0. 67|
The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of senior and junior secured and unsecured debt securities and loans, each of which may include an equity component, and by making direct preferred, common and other equity investments in such companies.Forward-looking statements This press release, and other statements that BlackRock Capital Investment Corporation may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock Capital Investment Corporation's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions. BlackRock Capital Investment Corporation cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may change over time. Forward-looking statements speak only as of the date they are made, and BlackRock Capital Investment Corporation assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In addition to factors previously disclosed in BlackRock Capital Investment Corporation's SEC reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) our future operating results; (2) our business prospects and the prospects of our portfolio companies; (3) the impact of investments that we expect to make; (4) our contractual arrangements and relationships with third parties; (5) the dependence of our future success on the general economy and its impact on the industries in which we invest; (6) the ability of our portfolio companies to achieve their objectives; (7) our expected financings and investments; (8) the adequacy of our cash resources and working capital, including our ability to obtain continued financing on favorable terms; (9) the timing of cash flows, if any, from the operations of our portfolio companies; (10) the impact of increased competition; (11) the ability of our investment advisor to locate suitable investments for us and to monitor and administer our investments; (12) potential conflicts of interest in the allocation of opportunities between us and other investment funds managed by our investment advisor or its affiliates; (13) the ability of our investment advisor to attract and retain highly talented professionals; (14) fluctuations in foreign currency exchange rates; and (15) the impact of changes to tax legislation and, generally, our tax position.
BlackRock Capital Investment Corporation's Annual Report on Form 10-K/A for the year ended December 31, 2015, filed with the SEC identifies additional factors that can affect forward-looking statements.Available Information BlackRock Capital Investment Corporation's filings with the SEC, press releases, earnings releases and other financial information are available on its website at www.blackrockbkcc.com. The information contained on our website is not a part of this press release.