The board of directors of Greenwich, Connecticut-based TICC Capital Corp has authorized a stock repurchase plan that allows for $75 million of share repurchases starting immediately and to run until 30 June 2016. The BDC has been trading at a discount to book value and posting poor results for some time.
The BDC reported $984.5 million in assets, down quarter-on-quarter (q-o-q) from about $1 billion at the end of June. TICC has been engaged in a long-running acquisition contest between several interested parties, including Benefit Street Partners, TPG Specialty Lending and NexPoint Advisors. TICC management didn’t discuss the situation on its earnings call Friday (6 November) and skipped the Q&A session with analysts.
A spokeswoman for TICC declined to comment on why the usual analyst question time was cut.
The BDC had net investment income of $10.9 million or $0.18 per share in the quarter, down from $17.5 million or $0.29 cents per share in the third quarter of 2014. The BDC declared an above earnings dividend of $0.29 cents per share.
Analysts and TPG, which has submitted proposals to acquire shares of the BDC in a stock-for-stock transaction, have criticized the BDC of running at dividends it can’t afford and have said that TICC will eventually have to cut them.
The lender did not respond to a request for comment on the dividend policy by the time of publication.
Speaking on the firm’s earnings call, chief executive Jonathan Cohen said the BDC’s CLO positions suffered significant price declines during the quarter. The BDC is primarily invested in CLO debt and equity and syndicated loans, while the firms fighting to acquire it are planning to turn the portfolio into directly originated investments to improve performance.
Returns on existing investments also declined q-o-q at TICC. The weighted average yield of debt investments at current cost was 7.2 percent, down from 7.6 percent in the second quarter. The weighted average yield on CLO equity dropped to 11.3 percent from 12.6 percent, management said.
Cohen also said that the BDC is running at its 1:1 regulatory leverage limit, which he admitted is high and should come down. “While the cost of capital associated with our two leveraged structures has been and remains attractive, we believe that the corporate loan market may now provide us with higher yielding opportunities that can be held on a less leveraged basis,” he said. “With that in mind, we expect our statutory leverage ratio to decline in the coming quarters.”