BlackRock TCP Capital Corp (TCPC) 2021 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon. Welcome, everyone, to the BlackRock TCP Capital Corp.'s Second Quarter 2021 Earnings Conference Call. Today's conference call is being recorded. (Operator Instructions)

And now I would like to turn the call over to Katie McGlynn, Director of the BlackRock TCP Capital Corp. Global Investor Relations team. Katie, please proceed.

Thank you, Matt. Before we begin, I'll 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 may 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. Earlier today, we issued our earnings release for the second quarter ended June 30, 2021. We also posted a supplemental earnings presentation to our website at tcpcapital.com. To view the slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today.

I will now turn the call over to our Chairman and CEO, Howard Levkowitz.

Thank you, Katie. And thank you all for joining us today. We appreciate your continued interest in TCPC, and we hope you are safe and well. There are several members of the TCPC team on the call with us today, including our President and Chief Operating Officer, Raj Vig; and our Chief Financial Officer, Erik Cuellar.

I will start with a few highlights from the second quarter. Raj will then provide an update on our portfolio and investment activity. Next, Erik will review our financial results as well as our capital and liquidity positioning. After that, I will provide some closing comments before opening the call to your questions.

Beginning with highlights from our second quarter. TCPC delivered another strong quarter of results driven by a meaningful increase in the value of our portfolio investments, which drove significant net asset value growth as well as outstanding credit quality and robust deployment. In the second quarter, our net asset value increased 4.8%, and year-over-year net asset value is up 16.4%. This is our fifth consecutive quarter of net asset value increases and builds on the positive net asset value accretion we had during 2020, a result of which we are extremely proud. As Erik will discuss in more detail, the increase in net asset value in Q2 was primarily driven by a $41 million unrealized gain on our investment in Edmentum, together with more modest increases in value across the portfolio.

Net investment income in the quarter was $17.8 million or $0.31 per share, which again exceeded our dividend of $0.30 per share. Our credit quality remains solid with loans to just 2 portfolio companies on nonaccrual, totaling 30 basis points of the portfolio at fair value and 70 basis points at cost. As Raj will discuss in more detail, we had significant gross deployment activity in the second quarter, and we increased a number of our investments by 10% to 108. While the market environment remains competitive, we continue to benefit from the relationships we've developed over more than 2 decades of lending to middle market companies as well as the extensive resources of the BlackRock platform that provide our team with attractive investment opportunities.

We also continue to seek ways to enhance our strong balance sheet and liquidity positioning. In June, we amended the SVCP credit facility. As part of the amendment, we extended the maturity 2 years to May 2026 and lowered the stated rate from LIBOR plus 2% and to LIBOR plus 1.75%. Despite the volatility that occurred in 2020, TCPC delivered strong results for shareholders over the past year as we've done throughout our nearly 10 years as a public company. Throughout this period, we have generated a 10.9% return on invested assets and a total cash return of 9.7%, while also outperforming the Wells Fargo BDC Index. Three years into the TCP acquisition by BlackRock, we are fully leveraging the strength and unparalleled scale of the BlackRock platform to build upon TCPC's performance track record. In view of these accomplishments, 2 months ago, I announced my plans to retire from my position as Chief Executive Officer of TCPC effective August 5 and as Chairman of TCPC effective September 30. I will remain at BlackRock through year-end. I'm extremely proud of the deep bench of talent that we have developed over 2 decades at TCPC and now BlackRock, which allows for a smooth transition. Raj Vig will succeed me as CEO and Chairman; and Phil Tseng will be appointed President and COO. Raj, Phil and I have worked together for more than 15 years, and together, we built an industry-leading private credit platform. Raj and Phil are also co-heads of the BlackRock U.S. Private Capital team. They have been instrumental in the integration and growth of our team at BlackRock and are well equipped to continue to build upon TCPC's successful track record. In addition, I would like to congratulate Erik Cuellar on his appointment as CFO, a position for which he is extremely well prepared after serving as TCPC's Controller since 2011. Erik has assumed this position seamlessly. Additionally, Kathleen Corbet announced a retirement from the TCPC Board effective today. Kathleen has been an invaluable member of the board, and we thank her for her tireless service on behalf of TCPC's shareholders.

Now I will turn it over to Raj to discuss our portfolio positioning.

Thanks, Howard. Let me first take a moment to recognize Howard's significant contributions to our team and to TCPC. Howard has been a well-recognized leader in our industry and a key architect in building what is now the U.S. Private Capital business at BlackRock. Phil and I greatly appreciate our long-standing partnership with Howard, and we are extremely proud of the team of talented investment professionals we have attracted and developed. Also, I greatly appreciate the Board's confidence in appointing me as Chairman and CEO along with Phil and the rest of TCP's leadership team, I look forward to continuing our track record of success.

Now turning to our portfolio positioning and investment activity during the second quarter. At quarter end, our portfolio had a fair market value in excess of $1.8 billion and an increase of nearly $100 million from the prior quarter. 88% of our investments are senior secured debt and are spread across a wide range of industries, providing portfolio diversity in minimizing concentration risk. Our portfolio is also weighted towards companies with established business models in less cyclical industries. The portfolio remains diverse at quarter end and was made up of investments in 108 companies. As the chart on the left side of Slide 6 shows of the presentation, our recurring income is spread broadly across our portfolio and is not reliant on income from any 1 company. In fact, over half of our portfolio companies each contribute less than 1% to our recurring income. 87% of our debt investments are first lien, providing significant downside protection and 94% of our debt investments are floating rate, positioning us well for when interest rates eventually rise.

Moving on to our investment activity. In our view, many of the competitive market dynamics that existed prior to the pandemic have resurfaced. However, an increasing number of middle market companies continue to seek private credit solutions due to their more tailored and flexible financing options, leading to investment opportunity. We continue to source a wide range of investment opportunities, leveraging the relationships we've developed over 2 decades, our deep industry expertise and the breadth and depth of the resources available to us across BlackRock's global credit platform. While we have been actively deploying capital in this market, we've always maintained a disciplined approach to investing, and while we regularly review a substantial number of opportunities, we end up investing in only a small percentage of that. Investment activity in the second quarter was robust. We invested $236 million primarily in 19 investments, including loans to 16 new portfolio companies and loans to 3 existing companies. Follow-on investments in existing holdings continue to be an important source of opportunity for us, accounting for more than 1/3 of our total investments over the last 12 months. From a risk management perspective, these are companies we already know and understand well. As we analyze new investment opportunities, we continue to emphasize seniority in the capital structure, portfolio diversity and transactions where we act as lead or co-lead. Our largest investment during the second quarter was a first lien loan to Pluralsight, an enterprise technology learning platform that designed and provides training software and services for software developers. While our investment was part of a larger total loan than our typical investment, Pluralsight presented a compelling opportunity to invest in a strong and growing business. The company has a solid existing customer base that provides visible recurring revenue and cash flows and strong support from a well-established equity sponsor. Our second largest investment in the quarter, KeepTruckin, leveraged our team's venture lending capabilities and relationships. Founded in 2013, KeepTruckin provides video safety, compliance and fleet management solutions for transportation and logistics companies. Our team worked directly with management to provide the entire first lien financing. New investments in the second quarter were partially offset by dispositions, totaling $185 million. These included the maturity and repayment of our loan to Dodge Data as well as pay off to our loans to Arotech, Greystone and Auto Trakk. The overall effective yield on our debt portfolio was 9.3% as of June 30, and investments in new portfolio companies during the quarter had a weighted average effective yield of 8.8%, modestly below the 9.2% weighted average effective yield on dispositions during the quarter. Since December 31, 2018, LIBOR has declined 265 basis points or by 95%, which has put pressure on our overall portfolio yield. However, 80% of our floating rate loans are currently operating with LIBOR floors. And given that 94% of our loans are floating rate, we are well positioned to benefit when rates eventually rise. We continue to invest selectively, maintaining our discipline and focusing on companies with established business models that are well positioned in the current economic environment. Our activity in the third quarter to date totals approximately $61 million primarily in 5 senior secured loans with a combined effective yield of approximately 9.1%. The yield on investments in our pipeline are generally in line with our current portfolio. And to date, we have had limited prepayment income in the third quarter.

Before turning the call over to Erik, I would like to congratulate him on his well-deserved promotion to CFO. Erik has been an instrumental part of our finance team and his promotion is a recognition of his significant contributions as TCPC's Controller over the past 10 years. I very much look forward to working with Erik in his new role. Erik?

Thank you, Raj. I appreciate that.

Turning to our financial results for the second quarter. We generated net investment income of $0.31 per share, which exceeded our dividend of $0.30 per share. We're committed to paying a sustainable dividend that is fully covered by net investment income as we have done every quarter since our IPO in 2012. Today, we declared a third quarter dividend of $0.30 per share.

Investment income for the second quarter was $0.72 per share. This included recurring cash interest of $0.61, recurring discount and fee amortization of $0.03 and PIK income of $0.02. Notably, PIK income is at our lowest level in more than 3 years. As a reminder, our income recognition follows our conservative policy of generally amortizing upfront economics over the life of an investment rather than recognizing all of it at the time the investment is made. Investment income also included $0.01 of other income, $0.03 of dividend income and $0.03 from accelerated OID and exit fees. Dividend income in the second quarter included $1.1 million or $0.02 per share of recurring dividend income on our equity investment in Edmentum. Operating expenses for the second quarter were $0.33 per share and included interest and other debt expenses of $0.19 per share. Incentive fees in the quarter, which included $0.6 million of previously deferred fees totaled $4.5 million or $0.08 per share for total net investment income of $0.31 per share. As we have previously noted, we voluntarily deferred incentive fees related to our income from 2020 over a period of 6 quarters, with the final amount to be recognized in the third quarter of this year, subject to our cumulative performance remaining above the hurdle.

Our net increase in net assets for the quarter was $55 million or $0.95 per share, which included net unrealized gains of $37 million or $0.65 per share and net realized losses of $0.2 million or less than $0.01 per share. Unrealized gains primarily reflected a $40.7 million gain on our investment in Edmentum as a result of an additional equity investment committed to the company in the second quarter. Edmentum continues to benefit from the dramatic increase in demand for online education. The additional equity investment also resulted in the sale of approximately 1/3 of our investment in the company post quarter end. Unrealized gains in the second quarter also reflected overall spread timing and continued market recovery as well as improved investor sentiment following the significant market dislocation in the first half of last year as a result of the pandemic. Unrealized gains were partially offset by the reversal of $7.6 million of unrealized gains on Amteck and $5.3 million in unrealized losses from Fishbowl. Fishbowl provides marketing software and services to restaurants and is our only direct exposure to the restaurant industry. Given Fishbowl's exposure to this industry, the company has been slower to recover. Substantially, all of our investments are valued every quarter using prices provided by independent third-party sources. These include quotation services and independent valuation services. And our process is also subject to rigorous oversight, including backtesting of every disposition against our valuations. Our overall credit quality remains strong, as Howard noted, with nonaccrual loans limited to just 2 portfolio companies that represent just 0.3% of the portfolio at fair value and 0.7% at cost at June 30.

Turning to our liquidity. We ended the quarter with total liquidity of $373 million. This included available leverage of $389 million, cash of $18 million and net pending settlements of $34 million. Unfunded loan commitments to portfolio companies at quarter end equaled 5.8% of total investments or approximately $105 million, of which $35 million were revolver commitments. Our diverse and flexible leverage program includes 2 low-cost credit facilities, a convertible note issuance, 3 straight unsecured note issuances and an SBA program. And subsequent to quarter end, we received an additional $10 million in capacity from the SBA. Our unsecured debt continues to be investment-grade rated by both Moody's and Fitch. Additionally, given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing, and our maturities are well laddered. Our nearest maturity is March of 2022. And given the success of our latest bond issuance earlier this year, we are very well positioned to redeem or refinance those notes. Combined, the weighted average interest rate on our outstanding liabilities decreased to 3.48% from 3.54% at the beginning of the year.

And with that, I'll turn it back over to Howard.

Thanks, Erik. In closing, I would like to thank our entire team for their hard work and dedication over the years. I'm incredibly proud of the team and the company we've built. I would also like to thank our investors for their trust and support over the years. As many of you know, TCPC's predecessor vehicle dates back to 2000, 21 years ago, and I'm grateful and appreciative that a number of those investors are still invested in the funds today. The results we have delivered for our shareholders over the years have truly been a team effort. Raj and Phil have both worked alongside me for more than 15 years, and most of our senior investment professionals have worked with us for well over a decade. I have every confidence in this team going forward and their ability to continue to deliver the results that TCPC shareholders have come to expect.

And with that, operator, please open the call for questions.

(Operator Instructions) Our first question will come from Robert Dodd with Raymond James.

First, yes, I'd like to say thanks to Howard, probably a decade of help in understanding the space and good luck with whatever your future endeavors are. So thanks for all the assistance over the years on that one, Howard. And then just on -- to the question, I mean, just competitively, obviously, a very, very active second quarter, more active in the second quarter than the fourth quarter last year, which is kind of a theme we're seeing. Is that the result of that activity or as a consequence of that, is competition shifting materially? Obviously, spreads have come back to kind of pre-COVID, but anything else on terms or general dynamics, given we've got an extremely active both on, obviously, the origination opportunities, but the amount of capital chasing. Any color you can give us there?

Sure. Robert, thank you for your comments. First of all, I've truly enjoyed the relationship as well. Let me say a few brief things, and then I'll turn it over to Raj to respond further. Our origination activity has always been somewhat lumpy. We have a platform that's diverse, that's industry-focused that creates a wide variety of opportunities in all environments, good markets, bad markets, and I think that's one of the things that has distinguished our business. Clearly, we benefit also from being part of the larger origination platform here at BlackRock. But we've been able to generate deal flow in all kinds of environments. Raj would probably -- it would be helpful if you add some things specifically about the competitive environment we're seeing today, but I do think it's important to remember that we have this diversity of origination streams that I think are a little bit distinct from many of the others in the business.

Yes. And I'd echo, Robert, your thanks to Howard again. And appreciate your comments. But let me just touch a little bit more on the competitive environment. I would say the fact that it's competitive is not new. I think that's been the case as people have been attracted to the returns in the opportunity set. I do think though that the -- what it takes to compete, particularly at this level and to be maintaining or improving the position as a fulsome solutions provider that people can go to for their needs. Even if you don't end up doing the deal on your own, being positioned to be able to do that and provide a solution is as important as it's ever been, maybe more important. Part of that means you need to have the right capital base. Part of it means you really need to be able to move quickly, the velocity of transactions seem to have picked up as well as the interest level. And given our approach, we've always taken the approach of coming at it from an industry point of view, having a broader platform and the ability to provide a fulsome solution isn't necessarily different, but it perhaps may be more important. And there is an ability for -- even though there's more competition, not everyone can do that. And I think that does lead to an ongoing opportunity set that we're excited about. So hopefully, that provides some more color. But this quarter was a good -- I think good evidence of being able to do that given where we were a sole lender or maybe part of a small club that is the overall characteristic of our investment activity. And I think that does result from being well positioned in that context that I just laid out.

Understood. And kind of if I can follow up to that in -- I mean to Howard's point, like you've typically had maybe a wide funnel than a lot of others. You do a lot of things beyond claims in our cash flow lending. You've got asset backed, et cetera. Would you expect if the level of competition stays enhanced with all the caveats that you added, right, would you expect to maybe element -- a greater element of your portfolio to come from those differentiated channels rather than just doing, for lack of a better term, a vanilla cash flow lending club deal. Would you expect to utilize more of your differentiated channel? Or do you expect it to kind of just stay the same?

I think it's hard to say. I think our focus has always been on -- we really are channel agnostic. So if that happens, I believe we're well positioned because we do cover the industries themselves. We have good coverage of private equity folks that we work with, not everyone, but the ones we work with, we do a lot of repeat business. And then we find pockets of value when those arise like the ARR deals. We were early in that space. The ABL, or asset-backed structures, where it's appropriate, we're open to that. So it's hard to predict that becomes the mainstay. I think rather than trying to predict it or being smart enough to predict that, we want to be positioned to take advantage of wherever those deal flow comes from and approaching things with an industry lens and being very cognizant of what we think. What risk and reward work for us should helpfully let us take advantage of a wider funnel wherever the concentration occurs on a go-forward basis.

Our next question will come from Finian O'Shea with Wells Fargo.

I'll first echo Robert's congratulatory -- and I appreciate your comments on your leadership, Howard, for the BDC or I'll add one on there. You were one of the -- part of the pioneering group of the credit lookback that now your peers proceedingly must adopt. We very much appreciate that. I'll -- and I'll move on to a couple of questions. Also sort of in the discussion of growth in origination and so forth. First of all, I wanted to ask sort of on the fundraising side. A couple of -- a couple of the large alternative managers. I think BlackRock is trying to be a large alternative manager as well, in some sense, are really stepping up the fundraising gains into the retail channels, and that's really driving a lot of this competition. Do you believe or in your -- of you should and will BlackRock be entering into that sort of fundraising races we see is really stepping up at this time?

Fin, thanks for the comments, both personally and I think much more importantly, for what we've done institutionally with respect to the look back. For those of you who are newer to joining us, when we took TCPC public, it was a private investment vehicle, and we left in place its institutional structure with respect to look back. It's something we're very proud of and believe in. With respect to competition in the industry, they are constantly new sources of people coming into this business. The public vehicles, private vehicles, registered vehicles, unregistered vehicles; different sources of investors: domestic, foreign, institutional, retail. I think your comments and questions around the push by other people into the retail or high net worth channel, are interesting. Obviously, as a global asset manager of BlackRock's size, we touch investors across every different aspect, and we're always looking to try and make sure we're doing the right thing for investors over time. With respect to TCPC, we think it provides a great opportunity for all investors, institutional and individual, and those who need daily liquidity as well as those who have been with us for now 2 decades to get that product, and we'll continue to probably see people offering different things in different channels, but we're really focused on making sure that we can do the right things for our investors in TCPC.

Okay. That's helpful. And I'll just do a small follow-up. I think Erik gave some color on Edmentum first quarter. Are you able to tell us if your exit related to debt or equity or both?

Sorry, can you repeat that? You faded a little bit. I think you asked about Edmentum and the exit, and what the exit was comprised of?

Yes. Did you get out of debt or equity for your book?

Yes. It was all equity at the -- we only are invested in the equity at this point since the beginning of last quarter.

Yes. Just to be clear, the -- when we did the original transaction, we had -- when the sponsor came in, we -- post that time, we've only been in equity. The balance sheet was refinanced. And to Erik's point, that sell-down was of that equity position.

Our next question will come from Ryan Lynch with KBW.

I just want to congratulate or give Howard you the best wishes. I really enjoyed working with you over the years. And congratulations to you, Raj, on the promotion. Following up on Fin's question regarding Edmentum, can you repeat your commentary, I believe you said you had a $1.2 million of recurring income in the second quarter-over-quarter from that investment. Can you talk about -- was that a nonrecurring item? Should we expect future income from Edmentum? And then how does that look regarding post sale of a portion of your position as well as on top of that, when you sold down 1/3 to your position, how did that amount come about? Why was it not a full exit or one you guys not just took with all? Why did you guys just kind of rightsize it down to just selling off 1/3?

Sure. I'll address -- this is Erik. I'll address the dividend question first. It is recurring dividend income. We actually were invested both in the preferred equity tranche and then the common equity as well. And as you recall, last quarter, we had a somewhat elevated level of dividend income, but this was more normalized recurring. But as you mentioned, we did sell down a portion of that equity position.

Yes. And let me pick up on that. So as Erik mentioned, the nice thing is we -- this comes as a result of a nice run-up in the valuation and also a realized exit in part at those elevated valuations. The benefit here is we can take that -- those proceeds and obviously redeploy it into our more normative investment profile for interest income. We do believe, obviously, as part of a sell-down that it was important to manage our position size. Being an equity owner of a business is not the normative strategy doing so as a way to really fully realize the work effort and the benefits of that work, and the position was part of the sell-down philosophy. But at the same time, we are still excited about the business. It's well positioned. There's been a lot of work to get it to where it is today. I do think there is ongoing positive wins end of sale, so to speak, for the business. You have new institutional investors, who have come in as well as part of this transaction. So we want to be a part of that success on an ongoing basis, but we want to balance it with what the core part of the strategy is as well as managing a diverse -- and well diversified book with the growth in that position. And that is sort of the combination of things that led us to partially exit -- take some chips off the table, but also be a part of the future success of the business.

Okay. Understood. And then I believe you mentioned of your new originations this quarter, 16 came from new portfolio companies and 3 came from existing. If that is correct, it feels like a lot of direct lenders over the past year have been leaning more into existing portfolio companies as they find additional capital deployment. You all, and again, I don't want to draw too many closures out of 1 single quarter because I know things can fluctuate, but you kind of flipped that trend this quarter really focusing a lot on new portfolio companies for deployment. So how about you share any commentary on why there was kind of such a large number of new portfolio companies this quarter versus the existing?

Ryan, thanks for the follow-up and also thanks for your initial comments. Truly, I have enjoyed working with you as well. I'm going to let Raj give you a little bit more granularity, but would like to emphasize your statement, which is don't pay too much attention to a single quarter. For a number of years now, we've talked about the fact that we have the benefit of doing a significant part of our business with existing borrower relationships and that has been running well over half. So the fact that for a particular quarter, there's a slightly different relationship is, in our view, not indicative of a new trend. It's simply a small set of datasets this quarter. We continue to benefit from having these long-term robust relationships with lots of existing companies across a lot of industries, and it's a very important part of our deal flow.

Yes. I mean, I think just to reiterate, Howard's usual commentary about no single quarter is indicative of a trend, we're going to keep that radiology even as we depart, but it's true. I mean there is no single quarter or quarterly period, I think, typifies the trend. I would highlight or reiterate that over the past year or so, about 1/3 of our investment activity has come from the existing portfolio. And I think that is really the message that at a level where you have a mature portfolio and business model, there is a benefit from the existing relationships and the existing portfolio itself to self-generate leads. And we have seen that with more consistency versus the data point of this quarter. And I expect that would continue just given how we view the pipeline, the performance over the last year and just a general level of maturity in our business.

And Ryan, I'll just add a little bit of color on the activity post quarter end. We mentioned we've done 5 deals in excess of $60 million and 3 of those 5 were to existing portfolio companies.

Okay. Understood. Yes. And I totally understand that the -- one quarter doesn't make a trend, but it was just a little bit unusual when it sounds like things are probably revert back to normal going forward. So those are my questions. I appreciate the time for that.

Our next question will come from Devin Ryan with JMP Securities.

Devin has dropped off.

Our next question will come from Christopher Nolan with Ladenburg Thalmann.

Howard, I want to congratulate you on your move and you are definitely a class act in the BDC world and you will be missed. And I want to say Raj, Erik and Phil, congratulations on your new promotions. Raj, is there going to be any sort of strategy in terms of shifting to other types of industry groups than what we've seen before?

I would say at a high level, no, not really. I think what we like about the business and the experience we've had to date is that I believe what we do and where we focus works. Certainly, 2020 was a great, very good validating time frame to be defensive. Occasionally, we see opportunity in businesses that perhaps are a little more cyclical than what we typically invest in. But there, oftentimes, we are focusing more on an asset base for collateral mitigating that business dynamic. But to answer your question, sort of in a more succinct way, I don't see -- we would not anticipate a big change in the strategy, although we're always very open to being -- open to good opportunities where they come from.

And I guess as a follow-up, I mean, given that your cost of capital is going down, especially with that latest bond raise, are you finding that you're able to compete more attractively on price but make it up on better terms and conditions?

We -- i think that's a good outcome of a lower cost of capital on the financing side. But to be honest, when we look at our investing activity or make our underwriting decisions, we are bifurcating that from the financing decisions. So we really want the investment to work on an unlevered basis for the perceived level of risk. And then the financing is more portfolio management versus creating an investment capacity where it may or may not work otherwise. So I think it's something we will be opportunistic about, but I would keep that viewpoint that it's separate from the investment decision.

Our next question will come from Derek Hewett with Bank of America.

I also want to congratulate Howard on your pending retirement. And then also Raj, Phil and Erik on your new roles. So it's been about 3 years now, on the BlackRock platform. So what percentage of the current portfolio are co-investment opportunities with BKCC at this point? And maybe could we kind of compare it to maybe 1 year ago?

I would say -- so keep in mind, BKCC is under our co-investment order. So by definition, from the day we started to today, it will be a higher percentage. We don't disclose the percentage of the overlap, but just logically, that activity has obviously been a function of the requirements of that order. But -- I'm sorry, the second part of your question was?

Just comparing it like from 1 year ago, but I think you already answered it.

Yes. So I would say, going back to the beginning of our transaction, clearly higher. Going back a year ago, again, being constrained by disclosures, I wouldn't want to make that comment.

Derek, let me just maybe add 1 thing on to what Raj is saying, which is we have had exemptive relief for over 15 years. So long before we became part of BlackRock and clearly being part of BlackRock, there are a lot more opportunities and entities. But we have, for a very long time, and certainly long since before TCPC was public, functioned in a way that we were investing across our various vehicles and had the benefit of being able to do that. So this is nothing new. It's expanded but not new or different.

Our next question will come from Devin Ryan with JMP Securities.

Howard, again, best wishes on future endeavors. And Raj, congratulations, great to see the continuity of the strategy. So looking forward to working more with you. In terms of the first question and a little bit of a follow-up just on the competitive dynamics that you guys are seeing. Clearly, the pendulum swung out during the pandemic with the dislocation in the markets. And created maybe some outsized opportunities at the moment. But as the pendulum has been coming back to the middle as macro stress is eased, does it feel like we're hitting kind of that point of equilibrium just given the capital and competition you're seeing in the market? Or do you think that we can actually see more compression just given that kind of elevated level of capital in different providers stepping into the market.

Yes. I mean I'll take -- try to take that and ask Erik to add any comments. I don't know if the phrase "equilibrium," whether it's since 2020 or since I joined over a decade and half ago, it feels like it's -- this is a very consistent level of activity. It's just a question of what that activity looks like. I also want to be careful and avoid making any broader market comments because where we position, where we look for deals, we tend not to be just searching the broader market. And so our dynamic is really defined by our pipeline and where we're sourcing our deals from which may not be as reflective. But I think in terms of our deals and just the activity level, it feels -- it clearly feels like things have recovered in activity. As we mentioned in the earnings script, terms and what people are looking for has certainly retraced their character to pre-pandemic levels and asks, if you will. But at the same time, we're also saying no to lots of deals and focusing on the ones that work for our portfolio and our business. So whether it's an equilibrium in the market or it's something that's going to have additional compression, what we will do is really what we feel works for us, where we can get the right terms and pricing, where we can stay disciplined and do the right work. And that may or may not coincide with the broader market, but I do think we've seen a good stabilization in our portfolio. But LIBOR has been a very different dynamic that we've had to sort of account for -- And that may mean more deal activity, it may mean less, but we're just going to focus on our pipeline and the things that we can control.

Okay. Terrific. Great color. And then a follow-up, just looking at the overall asset mix of the portfolio, you clearly benefited from strong performance on the equity side and I believe equities are now 11% of assets after the Edmentum sale. So it would be great to just get a little color on how you're thinking about the asset mix moving forward. Do you think that we should expect to see more monetization of the equities positions, so maybe that mix moves back to where it was pre 2020, which I believe was in kind of mid-single-digit level of the overall portfolio.

Yes. Look, we are -- in a credit business. We are focused on credit instruments. It is the primary strategy. Where we have equity, it's a function of either some ability to have warrants or things that convert into that or it's a function of something like Edmentum where the path to defending our capital is defined by converting to a different instrument, which is really the exception, not the rule. Fortunately, those -- a number of those have worked out, in some cases, very well. But I would say in terms of normal course activity, you should expect this to be a debt -- primarily a senior secured debt portfolio. Occasionally, as things need a little bit of different type of work or activity that may result in equity, but that is really not the primary focus. That is a function of protecting the portfolio versus deploying it in an original investment.

This concludes our question-and-answer session. I would like to turn the conference back over to Howard Levkowitz for any closing remarks.

We appreciate your questions and our dialogue today. I'd like to once again thank all of our shareholders for your confidence and your support. I would also like to again thank our experienced and talented team of professionals at BlackRock TCP Capital Corp. for your continued hard work and dedication. Thanks for joining us today. This concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.