Delaware

814-00712

20-2725151

(State or other jurisdiction of

(Commission

(IRS Employer

incorporation or organization)

File Number)

Identification Number)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

ITEM 7.01.

REGULATION FD DISCLOSURE.

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit

Number

Description

99.1

Press Release, dated as of August 1, 2018

BLACKROCK CAPITAL INVESTMENT CORPORATION

Date:  August 1, 2018

By:

/s/ Michael Pungello

Name:

Michael Pungello

Title:

Interim Chief Financial Officer and Interim Treasurer

Investor Contact:

Press Contact:

Nik Singhal

Brian Beades

212.810.5427

212.810.5596

•

GAAP Net Investment Income (NII) of $0.16 per share providing second quarter distribution coverage of 90%  

•

Net Asset Value (NAV) per share declined 1.2% or $0.09 per share to $7.56 per share on a quarter-over-quarter basis primarily due to increase in net unrealized and realized depreciation on legacy assets

•

Under our existing share repurchase program, we repurchased 1,268,684 shares of common stock for $7.9 million, including brokerage commissions, via open market purchases in the second quarter

•

Net leverage of 0.43x was down, reflecting an increase in prepayment activity. Total liquidity for portfolio company investments, including cash, was approximately $280 million, subject to leverage and borrowing base restrictions

•

BCIC Senior Loan Partners increases its investment capacity from $300 million to $400 million

Q2 2018

Q1 2018

Q2 2017

Total

Per

Total

Per

Total

Per

($'s in millions, except per share data)

Amount

Share

Amount

Share

Amount

Share

Net Investment Income

  $           11.5

  $             0.16

  $           11.6

  $             0.16

$           13.9

$           0.19

Net realized and unrealized gains/(losses)

  $           (5.5)

  $            (0.08)

  $         (12.5)

  $           (0.17)

$             3.1

$           0.04

Deferred taxes

  $           (1.8)        

  $            (0.02)

                 —

                 —

                 —

                —

Basic earnings/(loss)

  $             4.2

  $              0.06

  $           (0.9)

  $           (0.01)

$           17.0

$           0.23

Distributions declared

  $           12.8

  $              0.18

  $           13.2

  $              0.18

$           13.1

$           0.18

Net Investment Income/(loss), as adjusted¹

  $           11.5

  $              0.16

  $           11.6

  $              0.16

$           13.9

$           0.19

Basic earnings/(loss), as adjusted¹

  $             4.2

  $              0.06

  $           (0.9)

  $           (0.01)

$           17.0

$           0.23

June 30,

March 31,

December 31,

June 30,

($'s in millions, except per share data)

2018

2018

2017

2017

Total assets

  $                800.0

  $                887.1

  $                799.9

  $                925.0

Investment portfolio, at fair market value

  $                776.3

  $                870.1

  $                757.9

  $                893.3

Debt outstanding

  $                241.5

  $                310.1

  $                206.7

  $                295.5

Total net assets

  $                536.6

  $                553.1

  $                571.1

  $                607.5

Net asset value per share

  $                  7.56

  $                  7.65

  $                  7.83

  $                  8.33

Net leverage ratio²

                    0.43x

                     0.56x

                     0.32x

                     0.47x

•

Under our existing share repurchase program, during the second quarter of 2018, 1,268,684 shares were repurchased for $7.9 million at an average price of $6.21 per share, including brokerage commissions. The cumulative repurchases since BlackRock entered into the investment management agreement with the Company in early 2015 totaled approximately 5.1 million shares for $38.1 million, representing 75.6% of total share repurchase activity, on a dollar basis.  Since the inception of our share repurchase program through June 30, 2018, we have purchased 6.8 million shares at an average price of $7.36 per share, including brokerage commissions, for a total of $50.4 million. In May 2017, our Board of Directors approved an increase to the remaining amount of shares authorized to be repurchased to a total of 2.5 million shares effective July 1, 2017, and an extension to the plan until the earlier of June 30, 2018 or such time that all of the authorized shares have been repurchased. In April 2018, our Board of Directors authorized a total of 2.5 million shares for repurchase, effective July 1, 2018 until the earlier of June 30, 2019 or until such time that all of the authorized shares have been repurchased.

•

Subsequent to the quarter ended June 30, 2018, Senior Loan Partners, as Servicer, and its wholly-owned subsidiary BCIC Senior Loan Funding II, LLC (a newly formed entity), as Borrower, entered into a $270 million Loan and Servicing Agreement with Morgan Stanley Senior Funding, Inc. acting as Administrative Agent and The Bank of New York Mellon Trust Company acting as Collateral Agent. Proceeds from this credit facility refinanced the outstanding balances under the existing $200 million credit facility to BCIC Senior Loan Funding, LLC (a wholly-owned subsidiary of Senior Loan Partners). As previously disclosed, on April 16, 2018, the Company increased its equity commitment in Senior Loan Partners from $85.0 million to $113.3 million. Concurrently, Windward Investments LLC, our joint venture partner, increased their equity commitment in a pro rata manner from $15.0 million to $20.0 million. With the increase in the size of equity commitments and the credit facility, the investing capacity of Senior Loan Partners has increased from $300 million to approximately $400 million.

¹

Non-GAAP basis financial measure. See Supplemental Information on page 8.

²

Calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and receivable for investments sold, and (B) net asset value.

($’s in millions)

Three months

Three months

Three months

ended

ended

ended

June 30, 2018

March 31, 2018

June 30, 2017

Investment deployments

$

61.3  

$

144.6  

$

22.8  

Investment exits

$

152.1  

$

17.2  

$

72.0  

Number of portfolio company investments at the end of period

29  

31  

34  

Weighted average yield of debt and income producing equity securities, at fair market value

11.5%  

11.3%  

11.3%  

% of Portfolio invested in Secured debt, at fair market value

52%  

59%  

64%  

% of Portfolio invested in Unsecured debt, at fair market value

18%  

16%  

17%  

% of Portfolio invested in Equity, at fair market value

30%  

25%  

19%  

Average investment by portfolio company, at amortized cost (excluding investments below $5.0 million)

$

32.9  

$

33.6  

$

33.0  

•

We deployed $61.3 million during the quarter while exits of investments totaled $152.1 million, resulting in a $90.8 million net decrease in our portfolio due to investment activity.  

▪

Our deployments were primarily concentrated in two new portfolio company investments, and incremental investments in four existing portfolio companies:

▪

$14.0 million funded L+7.50% second lien term loan to Northstar Financial Services Group, LLC, which is a leading provider of technology enabled, web based outsourced practice management solutions serving investment advisors;

▪

$6.4 million funded and $2.7 million unfunded, L+8.00% second lien term loan and second lien delayed draw term loan to Pharmalogic Holdings Corp., which is a leading independent provider of radiopharmaceuticals with 16 nuclear pharmacies throughout the United States;

▪

$17.5 million of incremental equity to Senior Loan Partners;

▪

$8.3 million of incremental L+11.00% unsecured debt to Gordon Brothers Finance Company to fund portfolio growth;

▪

$6.2 million of incremental 12.00% unsubordinated debt and $1.6 million equity investment in First Boston Construction Holdings, LLC; and

▪

$5.6 million L+8.00% second lien delayed draw term loan to Pathway Partners Vet Management Company, LLC.

▪

Our repayments were primarily concentrated in four portfolio company exits, two dispositions and one partial repayments:

▪

$32.0 million repayment of Pre-paid Legal Services, Inc., second lien term loan;

▪

$25.0 million repayment of Tri-Anim Health Services, Inc., second lien term loan;

▪

$20.0 million repayment of JLL Pioneer Inc., second lien term loan;

▪

$7.3 million repayment of ECI Cayman Holdings, LP, limited partnership interest;

▪

$15.8 million sale at par to a third party of Bankruptcy Management Solutions, Inc., first lien term loan;

▪

$27.2 million and $5.6 million partial sale at par to a third party (as previously disclosed) of our first lien term loan and delayed draw term loan, respectively, from St. George Warehousing & Trucking Co. of California, Inc.; and

▪

$18.7 million partial repayment of our Gordon Brothers Finance Company’s unsecured debt.

•

Our $92.3 million equity investment in Senior Loan Partners is generating a yield of approximately 11%. Senior Loan Partners made investments into three new portfolio companies and three existing portfolio companies totaling $50.8 million of new capital deployments during the quarter, bringing committed and outstanding amounts, at par, to $287.2 million and $264.0 million, respectively, and a total of 22 borrowers.  The three new investments, at par, were (i) a $9.3 million first lien term loan to New Era Technology, Inc., a provider of managed services, cloud, collaboration, data networking, and security solutions, (ii) a $15.0 million first lien term loan to Crown Paper Group, Inc., an independent, vertically-integrated containerboard system company, and (iii) a $9.4 million first lien loan to ENC Holding Corporation, an asset-light logistics platform providing business process outsourcing services. Additional investments in existing portfolio companies primarily include (i) additional investment of $8.0 million in first lien and revolving loans to NSM Sub Holdings Corp., and (ii) additional investment of $4.5 million to Accruent, LLC in first lien and delayed draw loans.

•

As of June 30, 2018, there was one non-accrual investment position, representing approximately 0.1% and 1.8% of total debt and preferred stock investments, at fair value and cost, respectively, as compared to non-accrual investment positions of approximately 3.6% and 14.3% of total debt and preferred stock investments at fair value and cost, respectively, at December 31, 2017.  Our average internal investment rating at fair market value at June 30, 2018 was 1.23 as compared to 1.24 as of the prior quarter end.

•

During the quarter ended June 30, 2018, net realized gain was $3.9 million, primarily resulting from a gain on the sale of ECI Cayman Holdings, LP, partially offset by a loss relating to our investment in SVP Worldwide Ltd; net unrealized depreciation increased $9.5 million before deferred taxes, primarily due to an increase in unrealized depreciation mainly on certain legacy investments, as well as the reversal of previously recognized appreciation upon dispositions. For the three months ended June 30, 2018, unrealized gains in a consolidated taxable subsidiary resulted in a deferred tax liability of $1.8 million.

•

GAAP net investment income (“NII”) was $11.5 million, or $0.16 per share, for the three months ended June 30, 2018.  Relative to distributions declared of $0.18 per share, our NII distribution coverage was 90% for the quarter.

•

As previously disclosed, our base management fee rate was reduced from an annual rate of 2.00% of total assets to 1.75% effective March 7, 2017. For the quarter ended June 30, 2018, $1.9 million of incentive management fees based on income was earned by our investment adviser; however, as previously disclosed, any such fees earned until December 31, 2018 have been waived by our investment adviser. Pursuant to the waiver, $11.6 million of incentive management fees have been waived on a cumulative basis. During the quarter, there was no accrual for incentive management fees based on gains.

•

Tax characteristics of all 2017 distributions were reported to stockholders on Form 1099 after the end of the calendar year. Our 2017 tax distributions of $0.72 per share were comprised of ordinary income. Our return of capital distributions totaled $1.96 per share from inception to December 31, 2017.  At our discretion, we may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income.  We will accrue excise tax on estimated undistributed taxable income as required.  There was no undistributed taxable income carried forward from 2017.  For more information on distributions, please refer to Section 19 Notices posted within the Distribution History section of our website, as necessary.

•

At June 30, 2018, we had $7.7 million in cash and cash equivalents and $271.9 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $279.6 million of availability for portfolio company investments.

•

Net leverage, adjusted for available cash, receivables for investments sold and unamortized debt issuance costs, was 0.43x at quarter-end, and our 317% asset coverage ratio provided the Company with available debt capacity under its asset coverage requirements of $287.1 million which exceeds the available amount of $279.6 million for portfolio company investments.  Further, as of quarter-end, 80% of our portfolio was invested in qualifying assets, exceeding the 70% regulatory requirement of a business development company.

June 30,

2018

December 31,

2017

Assets

Investments at fair value:

Non-controlled, non-affiliated investments (cost of $260,738,061 and $311,938,762)

$   239,623,756

$   261,683,202

Non-controlled, affiliated investments (cost of $140,400,336 and $195,354,637)

     171,502,210

     215,779,077

Controlled investments (cost of $391,542,064 and $321,999,526)

     365,144,975

     280,478,528

Total investments at fair value (cost of $792,680,461 and $829,292,925)

    776,270,941

     757,940,807

Cash and cash equivalents

        7,687,958

       29,014,645

Receivable for investments sold

        5,366,758

         1,344,918

Interest, dividends and fees receivable

        7,533,034

         8,342,780

Prepaid expenses and other assets

        3,118,038

         3,236,819

Total Assets

$   799,976,729

$   799,879,969

Liabilities

Debt (net of deferred financing costs of $3,699,350 and $4,209,445)

$   241,522,761

$   206,661,272

Interest and credit facility fees payable

            549,902

         1,820,971

Distributions payable

       12,782,869

       13,152,924

Deferred tax liability

         1,810,391

                      —

Base management fees payable

         3,850,899

        3,734,655

Payable for investments purchased

                      —

           479,297

Accrued administrative services

           417,215

           114,995

Other accrued expenses and payables

        2,461,332

        2,815,923

Total Liabilities

    263,395,369

    228,780,037

Net Assets

Common stock, par value $.001 per share, 200,000,000 common shares authorized, 77,861,287 and 77,723,764 issued and 71,015,946 and 72,946,910 outstanding

              77,861

             77,723

Paid-in capital in excess of par

     858,904,233

    858,087,822

Undistributed / (Distributions in excess of) net investment income

       (16,691,741)

      (13,918,838)

Accumulated net realized loss on investments and extinguishment of debt

     (235,435,820)

    (162,723,790)

Net unrealized (depreciation), net of tax

       (19,881,331)

      (72,688,483)

Treasury stock at cost, 6,845,341 and 4,776,854 shares held

       (50,391,842)

      (37,734,502)

Total Net Assets

     536,581,360

    571,099,932

Total Liabilities and Net Assets

$   799,976,729

$   799,879,969

Net Asset Value Per Share

$                7.56

$                 7.83

Three months

Three months

Six months

Six months

ended

ended

ended

ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

Investment Income:

Non-controlled, non-affiliated investments:

Cash interest income

$         8,180,538

$       12,249,128

$       15,324,565

$          23,533,457

PIK interest income

—

                      1,513,528  

—

           2,990,916

Cash dividend income

—

                        —  

—

              404,781

PIK dividend income

—

                      —  

—

                65,943

Fee income

283,501

              41,780

748,707

              340,677

Total investment income from non-controlled, non-affiliated investments

8,464,039

             13,804,436

16,073,272

           27,335,774

Non-controlled, affiliated investments:

Cash interest income

2,908,434

          2,522,872

5,123,047

         4,987,708

PIK interest income

—

              918,265

690,960

           2,115,110

PIK dividend income

191,126

              277,119

380,152

              466,145

Fee income

—

                63,621

35,000

              349,916

Total investment income from non-controlled, affiliated investments

3,099,560

             3,781,877

6,229,159

             7,918,879

Controlled investments:

Cash interest income

5,730,772

           3,911,550

10,816,477

           9,615,537

PIK interest income

516,747

              1,043,953

1,283,213

              1,176,434

Cash dividend income

3,490,425

           2,111,151

6,617,286

           3,508,502

PIK dividend income

—

    —

731,516

                      —

Fee income

3,267

    —

390,325

                25,000

Total investment income from controlled investments

9,741,211

           7,066,654

19,838,817

             14,325,473

Other Income

—

590,429

—

590,429

Total investment income

21,304,810

           25,243,396

42,141,248

           50,170,555

Expenses:

Base management fees

3,850,899

4,139,347

7,163,268

             8,663,204

Incentive management fees

1,921,506

2,773,859

3,656,701

  3,583,042

Interest and credit facility fees

3,989,257

5,261,085

7,698,215

             9,248,165

Professional fees

618,756

792,283

1,351,920

                1,357,393

Administrative services

417,214

303,782

970,978

                631,459

Director fees

178,000

145,249

365,000

                317,749

Investment advisor expenses

87,500

87,501

175,000

                  175,001

Other

625,480

644,853

1,256,217

                1,342,988

Total expenses, before incentive management fee waiver

11,688,612

           14,147,959

        22,637,299

         25,319,001

Incentive management fee waiver

           (1,921,506)

           (2,773,859)

(3,656,701

)

              (3,583,042)

Expenses, net of incentive management fee waiver

            9,767,106

            11,374,100

18,980,598

             21,735,959

Net Investment Income

           11,537,704

           13,869,296

23,160,650

           28,434,596

Realized and Unrealized Gain (Loss):

Net realized gain (loss):

Non-controlled, non-affiliated investments

           3,919,359

           8,362

(46,596,597)

         (53,983,599)

Controlled investments

             3,000

               —

(26,115,432)

             2,375,535

Net realized gain (loss)

          3,922,359

            8,362

(72,712,029)

         (51,608,064)

Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments

(14,549,262)

(2,697,247)

29,141,255

           54,003,848

Non-controlled, affiliated investments

13,734,096

6,225,975

15,156,671

           3,537,381

Controlled investments

(8,511,872)

(576,287)

10,644,672

           (3,280,674)

Foreign currency translation

(151,144)

145,276

(325,055)

                  218,571

Net change in unrealized appreciation (depreciation)

(9,478,182)

3,097,717

54,617,543

           54,479,126

Net realized and unrealized gain (loss) before taxes

(5,555,823)

3,106,079

(18,094,486)

2,871,062

Deferred taxes

(1,810,391)

   —-

(1,810,391

   —-

Net realized and unrealized gain (loss) after taxes

(7,366,214)

         3,106,079

(19,904,877)

              2,871,062

Net Increase (Decrease) in Net Assets Resulting from Operations

$         4,171,490

$        16,975,375

$         3,255,773

$         31,305,658

Net Investment Income Per Share—basic

$                  0.16

$                   0.19

$                  0.32

$                    0.39

Earnings (Loss) Per Share—basic

$                  0.06

$                   0.23

$                  0.05

$                    0.43

Average Shares Outstanding—basic

  71,705,463

  72,929,346

72,341,433

  72,867,332

Net Investment Income Per Share—diluted

$                  0.16

$                  0.19

$                  0.31

$                    0.38

Earnings (Loss) Per Share—diluted

$                  0.06

$                  0.22

$                  0.05

$                    0.42

    Average Shares Outstanding—diluted

           88,699,200

           86,187,472

89,335,170

           84,454,044

Distributions Declared Per Share

$                  0.18

$                   0.18

$                  0.36

$                    0.36

Three months

ended
June 30, 2018

Three months

ended
June 30, 2017

Six months

ended
June 30, 2018

Six months

ended
June 30, 2017

GAAP Basis:

Net Investment Income

$        11,537,704  

$      13,869,296    

$      23,160,650  

$      28,434,596  

Net Investment Income per share

0.16  

0.19  

0.32  

0.39  

   Addback:  GAAP incentive management fee expense based on Gains

—  

—  

—  

—  

   Addback:  GAAP incentive management fee expense based on Income

               —  

               —  

               —  

          —  

Pre-Incentive Fee¹:

Net Investment Income

$        11,537,704  

$      13,869,296  

$      23,160,650  

$      28,434,596  

Net Investment Income per share

0.16  

0.19  

0.32  

0.39  

Less: Incremental incentive management fee expense based on Income

—  

—  

—  

—  

As Adjusted²:

Net Investment Income

$        11,537,704  

$      13,869,296  

$      23,160,650  

$      28,434,596  

Net Investment Income per share

0.16  

0.19  

0.32  

0.39