DEF 14A: BlackRock TCP Capital Corp. Seeks Stockholder Approval for Below NAV Share Sales at 2024 Annual Meeting

BlackRock TCP Capital Corp. is asking stockholders to approve a proposal allowing the company to sell shares of common stock below net asset value (NAV) at the upcoming annual meeting on May 23, 2024.

Summary

• BlackRock TCP Capital Corp. will hold its 2024 Annual Meeting of Stockholders virtually on May 23, 2024.
• Stockholders will vote on the election of six director nominees and a proposal to authorize the company to sell shares of common stock below its net asset value (NAV) for up to 12 months, subject to certain limitations.
• The proposal includes a condition that the number of shares sold on any given date does not exceed 25% of the company's outstanding common stock.
• The board recommends voting FOR the election of director nominees and FOR the proposal to sell shares below NAV.
• As of March 27, 2024, the company had 85,591,134 common shares outstanding, each entitled to one vote.
• The company estimates the costs and expenses related to the solicitation of proxies for the Annual Meeting to be approximately $387,200.
• The company intends to use the services of Georgeson LLC, to assist in the solicitation of proxies and expects to pay market rates for such services, with an estimated base fee not to exceed $8,000 plus estimated additional fees and expenses that may cause the Company to pay Georgeson LLC, approximately $150,000 in total fees and expenses based on the prior year combined proxy solicitation costs for the annual and special meetings.

Sentiment

Score: 6

Explanation: The document presents a balanced view, outlining both the potential benefits and risks associated with the proposal to sell shares below NAV. While the company expresses a positive outlook on its ability to capitalize on investment opportunities, it also acknowledges the dilutive effect on existing stockholders.

Positives

• Authorizing the sale of shares below NAV could provide the company with greater financial flexibility to capitalize on investment opportunities.
• Issuing additional shares may increase the company's market capitalization and trading volume, potentially attracting a broader range of investors.
• The company maintains sources of liquidity through its maintenance of a credit facility and other means, but generally attempts to remain close to fully invested and does not hold substantial cash for the purpose of making new investments.
• The company has a history of paying steady or increasing dividends to stockholders.

Negatives

• Selling shares below NAV would result in immediate dilution to existing stockholders.
• Non-participating stockholders would experience a reduction in NAV per share and a disproportionate decrease in their interest in the company's earnings and assets.
• The market price of the company's shares could decline as a result of selling shares below NAV.
• The Advisor will benefit from sales of common stock at a discount to net asset value as the Advisor will earn additional investment management fees on the proceeds of such offerings.

Risks

• Global capital markets have periodically experienced periods of disruption evidenced by a lack of liquidity in the debt capital markets, write-offs in the financial services sector, the re-pricing of credit risk, the failure of certain major financial institutions and general concerns about the state of the U.S. economy.
• The current economic situation, including high interest rates and inflationary pricing, as well as various social, political and psychological tensions in the United States and around the world, may continue to contribute to severe market disruptions and volatility and reduced economic activity, may have long-term negative effects on the U.S. and worldwide financial markets and economy and may cause further economic uncertainties in the U.S. and worldwide.
• Volatility in the capital markets could result in negative pressure on debt investment valuations, potentially impacting the Company's asset valuations, stockholder equity and the Company's asset coverage ratio.
• The debt capital that will be available, if at all, to the Company may be at a higher cost and on less favorable terms and conditions in the future.
• The possibility that our shares of common stock will trade at discounts from NAV or at premiums that are unsustainable over the long term is a risk separate and distinct from the risk that our NAV will decrease.

Future Outlook

The company seeks authorization to sell shares below NAV for the next 12 months to maintain financial flexibility and capitalize on investment opportunities.

Management Comments

• Rajneesh Vig, Chair of the Board of Directors and Chief Executive Officer, urges stockholders to submit their proxies as soon as possible.
• The Board of Directors believes that having the flexibility to issue our common stock below NAV per share in certain instances is in the best interests of stockholders.

Industry Context

Many BDCs have sought and received authorization from their stockholders to sell shares of common stock at prices below NAV for many of the same reasons discussed above.

Comparison to Industry Standards

• The document mentions that many other Business Development Companies (BDCs) have sought and received authorization to sell shares below NAV.
• This practice is not uncommon in the BDC industry, particularly when companies seek to raise capital in challenging market conditions.
• Companies like Ares Capital Corporation, Main Street Capital, and Prospect Capital have, at times, utilized similar strategies to manage their capital structure and pursue investment opportunities.
• The document also notes that several of those BDCs have over time completed offerings of common stock at prices per share below their respective NAV.

Management Changes

Corporate Governance

Related Party Transactions

• The company has an investment management agreement with the Advisor.
• The Administrator provides administrative services to the company.
• The company has a royalty-free license agreement with the Advisor and BlackRock, Inc.
• The Advisor and its affiliates may manage other funds and accounts, leading to potential conflicts of interest in allocating investment opportunities.

Stakeholder Impact

• Existing stockholders may experience dilution if shares are sold below NAV.
• The company's ability to capitalize on investment opportunities could benefit stockholders in the long term.
• Increased market capitalization and trading volume may improve liquidity for all stockholders.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold its Annual Meeting on May 23, 2024, to conduct the business outlined in the proxy statement.
• The company will implement the approved proposals, including the election of directors and the potential sale of shares below NAV, subject to the conditions outlined in the proxy statement.

Key Dates

Keywords

proxy statement, annual meeting, stockholders, directors, net asset value, NAV, common stock, BlackRock TCP Capital Corp., shares, vote