TICC Capital Corp. (TICC)

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TICC Capital Corporation (TICC)

Q3 2012 Earnings Call

November 7, 2012 10:00 AM ET


Jonathan Cohen – CEO

Bruce Rubin – SVP, Treasurer and Controller

Patrick Conroy – CFO

Saul Rosenthal – President and COO


John Stilmar – JMP Securities

John Hecht – Stephens

Greg Mason – Stifel Nicolaus

Mickey Schleien – Ladenburg

Boris Pialloux – National Securities



Good morning, and welcome to the TICC Capital Corp. Third Quarter 2012 Earnings 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 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 2012 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 the 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 a property of TICC Capital Corp. Any unauthorized rebroadcast of this call, in any form, is strictly prohibited. I’d also like to call to your attention 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 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 call back over to Jonathan.

Jonathan Cohen

Thanks, Bruce. For the third quarter, TICC reported core net investment income of approximately $0.24 per share and a core net increase in net assets resulting from operations of $0.83 per share. At September 30, net asset value per share stood at $9.85, compared with the net asset value at the end of the second quarter of $9.47.

We reported total investment income of approximately $15.6 million for the third quarter of 2012, representing a decrease of approximately $4.9 million from the second quarter. That decrease was due largely to the non-recurrence of a one-time fee of $3.4 million earned during the second quarter of 2012, as well as from lower interest income in the third quarter.

We also recorded net unrealized depreciation of approximately $21.5 million and a net realized capital gain of approximately $1.8 million for the quarter. As a result of those realized and unrealized gains, we had a core net increase in net assets resulting from operations of approximately $32.5 million, for approximately $0.83 per share.

Our third quarter GAAP net investment income was approximately $4.6 million or $0.12 per share, which includes the impact of a capital gains incentive fee accrual of approximately $4.6 million. Excluding the impact of that accrual, our core net investment income was approximately $9.3 million or $0.24 per share. On a GAAP basis, our net increase in net assets resulting from operations was $0.71 per share. The decrease in net investment income for the third quarter compared with – to the second quarter was due in part to our substantial capital raising activity, the very great majority of which is now been invested.

Our weighted average credit rating on a fair value basis was 2.2 at the end of the third quarter of 2012, compared with 2.1 at the end of the second quarter. During the third quarter, we announced that we closed a $160 million debt securitization transaction, consisting of $120 million of secured notes and $40 million in subordinated notes. The secured notes were issued in four classes. TICC has regained all of the subordinated notes and $3 million worth of the class D-1 secured notes. The secured notes have a stated maturity date of August 25, 2023 and are subject to a two-year non-call provision. The CLO has a four-year reinvestment period. This financing structure provides TICC with long-term financing and what we believe is an attractive cost of capital.

As we also announced during the third quarter, we closed a private placement of five-year unsecured 7.5% Senior Convertible Notes Due 2017. A total of $105 million of aggregate principal amount of the Notes were issued at closing. Additionally, on October 22, we announced that we issued an additional $10 million aggregate principal of the Notes.

The Notes bear interest at an annual rate of 7.5%, they mature on November 1, 2017 unless previously converted in accordance with their terms. Consistent with obtaining this financing during the third quarter, we deployed approximately $128 million in additional investments, the significant majority of which were made within the 2012 securitization vehicle. As of today, the capital is essentially fully committed in the 2012 security – securitization vehicle, pending commitments in outstanding trades yet to settle.

Our Board of Directors has declared a $0.29 per share distribution for the fourth quarter of this year payable on December 31, 2012, to stockholders of record as of December 17. During the third quarter, we raised in excess of $255 million of new capital, and we deployed in excess of $128 million. We continue to deploy this capital in fourth quarter, and we expect to be substantially invested prior to the end of this year.

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