Full-Year 2024 Adjusted Net Investment Income: $1.52 per share, down from $1.84 per share in 2023. Annualized Net Investment Income ROE: 14.5% for the year. Fourth-Quarter Adjusted Net Investment Income Per Share: $0.36, flat compared to the previous quarter. Non-Accruals: 5.6% of the portfolio at fair market value, up from 3.8% in the previous quarter. NAV Per Share: $9.23, down from $10.11 per share. Portfolio Fair Market Value: Approximately $1.8 billion. Weighted Average Effective Yield of Portfolio: 12.4%, down from 13.4% last quarter. New Investments: $121 million deployed into nine new and nine existing portfolio companies. Operating Expenses for Fourth Quarter: $0.32 per share, including $0.21 per share of interest and other debt expenses. Net Unrealized Losses for Fourth Quarter: $72 million or $0.85 per share. Total Liquidity at Quarter End: $615 million, with $519 million of available leverage and $92 million in cash. Net Regulatory Leverage: 1.14 times, within the target range of 0.9 to 1.2 times. Weighted Average Interest Rate on Debt Outstanding: 5.2%, down from 5.4% in the prior quarter.

Warning! GuruFocus has detected 2 Warning Signs with TCPC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

BlackRock TCP Capital Corp (NASDAQ:TCPC) reported a full-year 2024 adjusted net investment income of $1.52 per share, indicating a strong income generation despite challenges. The company maintained a highly diversified portfolio with investments across 154 companies in over 20 industry sectors, reducing risk exposure. 91.2% of the portfolio was invested in senior secured loans, with 94.5% being floating rate, which can benefit from rising interest rates. The company repurchased 510,687 shares at a weighted average price of $8.86, demonstrating a commitment to shareholder value. The Adviser voluntarily agreed to waive one-third of the base management fee for three quarters in 2025, aligning management interests with shareholders.

Negative Points

Net asset value (NAV) per share decreased to $9.23 from $10.11, reflecting significant markdowns in the investment portfolio. Non-accruals increased to 5.6% of the portfolio at fair market value, up from 3.8% in the previous quarter, indicating rising credit issues. The company reduced its regular dividend to $0.25 per share for the first quarter of 2025, reflecting a decline in earnings power. Significant markdowns were reported in investments such as Razor, Securus, and Astra, impacting overall financial performance. The weighted average effective yield of the portfolio decreased to 12.4% from 13.4% last quarter, indicating pressure on income generation.

Story Continues

Q & A Highlights

Q: Can you provide some color on your dividend spill-over and the target level for dividends? A: We declared a special dividend of $0.10 in Q4 2024, but did not distribute the full amount, leaving about $0.10 of carry-over into this quarter. Our approach to the regular dividend level is to ensure it is sustainable based on the current earnings power of the portfolio, considering factors like lower base rates and spread compression. We aim to provide strong total shareholder returns through regular dividends and special dividends.

Q: With the BlackRock-HPS acquisition, should we expect any strategic changes in your investment strategy? A: We do not expect meaningful changes. The acquisition highlights BlackRock's commitment to private credit and direct lending, and it will bring expanded resources, including enhanced sourcing capabilities and broader private credit expertise. We are excited about the complementary nature of HPS's US direct lending business with BlackRock's private market businesses.

Q: How confident are you that the recent write-downs represent a floor level for NAV, or should we expect more issues? A: We are focused on managing existing non-accruals and markdowns. The Razor markdown was unexpected due to a change in support from a recent equity investor. Most markdowns are from assets already on our watchlist. While there may be ongoing markdowns, they are largely centered around known issues.

Q: Regarding Renovo, what are the risks of incremental deterioration due to tariffs and slower demand? A: Renovo's issues stem from inflation and operational challenges, not tariffs. Their projects are smaller and less volatile, with domestic supply chains. While tariffs are a concern, they are not a significant issue for Renovo at this time.

Q: Is the decision to waive one-third of base management fees related to the timing of the HPS acquisition? A: The fee waiver is not related to the HPS acquisition timing. It is a thoughtful approach to acknowledge the NAV decline and support TCPC. The waiver is part of several actions, including a previous management fee reduction, to align with shareholder interests.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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