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BlackRock TCP Capital Corp (NASDAQ:TCPC)
Q4 2019 Earnings Call
Feb 26, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp.'s Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]

And now I would like to turn the call over to Katie McGlynn, Director of BlackRock TCP Capital Corp. Global Investor Relations team. Katie, please proceed.

Katie McGlynn -- Investor Relations

Thank you. Before we begin, I'll 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 fourth quarter and full year ended December 31st 2019. We also posted a supplemental earnings presentation to our website at tcpcapital.com. To view this slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events & Presentations. These documents should be reviewed in conjunction with the Company's Form 10-K which was filed with the SEC this morning.

I will now turn the call over to our Chairman and CEO, Howard Levkowitz.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Thanks, Katie. I'm here with our TCPC team, and we thank everyone for participating on our call today. I will start with an overview of our performance in 2019 and then our CFO, Paul Davis will review our financial results. After Paul's comments, I will provide some closing remarks before opening the call to your questions.

Beginning with our key accomplishments in 2019, which are summarized on slide 4 of our presentation. First, we leveraged both our long-standing relationships with borrowers and deal sources and the power of the BlackRock platform to identify attractive investment opportunities. For all of 2019, we invested $700 million in 45 investments, almost 45% of which came from existing portfolio companies. We also continue to emphasize portfolio diversification. Our average portfolio company investment was just $15.7 million or less than 1% of total investments as of December 31st, 2019. Second, we generated $94.9 million of net in trust income, a slight increase from 2018, despite the pressure on yields in 2019 from a decline in LIBOR. We also continued our track record of covering our quarterly dividend every quarter for nearly eight years. Third, we continue to seek debt financing on attractive and shareholder friendly terms. Towards this effort, we successfully issued a total of $200 million of notes due 2024 at a rate of 3.9%. This is significantly lower than the 5.25% convertible notes that matured in December and we also reduced the rate on our SVCP credit facility by 25 basis points.

Finally, in connection with our shareholders approval of an increase in our regulatory leverage limitation early in 2019, we reduced the management fee to 1% on assets financed with leverage greater than 1 to 1 [Phonetic]. We reduced the incentive fee rate to 17.5% and we reduced the hurdle rate to 7%, while maintaining our cumulative total return hurdle which is one of the only such structures in the industry.

Before moving on to our fourth quarter highlights, I would like to address the year-over-year decline in our net asset value. The write-off of our investment in Fidelis accounted for almost all of this decline. On our last two quarterly earnings calls, we've described several Company-specific challenges that Fidelis face in the increasingly competitive cyber security industry. At the time of our initial underwriting more than four years ago Fidelis was operating in a high-growth industry with a strong client base. The Company was well capitalized with a low loan to value. However, the owners and management team failed to sufficiently react to the shift in industry dynamics that accelerated in the last several years. Utilizing our extensive turnaround experience, our team worked alongside the sponsor and the management team to try to resolve these issues that ultimately decided to exit rather than to invest further in the Company. We are not satisfied with this result, but believe the challenges faced by Fidelis were distinct and are not indicative of any broader macroeconomic issues or other trends.

Moving to a few highlights from the quarter. As shown on slide 6, we earned net investment income of $0.38 per share, outearning our dividend by $0.02, and today we declared a first quarter dividend of $0.36 per share payable on March 31 to shareholders of record as of March, 17. Additionally, we delivered another strong quarter of deployments, totaling $142 million. Dispositions in the quarter were $152 million.

Turning to slide 7 of the presentation. At year end, our portfolio had a fair market value of $1.6 billion, 92% of which was in senior secured debt. In constructing our portfolio we have consistently focused on seniority as well as diversification. As of December 31st, our largest position represented only 4% of the portfolio and taken together, our five largest positions represented less than 17% of the portfolio.

Furthermore, as the chart on the left side of slide 7 illustrates, our recurring income is distributed across a diverse set of portfolio companies. We are not reliant on income from any one portfolio company. In fact on an individual company basis, well over half of our portfolio companies each contribute less than 1% to our recurring income. Our portfolio continues to be predominantly floating rate with an emphasis on first lien exposure. At year end, 92% of our debt investments were floating rate and 81% consist of first lien exposure as demonstrated on slide 8.

I would now like to take a minute to provide more detail on our investment approach, which has remained consistent throughout our team's two decades of investing in middle market companies. We continue to leverage our deep industry knowledge and experience in addition to the expanded access to deal flow and additional resources of the broader BlackRock platform to identify attractive investment opportunities. To this point, deployment activity in the fourth quarter included 10 new loans, four of which were with existing borrowers. Follow-on investments in existing portfolio companies continue to be an important source of investment opportunities.

In 2019, nearly half of our new investments came from existing borrowers. From a portfolio risk management perspective, these are credits we know and understand well. We believe these opportunities reflect the strength of our borrower relationships and the value we deliver to them beyond just capital. We also continue to focus on investments where we lead or co-lead negotiations, which allows us to set deal terms of solid creditor protections.

Our investments in the fourth quarter demonstrate our unique access to deal flow as well as our ability to drive terms in the investments we underwrite. Our largest investment in the quarter was $19 million senior secured first lien term loan to Barri Financial Group. Barri presented a compelling investment opportunity. The company has a 35-year operating history as a leading provider of diversified consumer financial services to the rapidly growing and often underserved to Hispanic community.

We let a group of three lenders, allowing us to negotiate deal terms in loan documents to include creditor protections, taking into account the diversified nature of the business. We also provided a significant follow-on investment with a $14 million senior secured first lien term loan to Snow Software increasing our total loan size to $29 million. The Company is the largest dedicated developer of software asset management solutions. Snow Software helps companies optimize significant dollars they invest in enterprise software applications.

We originally provide Snow with a first lien term loan in February of 2019. Since that time, the company has significantly outperformed relative to budget in our underwriting assumptions. The incremental financing we provided in the fourth quarter will support Snow Software's inorganic growth strategy. Overall, investments in the fourth quarter demonstrate our emphasis on building a diverse portfolio with exposure to a variety of industries and our disciplined approach to underwriting. Our two decades of experience through multiple cycles reminds us of the importance of investing in companies and industries that can perform consistently throughout the economic cycles.

Dispositions in the quarter totaled $152 million and include the pay-off of our $29 million loan to KPC Healthcare, our $26 million loan to Bond International Software and our $19 million loan to Tradeshift. New investments during the quarter had a weighted average effective yield of 9.6%. Investments we exited had a weighted average effective yield of 11.4%, as several higher yielding positions were either repaid or reduced. The overall effective yield on our debt portfolio at quarter end was 10.3% compared to 10.6% at the end of last quarter, primarily as a result of the decline in LIBOR. Our portfolio is not immune to downward pressure on yields, resulting from the decline in LIBOR.

However, we remain focused on evaluating each investment on its own unique merits, and selecting appropriately priced credits that produce strong risk adjusted returns for our shareholders. As shown on slides 9 and 10 respectively, we have returned in excess of $11 per share in dividends and outperformed the Wells Fargo BDC index by 23% since our IPO.

Now I will turn the call over to Paul, who will discuss our financial results.

Paul L. Davis -- Chief Financial Officer

Thanks, Howard, and hello, everyone. Starting on slide 17, net investment income for the fourth quarter was $0.38 per share, exceeding our dividend of $0.36 per share. On an annual basis, net investment income was $1.61 substantially outearning our dividends for the year. This extends our nearly eight-year record of covering our regular dividend every quarter since we went public.

Over this period on a cumulative basis we have outearned our dividends by an aggregate $44 million or $0.76 per share based on total shares outstanding at year end. Investment income for the fourth quarter was $0.81 per share substantially all of which was interest income. This includes recurring cash interest of $0.68, recurring discount and fee amortization of $0.04 and PIK income of $0.045. We also generated $0.04 per share from prepayment income including both prepayment fees and unamortized OID and $0.01 from dividend income. Our income recognition follows our conservative policy of generally amortizing upfront economics over the life of an investment rather than recognizing all of it at the time the investment is made.

Operating expenses for the fourth quarter were $0.43 per share and included incentive compensation of $0.08 per share, as well as interest and other debt expenses of $0.21 per share for net investment income of $0.38 per share. Incentive compensation during the fourth quarter reflected the reduction in our incentive fee rate from 20% to 17.5% that took effect on February 9th of 2019.

The net decrease in net assets of $1.2 million or $0.02 per share was primarily driven by the disposition of Fidelis as Howard discussed earlier. Our net asset value benefited during the quarter from $7.8 million in gains and interest from Edmentum offset by $9.7 million markdown on Securus net of interest income. Securus is a leading provider of communication services to correctional facilities and our loan traded down during the quarter as prison service providers were subject to recent political and regulatory scrutiny. However, our loan continues to be well covered and the Company continues to perform strongly as it has done over the course of our seven year investment.

The gain on events and results from the significant efforts of our team as we work with the Company to manage through a number of challenges, leveraging our deep special situations investing expertise. We are pleased that these efforts are continuing to show improved results in the financial performance of the Company which has lifted the value of our debt in equity holdings. As of December 31st, we had two loans. We had loans to two portfolio companies AGY and Avanti on non-accrual. These loans represented 0.5% of the portfolio at fair value and 0.9% at cost.

Turning to slide 16. We had total liquidity of $349 million at quarter end. This included available leverage of $316 million, cash of $45 million and net pending settlements of $12 million. In 2019, we expanded our credit facility capacity by a net $100 million, reduced the interest rate on our SVCP facility by 25 basis points and extended the maturity of both facilities to May 2023. Our credit facility expansion earlier in the year gave us flexibility as we plan for the maturity of our 2019 convertible notes in December. Subsequently, we issued $200 million of unsecured five year notes at a favorable rate of 3.9% including a $50 million follow-on issuance in November.

The weighted average interest rate on our debt outstanding at December 31st was 3.8%. Our diverse leverage program now includes two low-cost credit facilities. One, convertible note issuance; two, straight unsecured note issuances; and an SBA program. Outstanding draws on our $150 million SBA program remained at $138 million at December 31st. We are also pleased that Fitch initiated coverage of TCPC at investment grade rating in January of this year as S&P also reaffirmed its rating at investment grade.

We now have an investment grade rating from all three rating agencies, major rating agencies S&P, Moody's and Fitch. Net regulatory leverage which is net of SBIC debt, cash and outstanding trades remains unchanged from September 30 at 0.96 times common equity, well within our 2 to 1 leverage limitation following shareholder approval of our increased leverage flexibility last year.

I'll now turn the call back over to Howard.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Thanks, Paul. I'll conclude with a few comments on the market environment in our outlook for 2020 before opening the call to questions. US economic indicators including employment and GDP growth, support a cautiously optimistic growth outlook for the first half of 2020. However, we think domestic political uncertainty, including the pending 2020 presidential election could weigh on business investment decision making and long-term capital expenditure planning.

In addition geopolitical volatility and other disruptions like the coronavirus continue to create uncertainty. While the economic outlook maybe uncertain, our team is focused on delivering the results our shareholders have come to expect from TCPC. We remain highly disciplined in our underwriting, executing only a small number of the investment opportunities we review each quarter. We make investment decisions based on a comprehensive analysis of each company, its management team and strategy and relevant industry dynamics. Our investment committee evaluates each investment and regularly monitors the financial performance of each of our holdings.

From our perspective, where we are in the credit cycle matters less than the ability to select -- selectively capture opportunities throughout the cycle. To that end, we draw upon our teams two decades of experience and BlackRock's vast resources to prudently identify opportunities that align with our selective investment approach while providing our borrowers with financing solutions to help grow their business. We continue to source strong senior secured credit opportunities which have historically outperformed equities, bonds and other unsecured debt through economic downturns. While underweight highly cyclical industries, we will also continue to maintain a broadly diverse portfolio.

In closing, our 2019 presented challenges. We are cautiously optimistic about the operating environment and we remain focused on generating strong risk adjusted returns for our shareholders in the years ahead.

And with that, operator, please open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Chris Kotowski with Oppenheimer. Your line is open.

Chris Kotowski -- Oppenheimer -- Analyst

Yeah. Good afternoon. I just wanted to ask on Securus, is that, you noted the markdown, is that purely secondary market trading driven? Or was there any diminution in their debt service capability during the quarter?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

It was based on trading levels. It's a club deal, it's illiquid and it coincided with some headlines from several politicians on the business model. We have financed the company for seven years. There was a period under prior ownership. We reupped under the last acquisition, where a similar thing happened and the company wound up in court and in fact prevailed on its practices. But it's come under a number of headlines from a couple of politicians.

The company has made very clear that it is working to satisfy these concerns. And we believe that the company itself is running a critical business in that, it provides connections between prisoners and their families, mostly through public prisons and in contracts with a series of public prisons around the country. And in fact, last time it went through some scrutiny, the counter-parties came out and supported the company.

Chris Kotowski -- Oppenheimer -- Analyst

Okay. All right. And on Fidelis, that exit is complete, there is no prospect of any recovery on that -- that chapter is closed. Right?

Paul L. Davis -- Chief Financial Officer

That's exactly the words I was going to use. The chapter is closed. We view it as a unfortunate, but very isolated incident. And really, I think Howard covered most of the commentary in his opening remarks. But we just saw that the options had take over the business and fund it further or to make a tough decision and move on, which is what we did, but your characterization is accurate.

Chris Kotowski -- Oppenheimer -- Analyst

Okay. And then, I guess just somewhat more big picture, Howard, you sounded a bit more cautionary on the economy for reasons that I can understand. And knowing that the coronavirus and all this is very recent, are any of your portfolio companies as far as you can tell, seeing change in economics? Or is it thus far just still primarily, the stock market is uncertain and their coronavirus headlines and that's -- what we all see.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Well said, Chris. To date, we are not aware of any portfolio companies that have been impacted. We noted that with caution, because we thought to not say something about it given the market activity, the last couple of weeks would be remiss. And so we did flag it, but we have built a portfolio that is mostly non-cyclical and is highly diverse and has less international exposure, but if you have something that's impacting the world's second largest economy, we thought it was important to note that we could be impacted.

Chris Kotowski -- Oppenheimer -- Analyst

Okay. All right, fair enough. That's it from me. Thank you.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Thank you for your questions.

Operator

Our next question comes from the line of Robert Dodd with Raymond James. Your line is open.

Robert Dodd -- Raymond James -- Analyst

Thank you. Hi guys, just following up on coronavirus, I mean when I look at your -- obviously, you're lending to US businesses. But when I look at your third largest industry segment, textiles, luxury goods and obviously, China is the largest producer of textiles and one of the fastest growing markets for luxury goods. So while -- do you have any expectation that indirectly that the supply chain could get disrupted and impact that segment in particular, obviously, I mean there is news out of China that on the smaller side, still early, like 30% of small businesses are actually back at work. So, is it just too early to tell or could you give us any more color about what potential supply chain impacting your businesses?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Yeah, it's a great question. With respect to our portfolio, the companies that fall into that category are primarily licensing businesses. So, we are financing the licensors who are multi-channel, the licenses are sold online through stores through various other channels, very broad diversified companies. These include ABG, Kenneth Cole, PSEB which is Eddie Bauer and end client. So these are a diversified series of licensor business. Now their underlying products that the licensees sell, are of course manufactured around the world and primarily in Asia for a lot of these products and so if there is broad disruption it's reasonable to assume that they may be impacted, but to date, we have not heard anything and many of these businesses have guarantees in minimum streams of revenue from a lot of their counter parties.

So we had intentionally constructed this as a less cyclical, less retail-sensitive part of the portfolio. We've talked about this on several occasions, as we've thought about the retail business, we really focused on doing two things the last few years. One is doing asset backed deals and that's really what the Eddie Bauer is and the other is doing license deals. So we have hard asset coverage on some of these and licensed straight stream coverage on the others.

Robert Dodd -- Raymond James -- Analyst

Got it, got it. I appreciate, really helpful, Howard. Thank you. On the Fidelis -- not really, Fidelis. Software obviously has been a pretty decent between Internet software and various other components of software is a pretty decent segment in your portfolio. So far obviously, high margins can be a great business so long as customer retention stays high. Fidelis obviously I think one of the precipitating causes if I remember right, they lost a big customer. In the rest of your software book, are there any other of your software portfolio companies which have relatively concentrated customer books that we should be aware of and that could lessen that risk?

Rajneesh Vig -- President and Chief Operating Officer

Thanks. It's Raj. I'll take that. The answer is generally no and to be honest, if we further distinguish Fidelis from the rest of the software book, we don't -- it's a security software company versus a subscription or enterprise software company. And to your point, there is a lot we focus on retention, we focus on the value proposition of the business and Fidelis is very different in that. It was a very different sales cycle. It's a tougher sell. It's more of a product sale with less recurring elements to it and it's in an area where when it's working to be honest, you don't know what the value proposition is because it's working and you're not seeing security breaches.

So it's a high value and a good segment, but it's a tougher credit profile, if you will, which we learned along the way as the business was deteriorating. So I think coming back to your main question the rest of it really is more predictable, high-margin, high recurring contractual revenue streams and some of them are horizontal software. Some of them are concentrated within a vertical, but I would not characterize any of them really as similar to Fidelis both on the nature of the business and the concentration of the customers.

Robert Dodd -- Raymond James -- Analyst

Got it, I appreciate that. One more if I can kind of on the accounting side. Obviously, the dividends this year, roughly $2.4 million, all of that came from 36 Street Capital Partners according to the 10-K. Obviously, the conventional lending JV which is pretty small right now but could grow to be a more material piece of your book that had $982,000 in dividends, but they don't show up in the dividend line. So can you tell us where that is on the income statement and why it's not included in the dividend line given it's a distribution from LLC member unit?

Paul L. Davis -- Chief Financial Officer

It's a look through. That one is a look through to the interest income, so we included it in the interest income section.

Robert Dodd -- Raymond James -- Analyst

Got it. Appreciate it. Thank you.

Paul L. Davis -- Chief Financial Officer

Sure.

Operator

Thank you. Our next question comes from the line of Finian O'Shea with Wells Fargo.

Finian O'Shea -- Wells Fargo -- Analyst

Hi, good afternoon and thank you for taking my question and sorry to make you the BDC managers that has to provide all of the coronavirus expertise this quarter. But the -- one that stood out to me, there were a couple last year, was the airlines given that's most of what we see as the immediate impact. I think Mesa is mostly domestic, from what I gathered, but would it be fair to say is that something that you've looked at what these developments post quarter as a potential pressure point there?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Yeah. Thanks for the question and to you and the rest of you who have wished us good afternoon. It's still morning here in Santa Monica. We're very comfortable with the Mesa exposure. Mesa, as you point out is a regional US carrier. It's a feeder to the majors and so it doesn't have the international exposure. Of course, the whole industry could be subject to a slowdown in travel, but these are asset-backed loans. We have engines. We have planes. These engines are substitutable collateral on regional jets, many of them and we're comfortable with our attachment points.

And these planes are really necessary for the feeder system to function which feeds the hubs, which are the backbone of the large US legacy carriers. And so Mesa is a great partner. We've been financing them for many years. We've known senior management for over two decades. They do a great job running it. We also feel very comfortable with the underlying collateral values. And when we made these loans the real focus of them was the hard assets themselves.

Finian O'Shea -- Wells Fargo -- Analyst

Sure, I appreciate that. Just a follow on portfolio question on AGY. I think that was your, another mark this quarter. Obviously sort of legacy name, service that's non-accrual. I'm just wondering, it looks like you're treating service equity given that moves around a lot. And your first-lien it is marked at par accrues income. So if that's the case, near-term maturity why continue to accrue taxable income on the second lien if it's really underwater versus the current capital stack? And as a second part of the question, is there any outlook there given the maturities later this year?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Yeah. Let me address the fundamentals of the business first. This is a good fundamental company. We've talked about that for the last couple of quarters. What's been disappointing is and the top line is good. They make high-end glass-based composites that are used in sophisticated industrial, military and consumer uses. Their input costs have soared to record levels. They use some metals as a part of their manufacturing process, one of which is at a record high. We said that on our last call. It's now up 50% higher than that. It's 12 times where it was most of the last eight years. This is not normal for commodity cycles. It's really spiked up in an unusual way and so that has been creating pressure on the company's cash flow and so that's why you've seen some of this movement on what was a cash paying instrument, which then went to pick and then ultimately on the non-accrual.

Finian O'Shea -- Wells Fargo -- Analyst

Okay, I appreciate that context. And thank you for taking my questions.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Thank you, Fin.

Operator

Thank you. Our next question comes from the line of Chris York with JMP Securities. Your line is open.

Chris York -- JMP Securities -- Analyst

Good morning, guys and thanks for taking my questions. So Howard or Raj, I just want to talk about the management for a moment. We've anecdotally heard a couple of investment professionals give a hidden bomb for other direct lenders so obviously turnover does happen in this industry but in light of changes at the manager from the acquisition of BlackRock, we wanted to know if you think there are any cultural or operational changes at BlackRock TCP that could induce your employees' [indecipherable]?

Rajneesh Vig -- President and Chief Operating Officer

I'll take that one. I think the short answer is no. I think we've had, you may not see it as obviously we've also had additions come on to the team both internally from BlackRock and externally and we expect to have more people because we're coming on because we're growing. I think we've always had some level of people in the business find other opportunities. I think the way I look at it is it's where are they going and are they going for something that's particularly interesting and a good place because of what they've been able to do here.

And generally, that's been the case. We're proud of the things people have done when they have moved on to something that just works better for them, but I don't see any change or abnormal level of that and rather, we've actually seen a lot of influx of interest joining the team because of what we've been able to do stand-alone and what we're actually I think in the early stages of doing as a combined platform, which is pretty exciting.

Chris York -- JMP Securities -- Analyst

It's great to hear. Maybe just a follow-up on that. Could you provide us any color on maybe the investment professionals you had at year end versus what it was in the previous year?

Rajneesh Vig -- President and Chief Operating Officer

I want to say it's about the same, if not a few more at the margin, but yes I don't have the exact numbers.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

We grew our total number of investment professionals and we have been growing over time. In connection with the acquisition by BlackRock, we increased the total number of investment professionals that we have working across our private and public vehicles by almost 50%. And so we have a more significant and robust staff than we had. The average tenure of most of our senior people is well over a decade and the most senior ones many of them have been here 15 years and a few of us over 20 years. We have a lot of seniority and tenure in the business and we've been growing the platform and just to echo Raj's prior comments, we've been pleased with the significant interest from people in coming to join us and are continuing to hire.

Rajneesh Vig -- President and Chief Operating Officer

Chris, if you're looking to send your resume and we are about to take it, that's the source of the question.

Chris York -- JMP Securities -- Analyst

Yeah, thank you very much for that. The last one just on that topic is I think it's been maybe 18 months since the acquisition closed, so what do you think has been the biggest benefit for shareholders today from that acquisition?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

This is Howard. There are a series of benefits that we've gotten. I think the biggest one is as Tennenbaum Capital, we've built a great niche brand in the market, but what is clear to us is that there are many borrowers and counterparties out there that embrace doing business with the world's largest asset manager. They like our resources, they like our knowledge, they like knowing that there is that kind of support and information and credibility if they wish to go public or do other things with their capital structure and we found that to be very powerful. I will just add to that. We're also working with a fantastic group of people across a large and talented organization.

Chris York -- JMP Securities -- Analyst

Got it. Obviously, we know that you've reduced your cost of debt capital and then obviously the new investment-grade rating there. So just curious what you thought was the biggest benefit and obviously there are many benefits. So I will switch to my last question, I did noted the first in Juul is down this quarter. It's an interesting investment and I was a little bit surprised given that I think it was originated in the summer. So was that pay down encouraged by you or was it simply a function of just cash flow and amortization?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

So it's a highly structured loan that has a series of protections and features associated with it and as has been public Juul has raised significant junior capital recently and so we continue to have significant asset coverage and so they've been paying down the loan, just as we contemplated.

Chris York -- JMP Securities -- Analyst

Got it. That's it for me, thanks. And Raj, I may have to refresh that resume for you.

Rajneesh Vig -- President and Chief Operating Officer

Thanks Chris.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Your line is open.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Howard, turning to the election, if Sanders is the nominee and it becomes a close race, do you expect slowdown in deal origination activity in the second half of the year?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

It's a good question. We talked about that in our earlier comments. If you think about the last election that we had in 2018, there was a lot of rancour around it and I think there were a number of people that felt that that election caused angst and slowed down business activity and clearly a presidential election alongside of congressional local elections is going to be far more impactful than that and so we think that regardless of who is on the ticket, the discrepancies between the different agendas of the parties and the rhetoric coming out of some of the candidates and the annunciation of very different policies is likely to give some businesses pause.

Our portfolio is less heavily weighted to capital expenditures and long-term projects. This is intentional. It's part of a reorientation we've been going through for the last three years or four years sort of preparing for a change in the economy or an economic slowdown, but that doesn't mean we are immune and clearly a lot of the companies we have in there still have big-ticket items but they're probably less susceptible than a more capex heavy portfolio.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Thank you. Also as a follow-up. Another corona question. How is the discussion of corona and the possibility of a pandemic driving your negotiations and in new investments? How is that affecting terms and where is just the overall conversation?

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Obviously, this is very new. BlackRock has vast resources, including offices in a number of the more impacted countries and so our data flow and data sources are probably more expanded than many, and so we're trying to balance. Obviously, first and foremost, concerns for people safety but also an appropriate caution about things that could happen in companies. I think most people are trying to go back to businesses normal under the assumption that this will pass and that life will resume to normalcy and that certainly is normal for many businesses, particularly in the US.

But in the real recent term, you can see a backing off in the traded markets and a little bit more caution and whether that will spill into our markets, which are more negotiated and tend to remove a little bit more slowly. It remains to be seen but I would say the lender-borrower dynamics in the last few weeks is probably on the margin tilted a little bit more in favor of the lenders in some of the deals we've been working on as some people on the borrower side are probably more interested in getting things done quickly with the trusted counter-party that they know will get across the line instead of taking capital markets risk.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Got it. Okay, thank you.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Thanks for the question.

Operator

I'm not showing any further questions. I would now like to turn the call back over to Howard Levkowitz for closing remarks.

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

We appreciate your questions and our dialogue today. I'd like to thank all of our shareholders for your confidence and your continued support and our experienced and talented team of professionals at BlackRock TCP Capital Corp for your continued hard work and dedication. Thanks again for joining us. This concludes today's call.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Katie McGlynn -- Investor Relations

Howard M. Levkowitz -- Chairman of the Board and Chief Executive Officer

Paul L. Davis -- Chief Financial Officer

Rajneesh Vig -- President and Chief Operating Officer

Chris Kotowski -- Oppenheimer -- Analyst

Robert Dodd -- Raymond James -- Analyst

Finian O'Shea -- Wells Fargo -- Analyst

Chris York -- JMP Securities -- Analyst

Christopher Nolan -- Ladenburg Thalmann -- Analyst

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