BlackRock TCP Capital Corp (TCPC) 2015 Q3 法說會逐字稿

Ladies and gentlemen, good afternoon. Welcome, everyone, to the TCP Capital Corp. third quarter 2015 earnings conference call. Today's conference call is being recorded for replay purposes. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the company's formal remarks. (Operator Instructions).

And now I would like to turn the call over to Jessica Ekeberg, Vice President of the TCP Capital Corp. Global Investor Relations team. Jessica, please proceed.

Thank you. Before we begin, I would like to note that this conference call may contain forward-looking statements based on the estimates and assumptions of management at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. Any forward-looking statements made on this call are made as of today and are subject to change without notice.

During today's call, we will refer to a slide presentation, which you can access by visiting our Web site, www.tcpcapital.com. Click on the Investor Relations link and select Events and Presentations. Our earnings release and 10-Q are also available on our site.

I will now turn the call over to Mr. Howard Levkowitz, Chairman and CEO of TCP Capital Corp.

Thanks Jessica. We would like to thank everyone for participating in today's call. I'm here with our President and COO Raj Vig, our Chief Financial Officer, Paul Davis and other members of the TCPC team. This morning we issued our earnings release for the third quarter ended September 30, 2015. We also posted a supplemental earnings presentation to our Web site which we we'll refer to throughout this call. We will begin our call with an overview of TCPC's performance and investment activities and then our CFO Paul Davis will provide more detail on our financial results.

Next I will provide some additional perspective on the market before we take your questions. I will begin with the review of the highlights of our third quarter. We had strong originations totaling $121 million during the quarter, and increased the percentage of our portfolio in floating rate instruments to almost 80%. We also had $65 million in repayments for total net deployments of $55 million. As noted on Slide 4, we delivered net investment income of $0.40 per share. We paid a dividend of $0.36 per share substantially all of which was covered by recurring income and declared a fourth quarter dividend of $0.36 per share. Turning to Slide 5, during a quarter in which spreads generally widened, our NAV remains stable largely as result of both realized and unrealized gains. Also on Slide 5, you can see that our accumulated dividends plus NAV appreciation since going public approximately 3.5 years ago have delivered a total gain to our shareholders of almost 40% of our IPO value.

As detailed on Slide 6, during the quarter, we extended the maturity date of our $116 million SVCP credit facility to July 31, 2018 and reduced the interest rate from LIBOR plus $250 to LIBOR plus $175 through July 31, 2016 and then LIBOR plus $250 through the maturity date. Additionally, the $100.5 million Series A preferred was exchanged for $100.5 million of term debt with the same terms and maturity date as the SVCP credit facility. The net affect is negligible on our borrowing cost until August of 2016 at which point the combined rate will be LIBOR plus $250.

We increased our TCPC funding facility to $350 million, up from $300 million expanded the accordion feature to $400 million and extended the maturity date to March 6, 2020.

Additionally, we made a number of share repurchases when our shares traded below NAV during the fall selloff and, again, renewed our $50 million share repurchase program at our board meeting earlier this week. Lastly, this week the board elected a new independent director, Brian Wruble, to the TCPC board. Brian has had a decades long successful career in the investment management business. He has been a senior executive of two asset management companies, chief investment officer of a major insurance company and was a general partner of a multi-billion dollar hedge fund.

Brian was previously a director of one of our private institutional funds for over a decade and we are extremely pleased to have him join us as a director of TCPC. For those viewing our presentation please turn to Slide 7. At the end of the third quarter our highly diversified portfolio had a fair value of $1.3 invested in 91 companies across numerous industries. Our largest position represented 3.5% of the portfolio.

Slide 8 shows the increase in our portfolio since our IPO and particularly in our floating rate debt investments. As you can see on Slide 9, at quarter end, senior secured debt comprised 97% of the portfolio with floating rate debt comprising 78% of our debt positions. With most of our debt portfolio and floating rate instruments, we are well positioned for a rise in interest rates.

During the third quarter we continue to focus on allocating capital primarily to income producing securities and deployed approximately $121 million in 11 investments. These included investments in seven new and four existing portfolio companies. Our investments in existing portfolio companies continue to a source of strong risk adjusted returns for our shareholders given our preexisting relationships with these firms and our knowledge of their businesses and operating models.

Our five largest investments in Q3 reflect our diversification strategy and include a $24 million senior secured loan to KPC Healthcare, a leading predominantly physician owned and operated group of hospitals. A $13 million senior secured loan to Kenneth Cole Productions, a branded apparel licensor and retailer, a $10 million senior secured loan to InMobi, one of the largest independent mobile ad networks in the world, and $8 million senior secured loan to NEP a leading provider of mobile broadcast solutions to the entertainment industry and a $7 million senior secured loan to Conergy, a global downstream solar company for which we also syndicated some of the facility.

In the third quarter we exited $65 million of investments including a $20 million senior secured loan to Arkoma, a $10 million senior secured loan to Kenneth Cole Productions and $7 million in preferred stock to NEXTracker. New investments in the quarter had a weighted average effected yield of 11.1% and the investments we exited during the quarter had a weighted average effective yield of 10.1%. This is the 10th consecutive quarter we have underwritten new investments at higher yields than our exits. Our overall effective portfolio yield for the quarter was 10.9%.

Our direct energy exposure continues to represent a small portion of our portfolio comprising only two investments totaling less than 2% of the fair value of the portfolio at the end of the third quarter. Overall, we are pleased with the performance of our energy portfolio and we continue to carefully evaluate opportunities in the sector.

Now, I will turn the call over to Paul for a more detailed report of our third quarter financial results. After Paul's comments I will provide some additional perspective on what we are seeing in the market and then we will take your questions. Paul?

Thanks Howard. We are pleased to report another strong quarter. The third quarter gross investment income was $0.73 per share or $35.5 million which included recurring cash interest of $0.60 per share. Other income of $0.03 per share including amendment to the income of $0.02 per share, recurring PIC income of $0.03 per share, discount and fee amortization of $0.05 per share of which $0.01 was from prepayments plus an additional $0.05 per share from prepayment premiums.

As a reminder, it is our general policy to amortize upfront economics over time rather than recognize all of the income at the time that we make the investment. Earnings for the quarter also included cash income from aircraft leases of $0.02 per share, offset by depreciation expense of $0.01 per share reducing the company's tax basis income.

As shown on Slides 10 and 13, net investment income before incentive compensation was $24.3 million or $0.50 per share. Net investment income after incentive compensation was $19.4 million or $0.40 per share out-earning our dividend by $0.04.

Total operating expenses for the quarter were approximately $11.2 million or $0.23 per share which included interest expense of $0.08 per share. Our annualized operating expense ratio including interest expense was 6.0% of net assets, average net assets, before incentive compensation. Incentive compensation from net investment income for the quarter was $4.8 million or $0.10 per share which is computed by multiplying net investment income by 20%.

As noted in Slide 14 all incentive compensation is subject to the company meeting accumulative total return hurdle of 8% annually. Net realized gains were $5.7 million or $0.12 per share comprised primarily of a $5.9 million gain on the disposition of most of our investment in NEXTracker. The combined net realized and unrealized loss was $1.9 million or $0.04 per share.

Although the majority of our investments were marked down somewhat as market yield spreads increased, the decline was largely offset by a number of gains and specific assets. Aside from these adjustments, and reversal of unrealized gains on the NEXTracker disposition of $3.6 million, a changed in unrealized for the quarter included an unrealized gain on our AGY holdings of $4 million and a markdown on our Core Media loan of $2.4 million.

As a reminder, our entire portfolio is market-to-market each quarter with substantially the entire portfolio price affirmatively using independent third party sources with only a deminimis amount being priced internally. There were no new investments on non-accrual. Two loans currently on non-accrual represent 0.2% of the portfolio at fair value and the impact of non-accruals on quarterly net investment income is less than a penny per share.

After paying our third quarter dividend of $0.36 per share or $17.6 million, we closed the quarter with tax basis undistributed ordinary income of approximately $23.5 million or $0.48 per share. Available liquidity at the end of the quarter totaled approximately $200.9 million which was comprised of total available leverage of $172.2 million and cash and cash equivalence of $34.6 million less net pending settlements of $5.9 million.

Available leverage includes the remaining $36.2 million available on our $75 million leverage commitment from the small business administration but excludes an additional $75 million which we expect will become available once our initial commitment is fully funded.

Combined leverage net of cash and SBIC debt was approximately 0.69 times common equity at quarter end. Turning to Slide 15, at the end of the quarter our total weighted average interest rate on amounts outstanding on our leverage program was 2.96%. This reflects our TCPC funding facility at a current rate of LIBOR plus 2.5%, our SVPC facility and term loan at a rate of LIBOR plus 1.75%, our convertible notes at 5.25 and our SBA debentures at a blended rate of 2.84%.

We've also, through yesterday, repurchased approximately 92,000 shares of common stock when our shares traded below NAV and as Howard mentioned, the board renewed our $50 million share repurchase program at the meeting earlier this week.

I'll now turn the call back over to Howard.

Thanks Paul. I will briefly cover what we're currently seeing in the market and then open the line for questions. In the fourth quarter to-date our deal flow remains good and we are seeing numerous opportunities across many sectors. Notwithstanding the dislocation in the traded markets we are still seeing some aggressive pricing but continue to take a highly disciplined and selective approach to new investments and are passing on many opportunities.

Through November 4, 2015, we have invested approximately $15 million primarily in three senior secured loans with a combined effective yield of approximately 10.9% and a small yield generating equity position.

Our deal flow is very robust. However, TCPC's originations were deliberately small based on our current portfolio and leverage position. Our primary focus remains on growing our recurring earnings streams by effectively putting our recently expanded and diversified liquidity sources to work to optimize our portfolio.

TCPC has build a strong market position by leveraging our platform to lend -- to establish middle market companies with sustainable competitive advantages that generate significant cash flow and/or have significant asset coverage or enterprise value.

Our co-investment exemptive relief from the SEC, which was granted nine years ago, enables TCPC to partner with numerous, the numerous, private institutional funds we manage to provide comprehensive capital solutions to borrowers. In general, the middle market remains healthy and continues to outpace overall growth in the U.S. economy serving as the primary engine for creating jobs. We believe demand for growth capital from the middle market remains strong. Looking to the future, we are uniquely qualified for continued success for several reasons; first, we have scale and depth in our origination and servicing platform. We have a highly experienced team of more than 80 people firm-wide with our investment professionals organized into 19 discrete industry groups. We believe this structure provides us with a tremendous competitive advantage and sourcing transactions and gaining the trust of management teams, owners and their advisors.

Second, our focus on senior secured loans, most of which are floating rate, has resulted in a lower overall risk profile and strong portfolio performance. This has enabled us to consistently out-earn our dividend to grow our NAV and to make special distributions on the number of occasions since we went public.

In addition, our dividend coverage remains strong and our portfolio is well positioned for an increase in interest rates. Third, our low cost of capital and diverse funding sources continue to be key competitive advantages for TCPC. In addition, TCPC remains well positioned with our attractively priced leverage and financing flexibility which includes our convertible notes, term loan and multiple credit facilities as well as our long-term unsecured notes from the SBIC facility which adds another source of low-cost funding.

Finally, our interests are closely aligned with our shareholders. Our origination income recognition practices are conservative and we have one of the most shareholder friendly fee structures in the industry. We continue to invest alongside our shareholders and members of the management team and the board of directors have, on a number of occasions, including and during the third quarter, purchased shares in the open market. In addition, as previously noted, we have repurchased shares below NAV during the recent sell-off and our board recently renewed our $50 million share repurchase plan.

In closing, we are pleased with our performance in the third quarter of 2015. we are optimistic about our prospects for delivering continued growth and returns based on our opportunity set and our growing origination platform and we remain committed to our rigorous investment process that delivers high risk adjusted returns while preserving capital over the long-term. We would like to thank all of our shareholders for your confidence and your continued support. And with that, operator, please open the call for questions.

Thank you. (Operator instructions). Our first question comes from Robert Dodd of Raymond James, your line is open.

Hi guys, great detail as always on the call so I'm not even -- no need to dig into any of the details. On the floating rate sensitivity. As we know, a typical BDC, because of the nature of oil see some downside for the first initial rate move, that's not the case with you guys. I mean, I looked through the schedule of investments, you have a lot of either no floor or very low floor loans out there so could you give us a bit more color on precisely how you're managing to get those attractive investments in a marketplace that characterizes this as pretty pricing aggressive and there's a very favorable structure as it seems.

Yeah, thank you for the question, I'll take that. It's Raj speaking. I think the answer to that really, you know, touches on a lot of points on the business and other elements in the quarter you know, which is we are not -- we're just not doing every deal for, you know, a broad set of issuers. We really do try to pick our spots. I think we're at a size even with the growth that we can be very selective and we, I think, have done a good job across the platform creating more origination opportunities to maintain that selectivity. You know, when you think about the quarter, the number of deals and the type of deals the majority, the overwhelming majority were either sole or co-lead or small club deals versus syndicated and the nature of those deals is just more bespoke. You really do have the ability to customize and have leverage as a lender versus being a price taker or a structure taker to your point of LIBOR floor.

So we really -- you know, in our perception of a rate rise being a question of when, not if, we really do want to keep the portfolio positioned for benefiting from that rate rise I think in our dialogue we have the ability to push for those structures with a low or no floor option and I think it's a -- it really highlights some of the sort of off-market nature of the type of deals that we do versus being too large and having to take some price or getting a price restructure taker.

Okay, got it, thank you very much.

Thank you.

Thank you, our next question comes from Jonathan Bock of Wells Fargo, your line is open.

Hi guys, thank you. Fin O'Shea here in for Jon Bock. First we have a question on the stock repurchase program. You know, given it was such a small amount at such a small discount and we see this as a compliment, you know, just kind of how do you look at this in terms of capital deployment as, you know, a lot of people might think you're a BC that makes good loans and while it's good to have this program, you know, why not wait for a deeper discount if that should ever happen?

Fin thanks for the question. We put this program in place a while back as you're aware our stock has, for most of its existence, traded above NAV. And the way we structured this was with an algorithm and, you know, it was structured to be there if our stock ever traded down and the sell-off that happened at the end of the summer, beginning of the fall, it did and we don't have the ability to go in and change the way that the program works. It was done with the idea that if there was a tradeoff, trade-down, in the stock we'd be able to buy stock in on an accretive basis. You know, when the stock traded just below NAV, [which I think it has] for the last couple of months, you know, it's arguable whether it's really accretive or not given the cost of issuing equity but we set up the program and so it functioned, you know, buying shares below NAV almost everyday because that's the way it was set up.

Going forward we have changed it so that if the stock -- there is a big swoon in the market. The program will be more powerful and we'll buy more shares but as I think you know, these things are subject still to volume limits and other rules and so when you set it up, you can't anticipate every eventuality.

We would rather use our capital to invest in loans. We're seeing really a lot of opportunities. Our deal flow is great, we're very pleased with the market but our long-term goal is to do the right thing for shareholders over the long-term so we put this program in place to be there on an accretive basis should it work that way.

This is Paul, I would add too that as you know the stock didn't trade down that far below par and the algorithm as it was set up, was set up such that the further down it went the more we would buy and so hence, as you notice, stock repurchases were somewhat like just given how [shallow] of a discount was to NAV.

Thank you, appreciate that and didn't realize that it was previously an automated program. Just a couple more simple questions. On Atlantic and Pacific noticed that was (inaudible), is that still the dip facility or is that rolled into a new loan?

That's still the dip facility and just sort of a footnote comment on your prior question, we set it up on a program basis because otherwise there are just far fewer days when you can execute it.

That's right.

And this, you know, should be more flexible but you can't anticipate every eventuality so it's subject to the limitations in the program.

Very well, and the last one on InMobi, can you just kind of give us some color on how you came about that loan deal if you were the only lender and, you know, if you view this as typical or should we see more loans like this?

Sure, I'll take that one. Obviously I, you know, accompany that. Our venture debt team from the Bay area came across and really the sourcing there is consistent with how they approached, we've approached and they've approached, the market in their segment which is relationship driven but very stringent focus on structure having a compelling enterprise value here. This company had rumors to be acquired with a price in the billions but, you know, just even the financial performance and scale of the business, I think, supports a very strong coverage of our loan with the right structure and we have the consistent with many of their opportunities, you know, warrant that has some potential here as we've seen in the recent quarter existing NEXTracker, you know, those structures have some good upside to it. But to answer your question, we came across it consistent, we were approached, we are not the only lender but we are a large lender and we led a group that closed on the financing based on an inbound to us, you know, based on the teams relationships and track record and consistency on closing on these types of companies.

Very well, that's it for me and thank you.

Thank you Fin.

Thank you. Our next question comes from Troy Ward of KBW, your line is open.

Great, I'd like to follow-up a little bit on what Fin was talking about right there. Howard, can you talk about we've heard a lot of, obviously, the lenders out there, the BDC world and beyond are more capital constrained now than they have been in the last couple of years. Is that pushing more lenders to do club deals and to bring other people in with them and has that changed your focus at all? Obviously you've got the in-house funds, you've got the exemption to co-invest alongside of that but do you more actively look for outside participation today versus, you know, 12 or 24 months ago?

Yeah, we've been in business for almost 20 years and we've been running institutional lending funds since 1999 and our philosophy really hasn't changed that much which is we try and do the best risk adjusted deals and we're very happy doing deals by ourselves. If you look at our portfolio, many of these deals are deals in which we're sole lenders. We're also happy clubbing up with other people. You know, we don't view them as being exclusive of one another when we see a company that we think it creates a good risk adjusted reward we're happy to go into deals with other lenders as well.

You know, so there is a fair amount of clubbing up going on in the market. There's no question that some people who are doing deals by themselves are now more capital constrained and looking at partners and also as companies grow sometimes people are constrained even if they have been the sole provider or people make portfolio decisions that they want to limit their exposure to a particular company or sector and there's clearly more of that going on across the sector today than there was a year or two ago.

But having said that, we haven't changed the way we approach the market. We continue to be really very happy doing things in both a sole fashion and also in smaller clubs.

Yeah, I would just add one of the points we've made in the past, you know, really the value and the ability to get a premium in pricing and the right structures comes from providing the solution to our counterparties and whether that's a solution that we can do fortunately in this environment through our other funds with the exemptive order or if it's with some likeminded folks so long as the -- we're not compromising on the diligence or the documentation, we're still bringing a solution which lends itself to the type of premium I think we've consistently been able to underwrite to and just the clubbing is not a bad thing, in my mind, it's a -- if it's the right parties and parties that reciprocate which has happened for us, I think there's a good cooperative effort that we've historically seen in our business.

Okay, that's helpful thanks. And now on the SBIC that you really -- you've received the exemptive relief, can you just speak to what percentage of your last six months pipeline are deals that you've looked at or closed even would work inside that would fit inside of the SBIC box?

I don't have an exact percentage, it obviously is not the majority. I think there's two -- but it has been something that we've been able to take advantage of with a little bit of a steadier, steady pace, maybe not the pace we would like or initially expected but I think it's still a positive pace.

And I think there's two elements to that. One is we really are focused on both the right structure and part of the capital structure. Just as a highlight, you know, when you think about the capital deployed in this past quarter, you know, 85% or so was in first lien debt. So we really are focused on staying high if not at the top end of the capital structure and we also want to focus on well positioned and well established companies and that latter point, I think, sometimes diverges with SBIC parameters which is a little more on earlier stage or less profitable or lower net worth businesses. So you know, we're okay with the portfolio being better positioned and better protected by structure and by size of company versus chasing a pace on the SBIC which we've still been able to deploy. I don't have an exact percentage and we'll revert if we can disclose that but it certainly has been a lower percentage then the other capital sources.

Yeah, having said that we think it's a terrific program, we like it a lot. Our funnel is very wide on it there's just a high hurdle internally for everything but even more particularly probably on some of these smaller companies and some of that is probably mere coincidence when we looked at applying for this facility and we looked at it historically the number of deals that would have qualified that we've done that's a higher percentage then the number of deals that we've done since having the license and we haven't changed anything here. It's really more coincidental we think.

Okay, that's good. And then Paul I think on the undistributed earnings, did you say it was a $0.48, is that what it was at September 30?

Yeah, that's correct.

And then how, just ballpark, how does that compare with the spillover at this time last year and maybe the year before?

Sure, about this time last year the number was fairly consistent but that's back when the equity was smaller so it was $0.62 per share. It was $26 million on September 30, 2014, it was at $23 million at December 31, 2014 about -- actually coincidentally and then $0.48 per share.

Right, okay. And then Howard, can you just speak real quickly and I'll be done here, just on how you view the capital allocation with regard to this undistributed income versus special dividends and rolling it over and paying the excise tax?

Sure, Troy, as I know you're aware, initially we came out, we raised our dividend a couple of times, we've done five special dividends, we have out-earned our regular dividend every quarter since we've gone public and that's really what we're focused on. We know in the current environment people care deeply about dividend stability and we like to make sure that everybody understand that the dividend has been well covered and that our intent is to continue doing that and that's what I think Slide 4 in our presentation is intended to do. You know, a we talk with our board and think about whether it makes more sense to do special dividends going forward or to pay the excise tax and keep it, it's an ongoing discussion that we have. You know, I think there are questions about, and everybody has different views how much the special dividends are valued, in the current environment where we're seeing g lot of opportunities, and it's harder to grow given where share prices are trading, keeping capital in and paying the excise tax seems to be fairly efficient for us. And so, you know, our goal is to focus on the long-term value and the dividend stability having access to capital in effect for the excise tax price in the current environment seems to make a lot of sense but that's something that we'll continue to assess with our board of directors going forward.

That's great color, thanks Howard.

Thank you for the questions.

Our next question comes from Christopher Nolan of SBR & Company, your line is open.

Hey guys, you typically have a fourth quarter seasonality to your investment volumes. Is that -- do you expect that to occur again this year given where the capital ratios are?

You know it's -- you point out something that I think has been the case for the last couple of years. You know, I think if you asked us if we view our business as seasonal, we wouldn't necessarily view it that way. I think there is a good pipeline. A lot of these deals close and are, as Howard points out, are usually lumpy and it's a little bit of a happenstance. You know, rather than looking at it as seasonal, we do see a good set of opportunities. We think the pipeline is strong. We would like to close on the ones we can with the capital we have and provide the solution, you know, as I've mentioned in the past Q&A, just over the past Q&A, so I don't know if I would call it seasonal versus it's been pretty consistent over the last several quarters and into last year in terms of the size of the deployment so I think we view it consistently, I wouldn't necessarily characterize it as seasonal.

We do take great pride though in being around at the end of December and at the end of August and have seemingly closed a disproportionate number of deals then when other people aren't around.

Well, I guess Howard or Raj, the real question is, do you have enough capital, you know, for all of the quality deals that you're seeing?

You know, fortunately we have a broad platform here and so we are able to provide solutions to our borrowers with both our private funds and TCPC. And, you know, historically TCPC has grown through equity issuances. We've made very clear to people that we will only do those if we think they're long-term beneficial to the shareholders and accretive. You know, given where the whole sectors been trading recently, we don't think equity issuances have been advisable and that really hasn't been our focus. And so we are balancing the capital that we have today within the leverage that we have and doing things that make sense and fortunately we can provide solutions for our barrowers in other parts of our organization so that may mean that some of the deals we're doing in TCPC are taking a smaller allocation and it may mean that at the moment we're doing fewer of them but that's also a function of pay downs and repayments which historically have been very lumpy and we expect them to continue to be lumpy, that's our business.

But because we amortize the upfront fees overtime, when we get a repayment, you know, it often can be quite significant in terms of earnings and also free up a bunch of capital and so I wouldn't assume necessarily that the status quo at the end of 9/30 is where the balance sheet winds up. It is organic, it does move around but I also wouldn't say that this Q4 has been unusual as some fourth quarters have been, you know, when there have been tax related transactions or other things that have really moved the market. You've got a lot of dislocation in the traded markets. I would say the private middle market is functioning better and not really nearly as impacted by that as it has been at some times but we've got robust deal flow and we're going to continue to provide solutions to borrowers and do good deals as we see them.

Final question, your stock prices now are $15.24 so it's above that per share, congratulations.

Thanks.

This expansion continues and you continue to trade at a decent premium to NAV. Would you consider the equity rate --

You know, over time our goal is to provide accretive long-term returns to our shareholders and do so in a manner that benefits them over the long-term. Every time we've raised equity, it's been well above NAV and of course it's nice to grow and it -- being larger enables us to do more things for borrower although given the size of our overall firms platform, we're able to do a lot of execution now and so if it becomes appropriate at the right time, in the future, we certainly would look to expand but at the moment we're really focused on doing is long-term results for shareholders and anything we do on the capital side of the balance sheet needs to satisfy those criteria.

Okay, thank you for taking my questions Howard.

Thank you.

Thank you, our next question comes from David Chiaverini of Cantor Fitzgerald, your line is open.

Hi, thanks. My question relates to book values. It was great to see book value flat in the quarter. I'm curious about the drivers behind that. You mentioned gains and specific assets, could you talk about what industries you saw strength and the fundamentals underlying those companies?

Well, I'll answer that just from a balance sheet perspective or from an accounting perspective and then I'll let Howard or Raj talk about the industries. We were pleased to see -- there was -- there were some markdowns across the portfolio just based on increasing yield spreads during the quarter and we certainly saw some of those. Fortunately we had a number of positive events in a number of our investments during the quarter that largely offset that. As you know, the net decline on a realized, non-realized basis was only $2 million and the NEXTracker, which was a net $2 million, we had the AGY pop up $4 million and we had a number of other, a diverse number, of other assets that also had some valuations and these were valuations affirmatively done each quarter by using external sources.

So we were pleased to see some stability in the balance sheet from that perspective. It really wasn't an industry story, it was a company specific story. The macro-factor, as Paul pointed out was yield spreads widened and had we had no other changes we would have had a marked down balance sheet. Many names in the portfolio simply widened not on a credit basis but because of the ways the marks are done. But we had a few situations in which we had company specific events including the large realization in NEXTracker that really weren't related to the industries; simply these were good companies with improved situations in which on a realized and unrealized basis, you know, we had gains in the position but in none of those cases was it really about an industry rend, it was really a series of company-specific events.

Got it, hope it continues. Thanks very much.

So do we, thank you.

Thank you, our next question comes from Chris York of JMP Securities, your line is open.

Morning, or afternoon. Listening to the call and discussions on limits and available capital at TCPC and the flow of new deals, is it reasonable for us to expect that syndications and maybe syndication fees could show up within the vehicle at TCPC?

I think you have a little bit of a scratchy line Chris, but I think I heard the question of, do you expect to see more syndication fees showing up at TCPC, is that correct?

Yeah, that's the gist of it.

Yeah, so let me address that and others can chime in as they see fit. You know, we are not changing our business model. I know a lot of folks, some of the larger folks, have moved to more of a syndication oriented model and we'd like to underwrite and retain our risk. We just believe that's the best way to, you know, underwrite from a perspective of owning the risk versus selling it. Occasionally you will, as you have recently, you will see some syndication fees and by that, when we do that, really we are clubbing a deal or leaving a deal and we feel it's appropriate for the work we've done in sourcing it and doing some diligence and in sharing some perspective to get paid for it but that's, I think, the exception to the rule versus our typical focus of underwriting a deal, getting issuance discount and getting the right structure, you know, and reward, contractual and otherwise, for the business.

So I think to answer your question, it will -- you know, there's a chance that it will happen occasionally but from a point of view of a trend or a change in the business model, I wouldn't extrapolate to that at this stage in our business.

Got it, that makes sense. That's it for me, thanks for the color Raj.

Thank you, I'm not showing any further questions in queue at this time. I'd like to turn the call back over to management for any further remarks.

Thank you, we appreciate your questions and our dialogue today. I'd like to thank our experienced dedicated and talented team of professionals at TCP Capital Corp. Thanks again for joining us. This concludes today's call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a wonderful day.