Bcp Investment Corporation · NASDAQ:BCIC
Bcp Investment — KCAP Financial — Investor Presentation (April 2015)
29 slides from Bcp Investment's investor presentation, Apr 16, 2015
Slide 1: Investor Presentation April 2015
KCAP FINANCIAL, INC. Investor Presentation April 2015
Slide 2: Forward Looking / Non-GAAP Information
FORWARD LOOKING / NON-GAAP INFORMATION KCAP 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 e
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS KOAE ‘+ 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 wit
Slide 4: Experienced Management Team
KCAP EXPERIENCED MANAGEMENT TEAM Ainancin ine Extensive experience and a proven investment track record Dayl W. Pearson Chief Executive Officer » KCAP’s President and CEO since 2006 » More than 33 years of banking experience focused primarily on middle market credit intensive transactions » Inexcess
Slide 5: Dynamic Business Model
KCAP DYNAMIC BUSINESS MODEL — KCAP & 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 stra
Slide 6: Innovative Strategy and Platform: Direct Lending
KCAP INNOVATIVE STRATEGY AND PLATFORM "ne Internally managed BDC with three contributing business segments offering diversification through economic cycles Direct Lending » Middle market: first lien term loans, 2 lien loans, mezzanine, and private equity » $320 million portfolio of debt securities »
Slide 7: Innovative Strategy and Platform: Asset Manager Affiliates
KCAP INNOVATIVE STRATEGY AND PLATFORM "ne 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 m
Slide 8: Innovative Strategy and Platform: CLO Fund Securities
KCAP INNOVATIVE STRATEGY AND PLATFORM "xen 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 investme
Slide 9: Innovative Strategy and Platform: KCAP Structure
KCAP INNOVATIVE STRATEGY AND PLATFORM *=" KCAP comprises a publicly traded BDC focused on middle market lending and investing and a wholly owned asset management company > Total Investment in AMAs of $72 million at FMV as of 12/31/2014 > Investments in CLO Funds of $74 million at 12/31/14 > Investme
Slide 10: Components of Distributable Resources
KCAP COMPONENTS OF DISTRIBUTABLE RESOURCES "*scHuinc Delivering balanced sources of distributable cash flow In millions (MAMA Cash in Excess of Taxable E&P $50.0 IMMBECLO Cash in Excess of GAAP Investment Income $40.0 mmmOther mmm Dividends from Asset Manager Affiliates $30.0 lim Interest on CLO Fun
Slide 11: Direct Lending
KCAP FINANCIAL ING Direct Lending u
Slide 12: Disciplined Investment Process
DISCIPLINED INVESTMENT PROCESS KCAP Proven investment process with a successful track record, review over 200 transaction opportunities with an 90% turndown ratio + Strong industry fundamentals + Highly experienced management + Variable sourcing avenues + Seasoned credit cycle experience + Diversity
Slide 13: Portfolio Highlights
PORTFOLIO HIGHLIGHTS KOAE PORTFOLIO DrBT SECURITIES ~ INDUSTRY DIVERSIFICATION Healthcare & Pharmaceuticals Portfolio Company Loan mTelecommunications Transportation: Cargo Beverage, Food and Tobacco Services: Business High Tech Industries lm Media: Broadcasting & Subscription lm Consumer goods: Non
Slide 14: Originations and Repayments
KCAP ORIGINATIONS AND REPAYMENTS oe" . Closed 31 new deals in Q4 2014 comprising approximately $78 million of new assets* . 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 opportuniti
Slide 15: Asset Manager Affiliates (AMAs)
KCAP FINANCIAL ING Asset Manager Affiliates (AMAs) 15
Slide 16: Asset Manager Affiliates
KCAP ASSET MANAGER AFFILIATES freee . 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
Slide 17: CLO Equity / Asset Manager Synergy
KCAP CLO EQUITY / ASSET MANAGER SYNERGY —-™scHERc Typical Deal Equity Investment $10.0 million Rate of Retumn 12% Annual $1.2 million Asset Manager Affiliate’ AUM ‘$400 million Net Fee* 40 Bps Annual $1.6 million Combined Return Total Return 28% Investment $10 million Annual $2.8 million * Ascame CL
Slide 18: CLO Equity
KCAP FINANCIAL ING CLO Equity 18
Slide 19: CLO Equity
KCAP CLO EQUITY FINANCIAG ING 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 opport
Slide 20: Summary of KCAP Attributes
KCAP SUMMARY OF KCAP ATTRIBUTES freemen Dynamic business model generates sustainable dividends v 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 v New in
Slide 21: Appendix: Investor Supplement
KCAP FINANCIAL ING Appendix: Investor Supplement 21
Slide 22: Net Investment Income (NII)
KCAP NET INVESTMENT INCOME (NID irene 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”) * NILis starting point for understanding
Slide 23: Beyond Net Investment Income: CLO Equity Cash
KCAP BEYOND NET INVESTMENT INCOME | sen 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 ta
Slide 24: Beyond Net Investment Income: AMA Excess Free Cash Flow
KCAP BEYOND NET INVESTMENT INCOME | # mn 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 benefi
Slide 25: Taxable Distributable Income (TDI)
KCAP TAXABLE DISTRIBUTABLE INCOME (TDD) ene 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 r
Slide 26: AMA Excess Free Cash Flow
KCAP AMA ~— EXCESS FREE CASH FLOW BNANCARING 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 ex
Slide 27: KCAP Cash Flow Available for Distribution
KCAP KCAP CASH FLOW AVAILABLE FOR DISTRIBUTION "YS": Distributable Cash Bevond 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 Flow" * $0.19 . Total Available Distributable Cash in 2014 was $
Slide 28: AMA Return of Capital Differences
KCAP AMA INVESTMENT FINANCIAL ING AMA Return of Capital Differences * 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 Retum of Capital + Tax Advantage Flows Through to KCAP Sharehold
Slide 29: Q&A
KCAP FINANCIAL ING Q&A