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TCP Capital Corp. Announces Strong Second Quarter 2014 Financial Results; Net Investment Income Of $0.40 Per Share; Board Declares Third Quarter Dividend Of $0.36 Per Share

SANTA MONICA, Calif., Aug. 7, 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 second quarter ended June 30, 2014 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.

FINANCIAL HIGHLIGHTS

  • Net investment income for the quarter ended June 30, 2014 was $14.5 million, or $0.40 per share, after preferred dividends and $0.10 per share in incentive compensation on net investment income.  
  • Net increase in net assets resulting from operations for the quarter ended June 30, 2014 was $12.0 million, or $0.33 per share.
  • Net Asset Value per share at June 30, 2014 decreased to $15.31 per share from $15.32 at March 31, 2014.
  • Total acquisitions during the quarter ended June 30, 2014 were $169 million and total acquisitions net of total dispositions were $81 million
  • In May, we received a $75 million leverage commitment from the Small Business Administration (the "SBA"), which will provide access to another source of attractively priced capital. 
  • In June, we increased the aggregate principal commitment on the TCPC Funding Facility to $200 million and expanded the accordion feature to $250 million.
  • In June, we also closed a private placement of $108 million aggregate principal amount of 5.25% convertible senior unsecured notes due December 2019.
  • In July, we opened a San Francisco office anchored by our energy technology team, which is led by Todd Jaquez-Fissori
  • On August 7, 2014, our board of directors declared a third quarter dividend of $0.36 per share, payable on September 30, 2014 to shareholders of record as of September 16, 2014.

"We delivered strong results for the second quarter ended June 30, 2014," said TCP Capital Corp.'s Chairman and CEO, Howard Levkowitz.  "We continued to deploy capital at a strong pace, investing approximately $169 million in 14 different transactions, and increased the value of our portfolio to $895 million from $816 million last quarter.  The quality of our diversified portfolio remains strong and we were able to out-earn our dividend by $0.04 per share this quarter." 

"We significantly enhanced our financing flexibility during the quarter.  We received a $75 million leverage commitment from the SBA, expanded our TCPC Funding Facility to $200 million, and completed a $108 million private placement of convertible notes. In July, we completed our fourth follow-on equity offering for net proceeds of $90.4 million.  With access to a variety of attractive financing options, we are well positioned to continue to capitalize on strong demand for growth capital from middle market companies and to deliver high risk-adjusted returns to our shareholders." 

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2014, our investment portfolio consisted of debt and equity positions in 74 portfolio companies with a total fair value of approximately $894.7 million.  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 June 30, 2014, the weighted average annual effective yield of our debt portfolio was approximately 10.7%.(1)  As of June 30, 2014, approximately 77% of our debt portfolio at fair value had floating interest rates, approximately 89% of which had interest rate floors, and approximately 23% of our debt portfolio had fixed interest rates.  As of June 30, 2014, we had no debt investments on non-accrual status. 

During the three months ended June 30, 2014, we invested approximately $169 million in nine new and five existing portfolio companies.  The investments were comprised of approximately $157 million in senior secured loans and $12 million in senior secured notes.  Additionally, we received proceeds from sales and repayments of investment principal of approximately $88 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 June 30, 2014, total assets were $958.6 million, net assets applicable to common shareholders was $554.4 million and net asset value per share was $15.31, as compared to $857.4 million, $554.7 million, and $15.32 per share, respectively on March 31, 2014.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the three months ended June 30, 2014 was approximately $24.6 million, or $0.68 per share, including $0.02 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 June 30, 2014 were approximately $6.2 million, or $0.17 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 $3.6 million, or $0.10 per share and a decrease in the reserve for incentive compensation of $0.6 million, or $0.02 per share.  Excluding incentive compensation, annualized second quarter expenses, including all costs of leverage (both interest expense and preferred dividends), were 4.7% of average net assets. 

Net investment income for the three months ended June 30, 2014 was approximately $18.4 million, or $0.51 per share, before related incentive compensation and preferred dividends.  Net investment income after related incentive compensation and preferred dividends was $14.5 million, or $0.40 per share.

Net realized gains for the three months ended June 30, 2014 were $0.9 million, or $0.03 per share.  During the three months ended June 30, 2014, we recognized $3.9 million, or $0.11 per share, in net unrealized depreciation, primarily due to our investment in Marsico Capital Management, an investment made prior to our initial public offering as part of our legacy distressed strategy and which has yielded significant income over many years, and to an unrealized mark to market adjustment on certain of our aircraft leased to United Airlines.  Net realized and unrealized losses for the three months ended June 30, 2014 were $3.0 million, or $0.08 per share.

Net increase in net assets applicable to common shareholders resulting from operations for the three months ended June 30, 2014 was $12.0 million, or $0.33 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2014, available liquidity was approximately $284.2 million, comprised of approximately $29.4 million in cash and cash equivalents, approximately $8.8 million in net outstanding settlements, and $246 million in available capacity under the leverage program.

Total leverage outstanding at June 30, 2014 was $384.5 million, comprised of $145.0 million under our revolving credit facilities, $105.5 million of convertible notes and $134.0 million under our preferred equity facility.  The weighted average interest rate on amounts outstanding on the total leverage program as of March 31, 2014 was 2.63%.

Leverage Program ($633 million):

Rate


Maturity

$116mm Partnership Credit Facility

LIBOR + 0.44%*


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

TBD


Ten Years

$134mm Preferred Equity Facility

LIBOR + 0.85%


July 2016

* Changes to LIBOR + 2.50% in August 2014

RECENT DEVELOPMENTS

On August 1, 2014, the Company closed a public offering of 5.4 million shares of its common stock at $17.33 per share, for gross proceeds of approximately $93.6 million and net proceeds of $90.4 million, net of underwriter discounts and approximately $0.4 million of expenses related to the offering.

On August 7, 2014, the Company's board of directors declared a third quarter cash dividend of $0.36 per share payable on September 30, 2014 to stockholders of record as of the close of business on September 16, 2014.

CONFERENCE CALL AND WEBCAST

TCP Capital Corp. will host a conference call on Thursday, August 7, 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 69058321 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 Second 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 August 14, 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 69058321.

TCP Capital Corp.





Consolidated Statements of Assets and Liabilities




June 30, 2014


December 31, 2013


(unaudited)



Assets




Investments, at fair value:




Companies less than 5% owned (cost of $825,953,904 and $684,569,508, respectively)

$          827,560,564


$          678,326,915

Companies 5% to 25% owned (cost of $54,237,483 and $73,946,547, respectively)

50,409,131


69,068,808

Companies more than 25% owned (cost of $41,400,990 and $42,588,724 respectively)

16,699,429


18,867,236

Total investments (cost of $921,592,377 and $801,104,779, respectively)

894,669,124


766,262,959





Cash and cash equivalents

29,379,532


22,984,182

Receivable for investments sold

17,396,874


3,605,964

Accrued interest income:




Companies less than 5% owned

8,213,741


6,282,353

Companies 5% to 25% owned

372,400


415,061

Companies more than 25% owned

35,257


41,691

Deferred debt issuance costs

7,351,121


2,969,085

Options (cost $51,750)

1,855


14,139

Prepaid expenses and other assets

1,185,503


753,768

Total assets

958,605,407


803,329,202





Liabilities




Debt

250,500,788


95,000,000

Payable for investments purchased

8,561,631


14,706,942

Incentive allocation payable

3,613,830


3,318,900

Payable to the Investment Manager

1,750,735


1,121,108

Interest payable

882,820


430,969

Unrealized depreciation on swaps

208,862


331,183

Accrued expenses and other liabilities

2,598,420


3,136,010

Total liabilities

268,117,086


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

494,140


504,252

Total preferred limited partner interests

134,494,140


134,504,252





Non-controlling interest




General Partner interest in Special Value Continuation Partners, LP

1,602,199


1,168,583





Net assets applicable to common shareholders

$          554,391,982


$          549,611,255





Composition of net assets applicable to common shareholders




Common stock, $0.001 par value; 200,000,000 shares authorized, 36,200,130 and 36,199,916 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively 

36,200


36,200

Paid-in capital in excess of par

670,361,329


667,842,020

Accumulated net investment income

24,543,049


24,016,095

Accumulated net realized losses

(111,661,878)


(105,800,278)

Accumulated net unrealized depreciation

(27,284,519)


(35,314,199)

Non-controlling interest

(1,602,199)


(1,168,583)

Net assets applicable to common shareholders

$          554,391,982


$          549,611,255





Net assets per share

$                     15.31


$                     15.18


TCP Capital Corp.


Consolidated Statements of Operations (Unaudited)










Three Months Ended June 30,


Six Months Ended June 30,


2014


2013


2014


2013









Investment income








Interest income:








Companies less than 5% owned

$      22,333,382


$     12,247,602


$      40,474,125


$      27,487,968

Companies 5% to 25% owned

1,357,315


1,202,653


2,694,179


2,096,165

Companies more than 25% owned

234,835


312,268


492,462


642,585

Dividend income:








Companies 5% to 25% owned

-


-


1,968,748


-

Other income:








Companies less than 5% owned

319,582


419,415


954,316


576,948

Companies 5% to 25% owned

87,504


118,653


208,543


219,756

Companies more than 25% owned

254,682


168,604


463,572


311,515

Total investment income

24,587,300


14,469,195


47,255,945


31,334,937









Operating expenses








Management and advisory fees

3,104,872


1,940,295


5,991,080


3,905,033

Interest expense

1,019,751


186,702


1,476,612


323,109

Amortization of deferred debt issuance costs

429,394


142,914


802,148


251,478

Administrative expenses

379,469


167,808


636,275


335,616

Legal fees, professional fees and due diligence expenses

355,237


162,152


559,393


301,204

Commitment fees

215,864


38,506


407,062


61,094

Director fees

81,670


72,000


167,382


143,809

Insurance expense

64,928


42,522


118,828


78,795

Custody fees

60,849


30,232


111,656


59,651

Other operating expenses

449,058


224,535


768,644


417,506

Total operating expenses

6,161,092


3,007,666


11,039,080


5,877,295









Net investment income

18,426,208


11,461,529


36,216,865


25,457,642









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








Net realized gain (loss):








Investments in companies less than 5% owned

125,710


(4,095,160)


(6,670,011)


(3,577,502)

Investments in companies 5% to 25% owned

808,036


-


808,411


-

Net realized gain (loss)

933,746


(4,095,160)


(5,861,600)


(3,577,502)

Net change in net unrealized appreciation/depreciation

(3,945,684)


4,753,522


8,029,680


6,591,253

Net realized and unrealized gain (loss)

(3,011,938)


658,362


2,168,080


3,013,751









Dividends on Series A preferred equity facility

(356,677)


(392,669)


(725,812)


(786,082)

Net change in accumulated dividends on Series A preferred equity facility

(383)


19,111


10,112


35,122

Distributions of incentive allocation to the General Partner from:








Net investment income

(3,613,830)


(2,217,594)


(7,100,233)


(4,941,336)

Net realized gains

-


(258,441)


-


(258,441)

Net change in reserve for incentive allocation

602,388


126,768


(433,616)


(344,310)

Net increase in net assets applicable to common








shareholders resulting from operations

$      12,045,768


$       9,397,066


$      30,135,396


$      22,176,346

Basic and diluted earnings per common share

$                 0.33


$                0.40


$                 0.83


$                 0.98

Basic and diluted weighted average common shares outstanding

36,200,021


23,639,742


36,199,969


$      22,564,670

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 registration statement filed on Form N-2 dated June 27, 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.

SOURCE TCP Capital Corp.

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