TCP Capital Corp. Announces Strong Second Quarter 2015 Financial Results; Net Investment Income Of $0.44 Per Share; Board Declares Third Quarter Dividend Of $0.36 Per Share

Aug 06, 2015, 08:45 ET from TCP Capital Corp.

SANTA MONICA, Calif., Aug. 6, 2015 /PRNewswire/ -- TCP Capital Corp. ("we," "us," "our," "TCPC" or the "Company"), a business development company ("BDC") (NASDAQ: TCPC), today announced its financial results for the second quarter ended June 30, 2015 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.

FINANCIAL HIGHLIGHTS

  • Net investment income for the quarter ended June 30, 2015 was $21.5 million, or $0.44 per share on a diluted basis, after preferred dividends and $0.11 per share in incentive compensation on net investment income.
  • Net increase in net assets resulting from operations for the quarter ended June 30, 2015 was $21.0 million, or $0.43 per share.
  • Net asset value per share at June 30, 2015 increased to $15.10 from $15.03 at March 31, 2015.
  • Total acquisitions during the quarter ended June 30, 2015 were $195.9 million and total dispositions were $189.7 million.
  • In June, we repurchased 1,675 of our Series A preferred interests with an aggregate liquidation preference of $33.5 million for a purchase price of $31.8 million, generating a gain of $1.7 million, or $0.03 per share.
  • In August, we increased the aggregate principal commitment on the TCPC Funding Facility to $350 million and expanded the accordion feature to $400 million.
  • On August 6, 2015, our board of directors declared a third quarter dividend of $0.36 per share payable on September 30, 2015 to shareholders of record as of September 16, 2015.

"We are pleased with our strong performance for the second quarter," said TCP Capital Corp.'s Chairman and CEO, Howard Levkowitz.  "We deployed capital at a robust pace, with $196 million in new investments across eighteen transactions.  We out-earned our dividend by $0.08 cents per share, in part due to the high level of repayments during the quarter. In addition, our new investments had higher effective yields than the investments we exited for the ninth consecutive quarter."

"Our relatively flat net deployments underscore our focus on patiently seeking attractive investment opportunities versus over-emphasizing growth in the current environment. Earnings power from our current portfolio is strong, and with our expanded origination platform, we remain well positioned to meet ongoing demand for growth capital from middle market companies."

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2015, our investment portfolio consisted of debt and equity positions in 87 portfolio companies with a total fair value of approximately $1,212.0 million. Debt positions represented approximately 97% of the portfolio at fair value, all of which were senior secured debt. Equity positions represented approximately 3% of our investment portfolio.

As of June 30, 2015, the weighted average annual effective yield of our debt portfolio was approximately 10.9%.(1) As of June 30, 2015, approximately 77% of our debt portfolio at fair value had floating interest rates. As of June 30, 2015, we had two debt investments on non-accrual status totaling 0.3% of the portfolio at fair value.

During the three months ended June 30, 2015, we invested approximately $195.9 million in seven new and eleven existing portfolio companies. The investments were comprised of approximately $165.6 million in senior secured loans, $29.6 million in senior secured notes, and $0.7 million in equity investments. Additionally, we received proceeds from sales and repayments of investment principal of approximately $189.7 million. We expect to continue to invest in senior secured loans, bonds and subordinated debt, as well as select equity investments, to obtain a high level of current income and create the potential for appreciation, with an emphasis on principal protection.

As of June 30, 2015, total assets were $1,280.9 million, net assets applicable to common shareholders was $739.4 million and net asset value per share was $15.10, as compared to $1,260.5 million, $732.3 million, and $15.03 per share, respectively on March 31, 2015.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the three months ended June 30, 2015 was approximately $38.9 million, or $0.80 per share, including $0.09 per share from original issue discount and fee amortization ($0.05 of which was recognized in connection with prepayments), an additional $0.05 per share from prepayment premiums, $0.03 per share from income paid in kind, and $0.02 per share of syndication fee income. This reflects our policy of recording interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. Origination, structuring, closing, commitment, and similar upfront fees received in connection with the outlay of capital are generally amortized or accreted into interest income over the life of the respective debt investment. Total investment income was net of $0.6 million of depreciation expense from aircraft we own and lease (through portfolio trusts), or $0.01 per share.

Total operating expenses for the three months ended June 30, 2015 were approximately $11.7 million, or $0.24 per share including $0.6 million in nonrecurring transaction related professional fees. Dividends accrued on the preferred leverage facility were approximately $0.4 million, or $0.01 per share. We also incurred incentive compensation from net investment income of $5.4 million, or $0.11 per share. Excluding incentive compensation, annualized second quarter expenses, including all costs of leverage (both interest expense and preferred dividends), were 6.1% of average net assets.

Net investment income for the three months ended June 30, 2015 was approximately $27.3 million, or $0.56 per share, before related incentive compensation and preferred dividends. Net investment income after related incentive compensation and preferred dividends was $21.5 million, or $0.44 per share.

Net realized and unrealized losses for the three months ended June 30, 2015 were $2.2 million, or $0.05 per share, comprised of net realized losses of $9.3 million and net unrealized gains of $7.1 million. The net realized losses during the period were due primarily to the restructure of our loan to Edmentum, Inc., in which we received new debt and equity in a delevered company.

Gains on our repurchase of Series A preferred interests during the three months ended June 30, 2015 were $1.7 million, or $0.03 per share, which resulted from our repurchase of 1,675 preferred interests with an aggregate liquidation preference of $33.5 million for a purchase price of $31.8 million.

Net increase in net assets applicable to common shareholders resulting from operations for the three months ended June 30, 2015 was $21.0 million, or $0.43 per share.

(1) Weighted average annual effective yield includes amortization of deferred debt origination and backend fees and accretion of original issue discount, but excludes market discount, any prepayment and make-whole fee income, and any debt investments on non-accrual status.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2015, available liquidity was approximately $213.8 million, comprised of approximately $36.7 million in cash and cash equivalents and $180.0 million in available capacity under the leverage program, less approximately $2.9 million in net outstanding settlements.

Total leverage outstanding at June 30, 2015 was as follows:

Maturity

Rate

Carrying Value

Available

Total Capacity

Partnership Credit Facility

2016

L+2.50%

$

112,000,000

$

4,000,000

$

116,000,000

TCPC Funding Credit Facility

2019

L+2.25%

165,000,000

135,000,000

300,000,000

Convertible Notes ($108 million par)

2019

5.25%

105,900,159

-

105,900,159

SBA Debentures

2024-2025

2.85%*

34,000,000

41,000,000

75,000,000

Preferred Equity Facility

2016

L+0.85%

100,500,000

-

100,500,000

Total leverage

$

517,400,159

$

180,000,000

$

697,400,159

* Weighted-average interest rate on pooled loans of $28.0 million, excluding fees of 0.36%. As of June 30, 2015, the remaining $6.0 million of the outstanding amount was not yet pooled, and bore interest at a temporary rate of 0.59% plus fees of 0.36% through September 23, 2015, the date of the next SBA pooling.

Except for the Convertible Notes, all carrying values are the same as the principal amounts outstanding.

Anticipated total SBA leverage of $150 million

The combined weighted-average interest and dividend rates on amounts outstanding on the total leverage program as of June 30, 2015 was 2.93%.

On August 4, 2015, the Company's Board of Directors re-approved a stock repurchase plan to acquire up to $50 million in the aggregate of the Company's common stock at prices at certain thresholds below the Company's net asset value per share, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934.

RECENT DEVELOPMENTS

On July 13, 2015, we obtained exemptive relief from the SEC to permit us to exclude the debt of TCPC SBIC LP guaranteed by the SBA from our 200% asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 200% asset coverage test by permitting the SBIC to borrow up to $150 million more than it would otherwise be able to absent the receipt of this exemptive relief.

On August 4, 2015, we increased the aggregate principal commitment on the TCPC Funding Facility to $350 million and expanded the accordion feature to $400 million.

On August 6, 2015, the Company's board of directors declared a third quarter regular cash dividend of $0.36 per share payable on September 30, 2015 to stockholders of record as of the close of business on September 16, 2015.

CONFERENCE CALL AND WEBCAST

TCP Capital Corp. will host a conference call on Thursday, August 6, 2015 at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time) to discuss its quarterly financial results. All interested parties are invited to participate in the conference call by dialing (866) 393-0571; international callers should dial (206) 453-2872. Participants should enter the Conference ID 77012616 when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Relations section of our website (www.tcpcapital.com) and click on the Second Quarter 2015 Investor Presentation under Events and Presentations. The conference call will be webcast simultaneously in the investor relations section of our website at http://investors.tcpcapital.com/. An archived replay of the call will be available approximately two hours after the live call, through August 13, 2015. For the replay, please visit http://investors.tcpcapital.com/events.cfm or dial (855) 859-2056. For international replay, please dial (404) 537-3406. For all replays, please reference program ID number 77012616.

TCP Capital Corp.

Consolidated Statements of Assets and Liabilities

June 30, 2015

December 31, 2014

(unaudited)

Assets

Investments, at fair value:

Companies less than 5% owned (cost of $1,139,275,409 and $1,097,181,753, respectively)

$

1,131,417,557

$

1,081,901,384

Companies 5% to 25% owned (cost of $69,820,923 and $52,103,511, respectively)

65,722,069

48,716,425

Companies more than 25% owned (cost of $39,025,525 and $40,213,258 respectively)

14,835,423

15,918,077

Total investments (cost of $1,248,121,857 and $1,189,498,522, respectively)

1,211,975,049

1,146,535,886

Cash and cash equivalents

36,706,214

27,268,792

Deferred debt issuance costs

7,271,953

7,700,988

Receivable for investments sold

9,631,353

10,961,369

Accrued interest income:

Companies less than 5% owned

8,917,630

9,222,001

Companies 5% to 25% owned

544,098

253,987

Companies more than 25% owned

337,258

28,450

Unrealized appreciation on swaps

2,866,985

1,717,610

Options (cost $51,750)

30

497

Prepaid expenses and other assets

2,629,301

2,177,217

Total assets

1,280,879,871

1,205,866,797

Liabilities

Debt

416,900,159

328,696,830

Payable for investments purchased

12,513,559

2,049,518

Incentive allocation payable

5,383,885

4,303,040

Interest payable

2,074,858

1,510,981

Payable to the Investment Manager

908,347

459,827

Accrued expenses and other liabilities

2,772,724

3,219,783

Total liabilities

440,553,532

340,239,979

Commitments and contingencies (Note 5)

Preferred equity facility

Series A preferred limited partner interests in Special Value Continuation Partners, LP;

$20,000/interest liquidation preference; 5,025 and 6,700 interests authorized, issued and

outstanding as of June 30, 2015 and December 31, 2014, respectively

100,500,000

134,000,000

Accumulated dividends on Series A preferred equity facility

398,541

497,790

Total preferred limited partner interests

100,898,541

134,497,790

Non-controlling interest

General Partner interest in Special Value Continuation Partners, LP

-

-

Net assets applicable to common shareholders

$

739,427,798

$

731,129,028

Composition of net assets applicable to common shareholders

Common stock, $0.001 par value; 200,000,000 shares authorized, 48,959,494 and

  48,710,627 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively

48,959

48,710

Paid-in capital in excess of par

881,053,660

877,103,880

Accumulated net investment income

26,337,559

21,884,381

Accumulated net realized losses

(134,162,549)

(126,408,033)

Accumulated net unrealized depreciation

(33,849,831)

(41,499,910)

Net assets applicable to common shareholders

$

739,427,798

$

731,129,028

Net assets per share

$

15.10

$

15.01

TCP Capital Corp.

Consolidated Statements of Operations (Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Investment income

Interest income:

Companies less than 5% owned

$

36,133,215

$

22,333,382

$

66,410,364

$

40,474,125

Companies 5% to 25% owned

1,203,388

1,357,315

2,311,666

2,694,179

Companies more than 25% owned

148,269

234,835

319,094

492,462

Dividend income:

Companies 5% to 25% owned

-

-

-

1,968,748

Lease income:

Companies 5% to 25% owned

-

87,504

-

208,543

Companies more than 25% owned

331,336

254,682

623,042

463,572

Other income:

Companies less than 5% owned

1,121,612

319,582

2,089,007

954,316

Total investment income

38,937,820

24,587,300

71,753,173

47,255,945

Operating expenses

Management and advisory fees

4,618,214

3,104,872

8,977,412

5,991,080

Interest expense

3,518,811

1,019,751

6,741,661

1,476,612

Amortization of deferred debt issuance costs

514,289

429,394

1,074,535

802,148

Legal fees, professional fees and due diligence expenses

1,262,653

355,237

1,568,775

559,393

Administrative expenses

389,643

379,469

782,437

636,275

Commitment fees

282,921

215,864

604,443

407,062

Insurance expense

89,324

64,928

172,801

118,828

Director fees

80,750

81,670

165,840

167,382

Custody fees

69,062

60,849

139,250

111,656

Other operating expenses

842,818

449,058

1,316,203

768,644

Total operating expenses

11,668,485

6,161,092

21,543,357

11,039,080

Net investment income

27,269,335

18,426,208

50,209,816

36,216,865

Net realized and unrealized gain (loss) on investments and foreign currency

Net realized gain (loss):

Investments in companies less than 5% owned

(9,343,606)

125,710

(9,449,473)

(6,670,011)

Investments in companies 5% to 25% owned

395

808,036

790

808,411

Investments in companies more than 25% owned

-

-

19,167

-

Net realized loss

(9,343,211)

933,746

(9,429,516)

(5,861,600)

Net change in net unrealized appreciation/depreciation

7,128,219

(3,945,684)

7,650,079

8,029,680

Net realized and unrealized gain

(2,214,992)

(3,011,938)

(1,779,437)

2,168,080

Gain on repurchase of Series A preferred interests

1,675,000

-

1,675,000

-

Dividends on Series A preferred equity facility

(428,422)

(356,677)

(791,095)

(725,812)

Net change in accumulated dividends on Series A

preferred equity facility

78,515

(383)

99,249

10,112

Distributions of incentive allocation to the General Partner from:

Net investment income

(5,383,887)

(3,613,830)

(9,903,596)

(7,100,233)

Net change in reserve for incentive allocation

-

602,388

-

(433,616)

Net increase in net assets applicable to common  shareholders resulting from operations

$

20,995,549

$

12,045,768

$

39,509,937

$

30,135,396

Basic and diluted earnings per common share

$

0.43

$

0.33

$

0.81

$

0.83

Basic and diluted weighted average common shares outstanding

48,903,081

36,200,021

48,807,788

36,199,969

ABOUT TCP CAPITAL CORP.

TCP Capital Corp. (NASDAQ: TCPC) is a specialty finance company focused on performing credit lending to middle-market companies as well as small businesses.  TCPC lends primarily to companies with established market positions, strong regional or national operations, differentiated products and services and sustainable competitive advantages, investing across industries in which it has significant knowledge and expertise.  TCPC's investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. TCPC is a publicly-traded business development company, or BDC, regulated under the Investment Company Act of 1940 and is externally managed by its advisor, Tennenbaum Capital Partners, LLC, a leading alternative investment manager. For more information, visit www.tcpcapital.com.

FORWARD-LOOKING STATEMENTS

Prospective investors considering an investment in TCP Capital Corp. should consider the investment objectives, risks and expenses of the company carefully before investing. This information and other information about the company are available in the company's filings with the Securities and Exchange Commission ("SEC"). Copies are available on the SEC's website at www.sec.gov and the company's website at www.tcpcapital.com. Prospective investors should read these materials carefully before investing.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in general economic conditions or changes in the conditions of the industries in which the company makes investments, risks associated with the availability and terms of financing, changes in interest rates, availability of transactions, and regulatory changes. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the "Risks" section of the company's prospectus dated July 1, 2015 and the company's subsequent periodic filings with the SEC. Copies are available on the SEC's website at www.sec.gov and the company's website at www.tcpcapital.com. Forward-looking statements are made as of the date of this press release, and are subject to change without notice. The company has no duty and does not undertake any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

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SOURCE TCP Capital Corp.



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