Jonathan Cohen - CEO Bruce Rubin - CFO Kevin Yonon - MD, TICC Management Debdeep Maji - Senior Managing Director, Portfolio Manager.

Jonathan Bock - Wells Fargo Mickey Schleien - Ladenburg.

Good morning and welcome to the TICC Capital Corp Fourth Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded.

I would now like to turn the conference over to Jonathan Cohen, CEO. Please go ahead sir..

Thanks very much. Good morning, and welcome everyone to the TICC Capital Corp., fourth quarter 2016 earnings conference call. I'm joined today by Saul Rosenthal, our President and Chief Operating Officer, and Bruce Rubin, our Chief Financial Officer. 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. The 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 could cause actual results to differ materially from these projections. We do not undertake or 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. With that I'll turn the presentation back to Jonathan..

Thanks, Bruce. We are pleased to report that we generated a strong total return for shareholders during the fourth quarter and for the full year 2016. Our book value per share rose from $7.08 at the end of the September 2016 quarter to $7.50 at December 31.

We note that our book value per share now is $1.10 higher than it was at the end of 2015 and that we’ve paid distributions to our shareholders during2016 of a $1.16 per share.

In other words for the year ending 2016 we produced an increase in NAV per share combined with distributions paid equal to a 35.3% increase over our book value per share as of year-end 2015. For the quarter ended December 31, 2016 we recorded net investment income of approximately $7.3 million or approximately $0.14 per share.

In fourth quarter we also recorded net unrealized depreciation of $30.1 million and net realized capital losses of $1.1 million. Our collateral loan obligation position experienced significant market value appreciation during the quarter with $20.7 million of net unrealized depreciation associated with those investments.

In total we had a net increase in net assets from operations of approximately $36.3 million or $0.71 per share. Our core net investment income for the quarter ending December 31 was approximately $11.2 million or approximately $0.22 per share.

Please see the earnings release we issued today for a reconciliation of net investment income with core net investment income.

Following the company’s strong total return performance for the fourth calendar quarter and for the full year 2016 and with the continuation of the strength in the syndicated loan market into the first quarter of calendar 2017 the company’s Board of Directors has declared a $0.20 per share distribution for the quarter ending March 31, 2017 payable to shareholders of record as of March 16, 2017 and two additional distributions of $0.20 per share each payable to shareholders of record as of June 16, 2017 and September 15, 2017 with respect to the quarters ending June 30, 2017 and September 30, 2017 respectively.

With the recent rise in three months LIBOR and the corresponding loss of the benefit from the LIBOR floors and with the recent compression in corporate loan spreads leading to lower projected taxable income we believe that the change to this level of distributions will allow us to retain and compound returns on our capital over longer timeframes.

We note that this change is not related to any current or projected cash flow divergence from our CLO equity portfolio and that all our CLO equity positions made full distributions in the December 2016 quarter.

Going forward we intend to declare a special dividend to our shareholders on an as needed basis in order to comply with our income distribution requirements as a regulated investment company. As a reminder we are required to distribute at least 90% of our taxable income to our shareholders in the form of annual cash distributions.

As we continue to focus on a total investment return we provide to our shareholders and on the objective of now stability and growth overtime we believe that this change should benefit us going forward.

We believe that the various initiatives including the large share repurchase program we completed earlier in 2016 and the portfolio rotation strategy we continue to implement contributed to the strong total return we generated in the fourth quarter as well as for the full year 2016.

We note that we had no investments on non-accrual status as of December 31, 2016. With that I’d like to turn the call over to Kevin Yonon who is a portfolio manager focusing on our corporate loan business to talk about one recent development after the end of the quarter. .

Thank you Jonathan. In late February 2017, SourceHOV, Novitex and Quinpario Acquisition Corp. 2 publicly announced that they would combine to form Exela Technologies, a NASDAQ listed provider of business process outsourcing services. TICC has debt investments in both SourceHOV and Novitex.

If this proposed combination is completed, then all of TICC's existing 1st and 2nd Lien debt at SourceHOV and 1st Lien debt at Novitex would be repaid in full at par, plus any applicable call premium.

Pending the successful closing of this transaction which is expected in Q2 2017, subject to regulatory approval, TICC would receive a payment of 102% of par on its $15 million face value investment in the SourceHOV 2nd lien tranche.

We note that, as of December 31, 2016, we ascribed a fair value to this investment equal to approximately 65% of par, which was determined based on available information prior to the notification of the proposed transaction..

Kevin, thank you very much. I’d like to turn the call over now briefly to Deb Maji who is going to talk specifically to our CLO business during 2016 and the fourth quarter of 2016.

Dep?.

Thank you. 2016 represented a period of savings strength in the markets in which we participate. From January 1, 2016 to December 31, 2016 the LSTA Corporate Loan Index rose from 91.29% to 98.08%, an increase of 7.4%.

At the same time corporate loan default rates remained at low levels providing investors with a generally lower risks, lower return corporate debt environment.

Both our corporate loan and CLO portfolios had strong performance during 2016 with higher loan prices leading to increased CLO equity net asset values and significantly higher CLO equity market values.

During the second half of 2016 and into 2017 tighter leverage loan credit spreads reduced the weighted average spread of the loan assets in our foreseeable investment.

This reduction in credit spreads on CLO collateral coupled with a meaningful in three month LIBOR during the 2016 calendar year led to a lower current and projected cash flow distribution payments from many CLO equity tranches.

This reduction in cash flow payment also had the fact of increasing the perspective duration on our CLO equity investments, i.e. touting the balance towards a less front end loaded CLO equity return overall then has existed in previous years.

This dynamic concurrently had created various opportunities for us with higher NAV presenting us with the greater possibilities for CLO calls and for opportunistic investments in CLO junior debt at discounts to par.

The current market environment has also resulted in tighter CLO liabilities spreads presenting us with ongoing refinancing as well as resetting opportunities.

A reset is a reset financing that includes extension of the reinvestment period of the CLO with both CLO collateral and liability spreads at nearly the tightest levels since the 2008 credit crisis and with three month LIBOR now at approximately 1%, we believe that CLO assets class is currently well positioned for any widening of spreads and/or dislocation in the market.

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Deb, thanks very much. As we executed our strategy rotating out of more broadly syndicated corporate loans into a combination of club deals and narrowly syndicated loans through purchases in both the primary and secondary markets, we remained mindful of maintaining overall portfolio liquidity.

We believe this strategy has allowed us to maintain corporate debt investments which have sufficient liquidity to be sold if necessary in order to pay down leverage of TICC and to take advantage of market opportunities, as reflected by the significant reduction in our overall corporate debt level during 2016, and by higher yields on our new corporate loan investments in 2016.

We ended 2016 with approximately $8.3 million of cash in our balance sheet after the repurchase of $20.5 million of convertible notes in December of 2016 and we expect the cash on balance sheet will increase during 2017 in anticipation of the maturity of our convertible notes in November of 2017.

As of February 28, 2017 we estimate our balance sheet cash balance to stand at approximately $64.9 million. Additionally we've redeemed approximately $74.7 million of class A notes issued by our 2012-1 CLO during the fourth quarter.

As of December 31, we had approximately $129.3 million of debt within our 2012-1 CLO, down from $240 million as of December 31, 2015. During 2016 we took steps to increase shareholder value in multiple ways.

We repurchased stocks significantly, reduced our overall debt, rotated in the higher yield and corporate loan assets and rotated our CLO portfolio with a view towards maximizing our expected near and longer term returns. We continue to view our mandate as maximizing the risk adjusted return on our shareholders investment in TICC.

As such we have and continue to focus on portfolio management strategies designed to maximize our total return as opposed to generating a certain level of income over a particular timeframe.

We view the market opportunity currently available to us as strong and as a permanent capital vehicle we have historically been able to take a longer term view towards our investments. We believe this perspective served us well in 2016.

I note that additional information about TICC's fourth quarter performance has been posted to our website at www.ticc.com. And with that operator we're happy to turn the call over for any questions. .

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Jonathan Bock of Wells Fargo Securities. Please go ahead. .

Hey good morning and thank you for taking my question. Jonathan, will the new dividend contain a return of capital and thus will we continue to see book value diminution from this level.

I noticed that NOI is still at $0.14 or so and likely on a model go-forward basis, not going to go much higher given deleveraging and the dividend is still set at a level above it?.

Sure, John. The Board has set the dividend with an eye towards long-term stability. That’s the Board's initiative or perspective when they established the dividend and the dividend again has been set now for three quarters forward. In terms of book value per share, obviously you have seen a very substantial rise in book value in each of the last….

Just to cut it, I mean I understand the asset side, assets appreciated, Jonathan, but Ceteris paribus, all else equal will the uplift the valuation marks or book value under this dividend policy go up or down?.

We can’t provide any kind of an estimate as to forward book value John. We haven’t done that in the past. What I can say is that the lower dividend will provide us with additional capital to be recycled. The other point that you mentioned earlier is a relevant one which is a highly relevant one, which is the deleveraging of the balance sheet.

We are as you can imagine, actively looking at alternate strategies to put additional leverage on our balance sheet, in the right sort of way with the right sort of terms. All those being equal our hope and expectations is that could add to cash flows on a go forward basis. .

Of course. And then just last question, where do you think the market is on a price perspective, based on maybe some of your financing options? Thank you for taking my question. .

Thank you, Jon. That is a great question. The answer is as a BDC and as a company with our asset base, we have got several opportunities or several possibilities I should say, in terms of additional deleveraging possibilities. We can look at the $25 par market, the preferred stock market. We can look at the convert market.

Obviously we have had the benefit of the existing convert for some period of time. That market as you know is a healthy one with a great deal of activity at generally tighter spreads compared to where they were a year or two ago, or we can look at the bank loan market, the term market.

All of those -- each of those markets represent different benefits and different costs for us and we are actively reviewing our opportunities and our options in -- across that spectrum..

And our next question today comes from Mickey Schleien of Ladenburg. Please go ahead. .

Good morning, Jonathan. I wanted to follow-up on your prepared remarks where you mentioned your interest in pursuing other strategies.

I think the first time you mentioned that may have been as long as a year ago, maybe three quarters ago, one it became clear that holding CLOs within a BDC was not generally perceived as a positive attribute by the investment community. But from what I can see there hasn’t been any decisions made or progress made on those efforts.

Can you update us on where you stand, what do you looking at, have you turndown any ideas, what are you most interested some timeframe for those things to occur?.

Sure Mickey. As you know we have had a tremendously productive last 12 months on several fronts. First of all, in terms of the corporate loan market, we have actively rotated that book.

We have enjoyed the benefit now of increasing weighted average spreads and weighted average yields on a syndicated corporate loan book as we have moved very actively away from the broadly syndicated corporate loan market and into the more narrowly syndicated middle market and second lien market.

That has been a productive undertaking for us and I would regard that effort as generally successful. In terms of the CLO book, we have not taken steps in order to reduce our overall CLO exposure.

What we have done is we have sought to mitigate risk within that market by virtue of rotating our portfolio into positions that we regard as stronger table to refinance in many cases. We have enjoyed the benefit of refinancing in our book and positions that give us the benefit of a better risk adjusted return.

So the strategy continues as it has really for the last year or 18 months which is to continue to rotate into higher yielding corporate loan assets held on less leveraged basis and to rotate but not necessarily to significantly diminish anytime in the immediate future our CLO portfolio. .

I understand Jonathan, but it goes back to the fundamental question which is that the market generally doesn’t like to pay fees for folks or management teams to pick credits whether there broadly syndicated or more narrowly syndicated or CLO.

And my understanding was your intent was to look at directly originated deals, and to build a team to do that, what originally was to took the sell the business the benefits to do that, but when that didn’t work to build the team or in some other fashion to do that. So where do you stand on progress toward directly originated transactions. .

It may be an issue Mickey that you missed and truly, we had not previously said that we are intending to locate into the direct originated business. That has not been part of our strategy really for several years now. The focus has been on rotating into narrowly syndicated club deals and second lien loans. That’s been a successful undertaking.

We’ve made very substantial strides in that direction and again you’ve seen the benefit of that through a higher yielding portfolio over each of the last several quarters..

And thank you sir. I show no further questions. I’d like to turn the conference back over to Mr. Cohen for any closing final remarks. .

Great. Well I’d like to thank everyone for participating in the call and for their interest in TICC. We certainly look forward to speaking to you again in the future. Thank you very much..

Thank you sir. Today’s conference as now concluded. And we thank you all for attending today’s presentation. You may now disconnect..