February 28, 2017

TCP Capital Corp. Announces 2016 Financial Results; Board Declares First Quarter Dividend Of $0.36 Per Share

SANTA MONICA, Calif., Feb. 28, 2017 /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 fourth quarter and year ended December 31, 2016 and filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission.

FINANCIAL HIGHLIGHTS

  • Net investment income before taxes and a one-time expense for the quarter ended December 31, 2016 was $20.7 million, or $0.39 per share on a diluted basis. Net investment income after taxes and a one-time expense for the quarter ended December 31, 2016 was $18.9 million, or $0.36 per share on a diluted basis, net of $0.09 per share in incentive compensation. Net investment income after taxes for the year ended December 31, 2016 was $76.2 million, or $1.50 per share on a diluted basis, net of $0.37 per share in incentive compensation.
  • Net increase in net assets resulting from operations for the quarter ended December 31, 2016 was $22.9 million, or $0.43 per share. Net increase in net assets resulting from operations for the year ended December 31, 2016 was $76.3 million, or $1.50 per share.
  • Net asset value per share at December 31, 2016 increased to $14.91 from $14.84 at September 30, 2016 and $14.78 at December 31, 2015. The increase over December 31, 2015 is primarily a result of net investment income in excess of paid dividends and a premium from the issuance of convertible debt.
  • Total acquisitions during the quarter ended December 31, 2016 were $207.4 million and total dispositions were $179.2 million.
  • On February 28, 2017, our board of directors declared a first quarter dividend of $0.36 per share payable on March 31, 2017 to shareholders of record as of March 17, 2017.

"We are pleased with our strong fourth quarter and full year performance, particularly in continuing to substantially out-earn our full year dividends," said Howard Levkowitz, TCP Capital Corp. Chairman and CEO. "In the fourth quarter, we originated $207 million in loans, our highest level since our IPO. With our robust direct origination platform, we are seeing a significant volume of attractive opportunities, which enables us to grow our portfolio while continuing to be highly selective and disciplined in our investing." 

PORTFOLIO AND INVESTMENT ACTIVITY

As of December 31, 2016, our investment portfolio consisted of debt and equity positions in 90 portfolio companies with a total fair value of approximately $1.31 billion. Debt positions represented approximately 95% of the portfolio at fair value, substantially all of which were senior secured debt. Equity positions, including equity interests in portfolios of debt and lease assets, represented approximately 5% of our investment portfolio.

As of December 31, 2016, the weighted average annual effective yield of our debt portfolio was approximately 10.9%.(1) As of December 31, 2016, approximately 81% of our debt portfolio at fair value had floating interest rates. As of December 31, 2016, we had two debt investments on non-accrual status, totaling 0.4% of the portfolio at fair value. 

During the three months ended December 31, 2016, we invested approximately $207.4 million, primarily in nineteen investments, comprised of eleven new and eight existing portfolio companies. The investments were comprised of approximately $192.3 million in senior secured loans and $7.7 million in senior secured notes. The remaining $7.4 million was comprised of equity investments, including $5.6 million of additional equity interests in portfolios of debt and lease assets. Additionally, we received proceeds from sales and repayments of investment principal of approximately $179.2 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 December 31, 2016, total assets were $1,387.6 million, net assets applicable to common shareholders were $790.9 million and net asset value per share was $14.91, as compared to $1,441.8 million, $787.1 million, and $14.84 per share, respectively, on September 30, 2016 and $1,243.3 million, $722.0 million, and $14.78, respectively, on December 31, 2015.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the three months ended December 31, 2016 was approximately $39.5 million, or $0.75 per share, including $0.09 per share from prepayment premiums and related accelerated original issue discount amortization, $0.03 per share from recurring original issue discount amortization and $0.02 per share from recurring income paid in kind. This reflects our policy of recording interest income, adjusted for amortization of premiums and discounts, on an accrual basis. Origination, structuring, closing, commitment, and similar upfront fees received in connection with the outlay of capital are generally amortized into interest income over the life of the respective debt investment.

Total operating expenses, including excise taxes, for the three months ended December 31, 2016 were approximately $15.9 million, or $0.30 per share, including interest and other debt expenses of $7.6 million, or $0.14 per share. We also incurred incentive compensation from net investment income of $4.7 million, or $0.09 per share, and $1.3 million in certain non-recurring legal costs, or $0.02 per share. Excluding incentive compensation, interest and other debt expenses, the non-recurring legal costs and excise taxes, annualized fourth quarter expenses were 3.2% of average net assets.

Net investment income before taxes for the three months ended December 31, 2016 was approximately $24.1 million, or $0.46 per share, before related incentive compensation. Net investment income after excise taxes and related incentive compensation was $18.9 million, or $0.36 per share.

Net realized and unrealized gains for the three months ended December 31, 2016 were $4.1 million, or $0.8 per share, primarily comprised of increased pricing due to tightening spreads, and a $4.6 million unrealized gain on our investment in Soasta, partially offset by a $3.4 million markdown on our Iracore notes. Net realized losses for the three months ended December 31, 2016 were $11.0 million, or $0.21 per share, primarily comprised of a $12.6 million realization on the restructuring of our loan to CORE Entertainment, Inc., partially offset by an additional $1.8 million gain from our investment in NEXTracker, Inc. Substantially all of the loss on CORE Entertainment, Inc. had been recognized on an unrealized basis in prior periods. During the three months ended December 31, 2016, we recognized $15.1 million, or $0.29 per share, in net unrealized appreciation, primarily comprised of the reversal of the previously recognized unrealized loss on CORE Entertainment, Inc. and unrealized gain on NEXTracker, Inc., and $4.6 million in unrealized appreciation on our investment in Soasta, Inc.

Net increase in net assets applicable to common shareholders resulting from operations for the three months ended December 31, 2016 was $22.9 million, or $0.43 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2016, available liquidity was approximately $421.2 million, comprised of approximately $380.0 million in available capacity under our leverage program and $43.6 million in cash and cash equivalents, less approximately $12.4 million in net outstanding settlements.

The combined weighted-average interest rate on debt outstanding at December 31, 2016 was 3.95%.

Total debt outstanding at December 31, 2016 was as follows:

 



Maturity


Rate


Carrying
Value(1)


Available



Total
Capacity

SVCP Facility















SVCP Revolver


2018


L+2.50

%(2)


$


$

116,000,000


$

116,000,000

Term Loan


2018


L+2.50

%(2)



100,500,000





100,500,000

2019 Convertible Notes ($108 million par)


2019


5.25

%



106,547,929





106,547,929

2022 Convertible Notes ($140 million par)


2022


4.625

%



136,858,359





136,858,359

TCPC Funding Facility


2020


L+2.50

%(3)



175,000,000



175,000,000



350,000,000

SBA Debentures


2024-2026


2.58

%(4)



61,000,000



89,000,000



150,000,000

Total debt








579,906,288


$

380,000,000


$

959,906,288

Unamortized issuance costs








(8,247,426)







Debt, net of unamortized issuance costs







$

571,658,862









(1)

Except for the convertible notes, all carrying values are the same as the principal amounts outstanding.

(2) 

Based on either LIBOR or the lender's cost of funds, subject to certain limitations

(3)

Or L+2.25% subject to certain funding requirements

(4) 

Weighted-average interest rate, excluding fees of 0.36%.

 

On February 28, 2017, our board of directors re-approved our stock repurchase plan to acquire up to $50 million in the aggregate of our common stock at prices at certain thresholds below our 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. There were no stock repurchases during the three months ended December 31, 2016.

RECENT DEVELOPMENTS

On February 28, 2017, our board of directors declared a first quarter cash dividend of $0.36 per share payable on March 31, 2017 to stockholders of record as of the close of business on March 17, 2017.

CONFERENCE CALL AND WEBCAST

TCP Capital Corp. will host a conference call on Tuesday, February 28, 2017 at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time) to discuss its 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 56269482 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 Fourth Quarter 2016 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 March 7, 2017. 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 56269482.

TCP Capital Corp.


Consolidated Statements of Assets and Liabilities




December 31, 2016


December 31, 2015

Assets




Investments, at fair value:




Companies less than 5% owned (cost of $1,174,421,611 and $1,123,682,687, respectively)

$     1,175,097,468


$     1,099,208,475

Companies 5% to 25% owned (cost of $75,508,585 and $68,862,518, respectively)

69,355,808


69,008,931

Companies more than 25% owned (cost of $96,135,623 and $39,162,221, respectively)

70,516,594


14,702,319

Total investments (cost of $1,346,065,819 and $1,231,707,426, respectively)

1,314,969,870


1,182,919,725





Cash and cash equivalents

53,579,868


35,629,435

Accrued interest income:




Companies less than 5% owned

12,713,025


8,842,528

Companies 5% to 25% owned

953,561


741,306

Companies more than 25% owned

25,608


29,230

Deferred debt issuance costs

3,828,784


5,390,241

Unrealized appreciation on swaps

-


3,229,442

Options (cost of $51,750 at December 31, 2015)

-


-

Prepaid expenses and other assets

1,527,745


2,331,044

Total assets

1,387,598,461


1,239,112,951





Liabilities




Debt, net of unamortized issuance costs

571,658,862


498,205,471

Payable for investments purchased

12,348,925


6,425,414

Interest payable

5,013,713


2,911,257

Incentive allocation payable

4,716,834


5,207,606

Payable to the Advisor

325,790


508,334

Accrued expenses and other liabilities

2,598,346


3,877,852

Total liabilities

596,662,470


517,135,934





Commitments and contingencies








Net assets applicable to common shareholders

$        790,935,991


$        721,977,017





Composition of net assets applicable to common shareholders




Common stock, $0.001 par value; 200,000,000 shares authorized, 53,041,900 and 48,834,734 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively

$                 53,042


$                 48,834

Paid-in capital in excess of par

944,996,161


878,383,356

Accumulated net investment income

12,533,289


22,261,793

Accumulated net realized losses

(134,960,267)


(132,483,593)

Accumulated net unrealized depreciation

(31,116,723)


(46,233,373)

Net assets applicable to common shareholders

$        790,935,991


$        721,977,017





Net assets per share

$                   14.91


$                   14.78

 

TCP Capital Corp.

Consolidated Statements of Operations




Year Ended December 31,


2016


2015


2014

Investment income






Interest income:






Companies less than 5% owned

$     133,915,069


$     135,518,703


$       94,632,495

Companies 5% to 25% owned

6,672,486


5,932,861


5,394,075

Companies more than 25% owned

4,430,859


560,989


896,695

Dividend income:






Companies 5% to 25% owned

-


-


1,968,748

Lease income:






Companies 5% to 25% owned

-


-


320,277

Companies more than 25% owned

1,571,280


1,352,797


1,014,053

Other income:






Companies less than 5% owned

1,442,096


3,502,875


2,328,980

Companies 5% to 25% owned

-


-


26,125

Companies more than 25% owned

148,975


-


-

Total investment income

148,180,765


146,868,225


106,581,448

Operating expenses






Interest and other debt expenses

25,192,990


18,895,977


9,821,751

Management and advisory fees

18,881,786


18,593,660


13,646,064

Legal fees, professional fees and due diligence expenses

2,320,959


2,840,839


1,355,370

Administrative expenses

1,693,304


1,600,477


1,421,863

Director fees

423,904


318,317


357,050

Insurance expense

382,152


374,720


288,156

Custody fees

313,073


300,055


229,254

Other operating expenses

3,149,764


2,564,662


1,360,564

Total operating expenses

52,357,932


45,488,707


28,480,072







Net investment income before taxes

95,822,833


101,379,518


78,101,376

Excise tax expense

569,511


876,706


808,813

Net investment income

95,253,322


100,502,812


77,292,563

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





Net realized gain (loss):






Investments in companies less than 5% owned

(15,499,336)


(7,077,393)


(16,370,638)

Investments in companies 5% to 25% owned

417,446


(10,613,422)


(4,748,229)

Investments in companies more than 25% owned

79,742


19,167


-

Net realized gain (loss)

(15,002,148)


(17,671,648)


(21,118,867)







Change in net unrealized appreciation/depreciation

15,116,650


(4,733,463)


(6,185,711)

Net realized and unrealized gain (loss)

114,502


(22,405,111)


(27,304,578)







Net increase in net assets from operations

95,367,824


78,097,701


49,987,985







Gain on repurchase of Series A preferred interests

-


1,675,000


-

Dividends on Series A preferred equity facility

-


(1,251,930)


(1,444,634)

Net change in accumulated dividends on Series A preferred equity facility

-


497,790


6,462

Distributions of incentive allocation to the General Partner from:






Net investment income

(19,050,665)


(19,949,734)


(15,170,877)

Net change in reserve for incentive allocation

-


-


1,168,583

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

$       76,317,159


$       59,068,827


$       34,547,519

Basic and diluted earnings per common share

$                  1.50


$                  1.21


$                  0.88

Basic and diluted weighted average common shares outstanding

50,948,035


48,863,188


39,395,671

 

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 shelf registration statement declared effective on May 6, 2016, 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.




(1) Weighted average annual effective yield includes amortization of deferred debt origination and end-of-term 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.

 

 

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SOURCE TCP Capital Corp.

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