UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

 

Investment Company Act file number: 811-21318

 

Name of Fund: BlackRock Corporate High Yield Fund, Inc. (HYT)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Corporate High Yield Fund, Inc., 55 East 52^nd Street, New York, NY 10055

 

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

 

Date of fiscal year end: 08/31/2015

 

Date of reporting period: 11/30/2014

 

Item 1 – Schedule of Investments

Schedule of Investments November 30, 2014 (Unaudited)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)

Notes to Schedule of Investments
(a)	Non-income producing security.
(b)	Security is held by a wholly owned subsidiary.
(c)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(d)	Variable rate security. Rate shown is as of report date.
(e)	When-issued security. Unsettled when-issued transactions were as follows:

		Counterparty											Value			Unrealized Appreciation
		Bank of America N.A.										$		11,257,087	$		227,088
		Barclays Capital Inc.										$		5,358,570	$		(13,430	)
		Citigroup Global Markets Holdings, Inc.										$		3,588,895	$		—
		Credit Suisse Securities (USA) LLC										$		3,701,600	$		18,765
		Goldman Sachs & Co.										$		949,850	$		—
		Jefferies Co.										$		1,945,000	$		—
		Morgan Stanley & Co. LLC										$		2,925,100	$		470
		Robert W. Bard Co., Inc.										$		239,400	$		(600	)

(f)	Convertible security.
(g)	Represents a payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.
(h)	Security is perpetual in nature and has no stated maturity date.
(i)	Zero-coupon bond.
(j)	Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(k)	Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(l)	Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.
(m)	Warrants entitle the Trust to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

Portfolio Abbreviations
ADR	American Depositary Receipts
AUD	Australian Dollar
CAD	Canadian Dollar
CLO	Collateralized Loan Obligation
DIP	Debtor-In-Possession
EUR	Euro
GBP	British Pound
MSCI	Morgan Stanley Capital International
PIK	Payment-In-Kind.
USD	U.S. Dollar

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)

 

•	Financial futures contracts outstanding as of November 30, 2014 were as follows:

 

Contracts Sold

Issue

Exchange

Expiration

Notional Value

Unrealized Depreciation

(950)

S&P 500 E-Mini Index

Chicago Mercantile

December 2014

USD

98,149,250

$

(4,894,221)

(146)

Russell 2000 E-Mini Index

Chicago Mercantile

December 2014

USD

17,105,360

(448,459)

Total

$

(5,342,680)

•	Forward foreign currency exchange contracts outstanding as of November 30, 2014 were as follows:

 

Currency Purchased			Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CAD	910,000		USD	810,106	Standard Chartered Bank	1/21/15	$	(15,234	)
CAD	3,895,000		USD	3,438,508	State Street Bank and Trust Co.	1/21/15		(36,282	)
EUR	1,097,000		USD	1,376,108	Bank of America N.A.	1/21/15		(11,602	)
EUR	102,000		USD	127,652	Bank of America N.A.	1/21/15		(779	)
EUR	5,800,000		USD	7,207,917	BNP Paribas S.A.	1/21/15		6,427
EUR	380,000		USD	474,124	BNP Paribas S.A.	1/21/15		(1,460	)
EUR	1,041,000		USD	1,300,231	JPMorgan Chase Bank N.A.	1/21/15		(5,381	)
EUR	480,000		USD	612,600	State Street Bank and Trust Co.	1/21/15		(15,551	)
EUR	444,000		USD	552,576	State Street Bank and Trust Co.	1/21/15		(305	)
GBP	1,003,000		USD	1,571,579	Bank of America N.A.	1/21/15		(5,387	)
GBP	182,000		USD	293,514	State Street Bank and Trust Co.	1/21/15		(9,320	)
GBP	397,000		USD	634,731	The Bank of New York Mellon	1/21/15		(14,813	)
USD	675,444		AUD	781,000	UBS AG	1/21/15		13,251
USD	55,619,411		CAD	62,472,000	Barclays Bank PLC	1/21/15		1,051,025
USD	1,326,069		CAD	1,480,000	Citibank N.A.	1/21/15		33,310
USD	5,741,951		CAD	6,555,000	Toronto - Dominion Bank	1/21/15		16,254
USD	583,237		EUR	460,000	BNP Paribas S.A.	1/21/15		11,065
USD	998,448		EUR	789,000	Goldman Sachs International	1/21/15		17,048
USD	154,508,625		EUR	121,102,500	JPMorgan Chase Bank N.A.	1/21/15		3,874,994
USD	251,098		EUR	200,000	UBS AG	1/21/15		2,327
USD	63,255,417		GBP	39,672,000	Barclays Bank PLC	1/21/15		1,307,321
Total							$	6,216,908

 

•	Exchange-traded options purchased as of November 30, 2014 were as follows:

 

Description

Counterparty

Put/ Call

Strike Price

Expiration Date

Contracts

Market Value

S&P 500 Index

Merrill Lynch, Pierce, Fenner & Smith, Inc.

Put

USD

206.00

12/20/14

1,650

$

359,700

•	OTC options purchased as of November 30, 2014 were as follows:

 

	Description	Counterparty	Put/ Call	Strike Price		Expiration Date	Contracts	Market Value
	Marsico Parent Superholdco LLC	Goldman Sachs & Co.	Call	USD	942.86	12/21/19	39	$	—

 

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)

 

•	OTC credit default swaps – sold protection outstanding as of November 30, 2014 were as follows:

 

	Issuer/Index		Receive Fixed Rate		Counterparty		Expiration Date				Credit Rating1				Notional Amount (000)2				Market Value		Premiums Paid (Received)					Unrealized Appreciation
	CCO Holdings LLC		8.00%		Deutsche Bank AG		9/20/17			B+			USD				8,180	$		1,532,438			—		$	1,532,438
	Trionista Holdco GmbH		5.00%		Citibank N.A.		3/20/19			B+			EUR				340			54,755		$	31,725			23,030
	Trionista Holdco GmbH		5.00%		Citibank N.A.		3/20/19			B+			EUR				363			58,500			34,413			24,087
	Trionista Holdco GmbH		5.00%		Citibank N.A.		3/20/19			B+			EUR				289			46,472			33,091			13,381
	Level 3 Communications, Inc.		5.00%		Goldman Sachs International		6/20/19			B			USD				5,000			676,403			(350,002)			1,026,405
	Total																	$		2,368,568		$	(250,773)		$	2,619,341

 

•	For Trust compliance purposes, the Trust’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
•	Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting] purposes. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:
	•	Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
	•	Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
	•	Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust's own assumptions used in determining the fair value of investments and derivative financial instruments)
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, please refer to the Trust’s most recent financial statements as contained in its annual report.

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)

 

 

The following tables summarize the Trust's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2014:

 

							Level 1							Level 2							Level 3						Total
Assets:
Investments:
Long-Term Investments:
	Asset-Backed Securities			$				—			$				31,866,534				$			11,314,927			$		43,181,461
	Common Stocks							120,323,864							55,013,656							34,753,479					210,090,999
	Corporate Bonds							—							1,660,810,346							26,969,248					1,687,779,594
	Floating Rate Loan Interests							—							220,551,697							34,191,657					254,743,354
	Non-Agency Mortgage-Backed Securities							—							3,931,682							—					3,931,682
	Other Interests							—							1,003							10,978					11,981
	Preferred Securities							20,317,302							40,867,567							30,462,241					91,647,110
	Warrants							170,705							—							123,934					294,639
	Options Purchased:
	Equity Contracts							359,700							—							—					359,700
Total				$				141,171,571			$				2,013,042,485				$			137,826,464			$		2,292,040,520
							Level 1							Level 2							Level 3						Total
Derivative Financial Instruments 1
Assets:
Credit contracts						—				$			2,619,341							—			$			2,619,341
Foreign currency exchange contracts						—							6,333,022							—						6,333,022
Liabilities:
Credit contracts					—							—								—
Equity contracts		$			(5,342,680)							—								—						(5,342,680		)
Foreign currency exchange contracts					—							(116,114				)				—						(116,114		)
Total		$			(5,342,680)				$			8,836,249								—			$			3,493,569

 

1	Derivative financial instruments are swaps, financial futures contracts, and forward foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

Schedule of Investments (continued)	BlackRock Corporate High Yield Fund, Inc. (HYT)

 

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of November 30, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

			Level 1				Level 2					Level 3				Total
Assets:
	Cash	$		128,934				—					—		$	128,934
	Cash pledged for financial futures contracts			5,327,000				—					—			5,327,000
Liabilities:
	Bank borrowings payable			—		$		(656,000,000)					—			(656,000,000)
	Cash received as collateral for OTC swaps			—				(2,700,000)					—			(2,700,000)
	Foreign currency overdraft			—				(135,804)					—			(135,804)
Total		$		5,455,934		$		(658,835,804)			$		—		$	(653,379,870)

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Trust had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:
	Common Stocks		Asset-Backed Securities	Corporate Bonds	Floating Rate Loan Interests		Other Interests		Preferred Securities		Warrants		Total
Assets:
Opening Balance, as of August 31, 2014	$	56,896,277	$ 6,775,056	$29,135,018	$	38,229,343	$	10,978	$	1,011,134	$	4,857	$	132,062,663
Transfers into Level 31		—	—	—		9,982,501		—		22,866,140	118,682			32,967,323
Transfers out of Level 32		(16,930,672)	(5,448,731)	—		(8,954,880)		—		—	—			(31,334,283)
Accrued discounts/premiums		—	62	(3,623)		71,676		—		—	—			68,115
Net realized gain (loss)		—	—	38,581		121,311		—		—	—			159,892
Net change in unrealized appreciation/ depreciation3,4		(5,212,126)	(15,395)	(179,702)		(653,339)		—		6,578,374	395			518,207
Purchases		—	10,003,935	1,671,484		80,285		—		1,028,592	—			12,784,296
Sales		—	—	(3,692,510)		(4,685,240)		—		(1,021,999)	—			(9,399,749)
Closing Balance, as of November 30, 2014	$	34,753,479	$11,314,927	$26,969,248	$	34,191,657	$	10,978	$	30,462,241	$	123,934	$	137,826,464
Net change in unrealized appreciation/depreciation on investments still held at November 30, 20144	$	(5,212,126)	$88(15,395)	$8(153,402)	$	(652,060)		—	$	6,574,102	$	395	$	541,514

 

1			As of August 31, 2014, the Trust used significant observable inputs in determining the value of certain investments. As of November 30, 2014, the Trust used unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $32,967,323 transferred from Level 2 to Level 3 in the disclosure hierarchy.
2			As of August 31, 2014, the Trust used significant unobservable inputs in determining the value of certain investments. As of November 30, 2014, the Trust used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $32,967,323 transferred from Level 3 to Level 2 in the disclosure hierarchy.
3			Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations.
4			Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of November 30, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.

 

The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could results in a significantly lower or higher value of such Level 3 instruments.

Schedule of Investments (concluded)	BlackRock Corporate High Yield Fund, Inc. (HYT)

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the value of certain of the Trust’s Level 3 investments and derivative financial instruments as of November 30, 2014. The table does not include Level 3 investments and derivative financial instruments with values derived based upon unadjusted third party pricing information. A significant change in third party pricing information could result in a significantly lower or higher value of such Level 3 investments and derivative financial instruments. The value of Level 3 investments and derivative financial instruments derived using third party pricing information is $80,069,894.

 

	Value		Valuation Techniques	Unobservable Inputs	Range of Unobservable Inputs Utilized
Assets:
Common Stocks	$	10,862,810	Market Comparable Companies	2P (Proved and Probable) Reserves
				+2C (Contingent) Resources Multiple2	CAD $0.45x
				PV-10 Multiple2,3	0.19x
		17,637,548	Market Comparable Companies	Fleet Value Multiple	1.11x
				2016E EBITDA Multiple	4.73x
		6,253,117	Market Comparable Companies	Last 12 Months EBITDA Multiple2	5.13x-5.88x
				Current Fiscal Year EBITDA Multiple2	4.63x-6.25x
				Discontinued Operations Expected Sales Proceeds	$1504
Corporate Bonds		1,888,157	Cost1	N/A	—
		17,957,116	Other	Internal Rate of Return3	9.50%
		4,906,200	Discounted Cash Flow	Internal Rate of Return3	10.00%
		2,217,774	Par	Call Price2	—
Preferred Stock		29,598,562	Last Dealer Mark - Adjusted	Illiquidity Discount	1.67%
Warrants		4,857	Estimated Recovery Value	Distribution Rate3	$0.0541
		31,587	Last Dealer Mark - Adjusted	Delta Adjustment Based on Daily Movement in the Common Equity	120.00%
Total	$	91,357,728

 

1	The Trust fair values certain of its Level 3 investments using acquisition cost, although the transaction may not have occurred during the current reporting period. These investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Trust.
2	Increase in unobservable input may result in a significant increase to value, while a decrease in the unobservable input may result in a significant decrease to value.
3	Decrease in unobservable input may result in a significant increase to value, while an increase in the unobservable input may result in a significant decrease to value.
4	Amount is stated in millions.

 

Item 2 – Controls and Procedures

2(a) –	The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the ″1940 Act″)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
2(b) –	There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 3 –	Exhibits
	Certifications – Attached hereto
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
	BlackRock Corporate High Yield Fund, Inc.
	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Corporate High Yield Fund, Inc.
	Date: January 22, 2015
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Corporate High Yield Fund, Inc.
	Date: January 22, 2015
	By:	/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		BlackRock Corporate High Yield Fund, Inc.
	Date: January 22, 2015