BLACKROCK CAPITAL INVESTMENT CORPORATION (NASDAQ:BKCC) Files An 8-K Regulation FD DisclosureItem 7.01.
BlackRock Advisors, LLC (the “Advisor”) began serving as the investment manager of BlackRock Capital Investment Corporation (the “Company”) on March6, 2015, the date on which the Advisor acquired certain assets of the Company’s previous investment adviser (the “Acquisition Date”). For the Advisor’s marketing purposes unrelated to the Company, the Advisor has calculated an implied IRR (internal rate of return) for that portion of the Company’s portfolio which was invested on or after the Acquisition Date. Such implied IRR has been calculated gross of any fees and expenses as well as net of Applicable Fees (defined below). As a result, we are providing the information below. The calculation covers a period (the “Calculation Period”) beginning on the Acquisition Date and ending on June30, 2017 (the “Calculation End Date”).
The implied IRR calculation includes the performance of all new monies invested during the Calculation Period. For such investments exited during the Calculation Period, all actual cash inflows and outflows during the Calculation Period that were attributable to the investment were used to calculate the implied IRR. For all other such investments, the implied IRR was calculated (i)using all actual cash inflows and outflows during the Calculation Period that were attributable to the investment and (ii)assuming that the fair market value of the investment as well as any accrued but unpaid interest on the Calculation End Date were realized in cash as of such date. For the Calculation Period, such implied IRR was 13.6% on a gross basis and 9.3% on a net basis, based on $566million of cash invested in 29 different investments across 23 companies, of which 4 investments across 4 companies were exited during the Calculation Period. For the Calculation Period, the implied IRR on these 4 exited investments was 18.9% on a gross basis and 14.6% on a net basis based on $86million of cash invested. The implied IRR for the remaining 25 investments across 19 companies was 13.0% on a gross basis and 8.7% on a net basis based on $480million of cash invested.
Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the sale, repayment or other exit of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.
The implied IRRs on a gross basis are calculated using cash flows that are gross of any fees, costs or expenses incurred by the Company. The implied IRRs on a net basis are calculated using cash flows that are net of Applicable Fees. “Applicable Fees” equal the annualized base management fee, incentive management fee (before giving effect to any fee waiver during the most recent fiscal quarter) and operating expense (excluding base fee, incentive fee and
interest and credit facility fees), respectively, incurred by the Company during the most recent fiscal quarter (Q2 2017) expressed as a percentage of total investments of the Company, at fair market value, as of the end of Q1 2017. The Applicable Fees are applied to total invested capital throughout the Calculation Period for the purpose of calculating net implied IRR. Because the net implied IRR is calculated on the basis of the Company’s gross assets and IRR is not affected by the amount of the Company’s leverage, Applicable Fees do not include leverage expenses and are expressed as a percentage of the Company’s total invested capital (instead of being expressed as a percentage of the Company’s net assets, as expenses typically are expressed in the Company’s financial statements).
The Applicable Fees are calculated solely for the Advisor’s marketing purposes unrelated to the Company. Investors should not rely upon the gross or net implied IRRs shown above as a measure of the performance of the Company or its portfolio. There is no assurance that the fee and expense assumptions used for these calculations will be representative of fees and expenses incurred by the Company.
The implied IRRs shown above reflect only the performance of new monies invested during the Calculation Period and not the performance of the entire investment portfolio of the Company over any period of time. We would expect that any such implied IRR for the entire investment portfolio would be lower than the implied IRRs shown here. Investors should not rely upon the implied IRRs shown above as a measure of the performance of the Company or its portfolio as they do not represent returns experienced by an owner of the Company’s common stock. A common stockholder’s actual returns are subject to higher expense ratios when expenses are expressed as a percentage of the Company’s net assets and leverage expenses are included. There can be no assurance that these implied IRRs could be generated in the future for any investment.
The information disclosed under this Item 7.01 is being furnished and shall not be deemed to be “filed” for purposes of Section18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
About BLACKROCK CAPITAL INVESTMENT CORPORATION (NASDAQ:BKCC)
BlackRock Capital Investment Corporation, formerly BlackRock Kelso Capital Corporation, is an externally-managed, non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through its debt and equity investments. The Company provides middle-market companies with a range of financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities. The Company invests in middle-market companies with annual revenues typically between $50 million and $1 billion and targets investments throughout the capital structure. Its targeted investment typically ranges between $10 million and $50 million. The Company generally seeks to invest in companies that operate in a range of industries and that generate positive cash flows. The Company’s investment advisor is BlackRock Advisors, LLC.