BlackRock Capital Investment Corp - Quarter Report: 2022 June (Form 10-Q)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Delaware

20-2725151

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

40 East 52^nd Street, New York, NY

10022

(Address of Principal Executive Offices)

(Zip Code)

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

BKCC

NASDAQ Global Select Market

INDEX

PAGE NO.

PART I.

FINANCIAL INFORMATION

Item 1.

CONSOLIDATED FINANCIAL STATEMENTS

3

Consolidated Statements of Assets and Liabilities as of June 30, 2022 (unaudited) and December 31, 2021  

3

Consolidated Statements of Operations for the three and six months ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited)

4

Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited)

5

Consolidated Statements of Cash Flows for the six months ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited)

6

Consolidated Schedules of Investments as of June 30, 2022 (unaudited) and December 31, 2021

7

Notes to Consolidated Financial Statements (unaudited)

23

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

43

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

53

Item 4.

Controls and Procedures

54

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

55

Item 1A.

Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

59

SIGNATURES

60

June 30,

2022

December 31,

2021

(Unaudited)

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $540,873,730 and $520,501,274)

$

534,465,028

$

526,504,945

Non-controlled, affiliated investments (cost of $4,921,145 and $5,027,616)

4,255,178

4,131,978

Controlled investments (cost of $84,922,381 and $89,097,765)

18,674,073

21,927,071

Total investments at fair value (cost of $630,717,256 and $614,626,655)

557,394,279

552,563,994

Cash and cash equivalents

22,357,869

12,750,121

Interest, dividends and fees receivable

2,750,717

3,671,722

Deferred debt issuance costs

1,285,143

1,511,418

Due from broker

1,097,291

—

Receivable for investments sold

81,034

690,550

Prepaid expenses and other assets

378,496

788,469

Total assets

$

585,344,829

$

571,976,274

Liabilities

Debt (net of deferred issuance costs of $1,030,354 and $425,272)

$

236,969,646

$

196,875,330

Distributions payable

7,363,184

7,392,972

Management fees payable

1,947,167

2,122,519

Income incentive fees payable (see Note 3)

69,343

170,002

Accrued capital gains incentive fees (see Note 3)

—

1,544,569

Interest and debt related payables

739,153

601,379

Payable for investments purchased

597,517

11,679,798

Accrued administrative expenses

299,262

384,225

Interest Rate Swap at fair value

198,694

—

Accrued expenses and other liabilities

1,716,216

1,553,507

Total liabilities

249,900,182

222,324,301

Commitments and contingencies (see Note 9)

Net assets

Common stock, par value $.001 per share, 200,000,000 common shares authorized, 84,481,797 and 84,478,251 issued and 73,354,142 and 73,876,987 outstanding

84,482

84,478

Paid-in capital in excess of par

848,052,543

852,360,178

Distributable earnings (losses)

(442,176,304

)

(434,303,297

)

Treasury stock at cost, 11,127,655 and 10,601,264 shares held

(70,516,074

)

(68,489,386

)

Total net assets

335,444,647

349,651,973

Total liabilities and net assets

$

585,344,829

$

571,976,274

Net assets per share

$

4.57

$

4.73

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Investment income

Interest income (excluding PIK):

Non-controlled, non-affiliated investments

$

11,646,011

$

9,210,827

$

23,252,914

$

17,260,077

Non-controlled, affiliated investments

—

—

—

11,867

Controlled investments

—

135,371

—

718,571

PIK interest income:

Non-controlled, non-affiliated investments

126,140

815,710

249,158

1,596,389

Non-controlled, affiliated investments

116,572

117,985

232,468

237,014

Dividend income (excluding PIK):

Non-controlled, affiliated investments

—

—

—

71,500

Controlled investments

—

536,908

—

1,047,975

PIK dividend income:

Non-controlled, non-affiliated investments

78,729

—

154,611

—

Other income:

Non-controlled, non-affiliated investments

301,503

40,958

562,091

186,990

Total investment income

12,268,955

10,857,759

24,451,242

21,130,383

Operating expenses

Interest and other debt expenses

2,860,691

2,969,177

5,589,642

5,722,273

Management fees

1,947,167

1,775,684

4,007,031

3,575,450

Incentive fees on income

69,343

—

88,356

—

Incentive fees on capital gains⁽¹⁾

(1,073,068

)

—

(1,544,569

)

—

Administrative expenses

299,262

314,886

664,769

637,001

Professional fees

207,489

254,834

510,346

666,993

Insurance expense

196,114

201,597

395,872

400,961

Director fees

153,125

153,125

306,250

306,250

Investment advisor expenses

25,819

87,500

51,638

175,000

Other operating expenses

462,797

258,232

766,596

613,514

Total expenses, before incentive fee waiver

5,148,739

6,015,035

10,835,931

12,097,442

Incentive fee waiver (see Note 3)

—

—

—

—

Total expenses, net of incentive fee waiver

5,148,739

6,015,035

10,835,931

12,097,442

Net investment income⁽¹⁾

7,120,216

4,842,724

13,615,311

9,032,941

Realized and unrealized gain (loss) on investments, Interest Rate Swap and foreign currency

Net realized gain (loss):

Non-controlled, non-affiliated investments

—

6,773

825,913

(639,501

)

Non-controlled, affiliated investments

—

—

—

(7,989,591

)

Controlled investments

—

(8,749,931

)

—

(11,040,074

)

Net realized gain (loss)

—

(8,743,158

)

825,913

(19,669,166

)

Net change in unrealized appreciation (depreciation):

Non-controlled, non-affiliated investments

(9,875,353

)

27,464,721

(12,412,374

)

37,333,277

Non-controlled, affiliated investments

(352,787

)

153,217

229,671

6,988,190

Controlled investments

766,458

8,689,595

922,387

14,826,843

Interest Rate Swap

(198,694

)

—

(198,694

)

—

Foreign currency translation

—

(381,379

)

—

(285,360

)

Net change in unrealized appreciation (depreciation)

(9,660,376

)

35,926,154

(11,459,010

)

58,862,950

Net realized and unrealized gain (loss)

(9,660,376

)

27,182,996

(10,633,097

)

39,193,784

Net increase (decrease) in net assets resulting from operations

$

(2,540,160

)

$

32,025,720

$

2,982,214

$

48,226,725

Net investment income per share—basic⁽¹⁾

$

0.10

$

0.07

$

0.18

$

0.12

Earnings (loss) per share—basic⁽¹⁾

$

(0.03

)

$

0.43

$

0.04

$

0.65

Weighted average shares outstanding—basic

73,667,822

74,150,425

73,744,580

74,292,637

Net investment income per share—diluted^{(1) (2)}

$

0.10

$

0.07

$

0.18

$

0.12

Earnings (loss) per share—diluted^{(1) (2)}

$

(0.03

)

$

0.38

$

0.04

$

0.58

Weighted average shares outstanding—diluted

87,860,082

91,144,162

89,329,839

91,286,374

⁽¹⁾

Net investment income and per share amounts displayed above are net of the reversal for incentive fees on capital gains which is reflected on a hypothetical liquidation basis in accordance with GAAP for the three and six month periods ended June 30, 2022 (see Note 3).

⁽²⁾

For the three and six month periods ended June 30, 2022, the impact of the hypothetical conversion of the 2022 Convertible Notes was antidilutive (see Note 8).

Common Stock

Shares Outstanding

Par Amount, Shares Issued

Paid in Capital

in Excess of Par

Distributable

earnings (loss)

Treasury Stock at Cost

Total Net

Assets

Balance at December 31, 2021

73,876,987

$

84,478

$

852,360,178

$

(434,303,297

)

$

(68,489,386

)

$

349,651,973

Cumulative effect of adjustment for the adoption of ASU 2020-06⁽¹⁾

—

—

(4,337,631

)

3,888,233

—

(449,398

)

Repurchase of common stock

(106,308

)

—

—

—

(440,237

)

(440,237

)

Net investment income

—

—

—

6,495,095

—

6,495,095

Net realized and unrealized gain (loss)

—

—

—

(972,721

)

—

(972,721

)

Distributions to common stockholders⁽²⁾

—

—

—

(7,380,270

)

—

(7,380,270

)

Balance at March 31, 2022

73,770,679

$

84,478

$

848,022,547

$

(432,272,960

)

$

(68,929,623

)

$

346,904,442

Repurchase of common stock

(420,083

)

—

—

—

(1,586,451

)

(1,586,451

)

Issuance of common stock from the conversion of the 2022 Convertible Notes

3,546

4

29,996

—

—

30,000

Net investment income

—

—

—

7,120,216

—

7,120,216

Net realized and unrealized gain (loss)

—

—

—

(9,660,376

)

—

(9,660,376

)

Distributions to common stockholders⁽²⁾

—

—

—

(7,363,184

)

—

(7,363,184

)

Balance at June 30, 2022

73,354,142

$

84,482

$

848,052,543

$

(442,176,304

)

$

(70,516,074

)

$

335,444,647

Common Stock

Shares Outstanding

Par Amount, Shares Issued

Paid in Capital

in Excess of Par

Distributable

earnings (loss)

Treasury Stock at Cost

Total Net

Assets

Balance at December 31, 2020

74,466,665

$

84,478

$

858,079,713

$

(476,857,055

)

$

(66,296,859

)

$

315,010,277

Repurchase of common stock

(256,062

)

—

—

—

(869,726

)

(869,726

)

Net investment income

—

—

—

4,190,217

—

4,190,217

Net realized and unrealized gain (loss)

—

—

—

12,010,788

—

12,010,788

Distributions to common stockholders⁽²⁾

—

—

—

(7,441,594

)

—

(7,441,594

)

Balance at March 31, 2021

74,210,603

$

84,478

$

858,079,713

$

(468,097,644

)

$

(67,166,585

)

$

322,899,962

Repurchase of common stock

(80,944

)

—

—

—

(301,703

)

(301,703

)

Net investment income

—

—

—

4,842,724

—

4,842,724

Net realized and unrealized gain (loss)

—

—

—

27,182,996

—

27,182,996

Distributions to common stockholders⁽²⁾

—

—

—

(7,413,594

)

—

(7,413,594

)

Balance at June 30, 2021

74,129,659

$

84,478

$

858,079,713

$

(443,485,518

)

$

(67,468,288

)

$

347,210,385

⁽¹⁾

See Notes 2 and 4 for further information related to the adoption of ASU 2020-06.

⁽²⁾

Sources of distribution to stockholders will be adjusted on an annual basis, if necessary, and calculated in accordance with federal income tax regulations (see Note 2). For the three months ended June 30, 2022, it is estimated that $242,968 out of the total $7,363,184 distribution was from a return of capital based on book income. For the three months ended March 31, 2022, it is estimated that $885,175 out of the total $7,380,270 distribution was from a return of capital based on book income.

Six Months Ended

June 30, 2022

June 30, 2021

Operating activities

Net increase (decrease) in net assets resulting from operations

$

2,982,214

$

48,226,725

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

Net realized (gain) loss

(825,913

)

19,669,166

Net change in unrealized (appreciation) depreciation of investments

11,260,316

(59,148,310

)

Net change in unrealized (appreciation) depreciation on Interest Rate Swap

198,694

—

Net change in unrealized (appreciation) depreciation on foreign currency translation

—

285,360

Interest and dividend income paid in kind

(636,237

)

(1,833,403

)

Net amortization of investment discounts and premiums

(1,532,581

)

(688,156

)

Amortization of deferred debt issuance costs

668,747

863,830

Amortization of original issue discount on debt

—

464,480

Changes in assets and liabilities:

Purchase of investments

(116,857,948

)

(141,841,057

)

Proceeds from disposition of investments

103,762,076

113,366,562

Decrease (increase) in interest, dividends and fees receivable

921,005

(411,093

)

Decrease (increase) in due from broker

(1,097,291

)

—

Decrease (increase) in receivable for investments sold

609,516

5,414,351

Decrease (increase) in prepaid expenses and other assets

409,973

(744,102

)

Increase (decrease) in payable for investments purchased

(11,082,281

)

7,651,652

Increase (decrease) in interest and debt related payables

137,774

117,811

Increase (decrease) in management fees payable

(175,352

)

(537,763

)

Increase (decrease) in income incentive fees payable

(100,659

)

—

Increase (decrease) in accrued capital gains incentive fees

(1,544,569

)

—

Increase (decrease) in accrued administrative expenses

(84,963

)

(74,178

)

Increase (decrease) in accrued expenses and other liabilities

(88,671

)

(903,641

)

Net cash provided by (used in) operating activities

(13,076,150

)

(10,121,766

)

Financing activities

Repayment of 2022 Convertible Notes

(143,720,000

)

—

Proceeds from issuance of 2025 Private Placement Notes

92,000,000

—

Draws on Credit Facility

160,000,000

64,000,000

Repayments of Credit Facility draws

(68,000,000

)

(50,800,000

)

Distributions paid to common stockholders

(14,773,242

)

(7,441,594

)

Repurchase of common shares

(2,026,688

)

(1,171,429

)

Payments of debt issuance costs

(796,172

)

(767,459

)

Net cash provided by (used in) financing activities

22,683,898

3,819,518

Net increase (decrease) in cash and cash equivalents

9,607,748

(6,302,248

)

Cash and cash equivalents at beginning of period

12,750,121

23,332,831

Cash and cash equivalents at end of period

$

22,357,869

$

17,030,583

Supplemental cash flow information

Interest payments

$

4,330,110

$

3,762,774

Tax payments

$

60,464

$

60,050

Share issuance — conversion of 2022 Convertible Notes

$

30,000

$

—

Issuer(O/Q)

Instrument

Ref(E)

Floor

Spread

Total Coupon

Maturity

Principal

Cost(A)

Fair

Value(B)

Notes

Debt Investments

Aerospace & Defense

Unanet, Inc.

First Lien Term Loan

LIBOR(M)

—

6.25

%

7.94

%

5/31/2024

$

6,632,653

$

6,606,314

$

6,632,653

Unanet, Inc.

First Lien Delayed Draw Term Loan

LIBOR(M)

—

6.25

%

7.88

%

5/31/2024

$

1,709,184

1,705,603

1,709,184

Unanet, Inc.

First Lien Revolver

LIBOR(M)

—

6.25

%

7.94

%

5/31/2024

$

816,327

813,094

816,327

9,125,011

9,158,164

Automobiles

ALCV Purchaser, Inc. (AutoLenders)

First Lien Term Loan

LIBOR(M)

1.00

%

6.75

%

8.38

%

4/15/2026

$

2,400,993

2,372,994

2,400,993

ALCV Purchaser, Inc. (AutoLenders)

First Lien Revolver

LIBOR(M)

1.00

%

6.75

%

8.38

%

4/15/2026

$

180,908

178,261

180,908

N

2,551,255

2,581,901

Building Products

Porcelain Acquisition Corporation (Paramount)

First Lien Term Loan

LIBOR(Q)

1.00

%

5.75

%

8.00

%

4/30/2027

$

2,185,443

2,148,480

2,183,258

Porcelain Acquisition Corporation (Paramount)

First Lien Delayed Draw Term Loan

LIBOR(Q)

1.00

%

5.75

%

8.00

%

4/30/2027

$

340,589

335,018

340,248

2,483,498

2,523,506

Capital Markets

Pico Quantitative Trading, LLC

First Lien Term Loan (1.0% Exit Fee)

LIBOR(Q)

1.50

%

7.25

%

9.00

%

2/7/2025

$

500,000

487,331

505,000

Pico Quantitative Trading, LLC

First Lien Incremental Term Loan

LIBOR(S)

1.50

%

7.25

%

8.75

%

2/7/2025

$

560,228

536,113

560,228

1,023,444

1,065,228

Commercial Services & Supplies

Kellermeyer Bergensons Services, LLC

First Lien Term Loan

LIBOR(M)

1.00

%

6.00

%

7.67

%

11/7/2026

$

1,593,137

1,583,639

1,535,784

Kellermeyer Bergensons Services, LLC

First Lien Delayed Draw Term Loan A

LIBOR(M)

1.00

%

6.00

%

7.67

%

11/7/2026

$

350,506

348,295

337,888

Kellermeyer Bergensons Services, LLC

First Lien Delayed Draw Term Loan B

LIBOR(M)

1.00

%

6.00

%

7.67

%

11/7/2026

$

485,391

482,363

467,917

Thermostat Purchaser III, Inc. (Reedy Industries)

Second Lien Term Loan

LIBOR(Q)

0.75

%

7.25

%

8.82

%

8/31/2029

$

2,615,252

2,579,046

2,510,642

Thermostat Purchaser III, Inc. (Reedy Industries)

Second Lien Delayed Draw Term Loan

LIBOR(Q)

0.75

%

7.25

%

8.82

%

8/31/2029

$

—

(3,007

)

(17,901

)

N

4,990,336

4,834,330

Construction & Engineering

CSG Buyer, Inc. (Core States)

First Lien Term Loan

SOFR(Q)

1.00

%

6.00

%

7.00

%

3/31/2028

$

3,291,606

3,225,774

3,209,316

CSG Buyer, Inc. (Core States)

First Lien Delayed Draw Term Loan

SOFR(Q)

1.00

%

6.00

%

7.00

%

3/31/2028

$

—

(10,731

)

(26,828

)

N

CSG Buyer, Inc. (Core States)

First Lien Revolver

SOFR(Q)

1.00

%

6.00

%

7.03

%

3/31/2028

$

214,625

203,894

201,211

N

Homerenew Buyer, Inc. (Project Dream)

First Lien Term Loan

SOFR(Q)

1.00

%

6.50

%

8.70

%

11/23/2027

$

3,582,680

3,493,903

3,450,121

Homerenew Buyer, Inc. (Project Dream)

First Lien Delayed Draw Term Loan

SOFR(Q)

1.00

%

6.50

%

8.69

%

11/23/2027

$

3,339,336

3,237,712

3,095,818

N

Homerenew Buyer, Inc. (Project Dream)

First Lien Revolver

SOFR(Q)

1.00

%

6.50

%

8.70

%

11/23/2027

$

—

(18,617

)

(44,541

)

N

PHRG Intermediate, LLC (Power Home)

First Lien Term Loan

LIBOR(M)

0.75

%

6.00

%

7.60

%

12/16/2026

$

2,484,375

2,426,907

2,385,000

Sunland Asphalt & Construction, LLC

First Lien Term Loan

LIBOR(S)

1.00

%

6.00

%

8.88

%

1/13/2026

$