BlackRock TCP Capital - Q3 2023

Transcript

Operator (participant)

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's third quarter 2023 earnings conference call. Today's conference call is being recorded for replay purposes. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, please press the star key followed by the digit one. I'll repeat these instructions before we begin the Q&A session. And now, I'd like to turn the call over to Katie McGlynn, Director of the BlackRock TCP Capital Corp Investor Relations team. Katie, please proceed.

Katie McGlynn (Director of Investor Relations)

Thank you, Alex. 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. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the third quarter ended September 30th, 2023. We also posted a supplemental earnings presentation to our website at www.tcpcapital.com.

To view the slide presentation, which we will refer to on today's call, please click on the Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today. I will now turn the call over to our Chairman and CEO, Raj Vig.

Raj Vig (Chairman and CEO)

Thanks, Katie, and thank you all for joining us for TCPC's third quarter 2023 earnings call. I will begin the call with a review and reminder of our proposed merger with our affiliate BDC, BlackRock Capital Investment Corporation, that was recently announced in September. I will then cover the overview of our third quarter results before turning the call over to our President and Chief Operating Officer, Phil Tseng, who will provide an update on our portfolio and investment activity. Our CFO, Erik Cuellar, will then re-review our financial results, as well as our capital and liquidity positioning in greater detail. I will then close out our prepared remarks with a few final comments before we take your questions. On September 6th, 2023, we announced a proposed merger of TCPC with BlackRock Capital Investment Corp, or BCIC.

As highlighted at the time of the announcement, the proposed transaction is a very logical and natural strategic next step in the growth and evolution of BlackRock's BDC platform and the broader $81 billion global private debt business at BlackRock. What's especially compelling about the merger is that it combines two very similar portfolios that we know well as our collective investment team has been managing both portfolios for many years now. We believe the proposed merger positions the combined company for sustained growth and will create meaningful value for TCPC shareholders. As a reminder, the transaction is expected to result in a combined company that benefits from operational cost synergies, enhanced scale, and better access to capital on improved terms. We also anticipate that the transaction will be accretive to NII.

Importantly, our proven investment strategy and overall approach to investing will not change, and the officers of TCPC will remain officers of the combined company following the close of the transaction. The transaction will be a NAV for NAV exchange that will result in an ownership split of the combined company that is proportional to each of TCPC's and BCIC's respective net asset values, subject to each company's shareholder approvals, customary regulatory approvals, and any other necessary closing conditions. BCIC shareholders will receive newly issued shares of TCPC common stock based on the ratio of BCIC's net asset value per share, divided by the TCPC net asset value per share, each determined shortly before closing.

As an added reminder, TCPC's advisor, BlackRock, is supporting the transaction with several shareholder-friendly measures, including a reduction in the management fee from 1.5% to 1.25% for assets equal to or below 200% of net assets. Net investment income coverage via a waiver of advisory fees for any of the first 4 quarters ending following the merger closing. In the event net investment income in any such quarter is less than $0.32 per share, up to a maximum of the advisory fees earned during such quarter. Finally, BlackRock has agreed to cover 50% of the merger costs for both companies, up to a combined cap of $6 million, assuming shareholder approval for the transaction.

We expect the transaction to close in the first quarter of 2024, subject to shareholder and regulatory approvals and customary closing conditions. Now, let's get back to the normal programming and review of highlights from the current quarter. For the third quarter 2023, TCPC delivered net investment income of $0.49 per share, representing a 17% increase year-over-year and an approximate 15.3% annualized net investment income return on equity. Given the floating rate nature of our portfolio and the higher proportion of our liabilities are fixed rate, our net investment income continues to benefit from higher base rates as well as marginally wider spreads. Our run rate NII at the end of the third quarter was again among the highest in TCPC's history as a public company.

Our board of directors today declared a fourth-quarter dividend of $0.34 per share, which is consistent with the third quarter and inclusive of the 2 dividend increases declared by the board over the last 4 quarters. The fourth quarter dividend is payable on December 29th to shareholders of record on December 15th. In addition, as an acknowledgment of TCPC's strong earnings to date, the board announced an additional $0.25 per share of special dividend, also payable on December 29th to shareholders of record on December 15th. We have always taken a disciplined approach to the dividend, with an emphasis on stability and strong coverage from our recurring investment income. As a reminder, throughout TCPC's history, we have consistently covered our dividends with recurring net investment income.

In a few minutes, Phil will discuss our third quarter investment activity in more detail, but in summary, we saw a modest pickup in transactions toward the end of the quarter, although volumes remained muted in this uncertain environment. We remained disciplined and consistent with our historical activity, invested in only a small percentage of the opportunities we reviewed in the quarter. Given the slowdown in private equity deal volumes, we are reminded of the benefits of our channel-agnostic approach to deal sourcing. Our pipeline benefits from our direct relationships with management teams and other industry participants, developed over our more than 23 years of lending to the middle market across various cycles and our ability to draw upon the power of the BlackRock platform.

Our NAV declined 1.7% during the quarter, primarily reflecting unrealized markdowns on 6 positions, which Erik will discuss in more detail. The majority of these unrealized marks in this quarter reflect general market volatility and some isolated performance challenges. Importantly, we remain confident in the long-term performance of these investments and our portfolio in general. The credit quality of our portfolio remains solid, with loans to just 3 portfolio companies on nonaccrual as of the end of the third quarter, totaling 1.1% of total investments at fair value. We believe we are well positioned to continue to deliver solid results, given that our team has one of the longest track records in direct lending of any of the publicly traded BDCs.

While we do not have an explicit forward view on rates, we do believe we will be in a slower growth and elevated rate environment for the foreseeable future, with a range of macroeconomic uncertainties persisting. It is in periods like this, that our historical experience and deep industry knowledge continue to provide us an advantage and have resulted in strong results throughout various market cycles. As a reminder, our team has also had direct experience in special situations investing, which we believe positions us well to navigate more complex market environments, as we have demonstrated in prior periods of market volatility.

Looking back at our historical performance as a public company, since 2012, we have generated a 10.3% annualized return on invested assets and a total annualized return of 9.6%, much of which we have delivered while base rates were substantially lower than they are today. We believe this performance remains at the high end of our peer group, and it reflects our ability to consistently identify attractive opportunities at premium yields and deliver exceptional returns to our shareholders across market cycles. Now, let me turn it over to Phil to discuss our investment activity and portfolio positioning.

Phil Tseng (President and COO)

Thanks, Raj. I'll start with a few comments on the investment environment before providing an update on our portfolio and highlights from our investment activity during the third quarter. As Raj noted, economic uncertainty has driven a slowdown in market transaction volumes this year. However, we saw a modest pickup in transaction volumes toward the end of the third quarter that has continued into the fourth quarter to date. We are seeing pockets of activity, including in non-sponsor opportunities and refinancing to support existing portfolio companies. However, we've remained disciplined and continue to pass on the substantial number of less attractive opportunities coming to market, particularly when we believe that pricing does not appropriately reflect the current market conditions or when terms do not provide adequate lender protections. In the third quarter, TCPC invested $92 million, up significantly from the $17 million invested in the second quarter.

Deployment of the quarter included loans to 4 new and 4 existing companies, primarily in senior secured loans. In reviewing new opportunities, we emphasize transactions where we are positioned as a lender of influence, which enables us to leverage our two decades of experience in negotiating deal terms and conditions that we believe provide meaningful downside protection. We believe this has been a key factor in the low realized loss rates over our long-term track record. In addition, our industry specialization, which our borrowers value as well, provides two key benefits. First, it bolsters our ability to assess and effectively mitigate in our underwriting and when we negotiate terms in credit documentation. And second, it expands our deal sourcing capabilities with sponsors and non-sponsors who value our industry experience, which lends itself to more reliable execution.

Follow-on investments in existing holdings continue to be an important source of opportunity for us. About half of dollars deployed over the last 12 months and in the third quarter were with existing portfolio companies. TCPC's largest new investment during the third quarter was a senior secured first lien term loan to Nephron Pharmaceuticals to support the company's future growth initiatives. Nephron develops safe, affordable, generic inhalation solutions and suspension products. We view this investment as being aligned with our overall approach to healthcare lending. That is, focusing on companies that are lowering the overall cost of healthcare or building efficiency.... New investments in the third quarter were offset by total dispositions of $126 million. Our emphasis is on companies with established business models and proven core customer bases that make them more resilient.

We continue to closely monitor and engage in dialogue with our existing portfolio companies. As a result, we assess both current and projected performance relative to our original underwriting assumptions, enabling us to get ahead of any potential credit issues. The majority of our portfolio companies are successfully navigating the higher rate environment, inflation, and the general uncertainty in the economy, and they continue to deliver revenue growth and margin expansion. We are working closely with the management teams and owners of a handful of companies that are facing slower revenue growth or margin pressure. However, we recently completed our quarterly review process and are pleased to report that the portfolio remains in good shape. At quarter end, our portfolio had a fair market value of approximately $1.6 billion.

89% of our investments were senior secured debt spread across a wide range of industries, providing portfolio diversity and minimizing concentration risk. We also continue to emphasize companies in less cyclical industries. The portfolio at quarter end consisted of investments in 143 companies, and our average portfolio company investment was $11 million. As the chart on slide 7 of the presentation illustrates, our recurring income is distributed broadly across our portfolio and is not reliant on income from any one company. In fact, more than 90% of our portfolio companies each contribute less than 2% to our recurring income. 86% of our debt investments are first lien, providing significant downside protection, and 95% of our debt investments are floating rate, an important benefit in this higher rate environment.

The overall effective yield on our debt portfolio increased to 14.1% compared with 11.3% one year ago, reflecting the benefit of higher base rates and wider spreads on new investments. Investments in new portfolio companies during the quarter had a weighted average effective yield of 14.8%, exceeding the 12.7% weighted average effective yield on exited positions. While we observed some contraction in market spreads in the third quarter relative to earlier in the year, we continue to benefit from a more lender-friendly investment environment overall, with improvements in both pricing and terms relative to twelve months ago. Post-quarter end, we have seen a modest pick-up in activity and have been investing selectively, maintaining our underwriting discipline while being mindful of the lingering inflationary environment.

We emphasize companies that provide a necessary service or product to their customers, such that they are more resilient across market cycles. It's also important to note that we do not underwrite to perfection. We seek to build in sufficient buffers to ensure companies can withstand changes in the macro environment, including higher costs, without impairing the ability to service our loans. Our pipeline is building, and the yields on investments in our pipeline are generally in line with our current portfolio. To date, we have had no prepayment income in the fourth quarter. Let me now turn it over to Erik to walk through our financial results, as well as our capital and liquidity position.

Erik Cuellar (CFO)

Thank you, Phil. As Raj noted earlier, our net investment income in the third quarter benefited from the increase in base rates over the last 18 months. Net investment income of $0.49 was up 17% versus the third quarter of 2022 and exceeded the third quarter dividend of $0.34 per share. Today, we declared a fourth quarter dividend of $0.34 per share and a supplemental dividend of $0.25 per share. We remain committed to paying a sustainable dividend that is fully covered by net investment income, regardless of the interest rate environment, as we have done consistently over the last 11.5 years. Investment income for the third quarter was $0.94 per share. This included recurring cash interest of $0.32 per share, recurring discount and fee amortization of $0.03, and PIK income of $0.02.

PIK income remains in line with the average over our history. Investment income also included $0.02 of dividend income. Operating expenses for the third quarter were $0.34 per share and included interest and other debt expenses of $0.21 per share. Incentive fees in the quarter totaled $6.0 million, or $0.10 per share. Net realized losses for the quarter were $129,000, or less than $0.01 per share. Net unrealized losses in the third quarter totaled $15 million or $0.27 per share, primarily reflecting unrealized markdowns on our investments in Edmentum, Corus, McAfee, 36th Street Capital, Hyland, and CIBT. As Raj noted earlier, unrealized losses in the quarter were primarily driven by overall market volatility, coupled with a few isolated company-specific performance challenges.

Unrealized losses were partially offset by a $3.2 million unrealized gain on our investment in Astra Acquisition. The net increase in net assets for the quarter was $12.8 million, or $0.22 per share.... As a reminder, we have a robust valuation process, and substantially all of our investments are valued every quarter using prices provided by independent third-party sources. These include quotation services and independent valuation services, and this process is also subject to rigorous oversight, including back testing of every disposition against our valuations. As Raj noted, the credit quality of our overall portfolio remains strong. Only three portfolio companies were on nonaccrual at the end of the third quarter, representing 1.1% of the portfolio at fair value and 1.7% at cost. Turning now to our liquidity.

Our balance sheet positioning remains solid, and our total liquidity increased to $353 million at the end of the quarter, relative to our total investments of $1.6 billion. This included available leverage of $261 million and cash of $92 million. Unfunded loan commitments to portfolio companies at quarter end equals 4% of total investments, or approximately $57 million, of which only $35 million were longer commitments. Our diverse and flexible leverage program includes two low-cost credit facilities, two unsecured note issuances, and an SBA program. Earlier this month, Moody's reaffirmed TCPC's investment-grade rating with a stable outlook. Our unsecured debt continues to be investment-grade rated by both Fitch and Moody's.

Given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing, and our maturities remain well laddered. Additionally, we are comfortable with our current mix of secure and unsecured financing and do not have any immediate financing needs. Combined, the weighted average interest rate on our outstanding borrowings decreased during the quarter to 4.24%. That is an increase of only 98 basis points over the last 21 months, while base rates increased more than 525 basis points during that same period. This is the result of having over 70% of our borrowings from fixed-rate sources. Now, I'll turn the call back over to Raj.

Raj Vig (Chairman and CEO)

Thanks, Erik. Even as market volatility persists, we are confident in our proven strategy and approach to investing. We believe we have demonstrated a consistent ability to execute in both periods of economic growth and contraction, which has enabled us to deliver outstanding long-term returns to our shareholders and also makes us a reliable partner for our borrowers. Furthermore, we are excited about the merger with BCIC and believe the transaction will further amplify our strengths and provide numerous benefits. With that, operator, please open the call for questions.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Robert Dodd of Raymond James. Robert, your line is now open. Please go ahead.

Robert Dodd (Director and Senior Equity Research Analyst)

Hi, guys. On the pipeline question, I mean, you talked about a little bit of pickup activity at the quarter end, but that's actual investing. What about the more preliminary stages of the pipeline? Are you seeing that build towards maybe the closing in Q4, or are you seeing any evidence of an increase in activity at the moment?

Phil Tseng (President and COO)

Yeah. Thanks, Robert. This is Phil. So I'd say in the earlier stages of the pipeline, we are definitely seeing that more robust than in the prior quarters. Whether that means deals will close in Q4 or spill into the early parts of 2024 is still TBD. But I think what it does pose is a good solid pipeline for 2024. I think that you can consume, and that's something that we've been thinking more about as we see you know, the rate certainty be a little bit more visible, given you know, what the Fed just communicated yesterday, and has been alluding to in terms of you know, starting to really hitting a the ceiling.

Whether rates come up, you know, once or twice more, obviously depends, but I think the certainty over the near-term horizon probably will lead to, you know, more transactions happening, whether it's M&A or, you know, borrowers feeling like now may be a good opportunity to start investing in growth again. But I think that's, that should be encouraging for, for our pipeline going to 2024.

Robert Dodd (Director and Senior Equity Research Analyst)

Got it. Thank you. And then on the credit and maybe sponsor discussions, et cetera, I mean, Perch, a new nonaccrual this quarter, obviously got marked down a bit. You've talked about Hyland in the past, but then on the flip side, Astra, which was, you know, got marked up a decent chunk this quarter. So could you give us any color on where things are struggling and, to your point, where a handful of companies are seeing slower than you guys? Are the sponsors responding as normal or, you know, is there any change in the dynamics in your discussion with sponsors, where they exist for the companies that might be having a little bit more of a difficult time?

Raj Vig (Chairman and CEO)

Yeah, Robert, it's Raj. I'm gonna try to take that as one question because there's a lot in there, but we'll try to cover a bunch of those. So big picture, there's no thematic, you know, the names you mentioned are all very individual stories, and we can cover them. There's no sort of thematic portfolio-wide, you know, issue that you know is a general theme, even though there are obviously thematic issues in the macroeconomy. The sponsor question is a good one, and I will tell you that, you know, we've mentioned this in the past couple of times, and I think we continue to see this. For the most part, sponsors have been doing a good. There's been a good collective and constructive dialogue.

And again, I think this stems from everyone really looking at the environment as with some uniform view, which is higher rates and lower growth. In that environment, you know, it's all about promoting liquidity and longevity, either organically or supplementing it, you know, where it's needed. I think there has been a good general, you know, observation of sponsors doing the right things by their companies, whether that's cost-cutting more aggressively, certainly reducing discretionary items on the investing side, if the ROI and the growth isn't, you know, coming from that. It has meant, in numerous cases, you know, infusions of liquidity.

And so I think we've broadly speaking, we've, you know, we've had a good dialogue with the sponsors we work with, but keep in mind, we're not a sort of a broad sponsor shop. It's, it's more,

Robert Dodd (Director and Senior Equity Research Analyst)

Right.

Raj Vig (Chairman and CEO)

You know, folks that we've done a lot of deals with over the years. I think for the names you mentioned, and we, you know, there are very, very, very idiosyncratic things in general. I would say the Perch and the Amazon aggregators is a little bit more of a general industry, you know, weakness kind of in a consumer discretionary realm. It doesn't make us change our view on the long-term prospects and the thesis. It just means that in certain cases, these companies that had a certain expectation of growth, where that may not be to their expectations, have to do different things individually or in a collective fashion. And, you know, you know, we're sort of going to stay tuned on that.

We kind of leave it there, but generally, I think they're all looking at trying to, you know, mature, scale, and cost cut in a way that's expected and proactive. Hyland, we've talked about a number of times. Astra, just for your information, is a publicly traded name, so that valuation move is really just a quote. And then other names like Edmentum, you know, 36th Street and others, we can talk about, but I think there's very much a similar story that's company-specific, not necessarily portfolio, you know, portfolio-wide.

Robert Dodd (Director and Senior Equity Research Analyst)

Got it. Thank you.

Raj Vig (Chairman and CEO)

Yeah.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. Our next question comes from Christopher Nolan of Ladenburg Thalmann. Christopher, your line is now open. Please go ahead.

Christopher Nolan (Managing Director, SVP, and Equity Research)

Hey, guys. For the acquisition in the deck, the pro forma net leverage was following the deals 0.96. Given the change of the market, do you expect that to continue? Are you standing by that projection, or has market conditions changed that?

Raj Vig (Chairman and CEO)

Chris, your question on the... Our disclosures on the pro forma numbers, those are based off of, 6/30 leverage levels for both TCPC and BCIC. If you noticed, TCPC's leverage level came down at 9/30, right about what that pro forma number was. So on a pro forma level right now, it would be a little bit lower. However, the, our view of, our leverage, or range at which we plan to run leverage for the combined company doesn't change. It, it'll fluctuate quarter to quarter, but likely to stay within the range that it's been for TCPC over time.

Christopher Nolan (Managing Director, SVP, and Equity Research)

Great. And then I guess a follow-up question. Kawa Solar, that's an unusual holding. It's sort of been zero coupon for a long time, and I noticed that it's maturing, at least pieces of it are maturing in the fourth quarter. Is the plan simply to extend that investment? And if so, you know, it's zero coupon, so what's the status there, please?

Raj Vig (Chairman and CEO)

Yeah. That's quite an old one, and it's a residual position on something that we've generally exited, but has a longer tail of it's kind of just a liability participation, and it just have to run out. So there's no plan to extend it. There is no entity there other than these obligations that are going to run their course in a staggered fashion. They run through, I want to say, 2024. But you should see that exposure continue to whittle down to, it's pretty de minimis now, but continue to whittle down and run off. But there's no plan on re-upping or extending at all.

Phil Tseng (President and COO)

Great.

Christopher Nolan (Managing Director, SVP, and Equity Research)

That's it for me. Thank you very much.

Operator (participant)

... Thank you. At this time, we currently have no further questions. Well, my apologies. We do have a question from Ryan Lynch of KBW. Your line is now open. Please go ahead.

Ryan Lynch (Managing Director and Equity Research)

Hey, thanks for taking my questions. First one I just had was, was there any material amendments made in the quarter that were performance-related for any borrowers? And I'd just love to, if there were, could you just talk about what was the nature of those amendments, and was there any support in conjunction with those amendments from the private equity sponsor?

Raj Vig (Chairman and CEO)

Yeah, I'm going to try to answer that in a generalist way, because a lot of these tend to be confidential items. But keep in mind, for us, covenants are really built to be, you know, kind of risk mitigant, circuit breakers. They're, when things are a little weaker and, you know, growth is slower, whatever the case is, we expect them to be either, you know, get close to or breach. That doesn't mean that we, at those levels, we're viewing the credit as challenged. It's just structured to be a chance to get back in and discuss and, you know, review the situation. So in numerous cases, that's happening. It's, as it's supposed to.

And as I mentioned in the, you know, the answer earlier, in some cases, that has led to, you know, not doing very much because it's a, it's not a, it's not an issue, it's just a, you know, a reset, and we're, we're comfortable. In some cases, that has led to infusions where we think that's appropriate, and discussions with the, you know, the owner, whether it's a sponsor or not. In some cases, we may reset the covenants, you know, take an economic view if, so long as the credit is, you know, considered not compromised.

It sort of ranges quite a bit inclusive of cash infusions, but I think that it all stems from the ability to think about structuring these at the front end in a defensive way, and then leveraging covenants as one of the tools to allow us to, you know, do our job of protecting principal. Ultimately, that's our main and most important job in this type of business.

Ryan Lynch (Managing Director and Equity Research)

Okay, understood. And in your prepared comments, you mentioned about approximately half of the dollars deployed over the last 12 months, which also included in the third quarter, were two existing portfolio companies. Could you kind of just give a ballpark of generally, what are those proceeds being used for? Are they to just refinance existing debt packages you have in these borrowers? Are they for new growth or doing recaps? Just love to kind of get a good framework of when you're investing in an existing borrower in the last 12 months, what have been the use of those proceeds?

Phil Tseng (President and COO)

Yeah. Thanks, Ryan. This is Phil. So in every single one of those cases where we do provide additional financing for portfolio companies, they're always healthy situations, obviously, because we're willing to, based on the performance that we've observed over the years that these companies have been in our portfolio, we feel very comfortable extending additional credit. And then, in large part, it's for add-on acquisitions, primarily. There are some situations where they're, if they're continuing to, you know, grow their business, invest in organic growth rather than, you know, inorganic acquisitions. And then in a very small sense, probably some dividend recap capacity. But again, these are all for performing situations or very well-performing, where we feel like they have additional debt capacity.

You know, a good example of that is our companies that have delevered substantially over the time that they've been in our portfolio, and based on our analysis, we view that they have additional debt capacity that we're very willing to participate in and help facilitate.

Ryan Lynch (Managing Director and Equity Research)

Okay, my final question I had was, sizable special dividend made in the third quarter, a very large special in the fourth quarter. I would just love to hear dividend cover expected to remain really strong, you know, over your core dividend next year, our estimates and consensus. Is it an expectation that you will continue to pay out some level of special dividend on a quarterly if earnings stay within this range, and, and that special dividend will obviously vary from time to time? Or is this more of a year-end sort of true-up you did the last two quarters?

Raj Vig (Chairman and CEO)

So let me try to take that one. You know, I think certainly, we don't want people to take the special as a forecast of a repeating special, because then it's not a special anymore. So I do think we are looking at this as one way to give value back to the shareholders in a more concentrated fashion. Obviously, we've—it's not the only thing we've done. We've also done some dividend raises, which should be seen as recurring. Every period, you know, periodically and more frequently we are assessing the dividend and other tools to return value to the shareholders. The merger is actually another form of that as well, as we think about the benefits that accrue from that.

But our board, you know, we, we do a review, a thorough review with our board around the business, where it's going, the current prospects, and maintaining a dividend that is, you know, healthy, but also very well covered, so we don't, you know, find ourselves in a position to take it up and then, and to take it down, which I think will be, not received well. So it's a long way of saying we're going to continue to assess. The conditions are, are very good. Obviously, you can tell by the, by the, the NII over the last several quarters. Portfolio looks like it's in good shape, and the market, you know, is, is pretty attractive. I think you can just...

And obviously, we have a transaction that we're looking to close, and we'll revisit all of it, as we do every quarter, under the NewCo dynamic versus just TCP, the standalone. And as we do that, we will come back and convey our thoughts to the market and where we can give more to the shareholders. We're gonna continue to focus on that. I would just encourage you not to take any one-time item as a recurring item. It's the reason we put it as a one-time. And in part, there is a you know, year-end dynamic that you know ties to our overearning the dividend quite a bit through the year that ties into this one as well.

Ryan Lynch (Managing Director and Equity Research)

Okay, understood. I appreciate the time today.

Raj Vig (Chairman and CEO)

Thanks, Ryan.

Operator (participant)

Thank you. At this time, we currently have no further questions, so I'll hand back to Raj Vig for any further remarks.

Raj Vig (Chairman and CEO)

We appreciate your participation on today's call. I would like to thank our team for all of the continued hard work and dedication. I would also like to thank our shareholders and capital partners for your confidence and your continued support. Thanks for joining us. This concludes today's call.

Operator (participant)

Thank you for joining today's call. You may now disconnect your line.