Earnings call transcript: BlackRock TCP Q4 2024 misses EPS, stock falls

BlackRock TCP Capital Corp (NASDAQ:TCPC) reported its Q4 2024 earnings, revealing an EPS of $0.36, slightly below the forecast of $0.37. Revenue also fell short, coming in at $61.25 million against an expected $66.73 million. These results prompted a market reaction, with the stock dropping 8.3% to $9.34, reflecting investor disappointment. According to InvestingPro data, four analysts have recently revised their earnings estimates downward for the upcoming period, suggesting continued headwinds. The company’s trailing twelve-month revenue stands at $249.04 million, showing a robust growth of 21.38% despite recent challenges. The company also highlighted a challenging interest rate environment and reduced its regular dividend, which likely contributed to the negative sentiment.

Key Takeaways

• EPS missed forecasts by $0.01, and revenue was below expectations by $5.48 million.
• Stock price fell by 8.3% following the earnings release.
• The company reduced its regular dividend to $0.25 per share.
• Portfolio yield decreased to 12.4% from 13.4%.
• Strong focus on middle market lending and first lien loans.

Company Performance

BlackRock TCP Capital Corp experienced a challenging quarter, with its adjusted net investment income holding steady at $0.36 per share, consistent with the previous quarter. However, the full-year adjusted net investment income declined to $1.52 per share from $1.84 in 2023. The company’s net asset value per share decreased to $9.23 from $10.11, reflecting broader market pressures and portfolio markdowns.

Financial Highlights

• Revenue: $61.25 million, down from the forecast of $66.73 million.
• Earnings per share: $0.36, compared to the forecast of $0.37.
• Portfolio fair market value: $1.8 billion.
• Weighted average effective portfolio yield: 12.4%, down from 13.4%.

Earnings vs. Forecast

The company reported an EPS of $0.36, missing the forecast by $0.01, which represents a minor miss. Revenue also fell short by approximately 8.2%, which is significant given the company’s historical performance. This marks a deviation from previous quarters where earnings were more aligned with expectations.

Market Reaction

Following the earnings announcement, BlackRock (NYSE:BLK) TCP’s stock price dropped by 8.3%, closing at $9.34. With a beta of 1.56, InvestingPro analysis indicates the stock’s higher volatility compared to the market. Currently trading at $8.57, the stock sits between its 52-week range of $7.71 to $11.52, highlighting investor concerns over the earnings miss and dividend reduction. The broader market and sector trends have been stable, indicating that the decline is largely company-specific. Notably, TCPC maintains strong liquidity with a current ratio of 5.99, suggesting robust ability to meet short-term obligations.

Outlook & Guidance

Looking ahead, BlackRock TCP Capital Corp intends to declare special dividends of at least $0.02 in Q2 and Q3. The company remains focused on middle market lending and aims to maintain a diversified portfolio with a strong emphasis on first lien loans. InvestingPro data reveals that TCPC has maintained dividend payments for 13 consecutive years, with a current dividend yield of 19.27%. For deeper insights into TCPC’s financial health and future prospects, investors can access the comprehensive Pro Research Report, which provides detailed analysis of the company’s performance metrics and growth potential. The management is leveraging the BlackRock platform’s resources to navigate the current economic landscape.

Executive Commentary

CEO Phil Seng expressed optimism about the company’s future, stating, "We are optimistic about our future and confident in our strategic plan." President Jason Mering added, "We continue to think the middle market economy is strong." These comments underscore the company’s commitment to its strategic direction despite current challenges.

Risks and Challenges

• Interest rate fluctuations continue to impact deal activity and portfolio yields.
• Competitive pressures from both private credit and traditional lending sources.
• Potential for further portfolio markdowns due to economic uncertainties.
• Reduced dividend may affect investor sentiment and stock performance.
• Maintaining investment-grade rating amidst financial pressures.

Q&A

During the earnings call, analysts questioned the potential impacts of the HPS acquisition by BlackRock and expressed concerns about portfolio markdowns. Management addressed these issues, emphasizing their commitment to maintaining an investment-grade rating and explaining the rationale behind the dividend reduction.

Full transcript - BlackRock TCP Capital Corp (TCPC) Q4 2024:

Conference Operator: Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp’s Fourth Quarter and Year Ended twenty twenty four 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.

And now, I would like to turn the call over to Mikaela Murray, a member of the BlackRock TCP Capital Corp. Investor Relations team. Mikaela, please proceed.

Mikaela Murray, Investor Relations, BlackRock TCP Capital Corp: 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 fourth quarter and year ended 12/31/2024. We also posted a supplemental earnings presentation to our website at tcpcapital.com. To view the slide presentation, which we referred to on today’s call, please click on Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company’s Form 10 K, which we filed with the SEC earlier today.

Please note that we will shortly issue a corrected earnings release due to a typographical error. The third sentence of the third paragraph under consolidated results of operations has been corrected to refer to unrealized losses rather than unrealized gains. Our NAV and other statistics are presented correctly throughout. I will now turn the call over to our Chairman and CEO, Phil Seng.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Thank you, Mikaela, and thank you all for joining our call today. I will discuss our results for the fourth quarter and full year 2024. I will also describe how we are approaching our portfolio construction and investments to return the portfolio to historical above market returns as well as outline the shareholder friendly change we have implemented. I’ll then turn the call over to our President, Jason Mering, to review details of our investment activity and provide comments on the market environment. Last, Eric Quayar, our CFO, will provide financial results before we open the call up for questions.

We’re also joined today by Dan Worrell, our co CIO. We are optimistic about our future and confident in our strategic plan to successfully navigate the challenges presented in 2024. Full year 2024 adjusted net investment income was $1.52 per share as compared to $1.84 per share in 2023. Annualized net investment income ROE for the year was 14.5%. The declines in net investment income and ROE primarily reflect the impact from lower base rates and an increase in non accruals and expenses versus the prior year.

Fourth quarter adjusted net investment income per share was flat with last quarter at $0.36 At the end of the quarter, nonaccruals represented 5.6% of the portfolio at fair market value as compared to 3.8% in the previous quarter. NAV per share was $9.23 compared to $10.11 per share, reflecting incremental investment portfolio markdowns, the largest of which were Razer, Securus and Astra. Our results were also impacted by market conditions including tighter spreads as a result of the continued slower deal environment and declining interest rates. The vast majority of our portfolio continues to perform well and in a way that is reflective of our 12 history of consistently delivering attractive returns as a public company. That said, we are not pleased with the markdowns and non accruals that have impacted our performance in recent quarters, and we remain laser focused on working with our borrowers and sponsors to resolve these issues.

Based on our team’s substantial experience in direct lending, we are confident that we will make the right decisions to resolve these issues. We know from experience that resolving credit issues quickly does not always produce the best results for shareholders and that shareholder returns are often optimized through thoughtful solutions that may take some time to execute. Now let me provide a few high level updates on markdowns and non accruals during the quarter. We marked down our positions in Razer, Securus and Astra, each of which we’ve addressed on prior calls. We remain actively engaged with the management teams of each of these companies on the best path forward and will provide additional detail when we can.

I’ll quickly share an update on the Amazon (NASDAQ:AMZN) aggregators. First is Razer, which accounted for roughly 70% of our total markdowns this quarter. It continues to struggle with inventory issues that have impacted its profitability and liquidity. We’re working closely with Raizer to resolve these challenges, which may include consolidation to drive improved cash flow and provide runway for its turnaround. Again, these resolutions are not always linear and can take time to complete.

On the other hand, CellarX, which experienced a markup for the quarter, is further along in its transformation, having simplified its business by reducing overstock and investing in its growing brands while trimming unprofitable products. Notably, the company’s top brand nearly doubled in revenue year over year as it diversified its sales channels into brick and mortar. This progress is emblematic of the fact that improvements may take time and effort for our challenged borrowers. During the quarter, we added two new names, Renovo and EnMoment, to non accrual status. On our last call, we mentioned that EnMoment, which provides customer experience management software and solutions that help businesses understand and improve their customer experiences, experienced a slowdown in growth due to industry dynamics and is transitioning its focus towards multi signal product, which we believe has long term growth potential.

This slowdown in growth has continued into the fourth quarter, resulting in our decision to place the company on non accrual. We will continue to monitor EnMoment closely and to collaborate and support the management team. Renovo, the other company we placed on non accrual this quarter, is a direct to consumer home remodeling company. Renovo’s performance has declined as the company worked to integrate acquisitions while demand for residential repair and remodel services softened due to persistent inflation, resulting in deferred home repair and remodeling spend. We remain actively engaged with Renovo and its management team on both performance and financing considerations.

Given our recent financial performance, our Board made the decision to reduce our regular dividend to $0.25 per share for the first quarter. While net investment income exceeded our dividend in the fourth quarter, we believe the revised level is sustainable. In addition, our board declared a $0.04 special dividend for the first quarter, and we intend to declare a special dividend of at least $0.02 in each of the second and third quarters of twenty twenty five, subject to board approval. Next (LON:NXT), I want to discuss actions we’re taking to support our shareholders. We appreciate your continued trust and patience and believe these are examples of how we continue to align with you.

First, on 02/25/2025, our advisor voluntarily agreed to waive one third of our base management fee for three calendar quarters beginning on 01/01/2025 and ending on 09/30/2025. These fees cannot be earned back at a later date. We are taking this action as we acknowledge the decline in the portfolio’s NAV. Second, during the fourth quarter, we purchased repurchased 510,687 shares at a weighted average price per share of $8.86 pursuant to the plan our Board of Directors reapproved on 04/24/2024. And third, as you know, our shareholder friendly incentive incentive fee structure ensures that we earn incentive fees only when our total return exceeds the hurdle rate.

This fee structure was intentionally designed to align management and shareholder interests. When our shareholders do well, we do well, and only then. As the new management team, we have a clear path to position TCPC in a way that results in consistent, attractive long term returns. First, we will continue to focus primarily on the core middle market with an industry driven proactive approach to sourcing and underwriting. We will also opportunistically invest in companies in both the lower and upper middle market that align with our strategy, are relationship driven and ensure an efficient use of available capital.

There are many benefits to lending in the middle market. It’s an attractive and underserved segment with less competition than the broadly syndicated market that has historically delivered strong risk adjusted returns. It’s also an area where our direct relationships and our deep industry knowledge and deal structuring expertise are highly valued in creating customized financing solutions for companies that need growth capital. Second, we will maintain a highly diversified portfolio and limit exposure to industry subsectors. We have always focused on maintaining a diverse portfolio in industries we know well and where we have an established ecosystem of referral sources and borrower relationships, including verticals like health care, technology and fintech.

Going forward, we will also avoid meaningful concentrations in any one industry subsector such as Amazon aggregators. Third, we will continue to prioritize investing in first lien loans and where we consider second lien loans, we will emphasize those where we are a lender of influence. We know that having a direct relationship or at least a seat at the table with borrowers provides significant downside protection. Finally, we will continue to deepen our connections to and leverage the broader BlackRock platform. Our ability to draw on the extensive resources and relationships of the full platform is a distinct competitive advantage.

As part of BlackRock, we have access to a broader origination platform and investment team as well as substantial resources. In addition, we see a significant amount of proprietary deal flow that allows us to be highly selective in the investments we make. With our talented, experienced team and the unparalleled resources of the BlackRock platform, I am confident that we will successfully work through our current challenges and return the portfolio to historical performance levels. We believe that we have the right team and the right plan. We appreciate our shareholders’ continued patience throughout this process.

Now I’ll turn it over to Jason, who will review our investment activity during the quarter and the market environment.

Jason Mering, President, BlackRock TCP Capital Corp: Thanks, Phil. I’ll start my comments with a brief overview of our portfolio. At year end, our portfolio had a fair market value of approximately $1,800,000,000 invested across 154 companies in more than 20 industry sectors and with an average position size of $11,700,000 90 1 point 2 percent of our portfolio was invested in senior secured loans, 94.5% of which were floating rate. Investment income was distributed broadly across our diverse portfolio with more than 77 of our portfolio companies each contributing less than 1% to the total. At quarter end, the weighted average effective yield of our portfolio was 12.4 compared to 13.4% last quarter.

New investments had a weighted average yield of 10.8%, while those that we exited had a weighted average yield of 14%. These statistics reflect decline in base rates and some spread reduction during the period. In addition, a portion of our repayments in the quarter were from higher priced second lien deals that we have not emphasized more recently. While overall M and A volumes remained below expectations, we continue to see a healthy flow of new investment opportunities in the quarter and took a highly selective approach to investing, emphasizing seniority in the capital structure, portfolio diversity and transactions where we are a lender of influence. We deployed a total of $121,000,000 of capital during the quarter into nine new and nine existing portfolio companies.

All of our new investments were first lien loans and at quarter end, 83.6% of the portfolio was in first lien loans, up from 81.3% in the prior quarter. In several instances, we chose not to maintain our involvement in deals that were repriced at lower yields or that were amended to include weaker covenants where we believe the risk outweighed the potential reward. As a result of our focus on direct origination and borrower relationships, incumbency remains an important competitive advantage for TCPC. Investments in existing portfolio companies accounted for nearly 45% of our fourth quarter activity. From a risk management perspective, allocating additional capital to businesses and industries we know well and understand deeply is beneficial.

At the same time, we have seen a healthy level of opportunities from new borrowers that are aligned with our investment strategy. Now, I’ll discuss two specific investments from the quarter. Our largest investment in the new portfolio company was a $14,700,000 first lien loan to Global Experience Specialists or GES. Founded in 1926, GES is a global exhibition and trade show management company that provides end to end services for exhibitions, conferences and live events. Its services include strategy, creative, design, production and logistics.

We view this as a highly attractive opportunity to invest in a global leader with high levels of recurring revenue from long term client contracts within the $15 plus billion exhibition industry. Our largest investment into an existing portfolio company during the quarter was a $12,800,000 loan to Applause, a crowd testing company that connects software developers with a global community of digital experts to test and ensure the quality of applications before they are released to consumers. We have been a long time financing partner to Applause. We originally invested in the company to support its leveraged buyout in 2017 and led a subsequent transaction in October of last year. Since our initial investment, Applause has performed well and has significantly expanded annual recurring revenue driven by growth in AI advancements, strategic partners and customer expansion.

As it relates to the overall market in our pipeline, we have not seen the level of increase in M and A activity that most expected heading into 2024. This has been driven in part by interest rates. While the Fed has cut rates, the pace and overall level of reductions has been less than many had hoped for. Our view is that the market is digesting the implied rate outlook for 2025 and that there’s likely to be some lift in overall activity as expectations are adjusted. While rates clearly have significant influence on deal activity, the potential for other policy shifts following the U.

S. Election cannot be ignored. There’s much that is to be determined on this front, but it’s reasonable to think that a more favorable regulatory environment may contribute to activity as buyers and sellers endeavor to narrow the valuation gaps that have existed more recently. It’s also worth noting that many private equity sponsors continue to hold record levels of dry powder, which should further drive transaction volumes. As it relates to spread compression, which both Phil and I mentioned previously,

Eric Quayar, CFO, BlackRock TCP Capital Corp: this has been

Jason Mering, President, BlackRock TCP Capital Corp: an ongoing theme driven by increased competition between private credit and traditional lending sources. With that said, many companies have repriced or refinanced their debt at this point, suggesting a level of stabilization ahead. Overall, while it’s difficult to predict specifics related to deal activity, we continue to think the middle market economy is strong and that we’re well positioned to provide capital to borrowers in our core segment of that market. Now, I’ll turn the conversation over to Eric, who will discuss our financial results, capital and liquidity position.

Eric Quayar, CFO, BlackRock TCP Capital Corp: Thank you, Jason. Let me begin with our financial results for the quarter. As Phil noted, adjusted net investment income was $0.36 per share for the fourth quarter and $1.52 per share for the full year 2024. As detailed in our earnings press release, adjusted net investment income excludes amortization of the purchase accounting discount resulting from our 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 our earnings release and 10 ks.

Gross investment income for the fourth quarter was $0.72 per share. This amount included recurring cash interest of $0.52 non recurring income of $0.06 recurring discount and fee amortization of $0.03 PIC income of $0.08 and dividend income of $0.03 per share. Fixed interest income for the quarter was 10.5% of total investment income. Operating expenses for the fourth quarter were $0.32 per share and included $0.21 per share of interest and other debt expenses. As of 12/31/2024, the company’s cumulative total return did not exceed the total return hurdle.

And as a result, no incentive compensation was accrued for the three months ended 12/31/2024. Additionally, as Phil mentioned, our advisor has agreed to waive one third of our base management fees for three quarters beginning on 01/01/2025, and ending on 09/30/2025. Net realized losses for the quarter were approximately $3,000 or less than $0.01 per share. Net unrealized losses in the fourth quarter totaled $72,000,000 or $0.85 per share, primarily reflecting unrealized markdowns on the three investments Phil discussed earlier. The net decrease in net assets for the quarter was $80,000,000 or $0.89 per share.

As of December 31, ’12 portfolio companies were on non accrual status, representing 5.6% of the portfolio at fair value and 14.4% at cost. As Phil noted, we are working closely with our borrowers, their creditors and sponsors to resolve issues with the best possible outcomes for our shareholders. The remainder of our portfolio is performing well. Turning to our liquidity. Our balance sheet position remains solid, and our total liquidity increased to $615,000,000 at quarter end with $519,000,000 of available leverage and $92,000,000 in cash.

Unfunded loan commitments to portfolio companies at year end were 8% of our $1,800,000,000 investment portfolio or approximately $144,000,000 including only $62,000,000 of revolver commitments. Net regulatory leverage at the end of the quarter was 1.14x, which is within our target range of 0.9x to 1.2x. We have ample financing options to fund new investments with our diverse and flexible leverage program, which includes three low cost credit facilities, three unsecured note issuances and an SBA (LON:SBA) program. The weighted average interest rate on debt outstanding at the end of the quarter was 5.2% down from 5.4% at the end of the prior quarter. Now, I’ll turn the call back over to the operator to open the line up for questions.

Conference Operator: Thank you. We will now begin the question and answer session. Our first question today comes from Finian O’Shea with Wells Fargo (NYSE:WFC) Securities. Please go ahead, Finian.

Finian O’Shea, Analyst, Wells Fargo Securities: Hey, everyone. Good morning. On the dividend in the specials, can you give some color on your spillover now? I apologize if you gave that already. And what the target level will be?

Eric Quayar, CFO, BlackRock TCP Capital Corp: Yes. Fin, I’ll address first the spillover. We as you recall, we declared a special of $0.1 in Q4 of twenty twenty four. We did not distribute the full amount. We probably have about 0.1 or so of carryover from the prior quarter into this quarter.

But I’ll let Phil address the dividend level.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. Fin, we really try to be very thoughtful here on the regular dividend level. Our approach was to really think about a sustainable level based on the earnings power of the portfolio today. But there are a number of considerations, right, that we had to make in coming up to this decision. Obviously, the ongoing impact of base rates coming down, they’re lower today than they have been over the past few years.

And of course, the current spread environment, it’s been tightening, I think, as most in the industry have come to recognize. And so as we rotate the portfolio over time from repayments into new deployments, we are seeing some spread compression there. And of course, our non accruals will end up yielding less interest income. So what we really want to do is try and be thoughtful here around a true sustainable regular dividend level and that’s where we arrived. But of course, we understand that we do want to provide strong total shareholder returns here and therein lies our approach around the specials and the guidance accordingly for Q2 and Q3.

Finian O’Shea, Analyst, Wells Fargo Securities: Okay. That’s helpful. And just sort of a platform question. I’m not sure to what extent you can discuss, but we’ve all seen the BlackRock HPS acquisition and it appears that TCP will be a unit or roll up to HPS and that means your investments, the portfolio management, etcetera, function becomes part of theirs. So do you have any like should we brace for any strategic change in, say, your investment strategy or anything like that?

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. That’s a fair question. The HPS headline has been out there since BlackRock agreed to the acquisition of HPS back in December. I don’t expect there to be meaningful change. I can’t really go into much detail around the transaction given that it hasn’t closed yet, and we expect it to close at some point in the middle of this year subject to regulatory approvals.

But our team is laser focused on business as usual, particularly our existing portfolio and seeing this portfolio through some of these performance related issues. But I think importantly, Fin, the acquisition of HPS does highlight BlackRock’s deepened growing commitment to private credit and direct lending, particularly in The U. S, as you know, given their scale. And I think it will bring very much expanded resources to our business, including a network of borrower relationships and enhanced sourcing capabilities as well as just broader private credit expertise to our platform. So we’re very excited.

I think one of the compelling aspects of the transaction is how complementary the HPS, U. S. Direct lending business as well as the BlackRock private market businesses are. So I know we’re excited. Our team is excited.

And I think if understanding how to get the benefits of a larger platform that we’ve experienced to date as being part of the BlackRock platform is any indication, we’re very much looking forward to having HPS as part of that.

Finian O’Shea, Analyst, Wells Fargo Securities: And is your like just a sort of follow-up there, the when BlackRock acquired TCP, I think you’re in some blanket co invest order where you see everything and your board’s entitled to claim everything that fits the mandate. Is that like should we assume that, that applies that, for example, your funds and the HPS funds will be together in a co invest order, but perhaps as you point out, like to be determined if there’s cross pollination of deals?

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. Thanks for that question, Vint. We look forward to providing more details at a later date closer to when the deal comes to a close. But at this time, we can’t make comments.

Finian O’Shea, Analyst, Wells Fargo Securities: Okay. Appreciate that. Thanks so much.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Thank you.

Conference Operator: Our next question comes from Robert Dodd with Raymond (NSE:RYMD) James. Please go ahead, Robert.

Eric Quayar, CFO, BlackRock TCP Capital Corp: Hi, guys. And I understand you’re being as open as you can on the assets. But I mean, what level of confidence should we have that this is it, so to speak, in terms of the write downs, right? I mean, obviously, the Amazon aggregators have been a problem for a while. And Celler X might be improving, but the razor was a big markdown.

So I mean, how much confidence should we have that the NAV while there can be volatility to your point, it’s not an even pathway, right? But that this is a realistic floor level? Or is there just more things we should be worried about in the portfolio?

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. Robert, that’s a fair question. We’re obviously laser focused on trying to manage the existing non accruals and the positions that have shown meaningful markdowns. The razor markdown, which was the vast majority of the markdowns for the quarter, did come as a surprise to us. Partly there was an expectation that the recent equity investor that came in just about two quarters ago was going to continue supporting the business, but that went in a different direction, hence the meaningful markdown.

Aside from that, most of the markdowns came from the existing cohort of assets that have been on the list, so to speak, on the non accrual list in particular. So outside of those names, will there be ongoing markdowns or potential non accruals? There may be, but I think it’s largely been centered around the assets that we’ve been discussing.

Eric Quayar, CFO, BlackRock TCP Capital Corp: I appreciate it. If I look at one of the new ones, Renovo, remodeling, I have to assume that there’s exposure to lumber tariffs and maybe remodeling products in China and maybe China tariffs as well. But so what’s the it was seeing slower demand, but now maybe faces TAREX going forward as well. So I mean, what’s the risk on something like that that there’s incremental deterioration? And that’s just obviously a new non report rather than the existing group to your point that a lot of the issues have been restricted to that, but there are some new ones.

Jason Mering, President, BlackRock TCP Capital Corp: Sure. This is Jason. I’m happy to try and take a swing at the Renovo answer. And I think on that front, the underlying issues there have certainly been in part because of issues with inflation and sort of consumer appetite to bite off home projects, but there also have been some just operational and sort of execution issues which are probably easier to address. The one thing about this particular platform and it’s something we thought about at the time of our initial investment is that the sorts of projects that they focus on are smaller dollar amount as opposed to comprehensive home redos or remodels.

So number one, it ought to be a little less volatility based on our work and our experience within that market as there is elsewhere. And then secondarily, a lot of the things that they focus on are come from like windows, for example, come from supply chains that are domestic as opposed to coming from abroad. Now that doesn’t mean that they’re 100% insulated from what might happen with commodity or material prices broadly. But our current read right now is that they’re not necessarily specifically in the crosshairs of trouble because of where they’re getting the underlying materials. Obviously, everything related to tariffs continues to move around and we’re staying on top of it.

But at the moment, we don’t think that tariffs are necessarily a significant new issue in the context of that specific name at the moment.

Eric Quayar, CFO, BlackRock TCP Capital Corp: Got it. Thank you. I appreciate the color on that. One more if I can, and I’m going to keep my tinfoil hat in the box at the moment. But the decision to waive one third of base management fees through the first three quarters of the year, positive to shareholders, so applaud that.

It may be I’m reading too much into it, but at the same time, roughly the time that’s expiring is the time that the HPS acquisition is supposed to close. So I mean is that is it just coincidental or is it waiving some management fees until that close and then review the new landscape? Is that kind of what’s being laid out here?

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: I think, Robert, I appreciate your insightfulness and creativity, but I think that is looking into it a little bit too much. It’s not coincidental. We did try and take a thoughtful approach to really acknowledge the NAV decline and the management fee waiver is one of several things that the advisors done to really try and support TCPC. As you know, there was a reduction in our management fee last year from 1.5% to 1.25% to really be more aligned with the peer universe. And then our shareholder friendly incentive structure, I think that showed its merits this past quarter.

So I think it’s a collection of ways that the advisors trying to support TCPC here, but there’s nothing coincidental about oh, sorry, there’s nothing specific to the timing around HPS or any other matters.

Eric Quayar, CFO, BlackRock TCP Capital Corp: Got it. Thank you. Appreciate it.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. Thank you.

Conference Operator: Our next question comes from Christopher Nolan with Ladenburg Thalmann. Please go ahead.

Robert Dodd, Analyst, Raymond James: Hi. I applaud the I echo Robert in terms of waiting the management fee and also reduction of dividend. Given everything that’s going on and I appreciate you guys are handling a pretty hairy situation. And you have a really large debt maturity in 2026, ’3 ’20 ’5 million dollars that’s a 2.85% note. As I recall, that’s investment grade.

What I presume you want to keep the investment grade if you’re able to, but should we look for lower leverage going through the year or so? Or what steps should we take to watch as you prepare for that refinance?

Eric Quayar, CFO, BlackRock TCP Capital Corp: Yes. As you pointed out, that really is our next large maturity. We actually have a small piece coming due in December of twenty twenty five as well. And certainly, we’ll be looking to access the capital markets closer to that date. We’re definitely focused on maintaining that investment grade rating from our rating agencies.

And obviously, that helps with the process as well. But when we issue those notes, it’s what we on a combined basis post merger, we believe that we’re going to be doing similar sizes in terms of issuances.

Robert Dodd, Analyst, Raymond James: Okay. So you’re currently anticipating maintaining the investment grade?

Eric Quayar, CFO, BlackRock TCP Capital Corp: Yes. We continue to have closed discussions with our rating agencies and we have no reason to think otherwise.

Robert Dodd, Analyst, Raymond James: Okay. And I guess kind of a pointed question. Your NAV per share decreased 22 in 2024 versus 9% a year earlier. And is what has changed? I know there was the acquisition.

Is there additional management overhead from being part of BlackRock? And if so, if that’s the case, it may not be serving you guys well in terms of the performance. Anything you could comment on that would be helpful.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Yes. I think it’s the result of the broader factors that go into these portfolios. There’s obviously a rapid increase in rates in the back half of ’20 ’20 ’2 and through 2023. I think that is having a significant impact on borrowers who were levered pre rate rise, for example, that coupled with a slower growth environment given the higher rates across not just The U. S.

But globally, it’s putting pressure on a number of these operating companies and couple that with, of course, higher interest burden. So I think it’s a lot of that that’s come to impact these businesses in different ways, and that’s largely what we’re seeing. So you’re right. As you mentioned, a lot of that was in 2024, and I think that is a reflection of that.

Eric Quayar, CFO, BlackRock TCP Capital Corp: Okay. Thank you.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: Thank you.

Conference Operator: Thank you. At this time, we have no further questions. And so I’ll hand the call back to Phil Singh for closing remarks.

Phil Seng, Chairman and CEO, BlackRock TCP Capital Corp: In closing, I want to thank our entire team at BlackRock TCP Capital Corp. For all their hard work and our investors and analysts for your continued trust and support. Please reach out to us with any questions. Thank you.

Conference Operator: Thank you, everyone, for joining us today. This concludes our call and you may now disconnect your lines.

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