TICC

TICC Capital Corp. (TICC)

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TICC Capital Corp. (TICC)

Q1 2014 Earnings Conference Call

May 12, 2014 10:00 am ET

Executives

Jonathan Cohen – Chief Executive Officer

Saul Rosenthal – President & Chief Operating Officer

Patrick Conroy – Chief Financial Officer

Bruce Rubin – Controller & Treasurer

Analysts

Mickey Schleien – Ladenburg Thalmann

John Hecht – Stephens, Inc.

Ryan Lynch – KBW

Chris York – JMP Securities

Jonathan Bock – Wells Fargo

Presentation

Operator

Good morning and welcome to the TICC Capital Q1 2014 Earnings Conference Call. (Operator instructions.) Please note this event is being recorded. I would now like to turn the conference over to Jonathan Cohen, CEO. Please go ahead.

Jonathan Cohen

Thank you. Good morning, everyone, and welcome to the TICC Capital Corp’s Q1 2014 Earnings Conference Call. I’m joined today by Saul Rosenthal our President and Chief Operating Officer; Patrick Conroy, our Chief Financial Officer; and Bruce Rubin, our Controller and Treasurer. Bruce, could you open the call today with a discussion regarding forward-looking statements?

Bruce Rubin

Sure, Jonathan. Today’s call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was released earlier this morning.

Please note that this call is the property of TICC Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

I’d also like to call your attention to the customary disclosure in our press release this morning regarding forward-looking information. Today’s conference call contains forward-looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings please visit our website at www.ticc.com.

With that I’ll turn the presentation back to Jonathan.

Jonathan Cohen

Thanks, Bruce. As we noted in our press release this morning, TICC reported core net investment income of approximately $0.29 per share for Q1 2014. We reported total investment income of approximately $28.7 million for the quarter, representing a decrease of approximately $1.8 million from Q4. That decrease was largely due to lower interest income and some larger inaugural payments from our CLO Equity Investments during Q4.

Our Q1 GAAP net investment income was approximately $17.8 million or $0.33 per share which includes the impact of the capital gains incentive fee accrual reversal of approximately $2.2 million. Excluding the impact of that fee accrual reversal our core net investment income was approximately $15.6 million or $0.29 per share.

We also reported net unrealized depreciation of approximately $3.6 million and net realized capital losses of approximately $900,000 for the quarter. As a result of those unrealized and realized gains and losses we had a net increase in net assets resulting from operation of approximately $13.3 million for the quarter or approximately $0.24 per share.

At the same time we believe that the credit quality of our portfolio remains stable. Our weighted average credit rating on a fair value basis (inaudible) at 2.2 at the end of Q1 2014 compared to 2.1 at the end of Q4 2013.

At March 31, 2014, our net asset value per share stood at $9.78 compared with a net asset value at the end of Q4 of $9.85. During Q1 2014 we made additional investments totaling approximately $87.0 million. The additional investments consisted of approximately $58.6 million in corporate securities and $28.4 million in CLO equity.

For Q1 we received proceeds of approximately $55.4 million from repayments, sales, and amortization payments on our debt investments. For the quarter ending March 31, 2014, TICC recorded income from our investment portfolio as follows: approximately $12.5 million from our syndicated and bilateral investments; approximately $15.1 million from our CLO equity investments; approximately $500,000 from our CLO debt investments; and approximately $600,000 from all other income.

At March 31, 2014, the weighted average yield of our investment-producing investments on a cost basis was approximately 12.9% compared with 13.2% at December 31, 2013. I’d note that on March 31 we had one investment on nonaccrual status with a fair value of $3.5 million.

The company’s Board of Directors has declared a distribution of $0.29 per share for Q2 this year, payable on June 30, 2014, to stockholders of record as of June 16th. Additional information about TICC’s Q1 performance will be posted to our website at www.ticc.com.

And with that, Operator, we’re happy to now poll for questions.

Question-and-Answer Session

Operator

At this time we will begin the question-and-answer session. (Operator instructions.) And our first question today comes from Mickey Schleien of Ladenburg.

Mickey Schleien – Ladenburg Thalmann

Good morning, Jonathan and Saul. Just a couple of questions. Previously as the CLO 1.0 positions were approaching the end of their reinvestment period you rotated into CLO 2.0. So now we’re not there yet but we’re getting closer to the day when CLO 2.0 will end its reinvestment period, so I was curious what your thoughts are as to what you’ll do with those positions as you get closer.

Saul Rosenthal

Sure. Our general view at this moment is we are focusing on rotating out of older vintage CLO equity. Now the 1.0, 2.0 line of demarcation was a clear and easy one because the credit crisis essentially afforded us a clear distinction between pre- and post-credit crisis transactions. There isn’t quite such a clear line of distinction or demarcation in the context of 2.0 CLO transactions; however that aging of these transactions and our view as to when might be an appropriate moment to rotate out of certain 2.0 positions is consistent with that theme – that we have historically looked as you said to take advantage of market opportunities to rotate out of older vintage paper in the CLO market and into new primary transactions. And that has continued.

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