BlackRock TCP Capital Corp. (TCPC) Q1 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, good afternoon. Welcome everyone to the TCP Capital Corporation First Quarter 2017 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 Corporation, 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. This morning, we issued our earnings release for the first quarter ended March 31, 2017. We also posted a supplemental earnings presentation to our website at tcpcapital.com. Click on the Investor Relations link and select Events and Presentations. We will refer to the slide presentation throughout today’s call. I will now turn the call over to our Chairman and CEO, Howard Levkowitz.

Thanks, Jessica. We would like to thank everyone for participating on our call today. I’m here with our TCPC team. I will begin the call with an overview of our first quarter performance and investment activities, and then our CFO, Paul Davis, will review our financial results. After Paul’s comments, I will provide some perspective on the market and then we will take your questions. I will begin with the review of our first quarter highlights. We had a strong quarter of originations of $140 million, compared to $114 million for the same quarter last year. And we increased the percentage of floating rate instruments in our portfolio to 83% of our total debt investments. Dispositions for the quarter were $117 million, resulting in net deployments of $23 million. As shown on slide four, we earned net investment income of $0.38 per share covering our dividend of $0.36 per share as we have done each quarter since our IPO in 2012. And today, we declared a second quarter dividend of $0.36 per share. Turning to slide five, our NAV increased to $14.92 at March 31st from $14.91 at year-end. Also on slide five, you can see that our cumulative dividends plus NAV appreciation have generated a NAV basis total return on our initial IPO of over 50% through March 31st. Turning to slide six, on a market value basis, our cumulative dividends plus market appreciation have generated a total return of 89.3% over the same period. Our Board of Directors last week renewed or $50 million share repurchase plan in the events our shares trade below NAV. Additionally, in March, the Board elected a new independent Director, Kathleen Corbet to the TCPC Board. Kathleen has an impressive background in the financial services with significant leadership operating, corporate governance expertise. We are honored to have her join our team. Finally, subsequent to our quarter-end, we closed a follow-on offering of 5.75 million shares at $16.84 per share. For those viewing our presentation, please turn to slide seven. At the end of the first quarter, our highly diversified portfolio had a fair market value of approximately $1.32 billion invested in 88 companies across numerous industries. Our largest position represented only 3.5% of the portfolio; and taken together our five largest positions represented only 15.4% of the portfolio. As you can see on slide eight, at quarter end, the vast majority of our debt was senior secured and as shown on the chart at the bottom of the page, 83% of our debt was floating rate. To the extent that LIBOR continues to increase, we anticipate benefiting from higher interest rates in future quarters as our floating rate instruments reset. Many of them are already above their interest rates floors. Turning to slide nine, during the first quarter, we deployed $140 million of capital, primarily in nine investments, most of these investments were in senior secured loans. These included investments in four new companies and five existing portfolio companies. Our investments in existing portfolio companies continue to be an important source of ongoing investment opportunities and are a reflection of our strong relationships and the value we deliver to our borrowers. Our top five investments in the first quarter reflect our commitment to maintaining a diversified portfolio and our continued focus on lending at the top of the capital structure. They include a $29 million senior secured loan to Pacific Coast Holdings, a lender to hospitals; a $24 million senior secured loan to KPC Healthcare, a predominantly physician owned and operated group of hospitals; and $18 million senior secured loan to Fishbowl, AAS provider that helps the restaurants leverage data to drive sales growth, $15 million senior secured loan to Kenneth Cole a branded apparel licensor or in retailer, and then $11 million senior secured loan to Tradeshift, a global enterprise procurement payables and supplier management platform. In the first quarter, we exited a $117 million in portfolio investments. These included the repayments of the $32 million senior secured loan to SoundCloud, a $17 million senior secured loan to KPC and a $13 million senior secured loan to Integra. New investments in the quarter had a weighted average effective yield of 10.9% and the investments we exited during the quarter had a weighted average effective yield of 10.8%. Given the competitive pricing environment, we are pleased to replace our investment exits with new investments at a slightly higher deal demonstrating the strength of our origination platform. Our overall effective portfolio yields at quarter-end was 11%. Now, I will turn the call over to Paul, who will discuss our first quarter financial results. Paul?

Thanks, Howard and good morning everyone. Starting on slide 11, net investment income after incentive compensation was $0.38 per share compared to our dividend of $0.36 per share. This continues our contiguous history of covering our dividend every quarter since the IPO in 2012. Since the IPO, we have out-earned our dividends by a cumulative $18.2 million. Investment income for the quarter was $0.74 per share, interest income comprise $0.73 per share of which recurring cash interest was $0.55, recurring PIK income was $0.07 and recurring discount and fee amortization was $0.05. The remaining $0.06 per share came from prepayment income including both prepayment fees and unamortized OID. We also earned $0.01 per share of other income. Our income recognition follows our conservative policy of generally amortizing upfront economics over the life of the investment rather than recognizing all at a time the investment is made. Operating expenses of $0.27 per share included interest and other debt expenses of $0.15 per share for net investment income of $0.47 per share before incentive compensation. Incentive compensation was $0.09 per share or 20% of our net investment income. As our all-in performance continued to exceed our cumulative total return hurdle of 8%. Net realized and unrealized losses of $0.5 million or $0.01 per share were comprised realized losses of $5.1 million and unrealized gains of $4.6 million. Realized losses came primarily from a $3.5 million realization on the restructuring of our loan to Avanti, a position from which we’ve already receive significant cash interest and a $1.5 million realized loss in the disposition of our investment in Integra. Although, I would note that our exit from this legacy position was well above its value at our IPO and then we’ve also receive very substantial amounts of cash interest from disposition since the IPO. Unrealized gains were primarily comprised of the reversal of previously recognized unrealized losses, plus market gains from spread compression, partially offset by $2 million markdown we took on Real Mex even as the restaurant operator continued to see same-store sales increase among other improvements. Our credit quality remains strong after placing our small term loan to Essex Ocean on non-accrual during the quarter. We had three non-accrual debt investments at quarter end representing the 0.4% of the portfolio at fair value. Turning to slide 14, we closed the quarter with total liquidity of $397.9 million, which included available leverage of $344.0 million, and cash and cash equivalents of $56.0 million less net pending settlements of $2.1 million. Available leverage includes the remaining $89 million available on our $150 million leverage commitment from the SBA. Regulatory leverage at quarter-end, which is net of SBIC debt was 0.70 times common equity or 0.63 times common equity net of cash and outstanding trade. Following quarter-end, we extended maturity of our TCPC Funding Facility from March 2020 to April 2021. We also issued 5.75 million new common shares at $16.84 per share, a substantial premium, which added over $0.13 per share on a net basis to our NAV. The offering raised $93.6 million net of offering costs, which we used to pay down our debt and which provides us with significant additional capacity to fund our strong pipeline. Given the premium at which our stock has been trading, we did not repurchase any shares under our share repurchase program during the quarter. However, as Howard mentioned, our Board nonetheless renewed the program again last week, which provides for repurchases of up to $50 million should our stock trade below NAV. At the end of the quarter, the combined weighted average interest rate on our outstanding debt was 3.99%. This reflects our TCPC Funding Facility, SVCP Revolver and term loan, each at a rate of LIBOR plus 2.5%, our convertible notes at 4.625% and 5.25%, and our SBA debentures at a blended rate of 2.58%. I will now turn the call back over to Howard.

Thanks, Paul. Our annual shareholder meeting is on May 25th and all of our shareholders are invited to attend. Consistent with the prior years and in line with many of our BDC peers, we’ve included our proxy of proposal for shareholder approval to issue up to 25% of our common shares on any given date over the next 12 months at a price below net asset value. The purpose of the below NAV issuance proposal on our proxy is to provide flexibility for potential future scenarios. It is basically an insurance policy our shareholders have approved every year since we went public. If this proposal is approved and we hope that it will be, no action would be taken unless our independent directors determine that issuing common shares below NAV would be in the best interest of shareholders. To be clear, at this point, we do not intend to issue equity below NAV and certainly not unless it is accretive to our shareholders. In fact, our share buyback program is designed to provide for accretive share acquisition if our shares fall below NAV. If you have not already voted, we encourage you to do so. I also would like to note that TCPC is proud of the quality and depth of our Board of Directors. The recent addition of Kathleen Corbet to our Board as an independent director further evidences our commitment to strong corporate governance. Kathleen also serves as the Lead Director of MassMutual Financial Group and has served in a number of senior leadership positions including President of Standard & Poor’s, and CEO of AllianceBernstein’s fixed income division. Now, I will briefly cover what we are currently seeing in the market. We continue to see strong demand for our lending solutions from middle market companies across a wide variety of industries. At the same time, we recognize that there are many new competitors, some of whom are being aggressive. We continue to take a highly disciplined and selective approach to new investments. And while we are passing on many opportunities, we have a considerable number of attractive opportunities in our pipeline that meet our standards. In the second quarter through last Friday, we have invested approximately $141 million, primarily in seven senior secured loans. The combined effective yield of these investments is approximately 9.3%. We’re pleased that several of these investments were funded through our SBA facility. It is still early in the quarter and our pipeline includes many transactions, so as we caution every quarter, please don’t annualize short-term results. TCPC has built 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 help significant asset coverage or enterprise value. Our co-investments exemptive relief from the SEC which was granted over 10 years ago enables us to co-invest alongside the private institutional funds we manage in order to provide comprehensive capital solutions to borrowers. This enables us to provide large borrowing solutions to TCP borrowers that our larger than TCPC could provide on its own. Looking to the future, our strategy remains the same, and we will continue to focus on effectively deploying capital from our diversified funding sources to optimize our portfolio, to preserve shareholder capital while maintaining a strong recurring earnings stream. We believe we are uniquely qualified for continued success for several reasons. First, our focus remains squarely on managing our portfolio to produce a consistent level of returns, which enables us to maintain our stable dividend. Our disciplined underwriting has helped us to maintain strong credit quality and to deliver consistent income and dividends to our shareholders. While we invest in many different industries and in companies we know and understand well, we continue to focus on companies with sustainable competitive advantages with significant cash flow and/or asset coverage or enterprise value. Second, our focus on senior secured loans, most of which are floating rate, has reduced our risk profile and enhanced our strong portfolio performance. This has enabled us to cover our regular dividend every quarter. Our portfolio is well-positioned for any meaningful increase in interest rates and even a 25 basis-point increase in rates would be accretive. Third, our low cost of capital and diverse funding sources continue to be competitive advantages for TCPC. TCPC remains well-positioned with attractively priced leverage and financing flexibility that includes our convertible notes, a term loan, revolving credit facilities and long-term SBIC unsecured notes. 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 frequently purchase shares in the open market. In closing, we are pleased with our performance for the first quarter of 2017 and we are optimistic about our prospects for delivering continued growth and returns to our shareholders in 2017. We are well-positioned to deliver another year of strong risk-adjusted returns with a strong capital position, a growing origination platform and solid pipeline of opportunities that meet our rigorous investment process. We would like to thank all of our shareholders for your confidence and your continued support. And with that, operator, please open up the call for questions.

Thank you. [Operator Instructions] Our first question goes to the line of Robert Dodd with Raymond James. Your line is open.

Hi, guys. Just some questions, first on some specific credits in the portfolio. So, first of all, Essex Ocean, you said it’s on non-accrual; it’s not marked as non income producing in the schedule of investments. Is there that any reason for that or is that just an oversight?

Apologies. That’s probably just an oversight.

On Gander Mountain, another position you’ve got, obviously, you filed Chapter 11 during -- towards the end of March. Obviously, it’s on your books, above costs still on accrual. Can you give us an idea as to why that is structural protections et cetera and can you give us a little bit more color on that?

Sure, Robert. This is Howard. Gander Mountain is a retailer of sporting goods equipment among other things, and supplies for those people. And the loan restructured to give the company incremental liquidity to execute its business plan. But it’s protected by hard asset liquidation values, which is the way we underwrote it. As I think, we’ve been doing retail loans like this for almost two decades, focusing in structures like this on the liquidation value, so the assets which have been very stable over time, when we go into these deals we have data on what the assets would be liquidated at if there is no going concern value for the business. And that’s how we do our underwriting. In the case of Gander Mountain, that’s exactly the case. It continues to perform in bankruptcy receiving adequate protection. And so, it’s marked above par, because there’s also a prepayment premium on it.

Got it. Thank you. And if I can just on Boomerang is very small, Iracore, any color you can give on expected timeline of resolution on those two?

Sure. In the case of Boomerang, as you point out, it’s very small; there is clearly emphasis on using more American steel pipes which would be a good thing for it. With respect to Iracore, the company has been recapitalized Q2; the lenders are taking ownership of the business; we are one of those. And the goal there is to drive incremental value in the business. And so, we’re going to convert our debt into equity and focus on regaining the value in that business.

Got it. Thank you. And then, just one more if I can and I’m monopolizing here a little bit. But, just -- obviously you gave color about deployments so far in Q2, very good numbers, a lot of activity. Are you seeing -- we’ve heard comments from maybe some others, a repayment activity maybe elevated as well given lead pricing trends and spread compression and things like that. So, can you give us -- I’m not asking for a specific number but are you seeing those levels would be elevated as well or just...

Yes, I’ll take that one Robert. I think I would say two things. One is generally, we appreciate the comment on the deployments. And as you know, what we’ve said in the past is our sourcing network we view as somewhat idiosyncratic on the sourcing side. We’re just finding deals in many unique places. For the most part, our deals have been sole add [ph] or very small clubs where we are among the largest -- not the largest lender. So, we don’t necessary think about the sourcing in the context of the larger and more liquids syndicated loan market. That being said, in the current environment, particularly in Q1 that market has been pretty robust and we have often found our companies, if you will, graduating at some point for maturity when that market is open. And so we’ve seen that market be a source of funding for repayments for some of our companies. I don’t know that would be elevated. It certainly was active in Q1. I don’t think it says much the case in Q2 but that’s on the repayment side which at end of the day we don’t mind that because we pick up some unamortized OID, we pick up some prepayments occasionally and we very rarely see our loans go to maturity. So, I think your comment is accurate on the larger liquid market but it’s more an area that tends to take us out and that we participate in for sourcing.

Our next question is from the line of Chris Kotowski with Oppenheimer. Your line is open.

Maybe you went a little fast or maybe I’m a little slow but what did you say happened with a Avanti because I saw that it was marked from 60% of cost at year-end to 91% but the principal balance went down. So, it’s restructuring or did you get a partial repayment?

It was restructured into different instruments.

Okay. And was the difference between 9.3 of total cost -- but the fair value went up but the coast basis went down overall.

Right.

Okay, all right. And then, I guess kind of philosophically, we don’t see so much in your numbers but I mean the trend has been in the industry that credit quality is still amazingly good by anybody’s standards and credit spreads are tight. So, the net asset values seem harder and harder and better and better. But there seems to be pressure on being able to keep good assets on the balance sheets of BDCs. And we’ve seen that be a factor in some of the other earnings reports, again not so much yours. But do you expect back to be more of a headwind in the coming quarters?

Yes. I’ll take that one Chris, and I guess I’d answer no. It is qualitatively -- I think we’re saying no a lot more often, because the paramount characteristic is credit quality. I think we understand this is a credit business underwriting properly, way that we feel covered and safe is paramount, the returns will follow that as long as you are cognizant of on the front-end of the type of returns you’re targeting. I do think in this market at any -- in the private credit space generally, but in this market particularly it’s very important that you’re as a lender providing value. It’s not just a matter of getting a deal done at a certain price, but it’s the ability to understand a business to source something interesting in away where you can provide comfort that you can get the deal done. Maybe it’s a structural flexibility that stems from little more understanding of an issue. And I think in those situations where we tend to find good consistency of finding those deals, you’re able to preserve your returns and you preserve your credit structures. And those yields tend to I guess stay in the portfolio longer, because they are not just going to refinance at the next dip when the market allows them to. The market has been more active in driving that on the, I guess the broadly syndicated side. We’re not seeing more headwind at the moment, but we are seeing more deals that we are passing on to make sure the deals we do do fit back criteria, both on a return and a risk basis.

Okay. And then, I guess just lastly just on the liability side. You mentioned in the subsequent events section that you had pushed out the maturities on the TCPC Funding Facility by a year. Is there -- I guess what’s the plan for the revolver that matures in 2018?

Sure. Chris, I think as you’re aware, we have continued to add new elements to the right side of the balance sheet so that we’re not overly dependent on any of them, the revolver you’re referring is a facility we’ve had for well over decade actually. And so, as it gets closer to maturity, we’ll have discussions with the lenders for that. Whether it makes sense to leave that in place or to replace it with something else.

Our next question comes from Ryan Lynch with KBW. Your line is open.

Good afternoon. First question has to do with the solid or big amount of capital deployment you guys had quarter-to-date in the second quarter. If we look at kind of the lending landscape today with the seeded competition, we’ve heard from other -- on other calls some lenders are saying that this is a good time to actually be pulling back and slowing down originations because they are not seeing the kind of good risk-adjusted opportunities in the market today based on the competition. So, what would you say to folks who are wondering why you guys’ originations were so strong quarter-to-date in the second quarter?

I think I would repeat partly what I said earlier on. These are relative -- our deals tend to be where we are one of one or one of very few and not sort of run rate of the mill deals that a lot of lenders are coming into or necessarily competing for. They allow us to -- they are interesting deals, they allow us to provide some value in the form I mentioned earlier and defend our pricing. But it is -- that is not the same as saying there is not a competitive environment out there and there is not a fair bit of capital that is chasing a lot of deals that what we try to do is be very efficient on the front end determine if it’s something that fits our criteria or is going to be bit down, so to speak from folks that we try not to engage on that process. So, I do think, I would repeat we’re seeing a lot of deals that we pass on quickly. There are more folks out there and there are the same folks with more capital that I think you are seeing on the larger side, driving some returns down. I do think our platform in the current environment still is able to source with some consistency, some unique deals that led us deploy in a manner that’s consistent on a return and risk basis but it is a competitive environment. There is no question that has increased but none of our commentary is meant to imply that’s not the case.

I’ll just add one additional comment to that. I think as you know, we haven’t hesitated to let our balance sheet shrink in the past when we don’t see deals that we think make sense to originate. And the way we think about it’s really one loan, one investment at a time. And each of the investments that we have here comes in to our platform through many different sources. It’s the advantage of having been doing this for two decades. And so, we exist in a competitive environment but at the same time, we have some advantages in having built a truly diversified, more unique sourcing business.

Great, thanks for that. And then kind of following up on the question with Gander Mountain, and maybe little more broader question. You mentioned the two decades of kind of retail lending. Obviously there is considerable headwinds going on in some of the brick and mortar retail. So, those trends are obviously pretty negative right now. I was just wondering, given those negative trends and there being more distressed assets right now in that sort of arena, a lot of people are probably running the other way, sometimes that’s the best opportunity at the best time to actually run towards those assets if you think you can get good risk adjusted returns in those investments. So are you guys at all seeing any more opportunities and are you guys interested in any doing -- in investing any more retail kind of the retail based industry, given some of the headwinds there or is it right now is it just -- given the headwinds too distressed right now for you guys to pursue?.

Yes. You’ve used the word headwinds I think in many cases; it’s a little bit more like a cyclone. There is massive destruction going on in retail that’s somewhat akin to in the 1950s when retail moved from downtowns to the suburbs with the highways and the malls. And the same thing is going on today or even 100 years ago when the Sears catalog came along. It’s massively disruptive. Having said that, it’s a huge area of the economy. There will be chains and concepts that survive. And so, we’re taking advantage of our experience there; we’re being careful. Most of the things, in fact almost everything we’ve done in recent years has been secured by hard assets and/or licensing streams as opposed to focusing on enterprise values. So, that if management doesn’t meet its plans, we have different way of getting paid and that’s the way we’ve been thinking about it. But we’re continuing to look across the sector. We’re having a lot of conversations with people. But the portfolio we have today is really protected by being able to get our payments in a different way than ordinary cash flows.

Our next question comes from the line of Christopher Testa with National Securities Corp. Your line is open.

Hi. Thanks for taking my questions. I was just curious Howard, if you could talk about how the sources, the uses of capital rather for your originations have changed quarter to-date relatively to the first quarter for your borrowers?

I wouldn’t say that they’re dramatically different. Our originations quarter to-date at $140 million for five weeks is certainly higher than our normative quarterly run rate. And that’s why I made the point, please don’t annualize this or multiply it times the number of weeks in the quarter. The yields are also a little bit lower. And again, we make the point, please don’t rely on five weeks worth of business. Because although these are lower, it’s an average of a series of numbers with a relatively small number of loans. And so, the way we look at the role, there isn’t a dramatic difference in between the business we’ve done Q2 and Q1. Q1 is historically for us a slower quarter, we were pleased with our results. And in Q2, we are pleased with what we have done to-date, we continue to have a number of things in the pipeline. But I wouldn’t say that the sort of the artificial divide of March 31st had a material impact in changing the way our business is operating.

Got it. And just going on your comments obviously with the many new competitors, a lot of who are very aggressively in their approach. Is that abated at all by you making larger loans, larger sized borrowers across the platform with exemptive relief or is that kind of just equally competitive in terms of new sources of money coming in?

Yes. It’s a good question. The exemptive relief is very helpful to our business, because it enables us certainly to do much larger loans than TCPC could do without it. And having the flexibility to provide a wide range of loans is really important and helpful. I wouldn’t say that there is one size loan category. it’s necessarily hugely different with respect to competition and another. Raj mentioned earlier that some of the large transactions, those seem to be more competitive, clearly when they get really larger competing with the banks. And there are also a number of BDCs and private lenders who have as their business plan really being in the business -- competing with the banks for those club syndication deals. We’re not typically doing those or to extent we are the usually unique situations. So, I think it’s really pretty spread out across the board.

Okay. And I know it varies on a case-by-case basis but in general right now, would you say there is better risk adjusted returns within the asset based lending or your traditional middle market cash flow lending platform.

So, asset base, we consider it to be a traditional part of our platform because we’ve been doing it for just as long. It’s a little bit more unique market because there aren’t quite as many people doing it; there is the asset base sets that the banks are doing themselves. We can’t compete with that cost of capital and don’t try. So, we’re usually lending against assets that don’t fit within the conventional bank borrowing base. And we see interesting opportunities there, but they are little lumpier.

Okay. And last one from me just with the extension of the maturity on the funding facility. Should we expect any onetime costs related to that?

Not -- no significant costs, we’ll be amortizing the costs we incurred over the remaining life.

Thank you. And our next question is from Nick Brown with Zazove Associates. Your line is open.

So, first you mentioned $141 million deployment quarter-to-date. What were repayments and sales this quarter-to-date?

That’s not normally a number we give, we give inter quarter, Nick. But it was nothing atypical.

Okay. And then, I guess along those same lines. I guess given that you had a net -- I know that there are issues with timing of sales and repayments than can affect quarterly interest income. But, given that you had net deployments in the first quarter and at least on the deployment side seems to be strong quarter-to-date already. I mean should we expect -- but in the first quarter, you didn’t have any real appreciatable increase in interest income relative to the fourth quarter. Should we expect your interest income to start rising going forward or within this quarter?

Yes. We are not in the practice of giving forward guidance. There are obviously a lot of components that go into the calculation of it in any quarter including timing. When the assets are booked. For example, we did say in Q4 that there was a big distinction between our pay-offs which happened early in the quarter and our net-adds which happened late in the quarter, which was merely a coincidence. There was nothing that we are aware of that caused that. And so we’re a little bit cautious, again on the one handed there are lot of factors; in the income statement they are pretty easy to model but on the other hand there are things that move around, reset timing, repayment income, OID and other things. And so, we’re just not in the process of giving guidance at this point.

And next question is from Jonathan Bock with Wells Fargo. Your line is open.

Good afternoon. Thank you for taking my questions. Howard very quickly, we noticed that there are some loans that you originated this quarter that could be identified as we’ll call it venture or venture asset, or venture lending like, generally speaking. I was curious if you could give us a sense of weather, any of those loans were originated this quarter and if so, which ones you’d classify into that category? And then, outline that kind of idiosyncratic focus and its impact on your portfolio growth over the next several quarters.

Yes. Jon, thanks for the question. We don’t necessarily break up our loans into that category. We are in the business of making loans, venture loans, early-stage company loans, a number of those are the companies that are much newer businesses, typically at low attachment points that have in many cases warrants as a kicker. But the reason, we don’t necessarily delineate them as such, is we have businesses along a continuum, some of which are more established older businesses, but still growing at rapid rates and spending a lot on growth and may have similarities to those structures. It’s a business we’ve been doing really going back now about 15 years or so. We’re doing it more actively today than we use to, because we see a lot of growth and change in the economy in some of these newer companies. And so, we think there are a lot of lending opportunities and there aren’t as many lenders doing it. And we think our skill set plays very well to that area. So, I would expect that to continue. And hopefully that’s responsive to your question.

I appreciate that. Then perhaps turning to new deployment. Would you say that on the 140 -- were there any particularly larger loans originated that quarter that perhaps provided an outsized amount quarter to-date?

No, not really. There is one that’s largely than the others, but it’s well within the context of typical loans we’ve been originating and three others of significant size as well. So, without delving into information we haven’t disclosed, I think just directionally, there is nothing unusual about the assets that we booked during Q2 to-date.

Okay. Well, then, maybe just one in particular. So, if there was a deal with PNC Bank, you and TPG for $90 million senior secured term loan to particular company. Just give us, that’s all publicly information. How do amounts like that effectively get divided. Is PNC effectively a super senior or is -- and then you kind of split, so that 190 is more like 50 or just give us a sense on general divisions based on historical examples?

Sure. Every situation is different. We’ve been in the business of partnering with banks on loans, sometimes in a first lien, second lien structure; sometimes in a second out structure really since we started the business. Acknowledging the banks obviously have very broad networks, but can’t satisfy all of the borrowing needs of their borrowers and providing sort of a necessary and critical piece for borrowers beyond what a bank can provide. And there within the box that banks have and what works for their needs from a regulatory and risk standpoint they are generally willing to loan at much lower rates, but on a much smaller portion of the business. And where that attachment point is on any given deal varies deal-by-deal.

So, I guess if I was looking at loan with kind of all three, would it be fair to say that if it’s a half and then you get to split the other two, or actually said differently, forget what the banks takes, if you originate with another party, do you often split it down in the middle as someone is life line?

That is a very good assumption. It’s not always the case but in your hypothetical situation, it’s probably a pretty good surmise.

Got it. And then, just the last point, look as it relates to spread compression and you are focusing on the unique niche and Howard complements unfortunately for BDC management teams have been from the sell side community [indiscernible] had excellent performance. Is there a point where you start to believe that you’ve outgrown the opportunity set, particularly given trying to point the amount of capital continue to chase out, chasing after these loans. Because I understand you have both, public and private funds as do your peers and sometimes these opportunistic and situational assets, there is just -- they are too few and far between. So, kind of give us a sense on capital as well as opportunity set and whether or not you believe now is the time to perhaps to be raising more after credit you’ve completed one already?

Yes, thank you. There is a balance. We have built our business, both for TCPC and our business as a whole which existed long before TCPC was taken public, on a gradual incremental basis. And so, we’ve looked to grow it over time; we haven’t tried to do all things to people; we haven’t tried to be in all asset classes. And so as a result of that I think we’ve always had a pretty good balance in between demand and supply. And that’s not to say that there are aren’t times where we don’t have enough good deals and we’ll let our balance sheet shrink or really slow things down. And there are other times where we wish we were a little bit bigger and there are deals that we can’t do all of internally. As large as we are and the fact that we have exemptive relief, there are certainly times when we can’t do some of the truly larger deals. So, I don’t think today we are at a size where we feel we’re bumping up against our capacity, clearly having more entrance in the sector has an impact on that. But I think because of the borrower relationships and sourcing that we have, we don’t feel like today we are yet at that point.

Thank you. And I’m not showing any further questions. So, I’ll now turn the call back over to Howard Levkowitz, for closing remarks.

Thank you. We appreciate your questions and our dialogue today. We would also like to thank our experienced, dedicated, and talented team of professional at TCP Capital Corp. Thanks again for joining us. This concludes today’s call.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.