Jonathan Cohen - Chief Executive Officer Bruce Rubin - Chief Financial Officer and Treasurer.

Analysts:.

Good morning, and welcome to the TICC Capital Corp’s Third Quarter 2015 earnings conference call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jonathan Cohen, Chief Executive Officer. Please go ahead, sir..

Thank you. Good morning, and welcome everyone to the TICC Capital Corp’s third quarter 2015 earnings conference call. I'm joined today by Saul Rosenthal, our President and Chief Operating Officer, and Bruce Rubin, our Chief Financial Officer and Treasurer.

Bruce, could you open the call today with a discussion regarding forward-looking statements?.

Sure Jonathan. Today's call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was released earlier this morning. Please note that this call is the property of TICC Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

I would also like to call your attention to the customary disclosure in our press release this morning regarding forward-looking information.

Today's conference call includes forward-looking statements and projections, and we ask that you refer to our most recent filings at the SEC, for important factors that can cause actual results to differ materially from those projections. We do not undertake to update our forward-looking statements unless required to do so by law.

To obtain copies of our latest SEC filings, please visit our website at www.ticc.com. Please note, that we will not be conducting a Q&A at the end of this call. With that, I'll turn the call back over to Jonathan..

Thanks Bruce. For the third quarter of 2015, TICC reported GAAP total investment income of approximately $23.1 million, representing a decrease of approximately $600,000 from the second quarter's $23.7 million figure.

Third quarter GAAP income from our portfolio was distributed as follows, approximately $14.1 million from our debt investments, approximately $8.6 million from our CLO equity investments, and approximately $400,000 from all other income.

Income from our debt investments was up $1.2 million for the quarter, income from our CLO equity investments was down by $1.0 million, and all other income was down by approximately $900,000 from the prior quarter.

We also reported GAAP net investment income of approximately $10.9 million, or $0.18 per share for the third quarter of 2015, roughly flat with the second quarter's $0.18 per share on a GAAP NII basis.

Our taxable income, which we estimate approximates our cash income is generally higher, generally substantially higher than GAAP NII, due to the accounting for CLO equity investments under GAAP, and for the quarter equated to $10.5 million, or $0.34 per share.

This Core NII represents that portion of our estimated annual taxable income available for distribution to common shareholders that we estimate to be attributable to the quarter.

The company's Board of Directors has declared a distribution of $0.29 per share for the fourth quarter of this year, payable on December 31, 2015 to shareholders of record as of December 16th.

For the quarter ended September 30, 2015, we also recorded net realized capital gains of approximately $400,000, and net unrealized depreciation of approximately $41.0 million. Our CLO positions suffered significant price declines during the quarter.

As a result of those realized gains and unrealized losses, we had a net decrease in net assets resulting from operations of approximately $29.7 million, or $0.50 per share for the quarter.

Our weighed average credit rating on a fair value basis stood at 2.2 at the end of the third quarter of 2015, compared to 2.1 at the end of the second quarter of 2015. As a reminder, our credit rating system is based on a 1 to 5 scale, with a lower number representing a stronger credit quality.

At September 30, 2015, our net asset value per share stood at $7.81, compared with a net asset value at the end of the second quarter of $8.60. During the third quarter of 2015, we made additional investments totaling approximately $66.3 million.

The additional investments consisted of approximately $63.4 million in corporate securities, and $2.9 million in CLO equity. Also for the third quarter of 2015, we recognized portfolio exits of approximately $47 million, $47.0 million from repayments, sales and amortization payments on our investments.

As of September 30, 2015, the following weighted average yields were calculated. The weighted average yield of our debt investments at current cost stood at approximately 7.2%, compared with 7.6% as of June 30, 2015.

And the weighted average effective yield on our CLO equity investments at current cost stood at approximately 11.3%, compared with 12.6% as of June 30, 2015. The weighted average yield of cash income producing CLO equity investments at current costs was approximately 25.4%, compared with that same figure, 25.4% as of June 30, 2015.

We note that the cash yield calculated on the CLO equity investments is based on the cash distribution we received, or were entitled to receive at each respective period end, and excludes the CLO equity investments which have not yet made their respective inaugural payments.

We note that as of September 30, we held no investments on non-accrual status. From an investment strategy perspective, we note that our strategies since the credit crisis of 2008-2009 has been a consistent one.

We have maintained a focus on maximizing our exposure to senior secured corporate loans on a direct basis, by lower risk corporate loans, and on an indirect basis by a higher risk CLO debt and equity. We have and continue to view our overall leverage on our CLO exposure as two parts of one strategy.

We have maintained a high level of CLO debt and equity exposure over the past several years, close to our 30% statutory maximum.

That strategy is intended to produce high risk adjusted returns, based on the credit worthiness of the underlying collateral pools within each CLO structure, set against a relatively low weighted average cost of debt capital, which has been available to issuers within the CLO market.

We have pursued a relatively active trading strategy within that market, and given the returns generated on our CLO debt and equity investments since our initiation of the strategy in 2009, we believe it has been a successful one.

At the same time, and consistent with our broader strategy over the past several years, we have more recently maintained a relatively high statutory leverage ratio of approximately 1:1, but a relatively low recourse leverage ratio, as a result of the majority of the company's statutory leverage resulting from non-recourse debt, specifically our 2012 CLO and our Citi funding facility.

We note that our statutory leverage as of September 30th stood at $505 million, which was equal to approximately 107% of our equity value.

However, that portion of our statutory leverage represented by borrowings that represented recourse debt to the company stood at $115 million as of September 30th, equating to 22.8% of our total statutory leverage.

While our leverage currently stands above the 1:1 ratio, we note that because we have no publicly traded debt outstanding, our only limitation as a result of our leverage ratio, is with respect to incurring new debt, which we are not planning to do, and not with regard to making new investments or repurchasing our common shares.

At the same time, we believe that a reduction in our statutory leverage ratio is appropriate. While the cost of capital associated with our two leveraged structures has been and remains attractive, we believe that the corporate loan market may now provide us with higher yielding opportunities that can be held on a less leveraged basis.

With that in mind, we expect our statutory leverage ratio to decline in the coming quarters. With regard to our corporate loan portfolio, we note that the leverage loan market exhibited meaningful weakness in the third quarter of 2015, with the CS leveraged loan index total return down by 1.22% from [6/30 to 9/30].

This was largely driven by weak performance in commodity oriented sectors such as oil and gas, and metals and mining. Besides those sectors, the loan market also traded down more broadly, in conjunction with the high yield and equity markets.

TICC's directly held leverage loan portfolio has benefited from virtually no exposure to commodities oriented sectors, and de minimis exposure to oil and gas and the metals and mining sectors for an extended period. During the third quarter, our syndicated loan portfolio showed stability, with the value of that portfolio declining by 37 basis points.

We had no loans that were on a non-accrual status as of 9/30/2015. Consistent with our view to reduce our statutory leverage ratio, we're now exploring rotating out of lower yielding loans that are priced at or near their respective core values, and into higher yielding primary loans in order to take advantage of the rising credit spreads.

Given the deterioration in credit metrics, and the rise in the number of stressed and distressed loans, we expect to take an opportunistic approach to enhance the return on that portion of our investment portfolio.

With regard to our CLO investments, we note that during the quarter ended September 30, the CLO market suffered its worst price declines in several years, consistent with price declines in the syndicated loan assets, which represent the underlying collateral pools for those vehicles.

While much of that weakness was driven by commodities related sectors as previously mentioned, broader macro weakness also contributed to lower trading prices for the leveraged loan market as a whole.

According to Morgan Stanley, average 2.0 CLO equity NAVs were down by approximately 20% of par quarter-over-quarter, end of the third quarter compared to the end of the second quarter.

Consequently, during the quarter the market saw certain CLO tranches trading at significant discounts and significant yields from a cash price perspective, as portfolio collateral composition became more closely watched by investors.

The combination of depressed NAVs, weakness in the broader markets, and actually trades of CLO equity at those lower levels, have contributed to lower marks on our CLO equity portfolio, and for the CLO equity market as a whole.

Given the meaningful dislocation that has occurred in the CLO market, we are starting to see a much more compelling investment opportunity set, relative to the last twelve months, especially if certain portfolios continue to differentiate themselves from a credit perspective.

Since we began investing in the CLO market in 2009, we've focused on both the primary and secondary markets, and have varied our emphasis according to which we believe offered relative values at various times – better relative values at various times.

Given our active participation in both markets, we believe we have a deeper understanding of that market's trading dynamics, compared to other more recent market participants, especially in periods of market volatility.

We continue to deploy our CLO investing strategy where we see opportunities to generate attractive current cash flows, and/or the potential for capital appreciation.

As part of that opportunity, and because we have also seen a similarly pronounced dislocation in the CLO junior debt markets, we may more opportunistically invest in CLO debt tranches that can provide a compelling risk adjusted and absolute return.

Lastly, we plan to continue to rotate out of certain older vintage CLO equity tranches, when we see an attractive bid or redemption opportunities.

During these periods of mark-to-market volatility, we continue to benefit from the locked in term financing of our CLO vehicles, which may benefit from the current wider corporate spread environment over the long run, as well as our permanent capital base, which affords us the ability to hold these investments during periods of price volatility.

Lastly, I would also like to mention the new share repurchase program that we announced this morning. We announced today that the company's Board of Directors has authorized a new program for the purposes of repurchasing up to $75 million worth of TICC's common stock. The details of that new program are in a separate press release this morning.

With that, I would like to conclude our third quarter 2015 conference call. I would like to thank everyone on the call for their interest, and for their participation, and we look forward to speaking to everyone soon. Thanks very much.

Operator?.

Operator:.