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Nov 6, 2014
TCP Capital Corp. Announces Third Quarter 2014 Financial Results; Net Investment Income Of $0.38 Per Share; Board Declares Fourth Quarter Regular Dividend Of $0.36 Per Share And Special Dividend Of $0.05 Per Share

SANTA MONICA, Calif., Nov. 6, 2014 /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 third quarter ended September 30, 2014 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.

TCP Capital Corp.

FINANCIAL HIGHLIGHTS

  • Net investment income for the quarter ended September 30, 2014 was $15.1 million, or $0.38 per share, after preferred dividends and $0.09 per share in incentive compensation on net investment income.  
  • Net increase in net assets resulting from operations for the quarter ended September 30, 2014 was $11.5 million, or $0.29 per share.
  • Net Asset Value per share at September 30, 2014 increased to $15.43 per share from $15.31 at June 30, 2014.
  • Total acquisitions during the quarter ended September 30, 2014 were $207 million and total acquisitions net of total dispositions were $184 million
  • In August, the Company closed a public offering of 6.2 million shares of its common stock at $17.33 per share, for gross proceeds of approximately $107.6 million and net proceeds of $103.9 million.
  • In November, we increased the aggregate principal commitment on the TCPC Funding Facility to $250 million and expanded the accordion feature to $300 million.
  • On November 6, 2014, our board of directors declared a fourth quarter regular dividend of $0.36 per share and a special dividend of $0.05 per share.  Both dividends are payable on December 31, 2014 to shareholders of record as of December 8, 2014.

"The third quarter was another strong quarter of performance for TCPC Capital Corp.," said Howard Levkowitz, TCP Capital Corp. Chairman and CEO. "We deployed capital at a strong pace, investing a record $207 million in 14 different transactions, and the value of our portfolio, which is now comprised of 82 investments, increased 23 percent to approximately $1.1 billion.  The strength of our diversified portfolio enabled us to pay out our fifth special dividend since late 2012 and to out-earn our dividend, almost entirely from recurring income, by $0.02 per share in the third quarter." 

"We started to utilize our SBA facility during the quarter, thus enhancing our financing flexibility through the use of attractively priced 10-year debentures.  Additionally, in November we increased the TCPC Funding Facility to $250 million.  We are well positioned to capitalize on ongoing demand for growth capital from middle market companies and to deliver attractive returns to our shareholders. Our diversified portfolio is comprised primarily of senior secured, floating rate debt and our credit quality is strong. The investments we have made in expanding our origination platform are enabling us to take a highly selective approach to investing in only those companies that meet our disciplined investment criteria."   

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2014, our investment portfolio consisted of debt and equity positions in 82 portfolio companies with a total fair value of approximately $1.075 billion.  Debt positions represented approximately 97% of the portfolio fair value, over 99% of which were senior secured debt.  Equity positions represented approximately 3% of our investment portfolio.

As of September 30, 2014, the weighted average annual effective yield of our debt portfolio was approximately 10.7%.(1)  As of September 30, 2014, approximately 80% of our debt portfolio at fair value had floating interest rates, approximately 86% of which had interest rate floors, and approximately 20% of our debt portfolio had fixed interest rates.  As of September 30, 2014, we had one PIK loan on non-accrual status with a negligible market value. 

During the three months ended September 30, 2014, we invested approximately $207 million in ten new and four existing portfolio companies.  The investments were comprised of approximately $204 million in senior secured loans and $3 million in equity investments.  Additionally, we received proceeds from sales and repayments of investment principal of approximately $23 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 September 30, 2014, total assets were $1.120 billion, net assets applicable to common shareholders was $654.5 million and net asset value per share was $15.43, as compared to $958.6 million, $554.4 million, and $15.31 per share, respectively on June 30, 2014.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the three months ended September 30, 2014 was approximately $27.2 million, or $0.68 per share, including $0.01 per share from prepayment income, and $0.04 per share from income paid in kind.  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 $0.02 per share.

Total operating expenses for the three months ended September 30, 2014 were approximately $8.0 million, or $0.20 per share, including interest expense of approximately $2.5 million, or $0.06 per share.  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 $3.8 million, or $0.09 per share and a decrease in the reserve for incentive compensation of $0.9 million, or $0.02 per share.  Excluding incentive compensation, annualized third quarter expenses, including all costs of leverage (both interest expense and preferred dividends), were 5.5% of average net assets. 

Net investment income for the three months ended September 30, 2014 was approximately $19.2 million, or $0.48 per share, before related incentive compensation and preferred dividends.  Net investment income after related incentive compensation and preferred dividends was $15.1 million, or $0.38 per share.

Net realized gains for the three months ended September 30, 2014 were $0.9 million, or $0.02 per share.  During the three months ended September 30, 2014, we recognized $5.4 million, or $0.13 per share, in net unrealized depreciation, primarily as a result of increases in comparable yield spreads at the end of the quarter and a mark down on an investment made prior to our initial public offering.  Net realized and unrealized losses for the three months ended September 30, 2014 were $4.5 million, or $0.11 per share.

Net increase in net assets applicable to common shareholders resulting from operations for the three months ended September 30, 2014 was $11.5 million, or $0.29 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2014, available liquidity was approximately $200.4 million, comprised of approximately $24.1 million in cash and cash equivalents and $177.5 million in available capacity under the leverage program, reduced by approximately $1.2 million in net outstanding settlements.

Total leverage outstanding at September 30, 2014 was $453.1 million, comprised of $195.0 million under our revolving credit facilities, $105.6 million of convertible notes, $134.0 million under our preferred equity facility and $18.5 million in SBA debentures.  The weighted average interest rate on amounts outstanding on the total leverage program as of September 30, 2014 was 2.83%.


Leverage Program ($633 million):                  

          Rate               

   Maturity   


$116mm Partnership Credit Facility                

LIBOR + 2.50%         

July 2016


$200mm TCPC Funding Credit Facility            

LIBOR + 2.50%           

May 2017


$108mm Convertible Senior Unsecured Notes  

5.25%

Dec 2019


$75mm Committed Leverage from the SBA*      

3.015%

Ten Years


$134mm Preferred Equity Facility                      

LIBOR + 0.85%     

July 2016





* Anticipated total SBA leverage of $150 million

RECENT DEVELOPMENTS

On October 3, 2014, the Company entered into an equity distribution agreement with each of Raymond James & Associates, Inc. and Cantor Fitzgerald & Co. under which the Company may from time to time offer and sell, at a premium to net asset value, shares of its common stock in negotiated transactions or "at the market" offerings having an aggregate offering price of up to $100,000,000. Through November 3, 2014, the Company issued 400,255 shares pursuant the equity distribution agreement.

On November 5, 2014, we increased the aggregate principal commitment on the TCPC Funding Facility to $250 million and expanded the accordion feature to $300 million.

On November 6, 2014, the Company's board of directors declared a fourth quarter regular dividend of $0.36 per share and a special dividend of $0.05 per share.  Both dividends are payable on December 31, 2014 to stockholders of record as of the close of business on December 8, 2014.

CONFERENCE CALL AND WEBCAST

TCP Capital Corp. will host a conference call on Thursday, November 6, 2014 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 14236995 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 Third Quarter 2014 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 November 13, 2014. 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 14236995.

TCP Capital Corp.

Consolidated Statements of Assets and Liabilities






September 30, 2014


December 31, 2013


(unaudited)



Assets




Investments, at fair value:




Companies less than 5% owned (cost of $1,012,619,777 and $684,569,508, respectively)

$           1,010,685,137


$              678,326,915

Companies 5% to 25% owned (cost of $54,987,297 and $73,946,547, respectively)

48,193,229


69,068,808

Companies more than 25% owned (cost of $40,807,126 and $42,588,724 respectively)

15,918,961


18,867,236

Total investments (cost of $1,108,414,200 and $801,104,779, respectively)

1,074,797,327


766,262,959





Cash and cash equivalents

24,144,075


22,984,182

Receivable for investments sold

-


3,605,964

Accrued interest income:




Companies less than 5% owned

9,677,087


6,282,353

Companies 5% to 25% owned

650,326


415,061

Companies more than 25% owned

31,901


41,691

Deferred debt issuance costs

7,487,811


2,969,085

Unrealized appreciation on swaps

1,071,130


-

Options (cost $51,750)

1,327


14,139

Prepaid expenses and other assets

1,745,080


753,768

Total assets

1,119,606,064


803,329,202





Liabilities




Debt

319,099,077


95,000,000

Incentive allocation payable

3,767,604


3,318,900

Interest payable

2,482,066


430,969

Payable for investments purchased

1,250,031


14,706,942

Payable to the Investment Manager

411,292


1,121,108

Unrealized depreciation on swaps

-


331,183

Accrued expenses and other liabilities

2,862,844


3,136,010

Total liabilities

329,872,914


118,045,112





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; 6,700 interests authorized, issued and outstanding

134,000,000


134,000,000

Accumulated dividends on Series A preferred equity facility

498,858


504,252

Total preferred limited partner interests

134,498,858


134,504,252





Non-controlling interest




General Partner interest in Special Value Continuation Partners, LP

701,164


1,168,583





Net assets applicable to common shareholders

$              654,533,128


$              549,611,255





Composition of net assets applicable to common shareholders




Common stock, $0.001 par value; 200,000,000 shares authorized, 42,410,242 and 36,199,916



  shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively

42,410


36,200

Paid-in capital in excess of par

774,297,634


667,842,020

Accumulated net investment income

24,345,823


24,016,095

Accumulated net realized losses

(110,733,996)


(105,800,278)

Accumulated net unrealized depreciation

(32,717,579)


(35,314,199)

Non-controlling interest

(701,164)


(1,168,583)

Net assets applicable to common shareholders

$              654,533,128


$              549,611,255





Net assets per share

$                         15.43


$                         15.18

 

TCP Capital Corp.

Consolidated Statements of Operations (Unaudited)










Three Months Ended September 30,


Nine Months Ended September 30,


2014


2013


2014


2013

Investment income








Interest income:








Companies less than 5% owned

$    24,699,976


$    14,257,066


$    65,174,101


$    41,745,035

Companies 5% to 25% owned

1,728,834


1,938,950


4,423,013


4,035,115

Companies more than 25% owned

214,091


293,711


706,553


936,296

Dividend income:








Companies 5% to 25% owned

-


-


1,968,748


-

Other income:








Companies less than 5% owned

210,622


529,011


1,164,938


1,105,959

Companies 5% to 25% owned

74,038


85,983


282,581


305,739

Companies more than 25% owned

262,905


183,650


726,477


495,165

Total investment income

27,190,466


17,288,371


74,446,411


48,623,309









Operating expenses








Management and advisory fees

3,513,238


2,205,517


9,504,317


6,110,550

Interest expense

2,535,555


340,711


4,012,167


663,820

Amortization of deferred debt issuance costs

545,294


218,764


1,347,442


470,242

Administrative expenses

392,794


256,806


1,029,069


592,422

Legal fees, professional fees and due diligence expenses

268,710


188,284


828,102


489,488

Commitment fees

243,147


85,749


650,209


146,843

Director fees

88,395


76,478


255,776


220,288

Insurance expense

83,996


55,020


202,823


133,816

Custody fees

54,369


45,776


166,025


105,427

Other operating expenses

264,778


227,287


1,033,422


644,793

Total operating expenses

7,990,276


3,700,392


19,029,352


9,577,689

Net investment income

19,200,190


13,587,979


55,417,059


39,045,620









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





Net realized gain (loss):








Investments in companies less than 5% owned

544,212


804,482


(5,317,388)


(2,773,020)

Investments in companies 5% to 25% owned

383,670


-


383,670


-

Net realized gain (loss)

927,882


804,482


(4,933,718)


(2,773,020)









Net change in net unrealized appreciation/depreciation

(5,433,060)


2,132,565


2,596,620


8,723,819

Net realized and unrealized gain (loss)

(4,505,178)


2,937,047


(2,337,098)


5,950,799









Dividends on Series A preferred equity facility

(357,451)


(364,043)


(1,083,263)


(1,131,014)

Net change in accumulated dividends on Series A








preferred equity facility

(4,718)


(23,939)


5,394


(7,928)

Distributions of incentive allocation to the General Partner from:







Net investment income

(3,767,604)


(2,639,999)


(10,867,837)


(7,581,335)

Net realized gains

-


(54,157)


-


(312,598)

Net change in reserve for incentive allocation

901,035


(533,253)


467,419


(877,563)









Net increase in net assets applicable to common








shareholders resulting from operations

$    11,466,274


$    12,909,635


$    41,601,674


$    35,085,981









Basic and diluted earnings per common share

$               0.29


$               0.48


$               1.11


$               1.47









Basic and diluted weighted average common shares outstanding

40,079,914


26,654,702


37,507,497


23,942,996

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 2, 2014, its prospectus supplement dated July 29, 2014 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 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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