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TCPC BlackRock TCP Capital

Filed: 26 Feb 20, 7:58am
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  
 For the Year Ended December 31, 2019
  
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Commission File Number: 814-00899
______________________
 
BLACKROCK TCP CAPITAL CORP.
(Exact Name of Registrant as Specified in Charter)
______________________
 
Delaware56-2594706
(State or Other Jurisdiction of Incorporation)(IRS Employer Identification No.)
  
2951 28th Street, Suite 1000
 
Santa Monica, California90405
(Address of Principal Executive Offices)(Zip Code)

(310) 566-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
 
Common Stock, par value $0.001 per shareTCPCNASDAQ Global Select Market
(Title of each class)(Trading Symbol(s) )(Name of each exchange where registered)


Securities registered pursuant to Section 12(g) of the Act: None
______________________
  
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes x No ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller Reporting company ¨
Emerging growth company ¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨ No x
    
The aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant at June 30, 2019 (the last business day of the Registrant’s most recently completed second quarter) was $837.4 million based upon the last sales price reported for such date on The NASDAQ Global Select Market. For purposes of this disclosure, shares of common stock beneficially owned by executive officers and directors of the Registrant and members of their families have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for other purposes. The Registrant has no non-voting common stock.

The number of shares of the Registrant’s common stock, $0.001 par value, outstanding as of February 25, 2020 was 58,766,426.

Documents Incorporated by Reference: Portions of the Registrant’s Proxy Statement relating to the Registrant’s 2020 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III of this Report.




BLACKROCK TCP CAPITAL CORP.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS




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Part I
In this annual report in Form 10-K, except as otherwise indicated, the terms:
“Company,” "we," "us" and "our" refer to Special Value Continuation Fund, LLC, a Delaware limited liability company, for the periods prior to the consummation of the Conversion described elsewhere in this report and to BlackRock TCP Capital Corp., formerly known as TCP Capital Corp., for the periods after the consummation of the Conversion;
“SVCP” refers to Special Value Continuation Partners LLC, a Delaware limited liability company;
“TCPC Funding” refers to TCPC Funding I LLC, a Delaware limited liability company;
The “SBIC” refers to TCPC SBIC, LP, a Delaware limited partnership;
The “Advisor” refers to Tennenbaum Capital Partners, LLC, a Delaware limited liability company and the investment manager; and
“Administrator” refers to Series H of SVOF/MM, LLC, a series of a Delaware limited liability company, an affiliate of the Advisor and administrator of the Company.

Item 1.Business
The Company is a Delaware corporation formed on April 2, 2012 and is an externally managed, closed-end, non-diversified management investment company. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We seek to achieve our investment objective primarily through investments in debt securities of middle-market companies, which we typically define as those with enterprise values between $100 million and $1.5 billion. While we intend to primarily focus on privately negotiated investments in debt of middle-market companies, we may make investments of all kinds and at all levels of the capital structure, including in equity interests such as preferred or common stock and warrants or options received in connection with our debt investments. Our investment activities will benefit from what we believe are the competitive advantages of our Advisor, including its diverse in-house skills, proprietary deal flow, and consistent and rigorous investment process focused on established, middle-market companies. We expect to generate returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments.
Investment operations are conducted through the Company’s wholly-owned subsidiaries, SVCP, TCPC Funding and the SBIC. SVCP was organized as a limited partnership and had elected to be regulated as a BDC under the 1940 Act through July 31, 2018. On August 1, 2018, SVCP withdrew its election to be regulated as a BDC under the 1940 Act and withdrew the registration of its common limited partner interests under Section 12(g) of the Securities Exchange Act of 1934 and, on August 2, 2018, terminated its general partner, Series H of SVOF/MM, LLC, and converted to a Delaware limited liability company. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Company, TCPC Funding, and the SBIC. On August 1, 2018, the Advisor merged with and into a wholly-owned subsidiary of BlackRock Capital Investment Advisors, LLC, an indirect wholly-owned subsidiary of BlackRock, Inc. with the Advisor as the surviving entity. BlackRock, Inc., along with its subsidiaries is referred to herein as “BlackRock”.
The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, we will not be taxed on our income to the extent that we distribute such income each year and satisfy other applicable income tax requirements. SVCP was treated as a partnership for U.S. federal income tax purposes through August 1, 2018, and upon its conversion to a limited liability company on August 2, 2018 and thereafter is and will be treated as a disregarded entity.

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On April 2, 2012, the Company converted from a limited liability company to a corporation (the “Conversion”). At the time of the Conversion, all limited liability company interests of Special Value Continuation Fund, LLC (“SVCF”) were exchanged for 15,725,635 shares of common stock in the Company. As a result of the Conversion, the books and records of SVCF became the books and records of the Company.
On April 3, 2012, the Company priced its initial public offering (the “Offering”), selling 5,750,000 shares of its common stock at a public offering price of $14.75 per share.
To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Internal Revenue Code of 1986, as amended (the “Code”), for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.
The Advisor
Our investment activities are managed by the Advisor. The Advisor is a Delaware limited liability company and is registered as an investment advisor under the Investment Advisers Act of 1940. The Advisor is a wholly-owned, indirect subsidiary of BlackRock, Inc. BlackRock is the world’s largest publicly traded investment management firm, with approximately $7.4 trillion of assets under management as of December 31, 2019. BlackRock manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, real estate, cash management and alternative investment products. BlackRock serves clients in North and South America, Europe, Asia, Australia, Africa and the Middle East. Headquartered in New York, BlackRock maintains offices in over 30 countries, including 25 primary investment centers. BlackRock’s institutional knowledge includes proprietary valuation techniques, market outlook, competitive evaluation and structuring and operational expertise. In addition, BlackRock provides risk management, investment system outsourcing and financial advisory services to a growing number of institutional investors. Through BlackRock Solutions®, BlackRock provides risk management and advisory services that combine capital markets expertise with internally-developed systems and technology.
The investment professionals of the Advisor have significant industry experience, including experience investing in middle-market companies. Together, they have invested approximately $29.0 billion in 709 companies since the Advisor’s inception in 1999, through multiple business and credit cycles, across all segments of the capital structure and through a broad set of credit-oriented strategies including leveraged loan origination, secondary investments of discounted debt securities, and distressed and control opportunities. We believe that the Advisor's investment perspectives, complementary skills, and collective investment experience along with BlackRock’s resources, relationships and global platform provide the Advisor with a strategic and competitive advantage in middle-market investing.
As our investment advisor, the Advisor is responsible for sourcing potential investments, conducting research, analyzing investment opportunities and structuring our investments and monitoring our portfolio companies on an ongoing basis. We believe that the Advisor has a proven long-term track record of positive performance, notwithstanding some periods during which losses were incurred, of sourcing deals, originating loans and successfully investing in middle-market companies and that the relationships of its investment professionals are integral to the Advisor’s success. The Advisor’s investment professionals have long-term working relationships with key sources of investment opportunities and industry expertise, including investment bankers, financial advisors, attorneys, private equity sponsors, other senior lenders, high-yield bond specialists, research analysts, accountants, and senior management teams. Additionally, BlackRock’s broad and established sourcing network along with the Advisor’s board of advisors and senior executive advisors from a variety of industries extend the reach of the Advisor’s relationships and can enhance our deal sourcing and due diligence activities.
We also benefit from the existing infrastructure and administrative capabilities of an established investment manager. The Administrator, an affiliate of the Advisor, provides us with office space, equipment and office services. The tasks of our Administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the SEC and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

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Since the beginning of 2011, the Advisor executed across its funds approximately $15.5 billion in direct origination leveraged loans primarily to middle-market companies, of which approximately $4.4 billion was for our account. There can be no assurance that similar deal flow or terms will be available in the future for loans in which we may invest.
Operating and Regulatory Tax Structure
The Company elected to be treated for U.S. federal income tax purposes as a RIC under the Code. As a RIC, the Company generally does not have to pay corporate-level federal income taxes on any net ordinary income or capital gain that we distribute to our stockholders as dividends if we meet certain source-of-income, distribution and asset diversification requirements. The Company has elected to be regulated as a BDC under the 1940 Act. As a BDC we are required to invest at least 70% of our total assets primarily in securities of private and certain public U.S. companies (other than investment companies and certain financial institutions), cash, cash equivalents, U.S. Government securities, and other high-quality debt investments that mature in one year or less and to comply with other regulatory requirements, including limitations on our use of debt.
Investment Strategy
To achieve our investment objectives, we intend to focus on a subset of the broader investment strategies historically pursued by the Advisor. Our primary investment focus is the ongoing origination of and investments in leveraged loans of performing middle-market companies, building on the Advisor’s established track record of origination and participation in the original syndication of approximately $19.7 billion of leveraged loans to 482 companies since 1999, of which we invested over $5.0 billion in 267 companies. For the purposes of this filing, the term “leveraged loans” refers to senior debt investments that rank ahead of subordinated debt and that generally have the benefit of security interests in the assets of the borrower. Our investments generally range from $10 million to $50 million per company, the size of which may grow over time in proportion with our capital base. We expect to generate current returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments. We often receive equity interests such as preferred or common stock and warrants or options in connection with our debt investments. From time to time we may also use other investment strategies, which are not our primary focus, to attempt to enhance the overall return of our portfolio. These investment strategies may include, but are not limited to, the purchase of discounted debt, opportunistic investments, and financial instruments to hedge currency or interest rate risk associated with our portfolio.
Our typical investments are in performing middle-market companies. We believe that middle-market companies are generally less able to secure financing than larger companies and thus offer better return opportunities for those able to conduct the necessary diligence to appropriately evaluate these companies. We focus primarily on U.S. companies where we believe our Advisor’s perspective, complementary skills and investment experience provides us with a competitive advantage and in industries where our Advisor sees an attractive risk reward profile due to macroeconomic trends and existing Advisor industry expertise.
Investment Portfolio
At December 31, 2019, our investment portfolio of $1,649.5 million (at fair value) consisted of 105 portfolio companies and was invested 93.1% in debt investments, primarily in senior secured debt. In aggregate, our investment portfolio was invested 86.6% in senior secured loans, 5.2% in senior secured notes, 1.3% in junior notes and 6.9% in equity investments. Our average portfolio company investment at fair value was approximately $15.7 million. Our largest portfolio company investment by value was approximately 4.4% of our portfolio and our five largest portfolio company investments by value comprised approximately 17.2% of our portfolio at December 31, 2019.
The following charts summarize our portfolio mix by industry and type based on the fair value of our investments as of December 31, 2019.
investmentgraphs2.jpg
Investment Process
The Advisor’s investment process is designed to maximize its strategic advantages: a strong brand name as a specialty lender to the middle-market and diverse in-house expertise and skills. The Advisor seeks out opportunities by conducting a rigorous and disciplined investment process that combines the following characteristics:

Deal Sourcing
As a leading middle-market corporate debt investment manager with approximately $11 billion in committed capital as of December 31, 2019 (approximately 18% of which consists of the Company’s committed capital) and which has invested on behalf of institutions since 1999, the Advisor is active in new deal financing opportunities in the middle-market segment. However, we believe that the Advisor’s real deal flow advantage comes from the proprietary network of established relationships of its investment professionals and synergies among its professionals and portfolio companies. Members of the Advisor’s Investment Committee for the Company (the “Investment Committee”) have long-term relationships with deal sources including investment bankers, restructuring professionals, bankruptcy attorneys, senior lenders, high yield bond specialists, research analysts, accountants, fund management teams, the Advisor’s advisory board, senior executive advisors, board members of former clients, former colleagues and other operating professionals to facilitate deal flow. The Investment Committee is currently comprised of four voting members. In total, the Investment Committee consists of approximately 30 members from the Advisor. The number of voting and non-voting members of the Investment Committee is subject to increase or decrease in the sole discretion of the Advisor. All members of the Investment Committee attend investment meetings and are encouraged to participate in discussions. In addition, members of the Investment Committee have relationships with other investors, including insurance companies, bond funds, mezzanine funds, private equity funds, hedge funds and other funds which invest in similar assets. Further, the Advisor regularly calls on both active and recently retired senior executives from the relevant industries to assist with the due diligence of potential investments. Historically, these relationships with retired senior executives have also been a valuable source of transactions and information. The Advisor anticipates that they will continue to provide future opportunities. We believe the Advisor’s strong relationships with its portfolio companies facilitate positive word-of-mouth recommendations to other companies seeking the Advisor’s expertise. The Advisor’s relationships often result in the ability to access investment opportunities earlier than many of its competitors and in some cases on an exclusive basis.
Due Diligence Process
The foundation of the Advisor’s investment process is intensive investment research and analysis by its experienced staff of investment professionals. The Advisor’s senior professionals have worked together for

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numerous years and we believe that they have a superior level of credit investing knowledge relative to other credit investors. The Advisor supplements its in-house knowledge with industry experts, including CEO/CFO-level executives, with direct management experience in the industries under consideration. The Advisor prefers these industry experts to consultants because of the practical business advice that comes from having managed businesses. The Advisor rigorously and comprehensively analyzes issuers of securities of interest. The process includes a quantitative and qualitative assessment of the issuer’s business, an evaluation of its management, an analysis of the business strategy and industry trends, and an in-depth examination of the company’s capital structure, financial results and projections. The Advisor’s due diligence process includes:
an assessment of the outlook for the industry and general macroeconomic trends;
discussions with issuer management and other industry executives, including the assessment of management/board strengths and weaknesses;
an analysis of the fundamental asset values and the enterprise value of the issuer;
review of the issuer’s key assets, core competencies, competitive advantages, historical and projected financial statements, capitalization, financial flexibility, debt amortization requirements, and tax, environmental, legal and regulatory contingencies;
review of the issuer’s existing credit documents, including credit agreements, indentures, intercreditor agreements, and security agreements; and
review of documents governing the issuer, including charter, by-laws, and key contracts.
As a part of its due diligence process, the Advisor considers sustainability-related factors that can affect the future prospects of the issuer.  Since sustainable investment options have the potential to offer better outcomes, the Advisor integrates sustainability considerations into the way the it manages risk, constructs portfolios, designs products, and engages with companies.
Structuring Originations
As an early non-bank participant in the leveraged loan market, we believe that loan origination is a core competency of the Advisor. Supplementing industry deal teams’ experience and competency, the Advisor has a number of professionals with legal experience, including significant experience in bankruptcy and secured credit. Deal teams work with the Advisor’s in-house legal specialists and outside counsel to structure over-collateralized loans with what we believe to be strong creditor protections and contractual controls over borrower operations. In many cases, the Advisor works to obtain contractual governance rights and board observer seats to protect principal and maximize post-investment returns. Deals usually include original issue discounts, upfront fees, exit fees and/or equity participations through warrants or direct equity stakes.
Trading and Secondary Market Purchases
A key element in maximizing investment returns in secondary purchases is buying and selling investments at the best available prices. The Advisor has a dedicated trading staff for both the highly specialized traded loan market and for high-yield bonds. Through its trading operations, the Advisor maintains its established relationships with a network of broker-dealers in the debt securities markets. These relationships provide the Advisor with access to the trading dynamics of existing or potential investments and assist it in effectively executing transactions. These relationships may also lead to the early identification of potential investment opportunities for the Company.
Portfolio Management & Monitoring
The Advisor actively monitors the financial performance of its portfolio companies and market developments. This constant monitoring permits the Advisor to update position risk assessments, seek to address potential problems early, refine exit plans, and make follow-on investment decisions quickly. We view active portfolio monitoring as a vital part of our investment process.

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We consider board observation and information rights, regular dialogue with company management and sponsors, and detailed internally generated monitoring reports to be critical to our performance. We have developed a monitoring template that seeks to ensure compliance with these standards and that is used as a tool by the Investment Committee to assess investment performance relative to plan.
Deal teams maintain contact with portfolio company management through regularly scheduled and ad hoc conference calls and onsite visits.
Deal teams review portfolio company progress relative to plan and pre-determined performance benchmarks.

Adverse or unexpected developments, as well as consequential routine updates, are reported to the Investment Committee and thoroughly discussed at regularly scheduled weekly meetings. If merited, the Investment Committee will hold ad hoc meetings as necessary to address urgent issues.

Deal teams, with Investment Committee approval, encourage portfolio company managers to catalyze events to monetize holdings for greater return, or where needed, take corrective actions to address shortfalls to plan or benchmarks.

All existing portfolio holdings are formally reviewed in detail by the entire Investment Committee once per quarter at the Advisor’s quarterly portfolio review.
Investment Committee and Decision Process
The Advisor’s investment process is organized around the Investment Committee that provides for a centralized, repeatable decision process. The Investment Committee meets weekly and, with respect to each fund the Advisor advises, certain members of the Investment Committee are voting members. The voting members of the Investment Committee for the Company are currently Michael E. Leitner, Howard M. Levkowitz, Philip M. Tseng and Rajneesh Vig. Approval by a simple majority vote of the voting members of the Investment Committee for each respective fund is required for the purchase or sale of any investment, with certain de-minimis exceptions. No voting member has veto power. The Advisor’s investment process is designed to maximize risk-adjusted returns and preserve downside protection.
Regulation
We have filed an election to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisors or co-advisors), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by “a majority of our outstanding voting securities”, which is defined in the 1940 Act as the lesser of a majority of the outstanding voting securities or 67% or more of the securities voting if a quorum of a majority of the outstanding voting securities is present.
We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933, or the Securities Act. We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, except for registered money market funds we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might indirectly subject our stockholders to additional expenses as they will indirectly be responsible for the costs and expenses of such companies. None of our investment policies are fundamental and any may be changed without stockholder approval.

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Qualifying assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. The principal categories of qualifying assets relevant to our proposed business are the following:
Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
is organized under the laws of, and has its principal place of business in, the United States;
is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
satisfies either of the following:
has a market capitalization of less than $250.0 million or does not have any class of securities listed on a national securities exchange; or
is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated person who is a director of the eligible portfolio company.
Securities of any eligible portfolio company which we control.
Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.
Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.

Asset Coverage Requirement

Under Section 61(a) of the 1940 Act, prior to March 23, 2018, a BDC was generally not permitted to issue senior securities unless after giving effect thereto the BDC met a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which includes all borrowings of the BDC, of at least 200%. On March 23, 2018, the Small Business Credit Availability Act (“SBCAA”) was signed into law, which among other things, amended Section 61(a) of the 1940 Act to add a new Section 61(a)(2) that reduces the asset coverage requirement applicable to BDCs from 200% to 150% so long as the BDC meets certain disclosure requirements and obtains certain approvals. The reduced asset coverage requirement permits a BDC to have a ratio of total consolidated assets to outstanding indebtedness of 2:1 as compared to a maximum of 1:1 under the 200% asset coverage requirement.


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In accordance with the 1940 Act, with certain limited exceptions, we were allowed to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, equaled at least 200% after such borrowing. Effective November 7, 2018, the Company's board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of our board of directors, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA (the “Asset Coverage Ratio Election”), which would have resulted (had the Company not received earlier stockholder approval) in our asset coverage requirement applicable to senior securities being reduced from 200% to 150%, effective on November 7, 2019. On February 8, 2019, the stockholders of the Company approved the Asset Coverage Ratio Election, and, as a result, effective on February 9, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%.
Managerial assistance to portfolio companies
A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in “Qualifying assets” above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities significant managerial assistance. Where the BDC purchases such securities in conjunction with one or more other persons acting together, the BDC will satisfy this test if one of the other persons in the group makes available such managerial assistance, although reliance on other investors may not be the sole method by which the BDC satisfies the requirement to make available managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its investment manager, directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
Small Business Administration Regulations
On April 22, 2014, the SBIC received a license from the Small Business Administration (the “SBA”) to operate as a small business investment company. The SBIC license allows us to borrow funds from the SBA against eligible investments. The Small Business Investment Company regulations currently limit the amount that is available to borrow by any SBIC to $150.0 million. There is no assurance that we will draw up to the maximum limit available under the Small Business Investment Company program.
Small business investment companies are designed to stimulate the flow of private equity capital to eligible small businesses. Under present Small Business Administration regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, a small business investment company must devote 25% of its investment activity to “smaller” concerns as defined by the Small Business Administration. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. Small Business Administration regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to Small Business Administration regulations, small business investment companies may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. We plan to provide long-term loans to qualifying small businesses, and in connection therewith, make equity investments.
The SBIC is periodically examined and audited by the Small Business Administration’s staff to determine its compliance with small business investment company regulations.
Taxation of the Company
We have elected to be taxed as a RIC under Subchapter M of the Code. To continue to qualify as a RIC, we must, among other things, (a) derive in each taxable year at least 90 percent of our gross income from dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income (including but not limited to gain from

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options, futures and forward contracts) derived with respect to our business of investing in stock, securities or currencies, or net income derived from an interest in a “qualified publicly traded partnership” (a “QPTP”); and (b) diversify our holdings so that, at the end of each quarter of each taxable year (i) at least 50 percent of the market value of our total assets is represented by cash and cash items, U.S. Government securities, the securities of other RICs and other securities, with other securities limited, in respect of any one issuer, to an amount not greater than five percent of the value of our total assets and not more than 10 percent of the outstanding voting securities of such issuer (subject to the exception described below), and (ii) not more than 25 percent of the market value of our total assets is invested in the securities (other than U.S. Government securities and the securities of other regulated investment companies) (A) of any issuer, (B) of any two or more issuers that we control and that are determined to be engaged in the same business or similar or related trades or businesses, or (C) of one or more QPTPs. The Code provides for certain exceptions to the foregoing diversification requirements. We may generate certain income that might not qualify as good income for purposes of the 90% annual gross income requirement described above. We monitor our transactions to endeavor to prevent our disqualification as a RIC.
If we fail to satisfy the 90% annual gross income requirement or the asset diversification requirements discussed above in any taxable year, we may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the asset diversification requirements where we correct the failure within a specified period. If the applicable relief provisions are not available or cannot be met, all of our income would be subject to corporate-level U.S. federal income tax as described below. We cannot provide assurance that we would qualify for any such relief should we fail the 90% annual gross income requirement or the asset diversification requirements discussed above.
As a RIC, in any taxable year with respect to which we timely distribute at least 90% of the sum of our (i) investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital loss and other taxable income (other than any net capital gain), reduced by deductible expenses) determined without regard to the deduction for dividends and distributions paid and (ii) net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) (the “Annual Distribution Requirement”), we (but not our stockholders) generally will not be subject to U.S. federal income tax on investment company taxable income and net capital gain (generally, net long-term capital gain in excess of short-term capital loss) that we distribute to our stockholders. We intend to distribute annually all or substantially all of such income on a timely basis. To the extent that we retain our net capital gain for investment or any investment company taxable income, we will be subject to U.S. federal income tax at the regular corporate income tax rates. We may choose to retain our net capital gains for investment or any investment company taxable income, and pay the associated federal corporate income tax, including the federal excise tax described below.
Certain amounts not distributed during a calendar year are subject to a nondeductible four percent U.S. federal excise tax payable by us. To avoid this tax, we would need to distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of:
(1)at least 98 percent of our ordinary income (not taking into account any capital gains or losses) for the calendar year;
(2)at least 98.2 percent of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless an election is made by us to use our taxable year); and
(3)certain undistributed amounts from previous years on which we paid no U.S. federal income tax.
While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the four percent federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax. In that event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

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If, in any particular taxable year, we do not satisfy the Annual Distribution Requirement or otherwise were to fail to qualify as a RIC (for example, because we fail the 90% annual gross income requirement described above), and relief is not available as discussed above, all of our taxable income (including our net capital gains) will be subject to tax at regular corporate rates without any deduction for distributions to stockholders, and distributions generally will be taxable to the stockholders as ordinary dividends to the extent of our current and accumulated earnings and profits.
We may decide to be taxed as a regular corporation even if we would otherwise qualify as a RIC if we determine that treatment as a corporation for a particular year would be in our best interests.
As a RIC, we are permitted to carry forward a net capital loss realized in a taxable year beginning on or after December 23, 2010 to offset capital gain indefinitely. For net capital losses realized in taxable years beginning on or after December 23, 2010, the excess of our net short-term capital loss over our net long-term capital gain is treated as a short-term capital loss arising on the first day of our next taxable year and the excess of our net long-term capital loss over our net short-term capital gain is treated as a long-term capital loss arising on the first day of our next taxable year. If future capital gain is offset by carried forward capital losses, such future capital gain is not subject to fund-level U.S. federal income tax, regardless of whether they are distributed to stockholders. Accordingly, we do not expect to distribute any such offsetting capital gain. A RIC cannot carry back or carry forward any net operating losses.
Investment Structure
Once we determine that a prospective portfolio company is suitable for a direct investment, we work with the management of that company and its other capital providers, including senior and junior lenders, and equity holders, to structure an investment. We negotiate among these parties to agree on how our investment is expected to be structured relative to the other capital in the portfolio company’s capital structure.
Leveraged Loans
We structure our investments primarily as secured leveraged loans. Leveraged loans are generally senior debt instruments that rank ahead of subordinated debt of the portfolio company. Leveraged loans generally have the benefit of security interests on the assets of the portfolio company, which may rank ahead of, or be junior to, other security interests.

High-Yield Securities
The Company’s portfolio currently includes high-yield securities and the Company may invest in high-yield securities in the future. High-yield securities have historically experienced greater default rates than has been the case for investment grade securities and are generally rated below investment grade by one or more nationally recognized statistical rating organizations or will be unrated but of comparable credit quality to obligations rated below investment grade, and have greater credit and liquidity risk than more highly rated obligations. High-yield securities are generally unsecured and may be subordinate to other obligations of the obligor and are often issued in connection with leveraged acquisitions or recapitalizations in which the issuers incur a substantially higher amount of indebtedness than the level at which they had previously operated. The Company’s portfolio may also include mezzanine investments which are generally unsecured and rated below investment grade. Mezzanine investments of the type in which the Company invests in are primarily privately negotiated subordinated debt securities often issued in connection with leveraged transactions, such as management buyouts, acquisitions, re-financings, recapitalizations and later stage growth capital financings, and are generally accompanied by related equity participation features such as options, warrants, preferred and common stock. In some cases, our debt investments may provide for a portion of the interest payable to be paid-in-kind interest. To the extent interest is paid-in-kind, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation.
Warrants, Options and Minority Equity
In some cases, we will also receive nominally priced warrants or options to buy a minority equity interest in the portfolio company in connection with a loan. As a result, if a portfolio company appreciates in value, we may

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achieve additional investment return from this equity interest. We may structure such warrants to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer, upon the occurrence of specified events. In many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights.
Distressed Debt
The Company’s portfolio currently includes distressed debt investments and the Company is authorized to continue to invest in the securities and other obligations of distressed and bankrupt issuers, including debt obligations that are in covenant or payment default. As of December 31, 2019, two of the Company’s debt investments were on non-accrual status. The Company does not anticipate distressed debt to be a significant part of its investment strategy. Such investments generally trade significantly below par and are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments. Typically such workout or bankruptcy proceedings result in only partial recovery of cash payments or an exchange of the defaulted obligation for other debt or equity securities of the issuer or its affiliates, which may in turn be illiquid or speculative.
Opportunistic Investments
Opportunistic investments may include, but are not limited to, investments in debt securities of all kinds and at all levels of the capital structure and may include equity securities of public companies that are thinly traded, emerging market debt, structured finance vehicles such as collateralized loan obligation, or CLO, funds and debt of middle-market companies located outside the United States. We do not intend such investments to be our primary focus.
We tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its operating results. We seek to limit the downside potential of our investments by:
requiring a total return on our investments (including both interest and potential equity appreciation) that we believe will compensate us appropriately for credit risk;
negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing their businesses as possible, consistent with the preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or rights to a seat on the board of directors under some circumstances; and
selecting investments that we believe have a very low probability of loss.

We expect to hold most of our investments to maturity or repayment, but we may sell some of our investments earlier if a liquidity event occurs, such as a sale, recapitalization or worsening of the credit quality of the portfolio company.
Available Information

We file annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC. We make available free-of-charge, on or through our website at http://investors.tcpcapital.com/, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those filings, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. We also make available on our website the charters for the Audit Committee and the Governance and Compensation Committee, as well as our Code of Ethics [required under the 1940 Act] and our Code of Ethics and Business Conduct required under the Sarbanes-Oxley Act (our “SOX Code of Ethics”). Further, we will provide, without charge, upon written request, a copy of the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements

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and all amendments to those filings as well as the committee charters, our Code of Ethics and our SOX Code of Ethics. Requests for copies should be addressed to: BlackRock TCP Capital Corp., 2951 28th Street, Suite 1000, Santa Monica, CA 90405, Attention: Investor Relations. Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including our filings, are also available to the public from the SEC’s website at http://www.sec.gov.
Compliance Policies and Procedures
We and the Advisor have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws. We are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and to designate a chief compliance officer to be responsible for their administration. Elizabeth Greenwood currently serves as our chief compliance officer.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to our investment adviser. A summary of the Proxy Voting Policies and Procedures of the Advisor are set forth below. The guidelines are reviewed periodically by the adviser and our non-interested directors, and, accordingly, are subject to change.
The Advisor is registered under the Investment Advisers Act of 1940 and has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote securities held by its clients in a timely manner free of conflicts of interest. These policies and procedures for voting proxies for investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
Our investment adviser votes proxies relating to our portfolio securities in the best interest of our stockholders. The Advisor reviews on a case-by-case basis each proposal submitted for a proxy vote to determine its impact on our investments. Although it generally votes against proposals that may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to do so.
The proxy voting decisions of the Advisor are made by the senior officers who are responsible for monitoring each of our investments. To ensure that our vote is not the product of a conflict of interest, it requires that: (i) anyone involved in the decision making process disclose to the managing member any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are generally prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.
You may obtain information about how we voted proxies by making a written request for proxy voting information to: BlackRock TCP Capital Corp., 2951 28th Street, Suite 1000, Santa Monica, CA 90405, Attention: Investor Relations.
Privacy Principles
We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available to us. We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third-party administrator).
We restrict access to non-public personal information about our stockholders to employees of the Advisor and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.
Investment Management Agreement

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The Company has entered into an investment management agreement with the Advisor, under which the Advisor, subject to the overall supervision of our board of directors, manages the day-to-day operations and provides investment advisory services to the Company. For providing these services, the Advisor receives a base management fee and may receive incentive compensation. Prior to August 1, 2018, SVCP was regulated as a BDC and was also party to an investment management agreement with the Advisor. On January 29, 2018, SVCP amended and restated its limited partnership agreement (the "LPA"), effective as of January 1, 2018, to convert its then existing incentive compensation structure from a profit allocation and distribution to its general partner into a fee payable to the Advisor pursuant to such investment management agreement. The amendment had no impact on the amount of the incentive compensation paid or services received by the Company. Accordingly, prior to January 1, 2018, incentive compensation was allocated to SVCP’s general partner as a distribution. In connection with the approval of the Asset Coverage Ratio Election, our Board of Directors approved, at in-person meetings held November 30, 2018 and December 28, 2018, an amended investment management agreement, which was approved by stockholders on February 8, 2019 and became effective on February 9, 2019.
Prior to August 1, 2018, the base management fee and the incentive compensation, if any, were paid by SVCP to the Advisor. The Company, therefore, indirectly bore these amounts, which are reflected in our consolidated financial statements.
Under the terms of our investment management agreement, the Advisor:
determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;
identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and
closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.
The Advisor’s services under the investment management agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.
Pursuant to our investment management agreement, we pay the Advisor compensation for investment advisory and management services consisting of base management compensation and a two-part incentive compensation.
Management Fee. The base management fee is calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears; provided, however, that, effective as of February 9, 2019, the base management fee is calculated at an annual rate of 1.0% of our total assets (excluding cash and cash equivalents) that exceed an amount equal to 200% of the net asset value of the Company. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets and net asset value (in each case, excluding cash and cash equivalents) at the end of the most recently completed calendar quarter. The base management fee for any partial quarter is appropriately prorated.
Incentive Compensation. We also pay incentive compensation to the Advisor pursuant to the investment management agreement. Prior to January 1, 2018, incentive compensation was allocated to SVCP's general partner as a distribution under the LPA. Under the then-existing investment management agreements and the LPA (pursuant to which incentive compensation was distributed to SVCP’s general partner prior to January 1, 2018), no incentive compensation was incurred until after January 1, 2013.
Incentive Compensation pursuant to investment management agreements prior to February 9, 2019
Beginning January 1, 2013, the incentive compensation equaled the sum of (1) 20% of all ordinary income since that date and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since that date, with each component being subject to a total return requirement of 8% of contributed common equity annually. Through December 31, 2017, the incentive compensation was an equity allocation to SVCP’s general partner under the LPA. Effective as of January 1, 2018, the LPA was amended to remove the incentive compensation distribution

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provisions therein, and the incentive compensation became payable as a fee to the Advisor pursuant to the then-existing investment management agreements. The amendment had no impact on the amount of the incentive compensation paid or services received by the Company.
The incentive compensation had two components, ordinary income and capital gains. Each component was payable or distributable quarterly in arrears (or upon termination of the Advisor as the investment manager or SVCP’s general partner as its general partner, as of the termination date) beginning January 1, 2013 and calculated as follows:
Each of the two components of incentive compensation was separately subject to a total return limitation. Thus, notwithstanding the following provisions, we were not be obligated to pay or distribute any ordinary income incentive compensation or any capital gains incentive compensation if our cumulative total return did not exceed an 8% annual return on daily weighted average contributed common equity. If our cumulative annual total return was above 8%, the total cumulative incentive compensation we paid was not more than 20% of our cumulative total return, or, if lower, the amount of our cumulative total return that exceeded the 8% annual rate.
Subject to the above limitation, the ordinary income component was the amount, if positive, equal to 20% of the cumulative ordinary income before incentive compensation, less cumulative ordinary income incentive compensation previously paid or distributed.
Subject to the above limitation, the capital gains component was the amount, if positive, equal to 20% of the cumulative realized capital gains (computed net of cumulative realized losses and cumulative net unrealized capital depreciation), less cumulative capital gains incentive compensation previously paid or distributed. For assets held on January 1, 2013, capital gain, loss and depreciation are measured on an asset by asset basis against the value as of December 31, 2012. The capital gains component was paid or distributed in full prior to payment or distribution of the ordinary income component.
For purposes of the foregoing computations and the total return limitation, the following definitions apply:
“cumulative” means amounts for the period commencing January 1, 2013 and ending as of the applicable calculation date.
“contributed common equity” means the value of net assets attributable to our common stock as of December 31, 2012 plus the proceeds to us of all issuances of common stock less (A) offering costs of any of our securities or leverage facilities, (B) all distributions by us representing a return of capital and (C) the total cost of all repurchases of our common stock by us, in each case after December 31, 2012 and through the end of the preceding calendar quarter in question, in each case as determined on an accrual and consolidated basis.
“ordinary income before incentive compensation” means our interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that we receive from portfolio companies) during the period, (i) minus our operating expenses during the period (including the base management fee, expenses payable under the administration agreement, any interest expense and any dividends paid on any issued and outstanding preferred stock), (ii) plus increases and minus decreases in net assets not treated as components of income, operating expense, gain, loss, appreciation or depreciation and not treated as contributions or distributions in respect of common equity, and (iii) without reduction for any incentive compensation and any organization or offering costs, in each case determined on an accrual and consolidated basis.
“total return” means the amount equal to the combination of ordinary income before incentive compensation, realized capital gains and losses and unrealized capital appreciation and depreciation of the Company for the period, in each case determined on an accrual and consolidated basis.
If our total return did not exceed the total return limitation, the limitation would not have had the effect of eliminating the possibility of paying such incentive compensation, but rather would have postponed any incentive compensation until our cumulative annual total return exceeded the 8% threshold. The nature of the total return limitation may have also made it easier for the Advisor to earn incentive compensation in higher interest rate environments or if our net asset value had increased.

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Total Return Limitation
(based on cumulative annual total return)
s001562x1tcpcapitalco_image2.jpg
Percentage of ordinary income and net realized capital gain
separately payable at various levels of total return.
The financial highlights in the notes to our financial statements for the relevant periods include a calculation of total return based on the change in the market value of our shares. The financial highlights in the notes to our financial statements for the relevant periods also include a calculation of total return based on the change in our net asset value from period to period. The total return limitation for purposes of the incentive compensation calculations was based on the stated elements of return: ordinary income before incentive compensation, realized capital gain and loss and unrealized capital appreciation and depreciation. It differs from the total return based on the market value or net asset value of our shares in that it was a cumulative measurement that is compared to our daily weighted-average contributed common equity rather than a periodic measurement that is compared to our net asset value or market value, and in that it excludes incentive compensation.
Incentive Compensation pursuant to the current investment management agreement
Under the current investment management agreement, dated February 9, 2019, the incentive compensation equals the sum of (1) 20% of all ordinary income since January 1, 2013 through February 8, 2019 and 17.5% thereafter and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013 through February 8, 2019 and 17.5% thereafter, less ordinary income incentive compensation and capital gains incentive compensation previously paid. However, incentive compensation will only be paid to the extent the cumulative total return of the Company after incentive compensation and including such payment would equal or exceed a 7% annual return on daily weighted average contributed common equity.
The incentive compensation is payable quarterly in arrears (or upon termination of the Advisor as the investment manager, as of the termination date).
For assets held on January 1, 2013, capital gain, loss and depreciation are measured on an asset by asset basis against the value as of December 31, 2012. The capital gains component is paid or distributed in full prior to payment or distribution of the ordinary income component.
For purposes of the foregoing computations, the following definitions apply:
“cumulative” means amounts for the period commencing January 1, 2013 and ending as of the applicable calculation date.
“contributed common equity” means the value of net assets attributable to our common stock as of December 31, 2012 plus the proceeds to us of all issuances of common stock less (A) offering costs of any of our securities or leverage facilities, (B) all distributions by us representing a return of capital and (C) the total cost of all repurchases of our common stock by us, in each case after December 31, 2012 and through the end of the preceding calendar quarter in question, in each case as determined on an accrual and consolidated basis.
“ordinary income before incentive compensation” means our interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that we receive from portfolio companies) during the period, (i) minus our operating expenses during the period (including the base management fee, expenses payable under the administration agreement, any interest expense and any dividends paid on any issued and outstanding preferred stock), (ii) plus increases and minus decreases in net assets not treated as components

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of income, operating expense, gain, loss, appreciation or depreciation and not treated as contributions or distributions in respect of common equity, and (iii) without reduction for any incentive compensation and any organization or offering costs, in each case determined on an accrual and consolidated basis.
“total return” means the amount equal to the combination of ordinary income before incentive compensation, realized capital gains and losses and unrealized capital appreciation and depreciation of the Company and any other items affecting net asset value per share of the Company for the period (other than incentive compensation), in each case determined on an accrual and consolidated basis.
The financial highlights in the notes to our financial statements include a calculation of total return based on the change in the market value of our shares. The financial highlights in the notes to our financial statements also include a calculation of total return based on the change in our net asset value from period to period. The total return hurdle for purposes of the incentive compensation calculations is based on the stated elements of return as defined above, and differs from the total return based on the market value or net asset value of our shares in that it is a cumulative measurement that is compared to our daily weighted-average contributed common equity rather than a periodic measurement that is compared to our net asset value or market value, and in that it excludes incentive compensation.

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Examples of Incentive Compensation Calculation
Example 1: Income Portion of Incentive Compensation:
Assumptions
Total return hurdle(1) = 7%
Alternative 1
a.Additional Assumptions
i.cumulative gross ordinary income (including interest, dividends, fees, etc.) = 11.5%
ii.cumulative ordinary income before incentive compensation (gross ordinary income - (management fee + other expenses)) = 9%
iii.cumulative annual total return = 6%
b.Cumulative total return does not exceed total return hurdle, therefore there is no income incentive compensation.
Alternative 2
a.Additional Assumptions
i.cumulative gross ordinary income (including interest, dividends, fees, etc.) = 10%
ii.cumulative ordinary income before incentive compensation (gross ordinary income - (management fee + other expenses)) = 7.5%
iii.cumulative annual total return = 8.5%
b.Tentative incentive compensation = 17.5% x ordinary income before incentive compensation
= 17.5% x 7.5%
= 1.3%
c.Total return after incentive compensation = 8.5% - 1.3%
= 7.2%
d.Cumulative ordinary income before incentive compensation is positive and the cumulative total return after incentive compensation exceeds the total return hurdle, therefore incentive compensation is fully payable.

Alternative 3
a.Additional Assumptions
i.cumulative gross ordinary income (including interest, dividends, fees, etc.) = 10%
ii.cumulative ordinary income before incentive compensation (gross ordinary income — (management fee + other expenses)) = 7.5%
iii.cumulative annual total return = 8.0%
 
(1)Represents 7.0% annualized total return hurdle.
Management fee = 1.5%
Represents 1.5% annualized management fee, assuming no liabilities and no leverage above 1.0x debt to equity.
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 1%
Excludes organizational and offering costs.

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b.Tentative incentive compensation = 17.5% x ordinary income before incentive compensation
= 17.5% x 7.5%
= 1.3%
c.Total return after tentative incentive compensation = 8.0% - 1.3%
= 6.7%
d.Cumulative ordinary income before incentive compensation is positive and the total return hurdle is less than total return but greater than total return after tentative incentive compensation, therefore incentive compensation is partially payable and = Total return – total return hurdle
= 8.0% - 7.0%
= 1.0%

Example 2: Capital Gains Portion of Incentive Compensation:
Alternative 1:
a.Assumptions
i.
Year 1: $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”).
ii.Year 2: Investment A sold for $50 million and fair market value, or fair market value (“FMV”), of Investment B determined to be $32 million. Cumulative annual total return of 40%.
iii.Year 3: FMV of Investment B determined to be $25 million. Cumulative annual total return of 15%.
iv.Year 4: Investment B sold for $31 million. Cumulative annual total return of 10%.
b.The capital gains portion of the incentive compensation would be:
i.Year 1: None.
ii.Year 2: Capital gains incentive compensation of $5.25 million ($5.25 million = $30 million realized capital gains on sale of Investment A multiplied by 17.5% and total return hurdle satisfied).
iii.Year 3: None; no realized capital gains.
iv.Year 4: Capital gains incentive compensation of $0.175 million ($31 million cumulative realized capital gains multiplied by 17.5%, less $5.25 million of capital gains incentive compensation paid in year 2 and total return hurdle satisfied).
Alternative 2
a.Assumptions
i.
Year 1: $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”).
ii.Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million. Cumulative annual total return of 15%.
iii.Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million. Cumulative annual total return of 6%.

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iv.Year 4: FMV of Investment B determined to be $35 million. Cumulative annual total return of 20%.
v.Year 5: Investment B sold for $40 million. Cumulative annual total return of 20%.
b.The capital gains portion of the incentive compensation would be:
i.Year 1: None.
ii.Year 2: Capital gains incentive compensation of $4.375 million; 17.5% multiplied by $25 million ($30 million realized capital gains on Investment A less $5 million unrealized capital depreciation on Investment B, and the total return hurdle is satisfied).
iii.Year 3: None as the total return hurdle is not satisfied.
iv.Year 4: Capital gains incentive compensation of $1.75 million ($35 million cumulative realized capital gains (including $5 million of realized capital gains from year 3 at a time when the total return hurdle was not satisfied and no cumulative unrealized capital depreciation) multiplied by 17.5%, less $4.375 million capital gains incentive compensation paid in year 2, and the total return hurdle is satisfied).
v.Year 5: Capital gains incentive compensation of $1.75 million ($45 million cumulative realized capital gains multiplied by 17.5%, less $6.125 million in capital gains incentive compensation paid in years 2 and 4, and the total return hurdle is satisfied).    
Payment of our expenses
All investment professionals and staff of the Advisor, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services (including health insurance, 401(k) plan benefits, payroll taxes and other compensation related matters), are provided and paid for by the Advisor. We bear all other costs and expenses of our operations and transactions, including those relating to:
our organization;
calculating our net asset value and net asset value per share (including the cost and expenses of any independent valuation firm);
expenses, including travel expense, incurred by the Advisor or payable to third parties in performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;
interest payable on debt, if any, incurred to finance our investments;
the costs of all future offerings of common stock and other securities, if any;
the base management fee and any incentive compensation;
distributions on our shares;
administration fees payable under our administration agreement;
transfer agent and custody fees and expenses;
the allocated costs incurred by our Administrator in providing managerial assistance to those portfolio companies that request it;
amounts payable to third parties relating to, or associated with, evaluating, making and disposing of investments;
brokerage fees and commissions;

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registration fees;
listing fees;
taxes;
director fees and expenses;
costs of preparing and filing reports or other documents with the SEC;
the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;
costs of holding stockholder meetings;
our fidelity bond;
directors and officers/errors and omissions liability insurance, and any other insurance premiums;
litigation, indemnification and other non-recurring or extraordinary expenses;
direct costs and expenses of administration and operation, including audit and legal costs;
dues, fees and charges of any trade association of which we are a member; and
all other expenses reasonably incurred by us or the Administrator in connection with administering our business, such as the allocable portion of overhead under our administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.
From time to time, the Advisor may pay amounts owed by us to third party providers of goods or services. We will subsequently reimburse the Advisor for such amounts paid on our behalf.
Limitation of liability and indemnification
The investment management agreement provides that the Advisor and its officers, directors, employees and affiliates are not liable to us or any of our stockholders for any act or omission by it or its employees in the supervision or management of our investment activities or for any loss sustained by us or our stockholders, except that the foregoing exculpation does not extend to any act or omission constituting willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations under the investment management agreement. The investment management agreement also provides for indemnification by us of the Advisor’s members, directors, officers, employees, agents and control persons for liabilities incurred by it in connection with their services to us, subject to the same limitations and to certain conditions.
Board and stockholder approval of the investment management agreement
Our board of directors held in-person meetings on November 30, 2018 and December 28, 2018, in order to consider and reapprove our investment management agreement and stockholders approved the investment management agreement on February 8, 2019 to be effective on February 9, 2019. In its consideration of the investment management agreement, the board of directors focused on information it had received relating to, among other things: (a) the nature, quality and extent of the advisory and other services to be provided to us by the Advisor; (b) comparative data with respect to advisory fees or similar expenses paid by other business development companies with similar investment objectives; (c) our financial performance, operating expenses and expense ratio compared to business development companies with similar investment objectives; (d) any existing and potential sources of indirect income to the Advisor from its relationships with us and the profitability of those relationships; (e) information about the services performed and the personnel performing such services under the investment management agreement; (f) the organizational capability and financial condition of the Advisor and its affiliates; (g) the Advisor’s practices regarding the selection and compensation of brokers that execute our portfolio transactions and the brokers’ provision of brokerage and research services to our investment advisor; and (h) the possibility of obtaining similar services from other third party service providers or through an internally managed structure.

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Based on the information reviewed and the discussions, the board of directors, including a majority of the non-interested directors, concluded that the investment management fee rates are reasonable in relation to the services to be provided.
Duration and termination
The investment management agreement will remain in effect for a period of two years from the date of stockholder approval and thereafter will remain in effect from year to year if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The investment management agreement will automatically terminate in the event of its assignment. The investment management agreement may be terminated by either party without penalty upon not less than 60 days written notice to the other. Any termination by us must be authorized either by our board of directors or by vote of our stockholders. See “Risk Factors — Risks related to our business — We are dependent upon senior management personnel of the Advisor for our future success, and if the Advisor is unable to retain qualified personnel or if the Advisor loses any member of its senior management team, our ability to achieve our investment objective could be significantly harmed.”
Administration Agreement
We have entered into an administration agreement with the Administrator, which we refer to as the administration agreement, under which the Administrator provides administrative services to us. The Administrator provides services including, but not limited to, the arrangement for the services of, and the overseeing of, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks, stockholders and such other persons in any such other capacity deemed to be necessary or desirable. The Administrator also makes reports to the board of its performance of obligations under the administration agreement and furnishes advice and recommendations with respect to such other aspects of our business and affairs that we determine to be desirable. The Administrator is responsible for our financial and other records that are required to be maintained and prepares all reports and other materials required by any agreement or to be filed with the Securities and Exchange Commission or any other regulatory authority, including reports on Forms 8-K, 10-Q, 10-K and periodic reports to stockholders, determining the amounts available for distribution as dividends and distributions to be paid by us to our stockholders, reviewing and implementing any share purchase programs authorized by the board, maintaining or overseeing the maintenance of our books and records as required under the 1940 Act, and maintaining (or overseeing maintenance by other persons) such other books and records required by law or for our proper operation. For providing these services, facilities and personnel, we reimburse the Administrator for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of overhead under the administration agreement and the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance. From time to time, the Administrator may pay amounts owed by us to third-party providers of goods or services. We subsequently reimburse the Administrator for such amounts paid on our behalf.
Leverage

Our leverage program is comprised of $270.0 million in available debt under a revolving, multi-currency credit facility issued by SVCP (the “SVCP Facility”), $300.0 million in available debt under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”), $140.0 million in convertible senior unsecured notes issued by the Company maturing in 2022 (the “2022 Convertible Notes”), $175.0 million in senior unsecured notes issued by the Company maturing in 2022 (the “2022 Notes”), $200.0 million in senior unsecured notes issued by the Company maturing in 2024 (the “2024 Notes”) and $150.0 million in committed leverage from the SBA (the “SBA Debentures” and, together with the SVCP Facility, the TCPC Funding Facility, the 2022 Convertible Notes, the 2022 Notes and the 2024 Notes, the “Leverage Program”). Prior to its maturity on December 15, 2019, leverage also included convertible senior unsecured notes due December 2019 issued by the Company (the “2019 Convertible Notes”). Prior to being replaced by the SVCP Facility on February 26, 2018, leverage included $116.0 million in available debt under a senior secured revolving credit facility issued by SVCP (the “SVCP 2018

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Facility”). From April 18, 2016 through its conversion to common equity on June 7, 2016, leverage also included a privately placed convertible senior unsecured note due April 2021 issued by the Company. Prior to the repurchase and retirement of the remaining preferred interests on September 3, 2015, the Leverage Program also included amounts outstanding under a preferred equity facility issued by SVCP.
The SVCP Facility matures on May 6, 2023, subject to extension by the lenders at the request of SVCP, and bears interest at a rate of LIBOR plus 2.00%. In addition to amounts due on outstanding debt, the SVCP Facility accrues commitment fees of 0.50% per annum on the unused portion of the facility, or 2.25% per annum on the unused portion that is greater than 60% of the total facility.
The TCPC Funding Facility matures on May 31, 2023, subject to extension by the lender at the request of TCPC Funding, and contains an accordion feature which allows for expansion of the facility up to $400.0 million subject to consent from the lender and other customary conditions. Borrowings under the TCPC Funding Facility bear interest at a rate of LIBOR plus either 2.00% or 2.35% per annum, subject to certain funding requirements, plus an administrative fee of 0.25% per annum. In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.25% per annum on the unused portion of the facility, or 0.50% per annum when the unused portion is greater than 33% of the total facility, plus an administrative fee of 0.25% per annum.
On June 11, 2014, the Company issued $108.0 million of convertible senior unsecured notes that matured on December 15, 2019. The 2019 Convertible Notes were general unsecured obligations of the Company, and ranked structurally junior to the SVCP Facility, the TCPC Funding Facility and the SBA Debentures, and ranked pari passu with the 2022 Convertible Notes, 2024 Notes and 2022 Notes. The Company did not have the right to redeem the 2019 Convertible Notes prior to its maturity on December 15, 2019. The 2019 Convertible Notes bore interest at an annual rate of 5.25%, paid semi-annually.
On August 30, 2016, the Company issued $140.0 million of convertible senior unsecured notes that mature on March 1, 2022, unless previously converted or repurchased in accordance with their terms. The 2022 Convertible Notes are general unsecured obligations of the Company, and rank structurally junior to the SVCP Facility, the TCPC Funding Facility and the SBA Debentures, and rank pari passu with the 2022 Notes and 2024 Notes. The Company does not have the right to redeem the 2022 Convertible Notes prior to maturity. The 2022 Convertible Notes bear interest at an annual rate of 4.625%, payable semi-annually.
On August 4, 2017, the Company issued $125.0 million of unsecured notes that mature on August 11, 2022, unless previously repurchased or redeemed in accordance with their terms. On November 3, 2017, the Company issued an additional $50.0 million of unsecured notes as a follow-on issuance of the 2022 Notes. The 2022 Notes are general unsecured obligations of the Company, and rank structurally junior to the SVCP Facility, the TCPC Funding Facility and the SBA Debentures, and rank pari passu with the 2022 Convertible Notes and 2024 Notes. The 2022 Notes may be redeemed in whole or part at the Company's option at a redemption price equal to par plus a "make whole" premium, as determined pursuant to the indenture governing the 2022 Notes, and any accrued and unpaid interest. The 2022 Notes bear interest at an annual rate of 4.125%, payable semi-annually.

On August 23, 2019, the Company issued $150.0 million of unsecured notes that mature on August 23, 2024, unless previously repurchased or redeemed in accordance with their terms. On November 26, 2019, the Company issued an additional $50.0 million of unsecured notes as a follow-on issuance of the 2024 Notes. The 2024 Notes are general unsecured obligations of the Company and rank structurally junior to the SVCP Facility, TCPC Funding Facility and the SBA Debentures, and rank pari passu with the 2022 Convertible Notes and 2022 Notes. The 2024 Notes may be redeemed in whole or part at the Company's option at a redemption price equal to par plus a "make whole" premium, as determined pursuant to the indenture governing the 2024 Notes, and any accrued and unpaid interest. The 2024 Notes bear interest at an annual rate of 3.900%, payable semi-annually.
The SBIC is able to issue up to $150.0 million in debt under the SBA Debentures, subject to funded regulatory capital and other customary regulatory requirements. SVCP has committed $75.0 million of regulatory capital to the SBIC, all of which had been funded at December 31, 2019. Debt issued under the SBA Debentures is non-recourse and may be prepaid at any time without penalty. The interest rate on such debt is fixed at the time of issuance at a market-driven spread over 10-year U.S. Treasury Notes.

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The Leverage Program is subject to certain financial or other covenants. As of December 31, 2019, we were in full compliance with such covenants.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:
Pursuant to Rule 13a-14 of the 1934 Act, our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports;
Pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;
Pursuant to Rule 13a-15 of the 1934 Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and
Pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Item 1A.  Risk Factors
An investment in our securities involves certain risks relating to our structure and investment objectives. The risks set forth below are not the only risks we face, and we face other risks which we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment.
Certain risks in the current environment
Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations.
From time to time, capital markets may experience periods of disruption and instability, which may be evidenced by a lack of liquidity in debt capital markets, write-offs in the financial services sector, re-pricing of credit risk and failure of certain major financial institutions. An example of such disruption and instability occurred between 2008 and 2009. During that period, despite actions of the U.S. federal government and foreign governments, such disruption and instability contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While capital markets have improved in recent years, these conditions could deteriorate again and global financial markets could experience significant volatility. During such market disruptions, we may have difficulty raising debt or equity capital especially as a result of regulatory constraints. There can be no assurance that adverse market conditions will not repeat themselves or worsen in the future. Equity capital may be difficult to raise because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. At our annual meeting of stockholders held on May 30, 2019, subject to the condition that the maximum number of shares salable below net asset value pursuant to this authority in any particular offering that could result in such dilution is limited to 25% of our then outstanding common stock immediately prior to each such offering, our stockholders approved our ability

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to sell or otherwise issue shares of our common stock at a price below its then current net asset value per share for a twelve month period expiring on the anniversary of the date of stockholder approval. It should be noted that, theoretically, we may offer up to 25% of our then outstanding common stock each day. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage ratio, as calculated in accordance with the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than our current leverage. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.
Market conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness and any failure to do so could have a material adverse effect on our business. The re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience. Further, if we are unable to raise or refinance debt, then our equity investors may not benefit from the potential for increased returns on equity resulting from leverage and we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies.
The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including the disruption and volatility, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition and results of operations.
Price declines and illiquidity in the corporate debt markets have adversely affected, and may in the future adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation, which reduces our net asset value. Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations.
Changes in legal, tax and regulatory regimes could negatively impact our business, financial condition and earnings.
The global financial crisis of 2007-2009 led the U.S. Government and the Federal Reserve, as well as certain foreign governments, to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that experienced extreme volatility. The withdrawal of Federal Reserve or other U.S. or non-U.S. governmental support could negatively affect financial markets generally and reduce the value and liquidity of certain securities. Additionally, with continued economic recovery and the cessation of certain market support activities, we may face a heightened level of interest rate risk as a result of a rise or increased volatility in interest rates.
The current presidential administration has called for, and in certain instances has begun to implement, significant changes to U.S. fiscal, tax, trade, healthcare, immigration, foreign, and government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. Congress or the current presidential administration implements changes to U.S. policy, those changes may impact, among other

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things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows. Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.
The risks and uncertainties associated with these policy proposals and the current political climate are heightened by different political parties controlling the U.S. House of Representatives, on the one hand, and the U.S. Senate and the Executive Branch, on the other hand, and, potentially, upcoming U.S. federal elections. Additional risks arising from the differences in expressed policy preferences among the various constituencies in these branches of the U.S. government has led in the past, and may lead in the future, to short term or prolonged policy impasses, which could, and has, resulted in shutdowns of the U.S. federal government. U.S. federal government shutdowns, especially prolonged shutdowns, could have a significant adverse impact on the economy in general and could impair the ability of issuers to raise capital in the securities markets. Any of these effects could have a material adverse effect on our business, financial condition and results of operations.
Market disruptions and other geopolitical or macroeconomic events could create market volatility that negatively impact our business, financial condition and earnings.
Periods of market volatility remain, and may continue to occur in the future, in response to various political, social and economic events both within and outside of the United States. These conditions have resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Fund’s securities uncertain and/or result in sudden and significant valuation increases or declines in the Fund’s holdings. If there is a significant decline in the value of the Fund’s portfolio, this may impact the asset coverage levels for the Fund’s outstanding leverage.
Risks resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery, the financial condition of financial institutions and our business, financial condition and results of operation. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with respect to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, rising interest rates and/or a return to unfavorable economic conditions could impair the Fund’s ability to achieve its investment objective.
The occurrence of events similar to those in recent years, such as the aftermath of the war in Iraq, instability in Afghanistan, Pakistan, Egypt, Libya, Syria, Russia, Ukraine and the Middle East, ongoing epidemics of infectious diseases (including coronavirus) in certain parts of the world, terrorist attacks in the United States and around the world, social and political discord, debt crises (such as the Greek crisis), sovereign debt downgrades, increasingly strained relations between the United States and a number of foreign countries, including traditional allies, such as certain European countries, and historical adversaries, such as North Korea, Iran, China and Russia, and the international community generally, new and continued political unrest in various countries, such as Venezuela and Spain, the exit or potential exit of one or more countries from the EU or the EMU, continued changes in the balance of political power among and within the branches of the U.S. government, among others, may result in market volatility, may have long term effects on the U.S. and worldwide financial markets, and may cause further economic uncertainties in the United States and worldwide.
The current political climate has intensified concerns about a potential trade war between China and the United States, as each country has recently imposed tariffs on the other country’s products. These actions may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China’s export industry,

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which could have a negative impact on our performance. U.S. companies that source material and goods from China and those that make large amounts of sales in China would be particularly vulnerable to an escalation of trade tensions. Uncertainty regarding the outcome of the trade tensions and the potential for a trade war could cause the U.S. dollar to decline against safe haven currencies, such as the Japanese yen and the euro. Events such as these and their consequences are difficult to predict and it is unclear whether further tariffs may be imposed or other escalating actions may be taken in the future. Any of these effects could have a material adverse effect on our business, financial condition and results of operations.
Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.
There has been ongoing discussion and commentary regarding potential significant changes to United States trade policies, treaties and tariffs. The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to the trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.
Uncertainty regarding the impact of the United Kingdom's departure from the European Union could negatively impact our business, financial condition and earnings.
Pursuant to an agreement setting out the terms on which the United Kingdom may leave the European Union (the “EU,” and the United Kingdom’s withdrawal therefrom, “Brexit”) the United Kingdom formally withdrew from the EU, effective January 31, 2020, and entered into an 11-month transition period. During this transition period, the United Kingdom is expected to renegotiate its political and economic relationships with the EU and other countries. As a result of the original referendum and other geopolitical developments leading to Brexit, the financial markets experienced increased levels of volatility and it is likely that, in the near term, Brexit will continue to bring about higher levels of uncertainty and volatility. During this period of uncertainty, the negative impact on not only the United Kingdom and European economies, but the broader global economy, could be significant, potentially resulting in increased market and currency volatility (including volatility of the value of the British pound sterling relative to the United States dollar and other currencies and volatility in global currency markets generally), and illiquidity and lower economic growth for companies that rely significantly on Europe for their business activities and revenues. Additional risks associated with Brexit include macroeconomic risk to the United Kingdom and European economies, impetus for further disintegration of the EU and related political stresses (including those related to sentiment against cross border capital movements and activities of investors like us), prejudice to financial services businesses that are conducting business in the EU and which are based in the United Kingdom, legal uncertainty regarding achievement of compliance with applicable financial and commercial laws and regulations, and the unavailability of timely information as to expected legal, tax and other regimes. Any further exits from the EU, or the possibility of such exits, would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.
Rising interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations.
Our debt investments may be based on floating rates, such as London Interbank Offer Rate (“LIBOR”), EURIBOR, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.

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Because we have borrowed money, and may issue preferred stock to finance investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds or pay distributions on preferred stock and the rate that our investments yield. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase except to the extent we have issued fixed rate debt or preferred stock, which could reduce our net investment income.
You should also be aware that a change in the general level of interest rates can be expected to lead to a change in the interest rate we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold and may result in a substantial increase in the amount of incentive compensation payable to our Advisor with respect to the portion of the incentive compensation based on income.
Changes relating to the LIBOR calculation process, the phase-out of LIBOR and the use of replacement rates for LIBOR may adversely affect the value of our portfolio securities.
In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. The announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Actions by the British Bankers’ Association, the United Kingdom Financial Conduct Authority or other regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities
At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the U.S. Federal Reserve, in connection with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”). Given the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR, including but not limited to the need to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments. In addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference rates to gain market acceptance could adversely affect the return on, value of and market for securities linked to such rates.
Risks related to our business
We may not replicate the Company’s historical performance or the historical performance of other entities managed or supported by the Advisor.
We may not be able to replicate the Company’s historical performance or the historical performance of the Advisor’s investments, and our investment returns may be substantially lower than the returns achieved by the Company in the past. We can offer no assurance that the Advisor will be able to continue to implement our investment objective with the same degree of success as it has had in the past.
Our business model depends upon the development and maintenance of strong referral relationships with other asset managers and investment banking firms.
We are substantially dependent on our informal relationships, which we use to help identify and gain access to investment opportunities. If we fail to maintain our relationships with key firms, or if we fail to establish strong referral relationships with other firms or other sources of investment opportunities, we will not be able to grow our portfolio of equity investments and achieve our investment objective. In addition, persons with whom we have informal relationships are not obligated to inform us of investment opportunities, and therefore such relationships may not lead to the origination of equity or other investments. Any loss or diminishment of such relationships could effectively reduce our ability to identify attractive portfolio companies that meet our investment criteria, either for

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direct equity investments or for investments through private secondary market transactions or other secondary transactions.
The Advisor’s liability is limited under the investment management agreement, and we are required to indemnify the Advisor against certain liabilities, which may lead the Advisor to act in a riskier manner on our behalf than it would when acting for its own account.
The Advisor has not assumed any responsibility to us other than to render the services described in the investment management agreement, and it will not be responsible for any action of our board of directors in declining to follow the Advisor’s advice or recommendations. Pursuant to the investment management agreement, the Advisor and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it will not be liable to us for their acts under the investment management agreement, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect the Advisor and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it with respect to all damages, liabilities, costs and expenses resulting from acts of the Advisor not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the investment and management agreement. These protections may lead the Advisor to act in a riskier manner when acting on our behalf than it would when acting for its own account.
We may suffer credit losses.
Investment in middle-market companies is highly speculative and involves a high degree of risk of credit loss, and therefore our securities may not be suitable for someone with a low tolerance for risk. These risks are likely to increase during an economic recession.
Our use of borrowed funds, including under the Leverage Program, to make investments exposes us to risks typically associated with leverage.
The Company borrows money, both directly and indirectly through SVCP, TCPC Funding and the SBIC. As a result:
our common stock is exposed to incremental risk of loss and a decrease in the value of our investments would have a greater negative impact on the value of our common stock than if we did not use leverage;
adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of leverage;
we, and indirectly our common stockholders, bear the entire cost of issuing and paying interest or dividends on any borrowed funds issued by us or our subsidiaries; and
our ability to pay dividends on our common stock will be restricted if our asset coverage ratio is not at least 150% and any amounts used to service indebtedness would not be available for such dividends.
The use of leverage creates increased risk of loss and is considered a speculative investment technique. The use of leverage magnifies the potential gains and losses from an investment and increases the risk of loss of capital. To the extent that income derived by us from investments purchased with borrowed funds is greater than the cost of borrowing, our net income will be greater than if borrowing had not been used. Conversely, if the income from investments purchased from these sources is not sufficient to cover the cost of the leverage, our net investment income will be less than if leverage had not been used, and the amount available for ultimate distribution to the holders of common stock will be reduced. The extent to which the gains and losses associated with leveraged investing are increased will generally depend on the degree of leverage employed. We may, under some circumstances, be required to dispose of investments under unfavorable market conditions in order to maintain our leverage, thus causing us to recognize a loss that might not otherwise have occurred. In the event of a sale of investments upon default under our borrowing arrangements, secured creditors will be contractually entitled to direct such sales and may be expected to do so in their interest, rather than in the interests of the holders of common stock. Holders of common stock will incur losses if the proceeds from a sale in any of the foregoing circumstances are

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insufficient, after payment in full of amounts due and payable on leverage, including administrative expenses, to repay such holders investments in our common stock. As a result, you could experience a total loss of your investment. Any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common stock. The ability to service any debt that we have or may have outstanding depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. There is no limitation on the percentage of portfolio investments that can be pledged to secure borrowings. The amount of leverage that we employ at any particular time will depend on our Advisor’s and our board of director’s assessments of market and other factors at the time of any proposed borrowing.
In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment under the SVCP Facility and TCPC Funding Facility, thereby materially and adversely affecting our liquidity, financial condition and results of operations.
Under the Leverage Program, we must comply with certain financial and operational covenants. These covenants include:
restrictions on the level of indebtedness that we are permitted to incur in relation to the value of our assets;
restrictions on our ability to make distributions and other restricted payments under certain circumstances;
restrictions on extraordinary events, such as mergers, consolidation and sales of assets;
restrictions on our ability to incur liens and incur indebtedness; and
maintenance of a minimum level of stockholders’ equity.
In addition, by limiting the circumstances in which borrowings may occur under the SVCP Facility and TCPC Funding Facility, the credit agreements related to such facilities (the “Credit Agreements”) in effect provide for various asset coverage, credit quality and diversification limitations on our investments. Such limitations may cause us to be unable to make or retain certain potentially attractive investments or to be forced to sell investments at an inappropriate time and consequently impair our profitability or increase losses or result in adverse tax consequences. As of February 25, 2020, we were in compliance with these covenants. However our continued compliance with these covenants depends on many factors, some of which are beyond our control.
Accordingly, there are no assurances that we will continue to comply with the covenants in the Credit Agreements. Failure to comply with these covenants would result in a default under the Credit Agreements which, if we were unable to obtain a waiver from the respective lenders thereunder, could result in an acceleration of repayments under the Credit Agreements.
The SVCP Facility also has certain “key man” provisions. For example, it is an event of default if the Advisor is controlled by any person or group other than (i) a wholly-owned subsidiary of BlackRock, Inc. or (ii) any two of Howard Levkowitz, Michael Leitner, Philip Tseng and Rajneesh Vig (or any replacement manager or individual reasonably acceptable to the administrative agent and approved by the required lenders), provided that if the Advisor is no longer under the control of at least two of such four individuals (or their previously approved replacements) through an event resulting in the death or disability of such individuals, the Advisor has 60 calendar days to replace such individuals with other managers or individuals reasonably acceptable to the administrative agent and approved by the required lenders, provided further that a default (but not an event of default) shall be deemed to exist during such period.
The SVCP Facility matures on May 6, 2023, subject to extension by the lenders at the request of SVCP, and the TCPC Funding Facility matures on May 31, 2023, subject to extension by the lender at the request of TCPC Funding. Any inability to renew, extend or replace the SVCP Facility and/or TCPC Funding Facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.
The SVCP Facility matures on May 6, 2023, subject to extension by the lenders at the request of SVCP. Borrowings under the SVCP Facility generally bear interest at a rate of LIBOR plus 2.00% per annum, subject to

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certain limitations. The TCPC Funding Facility matures on May 31, 2023, subject to extension by the lender at the request of TCPC Funding. Borrowings under the TCPC Funding Facility generally bear interest at a rate of LIBOR plus either 2.00% or 2.35% per annum, subject to certain funding requirements, plus an administrative fee of 0.25% per annum. We do not currently know whether we will renew, extend or replace the SVCP Facility and TCPC Funding Facility upon their maturities or whether we will be able to do so on terms that are as favorable as the SVCP Facility and TCPC Funding Facility. In addition, we will be required to liquidate assets to repay amounts due under the SVCP Facility and TCPC Funding Facility if we do not renew, extend or replace the SVCP Facility and TCPC Funding Facility prior to their respective maturities.
Upon the termination of the SVCP Facility and TCPC Funding Facility, there can be no assurance that we will be able to enter into a replacement facility on terms that are as favorable to us, if at all. Our ability to replace the SVCP Facility and TCPC Funding Facility may be constrained by then-current economic conditions affecting the credit markets. In the event that we are not able to replace the SVCP Facility and TCPC Funding Facility at the time of their maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.
The creditors under the SVCP Facility and TCPC Funding Facility have a first claim on all of the Company’s assets included in the collateral for the respective facilities.
Lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders. Substantially all of our current assets have been pledged as collateral under the SVCP Facility and TCPC Funding Facility. If an event of default occurs under either of the SVCP Facility and TCPC Funding Facility, the respective lenders would be permitted to accelerate amounts due under the respective facilities and liquidate our assets to pay off amounts owed under the respective facilities and limitations would be imposed on us with respect to the purchase or sale of investments. Such limitations may cause us to be unable to make or retain certain potentially attractive investments or to be forced to sell investments at an inappropriate time and consequently impair our profitability or increase our losses or result in adverse tax consequences.
In the event of the dissolution of the Company or otherwise, if the proceeds of the Company’s assets (after payment in full of obligations to any such debtors) are insufficient to repay capital invested in us by the holders of the common stock, no other assets will be available for the payment of any deficiency. None of our board of directors, the Advisor or any of their respective affiliates, have any liability for the repayment of capital contributions made to the Company by the holders of common stock. Holders of common stock could experience a total loss of their investment in the Company.
Lenders under the SVCP Facility may have a veto power over the Company’s investment policies.
If a default has occurred under the SVCP Facility, the lenders under the SVCP Facility may veto changes in investment policies. The SVCP Facility also has certain limitations on unusual types of investments such as commodities, real estate and speculative derivatives, which are not part of the Company’s investment strategy or policies in any event.
The SBIC may be unable to make distributions to us that will enable us to meet or maintain RIC status, which could result in the imposition of an entity-level tax.
In order for us to continue to qualify for RIC tax treatment and to minimize corporate-level taxes, we will be required to distribute substantially all of our net ordinary income and net capital gain income, including income from certain of our subsidiaries, which includes the income from the SBIC. We will be partially dependent on the SBIC for cash distributions to enable us to meet the RIC distribution requirements. The SBIC may be limited by the Small Business Investment Act of 1958, and SBA regulations governing SBICs, from making certain distributions to us that may be necessary to enable us to maintain our status as a RIC. We may have to request a waiver of the SBA’s restrictions for the SBIC to make certain distributions to maintain our eligibility for RIC status. We cannot assure you that the SBA will grant such a waiver and if the SBIC is unable to obtain a waiver, compliance with the SBA regulations may result in loss of RIC tax treatment and a consequent imposition of an entity-level tax on us.
The SBIC is subject to SBA regulations, and any failure to comply with SBA regulations could have an adverse effect on our operations.

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On April 22, 2014, the SBIC received an SBIC license from the SBA. The SBIC license allows the SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to the SBIC’s assets over our stockholders in the event we liquidate the SBIC or the SBA exercises its remedies under the SBA-guaranteed debentures issued by the SBIC upon an event of default.
Under current SBA regulations, a licensed SBIC can provide capital to those entities that have a tangible net worth not exceeding $19.5 million and an average annual net income after Federal income taxes not exceeding $6.5 million for the two most recent fiscal years. In addition, a licensed SBIC must devote 25% of its investment activity to those entities that have a tangible net worth not exceeding $6.0 million and an average annual net income after Federal income taxes not exceeding $2.0 million for the two most recent fiscal years. The SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on factors such as the number of employees and gross sales. The SBA regulations permit licensed SBICs to make long term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the SBIC to forego attractive investment opportunities that are not permitted under SBA regulations.
Further, the SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or any transfers of the capital stock of a licensed SBIC. If the SBIC fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit its use of debentures, declare outstanding debentures immediately due and payable, and/or limit it from making new investments. In addition, the SBA can revoke or suspend a license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the Small Business Investment Act of 1958 or any rule or regulation promulgated thereunder. The Advisor, as the SBIC’s investment adviser, does not have any previous experience managing an SBIC. Its limited experience in complying with SBA regulations may hinder its ability to take advantage of the SBIC’s access to SBA-guaranteed debentures. Any failure to comply with SBA regulations could have an adverse effect on our operations.
SBA regulations limit the outstanding dollar amount of SBA-guaranteed debentures that may be issued by an SBIC or group of SBICs under common control.
The SBA regulations currently limit the dollar amount of SBA-guaranteed debentures that can be issued by any one SBIC to $150.0 million or to a group of SBICs under common control to $350.0 million.
An SBIC may not borrow an amount in excess of two times (and in certain cases, up to three times) its regulatory capital. As of December 31, 2019, the SBIC had $138.0 million in SBA-guaranteed debentures outstanding. If we reach the maximum dollar amount of SBA-guaranteed debentures permitted, and if we require additional capital, our cost of capital may increase, and there is no assurance that we will be able to obtain additional financing on acceptable terms.
Moreover, the current status of the SBIC as an SBIC does not automatically assure that the SBIC will continue to receive SBA-guaranteed debenture funding. Receipt of SBA leverage funding is dependent upon the SBIC continuing to be in compliance with SBA regulations and policies and available SBA funding. The amount of SBA leverage funding available to SBICs is dependent upon annual Congressional authorizations and in the future may be subject to annual Congressional appropriations. There can be no assurance that there will be sufficient debenture funding available at the times desired by the SBIC.
The debentures guaranteed by the SBA have a maturity of ten years and require semi-annual payments of interest. The SBIC will need to generate sufficient cash flow to make required interest payments on the debentures.

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If the SBIC is unable to meet their financial obligations under the debentures, the SBA, as a creditor, will have a superior claim to the SBIC’s assets over our stockholders in the event we liquidate the SBIC or the SBA exercises its remedies under such debentures as the result of a default by us.
If we incur additional leverage, it will increase the risk of investing in shares of our common stock.
The Company has indebtedness pursuant to the Leverage Program and expects, in the future, to borrow additional amounts under the SVCP Facility and TCPC Funding Facility and may increase the size of the SVCP Facility and TCPC Funding Facility or enter into other borrowing arrangements.
Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation is based on our level of leverage at December 31, 2019, which represented borrowings equal to 53.2% of our total assets. On such date, we also had $1,722.1 million in total assets; $1,649.5 million in total investments; an average cost of funds of 3.84%; $915.5 million aggregate principal amount of debt outstanding; and $776.3 million of total net assets. In order to compute the “Corresponding Return to Common Stockholders,” the “Assumed Return on Portfolio (Net of Expenses Other than Interest)” is multiplied by the total value of our investment portfolio at December 31, 2019 to obtain an assumed return to us. From this amount, interest expense multiplied the combined rate of interest of 3.84% by the $915.5 million of debt is subtracted to determine the return available to stockholders. The return available to stockholders is then divided by the total value of our net assets at December 31, 2019 to determine the “Corresponding Return to Common Stockholders.” Actual interest payments may vary.
Assumed Return on Portfolio (Net of Expenses Other than Interest)-10
% -5
% 0
% 5
% 10
%
Corresponding Return to Common Stockholders-26
% -15
% -5
% 6
% 17
%
The assumed portfolio return in the table is based on SEC regulations and is not a prediction of, and does not represent, our projected or actual performance. The table also assumes that we will maintain a constant level of leverage. The amount of leverage that we use will vary from time to time.
The lack of liquidity in substantially all of our investments may adversely affect our business.
Our investments generally are made and will continue to be made in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will be otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded our investments. Further, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we or an affiliated manager has material non-public information regarding such portfolio company.
A substantial portion of our portfolio investments may be recorded at fair value as determined using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities and, as a result, there may be uncertainty regarding the value of our portfolio investments.
The debt and equity investments that we make for which market quotations are not readily available will be valued at fair value as determined using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Our net asset value could be adversely affected if determinations regarding the fair value of these investments were materially higher than the values ultimately realized upon the disposal of such investments.
We are exposed to risks associated with changes in interest rates.

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General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net investment income. An increase in interest rates could decrease the value of any investments we hold that earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high-yield bonds, and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.
The Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could adversely impact our investment returns.
The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts, including for other funds and accounts in which certain holders of our common stock have investments, which we refer to as Other Advisor Accounts. Other Advisor Accounts invest in assets that are also eligible for purchase by us. Our investment policies, fee arrangements and other circumstances may vary from those of Other Advisor Accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and Other Advisor Accounts. In general, the Advisor and its affiliates will allocate investment opportunities pro rata among us and Other Advisor Accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us and described below. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more Other Advisor Accounts desire to sell it or we may not have additional capital to invest at a time Other Advisor Accounts do. When our investment allocations are made on a basis other than pro rata our investment performance may be less favorable when compared to the investment performance of Other Advisor Accounts with respect to those investments. The Advisor and its affiliates intend to allocate investment opportunities to us and Other Advisor Accounts in a manner that they believe in their judgment and based upon their fiduciary duties to be appropriate given the investment objectives, size of transaction, investable assets, alternative investments potentially available, prior allocations, liquidity, maturity, expected holding period, diversification, lender covenants and other limitations of ours and the Other Advisor Accounts. See “- Risks related to our operations as a BDC - While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, the Advisor may face conflicts of interests and investments made pursuant to the exemptive order conditions could in certain circumstances adversely affect the price paid or received by us or the availability or size of the position purchased or sold by us.”
There may be situations in which Other Advisor Accounts and the Company might invest in different securities issued by the same portfolio company. It is possible that if the portfolio company’s financial performance and condition deteriorates such that one or both investments are or could be impaired, the Advisor might face a conflict of interest given the difference in seniority of the respective investments. In such situations, the Advisor would review the conflict on a case-by-case basis and implement procedures consistent with its fiduciary duty to enable it to act fairly to the Other Advisor Accounts and the Company in the circumstances. Any steps by the Advisor will take into consideration the interests of each of the affected clients, the circumstances giving rise to the conflict, the procedural efficacy of various methods of addressing the conflict and applicable legal requirements.
Moreover, the Advisor’s investment professionals, its Investment Committee (as defined below), its senior management and employees serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business. Accordingly, these individuals may have obligations to investors in those entities or funds, the fulfillment of which might not be in our best interests or the best interests of our stockholders. In addition, certain of the personnel employed by the Advisor or focused on our business may change in ways that are detrimental to our business.

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The Advisor and its partners, officers, directors, members, managers, employees, affiliates and agents may be subject to certain potential or actual conflicts of interest in connection with the activities of, and investments by, us.
The Advisor and its affiliates may spend substantial time on other business activities, including investment management and advisory activities for entities with the same or overlapping investment objectives, investing for their own account, financial advisory services (including services for entities in which we invest), and acting as directors, officers, creditor committee members or in similar capacities. Subject to the requirements of the 1940 Act and other applicable laws, the Advisor and its affiliates and associates intend to engage in such activities and may receive compensation from third parties for their services. Subject to the same requirements, such compensation may be payable by entities in which we invest in connection with actual or contemplated investments, and the Advisor may receive fees and other compensation in connection with structuring investments which they will share.
The Advisor’s management fee is generally based on a percentage of our total assets (other than cash or cash equivalents) and the Advisor may have conflicts of interest in connection with decisions that could affect our total assets, such as decisions as to whether to incur additional debt to increase management fees paid and to recoup the Advisor’s payment of half of the sales load in connection with our initial public offering in April 2012.

Our incentive compensation may induce our Advisor to make certain investments, including speculative investments.
The incentive compensation payable by us to the Advisor may create an incentive for the Advisor to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive compensation is determined may encourage the Advisor to increase the use of leverage or take additional risk to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our common stock, or of securities convertible into our common stock or warrants representing rights to purchase our common stock or securities convertible into our common stock. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to certain of our debt investments and may accordingly result in a substantial increase in the amount of incentive compensation payable to the Advisor with respect to our cumulative investment income. Although the incentive compensation is subject to a total return hurdle, the Advisor may have some ability to accelerate the realization of gains to obtain incentive compensation earlier than it otherwise would when it may be in our best interests to not yet realize gains. Our directors monitor our use of leverage and the Advisor’s management of our investment program in the best interests of our common stockholders.
We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, we will bear our ratable share of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management and incentive compensation to the Advisor with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our common stockholders will bear his or her share of our management and incentive compensation as well as indirectly bear the management and performance fees and other expenses of any investment companies in which we invest.
We may be obligated to pay the Advisor incentive compensation payments in excess of the amounts we would have paid if such compensation was subject to clawback arrangements.
The Advisor is entitled to incentive compensation for each fiscal quarter after January 1, 2013 in an amount equal to a percentage of our ordinary income (before deducting incentive compensation) since that date and, separately, a percentage of our realized capital gains (net of realized capital losses and unrealized depreciation) since that date, in each case subject to a cumulative total return requirement. If we pay incentive compensation and thereafter experience additional realized capital losses or unrealized capital depreciation such that we would no longer have been required to provide incentive compensation, we will not be able to recover any portion of the incentive compensation previously paid or distributed because our incentive compensation arrangements do not contain any clawback provisions. As a result, the incentive compensation could exceed 17.5% of our cumulative total return, depending on the timing of unrealized appreciation, net unrealized depreciation and net realized capital losses. For example, part of the incentive compensation payable or distributable by us that relates to our ordinary

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income is computed on income that may include interest that has been accrued but not yet received in cash. If a portfolio company defaults on a loan, it is possible that accrued interest previously used in the calculation of the incentive compensation will become uncollectible. Similarly, the income component is measured against a total return limitation that includes unrealized gains. Such gains may not be realized or may be realized at a lower amount. Consequently, we may have paid incentive compensation on income in circumstances where we otherwise would not have done so and with respect to which we do not have a clawback right against the Advisor.

We are dependent upon senior management personnel of the Advisor for our future success, and if the Advisor is unable to retain qualified personnel or if the Advisor loses any member of its senior management team, our ability to achieve our investment objective could be significantly harmed.
The success of the Company is highly dependent on the financial and managerial expertise of the Advisor. The loss of one or more of the voting members of the Investment Committee could have a material adverse effect on the performance of the Company. Although the Advisor and the voting members of the Investment Committee devote a significant amount of their respective efforts to the Company, they actively manage investments for other clients and are not required to (and will not) devote all of their time to the Company’s affairs.
The Advisor or its affiliates may, from time to time, possess material non-public information, limiting our investment discretion.
The Advisor’s investment professionals, Investment Committee or their respective affiliates may serve as directors of, or in a similar capacity with, companies in which we invest. In the event that material non-public information is obtained with respect to such companies, or we became subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us and, consequently, your interests as a stockholder.
The Advisor can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
The Advisor has the right, under our investment management agreement, to resign at any time upon not more than 60 days’ written notice, whether we have found a replacement or not. If the Advisor resigns, we may not be able to find a new investment advisor or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Advisor and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.
We may in the future determine to fund a portion of our investments by issuing preferred stock, which would magnify the potential gains or losses and the risks of investing in us in the same manner as our borrowings.
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. In addition, preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any dividends or other payments to our common stockholders, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock). Lastly, under the 1940 Act, preferred stock constitutes a “senior security” for purposes of the 150% asset coverage test.

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We may experience fluctuations in our periodic operating results.
We could experience fluctuations in our periodic operating results due to a number of factors, including the interest rates payable on the debt securities we acquire, the default rate on such securities, the level of our expenses (including the interest rates payable on our borrowings), the dividend rates payable on preferred stock we issue, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
If we fail to maintain our status as a business development company, our business and operating flexibility could be significantly reduced.
We qualify as business development companies under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of business development companies. For example, BDCs are prohibited from making any unqualifying investments unless at least 70% of their total assets are invested in qualifying investments which are primarily securities of private or thinly-traded U.S. companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Failure to comply with the requirements imposed on business development companies by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, any such failure could cause an event of default under the Leverage Program, which could have a materially adverse effect on our business, financial conditions or results of operations.
Because we intend to distribute substantially all of our income to our stockholders to maintain our status as a RIC, we will continue to need additional capital to finance growth. If additional funds are unavailable or not available on favorable terms, our ability to grow will be impaired.
In order for the Company to qualify for the tax benefits available to RICs and to minimize payment of excise taxes, we intend to distribute to our stockholders substantially all of our annual taxable income, except that we may retain certain net capital gains for reinvestment in common interests of SVCP, and treat such amounts as deemed distributions to our stockholders. If we elect to treat any amounts as deemed distributions, we must pay income taxes at the corporate rate on such deemed distributions on behalf of our stockholders and our stockholders will receive a tax credit for such amounts and an increase in basis. A stockholder that is not subject to U.S. federal income tax or otherwise is not required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. As a result of these requirements, we will likely need to raise capital from other sources to grow our business. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.
As a BDC, we are not able to incur senior securities unless after giving effect thereto we meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which includes all of our borrowings, of at least 150%. This means that for every $100 of net assets, we may raise $200 from senior securities, such as borrowings or issuing preferred stock. These requirements limit the amount that we may borrow. On July 13, 2015, we obtained exemptive relief from the SEC to permit us to exclude the debt of TCPC SBIC LP guaranteed by the SBA from our 150% asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 150% asset coverage test by permitting the SBIC to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.
Because we will continue to need capital to grow our investment portfolio, these limitations may prevent us from incurring debt and require us to raise additional equity at a time when it may be disadvantageous to do so. While we expect we will be able to borrow and to issue additional debt securities and expect that we will be able to issue additional equity securities, we cannot assure you that debt and equity financing will be available to us on favorable terms, or at all. In addition, as a business development company, we generally will not be permitted to issue equity securities priced below net asset value without stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease new investment activities and our net asset value or common stock price could decline.

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The highly competitive market in which we operate may limit our investment opportunities.
A number of entities compete with us to make the types of investments that we make. We compete with other BDCs, public and private funds, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, private equity funds. Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities now invest in areas in which they have not traditionally invested, including making investments in middle-market private companies. As a result of these new entrants, competition for investment opportunities intensified over the past several years and may intensify further in the future. Some of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions and valuation requirements that the 1940 Act imposes on us as a BDC and that the Code imposes on us as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this existing and potentially increasing competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than the rates we offer.
We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on better terms to our portfolio companies than what we may have originally anticipated, which may impact our return on these investments.
Our board of directors may change our operating policies and strategies without prior notice or stockholder approval.
Our board of directors has the authority to modify or waive our operating policies and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results or value of our stock. Nevertheless, the effects could adversely affect our business and impact our ability to make distributions and cause you to lose all or part of your investment.
Risks related to our investments
Our investments may be risky, and you could lose all or part of your investment.
We invest primarily in middle-market companies primarily through leveraged loans.
Risks Associated with middle-market companies. Investing in private middle-market companies involves a number of significant risks, including:
these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral;
they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on the portfolio company and, in turn, on us;

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they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;
our executive officers, directors and the Advisor may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies;
changes in laws and regulations, as well as their interpretations, may adversely affect their respective businesses, financial structures or prospects; and
they may have difficulty accessing the capital markets to meet future capital needs.
Little public information exists about private middle-market companies, and we expect to rely on the Advisor’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. These companies and their financial information are not subject to the Sarbanes-Oxley Act of 2002 and other rules that govern disclosures and financial controls of public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investment.
Lower Credit Quality Obligations. Most of our debt investments are likely to be in lower grade obligations. The lower grade investments in which we invest may be rated below investment grade by one or more nationally-recognized statistical rating agencies at the time of investment or may be unrated but determined by the Advisor to be of comparable quality. Debt securities rated below investment grade are commonly referred to as “junk bonds” and are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. The debt that we invest in typically is not rated prior to our investment by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB-” by Fitch Ratings or lower than “BBB-” by Standard & Poor’s). We may invest without limit in debt of any rating, as well as debt that has not been rated by any nationally recognized statistical rating organization.
Investment in lower grade investments involves a substantial risk of loss. Lower grade securities or comparable unrated securities are considered predominantly speculative with respect to the issuer’s ability to pay interest and principal and are susceptible to default or decline in market value due to adverse economic and business developments. The market values for lower grade debt tend to be very volatile and are less liquid than investment grade securities. For these reasons, your investment in our company is subject to the following specific risks:
increased price sensitivity to a deteriorating economic environment;
greater risk of loss due to default or declining credit quality;
adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and
if a negative perception of the lower grade debt market develops, the price and liquidity of lower grade securities may be depressed. This negative perception could last for a significant period of time.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a lower grade issuer to make principal payments and interest payments than an investment grade issuer. The principal amount of lower grade securities outstanding has proliferated in the past decade as an increasing number of issuers have used lower grade securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. Similarly, downturns in profitability in specific industries could adversely affect the ability of lower grade issuers in that industry to meet their obligations. The market values of lower grade debt tend to reflect individual developments of the issuer to a greater extent than do higher quality investments, which react primarily to fluctuations in the general level of interest rates. Factors having an adverse impact on the market value of lower grade debt may have an adverse effect on our net asset value and the market value of our common stock. In addition, we may incur additional expenses to

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the extent we are required to seek recovery upon a default in payment of principal of or interest on our portfolio holdings. In certain circumstances, we may be required to foreclose on an issuer’s assets and take possession of its property or operations. In such circumstances, we would incur additional costs in disposing of such assets and potential liabilities from operating any business acquired.
The secondary market for lower grade debt is unlikely to be as liquid as the secondary market for more highly rated debt, a factor which may have an adverse effect on our ability to dispose of a particular instrument. There are fewer dealers in the market for lower grade securities than investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and asked price is generally larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market for lower grade debt could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become highly illiquid. As a result, we could find it more difficult to sell these instruments or may be able to sell the securities only at prices lower than if such instruments were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating our net asset value.
Since investors generally perceive that there are greater risks associated with lower grade debt of the type in which we may invest a portion of our assets, the yields and prices of such debt may tend to fluctuate more than those for higher rated instruments. In the lower quality segments of the fixed income markets, changes in perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the income securities market, resulting in greater yield and price volatility.
Distressed Debt Securities Risk. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, our ability to achieve current income for our stockholders may be diminished. We also will be subject to significant uncertainty as to when and in what manner and for what value the distressed debt we invest in will eventually be satisfied (e.g., through a liquidation of the obligor’s assets, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt we hold, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.
Payment-in-kind Interest Risk. Our loans may contain a payment-in-kind, or PIK, interest provision. PIK investments carry additional risk as holders of these types of securities receive no cash until the cash payment date unless a portion of such securities is sold. If the issuer defaults the Company may obtain no return on its investment. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To avoid the imposition of corporate-level tax on us, this non-cash source of income needs to be paid out to stockholders in cash distributions or, in the event that we determine to do so and in certain cases, in shares of our common stock, even though we have not yet collected and may never collect the cash relating to the PIK interest. As a result, we may have to distribute a taxable stock dividend to account for PIK interest even though we have not yet collected the cash.
Preferred Stock Risk. To the extent we invest in preferred securities, there are special risks, including:
Deferral. Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If we own a preferred security that is deferring its distributions, we may be required to report income for tax purposes although we have not yet received such income.
Subordination. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior debt instruments.

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Liquidity. Preferred securities may be substantially less liquid than many other securities, such as common stocks or U.S. Government securities.
Limited Voting Rights. Generally, preferred security holders have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may elect a number of directors to the issuer’s board. Generally, once all the arrearages have been paid, the preferred security holders no longer have voting rights.
Equity Security Risk. We may have exposure to equity securities. Although equity securities have historically generated higher average total returns than fixed-income securities over the long term, equity securities also have experienced significantly more volatility in those returns. The equity securities that we acquire may fail to appreciate and may decline in value or become worthless.
Hedging Transactions. We may employ hedging techniques to minimize currency exchange rate risks or interest rate risks, but we can offer no assurance that such strategies will be effective. If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Additionally, engaging in certain hedging transactions could result in adverse tax consequences, e.g. giving rise to income that does not qualify for the 90% annual gross income requirement applicable to RICs.
Because our investments are generally not in publicly traded securities, there will be uncertainty regarding the value of our investments, which could adversely affect the determination of our net asset value.
Our portfolio investments will generally not be in publicly traded securities. As a result, although we expect that some of our equity investments may trade on private secondary marketplaces, the fair value of our direct investments in portfolio companies will often not be readily determinable. Under the 1940 Act, investments for which there are no readily available market quotations, including securities that while listed on a private securities exchange have not actively traded, will be valued at fair value as determined using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities. In connection with that approval, the board of directors utilizes the services of an independent valuation firm, which prepares valuation reports on a quarterly basis for most of our portfolio investments that are not publicly traded or for which we do not have readily available market quotations, including securities that while listed on a private securities exchange, have not actively traded. However, the board of directors retains ultimate authority as to the appropriate valuation of each such investment. The types of factors that the board of directors takes into account in approving fair value with respect to such non-traded investments includes, as relevant and, to the extent available, the portfolio company’s earnings, the markets in which the portfolio company does business, comparison to valuations of publicly traded companies, comparisons to recent sales of comparable companies, the discounted value of the cash flows of the portfolio company and other relevant factors. This information may not be available because it is difficult to obtain financial and other information with respect to private companies, and even where we are able to obtain such information, there can be no assurance that it is complete or accurate. Because such valuations are inherently uncertain and may be based on estimates, our determinations of fair value may differ materially from the values that would be assessed if a readily available market for these securities existed. Due to this uncertainty, our fair value determinations with respect to any non-traded investments we hold may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our securities based on an overstated net asset value may pay a higher price than the value of our investments might warrant. Conversely, investors selling securities based on a net asset value that understates the value of our investments may receive a lower price for their securities than the value of our investments might warrant.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our

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portfolio may decrease during these periods as we are required to record the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, even though we or one of our affiliates may have structured our interest in such portfolio company as senior debt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt holding as equity and subordinate all or a portion of our claim to claims of other creditors.
We may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
We do not generally intend to take controlling equity positions in our portfolio companies. To the extent that we do not hold a controlling equity interest in a portfolio company, we are subject to the risk that such portfolio company may make business decisions with which we disagree, and the stockholders and management of such portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.
In addition, we may not be in a position to control any portfolio company by investing in its debt securities. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
The portfolio companies we invest in usually have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Additionally, certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after

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payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements, including agreements governing “first out” and “last out” structures, that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be in good faith under the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and other equity holders and management of the company may make decisions that could decrease the value of our portfolio holdings.
When we make debt or minority equity investments, we are subject to the risk that a portfolio company may make business decisions with which we disagree and the other equity holders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investment.
We may also make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
There may be circumstances in which our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
If one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, a bankruptcy court might recharacterize our debt holding as an equity investment and subordinate all or a portion of our claim to that of other creditors. In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. For example, we could become subject to a lender’s liability claim, if, among other things, we actually render significant managerial assistance.
Our portfolio companies may be highly leveraged.
Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used. Additionally, these companies may not be able to get a full tax deduction for such borrowings.

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Our portfolio companies may prepay loans, which prepayment may reduce stated yields in the future if capital returned cannot be invested in transactions with equal or greater expected yields.
Certain of the loans we make are prepayable at any time, some of them of them at no premium to par. We cannot predict when such loans may be prepaid. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that permit such company to replace existing financing with less expensive capital. As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. In the case of some of these loans, having the loan prepaid early may reduce the achievable yield for the Company in the future below the current yield disclosed for our portfolio if the capital returned cannot be invested in transactions with equal or greater expected yields.
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments in order to: (1) increase or maintain in whole or in part our equity ownership percentage; (2) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or (3) attempt to preserve or enhance the value of our initial investment.
We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. Our failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make such follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, because we are inhibited by compliance with BDC requirements or because we desire to maintain our tax status.
Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our investment strategy contemplates that a portion of our investments may be in securities of foreign companies in order to provide diversification or to complement our U.S. investments, although we are required generally to invest at least 70% of our assets in companies organized and having their principal place of business within the U.S. and its possessions. Accordingly, we may invest on an opportunistic basis in certain non-U.S. companies, including those located in emerging markets, that otherwise meet our investment criteria. In regards to the regulatory requirements for business development companies, some of these investments may not qualify as investments in “eligible portfolio companies,” and thus may not be considered “qualifying assets.” “Eligible portfolio companies” generally include U.S. companies that are not investment companies and that do not have securities listed on a national exchange. If at any time less than 70% of our gross assets are comprised of qualifying assets, including as a result of an increase in the value of any non-qualifying assets or decrease in the value of any qualifying assets, we would generally not be permitted to acquire any additional non-qualifying assets until such time as 70% of our then current gross assets were comprised of qualifying assets. We would not be required, however, to dispose of any non-qualifying assets in such circumstances. In addition, investing in foreign companies, and particularly those in emerging markets, may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. These risks may be more pronounced for portfolio companies located or operating primarily in emerging markets, whose economies, markets and legal systems may be less developed. Further, we may have difficulty enforcing our rights as equity holders in foreign jurisdictions. In addition, to the extent we invest in non-U.S. companies, we may face greater exposure to foreign economic developments.
Although it is anticipated that most of our investments will be denominated in U.S. dollars, our investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency may change in relation to the U.S. dollar. Among the factors that may affect currency values are trade balances, the level of short-

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term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk or, that if we do, such strategies will be effective. As a result, a change in currency exchange rates may adversely affect our profitability.
Our investments in the software sector are subject to various risks, including intellectual property infringement issues and rapid technological changes, which may adversely affect our performance. Software is our largest industry concentration. Each industry contains certain industry related credit risks.
General risks of companies in the software industry sector include intellectual property infringement liability issues, the inability to protect software and other proprietary technology, extensive competition and limited barriers to entry. Generally, the market for software products is characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introduction and enhancements. If a portfolio company in the software sector cannot develop new products and enhance its current products in response to technological changes and competing products, its business and operating results will be negatively affected. In addition, there has been a substantial amount of litigation in the software industry relating to intellectual property rights. Regardless of whether claims that a company is infringing patents or other intellectual property have any merit, these claims are time-consuming and costly. Moreover, a software company must monitor the unauthorized use of its intellectual property, which may be difficult and costly. A company’s failure to protect its intellectual property could put it at a disadvantage to its competitors and harm its business, results of operations and financial condition. If a software company in which we invest is unable to navigate these risks, our performance may be adversely affected.
The effect of global climate change may impact the operations of our portfolio companies.
There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.
Risks related to our operations as a BDC
While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, the Advisor may face conflicts of interests and investments made pursuant to the exemptive order conditions could in certain circumstances adversely affect the price paid or received by us or the availability or size of the position purchased or sold by us.
Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities or is managed by the Advisor will generally be our affiliate for purposes of the 1940 Act and we are generally prohibited from participating in certain transactions such as co-investing with, or buying or selling any security from or to, such affiliate, absent the prior approval of our independent directors and, in some cases, of the SEC. However, the Advisor and the funds managed by the Advisor have received an exemption from certain SEC regulations prohibiting transactions with affiliates. The exemptive order requires that certain procedures be followed prior to making an investment subject to the order and such procedures could in certain circumstances adversely affect the price paid or received by us or the availability or size of the position purchased or sold by us. The Advisor may also face conflicts of interest in making investments pursuant to the exemptive order. See “Risks related to our business - We have limited operating history as a BDC, and if the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns.”

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The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors and, in some cases, of the SEC. We are prohibited from buying or selling any security from or to any person who owns more than 25% of our voting securities and from or to certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC (other than certain limited situations pursuant to current regulatory guidance). The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances relating to the particular transaction. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.

Regulations governing our operation as a BDC may limit our ability to, and the way in which we raise additional capital, which could have a material adverse impact on our liquidity, financial condition and results of operations and may hinder the Advisor’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.
Our business may in the future require a substantial amount of capital. We may acquire additional capital from the issuance of additional shares of our common stock or from the additional issuance of senior securities (including debt and preferred stock). However, we may not be able to raise additional capital in the future on favorable terms or at all.
Our board of directors may decide to issue common stock to finance our operations rather than issuing debt or other senior securities. As a BDC, we are generally not able to issue our common stock at a price below net asset value without first obtaining required approvals from our stockholders and our independent directors. If our common stock trades at a discount to net asset value, those restrictions could adversely affect our ability to raise equity capital. Except in connection with the exercise of warrants or the conversion of convertible securities, in any such case the price at which our securities are to be issued and sold may not be less than a price, that in the determination of our board of directors, closely approximates the market value of such securities at the relevant time. We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to the requirements of the 1940 Act. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease, and such stockholders may experience dilution.
We may only issue senior securities up to the maximum amount permitted by the 1940 Act. On March 23, 2018, the SBCAA was signed into law, which among other things, amended Section 61(a) of the 1940 Act to add a new Section 61(a)(2) that reduces the asset coverage requirement applicable to BDCs from 200% to 150% so long as the BDC meets certain disclosure requirements and obtains certain approvals. The reduced asset coverage requirement would permit a BDC to have a ratio of total consolidated assets to outstanding indebtedness of 2:1 as compared to a maximum of 1:1 under the 200% asset coverage requirement and would limit the BDC’s ability to issue senior securities to amounts such that its asset coverage ratio, as defined in the 1940 Act, equals at least 150% immediately after such borrowing or issuance if certain requirements are met, rather than 200%. Effective November 7, 2018, the Company’s board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of our board of directors, approved the Asset Coverage Ratio Election, which would have resulted (had the Company not received earlier stockholder approval) in our asset coverage requirement applicable to senior securities being reduced from 200% to 150%, effective on November 7, 2019. On February 8, 2019, the stockholders of the Company approved the Asset Coverage Ratio Election, and, as a result, effective on February 9, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. If our assets decline in value and we fail to satisfy this test or any stricter test under the terms of our leverage instruments, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales or repayment may be disadvantageous, which could have a material adverse impact on our liquidity, financial condition and results of operations. As of December 31, 2019, the Company’s asset coverage was 199%.
Changes in the laws or regulations governing our business or the business of our portfolio companies, or changes in the interpretations thereof or newly enacted legislation and regulations, and any failure by us or our portfolio companies to comply with these laws or regulations, could have a material adverse effect on our business, results of operations or financial condition of us or our portfolio companies.

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We are subject to changing rules and regulations of federal and state governments, as well as the stock exchange in which our common stock is listed. These entities, including the Public Company Accounting Oversight Board, the SEC and The Nasdaq Global Select Market, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations.
Changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository commercial lenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our operations, including our loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures and other trade practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those in which we currently conduct business, we may have to incur significant expenses in order to comply, or we might have to restrict our operations. In addition, if we do not comply with applicable laws, regulations and decisions, we may lose licenses needed for the conduct of our business and may be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business, results of operations of financial condition.
If we do not invest a sufficient portion of our assets in qualifying assets, we could be precluded from investing in certain assets or could be required to dispose of certain assets, which could have a material adverse effect on our business, financial condition and results of operations.
As a BDC, we are prohibited from acquiring any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. As of December 31, 2019, approximately $160.0 million, or approximately 9.4%, of our adjusted total assets were not “qualifying assets.” If we do not invest a sufficient portion of our assets in qualifying assets, we will be prohibited from investing in additional non-qualifying assets, which could have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inopportune times in order to come into compliance with the 1940 Act. If we need to dispose of these investments quickly, it may be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if a buyer is found, we may have to sell the investments at a substantial loss.
We will be subject to corporate-level U.S. federal income tax on all of our income if we are unable to qualify as a RIC under the Code, which could have a material adverse effect on our financial performance.
Although we are currently qualified as a RIC, no assurance can be given that we will be able to maintain RIC status. To maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to its stockholders, we generally must meet the annual distribution, source-of-income and asset diversification requirements described below. In addition, our Leverage Program prohibits us from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or the Leverage Program.
To qualify as a RIC under the Code, we generally must meet certain source-of-income, asset diversification and annual distribution requirements. The annual distribution requirement for a RIC will generally be satisfied if we distribute at least 90% of our ordinary income and net short-term capital gain in excess of net long-term capital loss, if any, to our stockholders. Since we use debt financing, we are subject to certain asset coverage ratio requirements and other financial covenants under the terms of the Leverage Program, and we are, in some circumstances, also subject to similar requirements under the 1940 Act. The requirements could, under certain circumstances, restrict us from making distributions necessary to qualify as a RIC. If we are unable to obtain cash from other sources, we may fail to qualify as a RIC and, thus, may be subject to corporate-level income tax. To qualify as a RIC, we generally must also meet certain asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because we anticipate that most of our investments will be in private companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses.

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If we fail to qualify as a RIC for any reason and become subject to corporate-level income tax, the resulting corporate-level income taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For U.S. federal income tax purposes, we may include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, or PIK interest, which represents contractual interest added to the loan balance and due in the future, often only at the end of the loan. Such original issue discount, which could be significant relative to our overall investment activities, or increases in loan balances as a result of PIK arrangements are generally included in our taxable income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash. Similarly, newly enacted tax legislation contains rules that may in certain other circumstances require the recognition of non-cash taxable income or may limit the deductibility of certain of our cash expenses.
Since we may recognize taxable income before or without receiving cash representing such income or may be subject to limitations on the deductibility of our income, if we invest to a substantial extent in non-cash paying debt instruments we may have difficulty meeting the tax requirement to distribute at least 90% of our ordinary income and net short-term capital gain in excess of net long-term capital loss, if any, to maintain our status as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements.
There is a risk that you may not receive distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this filing. Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. Additionally, a portion of such distributions may include a return of stockholder capital. Distributions in excess of our current and accumulated earnings and profits are considered nontaxable distributions and serve to reduce the basis of our shares in the hands of the common stockholders rather than being currently taxable. As a result of the reduction of the basis of our shares, common stockholders may incur additional capital gains taxes or may have lower capital losses.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm (when undertaken, as noted below), may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors and lenders to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
We may experience cyber-security incidents and are subject to cyber-security risks.
Our business operations rely upon secure information technology systems for data processing, storage and reporting. Despite careful security and controls design, implementation and updating, our information technology

47






systems could become subject to cyber-attacks. Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended users). Network, system, application and data breaches could result in operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition.
Cyber-security failures or breaches by the Advisor, any sub-adviser(s) and other service providers (including, but not limited to, accountants, custodians, transfer agents and administrators), and the issuers of securities in which we invest, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with our ability to calculate our net asset value, impediments to trading, the inability of our stockholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. While we have established a business continuity plan in the event of, and risk management systems to prevent, such cyberattacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified. Furthermore, we cannot control the cyber security plans and systems put in place by our service providers and issuers in which we invest. We and our stockholders could be negatively impacted as a result.
The failure in cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.
Our business is dependent on our and third parties’ communications and information systems. Further, in the ordinary course of our business we or the Advisor may engage certain third party service providers to provide us with services necessary for our business. Any failure or interruption of those systems or services, including as a result of the termination or suspension of an agreement with any third-party service providers, could cause delays or other problems in our business activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
sudden electrical or telecommunications outages;
natural disasters such as earthquakes, tornadoes and hurricanes;
disease pandemics;

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events arising from local or larger scale political or social matters, including terrorist acts; and
cyber-attacks.
These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.
Risks related to our common stock
Shares of our common stock may trade at a discount to our net asset value per share.
Common stock of BDCs, like that of closed-end investment companies, frequently trades at a discount to current net asset value, which could adversely affect the ability to raise capital. In the past, shares of our common stock have traded at a discount to our net asset value. The risk that shares of our common stock may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline.
If we sell shares of our common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.
The issuance or sale by us of shares of our common stock at a discount to net asset value poses a risk of dilution to our stockholders. In particular, stockholders who do not purchase additional shares of common stock at or below the discounted price in proportion to their current ownership will experience an immediate decrease in net asset value per share (as well as in the aggregate net asset value of their shares of common stock if they do not participate at all). These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we experience in our assets, potential earning power and voting interests from such issuance or sale. In addition, such sales may adversely affect the price at which our common stock trades.
Your interest in us may be diluted if you do not fully acquire your proportionate share of any warrants, options or other rights to subscribe for, convert to, or purchase our common stock that we sell. In addition, in such circumstances, if the price at which we sell such warrants, options or other rights to subscribe for, convert to, or purchase our common stock, together with the exercise price, is less than our net asset value per share, then you will experience dilution of the net asset value of your shares.
We received authority from our stockholders at our 2013 annual meeting to issue warrants, options or other rights to subscribe for, convert to, or purchase shares of our common stock, which may include convertible preferred stock and convertible debentures. In the event we issue warrants, options or other rights to subscribe for, convert into, or purchase our common stock, stockholders who do not exercise such rights will own a smaller proportional interest in us than would otherwise be the case, thereby diluting the proportionate ownership interest and voting power of such stockholder. We cannot state precisely the amount of any such dilution in share ownership or voting power because we have no current intention of making any such offering and do not know at this time the terms or amount of such rights. The amount of dilution that a stockholder will experience could be substantial and the market price and net asset value per share of our common stock could be adversely affected. Our common stockholders will also indirectly bear the expenses associated with any rights offering we may conduct, regardless of whether they elect to exercise any rights.
In addition, if the price at which we sell such warrants, options or other rights to subscribe for, convert to, or purchase our common stock, together with the exercise price, is less than the net asset value per share of our common stock, then our stockholders who do not acquire their proportionate share of such rights will experience dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any such decrease in net asset value is not predictable because it is not known at this time what the price of the warrants, options or other rights to subscribe for, convert into, or purchase our common stock and net asset value per share will be.
Our common stock price may be volatile and may fluctuate substantially.
As with any stock, the price of our common stock will fluctuate with market conditions and other factors. If you sell shares, the price received may be more or less than the original investment. Net asset value will be reduced immediately following our offering by the amount of the sales load and selling expenses paid by us. At our 2019

49






annual meeting of stockholders held on May 30, 2019, our stockholders approved our ability, subject to the condition that the maximum number of shares salable below net asset value pursuant to this authority in any particular offering that could result in such dilution is limited to 25% of our then outstanding common stock immediately prior to each such offering, to sell shares of our common stock at any level of discount from net asset value per share during the 12 month period following the date of the meeting. It should be noted that, theoretically, we may offer up to 25% of our then outstanding common stock each day. We intend to seek stockholder approval at our 2020 annual meeting to continue for an additional year our ability to issue shares of common stock below net asset value, subject to the condition that the maximum number of shares salable below net asset value pursuant to this authority in any particular offering that could result in such dilution is limited to 25% of our then outstanding common stock immediately prior to each such offering. Our common stock is intended for long-term investors and should not be treated as a trading vehicle. Shares of BDCs and closed-end management investment companies, which are structured similarly to us, frequently trade at a discount from their net asset value. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share of common stock may decline. We cannot predict whether our common stock will trade at, above or below net asset value. This risk of loss associated with this characteristic of BDCs and closed-end management investment companies may be greater for investors who sell their shares in a relatively short period of time after completion of an offering.
The market price of our common stock may fluctuate significantly.
The market price and liquidity of the market for our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
significant volatility in the market price and trading volume of securities of BDCs or other companies in the sector in which we operate, which are not necessarily related to the operating performance of these companies;
price and volume fluctuations in the overall stock market from time to time;
changes in law, regulatory policies or tax guidelines, particularly with respect to SBICs, RICs or BDCs;
our loss of RIC status or the SBIC’s loss of SBIC status;
changes in earnings or variations in operating results;
changes in the value of our portfolio of investments;
any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
departure of key personnel from the Advisor;
operating performance of companies comparable to us;
short-selling pressure with respect to shares of our common stock or BDCs generally;
future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities;
uncertainty surrounding the strength of the U.S. economic recovery;
general economic trends and other external factors; and
loss of a major funding source.
Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering we may conduct. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.

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In the event we issue subscription rights, stockholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights offering, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering.
In addition, if the subscription price is less than the net asset value per share of our common stock, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could be substantial.
Terms relating to redemption may materially adversely affect your return on any debt securities that we may issue.
If your debt securities are redeemable at our option, we may choose to redeem your debt securities at times when prevailing interest rates are lower than the interest rate paid on your debt securities. In addition, if your debt securities are subject to mandatory redemption, we may be required to redeem your debt securities also at times when prevailing interest rates are lower than the interest rate paid on your debt securities. In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your debt securities being redeemed.
Our credit ratings may not reflect all risks of an investment in our debt securities.
Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities.

Item 1B.Unresolved Staff Comments
None

Item 2.Properties
We do not own any real estate or other physical properties materially important to our operation. Our executive offices are located at 2951 28th Street Suite 1000, Santa Monica, CA 90405, and are provided by the Advisor in accordance with the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

Item 3.         Legal Proceedings
We and the Advisor are not currently subject to any material pending or threatened legal proceedings against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

Item 4:         Mine Safety Disclosures.
Not applicable.



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Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
Our common stock began trading on April 5, 2012 and is currently traded on The Nasdaq Global Select Market under the symbol “TCPC.” The following table lists the high and low closing sale price for our common stock, the closing sale price as a percentage of net asset value, or NAV, and quarterly distributions per share in each fiscal quarter for the years ended December 31, 2019 and 2018. Our common stock historically has traded at prices both above and below its net asset value. There can be no assurance, however, that such premium or discount ranges, as applicable, to net asset value will be maintained.
       
Premium/
(Discount) of
High Sales
Price to
NAV
(3)
 
Premium/
(Discount) of
Low Sales
Price to
NAV
(3)
 Declared
Dividends
         
   Stock Price   
 
NAV(1)
 
High(2)
 
Low(2)
   
Fiscal year ended December 31, 2019           
First Quarter   
$14.18
 $14.87
 $13.21
 4.9% (6.8)% $0.36
Second Quarter   
13.64
 14.77
 14.05
 8.3% 3.0 % 0.36
Third Quarter   
13.59
 14.32
 13.16
 5.4% (3.2)% 0.36
Fourth Quarter   
13.21
 14.48
 13.15
 9.6% (0.5)% 0.36
            
Fiscal year ended December 31, 2018           
First Quarter$14.90
 $15.46
 $13.75
 3.8% (7.7)% $0.36
Second Quarter14.61
 14.86
 14.11
 1.7% (3.4)% 0.36
Third Quarter14.51
 14.93
 14.20
 2.9% (2.1)% 0.36
Fourth Quarter14.13
 14.49
 12.77
 2.5% (9.6)% 0.36
            
  
(1)NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2)The High/Low Stock Price is calculated as of the closing price on a given day in the applicable quarter.
(3)Calculated as the respective High/Low Stock Price minus the quarter end NAV, divided by the quarter end NAV.
As of February 25, 2020, we had approximately 30,000 beneficial owners whose shares are held in the names of the brokers, dealers and clearing agencies, and we had 25 stockholders of record. On February 25, 2020, the last reported sales price of our common stock was $13.77 per share.
The table below sets forth each class of our outstanding securities as of February 25, 2020.
Title of Class Amount
Authorized
 Amount Held by
Registrant or for
its Account
 Amount
Outstanding
Common Stock   
 200,000,000  58,766,426
Distributions
Our quarterly dividends and distributions to common stockholders are recorded on the ex-dividend date and are determined by our board of directors. Distributions are declared considering our estimate of annual taxable income available for distribution to stockholders and the amount of taxable income carried over from the prior year for

52






distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. Changes in investment results or focus, expense levels and other factors may have an effect on the amount of distributions we pay in the future. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
The following table summarizes the Company’s dividends declared and paid for the year ended December 31, 2019:
Date Declared Record Date Payment Date Type Amount
Per Share
 Total Amount
February 28, 2019 March 15, 2019 March 29, 2019 Regular $0.36
 $21,155,619
May 8, 2019 June 14, 2019 June 28, 2019 Regular 0.36
 21,155,688
August 8, 2019 September 16, 2019 September 30, 2019 Regular 0.36
 21,155,760
November 6, 2019 December 17, 2019 December 31, 2019 Regular 0.36
 21,155,837
        $1.44
 $84,622,904
The following table summarizes the Company’s dividends declared and paid for the year ended December 31, 2018:
Date Declared Record Date Payment Date Type Amount
Per Share
 Total Amount
February 27, 2018 March 16, 2018 March 30, 2018 Regular $0.36
 $21,184,004
May 9, 2018 June 15, 2018 June 29, 2018 Regular 0.36
 21,174,966
August 8, 2018 September 14, 2018 September 28, 2018 Regular 0.36
 21,170,272
November 8, 2018 December 17, 2018 December 31, 2018 Regular 0.36
 21,164,257
        $1.44
 $84,693,499
Tax characteristics of all dividends are reported to stockholders on Form 1099-DIV or Form 1042-S after the end of the calendar year.
We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain favorable RIC tax treatment, we must distribute annually to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of:
98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;
98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of the calendar year; and
certain undistributed amounts from previous years on which we paid no U.S. federal income tax.
We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amounts available to be distributed to our stockholders. We will accrue excise tax on estimated taxable income as required. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
We have adopted an “opt in” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend or other distribution payable in cash, each stockholder that has not “opted in” to our dividend reinvestment plan will receive such dividends in cash, rather than having their dividends automatically reinvested in additional shares of our common stock.

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We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. Also, we may be limited in our ability to make dividends and distributions due to the asset coverage test applicable to us as a BDC under the 1940 Act and due to provisions in our existing and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as PIK interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC and may be subject to an excise tax.
In order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion can be as low as 10% for dividends paid with respect to any taxable year) and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG BLACKROCK TCP CAPITAL CORP.,
S&P 500 TOTAL RETURN INDEX AND WELLS FARGO BUSINESS DEVELOPMENT COMPANY INDEX
Total Return Performance
graph3.jpg
  
NOTES:Assumes $100 invested April 4, 2012 in BlackRock TCP Capital Corp., the S&P 500 Total Return Index, the S&P LSTA Leveraged Loan Index and the Wells Fargo Business Development Company Index. Assumes all dividends are reinvested on the respective dividend payment dates without commissions.



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Item 6.Selected Financial Data
The selected consolidated financial and other data below reflects the consolidated historical operations of the Company.
The selected consolidated financial data below for the years ended December 31, 2019, 2018, 2017, 2016, and 2015 have been derived from the consolidated financial statements that were audited by our independent registered public accounting firm. The following selected financial data should be read in conjunction with our financial statements and related notes thereto.
 Fiscal Year Ended December 31,
 2019 2018 2017 2016 2015 
Performance Data:          
Interest income$191,584,009
 $189,147,814
 $173,527,345
 $145,018,414
 $142,012,553
 
Dividend income2,392,274
 750,714
 254,025
 
 
 
Lease income297,827
 297,827
 294,366
 1,571,280
 1,352,797
 
Other income891,805
 302,829
 1,893,764
 1,591,071
 3,502,875
 
Total investment income195,165,915
 190,499,184
 175,969,500
 148,180,765
 146,868,225
 
Interest and other debt expenses46,398,795
 40,468,761
 33,091,143
 25,192,990
 18,895,977
 
Management and advisory fees24,860,910
 24,179,376
 21,560,868
 18,881,786
 18,593,660
 
Incentive fee20,307,759
 23,346,164
 N/A
*N/A
*N/A
*
Other expenses8,740,358
 9,027,528
 7,879,489
 8,283,156
 7,999,070
 
Total expenses100,307,822
 97,021,829
 62,531,500
 52,357,932
 45,488,707
 
Net investment income before taxes94,858,093
 93,477,355
 113,438,000
 95,822,833
 101,379,518
 
Excise tax expense
 92,700
 36,380
 569,511
 876,706
 
Net investment income94,858,093
 93,384,655
 113,401,620
 95,253,322
 100,502,812
 
Net realized and unrealized gains (losses)(64,277,304) (47,908,773) (22,790,283) 114,502
 (22,405,111) 
Gain on repurchase of Series A preferred interests
 
 
 
 1,675,000
 
Dividends to preferred interest holders
 
 
 
 (754,140) 
Incentive allocation N/A
* N/A
*(22,680,323) (19,050,665) (19,949,734) 
Net increase in net assets applicable to common shareholders resulting from operations$30,580,789
 $45,475,882
 $67,931,014
 $76,317,159
 $59,068,827
 
Per Share Data (at the end of the period):          
Net increase in net assets from operations$0.52
 $0.77
 $1.19
 $1.50
 $1.21
 
Distributions declared per share(1.44) (1.44) (1.44) (1.44) (1.44) 
Average weighted shares outstanding for the period58,766,362
 58,815,216
 57,000,658
 50,948,035
 48,863,188
 
Assets and Liabilities Data:          
Investments$1,649,506,895
 $1,597,285,790
 $1,514,532,703
 $1,314,969,870
 $1,182,919,725
 
Other assets72,562,301
 62,249,899
 114,889,665
 72,628,591
 56,193,226
 
Total assets1,722,069,196
 1,659,535,689
 1,629,422,368
 1,387,598,461
 1,239,112,951
 
Debt, net of unamortized issuance costs907,802,387
 805,202,192
 725,200,281
 571,658,862
 498,205,471
 
Other liabilities37,948,423
 23,858,770
 33,493,961
 25,003,608
 18,930,463
 
Total liabilities945,750,810
 829,060,962
 758,694,242
 596,662,470
 517,135,934
 
Net assets$776,318,386
 $830,474,727
 $870,728,126
 $790,935,991
 $721,977,017
 
Investment Activity Data:          
No. of portfolio companies at period end105
 95
 96
 90
 88
 
Acquisitions$700,024,114
 $634,002,472
 $865,427,957
 $587,219,129
 $500,928,009
 
Sales, repayments, and other disposals$596,374,086
 $512,795,715
 $655,674,365
 $473,457,512
 $456,059,137
 
Weighted-average effective yield of debt portfolio at end of period10.3% 11.4% 11.0% 10.9% 11.0% 

* Prior to January 1, 2018, Incentive fees were reflected as Incentive allocation and distribution to the General Partner.


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Item 7.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with our audited consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or the future performance or financial condition of BlackRock TCP Capital Corp. (the “Company,” “we,” “us” or “our”), formerly known as TCP Capital Corp. The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

our, or our portfolio companies’, future business, operations, operating results or prospects;

the return or impact of current and future investments;

the impact of a protracted decline in the liquidity of credit markets on our business;

the impact of fluctuations in interest rates on our business;

the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;

our contractual arrangements and relationships with third parties;

the general economy and its impact on the industries in which we invest;

the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

our expected financings and investments;

the adequacy of our financing resources and working capital;

the ability of our investment advisor to locate suitable investments for us and to monitor and administer our investments;

the timing of cash flows, if any, from the operations of our portfolio companies;

the timing, form and amount of any dividend distributions; and

our ability to maintain our qualification as a regulated investment company and as a business development company.

We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward looking statements contained in this annual report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in this report.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.


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Overview

The Company is a Delaware corporation formed on April 2, 2012 and is an externally managed, closed-end, non-diversified management investment company. The Company was formed through the conversion of a pre-existing closed-end investment company. The Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We invest primarily in the debt of middle-market companies as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, we may make equity investments directly. Certain investment operations are conducted through the Company’s wholly-owned subsidiaries, Special Value Continuation Partners LLC, a Delaware limited liability company (“SVCP”), TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). SVCP was organized as a limited partnership and had elected to be regulated as a BDC under the 1940 Act through July 31, 2018. On August 1, 2018, SVCP withdrew its election to be regulated as a BDC under the 1940 Act and withdrew the registration of its common limited partner interests under Section 12(g) of the Securities Exchange Act of 1934 and, on August 2, 2018, terminated its general partner, Series H of SVOF/MM, LLC, and converted to a Delaware limited liability company. Series H of SVOF/MM, LLC (“SVOF/MM”) serves as the administrator (the “Administrator”) of the Company. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Company, TCPC Funding and the SBIC. On August 1, 2018, the Advisor merged with and into a wholly-owned subsidiary of BlackRock Capital Investment Advisors, LLC, an indirect wholly-owned subsidiary of BlackRock, Inc. with the Advisor as the surviving entity. The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. TCPC Funding and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes. SVCP was treated as a partnership for U.S. federal income tax purposes through August 1, 2018 and upon its conversion to a limited liability company on August 2, 2018, and thereafter is and will be treated as a disregarded entity.

Our leverage program is comprised of $270.0 million in available debt under a revolving, multi-currency credit facility issued by SVCP (the “SVCP Facility”), $300.0 million in available debt under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”), $140.0 million in convertible senior unsecured notes issued by the Company maturing in 2022 (the “2022 Convertible Notes”), $175.0 million in senior unsecured notes issued by the Company maturing in 2022 (the “2022 Notes”), $200.0 million in senior unsecured notes issued by the Company maturing in 2024 (the “2024 Notes”) and $150.0 million in committed leverage from the SBA (the “SBA Program” and, together with the SVCP Facility, the TCPC Funding Facility, the 2022 Convertible Notes, the 2022 Notes and the 2024 Notes, the “Leverage Program”). Prior to being replaced by the SVCP Facility on February 26, 2018, leverage included $116.0 million in available debt under a senior secured revolving credit facility issued by SVCP (the “SVCP 2018 Facility”). Prior to its maturity on December 15, 2019, leverage also included convertible senior unsecured notes due December 2019 issued by the Company (the “2019 Convertible Notes”).

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Internal Revenue Code of 1986, as amended, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.





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Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250.0 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of December 31, 2019, 90.7% of our total assets were invested in qualifying assets.

Revenues

We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests, capital gains on the disposition of investments, and certain lease, fee, and other income. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, end-of-term or exit fees, fees for providing significant managerial assistance, consulting fees and other investment related income.

Expenses

Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with the Administrator provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions (and the Company’s common stockholders indirectly bear all of the costs and expenses of the Company, SVCP, TCPC Funding and the SBIC), which may include those relating to:

our organization;

calculating our net asset value (including the cost and expenses of any independent valuation firms);

interest payable on debt, if any, incurred to finance our investments;

costs of future offerings of our common stock and other securities, if any;

the base management fee and any incentive compensation;


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dividends and distributions on our preferred shares, if any, and common shares;

administration fees payable under the administration agreement;

fees payable to third parties relating to, or associated with, making investments;

transfer agent and custodial fees;

registration fees;

listing fees;

taxes;

director fees and expenses;

costs of preparing and filing reports or other documents with the SEC;

costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

our fidelity bond;

directors and officers/errors and omissions liability insurance, and any other insurance premiums;

indemnification payments;

direct costs and expenses of administration, including audit and legal costs; and

all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.

The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears; provided, however, that, effective as of February 9, 2019, the base management fee is calculated at an annual rate of 1.0% of our total assets (excluding cash and cash equivalents) that exceed an amount equal to 200% of the net asset value of the Company. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets and net asset value (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

Additionally, the investment management agreement provides that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. According to the terms of such agreement, no incentive compensation was incurred prior to January 1, 2013. Under the current investment management agreement, dated February 9, 2019, the incentive compensation equals the sum of (1) 20% of all ordinary income since January 1, 2013 through February 8, 2019 and 17.5% thereafter and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013 through February 8, 2019 and 17.5% thereafter, less ordinary income incentive compensation and capital gains incentive compensation previously paid. However, incentive compensation will only be paid to the extent the cumulative total return of the Company after incentive compensation and including such payment would equal or exceed a 7% annual return on daily weighted-average contributed common equity. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.

Through December 31, 2017, the incentive compensation was an equity allocation to SVCP’s general partner under the LPA. Effective as of January 1, 2018, the LPA was amended to remove the incentive compensation

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distribution provisions therein, and the incentive compensation became payable as a fee to the Advisor pursuant to the then-existing investment management agreements. The amendment had no impact on the amount of the incentive compensation paid or services received by the Company.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.

Valuation of portfolio investments

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with original maturities of generally three months or less are valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.

The valuation process approved by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors.


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Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor.

The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm.

The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors.

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing one or more methodologies, including the market approach, the income approach, or in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.

When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

Our investments may be categorized based on the types of inputs used in their valuation. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Investments are classified by GAAP into the three broad levels as follows:

Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.

Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.

Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

As of December 31, 2019, none of our investments were categorized as Level 1, 8.3% were categorized as Level 2, 91.6% were Level 3 investments valued based on valuations by independent third party sources, and 0.1% were Level 3 investments valued based on valuations by the Advisor.


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As of December 31, 2018, 0.1% of our investments were categorized as Level 1, 4.2% were categorized as Level 2, 95.6% were Level 3 investments valued based on valuations by independent third party sources, and 0.1% were Level 3 investments valued based on valuations by the Advisor.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.

Revenue recognition

Interest and dividend income, including income paid in kind, is recorded on an accrual basis, when such amounts are considered collectible. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.

Certain of our debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

Net realized gains or losses and net change in unrealized appreciation or depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Portfolio and investment activity

During the year ended December 31, 2019, we invested approximately $700.0 million, comprised of new investments in 25 new and 20 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 94.0% were in senior secured debt comprised of senior secured loans ($643.0 million, or 91.9% of total acquisitions) and senior secured notes ($15.0 million, or 2.1% of total acquisitions). The remaining $42.0 million (6.0% of total acquisitions) was comprised primarily of $5.0 million(0.7% of total acquisitions) in unsecured notes and $37.0 million (5.3% of total acquisitions) in equity investments comprised primarily of $31.6 million in equity interests in portfolios of debt and lease assets and $5.4 million inequity positions received in connection with debt investments. Additionally, we received approximately $596.4 million in proceeds from sales or repayments of investments during the year ended December 31, 2019.

During the year ended December 31, 2018, we invested approximately $634.0 million, comprised of new investments in 26 new and 22 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 95.0% were in senior secured debt comprised of senior secured loans ($561.4 million, or 88.5% of total acquisitions) and senior secured notes ($41.1 million, or 6.5% of total acquisitions). The remaining $31.5 million (5.0% of total acquisitions) were comprised primarily of $20.9 million in equity interests in a portfolio of debt assets, $7.0 million in equity interests in a portfolio of lease assets, and $3.6 million in equity positions received in connection with debt investments. Additionally, we received approximately $512.8 million in proceeds from sales or repayments of investments during the year ended December 31, 2018.

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At December 31, 2019, our investment portfolio of $1,649.5 million (at fair value) consisted of 105 portfolio companies and was invested 93.1% in debt investments, primarily in senior secured debt. In aggregate, our investment portfolio was invested 86.6% in senior secured loans, 5.2% in senior secured notes, 1.3% in junior notes and 6.9% in equity investments. Our average portfolio company investment at fair value was approximately $15.7 million. Our largest portfolio company investment by value was approximately 4.4% of our portfolio and our five largest portfolio company investments by value comprised approximately 17.2% of our portfolio at December 31, 2019.
    
At December 31, 2018, our investment portfolio of $1,597.3 million (at fair value) consisted of 95 portfolio companies and was invested 94.9% in debt investments, primarily in senior secured debt. In aggregate, our investment portfolio was invested 87.3% in senior secured loans, 4.9% in senior secured notes, 2.7% in junior notes and 5.1% in equity investments. Our average portfolio company investment at fair value was approximately $16.8 million. Our largest portfolio company investment by value was approximately 3.3% of our portfolio and our five largest portfolio company investments by value comprised approximately 15.5% of our portfolio at December 31, 2018.

During 2019, we transitioned our industry classification system for financial reporting purposes to more closely align with the system generally used by the Advisor for portfolio management purposes. As part of this transition, we are generally classifying the industries of our portfolio companies based on the primary end market served rather than the product or service directed to those end markets.

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The industry composition of our portfolio at fair value at December 31, 2019 was as follows:
Industry 
Percent of Total
Investments
Diversified Financial Services 11.8%
Internet Software and Services 11.2%
Textiles, Apparel and Luxury Goods 6.9%
Professional Services 6.8%
Software 6.4%
Media 4.9%
Diversified Consumer Services 4.6%
Automobiles 4.3%
Diversified Telecommunication Services 3.8%
IT Services 3.8%
Airlines 3.3%
Insurance 3.0%
Hotels, Restaurants and Leisure 2.7%
Consumer Finance 2.6%
Building Products 2.2%
Health Care Technology 2.2%
Energy Equipment and Services 1.8%
Thrifts and Mortgage Finance 1.7%
Commercial Services and Supplies 1.7%
Tobacco Related 1.6%
Aerospace and Defense 1.5%
Pharmaceuticals 1.5%
Capital Markets 1.3%
Road and Rail 1.1%
Electrical Equipment 1.0%
Other 6.3%
Total 100.0%

The weighted average effective yield of our debt portfolio was 10.3% at December 31, 2019 and 11.4% at December 31, 2018. The weighted average effective yield of our total portfolio was 9.7% at December 31, 2019 and 10.9% at December 31, 2018. At December 31, 2019, 92.1% of debt investments in our portfolio bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 7.9% bore interest at fixed rates. The percentage of floating rate debt investments in our portfolio that were subject to an interest rate floor was 63.5% at December 31, 2019. At December 31, 2018, 92.7% of debt investments in our portfolio bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 7.3% bore interest at fixed rates. The percentage of floating rate debt investments in our portfolio that were subject to an interest rate floor was 65.1% at December 31, 2018.


Results of operations

Investment income

Investment income totaled $195.2 million, $190.5 million and $176.0 million, respectively, for the years ended December 31, 2019, 2018 and 2017, of which $191.6 million, $189.1 million and $173.5 million were attributable to interest and fees on our debt investments, $2.4 million, $0.8 million and $0.3 million to dividend

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income, $0.3 million, $0.3 million and $0.3 million to lease income and $0.9 million, $0.3 million and $1.9 million to other income, respectively. Included in interest and fees on our debt investments were $11.9 million, $9.8 million and $18.6 million of non-recurring income related to prepayments for the years ended December 31, 2019, 2018 and 2017, respectively. The increase in investment income in the year ended December 31, 2019 compared to the year ended December 31, 2018 reflects an increase in interest income due to the larger portfolio size in addition to the increase in dividend, prepayment and other income during the year ended December 31, 2019 compared to the year ended December 31, 2018. The increase in investment income in the year ended December 31, 2018 compared to the year ended December 31, 2017 reflects an increase in interest income due to the larger portfolio size and the impact of higher LIBOR during the year ended December 31, 2018 compared to the year ended December 31, 2017, partially offset by a decrease in prepayment income.

Expenses

Total operating expenses for the years ended December 31, 2019, 2018 and 2017 were $100.3 million, $97.0 million and $62.5 million, respectively, comprised of $46.4 million, $40.5 million and $33.1 million in interest expense and related fees, $24.9 million, $24.2 million and $21.6 million in base management and advisory fees, $20.3 million, $23.3 million and $0.0 million in incentive fee expense, $2.3 million, $2.4 million and $2.3 million in administrative expenses, $1.8 million, $2.3 million and $1.5 million in legal and professional fees, and $4.6 million, $4.3 million and $4.0 million in other expenses, respectively. The increase in expenses in the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily reflects the higher interest expense and other costs related to the increase in outstanding debt, partially offset by the lower incentive fees due to reduction in the incentive fee rate from 20.0% to 17.5% on February 9, 2019. The increase in expenses in the year ended December 31, 2018 compared to the year ended December 31, 2017 primarily reflects the inclusion of incentive fees within operating expenses during the year ended December 31, 2018 instead of being reflected as an allocation and distribution to SVCP's general partner during the year ended December 31, 2017. The increase in expenses also includes higher interest expense and other costs related to the increase in outstanding debt, the higher average interest rate following the issuance of the 2022 Notes and the higher LIBOR during the period, as well as the increase in management fees due to the increase in assets in the year ended December 31, 2018 compared to the year ended December 31, 2017.

Net investment income

Net investment income was $94.9 million, $93.4 million and $113.4 million, respectively, for the years ended December 31, 2019, 2018 and 2017. The increase in net investment income in the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily reflects the increase in total investment income, partially offset by the increase in expenses in the year ended December 31, 2019. The decrease in net investment income in the year ended December 31, 2018 compared to the year ended December 31, 2017 primarily reflects the increase in expenses (primarily due to the inclusion of incentive fees beginning January 1, 2018), partially offset by the increase in investment income in the year ended December 31, 2018.

Net realized and unrealized gain or loss

Net realized loss for the years ended December 31, 2019, 2018 and 2017 was $76.6 million, $28.8 million and $20.7 million, respectively. Net realized loss for the year ended December 31, 2019 was comprised primarily of $56.6 million on the restructuring of our investment in Fidelis and $20.5 million on the disposition of our investment in Green Biologics. Both Fidelis and Green Biologics had generated significant income prior to their dispositions.

Net realized losses during the year ended December 31, 2018 were comprised primarily of a $25.8 million loss realization on the disposition of our loan to RM OpCo, LLC ("Real Mex") and a $4.1 million loss realization on the disposition of our loan to Globecomm Systems, Inc. ("Globecomm"). Our loan to Real Mex was part of our legacy pre-IPO strategy. Both Globecomm and Real Mex had generated significant income prior to their dispositions.


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Net realized losses during the year ended December 31, 2017 were comprised primarily of a $10.1 million loss realization on the restructuring of our loan to Iracore International, Inc., a $7.1 million loss realization on the restructuring of our loan to Globecomm Systems, Inc., and a $3.5 million loss realization on the restructuring of our loan to Avanti Communications Group. The realized losses for all of these investments were triggered in connection with recapitalizations of these investments. These realized losses were partially offset by a $7.0 million gain on the sale of our equity in Blackline.
For the years ended December 31, 2019, 2018 and 2017, the change in net unrealized appreciation/
depreciation was $12.3 million, $(19.1) million and $(2.1) million, respectively. The change in net unrealized appreciation/depreciation for the year ended December 31, 2019 was comprised primarily of a gain of $13.4 million on our investment in Edmentum, a gain of $6.3 million on our investment in 36th Street, and reversals of previously recognized unrealized losses of $14.9 million from Green Biologics and $3.5 million from Fidelis, partially offset by markdowns of $12.5 million on our investment in Securus and $7.7 million on our investment in AGY. The change in net unrealized appreciation/depreciation for the year ended December 31, 2018 was comprised primarily of markdowns of $10.0 million, $9.4 million and $8.5 million on our investments in AGY, Kawa Solar and Green Biologics, respectively, as well as mark downs across the portfolio as a result of wider spreads, partially offset by the reversal of previously unrealized losses of $15.3 million from the disposition of our loan to Real Mex. The change in net unrealized appreciation/depreciation for the year ended December 31, 2017 was comprised primarily of markdowns of $9.0 million and $7.1 million on Kawa Solar and Real Mex, respectively, partially offset by a $6.4 million gain on AGY and the reversal of previously recognized unrealized gains and losses.

Incentive compensation

The decrease in incentive compensation for the year ended December 31, 2019 compared to the year ended December 31, 2018 was due to the reduction in the incentive fee rate from 20.0% to 17.5% on February 9, 2019. Beginning January 1, 2018, incentive compensation is paid to the Advisor as a fee and included in operating expenses in the Statement of Operations rather than as an allocation and distribution to SVCP's general partner within the Statement of Operations. Incentive compensation included in operating expenses for the year ended December 31, 2019 and 2018 and as an allocation and distribution to SVCP's general partner for the years ended December 31, 2017 was $20.3 million, $23.4 million and $22.7 million, respectively. Incentive compensation for the years ended December 31, 2019, 2018 and 2017 was paid due to our performance exceeding the total return threshold.

Income tax expense, including excise tax

The Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code (the "Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. The Company has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Company from U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income. Any excise tax expense is recorded at year end as such amounts are known. For the years ended December 31, 2019, 2018 and 2017, excise tax expenses of $0.0 million, $0.1 million and $0.1 million were recorded, respectively, based on the amount of tax-basis ordinary income carried forward at the respective year-end.

Net increase in net assets resulting from operations

The net increase in net assets applicable to common shareholders resulting from operations was $30.6 million, $45.5 million and $67.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. The lower net increase in net assets resulting from operations during the year ended December 31, 2019 was primarily

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due to the higher net realized and unrealized loss during the year ended December 31, 2019 compared to the year ended December 31, 2018, partially offset by the increase in net investment income. The lower net increase in net assets applicable to common shareholders resulting from operations during the year ended December 31, 2018 was primarily due to the larger net realized and unrealized loss during the year ended December 31, 2018 compared to the year ended December 31, 2017.

Liquidity and capital resources

Since our inception, our liquidity and capital resources have been generated primarily through the initial private placement of common shares of Special Value Continuation Fund, LLC (the predecessor entity) which were subsequently converted to common stock of the Company, the net proceeds from the initial and secondary public offerings of our common stock, amounts outstanding under our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.

The following table summarizes the total shares issued and proceeds received in connection with the Company’s dividend reinvestment plan for the years ended December 31, 2019 and 2018:
 2019 2018
Shares Issued819
 767
Average Price Per Share$13.98
 $13.94
Proceeds$11,453
 $10,693

On February 24, 2015, the Company’s board of directors approved a stock repurchase plan (the “Company Repurchase Plan”) to acquire up to $50.0 million in the aggregate of the Company’s common stock at prices at certain thresholds below the Company’s net asset value per share, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. The Company Repurchase Plan is designed to allow the Company to repurchase its common stock at times when it otherwise might be prevented from doing so under insider trading laws. The Company Repurchase Plan requires an agent selected by the Company to repurchase shares of common stock on the Company’s behalf if and when the market price per share is at certain thresholds below the most recently reported net asset value per share. Under the plan, the agent will increase the volume of purchases made if the price of the Company’s common stock declines, subject to volume restrictions. The timing and amount of any stock repurchased depends on the terms and conditions of the Company Repurchase Plan, the market price of the common stock and trading volumes, and no assurance can be given that any particular amount of common stock will be repurchased. The Company Repurchase Plan was re-approved on February 20, 2020, to be in effect through the earlier of two trading days after our first quarter 2020 earnings release, unless further extended or terminated by our board of directors, or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions. The following table summarizes the total shares repurchased and amounts paid by the Company under the Company Repurchase Plan, including broker fees, for the years ended December 31, 2019 and 2018:

 2019 2018
Shares Repurchased9,000
 73,416
Price Per Share *$13.96
 $14.25
Total Cost$125,679
 $1,046,475
______________
*Weighted-average price per share
 

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Total leverage outstanding and available under the combined Leverage Program at December 31, 2019 were as follows:
 Maturity Rate Carrying Value* Available Total
Capacity
 
SVCP Facility2023 L+2.00%
 
$108,497,620
 $161,502,380
 $270,000,000
 
TCPC Funding Facility2023 L+2.00%
 
158,000,000
 142,000,000
 300,000,000
 
SBA Debentures 2024−2029 2.63%
§ 
138,000,000
 12,000,000
 150,000,000
 
2022 Convertible Notes ($140 million par)2022 4.625% 138,584,313
 
 138,584,313
 
2022 Notes ($175 million par)2022 4.125% 174,649,566
 
 174,649,566
 
2024 Notes ($200 million par)2024 3.900% 197,782,572
 
 197,782,572
 
Total leverage    915,514,071
 $315,502,380
 $1,231,016,451
 
Unamortized issuance costs    (7,711,684)     
Debt, net of unamortized issuance costs    $907,802,387
     
______________
*
Except for the convertible notes, the 2022 Notes and the 2024 Notes, all carrying values are the same as the principal amounts outstanding.
As of December 31, 2019, $8.3 million of the outstanding amount bore interest at a rate of EURIBOR + 2.00%
Subject to certain funding requirements
§Weighted-average interest rate, excluding fees of 0.36% or 0.35%
 
Under Section 61(a) of the 1940 Act, prior to March 23, 2018, a BDC was generally not permitted to issue senior securities unless after giving effect thereto the BDC met a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which includes all borrowings of the BDC, of at least 200%. On March 23, 2018, the Small Business Credit Availability Act (“SBCAA”) was signed into law, which among other things, amended Section 61(a) of the 1940 Act to add a new Section 61(a)(2) that reduces the asset coverage requirement applicable to BDCs from 200% to 150% so long as the BDC meets certain disclosure requirements and obtains certain approvals. The reduced asset coverage requirement would permit a BDC to have a ratio of total consolidated assets to outstanding indebtedness of 2:1 as compared to a maximum of 1:1 under the 200% asset coverage requirement.

Effective November 7, 2018, the Company’s board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of our board of directors, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA (the “Asset Coverage Ratio Election”), which would have resulted (had the Company not received earlier stockholder approval) in our asset coverage requirement applicable to senior securities being reduced from 200% to 150%, effective on November 7, 2019. On February 8, 2019, the stockholders of the Company approved the Asset Coverage Ratio Election, and, as a result, effective on February 9, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of December 31, 2019, the Company’s asset coverage ratio was 199%.

On July 13, 2015, we obtained exemptive relief from the SEC to permit us to exclude debt outstanding under the SBA Debentures from our asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 150% asset coverage test by permitting the SBIC to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.

Net cash provided by operating activities during the year ended December 31, 2019 was $4.7 million. Our primary source of cash from operating activities during this period consisted of net investment income (net of non-cash income and expenses) of approximately $94.6 million, partially offset by settlement of acquisitions of investments (net of dispositions) of $89.9 million.

Net cash provided by financing activities was $12.2 million during the year ended December 31, 2019, consisting primarily of $197.6 million from net proceeds of issuance of debt and $12.5 million of net borrowings of

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debt, reduced by $108.0 million in repayments of convertible debt, $84.6 million in regular dividends paid on common equity, $5.2 million payment of debt issuance costs and $0.1 million in repurchases of common shares.

At December 31, 2019, we had $44.8 million in cash and cash equivalents.

The SVCP Facility and the TCPC Funding Facility are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 150% of total assets (less total liabilities other than indebtedness) to total indebtedness, and restrictions on certain payments and issuance of debt. Unfavorable economic conditions may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the SVCP Facility and the TCPC Funding Facility, and may therefore impact our ability to borrow under the SVCP Facility and the TCPC Funding Facility. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment of debt, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At December 31, 2019, we were in compliance with all financial and operational covenants required by the Leverage Program.

Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The 2022 Convertible Notes, the 2022 Notes, the SVCP Facility, the TCPC Funding Facility and the 2024 Notes, mature in March 2022, August 2022, May 2023, May 2023 and August 2024, respectively. Any inability to renew, extend or replace the Leverage Program could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

Challenges in the market are intensified for us by certain regulatory limitations under the Code and the 1940 Act. To maintain our qualification as a RIC, we must satisfy, among other requirements, an annual distribution requirement to pay out at least 90% of our ordinary income and short-term capital gains to our stockholders. Because we are required to distribute our income in this manner, and because the illiquidity of many of our investments may make it difficult for us to finance new investments through the sale of current investments, our ability to make new investments is highly dependent upon external financing. While we anticipate being able to continue to satisfy all covenants and repay the outstanding balances under the Leverage Program when due, there can be no assurance that we will be able to do so, which could lead to an event of default.

Contractual obligations

In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement are equal to a percentage of the value of our total assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records,

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indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.

Distributions

Our quarterly dividends and distributions to common stockholders are recorded on the ex-dividend date. Distributions are declared considering our estimate of annual taxable income available for distribution to stockholders and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

The following tables summarize dividends declared for the years ended December 31, 2019 and 2018:
Date Declared Record Date Payment Date Type 
Amount
Per Share
 Total Amount
February 28, 2019 March 15, 2019 March 29, 2019 Regular $0.36
 $21,155,619
May 8, 2019 June 14, 2019 June 28, 2019 Regular 0.36
 21,155,688
August 8, 2019 September 16, 2019 September 30, 2019 Regular 0.36
 21,155,760
November 6, 2019 December 17, 2019 December 31, 2019 Regular 0.36
 21,155,837
        $1.44
 $84,622,904

Date Declared Record Date Payment Date Type Amount Per Share Total Amount
February 27, 2018 March 16, 2018 March 30, 2018 Regular $0.36
 $21,184,004
May 9, 2018 June 15, 2018 June 29, 2018 Regular 0.36
 21,174,966
August 8, 2018 September 14, 2018 September 28, 2018 Regular 0.36
 21,170,272
November 8, 2018 December 17, 2018 December 31, 2018 Regular 0.36
 21,164,257
        $1.44
 $84,693,499

The following table summarizes the total shares issued in connection with our dividend reinvestment plan for the years ended December 31, 2019 and 2018:
 2019 2018
Shares Issued819
 767
Average Price Per Share$13.98
 $13.94
Proceeds$11,453
 $10,693
 
We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain favorable RIC tax treatment, we must distribute annually to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of:

98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;


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98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of the calendar year; and

certain undistributed amounts from previous years on which we paid no U.S. federal income tax.

We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amounts available to be distributed to our stockholders. We will accrue excise tax on estimated taxable income as required. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

We have adopted an “opt in” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend or other distribution payable in cash, each stockholder that has not “opted in” to our dividend reinvestment plan will receive such dividends in cash, rather than having their dividends automatically reinvested in additional shares of our common stock.

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. Also, we may be limited in our ability to make dividends and distributions due to the asset coverage test applicable to us as a BDC under the 1940 Act and due to provisions in our existing and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as PIK interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC and may be subject to an excise tax.

In order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes.

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

Each of the Company, TCPC Funding, and the SBIC has entered into an investment management agreement with the Advisor.

The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance. The Administrator is an affiliate of the Advisor and certain other series and classes of SVOF/MM, LLC serve as the general partner or managing member of certain other funds managed by the Advisor.

We have entered into a royalty-free license agreement with BlackRock and the Advisor, pursuant to which each of BlackRock and the Advisor has agreed to grant us a non-exclusive, royalty-free license to use the name "BlackRock" and "TCP."

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The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.

Recent Developments

From January 1, 2020 through February 25, 2020, the Company has invested approximately $65.9 million primarily in three senior secured loans with a combined effective yield of approximately 9.5%.

On January 31, 2020, Fitch Ratings initiated an investment grade rating of BBB-, with stable outlook. The Company continues to be investment grade rated by both Moody’s Investor Service and S&P Global Ratings.
    
On February 20, 2020, the Company’s board of directors re-approved the Company Repurchase Plan, to be in effect through the earlier of two trading days after the Company’s first quarter 2020 earnings release or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions.
        
On February 26, 2020, the Company’s board of directors declared a first quarter regular dividend of $0.36 per share payable on March 31, 2020 to stockholders of record as of the close of business on March 17, 2020.



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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. At December 31, 2019, 92.1% of debt investments in our portfolio bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At December 31, 2019, the percentage of floating rate debt investments in our portfolio that were subject to an interest rate floor was 63.5%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our December 31, 2019 balance sheet, the following table shows the annual impact on net investment income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments and the fact that our assets and liabilities may not have the same base rate period as assumed in this table) assuming no changes in our investment and borrowing structure:

Basis Point Change Interest income Interest Expense Net Investment Income
Up 300 basis points $45,316,285
 $(7,992,609) $37,323,676
Up 200 basis points 30,210,857
 (5,328,406) 24,882,451
Up 100 basis points 15,105,428
 (2,664,203) 12,441,225
Down 100 basis points (12,663,801) 2,664,203
 (9,999,598)
Down 200 basis points (18,047,994) 5,095,022
 (12,952,972)
Down 300 basis points (18,155,928) 5,095,022
 (13,060,906)


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Item 8.Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of BlackRock TCP Capital Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of BlackRock TCP Capital Corp. and subsidiaries (the "Company"), including the consolidated schedules of investments, as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period then ended, financial highlights (in Note 10) for each of the five years in the period then ended, and the related notes and consolidating schedules and statements listed in Index at Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period then ended, and financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2019 and 2018, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to an account or disclosure that is material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

75






Investment Valuation - Level 3 Investments - Refer to Note 2 to the financial statements
Critical Audit Matter Description
The Company held investments classified as Level 3 investments under accounting principles generally accepted in the United States of America. These investments included bank debt, other corporate debt, and equity, which are valued based on quotations or other affirmative pricing from independent third-party sources, or priced directly by Tennenbaum Capital Partners, LLC (the “Advisor”), each of which was determined using quotes and other observable market data to the extent such data are available, but which also required the use of one or more unobservable inputs significant to the valuation taken as a whole. Fair valuations of investments in each asset class are determined using one or more methodologies including market quotations, the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The fair value of the Company’s Level 3 investments was $1,512,767,659 as of December 31, 2019.
We identified the valuation of Level 3 investments as a critical audit matter because of the judgments necessary for management to select valuation methodologies and to select significant unobservable inputs to estimate the fair value. This required a high degree of audit judgement and increased effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise, to audit and evaluate the appropriateness of these models and unobservable inputs.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation methodologies and unobservable inputs used by management to estimate the fair value of Level 3 investments included the following, among others:
We tested the effectiveness of controls over management’s valuation of Level 3 investments, including those related to selection of valuation methodologies and significant unobservable inputs.
We evaluated the appropriateness of the selected valuation methodologies used for Level 3 investments and tested the related significant unobservable inputs by comparing these inputs to external sources. We evaluated the reasonableness of any significant changes in valuation methodologies or significant unobservable inputs for those investments from the prior year-end. For selected investments, we used the assistance of our fair value specialists.
For selected investments, with the assistance of our fair value specialists, we developed an independent estimate of the fair value and compared our estimate to management’s estimate.
We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable.

/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
February 26, 2020

We have served as the Company’s auditor since 2015.







76






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of BlackRock TCP Capital Corp.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of BlackRock TCP Capital Corp. and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company and our report dated February 26, 2020, expressed an unqualified opinion on those financial statements.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
February 26, 2020


77






BlackRock TCP Capital Corp.

Consolidated Statements of Assets and Liabilities 
 December 31, 2019 December 31, 2018
 
  
Assets   
Investments, at fair value:   
Companies less than 5% owned (cost of $1,483,508,500 and $1,460,936,257, respectively)$1,474,318,011
 $1,463,800,744
Companies 5% to 25% owned (cost of $70,112,667 and $78,353,253, respectively)75,880,291
 63,193,357
Companies more than 25% owned (cost of $135,655,840 and $110,258,458, respectively)99,308,593
 70,291,689
Total investments (cost of $1,689,277,007 and $1,649,547,968, respectively)1,649,506,895
 1,597,285,790
    
Cash and cash equivalents44,848,539
 27,920,402
Accrued interest income:   
Companies less than 5% owned16,937,339
 20,898,838
Companies 5% to 25% owned665,165
 678,057
Companies more than 25% owned305,721
 124,009
Deferred debt issuance costs5,476,382
 4,843,985
Receivable for investments sold1,316,667
 
Prepaid expenses and other assets3,012,488
 7,784,608
Total assets1,722,069,196
 1,659,535,689
    
Liabilities   
Debt, net of unamortized issuance costs of $7,711,684 and $6,805,196, respectively907,802,387
 805,202,192
Payable for investments purchased13,057,446
 908,759
Interest payable10,837,121
 8,747,872
Management and advisory fees payable5,429,075
 5,247,344
Incentive compensation payable4,753,671
 5,840,346
Payable to the Advisor1,591,651
 1,226,372
Accrued expenses and other liabilities2,279,459
 1,888,077
Total liabilities945,750,810
 829,060,962
    
Commitments and contingencies (Note 5)   
    
Net assets$776,318,386
 $830,474,727
    
Composition of net assets   
Common stock, $0.001 par value; 200,000,000 shares authorized, 58,766,426 and 58,774,607 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively$58,766
 $58,775
Paid-in capital in excess of par997,379,362
 1,000,073,183
Distributable earnings (loss)(221,119,742) (169,657,231)
Net assets$776,318,386
 $830,474,727
    
Net assets per share$13.21
 $14.13

See accompanying notes to the consolidated financial statements.

78





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments

December 31, 2019

Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (A)      
Aerospace and Defense      
Unanet, Inc. First Lien Delayed Draw Term Loan LIBOR(M) 
 6.25% 8.06% 5/31/2024 $5,127,551
 $5,059,515
 $5,135,971
 0.30% N
Unanet, Inc. First Lien Term Loan LIBOR(M) 
 6.25% 8.06% 5/31/2024 $19,897,959
 19,710,909
 19,919,847
 1.18% N
Unanet, Inc. Sr Secured Revolver LIBOR(M) 
 6.25% 8.06% 5/31/2024 $
 (21,632) 
 
 K/N
                24,748,792
 25,055,818
 1.48%  
Airlines      
Mesa Air Group, Inc. Junior Loan Agreement (N902FJ) LIBOR(Q) 
 7.50% 9.41% 2/1/2022 $801,784
 797,527
 801,784
 0.05% N
Mesa Air Group, Inc. Junior Loan Agreement (N903FJ) LIBOR(Q) 
 7.50% 9.41% 2/1/2022 $942,947
 937,941
 942,947
 0.06% N
Mesa Air Group, Inc. Junior Loan Agreement (N904FJ) LIBOR(Q) 
 7.50% 9.41% 2/1/2022 $1,066,574
 1,060,912
 1,066,574
 0.06% N
Mesa Air Group, Inc. Junior Loan Agreement (N905FJ) LIBOR(Q) 
 7.50% 9.41% 2/1/2022 $768,185
 764,107
 768,185
 0.05% N
Mesa Air Group, Inc. Junior Loan Agreement (N906FJ) LIBOR(Q) 
 7.50% 9.41% 5/1/2022 $817,276
 812,522
 817,276
 0.05% N
Mesa Air Group, Inc. Junior Loan Agreement (N907FJ) LIBOR(Q) 
 7.50% 9.41% 5/1/2022 $853,632
 848,667
 853,632
 0.05% N
Mesa Air Group, Inc. Junior Loan Agreement (N908FJ) LIBOR(Q) 
 7.50% 9.41% 5/1/2022 $1,272,196
 1,264,796
 1,272,196
 0.08% N
Mesa Air Group, Inc. Junior Loan Agreement (N909FJ) LIBOR(Q) 
 7.50% 9.41% 8/1/2022 $581,841
 578,354
 581,841
 0.03% N
Mesa Air Group, Inc. Junior Loan Agreement (N910FJ) LIBOR(Q) 
 7.50% 9.41% 8/1/2022 $554,715
 551,390
 554,715
 0.03% N
Mesa Airlines, Inc. Aircraft Acquisition Incremental Loan LIBOR(M) 
 5.25% 7.00% 9/27/2023 $2,655,121
 2,623,792
 2,620,870
 0.15% N
Mesa Airlines, Inc. Aircraft Acquisition Loan LIBOR(M) 
 5.00% 6.75% 6/5/2023 $21,683,485
 21,440,802
 21,653,129
 1.28% N
One Sky Flight, LLC First Lien Term Loan LIBOR(M) 1.00% 7.50% 9.30% 12/27/2024 $12,500,000
 12,187,500
 12,250,000
 0.72% N

             
 43,868,310
 44,183,149
 2.61%  
Automobiles 
 
 
Autoalert, LLC First Lien Incremental Term Loan LIBOR(Q) 0.25% 5.75% Cash+3.00% PIK
 10.88% 1/1/2022 $38,966,342
 38,845,649
 39,356,005
 2.32% N
Autoalert, LLC First Lien Term Loan LIBOR(Q) 0.25% 5.75% Cash+3.00% PIK
 10.88% 1/1/2022 $15,420,901
 15,313,907
 15,575,110
 0.92% N
DealerFX, Inc. First Lien Term Loan LIBOR(Q) 
 6.25% Cash+2.00% PIK
 10.25% 2/1/2023 $16,183,673
 15,965,712
 16,345,510
 0.96% N

             
 70,125,268
 71,276,625
 4.20%  
Building Products 
 
 
Dodge Data & Analytics, LLC First Lien Delayed Draw Term Loan LIBOR(Q) 1.00% 7.00% 9.00% 5/1/2020 $875,631
 875,023
 875,106
 0.05% N
Dodge Data & Analytics, LLC First Lien Term Loan LIBOR(Q) 1.00% 7.00% 9.00% 5/1/2020 $35,420,561
 35,395,034
 35,399,308
 2.09% N

             
 36,270,057
 36,274,414
 2.14%  
Capital Markets      
HighTower Holding, LLC Second Lien Term Loan LIBOR(M) 1.00% 8.75% 10.49% 1/31/2026 $15,080,645
 14,733,952
 15,082,153
 0.89% N
HighTower Holding, LLC Second Lien Delayed Draw Term Loan LIBOR(M) 1.00% 8.75% 10.49% 1/31/2026 $6,169,355
 6,059,721
 6,169,972
 0.36% N
                20,793,673
 21,252,125
 1.25%  
Chemicals      
AGY Holding Corp. Second Lien Notes Fixed 
 11.00% 11.00% 11/15/2020 $10,315,515
 8,778,822
 3,708,428
 0.22% B/C/E/N
AGY Holding Corp. Delayed Draw Term Loan Fixed 
 12.00% 12.00% 9/15/2020 $1,114,120
 1,114,120
 1,114,120
 0.07% B/N
AGY Holding Corp. Sr Secured Term Loan Fixed 
 12.00% 12.00% 9/15/2020 $5,171,151
 5,171,151
 5,171,151
 0.31% B/N
              

 15,064,093
 9,993,699
 0.60%  
                       
                       
                       
                       
                       
                       
                       

79





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)      
Commercial Services and Supplies      
Kellermeyer Bergensons Services, LLC First Lien Delayed Draw Term Loan A LIBOR(M) 1.00% 6.50% 8.39% 11/7/2026 $
 $
 $(13,529) 
 K/N
Kellermeyer Bergensons Services, LLC First Lien Delayed Draw Term Loan B LIBOR(M) 1.00% 6.50% 8.39% 11/7/2026 $
 
 (17,647) 
 K/N
Kellermeyer Bergensons Services, LLC First Lien Term Loan LIBOR(M) 1.00% 6.50% 8.39% 11/7/2026 $6,535,948
 6,472,583
 6,477,124
 0.38% N
Team Software, Inc. First Lien Incremental Term Loan LIBOR(Q) 
 5.50% 7.50% 9/17/2023 $7,220,080
 7,114,156
 7,172,428
 0.42% N
Team Software, Inc. First Lien Revolver LIBOR(Q) 
 5.50% 7.50% 9/17/2023 $1,228,924
 1,189,152
 1,205,750
 0.07% N
Team Software, Inc. First Lien Term Loan LIBOR(Q) 
 5.50% 7.50% 9/17/2023 $13,167,038
 13,012,854
 13,080,136
 0.77% N
                27,788,745
 27,904,262
 1.64%  
Communications Equipment      
Avanti Communications Jersey Limited 1.5 Lien Delayed Draw Term Loan (2.5% Exit Fee) Fixed 
 12.50% 12.50% 5/24/2021 $1,214,371
 1,214,371
 1,214,371
 0.07% L/N
Avanti Communications Jersey Limited 1.5 Lien Term Loan (2.5% Exit Fee) Fixed 
 12.50% 12.50% 5/24/2021 $282,820
 238,768
 282,820
 0.02% L/N
Avanti Communications Group, PLC (United Kingdom) Sr New Money Initial Note Fixed 
 9.00% PIK
 9.00% 10/1/2022 $1,592,934
 1,591,586
 1,074,115
 0.06% C/E/G/H/N
Avanti Communications Group, PLC (United Kingdom) Sr Second-Priority PIK Toggle Note Fixed 
 9.00% PIK
 9.00% 10/1/2022 $4,064,721
 4,064,219
 2,740,841
 0.16% C/E/G/H/N
                7,108,944
 5,312,147
 0.31%  
Construction and Engineering      
Hylan Datacom & Electrical, LLC First Lien Incremental Term Loan LIBOR(Q) 1.00% 9.50% 11.41% 7/25/2021 $2,536,311
 2,502,108
 2,090,739
 0.12% N
Hylan Datacom & Electrical, LLC First Lien Term Loan (5.4% Exit Fee) LIBOR(Q) 1.00% 9.50% 11.41% 7/25/2021 $14,031,084
 13,959,042
 11,566,142
 0.67% L/N
                16,461,150
 13,656,881
 0.79%  
Construction Materials 

 

 
Brannan Sand and Gravel Company, LLC First Lien Term Loan LIBOR(Q) 
 5.25% 7.25% 7/3/2023 $6,682,556
 6,612,301
 6,652,484
 0.39% N

             

 

 

 

  
Consumer Finance 

 

 
Auto Trakk SPV, LLC First Lien Delayed Draw Term Loan LIBOR(M) 0.50% 6.50% 8.24% 12/21/2021 $23,971,792
 23,800,742
 23,749,039
 1.40% N
Barri Financial Group, LL First Lien Term Loan LIBOR(M) 1.00% 7.75% 9.54% 10/23/2024 $19,346,662
 18,873,298
 19,031,311
 1.12% N

 
 
 

 

 

 
 

 42,674,040
 42,780,350
 2.52% 
Diversified Consumer Services 

 

  
Edmentum, Inc. Jr Revolving Facility Fixed 
 5.00% 5.00% 6/9/2020 $5,235,973
 5,235,973
 5,235,978
 0.31% B/N
Edmentum, Inc. First Lien Term Loan B LIBOR(Q) 
 8.50% 10.43% 6/9/2021 $10,740,023
 9,566,580
 10,740,023
 0.63% B/N
Edmentum, Inc. Second Lien Term Loan Fixed 
 7.00% PIK
 7.00% 12/8/2021 $8,281,653
 8,281,653
 8,281,661
 0.49% B/N
Edmentum Ultimate Holdings, LLC Jr PIK Notes Fixed 
 10.00% PIK
 10.00% 6/9/2020 $17,609,276
 17,536,516
 17,609,276
 1.04% B/N
Edmentum Ultimate Holdings, LLC Sr PIK Notes Fixed 
 8.50% PIK
 8.50% 6/9/2020 $3,675,888
 3,675,888
 3,675,888
 0.22% B/N
Spark Networks, Inc. Sr Secured Revolver LIBOR(Q) 1.50% 8.00% 9.95% 7/1/2023 $
 (30,874) (38,827) 
 K/N
Spark Networks, Inc. First Lien Term Loan LIBOR(Q) 1.50% 8.00% 9.95% 7/1/2023 $22,934,229
 22,203,944
 22,062,728
 1.30% N

 
 
 

 

 

 
 

 66,469,680
 67,566,727
 3.99% 
Diversified Financial Services 

 

 
36th Street Capital Partners Holdings, LLC Senior Note Fixed 
 12.00% 12.00% 11/1/2020 $40,834,419
 40,834,418
 40,834,419
 2.41% E/F/N/O
Aretec Group, Inc. (Cetera) Second Lien Term Loan LIBOR(M) 
 8.25% 10.05% 10/1/2026 $27,105,263
 26,845,399
 26,788,945
 1.58% G
Credit Suisse AG (Cayman Islands) Asset-Backed Credit Linked Notes LIBOR(Q) 
 9.50% 11.45% 4/12/2025 $38,000,000
 38,000,000
 37,604,800
 2.22% H/I/N
GC Agile Holdings Limited (Apex) (England) First Lien Delayed Term Loan B LIBOR(Q) 1.00% 7.00% 9.11% 6/15/2025 $18,979,469
 18,625,118
 18,629,867
 1.10% H/N
GC Agile Holdings Limited (Apex) (England) First Lien Term Loan A LIBOR(Q) 1.00% 7.00% 9.11% 6/15/2025 $824,958
 810,028
 809,366
 0.05% H/N
RSB-160, LLC (Lat20) First Lien Delayed Draw Term Loan LIBOR(M) 1.00% 6.00% 7.90% 7/20/2022 $2,333,333
 2,299,659
 2,335,900
 0.14% N

 
 
 

 

 

 
 

 127,414,622
 127,003,297
 7.50% 

80





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)      
Diversified Telecommunication Services      
American Broadband Holding Company First Lien Term Loan LIBOR(M) 1.25% 7.25% 9.05% 10/25/2022 $15,395,873
 $15,151,000
 $15,796,166
 0.93% N
ECI Macola/Max Holding, LLC Second Lien Term Loan LIBOR(Q) 1.00% 8.00% 9.94% 9/29/2025 $24,840,563
 24,660,905
 24,571,540
 1.45%  
Securus Technologies, Inc. Second Lien Term Loan LIBOR(M) 1.00% 8.25% 10.05% 11/1/2025 $25,846,154
 25,648,456
 12,509,538
 0.74%  
TPC Intermediate Holdings, LLC First Lien Delayed Draw Term Loan LIBOR(Q) 1.00% 6.00% 7.94% 5/15/2023 $799,588
 787,670
 796,310
 0.05% N
TPC Intermediate Holdings, LLC First Lien Incremental Delayed Draw Term Loan LIBOR(Q) 1.00% 6.00% 7.94% 5/15/2020 $525,686
 519,722
 522,453
 0.03% N
TPC Intermediate Holdings, LLC First Lien Incremental Delayed Draw Term Loan A LIBOR(Q) 1.00% 6.00% 7.94% 10/31/2020 $
 
 (16,811) 
 K/N
Telarix, Inc. First Lien Term Loan LIBOR(M) 1.00% 6.00% 7.80% 11/19/2023 $7,443,750
 7,348,457
 7,349,959
 0.43% N
Telarix, Inc. Sr Secured Revolver LIBOR(M) 1.00% 6.00% 7.80% 11/19/2023 $178,571
 174,365
 174,071
 0.01% N
                74,290,575
 61,703,226
 3.64%  
Electric Utilities      
Conergy Asia & ME Pte. Ltd (Singapore) First Lien Term Loan Fixed 
 10.00% 10.00% 5/26/2020 $1,773,807
 1,773,807
 1,207,785
 0.07% F/H/N
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) Bank Guarantee Credit Facility Fixed 
 
 0.00% 5/26/2020 $6,578,877
 6,578,877
 3,289,438
 0.19% C/F/H/N
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) Revolving Credit Facility Fixed 
 
 0.00% 5/26/2020 $8,668,850
 8,668,850
 2,208,823
 0.13% C/F/H/N
Utilidata, Inc. First Lien Delayed Draw Term Loan (4.0% Exit Fee) LIBOR(Q) 
 9.88% 11.81% 7/1/2020 $1,033,398
 1,024,722
 942,562
 0.06% L/N
                18,046,256
 7,648,608
 0.45%  
Electrical Equipment        
TCFI Amteck Holdings, LLC First Lien Delayed Draw Term Loan LIBOR(M) 
 8.25% 9.75% 5/22/2023 $497,143
 490,068
 497,143
 0.03% N
TCFI Amteck Holdings, LLC First Lien Term Loan LIBOR(M) 
 8.25% 9.75% 5/22/2023 $16,237,115
 16,003,295
 16,237,115
 0.96% N

 
 
 

 

 

 
 

 16,493,363
 16,734,258
 0.99% 
Energy Equipment and Services        
GlassPoint Solar, Inc. First Lien Term Loan (4.0% Exit Fee) LIBOR(Q) 
 8.50% 10.44% 12/31/2020 $4,167,831
 4,147,728
 3,999,033
 0.24% L/N
GlassPoint Solar, Inc. First Lien Term Loan (5.0% Exit Fee) LIBOR(Q) 
 11.44% 13.38% 12/31/2020 $2,276,123
 2,204,998
 2,226,731
 0.13% L/N
Sphera Solutions, Inc. (Diamondback) First Lien FILO Term Loan B LIBOR(Q) 2.00% 8.81% 10.81% 6/14/2022 $23,614,465
 23,255,646
 23,371,236
 1.38% N
                29,608,372
 29,597,000
 1.75%  
Health Care Technology 
 
 
 
CAREATC, Inc. First Lien Term Loan LIBOR(M) 
 7.25% 9.14% 3/14/2024 $8,502,033
 8,351,441
 8,483,328
 0.50% N
CAREATC, Inc. Sr Secured Revolver LIBOR(M) 
 7.25% 9.14% 3/14/2024 $
 (10,223) (1,336) 
 K/N
Patient Point Network Solutions, LLC Sr Secured Revolver LIBOR(Q) 1.00% 7.50% 9.44% 6/26/2022 $264,285
 261,418
 262,347
 0.02% N
Patient Point Network Solutions, LLC First Lien Incremental Term Loan LIBOR(Q) 1.00% 7.50% 9.44% 6/26/2022 $1,239,799
 1,229,504
 1,234,344
 0.07% N
Patient Point Network Solutions, LLC First Lien Term Loan LIBOR(Q) 1.00% 7.50% 9.44% 6/26/2022 $6,432,648
 6,389,679
 6,404,344
 0.38% N
Sandata Technologies, LLC First Lien Term Loan LIBOR(Q) 
 6.00% 8.00% 7/23/2024 $20,250,000
 19,961,722
 19,942,200
 1.18% N
Sandata Technologies, LLC Sr Secured Revolver LIBOR(Q) 
 6.00% 8.00% 7/23/2024 $
 (30,795) (34,200) 
 K/N

 
 
 

 

 

 
 

 36,152,746
 36,291,027
 2.15% 
                       
                       
                       
                       
                       
                       
                       

 
 
 
 
 
 
 
 
 
 
 
                       
                       
                       

81





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)             

 

 

 

  
Hotels, Restaurants and Leisure        
Fishbowl, Inc. First Lien Term Loan LIBOR(Q) 
 2.80% Cash+8.45% PIK
 13.25% 1/26/2022 $24,564,304
 $24,250,372
 $22,591,790
 1.33% N
Pegasus Business Intelligence, LP (Onyx Centersource) First Lien Incremental Term Loan LIBOR(Q) 1.00% 6.25% 8.20% 12/20/2021 $5,678,264
 5,678,264
 5,735,615
 0.34% N
Pegasus Business Intelligence, LP (Onyx Centersource) First Lien Term Loan LIBOR(Q) 1.00% 6.25% 8.20% 12/20/2021 $13,583,579
 13,524,243
 13,720,773
 0.81% N
Pegasus Business Intelligence, LP (Onyx Centersource) Revolver LIBOR(Q) 1.00% 6.25% 8.20% 12/20/2021 $
 (2,686) 
 
 K/N
VSS-Southern Holdings, LLC (Southern Theatres) First Lien Term Loan LIBOR(Q) 1.00% 6.50% Cash+2.00% PIK
 10.44% 3/31/2022 $2,395,992
 2,373,398
 2,443,913
 0.14% N
VSS-Southern Holdings, LLC (Southern Theatres) First Lien Incremental Term Loan LIBOR(Q) 1.00% 6.50% Cash+2.00% PIK
 10.44% 3/31/2022 $142,889
 141,895
 145,747
 0.01% N
VSS-Southern Holdings, LLC (Southern Theatres) First Lien Incremental Term Loan LIBOR(Q) 1.00% 6.50% 8.44% 3/31/2022 $550,909
 550,909
 561,927
 0.03% N
VSS-Southern Holdings, LLC (Southern Theatres) Sr Secured Revolver LIBOR(Q) 1.00% 6.50% Cash+2.00% PIK
 10.44% 3/31/2022 $
 (6,733) 
 
 K/N
              

 46,509,662
 45,199,765
 2.66%  
Insurance        
2-10 Holdco, Inc. First Lien Term Loan LIBOR(M) 
 6.25% 8.05% 10/31/2024 $4,537,500
 4,461,178
 4,479,420
 0.26% N
2-10 Holdco, Inc. Sr Secured Revolver LIBOR(M) 
 6.25% 8.05% 10/31/2024 $
 (6,724) (5,333) 
 K/N
Higginbotham Insurance Agency, Inc. Second Lien Term Loan LIBOR(M) 1.00% 7.50% 9.30% 12/19/2025 $28,000,000
 27,801,191
 27,860,000
 1.64% N
IAS Investco, Inc. First Lien Delayed Draw Term Loan A LIBOR(M) 1.00% 5.50% 7.30% 1/24/2021 $5,318,571
 5,296,361
 5,295,702
 0.31% N
IAS Investco, Inc. First Lien Delayed Draw Term Loan B LIBOR(M) 1.00% 5.50% 7.30% 1/24/2021 $1,714,286
 1,708,138
 1,706,914
 0.10% N
IAS Investco, Inc. First Lien Incremental Term Loan LIBOR(M) 1.00% 5.50% 7.30% 1/24/2021 $6,020,424
 6,002,687
 5,994,536
 0.35% N
IAS Investco, Inc. First Lien Term Loan LIBOR(M) 1.00% 5.50% 7.30% 1/24/2021 $3,934,469
 3,918,004
 3,917,550
 0.23% N
              

 49,180,835
 49,248,789
 2.89%  
Internet and Catalog Retail 

 

 

 
Live Auctioneers LLC First Lien Last Out B-2 Term Loan LIBOR(M) 
 6.76% 8.56% 5/20/2025 $13,960,362
 13,698,968
 13,635,085
 0.79% N
                

 

 

  
Internet Software and Services        
Acquia Inc. First Lien Term Loan LIBOR(Q) 
 7.00% 8.91% 11/1/2025 $16,648,997
 16,321,473
 16,345,985
 0.96% N
Acquia Inc. Sr Secured Revolver LIBOR(Q) 
 7.00% 8.91% 11/1/2025 $
 (35,084) (32,829) 
 K/N
Domo, Inc. First Lien Delayed Draw Term Loan (7.0% Exit Fee) LIBOR(M) 
 5.63% Cash+2.50% PIK
 9.94% 10/1/2022 $52,127,502
 51,828,896
 51,270,531
 3.03% L/N
FinancialForce.com, Inc. First Lien Delayed Draw Term Loan (3.0% Exit Fee) LIBOR(Q) 2.75% 6.75% 9.50% 2/1/2024 $28,000,000
 27,522,676
 28,464,800
 1.68% L/N
Foursquare Labs, Inc. First Lien Term Loan (5.0% Exit Fee) LIBOR(Q) 
 7.25% 9.19% 10/1/2022 $33,750,000
 33,445,277
 33,237,000
 1.96% L/N
InMobi, Inc. (Singapore) First Lien Term Loan LIBOR(Q) 1.37% 8.13% 10.06% 9/30/2021 $30,906,865
 30,717,380
 30,545,254
 1.80% H/N
Quartz Holding Company (Quick Base) Second Lien Term Loan LIBOR(M) 
 8.00% 9.71% 4/2/2027 $9,903,019
 9,708,757
 9,878,261
 0.58% N
ResearchGate GmBH (Germany) First Lien Term Loan (4.0% Exit Fee) EURIBOR(M) 
 8.55% 8.55% 10/1/2022 7,500,000
 7,856,974
 7,952,439
 0.47% D/H/L/N
              

 177,366,349
 177,661,441
 10.48%  
IT Services        
Apptio, Inc. First Lien Term Loan LIBOR(M) 1.00% 7.25% 8.96% 1/10/2025 $11,812,993
 11,598,319
 11,567,282
 0.68% N
Apptio, Inc. Sr Secured Revolver LIBOR(M) 1.00% 7.25% 8.96% 1/10/2025 $
 (12,904) (16,000) 
 K/N
Donuts Inc. First Lien Revolver LIBOR(M) 1.00% 6.25% 8.15% 9/17/2023 $373,849
 350,320
 364,746
 0.02% N
Donuts Inc. First Lien Term Loan LIBOR(Q) 1.00% 6.25% 8.19% 9/17/2023 $10,910,690
 10,653,623
 10,814,676
 0.64% N
Web.com Group Inc. Second Lien Term Loan LIBOR(M) 
 7.75% 9.49% 10/11/2026 $16,280,678
 16,166,395
 15,715,983
 0.93% G/J
Xactly Corporation First Lien Incremental Term Loan B LIBOR(M) 1.00% 7.25% 9.05% 7/31/2022 $4,996,644
 4,913,115
 4,990,148
 0.29% N
Xactly Corporation First Lien Incremental Term Loan LIBOR(M) 1.00% 7.25% 9.05% 7/31/2022 $2,726,918
 2,692,315
 2,723,373
 0.16% N
Xactly Corporation First Lien Term Loan LIBOR(M) 1.00% 7.25% 9.05% 7/31/2022 $16,397,517
 16,210,453
 16,376,200
 0.97% N
Xactly Corporation Sr Secured Revolver LIBOR(M) 1.00% 7.25% 9.05% 7/31/2022 $
 (14,579) (1,827) 
 K/N
              

 62,557,057
 62,534,581
 3.69%  

82





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)      
Leisure Products        
Blue Star Sports Holdings, Inc. First Lien Delayed Draw Term Loan LIBOR(Q) 1.00% 5.75% 7.76% 6/15/2024 $55,556
 $54,693
 $53,556
 
 N
Blue Star Sports Holdings, Inc. First Lien Revolver LIBOR(M) 1.00% 5.75% 7.55% 6/15/2024 $111,111
 108,557
 105,111
 0.01% N
Blue Star Sports Holdings, Inc. First Lien Term Loan LIBOR(M) 1.00% 5.75% 7.55% 6/15/2024 $1,504,611
 1,480,597
 1,450,445
 0.09% N
Machine Zone, Inc. First Lien Term Loan (10.0% Exit Fee) LIBOR(M) 
 13.50% 15.20% 2/1/2021 $5,672,712
 5,637,816
 5,588,188
 0.33% L/N
              

 7,281,663
 7,197,300
 0.43%  
Media        
Bisnow, LLC First Lien Revolver LIBOR(Q) 
 7.50% 9.63% 9/21/2022 $
 (10,270) 
 
 K/N
Bisnow, LLC First Lien Term Loan LIBOR(Q) 
 7.50% 9.63% 9/21/2022 $10,557,386
 10,446,491
 10,628,121
 0.63% N
Khoros, LLC (Lithium) Sr Secured Revolver LIBOR(Q) 1.00% 8.00% 10.04% 10/3/2022 $
 (7,100) (5,736) 
 K/N
Khoros, LLC (Lithium) Sr Secured Revolver LIBOR(Q) 1.00% 8.00% 10.04% 10/3/2022 $
 (19,127) (19,255) 
 K/N
Khoros, LLC (Lithium) First Lien Incremental Term Loan LIBOR(Q) 1.00% 8.00% 10.04% 10/3/2022 $7,131,905
 7,016,707
 7,042,043
 0.42% N
Khoros, LLC (Lithium) First Lien Term Loan LIBOR(Q) 1.00% 8.00% 10.04% 10/3/2022 $20,884,731
 20,616,273
 20,621,583
 1.22% N
NEP II, Inc. Second Lien Term Loan LIBOR(M) 
 7.00% 8.80% 10/19/2026 $25,000,000
 24,753,355
 22,687,500
 1.34% G
Quora, Inc. First Lien Term Loan (4.0% Exit Fee) Fixed 
 10.10% 10.10% 5/1/2022 $12,692,602
 12,528,197
 12,709,103
 0.75% L/N
              

 75,324,526
 73,663,359
 4.36%  
Metal and Mining        
Neenah Foundry Company First Lien Term Loan B LIBOR(M) 
 6.50% 8.35% 12/13/2022 $4,943,976
 4,909,287
 4,845,097
 0.29%  
         
Oil, Gas and Consumable Fuels        
Iracore International, Inc. First Lien Term Loan LIBOR(M) 1.00% 9.00% 10.88% 4/13/2021 $1,635,903
 1,635,902
 1,635,903
 0.10% B/N
                       
Pharmaceuticals        
Cambrex Corporation Second Lien Term Loan LIBOR(M) 1.00% 9.00% 10.70% 12/6/2027 $15,441,176
 15,133,798
 15,363,971
 0.91% N
P&L Development, LLC First Lien Term Loan LIBOR(Q) 2.00% 7.50% 9.50% 6/28/2024 $8,645,000
 8,447,637
 8,601,775
 0.51% G/N
                23,581,435
 23,965,746
 1.42%  
Professional Services 

 

 

  
Applause App Quality, Inc. First Lien Term Loan LIBOR(Q) 1.00% 5.00% 6.93% 9/20/2022 $20,772,306
 20,522,294
 20,851,241
 1.23% N
Applause App Quality, Inc. Sr Secured Revolver LIBOR(Q) 1.00% 5.00% 6.93% 9/20/2022 $
 (16,489) 
 
 K/N
CIBT Solutions, Inc. Second Lien Term Loan LIBOR(Q) 1.00% 7.75% 9.69% 6/1/2025 $7,611,914
 7,551,528
 7,155,199
 0.42% G/N
Discoverorg, LLC Second Lien Term Loan LIBOR(M) 
 8.50% 10.19% 2/1/2027 $15,000,000
 14,795,054
 15,075,000
 0.89% G
Dude Solutions Holdings, Inc. Sr Secured Revolver LIBOR(M) 1.00% 7.00% 8.80% 6/13/2025 $
 (45,365) (40,404) 
 K/N
Dude Solutions Holdings, Inc. First Lien Term Loan LIBOR(M) 1.00% 7.00% 8.80% 6/13/2025 $16,927,201
 16,566,086
 16,617,434
 0.98% N
iCIMS, Inc. Sr Secured Revolver LIBOR(M) 1.00% 6.50% 8.29% 9/12/2024 $
 (7,699) (11,385) 
 K/N
iCIMS, Inc. First Lien Term Loan LIBOR(M) 1.00% 6.50% 8.29% 9/12/2024 $9,482,016
 9,315,912
 9,262,034
 0.55% N
Institutional Shareholder Services, Inc. Second Lien Term Loan LIBOR(Q) 
 8.50% 10.44% 3/5/2026 $5,820,856
 5,658,368
 5,588,022
 0.33% N
STG-Fairway Acquisitions, Inc.(First Advantage) Second Lien Term Loan LIBOR(M) 1.00% 9.25% 11.05% 6/30/2023 $31,000,000
 30,701,658
 31,000,000
 1.83% N
              

 105,041,347
 105,497,141
 6.23%  
Real Estate Management and Development        
Florida East Coast Industries, LLC First Lien Term Loan B LIBOR(M) 
 6.75% 8.51% 12/13/2021 $2,321,694
 2,289,777
 2,310,086
 0.14% N
Florida East Coast Industries, LLC First Lien Incremental Lien Term Loan B LIBOR(M) 
 6.75% 8.51% 12/13/2021 $876,520
 869,946
 872,138
 0.05% N
Space Midco, Inc. (Archibus) First Lien Term Loan LIBOR(M) 
 6.25% 8.00% 12/5/2023 $4,444,444
 4,371,064
 4,371,111
 0.26% N
Space Midco, Inc. (Archibus) Sr Secured Revolver LIBOR(M) 
 6.25% 8.00% 12/5/2023 $
 (4,371) (4,583) 
 K/N
              

 7,526,416
 7,548,752
 0.45%  
Road and Rail        
GlobalTranz Enterprises LLC Second Lien Term Loan LIBOR(M) 1.00% 8.25% 10.04% 5/15/2027 $19,382,324
 19,008,604
 18,796,978
 1.11% N

83





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument Ref Floor Spread Total Coupon Maturity/Expiration Principal/Shares Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)                 
        
Software        
Certify, Inc. First Lien Delayed Draw Term Loan LIBOR(M) 1.00%
 5.75%
 7.55%
 2/28/2024 $1,594,315
 $1,547,623
 $1,537,877
 0.09% N
Certify, Inc. First Lien Term Loan LIBOR(M) 1.00%
 5.75%
 7.55%
 2/28/2024 $23,383,293
 23,292,776
 22,969,408
 1.36% N
Certify, Inc. Sr Secured Revolver LIBOR(M) 1.00%
 5.75%
 7.55%
 2/28/2024 $159,432
 143,495
 140,619
 0.01% N
JAMF Holdings, Inc. First Lien Incremental Term Loan LIBOR(Q) 1.00%
 7.00%
 8.91%
 11/13/2022 $3,606,829
 3,563,940
 3,606,829
 0.21% N
JAMF Holdings, Inc. First Lien Term Loan LIBOR(Q) 1.00%
 7.00%
 8.91%
 11/13/2022 $14,160,797
 13,978,598
 14,160,797
 0.84% N
JAMF Holdings, Inc. Sr Secured Revolver LIBOR(M) 1.00%
 7.00%
 8.80%
 11/13/2022 $
 (14,355) 
 
 K/N
Marketlive, LLC (Kibo) First Lien Term Loan LIBOR(Q) 
 8.00%
 9.91%
 12/18/2020 $5,076,516
 4,988,719
 4,989,707
 0.29% N
Rhode Holdings, Inc. (Kaseya) First Lien Delayed Draw Term Loan LIBOR(Q) 1.00%
 6.50%
 8.60%
 5/3/2025 $224,401
 193,557
 190,964
 0.01% N
Rhode Holdings, Inc. (Kaseya) First Lien Term Loan LIBOR(Q) 1.00%
 5.50% Cash+1.00% PIK
 8.72%
 5/3/2025 $14,362,948
 14,098,242
 14,084,307
 0.82% N
Rhode Holdings, Inc. (Kaseya) Sr Secured Revolver LIBOR(M) 1.00%
 6.50%
 8.30%
 5/3/2025 $689,257
 667,641
 665,857
 0.04% N
Snow Software AB First Lien Term Loan LIBOR(Q) 2.00%
 6.50%
 8.50%
 4/17/2024 $13,081,645
 12,846,264
 12,860,565
 0.76% N
Snow Software AB First Lien Incremental Term Loan LIBOR(Q) 2.00%
 6.50%
 8.50%
 4/17/2024 $14,557,807
 14,269,367
 14,311,780
 0.84% N
Snow Software AB Sr Secured Revolver LIBOR(Q) 2.00%
 6.50%
 8.50%
 4/17/2024 $1,744,219
 1,668,977
 1,670,526
 0.10% N
Winshuttle, LLC First Lien FILO Term Loan LIBOR(M) 1.00%
 8.42%
 10.22%
 8/9/2024 $14,007,952
 13,649,539
 13,665,177
 0.81% N
                104,894,383
 104,854,413
 6.18%  
Specialty Retail        
USR Parent, Inc. (Staples) First Lien FILO Term Loan LIBOR(M) 1.00% 8.84% 10.54% 9/12/2022 $6,410,930
 6,314,032
 6,404,519
 0.38% N
                       
Technology Hardware, Storage and Peripherals        
Pulse Secure, LLC Sr Secured Revolver LIBOR(M) 1.00% 7.00% 8.71% 5/1/2022 $
 (9,446) (3,893) 
 K/N
Pulse Secure, LLC First Lien Term Loan LIBOR(M) 1.00% 7.00% 8.71% 5/1/2022 $11,142,879
 11,057,992
 11,110,565
 0.66% N
TierPoint, LLC Second Lien Term Loan LIBOR(M) 1.00% 7.25% 9.05% 5/5/2025 $2,880,000
 2,854,404
 2,558,405
 0.15%  
              

 13,902,950
 13,665,077
 0.81%  
Textiles, Apparel and Luxury Goods        
ABG Intermediate Holdings 2, LLC (Authentic Brands) Second Lien Term Loan LIBOR(M) 1.00% 7.75% 9.55% 9/29/2025 $11,967,243
 11,888,882
 11,987,228
 0.71%  
Kenneth Cole Productions, Inc. First Lien FILO Term Loan LIBOR(M) 1.00% 7.75% 9.50% 12/28/2023 $23,528,829
 23,383,523
 23,507,653
 1.39% N
PSEB, LLC (Eddie Bauer) First Lien FILO II Term Loan PRIME 
 7.25% 12.00% 10/12/2023 $10,793,402
 10,549,564
 10,793,402
 0.64% N
PSEB, LLC (Eddie Bauer) First Lien Term Loan LIBOR(Q) 1.50% 8.00% 9.91% 10/12/2023 $39,823,155
 38,936,624
 39,624,039
 2.34% N
WH Buyer, LLC (Anne Klein) First Lien Term Loan LIBOR(Q) 1.50% 6.75% 8.75% 7/16/2025 $27,664,640
 27,395,096
 27,410,125
 1.62% N
              

 112,153,689
 113,322,447
 6.70%  
Thrifts and Mortgage Finance        
Greystone Select Holdings, LLC First Lien Term Loan LIBOR(Q) 1.00% 8.00% 9.93% 4/17/2024 $24,826,865
 24,672,974
 25,571,671
 1.51% N
Home Partners of America, Inc. First Lien Delayed Draw Term Loan LIBOR(M) 1.00% 6.25% 8.05% 10/13/2022 $
 
 
 
 N
Home Partners of America, Inc. First Lien Term Loan LIBOR(M) 1.00% 6.25% 8.05% 10/13/2022 $2,857,143
 2,826,874
 2,857,145
 0.17% N
              

 27,499,848
 28,428,816
 1.68%  
Tobacco Related        
Juul Labs, Inc. First Lien Term Loan LIBOR(M) 1.50% 7.00% 8.90% 8/2/2023 $26,315,789
 26,067,931
 26,202,632
 1.55% N
                       
Total Debt Investments 1,564,445,871
 1,535,193,938
 90.60%  
                       
Equity Securities           
        
Airlines    
Epic Aero, Inc (One Sky) Common Stock           1,842
 855,313
 6,333,559
 0.38% C/N
United N659UA-767, LLC (N659UA) Trust Beneficial Interests           683
 2,165,433
 2,300,366
 0.14% E/F/N
United N661UA-767, LLC (N661UA) Trust Beneficial Interests           688
 2,225,361
 2,347,314
 0.14% E/F/N
              

 5,246,107
 10,981,239
 0.66%  
                       

84





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument         Expiration Shares Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Equity Securities (continued)                 
        
Chemicals    
AGY Holding Corp. Common Stock           1,333,527
 $
 $
 
 B/C/E/N
KAGY Holding Company, Inc. Series A Preferred Stock           9,778
 1,091,200
 
 
 B/C/E/N
                1,091,200
 
 
  
Communications Equipment    
Avanti Communications Group, PLC (United Kingdom) Common Stock           26,576,710
 4,902,674
 3,523
 
 C/D/H/N
                       
Diversified Consumer Services    
Edmentum Ultimate Holdings, LLC Class A Common Units           159,515
 680,226
 1,433,968
 0.08% B/C/E/N
Edmentum Ultimate Holdings, LLC Warrants to Purchase Class A Units         2/23/2028 788,112
 1
 7,084,470
 0.42% B/C/E/N
                680,227
 8,518,438
 0.50%  
Diversified Financial Services    
36th Street Capital Partners Holdings, LLC Membership Units           22,199,416
 22,199,416
 31,682,859
 1.87% E/F/N/O
Conventional Lending TCP Holdings, LLC Membership Units           14,269,948
 14,269,948
 14,269,948
 0.84% E/F/I/N
GACP I, LP (Great American Capital) Membership Units           1,772,812
 1,772,812
 2,384,330
 0.14% E/I/N
GACP II, LP (Great American Capital) Membership Units           18,039,482
 18,039,482
 18,764,975
 1.11% E/I/N
              

 56,281,658
 67,102,112
 3.96%  
Diversified Telecommunication Services    
V Telecom Investment S.C.A. (Vivacom) (Luxembourg) Common Shares           1,393
 3,236,256
 95,280
 0.01% C/D/E/H/N
                       
Electric Utilities    
Conergy Asia Holdings Limited (United Kingdom) Class B Shares           1,000,000
 1,000,000
 
 
 C/E/F/H/N
Conergy Asia Holdings Limited (United Kingdom) Ordinary Shares           3,333
 7,833,333
 
 
 C/E/F/H/N
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) Ordinary Shares           2,332,594
 
 
 
 C/E/F/H/N
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) Series B Preferred Shares           93,023
 1,395,349
 
 
 C/E/F/H/N
Utilidata, Inc. Warrants to Purchase Preferred Stock         12/22/2022 719,998
 216,336
 29,070
 
 C/E/N
              

 10,445,018
 29,070
 
  
Electronic Equipment, Instruments and Components 

  
Soraa, Inc. Warrants to Purchase Preferred Stock         8/29/2024 3,071,860
 478,899
 
 
 C/E/N
                

 

 

  
Energy Equipment and Services    
GlassPoint Solar, Inc. Warrants to Purchase Series E Preferred Stock         2/7/2027 400,000
 248,555
 113,280
 0.01% C/E/N
GlassPoint Solar, Inc. Warrants to Purchase Series E Preferred Stock         2/7/2027 2,048,000
 505,450
 579,992
 0.03% C/E/N
                754,005
 693,272
 0.04%  

85





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument 
 
 
 
 Expiration Shares Cost Fair
Value
 % of Total
Cash and
Investments
 Notes
Equity Securities (continued)                 
        
Internet Software and Services      
Domo, Inc. Warrants to Purchase Class B Common Stock         6/28/2021 62,247
 $511,349
 $509,086
 0.03% C/E/N
FinancialForce.com, Inc. Warrants to Purchase Series C Preferred Stock         1/30/2029 840,000
 287,985
 271,044
 0.02% C/E/N
Foursquare Labs, Inc. Warrants to Purchase Series E Preferred Stock         5/4/2027 1,687,500
 297,361
 347,063
 0.02% C/E/N
InMobi, Inc. (Singapore) Warrants to Purchase Common Stock         8/15/2027 1,327,869
 212,360
 180,797
 0.01% C/E/H/N
InMobi, Inc. (Singapore) Warrants to Purchase Series E Preferred Stock (Strike Price $20.01)         9/18/2025 1,049,996
 276,492
 396,397
 0.02% C/E/H/N
InMobi, Inc. (Singapore) Warrants to Purchase Series E Preferred Stock (Strike Price $28.58)         10/3/2028 1,511,002
 93,407
 335,614
 0.02% C/E/H/N
ResearchGate Corporation (Germany) Warrants to Purchase Series D Preferred Stock         10/30/2029 333,370
 202,001
 205,018
 0.01% C/D/E/H/N
Snaplogic, Inc. Warrants to Purchase Series Preferred Stock         3/19/2028 1,860,000
 377,722
 4,600,000
 0.27% C/E/N
                2,258,677
 6,845,019
 0.40%  
IT Services      
Fidelis (SVC), LLC Preferred Units           657,932
 2,001,384
 47,518
 
 C/E/N
       
Life Sciences Tools and Services      
Envigo RMS Holdings Corp. Common Stock           36,413
 
 526,350
 0.03% C/E/N
       
Media      
NEG Parent, LLC (Core Entertainment, Inc.) Class A Units           2,720,392
 2,772,807
 6,925,847
 0.41% B/C/E/N
NEG Parent, LLC (Core Entertainment, Inc.) Class A Warrants to Purchase Class A Units         10/17/2026 343,387
 196,086
 391,407
 0.02% B/C/E/N
NEG Parent, LLC (Core Entertainment, Inc.) Class B Warrants to Purchase Class A Units         10/17/2026 346,794
 198,032
 395,290
 0.02% B/C/E/N
Quora, Inc. Warrants to Purchase Series D Preferred Stock         4/11/2029 507,704
 65,245
 64,803
 
 C/E/N
Shop Holding, LLC (Connexity) Class A Units           507,167
 480,049
 
 
 C/E/N
SoundCloud, Ltd. (United Kingdom) Warrants to Purchase Preferred Stock         4/29/2025 946,498
 79,082
 45,143
 
 C/E/H/N
              

 3,791,301
 7,822,490
 0.45%  
Oil, Gas and Consumable Fuels      
Iracore Investments Holdings, Inc. Class A Common Stock           16,207
 4,177,710
 2,476,881
 0.15% B/C/E/N
                

 

 

  
Professional Services      
Anacomp, Inc. Class A Common Stock           1,255,527
 26,711,048
 1,167,641
 0.07% C/E/F/N
Findly Talent, LLC Membership Units           708,229
 230,938
 123,939
 0.01% C/E/N
STG-Fairway Holdings, LLC (First Advantage) Class A Units           803,961
 325,432
 5,380,520
 0.32% C/E/N
              

 27,267,418
 6,672,100
 0.40%  
Semiconductors and Semiconductor Equipment      
Adesto Technologies Corporation Warrants to Purchase Common Stock         5/8/2024 436,320
 846,724
 667,570
 0.04% C/E/N
Nanosys, Inc. Warrants to Purchase Preferred Stock         3/29/2023 800,000
 605,266
 838,607
 0.05% C/E/N
                1,451,990
 1,506,177
 0.09%  
                       
                       
                       
                       
                       
                       
                       
                       

86





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2019



Issuer Instrument         Expiration Shares Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Equity Securities (continued)                 
        
Software      
Actifio, Inc. Warrants to Purchase Series G Preferred Stock         5/5/2027 1,052,651
 $188,770
 $469,687
 0.03% C/E/N
Tradeshift, Inc. Warrants to Purchase Series D Preferred Stock         3/26/2027 1,712,930
 577,842
 523,801
 0.03% C/E/N
              

 766,612
 993,488
 0.06%  
                       
Total Equity Securities  
 124,831,136
 114,312,957
 6.75%   
         
Total Investments $1,689,277,077
 $1,649,506,895
  
   
                       
Cash and Cash Equivalents  
  
  
   
Cash Held on Account at Various Institutions                
  
 44,848,539
 2.65%   
Cash and Cash Equivalents 44,848,539
 2.65%   
       
Total Cash and Investments  $1,694,355,434
 100.00% M
                       

Notes to Consolidated Schedule of Investments:

(A)Debt investments include investments in bank debt that generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.
(B)Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting  securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.
(C)Non-income producing.
(D)Investment denominated in foreign currency.  Cost and fair value converted from foreign currency to US dollars. Foreign currency denominated investments are generally hedged for currency exposure.
(E)Restricted security. (See Note 2)
(F)Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% of the outstanding voting securities of the issuer nor deemed to be a significant subsidiary.  See Consolidated Schedule of Changes in Investments in Affiliates.
(G)Investment has been segregated to collateralize certain unfunded commitments.
(H)Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
(I)Deemed an investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
(J)Publicly traded company with a market capitalization greater than $250 million and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
(K)Negative balances relate to an unfunded commitment that was acquired and/or valued at a discount.
(L)In addition to the stated coupon, investment has an exit fee payable upon repayment of the loan in an amount equal to the percentage of the original principal amount shown.
(M)All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements.
(N)Inputs in the valuation of this investment included certain unobservable inputs that were significant to the valuation as a whole.
(O)36th Street Capital Partners Holdings, LLC holds common and preferred interests in a pool of equipment loans and leases made by 36th Street Capital Partners, LLC.

LIBOR or EURIBOR resets monthly (M), quarterly (Q), semiannually (S), or annually (A).
 
During 2019, we transitioned our industry classification system for financial reporting purposes to more closely align with the system generally used by the Advisor for portfolio management purposes. As part of this transition, we are generally classifying the industries of our portfolio companies based on the primary end market served rather than the product or service directed to those end markets. The Consolidated Schedule of Investments as of December 31, 2018 reflects the industry classification system prior to this transition.

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $700,024,114 and $596,374,086, respectively, for the twelve months ended December 31, 2019. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments. The total value of restricted securities and bank debt as of December 31, 2019 was $1,605,565,013 or 94.8% of total cash and investments of the Company. As of December 31, 2019, approximately 9.3% of the total assets of the Company were not qualifying assets under Section 55(a) of the 1940 Act.

See accompanying notes to the consolidated financial statements.

87





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments

December 31, 2018

Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (A)      
Advertising, Public Relations and Marketing      
Foursquare Labs, Inc. First Lien Delayed Draw Term Loan (5.0% Exit Fee) LIBOR (Q) 
 8.81% 11.56% 6/1/2020 $22,500,000
 $22,288,567
 $22,343,623
 1.37% L/N
InMobi, Inc. (Singapore) First Lien Term Loan LIBOR (Q) 1.37% 8.13% 10.88% 9/30/2021 $37,775,057
 37,432,000
 37,727,838
 2.32% H/N
                59,720,567
 60,071,461
 3.69%  
Air Transportation      
Mesa Airlines, Inc. Engine Acquisition Delayed Draw Term Loan A LIBOR (Q) 
 7.25% 9.81% 12/14/2021 $12,945,769
 12,802,291
 13,130,247
 0.81% N
Mesa Airlines, Inc. Engine Acquisition Delayed Draw Term Loan B LIBOR (Q) 
 7.25% 9.81% 2/28/2022 $7,683,837
 7,594,071
 7,793,332
 0.48% N
Mesa Airlines, Inc. Engine Acquisition Delayed Draw Term Loan C LIBOR (Q) 
 7.25% 9.81% 7/31/2022 $3,205,798
 3,166,674
 3,296,682
 0.20% N
Mesa Airlines, Inc. Engine Acquisition Delayed Draw Term Loan C-1 LIBOR (Q) 
 7.25% 9.81% 9/30/2022 $4,912,965
 4,845,174
 5,051,510
 0.31% N
Mesa Airlines, Inc. Engine Acquisition Term loan C-3 LIBOR (Q) 
 7.25% 9.81% 2/28/2023 $1,353,738
 1,332,947
 1,391,236
 0.08% N
Mesa Air Group, Inc. Junior Loan Agreement (N902FJ) LIBOR (Q) 
 7.50% 10.04% 2/1/2022 $1,027,521
 1,018,433
 1,014,163
 0.06% N
Mesa Air Group, Inc. Junior Loan Agreement (N903FJ) LIBOR (Q) 
 7.50% 10.04% 2/1/2022 $1,229,633
 1,218,758
 1,213,648
 0.07% N
Mesa Air Group, Inc. Junior Loan Agreement (N904FJ) LIBOR (Q) 
 7.50% 10.04% 2/1/2022 $1,406,638
 1,394,198
 1,388,352
 0.09% N
Mesa Air Group, Inc. Junior Loan Agreement (N905FJ) LIBOR (Q) 
 7.50% 10.04% 2/1/2022 $979,415
 970,753
 966,683
 0.06% N
Mesa Air Group, Inc. Junior Loan Agreement (N906FJ) LIBOR (Q) 
 7.50% 10.04% 5/1/2022 $1,021,301
 1,012,097
 1,008,024
 0.06% N
Mesa Air Group, Inc. Junior Loan Agreement (N907FJ) LIBOR (Q) 
 7.50% 10.04% 5/1/2022 $1,071,436
 1,061,780
 1,057,507
 0.07% N
Mesa Air Group, Inc. Junior Loan Agreement (N908FJ) LIBOR (Q) 
 7.50% 10.04% 5/1/2022 $1,648,638
 1,633,781
 1,627,206
 0.10% N
Mesa Air Group, Inc. Junior Loan Agreement (N909FJ) LIBOR (Q) 
 7.50% 10.04% 8/1/2022 $683,862
 677,658
 674,972
 0.04% N
Mesa Air Group, Inc. Junior Loan Agreement (N910FJ) LIBOR (Q) 
 7.50% 10.04% 8/1/2022 $647,598
 641,723
 639,179
 0.04% N
                39,370,338
 40,252,741
 2.47%  
Amusement and Recreation      
Blue Star Sports Holdings, Inc. First Lien Delayed Draw Term Loan LIBOR (M) 1.00% 5.75% 8.22% 6/15/2024 $
 (15,165) 
 
 K/N
Blue Star Sports Holdings, Inc. First Lien Revolver LIBOR (M) 1.00% 5.75% 8.22% 6/15/2024 $122,222
 119,176
 119,139
 0.01% N
Blue Star Sports Holdings, Inc. First Lien Term Loan LIBOR (M) 1.00% 5.75% 8.22% 6/15/2024 $1,500,000
 1,472,068
 1,472,250
 0.09% N
Machine Zone, Inc. First Lien Term Loan (10.0% Exit Fee) LIBOR (M) 
 13.50% 15.85% 2/1/2021 $5,502,976
 5,439,653
 5,414,929
 0.33% L/N
VSS-Southern Holdings, LLC (Southern Theatres) First Lien Term Loan LIBOR (Q) 1.00% 6.50% Cash+2.00% PIK
 11.30% 11/3/2020 $23,739,142
 23,504,334
 24,037,068
 1.48% N
VSS-Southern Holdings, LLC (Southern Theatres) Sr Secured Revolver LIBOR (Q) 1.00% 6.50% Cash+2.00% PIK
 11.30% 11/3/2020 $856,164
 848,517
 856,165
 0.05% N
VSS-Southern Holdings, LLC (Southern Theatres) First Lien Incremental Term Loan LIBOR (Q) 1.00% 6.50% Cash+2.00% PIK
 11.30% 11/2/2022 $1,415,726
 1,402,020
 1,433,494
 0.09% N
                32,770,603
 33,333,045
 2.05%  
Building Equipment Contractors      
Hylan Datacom & Electrical, LLC First Lien Incremental Term Loan LIBOR (M) 1.00% 7.50% 10.02% 7/25/2021 $2,496,448
 2,442,261
 2,490,207
 0.15% N
Hylan Datacom & Electrical, LLC First Lien Term Loan LIBOR (M) 1.00% 7.50% 10.02% 7/25/2021 $13,807,225
 13,691,491
 13,772,707
 0.85% N
TCFI Amteck Holdings, LLC First Lien Delayed Draw Term Loan LIBOR (Q) 
 6.25% 9.06% 5/22/2023 $481,249
 472,488
 487,746
 0.03% N
TCFI Amteck Holdings, LLC First Lien Term Loan LIBOR (Q) 
 6.25% 9.06% 5/22/2023 $16,046,661
 15,753,256
 16,263,291
 1.00% N
                32,359,496
 33,013,951
 2.03%  
                       
                       
                       

                      

88





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2018


Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)               
        
Business Support Services      
STG-Fairway Acquisitions, Inc.(First Advantage) Second Lien Term Loan LIBOR (Q) 1.00% 9.25% 11.96% 6/30/2023 $31,000,000
 $30,671,781
 $31,000,000
 1.91% N
       
Chemicals      
Nanosys, Inc. First Lien Delayed Draw Term Loan (3.5% Exit Fee) LIBOR (Q) 
 9.81% 12.56% 4/1/2019 $5,773,290
 5,728,080
 5,799,558
 0.36% L/N
                
 
 
  
Computer Systems Design and Related Services      
Fidelis Acquisitionco, LLC First Lien Term Loan B LIBOR (M) 
 8.00% PIK
 10.44% 12/31/2022 $25,904,525
 25,904,525
 22,562,841
 1.39% N
Fidelis Acquisitionco, LLC First Lien Term Loan C LIBOR (M) 
 10.00% PIK
 12.44% 12/31/2022 $25,240,108
 25,240,108
 21,663,585
 1.33% N
                51,144,633
 44,226,426
 2.72%  
Construction      
Brannan Sand Gravel Company, LLC First Lien Term Loan LIBOR (Q) 
 5.25% 8.06% 7/3/2023 $9,403,553
 9,272,489
 9,417,659
 0.58% N
                       
Credit (Nondepository)      
Auto Trakk SPV, LLC First Lien Delayed Draw Term Loan LIBOR (M) 0.50% 6.50% 8.96% 12/21/2021 $22,432,442
 22,185,057
 22,498,697
 1.38% N
CFG Investments Limited (Caribbean Financial Group) (Cayman Islands) Subordinated Class B Notes Fixed 
 9.42% 9.42% 11/15/2026 $28,314,000
 27,452,195
 28,998,633
 1.78% E/G/H
RSB-160, LLC (Lat20) First Lien Delayed Draw Term Loan LIBOR (Q) 1.00% 6.00% 8.80% 7/20/2022 $3,833,333
 3,762,444
 3,765,867
 0.23% N
RSB-160, LLC (Lat20) First Lien Incremental Delayed Draw Term Loan LIBOR (Q) 1.00% 6.00% 8.80% 7/20/2022 $
 
 10,646
 
 N
                53,399,696
 55,273,843
 3.39%  
Credit Related Activities      
Pegasus Business Intelligence, LP (Onyx Centersource) First Lien Incremental Term Loan LIBOR (Q) 1.00% 6.25% 9.06% 12/20/2021 $5,737,148
 5,737,148
 5,823,206
 0.36% N
Pegasus Business Intelligence, LP (Onyx Centersource) First Lien Term Loan LIBOR (Q) 1.00% 6.25% 9.06% 12/20/2021 $14,278,605
 14,188,274
 14,492,784
 0.89% N
Pegasus Business Intelligence, LP (Onyx Centersource) Revolver LIBOR (Q) 1.00% 6.25% 9.06% 12/20/2021 $
 (4,047) 
 
 K/N
Pacific Union Financial, LLC First Lien Term Loan LIBOR (M) 1.00% 7.50% 9.85% 4/21/2022 $24,583,333
 24,410,715
 24,891,854
 1.53% N
                44,332,090
 45,207,844
 2.78%  
Data Processing and Hosting Services      
Applause App Quality, Inc. First Lien Term Loan LIBOR (M) 1.00% 5.00% 7.48% 9/20/2022 $20,772,306
 20,444,242
 20,634,170
 1.27% N
Applause App Quality, Inc. Sr Secured Revolver LIBOR (M) 1.00% 5.00% 7.48% 9/20/2022 $
 (22,511) (10,040) 
 K/N
Datto, Inc. First Lien Term Loan LIBOR (M) 1.00% 8.00% 10.46% 12/7/2022 $27,792,848
 27,330,546
 27,695,573
 1.70% N
Datto, Inc. Sr Secured Revolver LIBOR (M) 1.00% 8.00% 10.46% 12/7/2022 $
 (29,490) (6,547) 
 K/N
DigiCert Holdings, Inc. Second Lien Term Loan LIBOR (M) 1.00% 8.00% 10.52% 10/31/2025 $9,590,821
 9,562,544
 9,339,062
 0.57% G
Domo, Inc. First Lien Delayed Draw Term Loan (4.5% Exit Fee) LIBOR (Q) 
 5.50% Cash+2.50% PIK
 10.50% 6/1/2021 $50,827,704
 50,270,460
 50,601,521
 3.11% L/N
Donuts Inc. First Lien Revolver LIBOR (Q) 1.00% 6.25% 9.05% 9/17/2023 $373,849
 344,520
 363,194
 0.02% N
Donuts Inc. First Lien Term Loan LIBOR (Q) 1.00% 6.25% 9.05% 9/17/2023 $10,965,517
 10,652,302
 10,653,000
 0.66% N
Pulse Secure, LLC First Lien Term Loan LIBOR (M) 1.00% 7.00% 9.39% 5/1/2022 $11,384,532
 11,264,016
 11,430,070
 0.70% N
Pulse Secure, LLC Sr Secured Revolver LIBOR (M) 1.00% 7.00% 9.39% 5/1/2022 $
 (13,473) 
 
 K/N
SnapLogic, Inc. First Lien Term Loan LIBOR (Q) 
 7.81% Cash+2.00% PIK
 12.56% 3/1/2022 $31,313,470
 30,684,121
 31,313,470
 1.93% N
TierPoint, LLC Second Lien Term Loan LIBOR (M) 1.00% 7.25% 9.77% 5/5/2025 $4,275,000
 4,234,570
 4,058,578
 0.25%  
Web.com Group Inc. Second Lien Term Loan LIBOR (Q) 
 7.75% 10.17% 10/11/2026 $23,493,200
 23,320,082
 23,317,001
 1.43% J/N
                188,041,929
 189,389,052
 11.64%  
                       
                       
                       
                       
                       

89





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2018


Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)               
        
Diversified Software      
Acronis International GmbH (Switzerland) First Lien Term Loan LIBOR (Q) 1.00% 11.50%Cash+2.00% PIK
 16.31% 7/16/2020 $15,196,285
 $15,200,725
 $15,196,285
 0.94 % H/N
ArcServe (USA), LLC Second Lien Term Loan LIBOR (Q) 0.50% 8.50% Cash+1.25% PIK
 12.55% 1/31/2020 $31,075,558
 30,932,264
 30,997,869
 1.91 % N
Autoalert, LLC First Lien Incremental Term Loan LIBOR (Q) 0.25% 5.75% Cash+3.00% PIK
 11.19% 12/31/2020 $37,886,155
 37,654,959
 38,113,472
 2.35 % N
Autoalert, LLC First Lien Term Loan LIBOR (Q) 0.25% 5.75% Cash+3.00% PIK
 11.19% 12/31/2020 $14,993,418
 14,790,062
 15,083,378
 0.93 % N
Bond International Software, Inc. (United Kingdom) First Lien Term Loan LIBOR (M) 1.00% 10.00% 12.40% 11/4/2021 $26,358,696
 25,955,777
 25,122,473
 1.55 % H/N
Certify, Inc. First Lien FILO Term Loan LIBOR (M) 1.00% 6.25% 8.77% 1/30/2022 $15,863,835
 15,632,297
 15,625,877
 0.96 % N
DealerFX, Inc. First Lien Term Loan LIBOR (Q) 
 6.25% Cash+2.00% PIK
 11.06% 2/1/2023 $16,016,055
 15,742,618
 16,118,558
 0.99 % N
ECI Macola/Max Holding, LLC Second Lien Term Loan LIBOR (Q) 1.00% 8.00% 10.80% 9/19/2025 $24,840,563
 24,634,138
 24,343,752
 1.50 % N
Fishbowl, Inc. First Lien Term Loan LIBOR (Q) 
 4.80% Cash+8.45% PIK
 16.06% 1/26/2022 $21,976,505
 21,542,497
 20,751,314
 1.28 % N
iCIMS, Inc. First Lien Term Loan LIBOR (Q) 1.00% 6.50% 9.02% 9/12/2024 $7,851,765
 7,699,495
 7,698,655
 0.47 % N
iCIMS, Inc. Sr Secured Revolver LIBOR (Q) 1.00% 6.50% 9.02% 9/12/2024 $
 (9,323) (9,569) 
 K/N
JAMF Holdings, Inc. First Lien Term Loan LIBOR (Q) 1.00% 8.00% 10.61% 11/13/2022 $14,160,797
 13,927,609
 13,990,868
 0.86 % N
JAMF Holdings, Inc. Sr Secured Revolver LIBOR (Q) 1.00% 8.00% 10.61% 11/13/2022 $
 (18,815) (14,569) 
 K/N
Lithium Technologies, LLC First Lien Term Loan LIBOR (M) 1.00% 8.00% 10.39% 10/3/2022 $20,884,731
 20,520,511
 20,529,691
 1.26 % N
Lithium Technologies, LLC Sr Secured Revolver LIBOR (M) 1.00% 8.00% 10.39% 10/3/2022 $
 (25,897) (25,978) 
 K/N
Lithium Technologies, LLC First Lien Incremental Term Loan LIBOR (M) 1.00% 8.00% 10.39% 10/3/2022 $7,131,905
 6,977,108
 7,010,663
 0.43 % N
Lithium Technologies, LLC Sr Secured Revolver LIBOR (M) 1.00% 8.00% 10.39% 10/3/2022 $
 (9,610) (7,739) 
 K/N
Space Midco, Inc. (Archibus) First Lien Term Loan LIBOR (M) 
 6.25% 8.69% 12/5/2023 $4,444,444
 4,356,066
 4,355,556
 0.27 % N
Space Midco, Inc. (Archibus) Sr Secured Revolver LIBOR (M) 
 6.25% 8.69% 12/5/2023 $
 (5,473) (5,556) 
 K/N
Team Software, Inc. First Lien Revolver LIBOR (Q) 
 5.50% 8.31% 9/17/2023 $
 (49,632) (49,508) 
 K/N
Team Software, Inc. First Lien Term Loan LIBOR (Q) 
 5.50% 8.31% 9/17/2023 $13,167,038
 12,979,534
 12,981,383
 0.80 % N
Telarix, Inc. First Lien Term Loan LIBOR (M) 1.00% 6.00% 8.47% 11/19/2023 $7,500,000
 7,388,692
 7,387,500
 0.45 % N
Telarix, Inc. Sr Secured Revolver LIBOR (M) 1.00% 6.00% 8.47% 11/19/2023 $
 (5,231) (5,357) 
 K/N
Tradeshift Holdings, Inc. First Lien Delayed Draw Term Loan (7.0% Exit Fee) LIBOR (Q) 
 8.88% 11.63% 9/1/2020 $19,117,528
 18,692,528
 19,569,008
 1.20 % L/N
Utilidata, Inc. First Lien Delayed Draw Term Loan (4.0% Exit Fee) LIBOR (Q) 
 9.88% 12.63% 6/1/2019 $1,973,398
 1,955,853
 1,888,937
 0.12 % L/N
Xactly Corporation First Lien Incremental Term Loan LIBOR (Q) 1.00% 7.25% 9.78% 7/31/2022 $2,726,918
 2,680,492
 2,726,918
 0.17 % N
Xactly Corporation First Lien Term Loan LIBOR (Q) 1.00% 7.25% 9.78% 7/31/2022 $16,397,517
 16,146,078
 16,397,517
 1.01 % N
Xactly Corporation Sr Secured Revolver LIBOR (Q) 1.00% 7.25% 9.78% 7/31/2022 $
 (20,188) 
 
 K/N
                315,265,134
 315,771,398
 19.45 %  
Educational Support Services      
Edmentum, Inc. First Lien Term Loan B LIBOR (Q) 
 8.50% 11.03% 6/9/2021 $6,187,476
 5,276,592
 6,187,478
 0.38 % B/N
Edmentum, Inc. Junior Revolving Facility Fixed 
 5.00% 5.00% 6/9/2020 $1,153,071
 1,153,071
 1,153,076
 0.07 % B/N
Edmentum, Inc. Second Lien Term Loan Fixed 
 7.00% PIK
 7.00% 12/8/2021 $7,719,061
 7,719,061
 7,719,069
 0.47 % B/N
Edmentum Ultimate Holdings, LLC Sr PIK Notes Fixed 
 8.50% 8.50% 6/9/2020 $3,375,453
 3,375,453
 3,375,453
 0.21 % B/N
Edmentum Ultimate Holdings, LLC Jr PIK Notes Fixed 
 10.00% 10.00% 6/9/2020 $15,931,540
 15,700,810
 11,152,078
 0.69 % B/N
                33,224,987
 29,587,154
 1.82 %  
Electronic Component Manufacturing      
Adesto Technologies Corporation First Lien Term Loan LIBOR (Q) 1.00% 8.75% 11.56% 5/8/2022 $17,816,424
 16,762,198
 16,979,052
 1.04 % N
Soraa, Inc. Tranche A Term Loan (4.33% Exit Fee) LIBOR (Q) 0.44% 9.33% 12.15% 12/31/2019 $5,425,530
 5,345,178
 5,042,759
 0.31 % L/N
                22,107,376
 22,021,811
 1.35 %  
                       
                       

90





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2018


Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)               
 

 

 

  
Equipment Leasing      
36th Street Capital Partners Holdings, LLC Senior Note Fixed 
 12.00% 12.00% 11/1/2020 $27,839,419
 $27,839,419
 $27,839,419
 1.71 % E/F/N/O
                       
Financial Investment Activities      
Aretec Group, Inc. (Cetera) Second Lien Term Loan LIBOR (M) 
 8.25% 10.77% 10/1/2026 $27,105,263
 26,835,011
 26,969,737
 1.66 % N
Credit Suisse AG (Cayman Islands) Asset-Backed Credit Linked Notes LIBOR (M) 
 9.50% 11.80% 4/12/2025 $38,000,000
 38,000,000
 36,540,800
 2.25 % H/I/N
HighTower Holding, LLC Second Lien Delayed Draw Term Loan LIBOR (Q) 1.00% 8.25% 10.77% 1/31/2026 $
 (123,019) (135,726) (0.01)% K/N
HighTower Holding, LLC Second Lien Term Loan LIBOR (M) 1.00% 8.25% 10.64% 1/31/2026 $15,080,645
 14,696,998
 14,748,871
 0.91 % N
Institutional Shareholder Services, Inc. Second Lien Term Loan LIBOR (Q) 1.00% 7.75% 10.55% 10/16/2025 $4,333,333
 4,314,098
 4,268,333
 0.26 % N
                83,723,088
 82,392,015
 5.07 %  
Health Care      
Pacific Coast Holdings Investment, LLC (KPC Healthcare) First Lien Term Loan LIBOR (M) 1.00% 7.50% 10.02% 2/14/2021 $29,288,064
 29,037,391
 29,727,385
 1.83 % N
                       
Insurance      
2-10 Holdco, Inc. First Lien Term Loan LIBOR (M) 
 6.25% 8.77% 10/31/2024 $4,583,333
 4,493,433
 4,491,667
 0.28 % N
2-10 Holdco, Inc. Sr Secured Revolver LIBOR (M) 
 6.25% 8.77% 10/31/2024 $
 (8,102) (8,333) 
 K/N
Higginbotham Insurance Agency, Inc. Second Lien Term Loan LIBOR (M) 1.00% 7.25% 9.76% 12/19/2025 $16,417,578
 16,312,313
 16,253,402
 1.00 % N
IAS Investco, Inc. First Lien Delayed Draw Term Loan A LIBOR (M) 1.00% 5.50% 8.02% 1/24/2021 $5,610,000
 5,569,506
 5,565,120
 0.34 % N
IAS Investco, Inc. First Lien Delayed Draw Term Loan B LIBOR (M) 1.00% 5.50% 8.02% 1/24/2021 $600,000
 588,544
 586,286
 0.04 % N
IAS Investco, Inc. First Lien Term Loan LIBOR (M) 1.00% 5.50% 8.02% 1/24/2021 $4,178,571
 4,148,342
 4,145,143
 0.26 % N
US Apple Holdco, LLC (Ventiv Technology) First Lien FILO Term Loan LIBOR (Q) 1.00% 7.96% 10.57% 8/15/2020 $20,151,515
 20,017,875
 20,092,068
 1.24 % N
US Apple Holdco, LLC (Ventiv Technology) First Lien Incremental Tranche B FILO Term Loan LIBOR (Q) 1.00% 7.96% 10.57% 8/15/2020 $4,371,000
 4,329,254
 4,358,106
 0.27 % N
US Apple Holdco, LLC (Ventiv Technology) First Lien Incremental Tranche B FILO Term Loan LIBOR (Q) 1.00% 7.00% 9.81% 8/15/2020 $12,000,000
 11,941,059
 11,964,600
 0.74 % N
                67,392,224
 67,448,059
 4.17 %  
Lessors of Nonfinancial Licenses      
ABG Intermediate Holdings 2, LLC (Authentic Brands) Second Lien Term Loan LIBOR (M) 1.00% 7.75% 10.27% 9/29/2025 $15,000,000
 14,897,544
 14,775,000
 0.91 % N
Kenneth Cole Productions, Inc. First Lien FILO Term Loan LIBOR (Q) 1.00% 7.75% 10.31% 12/28/2023 $24,445,537
 24,261,768
 24,449,204
 1.50 % N
PSEB, LLC (Eddie Bauer) First Lien FILO II Term Loan Prime 
 7.25% 12.75% 10/12/2023 $10,793,402
 10,503,078
 10,496,583
 0.65 % N
PSEB, LLC (Eddie Bauer) First Lien Term Loan Prime 
 7.00% 12.25% 10/12/2023 $41,374,706
 40,270,155
 40,236,902
 2.48 % N
                89,932,545
 89,957,689
 5.54 %  
Management, Scientific, and Technical Consulting Services      
Dodge Data & Analytics, LLC First Lien Delayed Draw Term Loan LIBOR (Q) 1.00% 7.00% 9.81% 5/1/2020 $939,723
 937,704
 938,078
 0.06 % N
Dodge Data & Analytics, LLC First Lien Term Loan LIBOR (Q) 1.00% 7.00% 9.81% 5/1/2020 $38,013,149
 37,925,182
 37,946,626
 2.33 % N
                38,862,886
 38,884,704
 2.39 %  
Metal Manufacturing      
Neenah Foundry Company First Lien Term Loan B LIBOR (Q) 
 6.50% 9.12% 12/13/2022 $5,218,642
 5,173,487
 5,166,455
 0.32 % N
                       
Motion Picture and Video Industries      
NEG Holdings, LLC (CORE Entertainment, Inc.) First Lien Term Loan LIBOR (Q) 1.00% 8.00% PIK
 10.80% 10/17/2022 $1,574,099
 1,574,099
 1,574,099
 0.10 % B/N
                       
                       
                       
                       

91





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2018


Issuer Instrument Ref Floor Spread Total Coupon Maturity Principal Cost 
Fair
Value
 
% of Total
Cash and
Investments
 Notes
Debt Investments (continued)        
Other Information Services      
Discoverorg, LLC Second Lien Incremental Term Loan LIBOR (Q) 1.00% 8.50% 11.03% 2/26/2024 $3,419,277
 $3,404,541
 $3,435,005
 0.21 % N
Discoverorg, LLC Second Lien Term Loan LIBOR (Q) 1.00% 8.50% 11.03% 2/26/2024 $12,839,252
 12,738,498
 12,898,312
 0.79 % N
                16,143,039
 16,333,317
 1.00 %  
Other Manufacturing      
AGY Holding Corp. Sr Secured Term Loan Fixed 
 12.00% 12.00% 5/18/2020 $4,869,577
 4,869,577
 4,869,577
 0.30 % B/N
AGY Holding Corp. Second Lien Notes Fixed 
 11.00% 11.00% 11/15/2020 $9,777,740
 8,096,057
 9,777,740
 0.60 % B/E/N
AGY Holding Corp. Delayed Draw Term Loan Fixed 
 12.00% 12.00% 5/18/2020 $1,049,146
 1,049,146
 1,049,147
 0.06 % B/N
                14,014,780
 15,696,464
 0.96 %  
Other Real Estate Activities      
Greystone Select Holdings, LLC First Lien Term Loan LIBOR (M) 1.00% 8.00% 10.51% 4/17/2024 $25,076,693
 24,873,125
 25,828,994
 1.59 % N
                

 

 

  
Other Telecommunications      
Securus Technologies, Inc. Second Lien Term Loan LIBOR (M) 1.00% 8.25% 10.77% 11/1/2025 $25,846,154
 25,636,438
 25,006,154
 1.54 %  
                       
Pharmaceuticals      
P&L Development, LLC First Lien Term Loan LIBOR (Q) 1.00% 8.00% 10.40% 5/18/2022 $489,643
 489,643
 460,460
 0.03 % N
                       
Plastics Manufacturing      
Iracore International, Inc. First Lien Term Loan LIBOR (Q) 1.00% 9.00% 11.63% 4/13/2021 $1,900,733
 1,900,733
 1,900,733
 0.12 % B/N
                       
Publishing      
Bisnow, LLC First Lien Revolver LIBOR (Q) 
 7.50% 9.94% 9/21/2022 $
 (14,023) (1,800) 
 K/N
Bisnow, LLC First Lien Term Loan LIBOR (Q) 
 7.50% 9.94% 9/21/2022 $11,412,284
 11,255,232
 11,395,166
 0.70 % N
Patient Point Network Solutions, LLC First Lien Term Loan LIBOR (Q) 1.00% 7.50% 10.30% 6/26/2022 $6,783,498
 6,717,412
 6,825,895
 0.42 % N
Patient Point Network Solutions, LLC Sr Secured Revolver LIBOR (Q) 1.00% 7.50% 10.30% 6/26/2022 $
 (3,994) 
 
 K/N
Patient Point Network Solutions, LLC First Lien Incremental Term Loan LIBOR (Q) 1.00% 7.50% 10.30% 6/26/2022 $1,307,421
 1,291,842
 1,315,592
 0.08 % N
                19,246,469
 19,534,853
 1.20 %  
Radio and Television Broadcasting      
NEP II, Inc. Second Lien Term Loan LIBOR (M) 
 7.00% 9.52% 10/19/2026 $18,769,990
 18,676,292
 17,737,641
 1.09 % G/N
                       
Real Estate Leasing      
Daymark Financial Acceptance, LLC First Lien Delayed Draw Term Loan LIBOR (M) 
 9.50% 11.85% 1/12/2020 $14,000,000
 13,945,511
 13,878,900
 0.85 % N
Home Partners of America, Inc. First Lien Delayed Draw Term Loan LIBOR (M) 1.00% 6.25% 8.77% 10/13/2022 $
 
 19,286
 
 N
Home Partners of America, Inc. First Lien Term Loan LIBOR (M) 1.00% 6.25% 8.77% 10/13/2022 $2,857,143
 2,817,711
 2,840,000
 0.17 % N
                16,763,222
 16,738,186
 1.02 %  
Retail      
USR Parent, Inc. (Staples) First Lien FILO Term Loan LIBOR (M) 1.00% 8.84% 11.18% 9/12/2022 $7,525,874
 7,376,741
 7,531,142
 0.46 % N
                       
Satellite Telecommunications      
Avanti Communications Group, PLC (United Kingdom) Sr New Money Initial Note Fixed 
 9.00% PIK
 9.00% 10/1/2022 $1,524,339
 1,491,697
 1,152,172
 0.07 % E/G/H/N
Avanti Communications Group, PLC (United Kingdom) Sr Second-Priority PIK Toggle Note Fixed 
 9.00% 9.00% 10/1/2022 $3,889,686
 3,808,971
 2,940,019
 0.18 % E/G/H/N
                5,300,668
 4,092,191
 0.25 %  
                       
                       
                       
                       
                       
                       

92





BlackRock TCP Capital Corp.

Consolidated Schedule of Investments (Continued)

December 31, 2018


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