TCW Direct Lending LLC - FORM 10-Q

TCW Direct Lending LLC - FORM 10-Q - November 10, 2016

Attached files

Attached files

TCW Direct Lending LLC Reports

file	filename
EX-32.2 - EX-32.2 - TCW Direct Lending LLC	d267474dex322.htm
EX-99.1 - EX-99.1 - TCW Direct Lending LLC	d267474dex991.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLC	d267474dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLC	d267474dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLC	d267474dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2016

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number 814-01069

TCW DIRECT LENDING LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		46-5327366
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 Clarendon Street, Boston, MA		02116
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 936-2275

Not applicable

Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

The number of the Registrant’s common units outstanding at November 10, 2016 was 20,134,698.

TCW DIRECT LENDING LLC

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2016

Table of Contents


	INDEX	PAGE NO.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Schedules of Investments as of September 30, 2016 (unaudited) and December 31, 2015	2

	Consolidated Statements of Assets and Liabilities as of September 30, 2016 (unaudited) and December 31, 2015	8

	Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)	9

	Consolidated Statements of Changes in Members’ Capital for the nine months ended September 30, 2016 and 2015 (unaudited)	10

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)	11

	Notes to Consolidated Financial Statements (unaudited)	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

SIGNATURES		39

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments

As of September 30, 2016

(Unaudited)


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Chemicals
	Revere Industries, LLC		08/20/15	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		1.8%	$		17,252,200		08/20/19	$	16,941,342	$	17,252,200

						1.8%			17,252,200				16,941,342		17,252,200

Diversified Consumer Services
	Pre Paid Legal Services, Inc.		06/09/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		1.6%			15,102,114		07/01/19		15,057,329		15,102,114

						1.6%			15,102,114				15,057,329		15,102,114

Diversified Financial Services
	Verus Financial, LLC		04/12/16	First Lien Term Loan - 8.00% (LIBOR + 7.25%, 0.75% Floor)		1.8%			17,281,250		04/12/21		16,968,397		17,222,494

						1.8%			17,281,250				16,968,397		17,222,494

Food Products
	AmeriQual Group, LLC		03/31/16	First Lien Term Loan - 8.50% (LIBOR + 7.75%, 0.75% Floor)		1.5%			13,721,050		01/20/21		13,536,800		13,546,793
	Harvest Hill Beverage Company		01/20/16	First Lien, First Out Term Loan - 5.00% (LIBOR + 4.00%, 1.00% Floor)		1.5%			14,306,049		01/19/21		14,121,428		14,251,686
	Harvest Hill Beverage Company(1)		01/20/16	First Lien, Last Out Term Loan - 7.25% (LIBOR + 6.25%, 1.00% Floor)		11.5%			107,890,093		01/19/21		106,497,744		108,429,543

						13.0%			122,196,142				120,619,172		122,681,229

						14.5%			135,917,192				134,155,972		136,228,022

Health Care Providers & Services
	Help at Home, LLC(2)		08/03/15	Revolver - 10.00% (Prime + 6.50%)		0.1%			1,081,081		08/03/20		1,081,081		1,091,676
	Help at Home, LLC(1)		08/03/15	Term Loan B - 8.75% (LIBOR + 7.50%, 1.25% Floor)		4.6%			42,972,973		08/03/20		42,558,781		43,394,108

						4.7%			44,054,054				43,639,862		44,485,784

Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico(3)		10/09/15	Senior Secured Notes - 11.00% (LIBOR + 10.00%, 1.00% Floor)		4.3%			40,635,042		10/09/20		39,982,555		40,610,662
	OTG Management, LLC(4)		06/30/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		7.9%			75,012,754		08/26/21		73,542,076		73,887,562

						12.2%			115,647,796				113,524,631		114,498,224

Household Durables
	Cedar Electronics Holdings, Corp.(1)		07/01/15	Senior Term Loan - 6.83% (LIBOR + 6.00%, 0.50% Floor)		2.3%			21,728,900		06/26/20		21,346,845		21,300,841
	Robertshaw US Holding Corp.		06/15/16	Term Loan B - 8.50% (LIBOR + 7.00%, 1.50% Floor)		6.7%			62,628,582		06/18/19		62,268,068		62,678,685
	Robertshaw US Holding Corp.		06/15/16	Term Loan C - 8.50% (LIBOR + 7.00%, 1.50% Floor)		0.5%			4,750,013		06/18/19		4,750,013		4,750,013

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of September 30, 2016

(Unaudited)


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Household Durables (continued)
	Robertshaw US Holding Corp.		08/29/16	Term Loan D - 8.50% (LIBOR + 7.00%, 1.50% Floor)		1.0%	$		9,856,277		06/18/19	$	9,737,048	$	9,856,277

						8.2%			77,234,872				76,755,129		77,284,975

						10.5%			98,963,773				98,101,974		98,585,816

Industrial Conglomerates
	H-D Advanced Manufacturing Company		06/30/15	First Lien First Out Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		3.3%			33,436,704		06/30/20		33,063,834		31,079,416
	H-D Advanced Manufacturing Company(1)		06/30/15	First Lien Last Out Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		9.0%			109,052,186		06/30/20		107,836,022		84,951,653

						12.3%			142,488,890				140,899,856		116,031,069

Information Technology Services
	ENA Holding Corporation		05/06/16	First Lien - Revolver - 8.00% (LIBOR + 7.00%, 1.00% Floor)		0.2%			1,601,430		05/05/21		1,601,430		1,588,298
	ENA Holding Corporation(5)		05/06/16	First Lien Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor)		3.4%			31,828,861		05/05/21		31,324,340		31,567,865

						3.6%			33,430,291				32,925,770		33,156,163

	Sierra Private Holdings II Ltd.(3)(6)		08/19/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		2.9%			27,546,376		08/19/22		26,821,880		27,268,158
	Xura, Inc. - US(3)(7)		08/19/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		4.3%			41,319,564		08/19/22		40,232,819		40,902,236

						10.8%			102,296,231				99,980,469		101,326,557

Manufacturing: Rubber and Misc. Plastic Products
	GSE Environmental, Inc.		09/26/16	First Lien Term Loan - 10.00% (LIBOR + 9.00%, 1.00% Floor)		1.3%			12,106,276		08/11/21		12,106,276		12,106,276

						1.3%			12,106,276				12,106,276		12,106,276

Metals & Mining
	Pace Industries, Inc.		06/30/15	Senior Secured Notes - 9.25% (LIBOR + 8.25%, 1.00% Floor)		9.3%			88,875,000		06/30/20		87,876,798		87,932,925

						9.3%			88,875,000				87,876,798		87,932,925

Pharmaceuticals
	Noramco, LLC(1)		07/01/16	Senior Term Loan - 9.00% (LIBOR + 8.00%, 1.00% Floor)		6.7%			61,900,000		07/01/21		61,452,460		62,543,760

						6.7%			61,900,000				61,452,460		62,543,760

Road & Rail
	Total Military Management, Inc.(1)		04/14/15	Second Out Term Loan - 7.75% (LIBOR + 6.75%, 1.00% Floor)		9.0%			86,857,143		10/14/20		85,397,394		85,093,943

						9.0%			86,857,143				85,397,394		85,093,943

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of September 30, 2016

(Unaudited)


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Software
	Quicken Parent Corp.(8)		04/01/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		2.7%	$		25,098,750		04/01/21	$	24,918,083	$	25,304,560

						2.7%			25,098,750				24,918,083		25,304,560

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan - 9.76% (LIBOR + 9.00%, 0.50% Floor)		2.9%			28,484,750		01/28/21		28,053,659		27,618,814
	Frontier Spinning Mills, Inc.(1)		05/19/15	Last Out Term Loan B - 9.25% (LIBOR + 8.25%, 1.00% Floor)		1.3%			13,960,180		04/30/20		13,862,152		11,754,471

						4.2%			42,444,930				41,915,811		39,373,285


								Shares				Cost
	Equity
	Verus Financial, LLC(9)		05/20/16	Common Stock		0.8%			8,750				8,507,135		7,770,875

	Total Non-Controlled/Non-Affiliated Investments					104.2%						$	1,001,443,789	$	980,857,904

	Controlled/Affiliated Investments
Investment Funds & Vehicles
	TCW Direct Lending Strategic Ventures LLC(3)(10)		06/05/15	Preferred membership interests		31.7%			279,896			$	279,895,573	$	298,333,713
				Common membership interests		0.0%			800				800,000		236,568

	Total Controlled/Affiliated Investments					31.7%						$	280,695,573	$	298,570,281

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.00%					0.0%							7,010		7,010

	Total Investments 135.9%											$	1,282,146,372	$	1,279,435,195

	Net unrealized depreciation on unfunded commitments (0.0%)													$	(161,714)

	Liabilities in Excess of Other Assets (35.9%)													$	(338,116,177)

	Net Assets 100.0%													$	941,157,304

(1)

In addition to the interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

(2)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $5,675,676, and an interest rate at the option of the borrower of Prime (Prime + 6.50%, 3.50% floor) or LIBOR (LIBOR + 7.50%, 1.25% floor), and a maturity of August 3, 2020. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $55,622 as of September 30, 2016.

(3)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.

(4)

Excluded from the investment total above is a delayed draw term loan commitment in an amount not to exceed $10,291,552, an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of August 26, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(154,373) as of September 30, 2016.

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of September 30, 2016

(Unaudited)

(5)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $3,202,860, an interest rate of LIBOR plus 7.00%, with a LIBOR Floor of 1.00%, and a maturity of May 5, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(26,263) as of September 30, 2016.

(6)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $2,013,624, an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of August 19, 2022. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(20,338) as of September 30, 2016.

(7)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $3,020,436, an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of August 19, 2022. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(30,507) as of September 30, 2016.

(8)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,725,000, an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of April 1, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $14,145 as of September 30, 2016.

(9)

Holdings of Verus Financial LLC common stock are through Verus Holdings LLC, a special purpose vehicle

(10)

As defined in the Investment Company Act of 1940, the investment is deemed to be a “controlled affiliated person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

LIBOR - London Interbank Offered Rate, generally 1-Month or 3-Month

Prime - Prime Rate


Country Breakdown of Portfolio
United States		94.7%
Mexico		3.2%
United Kingdom		2.1%

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Schedule of Investments

As of December 31, 2015


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value

	Non-Controlled/Non-Affiliated Investments
Auto Components
	Pittsburgh Glass Works LLC ⁽¹⁾		11/25/15	First Lien Term Loan - 9.00% (LIBOR + 8.00%, 1.00 Floor)		7.7	%	$	50,000,000		11/25/21	$	49,508,444	$	49,950,000
Chemicals
	Revere Industries, LLC		08/20/15	First Lien Term Loan - 9.50% (LIBOR + 8.5%, 1.00% Floor)		6.5	%		43,052,885		08/20/19		42,075,281		42,536,250
Communications Equipment
	Aclara Technologies, LLC		12/21/15	First Lien Term Loan - 9.00% (LIBOR + 7.50%, 1.50% Floor)		6.7	%		43,168,605		03/28/19		42,775,275		43,427,616
Diversified Consumer Services
	PrePaid Legal Services, Inc.		06/09/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		2.2	%		14,483,333		06/01/19		14,420,992		14,410,917
Health Care Providers & Services
	Help at Home, Inc. ⁽¹⁾		08/03/15	First Lien Term Loan B - 10.00% (Prime + 6.50%, 3.25% Floor)		6.5	%		43,175,676		08/03/20		42,705,972		42,398,513
	Help at Home, Inc. ⁽²⁾		08/03/15	First Lien - Revolver - 10.00% (Prime + 6.50%, 3.25% Floor)		0.8	%		5,270,270		08/03/20		5,270,270		5,170,135

						7.3	%		48,445,946				47,976,242		47,568,648

Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico ⁽³⁾		10/09/15	First Lien Term Loan - 11.00% (LIBOR + 10.00%, 1.00 Floor)		6.4	%		42,500,000		10/09/20		41,689,317		41,990,000
Household Durables
	Cedar Electronics Holdings, Corp. ⁽¹⁾		07/01/15	First Lien Term Loan - 7.50% (Prime + 4.00%, 3.50% Floor)		3.4	%		22,181,000		06/26/20		21,712,652		22,070,095
Industrial Conglomerates
	H-D Advanced Manufacturing Company ⁽¹⁾		06/30/15	First Lien Term Loan A - 8.00% (LIBOR + 7.00%, 1.00% Floor)		20.8	%		143,591,912		06/30/20		141,656,132		135,143,228
Metals & Mining
	Pace Industries, Inc.		06/30/15	First Lien Term Loan - 9.25% (LIBOR + 8.25%, 1.00% Floor)		13.6	%		89,550,000		06/30/20		88,342,766		88,654,500
Road & Rail
	Total Military Management, Inc.		04/14/15	First Lien Term Loan - 7.75% (LIBOR + 6.75%, 1.00 Floor)		13.3	%		88,000,000		10/14/20		86,319,746		86,592,000
Textiles, Apparel & Luxury Goods
	Frontier Spinning Mills, Inc. ⁽¹⁾		05/19/15	First Lien Term Loan B - 9.25% (LIBOR + 8.25%, 1.00% Floor)		2.2	%		14,515,385		04/30/20		14,387,068		14,283,138


	Total Non-Controlled/Non-Affiliated Investments					90.1	%						590,863,915		586,626,392

TCW DIRECT LENDING LLC

Schedule of Investments (Continued)

As of December 31, 2015


						Shares		Cost		Fair Value
	Controlled/Affiliated Investments
Investment Funds & Vehicles	TCW Direct Lending Strategic Ventures LLC ⁽³⁾⁽⁴⁾	06/05/2015	Preferred membership interests	31.7	%		199,760	$	199,760,000	$	206,595,336

			Common membership interests	0.0	%		800		800,000		39,943


	Total Controlled/Affiliated Investments			31.7	%				200,560,000		206,635,279

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 0.35%			25.9	%		168,850,468		168,850,468		168,850,468


	Total Investments 147.7%							$	960,274,383	$	962,112,139

	Net unrealized depreciation on unfunded commitments (0.0%)									$	(28,243	)

	Liabilities in Excess of Other Assets (47.7%)									$	(310,780,753	)

	Net Assets 100.0%									$	651,303,143

⁽¹⁾	In addition to the interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

⁽²⁾

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,486,486, and an interest rate at the option of the borrower of Prime (Prime + 6.50%, 3.25% floor) or LIBOR (LIBOR + 7.50%, 1.00% floor), and a maturity of August 3, 2020. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(28,234) as of December 31, 2015.

⁽³⁾	The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.

⁽⁴⁾

LIBOR - London Interbank Offered Rate, generally 1-Month or 3-Month

Prime - Prime Rate


Country Breakdown of Portfolio
United States	95.6	%
Mexico	4.4	%

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of September 30, 2016 (unaudited)		As of December 31, 2015
Assets
Investments, at fair value
Non controlled/non-affiliated investments (amortized cost of $1,001,444 and $590,864, respectively)	$	980,858	$	586,626
Controlled affiliated investments (cost of $280,696 and $200,560, respectively)		298,570		206,635
Cash and cash equivalents		236,444		180,436
Interest receivable		7,717		2,653
Deferred financing costs		2,548		4,263
Receivable for investments sold		—		27,098
Capital call due from Members		—		933
Prepaid and other assets		216		157

Total Assets	$	1,526,353	$	1,008,801

Liabilities
Credit facility payable	$	572,024	$	329,000
Payable for investments purchased		12,106		—
Directors’ fees payable		174		—
Net unrealized depreciation on unfunded commitments		162		28
Interest and credit facility expense payable		140		496
Management fees payable		—		27,737
Other accrued expenses and other liabilities		590		237

Total Liabilities	$	585,196	$	357,498


Commitments and Contingencies (Note 5)

Members’ Capital
Common unitholders commitment: (20,134,698 and 20,134,698 units issued and outstanding, respectively)	$	2,013,470	$	2,013,470
Common unitholders undrawn commitment: (20,134,698 and 20,134,698 units issued and outstanding, respectively)		(920,589)		(1,349,024)
Common unitholders return of capital		(178,435)		—
Common unitholder offering costs		(853)		(853)
Common unitholder tax reclassification (Note 8)		(9,620)		(9,620)

Common unitholder capital		903,973		653,973
Accumulated net realized loss		(3,575)		(3,888)
Accumulated net investment (loss)		43,633		(591)
Net unrealized appreciation (depreciation) on investments		(2,874)		1,809

Members’ Capital	$	941,157	$	651,303

Total Liabilities and Members’ Capital	$	1,526,353	$	1,008,801

Net Asset Value Per Unit (accrual base) (Note 9)	$	92.46	$	99.35

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended September 30,				For the nine months ended September 30,
	2016		2015		2016		2015
Investment Income:
Interest income from non-controlled/non-affiliated investments	$	26,261	$	10,702	$	68,914	$	17,409
Dividend income from controlled affiliated investments		4,394		—		9,357		—
Other fee income		—		—		652		—

Total investment income		30,655		10,702		78,923		17,409

Expenses:
Management fees		7,551		7,634		22,652		27,777
Interest and credit facility expenses		4,001		1,917		9,977		4,386
Administrative fees		295		218		808		484
Professional fees		365		273		754		586
Directors’ fees		72		71		216		216
Other expenses		94		91		292		276

Total expenses		12,378		10,204		34,699		33,725
Expense recaptured/(reimbursed) by the Investment Adviser		—		—		—		312

Net expenses		12,378		10,204		34,699		34,037

Net investment income (loss)	$	18,277	$	498	$	44,224	$	(16,628)


Net realized and unrealized gain (loss) on investments
Net realized gain on investments non-controlled/non-affiliated investments		195		312		313		2,307
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(1,075)		1,162		(16,482)		5,981
Net change in unrealized appreciation on controlled affiliated investments		3,285		3,018		11,799		3,415

Net realized and unrealized gain (loss) on investments	$	2,405	$	4,492	$	(4,370)	$	11,703

Net increase (decrease) in Members’ Capital from operations	$	20,682	$	4,990	$	39,854	$	(4,925)

Basic and diluted:
Income (Loss) per unit	$	1.03	$	0.15	$	1.98	$	(0.28)

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the nine months ended September 30, 2016		For the nine months ended September 30, 2015
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income (loss)	$	44,224	$	(16,628)
Net realized gain on investments		313		2,307
Net change in unrealized appreciation (depreciation) on investments		(4,683)		9,396

Net Increase (Decrease) in Members’ Capital from Operations		39,854		(4,925)

Distributions to shareholders from:
Return of capital		(178,435)		—

Total distributions to shareholders		(178,435)		—

Increase (Decrease) in Members’ Capital Resulting from Capital Activity
Contributions		428,435		499,935
Offering costs		—		(853)

Total Increase in Members’ Capital Resulting from Capital Activity		428,435		499,082

Total Increase in Members’ Capital		289,854		494,157

Members’ Capital, beginning of period		651,303		64,528

Members’ Capital, end of period	$	941,157	$	558,685

Accumulated net investment income (loss)	$	43,633	$	(21,120)

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Consolidated Statements of Cash Flows (unaudited)

(Dollar amounts in thousands, except unit data)


	For the nine months ended September 30, 2016		For the nine months ended September 30, 2015
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	39,854	$	(4,925)
Adjustments to reconcile the net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Purchases of investments		(806,276)		(757,868)
Interest income paid in-kind		(1,793)		—
Proceeds from sales and paydowns of investments		321,331		216,094
Net realized (gain) loss on investments		(313)		(2,307)
Change in net unrealized appreciation/depreciation on investments		4,683		(9,396)
Accretion of discount		(3,665)		(657)
Amortization of deferred financing costs		1,715		1,233
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		(5,064)		(4,000)
(Increase) decrease in prepaid offering costs		—		663
(Increase) decrease in receivable for investments sold		27,098		—
(Increase) decrease in prepaid and other assets		(59)		(247)
(Increase) decrease in receivable from Investment Adviser		—		311
Increase (decrease) in payable for investments purchased		12,106		—
Increase (decrease) in directors’ fees payable		174		9
Increase (decrease) in interest and credit facility expense payable		(356)		455
Increase (decrease) in management fees payable		(27,737)		27,777
Increase (decrease) in initial organizational expense payable to affiliate		—		(682)
Increase (decrease) in offering costs payable to affiliate		—		(663)
Increase (decrease) in other accrued expenses and liabilities		353		(76)

Net cash used in operating activities	$	(437,949)	$	(534,279)


Cash Flows from Financing Activities
Contributions from Members		250,000		499,935
Capital call due from Members, net		933		18
Offering costs paid		—		(853)
Deferred financing costs paid		—		(2,363)
Proceeds from credit facility		906,000		623,000
Repayments of credit facility		(662,976)		(344,000)

Net cash provided by financing activities	$	493,957	$	775,737

Net increase in cash and cash equivalents	$	56,008	$	241,458
Cash and cash equivalents, beginning of period	$	180,436	$	6,967

Cash and cash equivalents, end of period	$	236,444	$	248,425


Supplemental and non-cash financing activities
Interest expense paid	$	7,542	$	1,899
Deemed purchase and return of capital from Investment Funds & Vehicles	$	26,068	$	—
In-kind transfer of investments	$	—	$	111,656
Deemed distribution/re-contribution	$	178,435	$	—

See notes to consolidated financial statements

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited)

(dollar amount in thousands, except for unit data)

September 30, 2016

1. Organization and Basis of Presentation

Organization: TCW Direct Lending LLC (“Company”), was formed as a Delaware corporation on March 20, 2014 and converted to a Delaware limited liability company on April 1, 2014. The Company conducted a private offering of its limited liability company units (the “Common Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”). In addition, the Company may issue preferred units, though it currently has no intention to do so. The Company has engaged TCW Asset Management Company LLC (“TAMCO”), an affiliate of The TCW Group, Inc. (“TCW”) to be its adviser (the “Adviser”). On May 13, 2014 (“Inception Date”), the Company sold and issued 10 Common Units at an aggregate purchase price of $1 to TAMCO.

The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company has also elected to be treated for U.S. federal income tax purposes as a Regulated Investment Company (a “RIC”) under Subchapter M of the U.S Internal Revenue Code of 1986, as amended (the “Code”) for the taxable year ending December 31, 2015 and subsequent years. The Company is required to meet the minimum distribution and other requirements for RIC qualification and as a BDC and a RIC, the Company is required to comply with certain regulatory requirements.

On September 19, 2016, the Company formed TCW Direct Lending Luxembourg VI S.à.r.l., (“TCW Direct Lending Luxembourg”) a private limited liability company under the laws of Luxembourg, of which the Company owns 100% of the membership interests. The Company incurred $136 in professional fees in connection with the formation of TCW Direct Lending Luxembourg, all of which were expensed as incurred. These consolidated financial statements include the accounts of the Company and TCW Direct Lending Luxembourg. All significant intercompany transactions and balances have been eliminated in consolidation.

Term: The term of the Company will continue until the sixth anniversary of the Initial Closing Date (as defined below), September 14, 2020 unless extended or sooner dissolved as provided in the limited liability agreement or by operation of law. The Company may extend the term for two additional one-year periods upon written notice to the holders of the Common Units and holders of preferred units, if any, (collectively the “Members”) at least 90 days prior to the expiration of the term or the end of the first one-year period. Thereafter, the term may be extended for successive one-year periods, with the vote or consent of a supermajority in interest of the holders of the Common Units.

Commitment Period: The Commitment Period commenced on September 19, 2014 (the “Initial Closing Date”) and will end on the third anniversary of the Initial Closing Date.

Capital Commitments: On September 19, 2014 (the “Initial Closing Date”), the Company began accepting subscription agreements from investors for the private sale of its Common Units. On March 19, 2015, the Company completed its final private placement of its Common Units. Subscription agreements with commitments (“Commitments”) from investors (each a “Common Unitholder”) totaling $2,013,470 for the purchase of Common Units were accepted. Each Common Unitholder is obligated to contribute capital equal to their Commitment and each Unit’s Commitment obligation is $100.00 per unit. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment.”

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members’ as unused capital. As of September 30, 2016 aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company were as follows:


	Commitments		Undrawn Commitments		% of Commitments Funded		Units
Common Unitholder	$	2,013,470	$	920,589		54.3%		20,134,698

Recallable Amount: A Common Unitholder may be required to re-contribute amounts distributed equal to 75% of the principal amount or the cost portion of any Portfolio Investment that is fully repaid to or otherwise fully recouped by the Company within one year of the Company’s investment. The Recallable Amount is excluded from the calculation of the accrual based net asset value.

The Recallable Amount as of September 30, 2016 was $63,750.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

1. Organization and Basis of Presentation (continued)

Investments Transferred In-Kind: In partial satisfaction of its capital commitment to TCW Direct Lending Strategic Ventures LLC (“Strategic Ventures”), the Company transferred in-kind 100% of its investment interest in two loans with an aggregate fair market value of $111,656 to Strategic Ventures on June 3, 2015. Investments transferred include Motor Coach Industries International, Inc. term loan A and term loan B, outstanding par amount, on a combined basis of $66,656 and Angie’s List , Inc. term loan, outstanding par amount of $45,000 and an unfunded delayed draw of $18,750.

The amount realized on the investment and corresponding in-kind transfer of $111,656 recognized by the Company equaled the fair value of such investments on the date of transfer.

2. Significant Accounting Policies

Basis of Presentation: The consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC Topic 946”). The Company has consolidated the results of its wholly owned subsidiary in its consolidated financial statements in accordance with ASC Topic 946.

The unaudited consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The results of operations for interim periods are not indicative of results to be expected for the full year.

Amounts as of December 31, 2015 included in the unaudited consolidated financial statements have been derived from the audited financial statements as of that date. Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These consolidated financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on March 30, 2016.

Reclassifications: Certain prior period amounts in the Consolidated Statements of Operations relating to audit, legal, valuation and tax service fees have been reclassified into “Professional Fees” and sub-administrator, transfer agent and custody fee expense have been reclassified into “Administrative Fees.” On the Consolidated Statements of Assets and Liabilities certain prior period amounts in sub-administrator, transfer agent and custody fees, insurance, audit and tax service and valuations service fee payables have been reclassified into “Other accrued expenses and liabilities.” These reclassifications have been made to conform to the current period presentation.

Use of Estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the reported amounts of income and expenses during the years presented and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.

Investments: The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC Topic 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.

Transactions: The Company records investment transactions on the trade date. The Company considers trade date for investments not traded on a recognizable exchange, or traded in the over-the-counter markets, to be the date on which the Company receives legal or contractual title to the asset and bears the risk of loss.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

2. Significant Accounting Policies (continued)

Income Recognition: Interest income is recorded on an accrual basis unless doubtful of collection or the related investment is in default. Realized gains and losses on investments are recorded on a specific identification basis. The Company typically receives a fee in the form of a discount to the purchase price at the time it funds an investment in a loan. The discount is accreted to interest income over the life of the respective loan using the effective-interest method assuming there are no questions as to collectability, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver are treated as a discount to the issuers’ term loan. In the event there is a fee associated with a delayed draw that remains unfunded, the Company will recognize the fee as fee income immediately. Ongoing facility, commitment or other additional fees including, prepayment fees, consent fees and forbearance fees are recognized immediately when earned as income.

Deferred Financing Costs: Deferred financing costs incurred by the Company in connection with the revolving credit facility, including arrangement fees, upfront fees and legal fees, are amortized on a straight-line basis over the term of the revolving credit facility.

Organization and Offering Costs: Costs incurred to organize the Company totaling $665 were expensed as incurred. Offering costs totaling $853 were accumulated and charged directly to Members’ Capital on March 19, 2015, the end of the period during which Common Units were offered (the “Closing Period”). The Company did not bear more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses.

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. At September 30, 2016 cash and cash equivalents is comprised of demand deposits and highly liquid investments with maturities of three months or less, which approximate fair value.

Income Taxes: So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. Federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company.

Accounting Pronouncements Recently Adopted: In February 2015, the FASB issued Accounting Standard Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends the consolidation requirements in ASC 810, Consolidation, and significantly changes the consolidation analysis required under GAAP. The FASB’s focus during deliberations was largely on the investment management industry. The key amendments that had a significant impact on Company’s consolidation conclusion included:

•

Limited partnerships will be variable interest entities (VIEs), unless the limited partners have either substantive kick-out or participating rights. Although more partnerships will be VIEs, it is less likely that a general partner will consolidate a limited partnership.

•

The ASU changes the effect that fees paid to a decision maker or service provider have on the consolidation analysis. Specifically, it is less likely that the fees themselves will be considered a variable interest, that an entity will be a VIE, or that consolidation will result.

•

The deferral of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, for investments in certain investment funds has been eliminated. Therefore, investment managers, general partners, and investors in these investment funds will need to perform a drastically different consolidation evaluation.

•

For entities other than limited partnerships, ASU 2015-02 clarified how to determine whether the equity holders (as a group) have power over the entity (this will most likely result in a change to current practice). The clarification could affect whether the entity is a VIE.

ASU 2015-02 became effective for the Company on January 1, 2016. The adoption of ASU 2015-02 had no material impact on the Company’s consolidated financial statements.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

2. Significant Accounting Policies (continued)

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30)—Simplifying the Presentation of Debt Issuance Costs. The Company also adopted ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015. Together, these ASUs required, in most cases, that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Debt issuance costs incurred in connection with line-of-credit arrangements, however, may continue to be presented as an asset in the balance sheet. The adoption of these ASUs had no material impact on the Company’s consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. ASU 2015-07 is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2015. The adoption of ASU No. 2015-07 had no material impact on the Company’s consolidated financial statements.

3. Investment Valuations and Fair Value Measurements

Investments at Fair Value: Investments held by the Company are valued at fair value. Fair value is generally determined on the basis of last reported sales prices or official closing prices on the primary exchange in which each security trades, or if no sales are reported, based on the midpoint of the valuation range obtained for debt investments from a quotation reporting system, established market makers or pricing service.

Investments for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by the Company based on valuation inputs used to determine fair value into three levels:

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect the Company’s determination of assumptions that market participants might reasonably use in valuing the assets.

Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Registered Investment Companies, (Level 1), include registered open-end investment companies that are valued based upon the reported net asset value of such investment.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine fair value of investments in private debt and equity for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Debt, (Level 3), include investments in privately originated senior secured debt. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A discounted cash flow approach incorporating a weighted average cost of capital is generally used to determine fair value. Valuation may also include a shadow rating method. Standard pricing inputs include but are not limited to the financial health of the issuer, place in the capital structure, value of other issuer debt, credit, industry, and market risk and events.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

3. Investment Valuations and Fair Value Measurements (continued)

Equity, (Level 3), include common stock. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health, and relevant business developments of the issuer; EBITDA, market multiples of comparable companies, comparable market transactions and recent trades or transactions; issuer, industry and market events; contractual or legal restrictions on the sale of the security. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

Pricing inputs and weightings applied to determine value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (Strategic Ventures) are valued based on the NAV reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. The Company is entitled to income and principal distributed by the fund.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of September 30, 2016:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	-	$	-	$	973,087	$	-	$	973,087
Equity		-		-		7,771		-		7,771
Investment Funds & Vehicles ⁽¹⁾		-		-		-		298,570		298,570
Cash equivalents		7		-		-		-		7

Total Assets	$	7	$	-	$	980,858	$	298,570	$	1,279,435

⁽¹⁾Includes equity investments in Strategic Ventures. In accordance with ASC Topic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of December 31, 2015:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	-	$	-	$	586,626	$	-	$	586,626
Investment Funds & Vehicles ⁽¹⁾		-		-		-		206,635		206,635
Cash equivalents		168,850		-		-		-		168,850

Total Assets	$	168,850	$	-	$	586,626	$	206,635	$	962,111

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

3. Investment Valuations and Fair Value Measurements (continued)

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and nine months ended September 30, 2016:


	Debt			Equity			Total
Balance, June 30, 2016	$	891,792		$	8,507		$	900,299
Purchases^*		159,028			-			159,028
Sales and paydowns of investments		(78,855	)		-			(78,855	)
Accretion of original issue discounts		1,233			-			1,233
Net realized gains		195			-			195
Net change in unrealized appreciation/depreciation		(306	)		(736	)		(1,042	)

Balance, September 30, 2016	$	973,087		$	7,771		$	980,858


Change in net unrealized appreciation (depreciation) in investments held as of September 30, 2016		346			(736	)	$	(390	)

*Includes payments received in kind


	Debt			Equity			Total
Balance, December 31, 2015	$	586,626		$	-		$	586,626
Purchases^*		613,076			8,750			621,826
Sales and paydowns of investments		(214,981	)		(243	)		(215,224	)
Accretion of original issue discounts		3,665			-			3,665
Net realized gains		313			-			313
Net change in unrealized appreciation/depreciation		(15,612	)		(736	)		(16,348	)

Balance, September 30, 2016	$	973,087		$	7,771		$	980,858


Change in net unrealized appreciation (depreciation) in investments held as of September 30, 2016		(14,518	)		(736	)	$	(15,254	)

*Includes payments received in kind

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and nine months ended September 30, 2015:


	Debt
Balance, June 30, 2015	$	438,431
Purchases		123,834
Sales and paydowns of investments		(57,626	)
Accretion of original issue discounts		376
Net realized gains		312
Net change in unrealized appreciation/depreciation		1,162

Balance, September 30, 2015	$	506,489


Change in net unrealized appreciation (depreciation) in investments held as of September 30, 2015		1,162

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

3. Investment Valuations and Fair Value Measurements (continued)


	Debt
Balance, December 31, 2014	$	112,500
Purchases		555,239
Sales and paydowns of investments ⁽¹⁾		(170,195	)
Accretion of original issue discounts		657
Net realized gains		2,307
Net change in unrealized appreciation/depreciation		5,981

Balance, September 30, 2015	$	506,489


Change in net unrealized appreciation (depreciation) in investments held as of September 30, 2015		8,168

⁽¹⁾

Includes in-kind transfer of investments of $111,656.

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the three and nine months ended September 30, 2016 and 2015, the Company did not have any transfers between levels.

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of September 30, 2016.

Investment Type

Fair Value

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to
Valuation from an
Increase in Input

Debt

876,029

Income method

Weighted average cost of capital

5.2% - 21.6%

9.4%

Decrease

Shadow credit rating

CCC- to BB

N/A

Increase

Debt

84,952

Market method

EV Implied multiple

9.0x to 10.0x

N/A

Increase

Debt

12,106

Market method

Recent transaction

100.0% - 100.0%

N/A

Increase

Equity

7,771

Market method

EV implied multiple

10.75x to 11.75x

N/A

Increase

Investment Type

Fair Value

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to Valuation
from an Increase in
Input

Debt

586,262

Income method

Weighted average cost of capital

Shadow credit rating

6.4% - 14.5%

CCC+ to B+

10.7

N/A

Decrease

Increase

Valuation Process:

Oversight for determining fair value is the responsibility of the Board of the Company (with input from the Adviser and an external, independent valuation firm retained by the Company). The Company and the Adviser value the investments at fair value on a quarterly basis and whenever required by the Company’s operating agreement. The Company has engaged an external, independent valuation firm to assist the Board in determining the fair market value of the Company’s investments for which market quotations are not readily available.

The Adviser undertakes a multi-step valuation process for investments whose market prices are not otherwise readily available. Unless noted, the Company is utilizing the midpoint of a valuation range provided by an external, independent valuation firm and approved by the Board. The Board may approve a value other than the midpoint if it believes that is the fair value.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

3. Investment Valuations and Fair Value Measurements (continued)

Based on its review of the external, independent valuation firm’s range and related documentation, the Adviser documents the valuation recommendations. The Adviser provides the valuation recommendation for each investment to the Company’s audit committee, based on / along with the independent valuation report. After the Company’s audit committee reviews the valuation recommendations, the Board discusses the portfolio company and investment valuations with the Adviser and determines the fair value of these investments in good faith.

The Adviser uses all relevant factors in recommending fair value including, without limitation, any of the following factors as may be deemed relevant by the Board: current financial position and current and historical operating results of the issuer; sales prices of recent public or private transactions in the same or similar securities, including transactions on any securities exchange on which such securities are listed or in the over-the-counter market; general level of interest rates; recent trading volume of the security; restrictions on transfer including the Company’s right, if any, to require registration of its securities by the issuer under the securities laws; any liquidation preference or other special feature or term of the security; significant recent events affecting the portfolio company, including any pending private placement, public offering, merger, or acquisition; the price paid by the Company to acquire the asset; the percentage of the issuer’s outstanding securities that is owned by the Company and all other factors affecting value.

4. Agreements and Related Party Transactions

Advisory Agreement: On September 15, 2014, the Company entered into an Investment Advisory and Management Agreement (the “Advisory Agreement”) with the Adviser, its registered investment adviser under the Investment Advisers Act of 1940, as amended. The Advisory Agreement was approved by the Board at an in-person meeting. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years and will remain in effect from year to year thereafter if approved annually by (i) the vote of the Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of the independent directors of the Board.

Management Fee: Pursuant to the Advisory Agreement, and subject to the overall supervision of the Board, the Adviser will manage the Company’s day-to-day operations and provide investment advisory services to the Company. The Company will pay to the Adviser, quarterly in advance, a management fee (the “Management Fee”) calculated as follows: (i) for the period starting on the initial closing date and ending on the earlier of (A) the last day of the calendar quarter during which the Commitment Period (as defined below) ends or (B) the last day of the calendar quarter during which the Adviser or an affiliate thereof begins to accrue a management fee with respect to a successor fund, 0.375% (i.e., 1.50% per annum) of the aggregate commitments determined as of the end of the Closing Period, and (ii) for each calendar quarter thereafter during the term of the Company (but not beyond the tenth anniversary of the initial closing date), 0.1875% (i.e., 0.75% per annum) of the aggregate cost basis (whether acquired by the Company with contributions from members, other Company funds or borrowings) of all portfolio investments that have not been sold, distributed to the members, or written off for tax purposes (but reduced by any portion of such cost basis that has been written down to reflect a permanent impairment of value of any portfolio investment), determined in each case as of the first day of such calendar quarter. The Management Fee in respect of the Closing Period will be calculated as if all capital commitments of the Company were made on the initial closing date, regardless of when Common Units were actually funded. The actual payment of the Management Fee with respect to the Closing Period will not be made prior to the first day of the first full calendar quarter following the end of the Closing Period. The “Commitment Period” of the Company will begin on the initial closing date and end on the earlier of (a) three years from the initial closing date and (b) the date on which the undrawn Commitment of each Common Unit has been reduced to zero. While the Management Fee will accrue from the initial closing date, the Adviser intends to defer payment of such fees to the extent that such fees cannot be paid from interest and fee income generated by our investments.

For the three and nine months ended September 30, 2016, Management Fees incurred amounted to $7,551 and $22,652, respectively, of which $0 remained payable at September 30, 2016. For the three and nine months ended September 30, 2015, Management Fees incurred amounted to $7,634 and $27,777, respectively, of which $31,270 remained payable at September 30, 2015.

Transaction and Offset Fees: Any (i) transaction, advisory, consulting, management, monitoring, directors’ or similar fees, (ii) closing, investment banking, finders’, transaction or similar fees, (iii) commitment, breakup or topping fees or litigation proceeds and (iv) other fee or payment of services performed or to be performed with respect to an investment or proposed investment received from or with respect to Portfolio Companies or prospective Portfolio Companies in connection with the Company’s activities will be will be the property of the Company. Notwithstanding the foregoing, for administrative or other reasons, certain fees described in

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

4. Agreements and Related Party Transactions (continued)

clauses (i) through (iv) above (including any fees for administrative agent services provided by the Adviser or an affiliate with respect to a particular loan or portfolio of loans made by the Company) may be paid to the Adviser or the affiliate (rather than directly to the Company), in which case the amount of such fees (net of any related expenses associated with the generation of such fees borne by the Adviser or such affiliate that have not been and will not be reimbursed by the Portfolio Company) shall be paid to the Company or shall offset amounts (including the Management Fee) otherwise payable by the Company to the Adviser.

Since inception of the Company through the three and nine months ended September 30, 2016, the Adviser was paid directly zero and $652, respectively in such fees. In accordance with the limited liability company agreement, as of September 30, 2016 all of the $652 of such fees has been recorded as fee income. No fees were paid to the Advisor for the three and nine months ended September 30, 2015.

Incentive Fee: In addition, the Adviser will receive an incentive fee (the “Incentive Fee”) as follows:

(a) First, no Incentive Fee will be owed until the unitholders have collectively received cumulative distributions pursuant to this clause (a) equal to their aggregate capital contributions in respect of all Common Units;

(b) Second, no Incentive Fee will be owed until the unitholders have collectively received cumulative distributions equal to a 9% internal rate of return on their aggregate capital contributions in respect of all Common Units (the “Hurdle”);

(c) Third, the Adviser will be entitled to an Incentive Fee out of 100% of additional amounts otherwise distributable to unitholders until such time as the cumulative Incentive Fee paid to the Adviser is equal to 20% of the sum of (i) the amount by which the Hurdle exceeds the aggregate capital contributions of the unitholders in respect of all Common Units and (ii) the amount of Incentive Fee being paid to the Adviser pursuant to this clause (c); and

(d) Thereafter, the Adviser will be entitled to an Incentive Fee equal to 20% of additional amounts otherwise distributable to unitholders, with the remaining 80% distributed to the unitholders.

The Incentive Fee will be calculated on a cumulative basis and the amount of the Incentive Fee payable in connection with any distribution (or deemed distribution) will be determined and, if applicable, paid in accordance with the foregoing formula each time amounts are to be distributed to the unitholders.

If the Advisory Agreement terminates early for any reason other than (i) the Adviser voluntarily terminating the agreement or (ii) our terminating the agreement for cause (as set out in the Advisory Agreement), we will be required to pay the Adviser a final incentive fee payment (the “Final Incentive Fee Payment”). The Final Incentive Fee Payment will be calculated as of the date the Advisory Agreement is so terminated and will equal the amount of Incentive Fee that would be payable to the Adviser if (A) all our investments were liquidated for their current value (but without taking into account any unrealized appreciation of any portfolio investment), and any unamortized deferred portfolio investment-related fees would be deemed accelerated, (B) the proceeds from such liquidation were used to pay all our outstanding liabilities, and (C) the remainder were distributed to unitholders and paid as Incentive Fee in accordance with the “waterfall” (i.e., clauses (a) through (d)) described above for determining the amount of the Incentive Fee. We will make the Final Incentive Fee Payment in cash on or immediately following the date the Advisory Agreement is so terminated. The Adviser Return Obligation (defined below) will not apply in connection with a Final Incentive Fee Payment.

For the three and nine months ended September 30, 2016, no Incentive Fees were incurred. For the three and nine months ended September 30, 2015, no Incentive Fees were incurred.

Administration Agreement: On September 15, 2014, the Company entered into the Administration Agreement with the Adviser under which the Adviser (or one or more delegated service providers) will oversee the maintenance of our financial records and otherwise assist on the Company’s compliance with regulations applicable to a BDC under the 1940 Act, and a RIC under the Code, to prepare reports to our Members, monitor the payment of our expenses and the performance of other administrative or professional service providers, and generally provide us with administrative and back office support. The Company will reimburse the Administrator for expenses incurred by it on behalf of the Company in performing its obligations under the Administration Agreement. Amounts paid pursuant to the Administration Agreement are subject to the annual cap on Company Expenses (as defined below), as described more fully below.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

4. Agreements and Related Party Transactions (continued)

The Company, and indirectly the unitholders, will bear (including by reimbursing the Adviser or Administrator) all other costs and expenses of its operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of the Company’s counsel and accounting fees. However, the Company will not bear (a) more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments of the Company per annum (pro-rated for partial years) for its costs and expenses other than ordinary operating expenses (“Company Expenses”), including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser. All expenses that the Company will not bear will be borne by the Adviser or its affiliates. Notwithstanding the foregoing, the cap on Company Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts payable in connection with the Company’s borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to the liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments).

TCW Direct Lending Strategic Ventures LLC: On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Direct Lending Strategic Ventures LLC (“Strategic Ventures”). Strategic Ventures focuses primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015.

The Company’s capital commitment is $481,600, representing approximately 80% of the preferred and common equity ownership of Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to Strategic Ventures. Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. Effective August 21, 2015, the revolving credit facility increased to $600 million from $500 million. Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of Strategic Ventures, the Company does not believe that it has control over Strategic Ventures (other than for purposes of the Investment Company Act).

The Company’s investments in affiliated investments for the nine months ended September 30, 2016 were as follows:


	Fair Value as of December 31, 2015		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of September 30, 2016		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	206,635	$	104,337	$	(24,201	)	$	11,799	$	298,570	$	9,357

Total Controlled Affiliates	$	206,635	$	104,337	$	(24,201	)	$	11,799	$	298,570	$	9,357

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

4. Agreements and Related Party Transactions (continued)

The Company’s investments in affiliated investments for the year December 31, 2015 were as follows:


	Fair Value as of December 31, 2014		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2015		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	-	$	268,229	$	(67,669	)	$	6,075	$	206,635	$	894

Total Controlled Affiliates	$	-	$	268,229	$	(67,669	)	$	6,075	$	206,635	$	894

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized gain/(loss) as of September 30, 2016 by investment:


		September 30, 2016					December 31, 2015
Unfunded Commitments	Maturity	Amount		Unrealized Gains (Losses)			Amount		Unrealized Gains (Losses)
ENA Holdings Corporation	May 2021	$	3,202	$	(26	)	$	N/A	$	N/A
Help At Home, Inc.	August 2020		5,676		55			1,486		(28	)
OTG Management LLC	August 2021		10,292		(154	)		N/A		N/A
Quicken Parent Corp.	February 2017		1,725		14			N/A		N/A
Sierra Private Holdings II Ltd.	August 2022		2,014		(20	)		N/A		N/A
Xura, Inc.	August 2022		3,020		(31	)		N/A		N/A

Total Unfunded Commitments		$	25,929	$	(162	)	$	1,486	$	(28	)

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of September 30, 2016, the Company’s unfunded commitment to Strategic Ventures is $200,904.

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of September 30, 2016, management is not aware of any pending or threatened litigation.

In the normal course of business, the Company enters into contracts which provide a variety of representations and warranties, and that provide general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Company has not accrued any liability in connection with such indemnifications.

6. Members’ Capital

As of the nine months ended September 30, 2016, the Company did not sell or issue any Common Units. As of the nine months ended September 30, 2015, the Company sold and issued 11,894,188 Common Units at an aggregate purchase price of $100 per unit. The activity for the three and nine months ended September 30, 2016 and 2015 is a follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2016

2015

2016

2015

Units at beginning of period

20,134,698

8,240,510

Units issued and committed

11,894,188

Units issued and committed at end of period

20,134,698

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

6. Members’ Capital (continued)

During the nine months ended September 30, 2016, the Company processed $178,435 of deemed distributions and re-contributions.

7. Credit Facility

On November 12, 2014, the Company entered into a senior secured revolving credit agreement, by and between the Company, as borrower, and Natixis, New York Branch, as administrative agent and committed lender (“Natixis”). That agreement was subsequently amended pursuant to an amended and restated credit agreement, dated as of December 22, 2014, by and among the Company, Natixis, and various lenders party thereto, which was then further amended pursuant to a second amended and restated credit agreement, dated as of July 1, 2015 (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment”) (with sublimits for letters of credit of up to $50 million and short-term “swingline” loans of up to $10 million) (the “Credit Facility”), subject to an available borrowing base which is generally, a percentage of remaining unfunded commitments from certain eligible Members, (the “Borrowing Base” or “Available Amount”), and is secured by the undrawn commitments together with the recallable amounts of the Company’s Members generally. The initial lender commitment was $250 million which periodically increased up to an aggregate amount of $750 million. The stated maturity date of the Credit Agreement is November 10, 2017, unless such date is extended at the Company’s option no more than two times for a term of up to twelve months per such extension. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.70%, (b) commercial paper rate plus 1.70%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.70%. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of September 30, 2016, the Company was in compliance with such covenants.

As of September 30, 2016, the Maximum Commitment was $750 million and the Available Amount was $622 million under the Credit Facility Borrowing Base. As of December 31, 2015, the Maximum Commitment and the Available Amount was $750 million. The Available Amount decreased from $750 million to $622 million as of August 30, 2016 in conjunction with recent capital activity that decreased the remaining Undrawn Commitments together with the Recallable Amount of the Company’s Members. As of September 30, 2016 and December 31, 2015, the amounts outstanding under the Credit Facility were $572 million and $329 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of September 30, 2016 and December 31, 2015, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred $6,415 in connection with obtaining the Credit Facility, which the Company has recorded as deferred financing costs on its Consolidated Statements of Asset and Liabilities and is amortizing these fees over the life of the Credit Facility. As of September 30, 2016 and December 31, 2015, $2,548 and $4,263, respectively, of such prepaid deferred financing costs had yet to be amortized.

The summary information regarding the Credit Facility for the three and nine months ended September 30, 2016 and 2015 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Credit facility interest expense	$	3,301		$	970		$	7,558		$	1,914
Unused fees		105			479			647			1,183
Administrative fees		19			19			57			56
Amortization of deferred financing costs		576			449			1,715			1,233

Total	$	4,001		$	1,917		$	9,977		$	4,386


Weighted average interest rate		3.83	%		1.89	%		2.21	%		1.89	%
Average outstanding balance		294,409			200,511			457,747			133,615

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

8. Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. Federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its common unitholders as dividends. The Company elected to be taxed as a RIC in 2015. Built-in gains by a C-Corp transferred to a RIC are subject to tax. The Company does not anticipate a tax on its built-in gains due its current net operating losses.

Federal Income Taxes

It is the policy of the Company to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income and any net realized gains on investments to its shareholders. Therefore, no federal income tax provision is required.

As of September 30, 2016 and December 31, 2015, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes were as follows:


	September 30, 2016			December 31, 2015
Cost of investments for federal income tax purposes	$	1,282,147		$	795,312
Unrealized appreciation	$	26,362		$	5,828
Unrealized depreciation	$	29,074		$	7,879
Net unrealized appreciation (depreciation) on investments	$	(2,712	)	$	(2,051	)

The Company did not have any unrecognized tax benefits at December 31, 2015, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; and therefore no interest or penalties were accrued. The Company is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three and four fiscal years, respectively.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

9. Financial Highlights

Selected data for a unit outstanding throughout the nine months ended September 30, 2016 and 2015 is presented below. The accrual base Net Asset Value is calculated by subtracting the per unit loss from investment operations from the beginning Net Asset Value per unit and reflects all units issued and outstanding.


	For the Nine Months Ended September 30,
	2016			2015

Net Asset Value Per Unit (accrual base), Beginning of Period	$	99.35		$	99.84

Net Income in Common Unitholder NAV from Prior Year⁽¹⁾		—			0.09

Income from Investment Operations:
Net investment income (loss)⁽²⁾		2.20			(0.83	)
Net realized and unrealized gain (loss)		(0.23	)		0.55

Total from investment operations		1.97			(0.28	)

Less Distributions:
From net investment income		0.00			0.00
From net realized gains		0.00			0.00
Return of capital		(8.86	)		0.00

Total distributions		(8.86	)		—


Net Asset Value Per Unit (accrual base), End of Period	$	92.46		$	99.65

Common Unitholder Total Return⁽³⁾⁽⁷⁾		5.8	%		(2.0	)%

Common Unitholder IRR⁽⁴⁾		3.1	%		—


Ratios and Supplemental Data
Members’ Capital, end of period	$	941,157		$	558,685
Units outstanding, end of period		20,134,698			20,134,698

Ratios based on average net assets of Member’s Capital:
Ratio of total expenses to average net assets⁽⁵⁾		6.5	%		13.1	%
Expenses recaptured by Investment Adviser⁽⁶⁾		—	%		0.1	%

Ratio of net expenses to average net assets⁽⁵⁾		6.5	%		13.2	%
Ratio of financing cost to average net assets⁽⁷⁾		1.4	%		1.7	%
Ratio of net investment income (loss) before expense recapture to average net assets⁽⁵⁾		8.2	%		(6.3	)%
Ratio of net investment income (loss) to average net assets⁽⁵⁾		8.2	%		(6.4	)%
Credit facility payable		572,024			334,000
Asset coverage ratio		2.6			2.7
Portfolio turnover rate⁽⁷⁾		30.0	%		64.0	%

⁽¹⁾	Net increase in Common Unitholder NAV from prior year is a one-time adjustment to account for the increase in the Common Units issued from January 1, 2015 through the final closing date of March 19, 2015.

⁽²⁾	Per unit data was calculated using the number of common units issued and outstanding as of September 30, 2016.

⁽³⁾

The Total Return for the nine months ended September 30, 2016 and September 30, 2015 were calculated by taking the net income (loss) of the Company for the period divided by the weighted average capital contributions from the members during the period. The return is net of management fees and expenses.

⁽⁴⁾

The Internal Rate of Return (IRR) since inception for the Common Unitholders’, after management fees, financing costs and operating expenses is 3.1% through September 30, 2016. The IRR is computed based on cash flow due dates contained in notices to Member’s (contributions from and distributions to the Common Unitholders) and the net assets (residual value) of the Members’ capital account at period end. The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the return may vary significantly upon realization.

⁽⁵⁾	Annualized except for organizational costs.

⁽⁶⁾	Annualized.

⁽⁷⁾	Not annualized.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

September 30, 2016

10. Subsequent Events

The Company has evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. This discussion also should be read in conjunction with the “Cautionary Statement Regarding Forward Looking Statements” set forth on page 3 of this quarterly report. For simplicity, this report uses the terms “Company,” “we,” “us” and “our” to refer to TCW Direct Lending LLC and where appropriate, its wholly-owned subsidiary, TCW Direct Lending Luxembourg VI S.à.r.l., on a consolidated basis. All dollar amounts are presented in thousands.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation:

•

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or a significant portion of our investments in such portfolio companies;

•

a contraction of available credit could impair our lending and investment activities;

•

interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

an inability to replicate the historical success of any previously launched fund managed by the direct lending team of our investment adviser, TCW Asset Management Company (the “Adviser”);

•

the speculative and illiquid nature of our investments;

•

the use of borrowed money to finance a significant portion of our investments;

•

the adequacy of our financing sources and working capital;

•

the costs associated with being a public entity;

•

the loss of key personnel;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•

the ability of The TCW Group, Inc. to attract and retain highly talented professionals that can provide services to the Adviser in its capacity as our investment adviser and administrator;

•

our ability to qualify and maintain our qualification as a regulated investment company, or “RIC,” under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, or the “Code,” and as a business development company (“BDC”) under the Investment Company Act of 1940;

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 30, 2016 and in this report.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the 1934 Act, which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this report because we are an investment company.

Overview

TCW Direct Lending LLC was formed on April 1, 2014 as a limited liability company under the laws of the State of Delaware. We have filed an election to be regulated as a BDC under the 1940 Act. We have also elected to be treated for U.S. federal income tax purposes as a RIC under the Code for the taxable year ending December 31, 2015 and subsequent years. We are required to continue to meet the minimum distribution and other requirements for RIC qualification. As such, we will be required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest.

Each investor was required to enter into a subscription agreement in connection with its Commitment (a “Subscription Agreement”). Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the Unitholders. Investors have entered into subscription agreements for 20,134,698 Common Units of the Company issued and outstanding representing a total of $2.013 billion of committed capital.

Revenues

We generate revenues in the form of interest income and capital appreciation by providing private capital to middle market companies operating in a broad range of industries primarily in the United States. We do not anticipate the Direct Lending Team to originate investments for us with PIK interest features, although, we may have investments with payment-in-kind (“PIK”) interest features in limited circumstances involving debt restructurings or work-outs of current investments. Our highly negotiated private investments may include senior secured loans, unsecured senior loans, subordinated and mezzanine loans, convertible securities, equity securities, and equity-linked securities such as options and warrants. However, our investment bias will be towards adjustable-rate, senior secured loans. We do not anticipate a secondary market developing for our private investments.

We are primarily focused on investing in senior secured debt obligations, although there may be occasions where the investment may be unsecured. We also consider an equity investment as the primary security, in combination with a debt obligation, or as a part of total return strategy. Our investments are mostly in corporations, partnerships or other business entities. Additionally, in certain circumstances, we may co-invest with other investors and/or strategic partners through indirect investments in portfolio companies through a joint venture vehicle, partnership or other special purpose vehicle (each, an “Investment Vehicle”). While we invest primarily in U.S. companies, there may be certain instances where we will invest in companies domiciled elsewhere.

Expenses

We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided through the Administration Agreement and the Advisory Agreement.

We will bear (including by reimbursing the Adviser or Administrator) all costs and expenses of our operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of our counsel and accounting fees. However, we will not bear (a) more than an amount equal to 10 basis points of the aggregate Commitments for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments per annum (pro-rated for partial years) for our Operating Expenses, including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser and its affiliates. Notwithstanding the foregoing, the cap on Operating Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate cap described above), amounts payable in connection with our borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to our liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments to either the Adviser or the Administrator). All expenses that we will not bear will be borne by the Adviser or its affiliates.

Operating expenses for the three and nine months ended September 30, 2016 and 2015 were as follows (dollar amounts in thousands):


	For the three months ended September 30,
	2016		2015
Expenses
Management fees	$	7,551	$	7,634
Interest and credit facility expenses		4,001		1,917
Administrative fees		295		218
Professional fees		365		273
Directors’ fees		72		71
Other expenses		94		91

Total expenses	$	12,378	$	10,204

Expense recaptured by the Investment Adviser		-		-

Net expenses	$	12,378	$	10,204


	For the nine months ended September 30,
	2016		2015
Expenses
Management fees	$	22,652	$	27,777
Interest and credit facility expenses		9,977		4,386
Administrative fees		808		484
Professional fees		754		586
Directors’ fees		216		216
Other expenses		292		276

Total expenses	$	34,699	$	33,725

Expense recaptured by the Investment Adviser		-		312

Net expenses	$	34,699	$	34,037

Our total operating expenses were $12.4 million and $10.2 million for the three months ended September 30, 2016 and 2015, respectively. Our operating expenses include management fees attributed to the Adviser of $7.6 million for the three months ended September 30, 2016 and 2015. The increase in interest and credit facility expenses during three months ended September 30, 2016 compared to the three months ended September 30, 2015 reflect the increase our business activity and related increase in credit facility outstanding. During the three months ended September 30, 2016 we incurred $0.1 million in organization costs associated with the formation of TCW Direct Lending Luxembourg VI S.à.r.l. Other expenses are consistent with prior year amounts.

For the nine months ended September 30, 2016 and 2015, our net operating expenses were $34.7 million and $34.0 million, respectively. Our operating expenses include management fees attributed to the Adviser of $22.7 million and $27.8 million for the nine months ended September 30, 2016 and 2015, respectively. Management fees for the nine months ended September 30, 2015 of $27.8 million included $5.0 million for the final placements of Common Units from the Initial Closing Date of September 14, 2014 through those closings. Operating expenses in all categories except directors’ fees increased during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 and reflect Company expenses consistent with regular operations versus the prior period’s commencement of operations activity. Net expenses during the nine months ended September 30, 2015 include an expense recapture of $0.3 million which offset the expense reimbursement by the Investment Adviser of $0.3 million in 2014 related to the expense limitation on organization expenses as outlined in the Advisory Agreement.

Net investment income (loss)

Our net investment income for the three months ended September 30, 2016 and 2015 was $18.3 million and $0.5 million, respectively. The income for the three months ended September 30, 2016 is attributable to current operations and the increase in the number of debt investments from 8 as of September 30, 2015 to 19 as of September 30, 2016 for the Company. The income for the three months ended September 30, 2015 was attributable to the commencement of investment operations and a full quarter of interest income earned on loans originated in the three months ended June 30, 2015, as well as the loans originated in the three months ended September 30, 2015.

Our net investment income (loss) for the nine months ended September 30, 2016 and 2015 was $44.2 million and ($16.6) million, respectively. The income for the nine months ended September 30, 2016 is attributable to current operations and the increase in the number of debt investments as of September 30, 2016 compared to September 30, 2015 as well as a greater number of debt investments which earned interest income for the entire nine months ended September 30, 2016 compared to September 30, 2015. The loss for the nine months ended September 30, 2015 was attributable to the commencement of investment operations and ongoing costs in the period.

Net realized gains on non-controlled/non-affiliated investments

Net realized gain on non-controlled/non-affiliated investments for the three months ended September 30, 2016 and 2015 were $0.2 million and $0.3 million, respectively. The realized gain on investments from non-controlled/non-affiliated investments during the three months ended September 30, 2016 was primarily due to the realization of gains related to our term loan to Harvest Hill Beverage Company, while the gains during the three months ended September 30, 2015 were due to the realization of gains related to Nice-Pak Products, Inc.,

Net realized gains on non-controlled/non-affiliated investments was $0.3 million and $2.3 million during the nine months ended September 30, 2016 and 2015, respectively. The realized gain on investments from non-controlled/non-affiliated investments during the three months ended September 30, 2016 was primarily due to the realization of gains related to our term loan to Harvest Hill Beverage Company. The net realized gains during the nine months ended September 30, 2015 resulted primarily from the transfer of investments to TCW Direct Lending Strategic Ventures LLC and the corresponding realization of origination fees from the transferred investments.

Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments

For the three months ended September 30, 2016, our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments was a decrease of $1.1 million and is primarily attributable to our equity investment in Verus Financial, LLC which recorded a decrease of $0.7 million in fair value for the quarter ended September 30, 2016.

For the three months ended September 30, 2015, our net change in unrealized appreciation on investments totaled $1.2 million and resulted primarily from three loans originated in during the quarter.

For the nine months September 30, 2016, our net change in unrealized depreciation on investments totaled $16.5 million and is primarily attributable to the our term loans to H-D Advanced Manufacturing and Frontier Spinning Mills, Inc. which recorded decreases in fair value of $18.4 million and $2.0 million, respectively, during the nine months ended September 30, 2016. These were partially offset by $1.9 million in unrealized appreciation on our term loan Harvest Hill Beverage Company, during the nine months ended September 30, 2016. The Company’s remaining investments recorded a net unrealized appreciation of $2.0 million.

For the nine months ended September 30, 2015, our net change in unrealized appreciation on investments totaled $6.0 million and resulted from investments originated in 2014 and 2015.

Net change in unrealized appreciation on controlled affiliated investments

Our net change unrealized appreciation from controlled affiliated investments was $3.3 million and $3.0 million for the three months ended September 30, 2016 and 2015, respectively. This activity relates to loans originated in 2016 and undistributed profits from TCW Strategic Ventures for which commenced operation in June 2015.

For the nine months ended September 30, 2016 and 2015, our net change unrealized appreciation from controlled affiliated investments was $11.8 million and $3.4 million, respectively resulting from loans originated in 2016 and undistributed profits from TCW Strategic Ventures.

Net increase (decrease) in members’ capital from operations

Our net increase in Members’ Capital from operations for the three months ended September 30, 2016 and 2015 was $20.7 million and $5.0 million, respectively. This increase reflects the increase in operations, loan originations and activity versus the prior year where we had just commenced operations.

For the nine months ended September 30, 2016 our net increase in members’ capital from operations was $39.9 million versus a decrease of $4.9 million in for the nine months ended September 30, 2015. This increase reflects the increase in operations, loan originations and activity vs. the prior year where we had just commenced operations.

Financial Condition, Liquidity and Capital Resources

On March 19, 2015 we completed the final private placement of Common Units. We generate cash from (1) drawing down capital in respect of Units, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders.

Our primary use of cash is for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, the management fee, the incentive fee, and any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to the Unitholders.

As of September 30, 2016 and December 31, 2015, aggregate Commitment, Undrawn Commitments and subscribed for Units of the Company are as follows (dollar amounts in thousands):


	September 30, 2016			December 31, 2015
Commitments	$	2,013,470		$	2,013,470
Undrawn commitments	$	920,589		$	1,349,024
Percentage of commitments funded		54.3	%		33.0	%
Units		20,134,698			20,134,698

Natixis Credit Agreement

On November 12, 2014, the Company entered into a senior secured Revolving Credit Agreement, by and between the Company, as borrower, and Natixis, New York Branch, as administrative agent and committed lender (“Natixis”). That agreement was subsequently amended pursuant to an Amended and Restated Credit Agreement, dated as of December 22, 2014, by and among the Company, Natixis, and various lenders party thereto, which was then further amended pursuant to a Second Amended and Restated Credit Agreement, dated as of July 1, 2015 (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a revolving credit line of up to $750 million (with sublimits for letters of credit of up to $50 million and short-term “swingline” loans of up to $10 million), subject to the available Borrowing Base (generally, a percentage of remaining unfunded commitments from certain eligible Company investors), and is secured by the undrawn commitments together with the recallable amounts of the Company’s investors generally. The initial lender commitment was $250 million which periodically increased up to an aggregate amount of $750 million. The stated maturity date of the Credit Agreement is November 10, 2017, unless such date is extended at the Company’s option no more than two times for a term of up to twelve months per such extension. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.70%, (b) commercial paper rate plus 1.70%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.70%.

As of September 30, 2016 and December 31, 2015, the credit facility commitment amounts were $750 million and the amounts outstanding under the Credit Facility were $572 million and $329 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of September 30, 2016 and December 31, 2015, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred $6.4 million in connection with obtaining the Credit Facility, which the Company has recorded as deferred financing costs on its statement of asset and liabilities and is amortizing these fees over the life of the Credit Facility. As of September 30, 2016 and December 31, 2015, $2.4 million and $4.3 million, respectively, of such prepaid deferred financing costs had yet to be amortized.

Investment Activity

Based on fair value as of September 30, 2016, our non-controlled/non-affiliated portfolio was comprised by 21 debt investments and one equity investment. Of these investments, 99.2% were debt investments which were primarily senior secured, first lien or term loans and 0.8% was common stock. As of September 30, 2015, the 8 debt investments outstanding were 100% first lien investments.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as of September 30, 2016:


	September 30, 2016
Food Products		14%
Industrial Conglomerates		12%
Hotels, Restaurant & Leisure		12%
Information Technology Services		10%
Household Durables		10%
Metals and Mining		9%
Road and Rail		9%
Pharmaceuticals		6%
Health Care Providers and Services		4%
Textiles, Apparel and Luxury Goods		4%
Software		3%
Diversified Financial Services		3%
Chemicals		2%
Diversified Consumer Services		1%
Manufacturing: Rubber and Miscellaneous Plastic Products		1%

Total		100%

Interest income from non-controlled/non-affiliated investments was $26.3 million and $10.7 million for the three months ended September 30, 2016 and 2015, respectively. Interest income from non-controlled/non-affiliated investments was $68.9 million and $17.4 million for the nine months ended September 30, 2016 and 2015, respectively.

Results of Operations

Our operating results for the three and nine months ended September 30, 2016 and 2015 were as follows:


	Three Months Ended September 30,
	2016			2015
Total investment income	$	30,655		$	10,702
Net expenses		12,378			10,204

Net investment income		18,277			498
Net realized gain on investments		195			312
Net change in unrealized appreciation/depreciation from non-controlled/non-affiliated investments		(1,075	)		1,162
Net change in unrealized appreciation from controlled affiliated investments		3,285			3,018

Net increase (decrease) in Members’ Capital from operations	$	20,682		$	4,990


	Nine Months Ended September 30,
	2016			2015
Total investment income	$	78,923		$	17,409
Net expenses		34,699			34,037

Net investment income		44,224			(16,628	)
Net realized gain on investments		313			2,307
Net change in unrealized appreciation/depreciation from non-controlled/non-affiliated investments		(16,482	)		5,981
Net change in unrealized appreciation from non-controlled affiliated investments		11,799			3,415

Net increase (decrease) in Members’ Capital from operations	$	39,854		$	(4,925	)

The investment income of $30.7 million and $10.7 million is interest income from our investments earned for the three months ended September 30, 2016 and 2015 respectively. The investment income of $78.9 million and $17.4 million is interest income from our investments earned for the nine months ended September 30, 2016 and 2015 respectively.

Direct Lending Strategic Ventures LLC

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Direct Lending Strategic Ventures LLC (“TCW Strategic Ventures”). TCW Strategic Ventures will focus primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015.

The Company’s capital commitment is $481.6 million, representing approximately 80% of the preferred and common equity ownership of TCW Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to TCW Strategic Ventures. TCW Strategic Ventures also entered into a $500 million revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. Effective August 21, 2015, the Credit Agreement was amended to increase the revolving credit facility to $600 million from $500 million. TCW Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of TCW Strategic Ventures, the Company does not believe that it has control over TCW Strategic Ventures (other than for purposes of the Investment Company Act).

The Company’s investments in affiliated investments for the nine months ended September 30, 2016 were as follows:


	Fair Value as of December 31, 2015		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of September 30, 2016		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	206,635	$	104,337	$	(24,201	)	$	11,799	$	298,570	$	9,357

Total Controlled Affiliates	$	206,635	$	104,337	$	(24,201	)	$	11,799	$	298,570	$	9,357

The Company’s investments in affiliated investments for the year December 31, 2015 were as follows:


	Fair Value as of December 31, 2014		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2015		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	-	$	268,229	$	(67,669	)	$	6,075	$	206,635	$	894

Total Controlled Affiliates	$	-	$	268,229	$	(67,669	)	$	6,075	$	206,635	$	894

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ.

In addition to the discussion below, our critical accounting policies are further described in Note 2 to the consolidated financial statements. We consider these accounting policies to be critical because they involve management judgments and assumptions, require estimates about matters that are inherently uncertain and are important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. The critical accounting policies should be read in connection with our risk factors as disclosed in “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 30, 2016

Investments which we hold for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by our Board of Directors based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by us based on valuation inputs used to determine fair value into three levels.

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect our determination of assumptions that market participants might reasonably use in valuing the assets.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Registered Investment Companies, (Level 1), include registered open-end investment companies that are valued based upon the reported net asset value of such investment.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine fair value of investments in private debt for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (Strategic Ventures) are valued based on the NAV reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. The Company is entitled to income and principal distributed by the fund.

Contractual Obligations

A summary of our contractual payment obligations as of September 30, 2016 and December 31, 2015 is as follows:


Revolving Credit Agreement ⁽¹⁾	Total Facility Commitment		Borrowings Outstanding		Available Amount
Total Debt Obligations – September 30, 2016	$	750,000	$	572,024	$	177,976
Total Debt Obligations – December 31, 2015	$	750,000	$	329,000	$	421,000

(1)	The amount available considers any limitations related to the debt facility borrowing.

The Company had the following unfunded commitments and unrealized gains/(losses) as of September 30, 2016 and December 31, 2015 by investment type:


			September 30, 2016					December 31, 2015
Unfunded Commitments	Maturity		Amount		Unrealized Gains (Losses)			Amount		Unrealized Gains (Losses)
ENA Holdings Corporation		May 2021	$	3,202	$	(26	)	$	N/A	$	N/A
Help At Home, Inc.		August 2020		5,676		55			1,486		(28	)
OTG Management LLC		August 2021		10,292		(154	)		N/A		N/A
Quicken Parent Corp.		February 2017		1,725		14			N/A		N/A
Sierra Private Holdings II Ltd.		August 2022		2,014		(20	)		N/A		N/A
Xura, Inc.		August 2022		3,020		(31	)		N/A		N/A

Total Unfunded Commitments			$	25,929	$	(162	)	$	1,486	$	(28	)

The Company’s total capital commitment to its underlying investment in TCW Direct Lending Strategic Ventures LLC is $481.6 million. As of September 30, 2016, the Company’s unfunded commitment to Strategic Ventures was $200.9 million.

Recent Developments

None.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. At September 30, 2016, 100.0% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At September 30, 2016, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 100.0%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor. Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our September 30, 2016 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):


Basis Point Change	Interest Income			Interest Expense			Net Income
Up 300 basis points	$	28,166		$	17,399		$	10,767
Up 200 basis points		17,597			11,599			5,998
Up 100 basis points		7,028			5,800			1,228
Down 100+ basis points		(0	)		(3,193	)		3,193

Item 4.

Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934). Based on that evaluation, our President and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934.

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

On September 19, 2014, the Company began accepting subscription agreements from investors for the private sale of its Common Units. The Company continued to enter into subscription agreements through the final closing date of March 19, 2015. Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the unitholders. The issuance of the Common Units pursuant to these subscription agreements and any draw by the Company under the related commitments is expected to be exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and Rule 506(c) of Regulation D thereunder.

Issuer purchases of equity securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits.

(a)

Exhibits


3.1		Certificate of Formation (incorporated by reference to Exhibit 3.1 to a registration on Form 10 filed on April 18, 2014)

3.4		Second Amended and Restated Limited Liability Company Agreement, dated September 19, 2014 (incorporated by reference to Exhibit 3.4 to a filing on Form 10-Q filed on November 7, 2014)

31.1*		Certification of President Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1*		Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

99.1*		Financial Statements of TCW Direct Lending Strategic Ventures LLC for the nine months end September 30, 2016 (Unaudited)

*	Filed herewith

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TCW DIRECT LENDING LLC

Date: November 10, 2016	By:	/s/ Richard T. Miller
		Richard T. Miller President

Date: November 10, 2016	By:	/s/ James G. Krause
		James G. Krause Chief Financial Officer

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