Good morning, and welcome to the fourth quarter and year end 2020 earnings conference call of BlackRock Capital Investment Corporation or BCIC. Before we begin our remarks today, I would like to point out that certain comments made during this conference call and within corresponding documents contain forward-looking statements subject to risks and uncertainties.

Many of these forward-looking statements can be identified by the use of words, such as anticipates, believes, expects, intend, will, should, may, and similar expressions. We call to your attention the fact that BCIC's actual results may differ from these statements.

As you know, BCIC has filed with the SEC reports which list some of the factors, which may cause BCIC's results to differ materially from these statements. BCIC assumes no duty to and does not undertake to update any forward-looking statements.

Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, BCIC makes no representation or warranty with respect to such information.

Please note we've posted to our Web site an investor presentation that complements this call. Shortly, Jim will highlight some of the information contained in the presentation.

The presentation can be accessed by going to our Web site at www.blackrockbkcc.com and clicking the March 2021 Investor Presentations link in the Presentations section of the Investors page. I would now like to turn the call over to Jim.

Thank you, Larry. Good morning, and thank you for joining our fourth quarter earnings call.

Today, I'm going to provide an update on the significant progress we had made towards our strategic goals during and after the fourth quarter. I will also provide an overview of our fourth quarter performance and our remaining near term priorities.

Nik Singhal will then give an update on our portfolio status and activities. And Abby Miller will follow the discussion of our financial results in more detail before we open the call to questions.

As we have stated in the past, our primary strategic priority has been to rotate out of noncore legacy and other junior investments and redeploy the capital into primarily senior secured first lien loans with the overall objective of generating stable recurring income and reducing the volatility of our net asset value. I am pleased to report that we have made significant progress in 2020 towards achieving these goals and continue to do so as we move into 2021.

During and subsequent to the fourth quarter, we exited over $170 million of noncore and other junior investments. This brings our noncore holdings to $40 million as of February 23rd, which is 9% of our total portfolio at fair market value, down from 16% at December 31 2019.

Our current portfolio consists of 58% first lien loans, 28% second lien and 14% junior capital. The junior capital concentration is down from 43% at the beginning of 2020.

If we adjust for our 85% equity interest in BCIC SLP, which now consists of four first lien loans and cash on the balance sheet, our pro forma exposure to first few loans is 65%. We have also made good progress in reducing portfolio concentration and achieving greater diversity as the portfolio now consists of 58 companies.

We are confident that as we selectively deploy capital into new investments, we will reach our target of at least 70 portfolio companies. Our credit quality remains solid with only four investments are nonaccrual at year end which includes our $23 million unsecured debt investment in Gordon Brothers Finance Company or GBFC.

As we mentioned last quarter, this investment is expected to pay down gradually as GBFC realizes recoveries on certain paid assets, following the sale and its portfolio to Callodine in November of last year. Since that sell, BCIC has already received $10 million from these residual assets.

Excluding GBFC, the three remaining nonaccruals represented only 1.2% of our total portfolio at fair value. One of those investments returned to performance status in the first quarter of 2021.

Overall, we feel very good about the credit quality of our portfolio. In addition, we reinstated our all cash dividend for the first quarter and maintained the rate of $0.10 per share.

We appreciate the patience of our shareholders. While we paid a portion of our dividend in stocks for the last three quarters, there's a way to bolster our NAV.

With the strategic portfolio exits largely behind us and the redeployment strategy firmly taking hold, we feel very comfortable returning to the all cash dividend. The significant derisking that we accomplished is expected to compress our NII in the near term.

With our current leverage at roughly 0.4 times, our quarterly NII run rate is expected to be in the $0.05 to $0.06 per share range. We expect the NII run rate to grow into our dividend over the coming quarters as we redeploy to freed up capital in a disciplined manner.

Finally, we are still authorized reproach up to 7.5 million shares of our common stock. Our share repurchase plan did not kick in during the fourth quarter.

Given the significant improvement in our leverage profile and our ongoing discount to NAV, we have increased the capital allocated towards our share repurchases under a 10b5-1 and a 10b-18 plan. I'll now turn the call over to Nik Singhal to discuss our portfolio activities in further detail.

Thank you, Jim. As Jim mentioned, we made significant progress in exiting over $170 million in noncore and other junior investments since the end of the third quarter.

The largest drivers of this were the $87 million we received from our investment in the GBFC unsecured debt, followed by the $39 million full repayment of our investment in First Boston Construction Holdings and a $27 million return of capital from our equity investment in BCIC SLP. We also successfully exited our $9 million position in CB-HDT Holdings and received $6 million partial payment on our second lien investment in Red Apple.

In addition, there were approximately $67 million in repayments from our core holdings. This was primarily driven by strong refinancing activity during the fourth quarter as the economy began to pick up and the capital markets opened up.

With respect to originations, we have gross deployments of $91 million during and after the fourth quarter, spanning 13 new and five existing portfolio companies. Approximately 75% of our originations were first lien loans.

Our pipeline of new opportunities remains robust and we're seeing less prepayment activity in the first quarter. We are maintaining our disciplined approach to investing, executing only a small percentage of the opportunities we [review].

We're seeing opportunities across a variety of industries and generally continue to invest in less cyclical businesses. We are primarily co-investing with other BlackRock funds, which enables us to participate in larger transactions without taking on too much concentration risk, and we continue to emphasize transactions where we lead or co-lead negotiations on near term.

The details of all of our new investments can be found in the earnings release, but some of our more prominent investments include the following. A first lien LIBOR plus 6.25% term loan in Paula's Choice Holdings, a well established direct to consumer skincare brand.

BlackRock lead an investment of $175 million in this loan, of which BCIC invested $7.8 million. A first lien LIBOR plus 7% term loan in unfunded delayed draw term loan in Thras.io, a consolidator of small to medium size brands that sells through Amazon's third party platform.

BlackRock committed $125 million to this transaction, of which, BCIC committed $7.8 million across the two tranches. A second lien LIBOR plus 9% term loan to Team Services Group, a leading provider of self directed home care system for the elderly and people with disabilities.

BlackRock provided the entire $85 million tranche, of which, BCIC invested $5.8 million. Our core portfolio with an increasing percentage of first lien has continued to perform well despite the pandemic.

As Jim mentioned, excluding GBFC, there are only two investments currently on nonaccrual both with zero fair value. During the fourth quarter, our NAV increased by $8.4 million or 2.8% from the prior quarter.

This was driven by 0.8% increase due to realized and unrealized gains and approximately 2% due to issuing a portion of dividend in stock. The NAV per share declined by $0.01 to $4.23 per share due to the associated increase in share count.

As Jim mentioned earlier, we are pleased to work to an all cash during this quarter. Now that we have substantially completed the repositioning of our portfolio, our focus in 2021 will be deploy our liquidity into core investments consistent with our objectives of stable income and low NAV volatility.

As we do this, our goal is to build back leverage to normalized levels over the next several quarters. We will do so in a selective manner benefiting from the broad funnel of opportunities that our platform provides.

The derisking of our portfolio also provides us significantly higher flexibility in managing our capital structure. We intend to address both the 2022 maturity of our convertible notes, as well as working on extending our credit facility this year.

I will now turn the call over to Abby Miller to further discuss our financial results for the quarter.

Thank you, Nik. I will take a few minutes to review additional financial results for the fourth quarter of 2020.

GAAP net investment income, NII, was $7.3 million or $0.10 per share for the fourth quarter and represented 101% coverage of our $7.2 million distributions for the quarter. Total investment income for the quarter was $14.6 million, down $1.7 million or 10.4% from the third quarter, primarily driven by 12.3% decrease in average investment portfolio size combined with GBFC's unsecured debt going on nonaccrual during the quarter.

Compared to the fourth quarter of 2019, total investment income decreased $4.6 million, also primarily due to GBFC’s going on nonaccrual, as well as a 17.1% decrease in average investment portfolio size. Total expenses, net of incentive management fee waivers, decreased $0.5 million or 6.1% from the third quarter, primarily the result of a smaller average portfolio, which translated into lower base management fees and lower interest expense quarter over quarter.

Compared to the fourth quarter of 2019, net expenses decreased $2.3 million or 23.6%, mainly due to decreases in net incentive fees, base management fees and interest expense period over period. In the fourth quarter, we voluntarily waived all incentive fees earned of $1.3 million, bringing our cumulative and permanent incentive fees waived since March 2017 to $29.7 million.

Additionally, there was no accrual for incentive management fees based on gains. During the fourth quarter, net realized and unrealized gains were $2.6 million, primarily driven by mark ups in First Boston, Red Apple and from core assets.

These gains were partially offset by markdowns in GBFC and BCIC SLP. As of December 31, 2020, we had a strong liquidity position at approximately $285 million from availability under our credit facility and cash on hand.

Our net leverage ratio was 0.51 time at year end and as of February 23rd, had declined further to 0.43 times due to additional repayments that we received subsequent to year end. As Nik mentioned, we expect to gradually return to normalized levels as we redeploy capital and grow our portfolio over time.

Net asset value was $315 million or $4.23 per share, which included the impact of $5.8 million dividends paid in stock on December 30, 2020. And as Jim mentioned, we announced the resumption of our all cash dividend for the first quarter of 2021.

On April 7th, we will pay a cash dividend of $0.10 per share to stockholders of record at the close of business on March 17th. During the fourth quarter, no shares were repurchased and 7.5 million shares remained available for repurchase under the current program as of December 31, 2020.

With that, I would like to turn the call back to Jim.

Thank you, Abby. In closing, I would like to take a moment to thank our stockholders for their ongoing support, and to recognize our team for the continued hard work in creating exits for noncore positions.

We are excited about the pipeline of opportunities from the advisors’ middle market lending platform, which manages over $15 billion of capital and is supported by approximately 50 dedicated investment professionals. Above all, I hope everyone remains safe and healthy during this ongoing pandemic.

This concludes our prepared remarks. Operator, we’re ready to open the call for questions.

First question on I suppose naturally GBFC. Can you provide some color on what happens there underneath the entity or at least the unsecured claim composition?

And also, is it still adding there -- is it still paying cash?

So as we had mentioned last quarter GBFC, so all of its investment portfolio to Callodine in November of last year. Post that transaction it was left with a basket of residual assets, which were namely they're entitled to up to $40 million recovery work for the first lien note in the portfolio that was sold.

Initially, there's an earn out note with a maximum potential recovery of $15 million. There was a warrant possession in existing portfolio company that GBFC actually monetized in December, and that was used to return $10 million of capital to BCIC.

And then initially there's some cash and some escrow proceeds approximately $1 million was returned initially to BCIC. None of these assets are income generating.

As a result, that unsecured note does not pay an income, and is not expected to do so. We view that as a recovery play.

And as I mentioned, we’re already seeing approximately $10 million of recoveries on that.

So the nonaccrual was more a result of moving stuff around than anything that happened underneath fundamentally?

So all of the income producing portfolio flows was still as part of that transaction. So none of these sort of residual assets actually are income generating.

And at this point that's the only -- the GBFC unsecured debt is the only nonaccrual position in the portfolio. There are two other nonaccruals in the portfolio but they actually not seal their market value.

And another question on the dividend. How is there such a high return of capital components given that you over earned the dividend on NII?

And I figured there would be even more taxable income with nonaccruals? So pretty big surprise.

If you could give some color on that?

As you pointed out that our total year NII was $34 million and total distribution declared was $31 million. The main [rock] that you mentioned was due to tax characteristics of our distributions.

So with anything [tax], there's more complication. The tax code allows the fourth quarter declared distribution that's paid in January to be count towards either prior year or current year distribution number.

So this is our January 2020 distribution where it was counted towards the 2020 tax distribution. So the way to look at it is that that gross number we disclosed is from a tax perspective, and that was driven by the January 2020 distribution.

And just last one for me. Can you provide an update on the BCIC efforts to exit out or liquidate?

Any progress post quarter or what you're thinking there now?

Just I’ll ask, is your question specific to just the remaining noncore positions and other equity capital?

No, I word that -- I gave you the wrong acronym there, the [SLF].

So that’s a senior loan JV. We conducted a portfolio sale in Q4 of last year and that sale resulted, that process resulted in the sale of 14 out of the 18 first lien names that vehicle held.

That sale enabled that vehicle to retire it's leverage in full and return an additional $23 million of capital to BCIC. Of those remaining four names, one was partially sold in January of this year, which resulted in another $4 million in return of capital.

So that portfolio now is just four first lien positions and some cash completely has on an unlevered basis. We will continue to look for opportunities to exit those investments at attractive levels.

I want to make sure I’m thinking about the activity in the portfolio the right way. I appreciate the additional disclosure provided on sort of specific through most of February.

If we're looking at that right, does that sort of translate into or imply no originations around $30 million-ish so far in Q1 versus about 58 of exits so far in Q1?

I think there are a couple things with regards to the [phases] of deployment. Obviously, last year was a fairly volatile year.

And we saw activity slow down in the market. And obviously, we slowed down with regards to our own book in the kind of Q2-Q3 timeframe.

We really picked up in the end of the year, but also repayments started to pick up pace as well. But for the most part, a large part of our repayments were us exiting out of noncore and legacy positions.

I think as we look forward, obviously, there's going to be some volatility around the timing, of course, and I would say the selective nature that we have with regards to the types of deals that we're looking at. So I would say there's upside and I would guide you to an increase with regards to that number.

We're kind of thinking in aggregate, we should see five to 10 dates of deals as we add diversification across the quarter, more in the first lien and we’re generally closing in the kind of mid single digits is the amount of deals that we see. And if you look at our hold size and expected hold size, I would say that number we would expect to be that greater than $30 million averaging over the next couple quarters.

And so probably somewhere in the range of 30 to 50. But you can’t actually determine that exactly just because it depends on the quality of the deal flow that is coming in.

And I have a couple of follow up questions on the dividend. Sort of just for thinking of returning to an all cash dividend at the current level, while expecting some compressed NII over the near term.

Can you just talk about the process of thinking through that? And then whether or not is it the interplay between that and allocating capital to share repurchases right now?

Yes, that's exactly. And obviously, as we went through the 2020 environment, we are known and also the uncertainty or the volatility risk with regards to our junior capital and equity positions we were in a different place.

And obviously, we distributed some of the dividend in stock. I think as we look into 2020 and we've been able to exit a significant portion of our equity positions and our kind of more noncore assets.

Obviously, leverage has come down significantly in that dynamic as we move forward. So one, we have more conviction with regards to the book and returning to an all cash dividend.

But two, with regards to a balance of kind of the three things that we look at of trying to return capital to shareholders is, first and foremost is that deployment that we just discussed and really adding more diversification across a broader range of first lien notes and obviously, that will take time, but over the next couple quarters. And then the balance of over distributing the dividend to add some stability and managing that dividend as we grow into and as we deploy.

And lastly is the measure of allocating towards stock repurchases, which we've disclosed in the book with regards to the $7.5 million shares and we'll have a programmatic plan that’s in place. So it's really those three measures.

Thank you, operator. And I think that concludes the call.

Thank you, everyone for your continued support in the portfolio and the company. And look forward to the continued progress and transition, and full transition now with regard to company’s going forward strategy.

Thanks again and stay healthy.