Bcp Investment Corporation · NASDAQ:BCIC
Bcp Investment — KCAP Financial — Investor Presentation (April 2015)
29 slides from Bcp Investment's investor presentation, April 2015
Slide 1: Investor Presentation April 2015
Investor Presentation April 2015
Slide 2: Forward Looking / Non-GAAP Information
Forward Looking / Non-GAAP Information This presentation includes forward-looking statements. The matters discussed in this presentation, as well as in future oral and written statements by management of KCAP Financial, Inc., that are forward-looking statements are based on current management expect
Slide 3: Investment Highlights
Investment Highlights Internally managed structure – low expense ratio especially compared to externally Innovative Strategy managed BDCs and Platform 100% ownership of Asset Manager Affiliates (Katonah Debt Advisors and Trimaran Advisors) Highly Experienced Seasoned management team with avera
Slide 4: Experienced Management Team
Experienced Management Team Extensive experience and a proven investment track record KCAP’s President and CEO since 2006 More than 33 years of banking experience focused primarily on middle Dayl W. Pearson market credit intensive transactions Chief Executive Officer In excess of $5 billion in
Slide 5: Dynamic Business Model
Dynamic Business Model KCAP’s innovative business strategy generates strong asset and dividend growth while responsibly managing credit risk Focus on middle market transaction-driven lending with large transaction volume We pursue a highly selective and diversified asset accumulation strategy
Slide 6: Innovative Strategy and Platform: Direct Lending
Innovative Strategy and Platform Internally managed BDC with three contributing business segments offering diversification through economic cycles Direct Lending Middle market: first lien term loans, 2nd lien loans, mezzanine, and private equity $320 million portfolio of debt securities Averag
Slide 7: Innovative Strategy and Platform: Asset Manager Affiliates
Innovative Strategy and Platform Internally managed BDC with three contributing business segments offering diversification through economic cycles Asset Manager Affiliates Wholly owned asset management businesses, Katonah Debt Advisors and Trimaran Advisors $3.0 billion in AUM and $72 million fa
Slide 8: Innovative Strategy and Platform: CLO Fund Securities
Innovative Strategy and Platform Internally managed BDC with three contributing business segments offering diversification through economic cycles CLO Fund Securities $78 million portfolio of investments in CLO Fund Securities $72 million (93%) of CLO Fund Securities represent investments in sub
Slide 9: Innovative Strategy and Platform
Innovative Strategy and Platform KCAP comprises a publicly traded BDC focused on middle market lending and investing and a wholly owned asset management company KCAP Receives “KCAP” Distributions of cash flow Publicly Traded BDC from AMA’s Current cash returns (non- GAAP) on CLO equity investmen
Slide 10: Components of Distributable Resources
Components of distributable RESOURCES Delivering balanced sources of distributable cash flow In millions AMA Cash in Excess of Taxable E&P $50.0 CLO Cash in Excess of GAAP Investment Income $40.0 Other Dividends from Asset Manager Affiliates $30.0 Interest on CLO Fund Securities (GAAP) Interest Inco
Slide 11: Direct Lending
KCAP FINANCIAL, INC. Direct Lending 11
Slide 12: Disciplined Investment Process
Disciplined Investment Process Proven investment process with a successful track record, review over 200 transaction opportunities with an 90% turndown ratio Qualitative Analysis • Strong industry fundamentals Investment Opportunity • Highly experienced management • Variable sourcing avenues • Seaso
Slide 13: Portfolio Highlights
PORTFOLIO HIGHLIGHTS PORTFOLIO DEBT SECURITIES - INDUSTRY DIVERSIFICATION Healthcare & Pharmaceuticals Portfolio Company Loan 16% 20% Telecommunications Transportation: Cargo Beverage, Food and Tobacco 3% Services: Business 3% High Tech Industries 3% 7% Media: Broadcasting & Subscription Consumer go
Slide 14: Originations and Repayments
Originations and Repayments Closed 31 new deals in Q4 2014 comprising approximately $78 million of new assets¹ KCAP Senior Funding: Upsized by $56 million in December Weighted average yield on our debt securities portfolio was 7.3% in Q4 Our pipeline remains robust and opportunities exist
Slide 15: Asset Manager Affiliates (AMAs)
Asset Manager Affiliates (AMAs) 15
Slide 16: Asset Manager Affiliates
Asset Manager Affiliates Wholly owned asset management business $3.0 billion in AUM Priced a $464 million CLO fund in March 2015 - Catamaran CLO 2015-1 Ltd. All CLO’s managed by KDA and Trimaran are current on equity distributions and management fees. Five of the funds were paying incentive
Slide 17: CLO Equity / Asset Manager Synergy
CLO Equity / Asset Manager Synergy Typical Deal KCAP Equity Investment $10.0 million Rate of Return 12% Annual $1.2 million Asset Manager Affiliate¹ AUM $400 million Net Fee² 40 Bps Annual $1.6 million Combined Return Total Return 28% Investment $10 million Annual $2.8 million ¹Assume CLO Deal size
Slide 18: CLO Equity
KCAP FINANCIAL, INC. CLO Equity 18
Slide 19: CLO Equity
CLO Equity Opportunistically Enhancing Portfolio Yields Through Investments in CLO Equity KCAP makes investments in the CLO Funds managed by our Asset Manager Affiliates as well as third party investors These investments provide our Asset Manager Affiliates with greater opportunities to access n
Slide 20: Summary of KCAP Attributes
Summary of KCAP Attributes Dynamic business model generates sustainable dividends Sustainable, recurring revenues not dependent on capital gains Recurring interest income from secured loan and CLO portfolios Stable asset management fee income from Asset Manager Affiliates New investments in
Slide 21: Appendix: Investor Supplement
Appendix: Investor Supplement 21
Slide 22: Net Investment Income (NII)
Net Investment Income (NII) A Major Component of Operating Cash Flow…But Not The Whole Story Unlike most BDCs, KCAP’s NII is not a proxy for either cash flow available for distribution to its shareholders nor Taxable Distributable Income (“TDI”) NII is starting point for understanding KCAP’s abi
Slide 23: Beyond Net Investment Income
Beyond Net Investment Income Cash Distributions from CLO equity Not included in NII Distributions from CLO Equity Investments With some caveats, a BDC must distribute 90% of TDI in order to maintain its pass through RIC status 100% of cash distributions received on CLO Equity are taxable incom
Slide 24: Beyond Net Investment Income
Beyond Net Investment Income AMA Excess Free Cash Flow Not Included in NII AMA Excess Free Cash Flow (ECF) Cash available for distribution above tax-basis E&P Due to the tax structure of the acquisitions of both AMAs, and the affect of net operating loss carry forwards, they benefit from signi
Slide 25: Taxable Distributable Income (TDI)
Taxable Distributable Income (TDI) Income Distributable as a RIC NII + CLO Equity Cash (in excess of GAAP effective interest) = Taxable Distributable Income or TDI 2014 TDI was $0.78 While this means $0.22 of KCAP’s distribution was technically a return of capital, all but $0.03 of that reflects
Slide 26: AMA – Excess Free Cash Flow
AMA – Excess Free Cash Flow AMA Cash in Excess of Taxable E&P is Available for Distribution Free Cash Flow benefits from non-cash Tax Deductions and loss carryforwards Without these items, the AMA’s would pay more in taxes KCAP benefits from these non-cash tax items through excess free cash fl
Slide 27: KCAP Cash Flow Available for Distribution
KCAP Cash Flow Available for Distribution Distributable Cash Beyond NII and TDI 2014 Net Investment Income $0.59 Taxable Income In Excess of Net Interest Income due to CLO equity distributions $0.19 AMA Excess Cash Flow¹ $0.19 Total Available Distributable Cash in 2014 was $0.97¹ . ¹ A
Slide 28: AMA Investment
AMA Investment AMA Return of Capital Differences AMA Growing Dynamic Non-Capital Intensive Tax Advantage Structure AMA Produces Steady Cash Flows A Portion of Those Cash Flows are Tax Advantaged (ECF) – Flow out as AMA Return of Capital Tax Advantage Flows Through to KCAP Shareholder
Slide 29: Q&A
KCAP FINANCIAL, INC. Q&A