TCP Capital Corp. (TCPC)

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TCP Capital Corporation (TCPC)

Q1 2013 Earnings Call

May 09, 2013 01:00 pm ET


Jessica Ekeberg – Head-Investor Relations

Howard Levkowitz – Chairman, Chief Executive Officer

Paul Davis – Chief Financial Officer

Raj Vig – President


Greg Mason – KBW

Stephen Laws – Deutsche Bank

Chris Kotowski – Oppenheimer

Boris Pialloux – National Securities



Good day, ladies and gentlemen, and thank you for standing by. Welcome everyone, to the TCP Capital Corporation’s First Quarter 2013 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. (Operator Instructions).

And now I’d like to turn the call over to Jessica Ekeberg, a member of the TCP Capital Corporation Global Investor Relations team. Jessica, please proceed.

Jessica Ekeberg

Before we begin, I would like to 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.

During today’s call, we will refer to a slide presentation which you can access by visiting our website, Click on the Investor Relations link and select Events and Presentations. Our earnings release and 10-Q are also available on our site.

I will now turn the call over to Mr. Howard Levkowitz, Chairman and CEO of TCP Capital Corp.

Howard Levkowitz

Thanks, Jessica. I would like to thank everyone for participating in today’s call. I am here with our President and COO, Raj Vig; our Chief Financial Officer, Paul Davis; and other members of the TCP Capital team.

Yesterday, we issued our earnings release for the first quarter ended March 31, 2013. A supplemental earnings presentation is posted to our website. We will refer to this presentation throughout our call. Today I will provide an overview of TCPC’s investment activities and performance. And then, Paul will provide more details on the numbers. I will then return with some further prospective before we take your questions.

I would like to start by reviewing a few key highlights from the first quarter. First, we are pleased to report that our portfolio generated net investment income of $0.49 per share after preferred dividends and incentive compensation. Second, we are raising our quarterly dividend to $0.36 per share up from $0.35 per share in the previous quarter.

Third, our earnings per share was $0.60 and our net asset value increased sequentially by 1.4% to $14.91 per share. Our estimated net asset value as of April 30 was $15.14 per share. Fourth, we deployed $40 million in new investments during the quarter and $62.5 million during the first five weeks of the second quarter.

Now moving on to a summary of the market environment in the first quarter, we saw a lower level of activity during the first quarter following a surge in deal activity at year-end. Activity levels across our markets were slow at the beginning of the quarter, but our deal flow began to increase later in the quarter. Over the last four quarters, we invested over $325 million on a gross basis and over $100 million on a net basis. We continue to focus on allocating our capital to income producing securities as 98% of our new investments in the quarter were in the form of senior secured debt.

Spreads and covenant packages in the middle market continue to be more attractive than those in the large leverage loan market. However, the tight spreads in the broadly syndicated market have influenced terms in our market. Against this backdrop, we took a highly selective approach that choosing investments and we’ll continue to carefully analyze each opportunity through our intensive and proven due diligence process.

Turning now to TCP Capital’s first quarter performance, TCP Capital generated $0.49 per share in net investment income after preferred dividends and incentive compensation. And we will pay a quarterly dividend of $0.36 per share at the end of June.

We would like to emphasize that the first quarter net investment income significantly exceeds our regular second quarter dividend. This margin of coverage demonstrates the earnings power of our portfolio.

In addition, our first quarter net increase in net assets from operations was $0.60 per share. Paul Davis, our CFO, will cover this in more detail. For those viewing our presentation, please turn to slide 8. Our highly diversified portfolio was in good shape at the end of the quarter with a fair value of $510 million invested in 54 companies.

On slide 9, you can see the continued transformation of our portfolio since the beginning of 2012. During the first quarter we maintained our high percentage of debt investments as well as the percentage invested in senior secured debt and floating rate investments. At quarter end, approximately 93% of the portfolio was invested in debt securities, 96% of which were senior secured loans.69% of the debt positions were in floating rate debt, 96% of which had interest rate floors.

During the first quarter we invested approximately $40.3 million in five different transactions. These include four follow-on investments in existing portfolio company positions and one new company.

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