TCP Capital doubles down on selective investing

The BDC grew its investment portfolio to $1.3 billion by the end of 2016. 

TCP Capital Corp will continue its selective investing approach after increasing its net asset value and portfolio size last year, executives said during an earnings call on Thursday.

In the fourth quarter alone, TCPC deployed a total of $207 million across 19 investments, which were made in 11 new portfolio companies and eight existing companies. By the end of last year, the firm had grown its portfolio to $1.3 billion. That figure marks an increase from the third quarter, when TCPC’s portfolio stood $1.27 billion and $1.18 billion at the end of 2015.

Some of its largest investments over the three months included a $34 million senior secured loan to Envigo, a pharmaceutical and chemical firm; a $32 million senior secured loan to AutoTrakk, a auto leaser; and a $24 million senior secured loan to Southern Theaters, movie theater chain in the US.

Howard Levkowitz, chief executive officer, said on the call that the company is currently “passing on many opportunities” and will continue its “highly disciplined and selective approach to new investments”. Competition in the mid-market is currently heating up, with some firms pursing a more aggressive strategy, Levkowitz said.

The Los Angeles-based business development company will continue its investment emphasis on senior secured loans to companies “we know and understand well” that have strong cashflow, Levkowitz said.

Last year, the company increased its net asset value per share to $14.91 by the end of December, up from $14.84 at the end of third quarter. Both numbers are higher than the company’s NAV per share at the end of 2016, or $14.78, according to an investor presentation released with the earnings results.

Approximately 81 percent of the portfolio was floating rate products as of 31 December, which leaves the firm “well positioned for a rising rate environment”, Levkowitz said.

New investments in Q4 had a weighted average effective yield of 9.8 percent, according to the release. The firm ended last quarter with a leverage ratio of 0.60x.