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TICC Capital Corp (TICC)

Q3 2017 Results Earnings Conference Call

November 2, 2017, 10:00 AM ET

Executives

Jonathan Cohen - CEO

Bruce Rubin - CFO

Analysts

Christopher Testa - National Securities Corporation

Mickey Schleien - Ladenburg Thalmann

Presentation

Operator

Good morning and welcome to the TICC Capital Corp. Third Quarter 2017 Earnings Release and Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Jonathan Cohen, CEO. Please go ahead.

Jonathan Cohen

Thanks very much. Good morning and welcome everyone to the TICC Capital Corp. third quarter 2017 earnings conference call. I'm joined today by Saul Rosenthal, our President and Chief Operating Officer; and Bruce Rubin, our Chief Financial Officer.

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. The 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 includes forward-looking statements and projections, and we ask that you refer to our most recent filings at the SEC, for important factors that could cause actual results to differ materially from those 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 over to Jonathan.

Jonathan Cohen

Thanks very much Bruce. We generated a total return of approximately 1.6% for shareholders during the third quarter of 2017, representing the change in TICC's book value per share plus distributions paid to our common shareholders. The book value per share was $7.43 at the end of the third quarter of 2017 compared to $7.51 at the end of the second quarter of 2017. We paid distributions of $0.20 per share during the third quarter.

For the quarter ended September 30th, 2017, we reported GAAP net investment income of approximately $6.8 million or approximately $0.13 per share. In the third quarter, we recorded net realized losses of approximately $3.3 million, of which $2.2 million represented an acceleration of costs associated with the optional early repayment of the TCCI 2012-1 CLO secured notes and net unrealized appreciation of approximately $2.6 million. In total, we had a net increase in net assets from operations of approximately $6 million or $0.12 per share.

Our core net investment income for the quarter end of September 30th, 2017 was approximately $6.8 million or approximately $0.13 per share. Please see the earnings release we issued today for reconciliation of the investment income with core net investment income.

We know that we continue to have no investments on non-accrual status as of September 30th, 2017. During the third quarter, we continue to execute our strategy of rotating out a broadly syndicated corporate loans and into more narrowly syndicated loans through purchases in both the primary via pre-marketing and general syndications, and the secondary markets.

Moreover, our corporate investment activity continues to focus on the rotation of the portfolio into higher yielding loans. We also continued the active rotation of our CLO portfolio with opportunistic purchases and sales.

Several of our CLOs executed refinancing transactions which decreased the weighted average cost of their respective liabilities, and in certain instances, executed reset transactions, which also concurrently lengthened the reinvestment period of those -- of the CLO.

During the quarter, we voluntarily redeemed the secured notes on our TCII 2012-1 CLO. The redemption of that CLO provides us with the ability to continue the rotation of our corporate loan portfolio into higher yielding assets.

With that redemption, we eliminated approximately $73.4 million of debt on our balance sheet. Additionally, on November 1st, 2017, our 7.5% 2017 convertible senior notes matured and were repaid in full, representing a $94.5 million reduction in our leverage.

We continue to pursue our mandate of maximizing the risk adjusted total return to our shareholders. As such we haven't continued to focus on portfolio management strategies designed to maximize our total return as opposed to generating a certain level of income over a particular timeframe.

We view the market opportunity currently available to us as strong and as a permanent capital vehicle we have historically been able to take a longer term view towards our investments. We believe this perspective has served us well during 2017.

We know that additional information about TCII's third quarter performance has been posted to our website at www.ticc.com.

And with that, operator, we are happy to open the call for any questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Our first question comes from Christopher Testa with National Securities Corporation. Please go ahead.

Christopher Testa

Hey, good morning guys. Thanks for taking my questions. Jonathan, just curious what would have been the decrease in the CLO equity cash yields backing out the one-time costs of refinancing and other things you noted in the press release?

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