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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended March 31, 2017

OR

 

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

For the transition period                      to                     

Commission File No. 000-54899

 

 

TCG BDC, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Maryland   80-0789789

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

520 Madison Avenue, 38th Floor, New York, NY 10022

(Address of principal executive office) (Zip Code)

(212) 813-4900

(Registrant’s telephone number, including area code)

 

 

N/A

(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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  

Emerging Growth Company

 

    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

  

Outstanding at May 10, 2017

 

Common stock, $0.01 par value

     41,713,287  

 

 

 


Table of Contents

TCG BDC, INC.

INDEX

 

Part I.    Financial Information   
Item 1.    Financial Statements   
   Consolidated Statements of Assets and Liabilities as of March 31, 2017 (unaudited) and December 31, 2016      3  
   Consolidated Statements of Operations for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)      4  
   Consolidated Statements of Changes in Net Assets for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)      5  
   Consolidated Statements of Cash Flows for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)      6  
   Consolidated Schedules of Investments as of March 31, 2017 (unaudited) and December 31, 2016      7  
   Notes to Consolidated Financial Statements (unaudited)      21  
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      57  
Item 3.    Quantitative and Qualitative Disclosures About Market Risk      86  
Item 4.    Controls and Procedures      87  
Part II.    Other Information   
Item 1.    Legal Proceedings      89  
Item 1A.    Risk Factors      89  
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      89  
Item 3.    Defaults Upon Senior Securities      89  
Item 4.    Mine Safety Disclosures      89  
Item 5.    Other Information      89  
Item 6.    Exhibits      89  
   Signatures      90  

 

2


Table of Contents

TCG BDC, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)

 

     March 31,
2017
    December 31,
2016
 
     (unaudited)        

ASSETS

    

Investments, at fair value

    

Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,263,462 and $1,332,596, respectively)

   $ 1,258,424     $ 1,323,102  

Investments—controlled/affiliated, at fair value (amortized cost of $131,545 and $97,385, respectively)

     134,121       99,657  
  

 

 

   

 

 

 

Total investments, at fair value (amortized cost of $1,395,007 and $1,429,981, respectively)

     1,392,545       1,422,759  

Cash and cash equivalents

     44,874       38,489  

Receivable for investment sold

     11,874       19,750  

Deferred financing costs

     3,221       3,308  

Interest receivable from non-controlled/non-affiliated investments

     3,272       3,407  

Interest and dividend receivable from controlled/affiliated investments

     3,048       2,400  

Prepaid expenses and other assets

     159       42  
  

 

 

   

 

 

 

Total assets

   $ 1,458,993     $ 1,490,155  
  

 

 

   

 

 

 

LIABILITIES

    

Secured borrowings (Note 6)

   $ 390,608     $ 421,885  

2015-1 Notes payable, net of unamortized debt issuance costs of $2,100 and $2,151, respectively (Note 7)

     270,900       270,849  

Due to Investment Adviser

     86       215  

Interest and credit facility fees payable (Notes 6 and 7)

     3,703       3,599  

Dividend payable (Note 9)

     17,100       20,018  

Base management and incentive fees payable (Note 4)

     11,764       8,157  

Administrative service fees payable (Note 4)

     115       137  

Other accrued expenses and liabilities

     1,399       1,158  
  

 

 

   

 

 

 

Total liabilities

     695,675       726,018  
  

 

 

   

 

 

 

Commitments and contingencies (Notes 8 and 11)

    

NET ASSETS

    

Common stock, $0.01 par value; 200,000,000 shares authorized; 41,708,155 shares and 41,702,318 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively

     417       417  

Paid-in capital in excess of par value

     799,688       799,580  

Offering costs

     (74     (74

Accumulated net investment income (loss), net of cumulative dividends of $146,165 and $129,065 at March 31, 2017 and December 31, 2016, respectively

     (1,200     (3,207

Accumulated net realized gain (loss)

     (33,051     (25,357

Accumulated net unrealized appreciation (depreciation)

     (2,462     (7,222
  

 

 

   

 

 

 

Total net assets

   $ 763,318     $ 764,137  
  

 

 

   

 

 

 

NET ASSETS PER SHARE

   $ 18.30     $ 18.32  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


Table of Contents

TCG BDC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share data)

(unaudited)

 

     For the three month periods
ended
 
     March 31,
2017
    March 31,
2016
 

Investment income:

    

Interest income from non-controlled/non-affiliated investments

   $ 28,354     $ 22,111  

Other income from non-controlled/non-affiliated investments

     2,536       999  

Interest income from controlled/affiliated investments

     1,949       —    

Dividend income from controlled/affiliated investments

     1,260       —    
  

 

 

   

 

 

 

Total investment income

     34,099       23,110  
  

 

 

   

 

 

 

Expenses:

    

Base management fees (Note 4)

     5,125       4,140  

Incentive fees (Note 4)

     4,777       2,990  

Professional fees

     443       431  

Administrative service fees (Note 4)

     173       148  

Interest expense (Notes 6 and 7)

     5,034       3,599  

Credit facility fees (Note 6)

     503       599  

Directors’ fees and expenses

     103       120  

Other general and administrative

     542       503  
  

 

 

   

 

 

 

Total expenses

     16,700       12,530  

Waiver of base management fees (Note 4)

     1,708       1,380  
  

 

 

   

 

 

 

Net expenses

     14,992       11,150  
  

 

 

   

 

 

 

Net investment income (loss)

     19,107       11,960  

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:

    

Net realized gain (loss) on investments—non-controlled/non-affiliated

     (7,694     (3,577

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

     4,456       (11,091

Net change in unrealized appreciation (depreciation) on investments—controlled/affiliated

     304       —    
  

 

 

   

 

 

 

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments

     (2,934     (14,668
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ 16,173     $ (2,708
  

 

 

   

 

 

 

Basic and diluted earnings per common share (Note 9)

   $ 0.39     $ (0.08
  

 

 

   

 

 

 

Weighted-average shares of common stock outstanding—Basic and Diluted (Note 9)

     41,706,598       31,945,959  
  

 

 

   

 

 

 

Dividends declared per common share (Note 9)

   $ 0.41     $ 0.40  

The accompanying notes are an integral part of these consolidated financial statements.

 

4


Table of Contents

TCG BDC, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollar amounts in thousands)

(unaudited)

 

     For the three month periods ended  
         March 31, 2017             March 31, 2016      

Increase (decrease) in net assets resulting from operations:

    

Net investment income (loss)

   $ 19,107     $ 11,960  

Net realized gain (loss) on investments

     (7,694     (3,577

Net change in unrealized appreciation (depreciation) on investments

     4,760       (11,091
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     16,173       (2,708
  

 

 

   

 

 

 

Capital transactions:

    

Common stock issued

     —         33,000  

Reinvestment of dividends

     108       74  

Dividends declared (Note 12)

     (17,100     (13,337
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from capital share transactions

     (16,992     19,737  
  

 

 

   

 

 

 

Net increase (decrease) in net assets

     (819     17,029  
  

 

 

   

 

 

 

Net assets at beginning of period

     764,137       571,726  
  

 

 

   

 

 

 

Net assets at end of period

   $ 763,318     $ 588,755  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


Table of Contents

TCG BDC, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)

 

     For the three month periods ended  
         March 31, 2017             March 31, 2016      

Cash flows from operating activities:

    

Net increase (decrease) in net assets resulting from operations

   $ 16,173     $ (2,708

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

    

Amortization of deferred financing costs

     231       264  

Net accretion of discount on investments

     (3,576     (611

Net realized (gain) loss on investments

     7,694       3,577  

Net change in unrealized (appreciation) depreciation on investments

     (4,760     11,091  

Cost of investments purchased and change in payable for investments purchased

     (152,235     (114,034

Proceeds from sales and repayments of investments and change in receivable for investments sold

     190,967       28,146  

Changes in operating assets:

    

Interest receivable

     (578     81  

Dividend receivable

     65       —    

Prepaid expenses and other assets

     (117     370  

Changes in operating liabilities:

    

Due to Investment Adviser

     (129     (121

Interest and credit facility fees payable

     104       438  

Base management and incentive fees payable

     3,607       3,163  

Administrative service fees payable

     (22     50  

Other accrued expenses and liabilities

     241       238  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     57,665       (70,056
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     —         33,000  

Borrowings on SPV Credit Facility and Credit Facility

     93,000       111,000  

Repayments of SPV Credit Facility and Credit Facility

     (124,277     (66,000

Debt issuance costs paid

     (93     —    

Dividends paid in cash

     (19,910     (18,210
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (51,280     59,790  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     6,385       (10,266

Cash and cash equivalents, beginning of period

     38,489       41,837  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 44,874     $ 31,571  
  

 

 

   

 

 

 

Supplemental disclosures:

    

Interest paid during the period

   $ 4,952     $ 3,227  

Dividends declared during the period

   $ 17,100     $ 13,337  

Reinvestment of dividends

   $ 108     $ 74  

The accompanying notes are an integral part of these consolidated financial statements.

 

6


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

Investments—
non-controlled/non-affiliated (1)

 

Industry

 

Interest
Rate (2)

  Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

First Lien Debt (77.95%)

             

Access CIG, LLC (2) (3) (4) (13)

  Business Services   L + 5.00% (1.00% Floor)     10/17/2021     $ 18,289     $ 18,180     $ 18,313       2.40

Advanced Instruments,
LLC (2) (3) (4) (13) (15)

  Healthcare & Pharmaceuticals   L + 5.25% (1.00% Floor)     10/31/2022       10,500       10,287       10,476       1.37  

Alpha Packaging Holdings,
Inc. (2) (3) (4) (13)

  Containers, Packaging & Glass   L + 4.25% (1.00% Floor)     5/12/2020       11,293       11,285       11,293       1.48  

Anaren, Inc. (2) (3) (4) (13)

  Telecommunications   L + 4.50% (1.00% Floor)     2/18/2021       3,849       3,826       3,849       0.50  

Audax AAMP Holdings,
Inc. (2) (3) (4) (13)

  Durable Consumer Goods   L + 6.50% (1.00% Floor)     6/24/2017       10,274       10,260       9,789       1.28  

BAART Programs,
Inc. (2) (4) (13) (16)

  Healthcare & Pharmaceuticals   L + 7.75% (0.00% Floor)     10/9/2021       7,388       7,339       7,535       0.99  

Brooks Equipment Company,
LLC (2) (3) (4) (13)

  Construction & Building   L + 5.00% (1.00% Floor)     8/29/2020       6,694       6,659       6,682       0.89  

Capstone Logistics Acquisition,
Inc. (2) (3) (4) (13)

  Transportation: Cargo   L + 4.50% (1.00% Floor)     10/7/2021       19,478       19,343       19,445       2.55  

Captive Resources Midco,
LLC (2) (3) (4) (13) (15) (16)

  Banking, Finance, Insurance & Real Estate   L + 5.75% (1.00% Floor)     6/30/2020       28,975       28,630       28,975       3.80  

Central Security Group,
Inc. (2) (3) (4) (13) (16)

  Consumer Services   L + 5.63% (1.00% Floor)     10/6/2020       28,584       28,247       28,499       3.73  

CIP Revolution Holdings,
LLC (2) (3) (5) (15)

  Media: Advertising, Printing & Publishing   L + 6.00% (1.00% Floor)     8/19/2021       16,500       16,332       16,783       2.20  

Colony Hardware
Corporation (2) (3) (4) (13)

  Construction & Building   L + 6.00% (1.00% Floor)     10/23/2021       16,995       16,773       16,995       2.23  

Datapipe, Inc. (2) (3) (13) (16)

  Telecommunications   L + 4.75% (1.00% Floor)     3/15/2019       9,725       9,650       9,753       1.28  

Dent Wizard International
Corporation (2) (3) (4) (13) (16)

  Automotive   L + 4.75% (1.00% Floor)     4/7/2020       7,216       7,192       7,208       0.94  

Derm Growth Partners III,
LLC (Dermatology
Associates) (2) (3) (4) (5) (13) (15)

  Healthcare & Pharmaceuticals   L + 6.50% (1.00% Floor)     5/31/2022       41,005       40,468       40,842       5.35  

DermaRite Industries,
LLC (2) (3) (5) (15)

  Healthcare & Pharmaceuticals   L + 7.00% (1.00% Floor)     3/3/2022       16,724       16,381       16,507       2.16  

Dimensional Dental
Management,
LLC (2) (3) (5) (12) (15)

  Healthcare & Pharmaceuticals   L + 7.00% (1.00% Floor)     2/12/2021       19,066       18,684       19,129       2.51  

Dimora Brands, Inc. (fka TK
USA Enterprises,
Inc.) (2) (3) (5) (15)

  Construction & Building   L + 4.50% (1.00% Floor)     4/4/2022       —         (57     (14     0.00  

Direct Travel,
Inc. (2) (3) (4) (5) (13) (15)

  Hotel, Gaming & Leisure   L + 6.50% (1.00% Floor)     12/1/2021       12,782       12,382       12,708       1.66  

EIP Merger Sub, LLC (Evolve
IP) (2) (3) (5) (12) (13) (16)

  Telecommunications   L + 6.25% (1.00% Floor)     6/7/2021       23,750       23,119       23,356       3.06  

EP Minerals, LLC (2) (3) (4) (13)

  Metals & Mining   L + 4.50% (1.00% Floor)     8/20/2020       10,238       10,207       10,237       1.34  

FCX Holdings
Corp. (2) (3) (4) (13) (16)

  Capital Equipment   L + 4.50% (1.00% Floor)     8/4/2020       9,849       9,845       9,849       1.29  

Genex Holdings, Inc. (2) (3) (13) (16)

  Banking, Finance, Insurance & Real Estate   L + 4.25% (1.00% Floor)     5/30/2021       4,189       4,177       4,181       0.55  

Global Software,
LLC (2) (3) (4) (5) (13)

  High Tech Industries   L + 5.50% (1.00% Floor)     5/2/2022       20,963       20,595       20,734       2.72  

Green Energy Partners/Stonewall
LLC (2) (3) (5) (13)

  Energy: Electricity   L + 5.50% (1.00% Floor)     11/13/2021       16,600       16,479       16,612       2.18  

Green Plains II
LLC (2) (3) (4) (5) (13) (15) (16)

  Beverage, Food & Tobacco   L + 7.00% (1.00% Floor)     10/3/2022       15,229       15,089       15,465       2.03  

Hummel Station
LLC (2) (3) (5) (13) (16)

  Energy: Electricity   L + 6.00% (1.00% Floor)     10/27/2022       21,000       20,331       20,292       2.66  

Imagine! Print Solutions,
LLC (2) (3) (4) (13)

  Media: Advertising, Printing & Publishing   L + 6.00% (1.00% Floor)     3/30/2022       18,414       18,177       18,414       2.41  

Imperial Bag & Paper Co.
LLC (2) (3) (4) (13) (16)

  Forest Products & Paper   L + 6.00% (1.00% Floor)     1/7/2022       24,013       23,705       23,983       3.14  

 

7


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

Investments—
non-controlled/non-affiliated (1)

 

Industry

 

Interest
Rate (2)

  Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

First Lien Debt (77.95%) (continued)

             

Indra Holdings Corp. (Totes
Isotoner) (2) (3) (5) (13)

  Non-durable Consumer Goods   L + 4.25% (1.00% Floor)     5/1/2021     $ 14,224     $ 14,135     $ 9,264       1.21

International Medical Group,
Inc. (2) (3) (5) (12) (16)

  Banking, Finance, Insurance & Real Estate   L + 6.50% (1.00% Floor)     10/30/2020       30,000       29,526       30,371       3.98  

Jackson Hewitt Inc. (2) (3) (4) (13)

  Retail   L + 7.00% (1.00% Floor)     7/30/2020       8,758       8,632       8,276       1.08  

Legacy.com Inc. (2) (3) (5) (12)

  High Tech Industries   L + 6.00% (1.00% Floor)     3/20/2023       17,000       16,619       16,708       2.19  

Metrogistics LLC (2) (3) (4) (13)

  Transportation: Cargo   L + 6.50% (1.00% Floor)     9/30/2022       15,105       14,900       15,105       1.98  

National Technical Systems,
Inc. (2) (3) (4) (13) (15)

  Aerospace & Defense   L + 6.25% (1.00% Floor)     6/12/2021       25,123       24,867       24,234       3.17  

NES Global Talent Finance
US LLC (United
Kingdom) (2) (3) (4) (8) (13)

  Energy: Oil & Gas   L + 5.50% (1.00% Floor)     10/3/2019       11,094       10,985       10,751       1.41  

OnCourse Learning
Corporation (2) (3) (4) (5) (13) (15)

  Consumer Services   L + 6.50% (1.00% Floor)     9/12/2021       26,077       25,724       26,288       3.44  

Paradigm Acquisition
Corp. (2) (3) (4) (13)

  Business Services   L + 5.00% (1.00% Floor)     6/2/2022       11,217       11,086       11,217       1.47  

Pelican Products, Inc. (2) (3) (4) (13)

  Containers, Packaging & Glass   L + 4.25% (1.00% Floor)     4/11/2020       7,623       7,634       7,604       1.00  

Plano Molding Company,
LLC (2) (3) (4) (5) (13)

  Hotel, Gaming & Leisure   L + 7.50% (1.00% Floor)     5/12/2021       18,117       17,990       17,262       2.26  

PPT Management Holdings,
LLC (2) (3) (5) (13)

  Healthcare & Pharmaceuticals   L + 6.00% (1.00% Floor)     12/16/2022       22,444       22,240       22,457       2.94  

Premier Senior Marketing,
LLC (2) (3) (5) (16)

  Banking, Finance, Insurance & Real Estate   L + 5.00% (1.00% Floor)     7/1/2022       3,731       3,683       3,731       0.49  

Product Quest Manufacturing,
LLC (2) (3) (4) (5) (12) (16)

  Containers, Packaging & Glass   L + 5.75% (1.00% Floor)     9/9/2020       28,000       27,588       25,864       3.39  

Prowler Acquisition Corp.
(Pipeline Supply and Service,
LLC) (2) (3) (4)

  Wholesale   L + 4.50% (1.00% Floor)     1/28/2020       10,769       10,714       8,773       1.15  

PSC Industrial Holdings
Corp (2) (3) (4) (13)

  Environmental Industries   L + 4.75% (1.00% Floor)     12/5/2020       11,730       11,653       11,482       1.50  

PT Intermediate Holdings III,
LLC (Parts
Town) (2) (3) (4) (5) (13) (15) (16)

  Wholesale   L + 6.50% (1.00% Floor)     6/23/2022       19,545       19,336       19,447       2.55  

QW Holding Corporation
(Quala) (2) (3) (4) (5) (13)

  Environmental Industries   L + 6.75% (1.00% Floor)     8/31/2022       29,925       29,122       30,131       3.95  

Reliant Pro Rehab,
LLC (2) (3) (5) (12)

  Healthcare & Pharmaceuticals   L + 10.00% (1.00% Floor)     12/29/2017       22,275       22,101       22,264       2.92  

SolAreo Technologies
Corp. (2) (3) (4) (5)

  Telecommunications   L + 5.25% (1.00% Floor)     12/10/2020       19,418       19,292       18,049       2.36  

Superior Health Linens,
LLC (2) (3) (4) (5) (13) (15)

  Business Services   L + 6.50% (1.00% Floor)     9/30/2021       19,208       18,908       19,012       2.49  

T2 Systems Canada, Inc. (2) (3) (5)

  Transportation: Consumer   L + 6.75% (1.00% Floor)     9/28/2022       4,040       3,946       4,045       0.53  

T2 Systems, Inc. (2) (3) (4) (5) (13) (15)

  Transportation: Consumer   L + 6.75% (1.00% Floor)     9/28/2022       22,892       22,298       22,924       3.00  

The Hilb Group,
LLC (2) (3) (5) (12) (15)

  Banking, Finance, Insurance & Real Estate   L + 6.00% (1.00% Floor)     6/24/2021       31,313       30,744       30,849       4.04  

The SI Organization,
Inc. (2) (3) (4) (13)

  Aerospace & Defense   L + 4.75% (1.00% Floor)     11/23/2019       8,552       8,507       8,637       1.13  

The Topps Company,
Inc. (2) (3) (4) (13)

  Non-durable Consumer Goods   L + 6.00% (1.00% Floor)     10/2/2020       18,657       18,588       18,654       2.44  

Truckpro, LLC .(2) (3) (4) (13) (16)

  Automotive   L + 5.00% (1.00% Floor)     8/6/2018       9,194       9,173       9,170       1.20  

Tweddle Group, Inc. (2) (3) (4) (13)

  Media: Advertising, Printing & Publishing   L + 6.00% (1.00% Floor)     10/24/2022       15,998       15,697       16,063       2.10  

 

8


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

Investments—
non-controlled/non-affiliated (1)

 

Industry

 

Interest
Rate (2)

  Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

First Lien Debt (77.95%) (continued)

             

TwentyEighty, Inc.—Revolver
(fka Miller Heiman,
Inc.) (2) (3) (5) (10) (15)

  Business Services   L + 8.00% (1.00% Floor)     3/21/2020     $ —       $ (7   $ (3     0.00

TwentyEighty, Inc.—(Term A
Loans) (2) (3) (5) (10)

  Business Services   L + 3.50% (1.00% Floor), 4.50% PIK     3/31/2020       2,860       2,844       2,843       0.37  

TwentyEighty, Inc.—(Term B
Loans) (5) (10)

  Business Services   1.00%, 7.00% PIK     3/31/2020       4,698       4,698       3,773       0.50  

TwentyEighty, Inc.—(Term C
Loans) (5) (10)

  Business Services   0.25%, 8.75% PIK     3/31/2020       4,485       4,485       2,245       0.29  

U.S. TelePacific Holdings
Corp. (2) (3) (5)

  Telecommunications   L + 8.50% (1.00% Floor)     2/24/2021       30,000       29,189       30,027       3.93  

Vetcor Professional Practices,
LLC (2) (3) (4) (5) (13) (15)

  Consumer Services   L + 6.00% (1.00% Floor)     4/20/2021       28,488       28,028       28,737       3.76  

Violin Finco S.A.R.L. (Alexander
Mann Solutions) (United
Kingdom) (2) (3) (4) (8) (13)

  Business Services   L + 4.75% (1.00% Floor)     12/20/2019       10,034       9,985       10,034       1.31  

Vistage Worldwide
Inc. (2) (3) (4) (13) (16)

  Business Services   L + 5.50% (1.00% Floor)     8/19/2021       28,757       28,534       28,964       3.79  

VRC Companies,
LLC (2) (3) (5) (13) (15) (17)

  Business Services   L + 6.50% (1.00% Floor)     3/31/2023       25,632       24,923       25,140       3.29  

Winchester Electronics
Corporation (2) (3) (4) (5) (13) (15)

  Capital Equipment   L + 6.50% (1.00% Floor)     6/30/2022       27,298       26,914       27,749       3.64  

Zest Holdings, LLC (2) (3) (4) (13)

  Durable Consumer Goods   L + 4.75% (1.00% Floor)     8/16/2020       9,530       9,530       9,523       1.25  
         

 

 

   

 

 

   

 

 

 

First Lien Debt Total

          $ 1,088,396     $ 1,085,554       142.20
         

 

 

   

 

 

   

 

 

 
Second Lien Debt (11.61%)                                      

AIM Group USA Inc. (2) (3) (5) (13)

  Aerospace & Defense   L + 9.00% (1.00% Floor)     8/2/2022     $ 23,000     $ 22,710     $ 23,025       3.02

AmeriLife Group,
LLC (2) (3) (5) (13) (16)

  Banking, Finance, Insurance & Real Estate   L + 8.75% (1.00% Floor)     1/10/2023       20,000       19,665       19,318       2.53  

Argon Medical Devices,
Inc. (2) (3) (4) (5)

  Healthcare & Pharmaceuticals   L + 9.50% (1.00% Floor)     6/23/2022       24,000       23,381       24,437       3.20  

Berlin Packaging L.L.C. (2) (3) (5) (13)

  Containers, Packaging & Glass   L + 6.75% (1.00% Floor)     10/1/2022       2,927       2,910       2,949       0.39  

Charter NEX US Holdings,
Inc. (2) (3) (5) (13)

  Chemicals, Plastics & Rubber   L + 8.25% (1.00% Floor)     2/5/2023       7,394       7,305       7,394       0.97  

Confie Seguros Holding II
Co. (2) (3) (5) (13)

  Banking, Finance, Insurance & Real Estate   L + 9.00% (1.25% Floor)     5/8/2019       9,000       8,945       8,947       1.17  

Drew Marine Group
Inc. (2) (3) (4) (5) (13)

  Chemicals, Plastics & Rubber   L + 7.00% (1.00% Floor)     5/19/2021       12,500       12,482       12,373       1.62  

Genex Holdings, Inc. (2) (3) (5) (16)

  Banking, Finance, Insurance & Real Estate   L + 7.75% (1.00% Floor)     5/30/2022       7,990       7,917       7,990       1.05  

Institutional Shareholder Services
Inc. (2) (3) (5) (13)

  Banking, Finance, Insurance & Real Estate   L + 8.50% (1.00% Floor)     4/29/2022       12,500       12,409       12,448       1.63  

Jazz Acquisition, Inc.
(Wencor) (2) (3) (5) (13)

  Aerospace & Defense   L + 6.75% (1.00% Floor)     6/19/2022       6,700       6,677       5,901       0.77  

MRI Software, LLC (2) (3) (5)

  Software   L + 8.00% (1.00% Floor)     6/23/2022       11,250       11,115       11,305       1.48  

Power Stop, LLC (5) (9)

  Automotive   11.00%     5/29/2022       10,000       9,836       9,957       1.30  

Prowler Acquisition Corp.
(Pipeline Supply and Service,
LLC) (2) (3) (5)

  Wholesale   L + 8.50% (1.00% Floor)     7/28/2020       3,000       2,962       1,856       0.24  

Ramundsen Public Sector,
LLC (2) (3) (5)

  Sovereign & Public Finance   L + 8.50% (1.00% Floor)     1/31/2025       1,800       1,783       1,800       0.24  

 

9


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

Investments—
non-controlled/non-affiliated (1)

 

Industry

 

Interest
Rate (2)

  Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 
Second Lien Debt (11.61%)
(continued)
                                     

Watchfire Enterprises,
Inc. (2) (3) (5) (13)

  Media: Advertising, Printing & Publishing   L + 8.00% (1.00% Floor)     10/2/2021       7,000     $ 6,934     $ 6,994       0.92

Zywave, Inc. (2) (3) (5)

  High Tech Industries   L + 9.00% (1.00% Floor)     11/17/2023       4,950       4,881       4,949       0.65  
         

 

 

   

 

 

   

 

 

 

Second Lien Debt Total

          $ 161,912     $ 161,643       21.18
         

 

 

   

 

 

   

 

 

 

 

Investments—non-controlled/non-affiliated (1)

 

Industry

  Maturity
Date
    Par
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage of
Net Assets
 

Structured Finance Obligations (0.20%) (5) (8) (11)

           

1776 CLO I, Ltd., Subordinated Notes

  Structured Finance     5/8/2020     $ 11,750     $ 6,519     $ 2,761       0.36

Clydesdale CLO 2005, Ltd., Subordinated Notes

  Structured Finance     12/6/2017       5,750       —         10       0.00  

MSIM Peconic Bay, Ltd., Subordinated Notes

  Structured Finance     7/20/2019       4,500       63       5       0.00  
       

 

 

   

 

 

   

 

 

 

Structured Finance Obligations Total

        $ 6,582     $ 2,776       0.36
       

 

 

   

 

 

   

 

 

 

 

Investments—non-controlled/non-affiliated (1)

  

Industry

   Shares/
Units
     Cost      Fair
Value (7)
     Percentage of
Net Assets
 

Equity Investments (0.61%) (5)

              

CIP Revolution Investments, LLC

   Media: Advertising, Printing & Publishing      300,000      $ 300      $ 411        0.05

Derm Growth Partners III, LLC (Dermatology Associates)

   Healthcare & Pharmaceuticals      1,000,000        1,000        1,230        0.16  

GS Holdco LLC (Global Software, LLC)

   High Tech Industries      1,000,000        1,001        1,207        0.16  

Legacy.com Inc.

   High Tech Industries      1,500,000        1,500        1,500        0.20  

Power Stop Intermediate Holdings, LLC

   Automotive      7,150        715        1,314        0.17  

T2 Systems Parent Corporation

   Transportation: Consumer      555,556        556        533        0.07  

THG Acquisition, LLC (The Hilb Group, LLC)

   Banking, Finance, Insurance & Real Estate      1,500,000        1,500        2,256        0.30  

TwentyEighty Investors LLC

   Business Services      51,936        —          —          0.00  
        

 

 

    

 

 

    

 

 

 

Equity Investments Total

         $ 6,572      $ 8,451        1.11
        

 

 

    

 

 

    

 

 

 

Total investments—non-controlled/non-affiliated

         $ 1,263,462      $ 1,258,424        164.86
        

 

 

    

 

 

    

 

 

 

 

Investments—controlled/affiliated

 

Industry

 

Interest
Rate (2)

  Maturity
Date
    Par
Amount/
LLC
Interest
    Cost     Fair
Value (7)
    Percentage of
Net Assets
 

Investment Fund (9.63%) (8)

             

Middle Market Credit Fund, LLC, Mezzanine Loan (2) (5) (9) (14)

  Investment Fund   L+9.50%     6/24/2017     $ 86,044     $ 86,044     $ 86,044       11.27

Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest (5) (14)

  Investment Fund   0.001     3/1/2021       45,501       45,501       48,077       6.30  
         

 

 

   

 

 

   

 

 

 

Investment Fund Total

          $ 131,545     $ 134,121       17.57
         

 

 

   

 

 

   

 

 

 

Total investments—controlled/affiliated

          $ 131,545     $ 134,121       17.57
         

 

 

   

 

 

   

 

 

 

Total investments

          $ 1,395,007     $ 1,392,545       182.42
         

 

 

   

 

 

   

 

 

 

 

(1) Unless otherwise indicated, issuers of debt and equity investments held by TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) are domiciled in the United States and issuers of structured finance obligations are domiciled in the Cayman Islands. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of March 31, 2017, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of March 31, 2017, the Company is not an “affiliated person” of any of these portfolio companies.

 

10


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

(2) Variable rate loans to the portfolio companies and variable rate notes of structured finance obligations bear interest at a rate that may be determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan and note, the Company has provided the interest rate in effect as of March 31, 2017. As of March 31, 2017, all of our LIBOR loans were indexed to the 90-day LIBOR rate at 1.15%, except for those loans as indicated in Notes 16 and 17 below.
(3) Loan includes interest rate floor feature.
(4) Denotes that all or a portion of the assets are owned by the Company’s wholly owned subsidiary, TCG BDC SPV LLC (the “SPV”). The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or the 2015-1 Issuer.
(5) Denotes that all or a portion of the assets are owned by the Company. The Company has entered into a senior secured revolving credit facility (as amended, the “Credit Facility” and, together with the SPV Credit Facility, the “Facilities”). The lenders of the Credit Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the SPV or Carlyle GMS Finance MM CLO 2015-1 LLC (the “2015-1 Issuer”).
(6) Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. Equity tranche collateralized loan obligation (“CLO”) fund investments, which are referred to as “structured finance obligations”, are recorded at amortized cost using the effective interest method.
(7) Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy.
(8) The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
(9) Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company/investment fund.
(10) Loan was on non-accrual status as of March 31, 2017.
(11) As of March 31, 2017, the Company has a greater than 25% but less than 50% equity or subordinated notes ownership interest in certain structured finance obligations. These investments have governing documents that preclude the Company from controlling management of the entity and therefore the Company has determined that the issuer of the investment is not a controlled affiliate or a non-controlled affiliate because the investments are not “voting securities”.
(12) In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.70%), EIP Merger Sub, LLC (Evolve IP) (3.91%), International Medical Group, Inc. (4.79%), Legacy.com Inc. (3.79%), Product Quest Manufacturing, LLC (3.66%), Reliant Pro Rehab, LLC (nil) and The Hilb Group, LLC (3.33%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.
(13) Denotes that all or a portion of the assets are owned by the 2015-1 Issuer and secure the notes issued in connection with a $400 million term debt securitization completed by the Company on June 26, 2015 (see Note 7, 2015-1 Notes). Accordingly, such assets are not available to the creditors of the SPV or the Company.
(14) Under the Investment Company Act, the Company is deemed to be an “affiliated person” of and “control” this investment fund because the Company owns more than 25% of the investment fund’s outstanding voting securities and/or has the power to exercise control over management or policies of such investment fund. See Note 5, Middle Market Credit Fund, LLC, for more details.

 

11


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

(15) As of March 31, 2017, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

 

Investments—non-controlled/non-affiliated

  

Type

   Unused
Fee
    Par/
Principal
Amount
     Fair
Value
 

First Lien Debt—unfunded delayed draw and revolving term loans commitments

          

Advanced Instruments, LLC

  

Revolver

     0.50   $ 1,167      $ (2

Captive Resources Midco, LLC

  

Delayed Draw

     1.25     3,125        —    

Captive Resources Midco, LLC

  

Revolver

     0.50     1,875        —    

CIP Revolution Holdings, LLC

  

Delayed Draw

     0.75     1,331        20  

CIP Revolution Holdings, LLC

  

Revolver

     0.50     1,331        20  

DermaRite Industries, LLC

  

Revolver

     0.50     3,276        (35

Derm Growth Partners III, LLC (Dermatology Associates)

  

Delayed Draw

     1.00     2,217        (8

Derm Growth Partners III, LLC (Dermatology Associates)

  

Revolver

     0.50     704        (3

Dimensional Dental Management, LLC

  

Delayed Draw

     1.00     1,442        4  

Dimora Brands, Inc. (fka TK USA Enterprises, Inc.)

  

Revolver

     0.50     4,750        (14

Direct Travel, Inc.

  

Delayed Draw

     1.00     9,658        (32

Green Plains II LLC

  

Revolver

     0.50     1,291        18  

National Technical Systems, Inc.

  

Delayed Draw

     1.00     4,469        (123

National Technical Systems, Inc.

  

Revolver

     0.50     2,031        (73

OnCourse Learning Corporation

  

Revolver

     0.50     859        7  

PT Intermediate Holdings III, LLC (Parts Town)

  

Revolver

     0.50     1,429        (7

Superior Health Linens, LLC

  

Revolver

     0.50     2,614        (24

T2 Systems, Inc.

  

Revolver

     0.50     2,933        4  

The Hilb Group, LLC

  

Delayed Draw

     1.00     10,902        (120

TwentyEighty, Inc. (f/k/a Miller Heiman, Inc.)

  

Revolver

     0.50     452        (3

Vetcor Professional Practices, LLC

  

Delayed Draw

     1.00     4,384        33  

VRC Companies, LLC

  

Delayed Draw

     1.00     4,513        (69

VRC Companies, LLC

  

Revolver

     0.50     1,805        (28

Winchester Electronics Corporation

  

Delayed Draw

     1.00     2,500        38  
       

 

 

    

 

 

 

Total unfunded commitments

        $ 71,058      $ (397
       

 

 

    

 

 

 

 

(16) As of March 31, 2017, this LIBOR loan was indexed to the 30-day LIBOR rate at 0.98%.
(17) As of March 31, 2017, this LIBOR loan was indexed to the 180-day LIBOR rate at 1.42%.

As of March 31, 2017, investments at fair value consisted of the following:

 

Type—% of Fair Value

   Amortized Cost      Fair Value      % of Fair Value  

First Lien Debt

   $ 1,088,396      $ 1,085,554        77.95

Second Lien Debt

     161,912        161,643        11.61  

Structured Finance Obligations

     6,582        2,776        0.20  

Equity Investments

     6,572        8,451        0.61  

Investment Fund

     131,545        134,121        9.63  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,395,007      $ 1,392,545        100.00
  

 

 

    

 

 

    

 

 

 

 

Type—% of Fair Value of First and Second Lien Debt

  Amortized Cost     Fair Value     % of Fair Value  

Floating Rate

  $ 1,231,289     $ 1,231,222       98.72

Fixed Rate

    19,019       15,975       1.28  
 

 

 

   

 

 

   

 

 

 

Total

  $ 1,250,308     $ 1,247,197       100.00
 

 

 

   

 

 

   

 

 

 

 

12


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

 

The industry composition of investments at fair value as of March 31, 2017 was as follows:

 

Industry

   Amortized Cost      Fair Value      % of Fair Value  

Aerospace & Defense

   $ 62,761      $ 61,797        4.44

Automotive

     26,916        27,649        1.99  

Banking, Finance, Insurance & Real Estate

     147,196        149,066        10.70  

Beverage, Food & Tobacco

     15,089        15,465        1.11  

Business Services

     123,636        121,538        8.73  

Capital Equipment

     36,759        37,598        2.70  

Chemicals, Plastics & Rubber

     19,787        19,767        1.42  

Construction & Building

     23,375        23,663        1.70  

Consumer Services

     81,999        83,524        6.00  

Containers, Packaging & Glass

     49,417        47,710        3.43  

Durable Consumer Goods

     19,790        19,312        1.39  

Energy: Electricity

     36,810        36,904        2.65  

Energy: Oil & Gas

     10,985        10,751        0.77  

Environmental Industries

     40,775        41,613        2.99  

Forest Products & Paper

     23,705        23,983        1.72  

Healthcare & Pharmaceuticals

     161,881        164,877        11.84  

High Tech Industries

     44,596        45,098        3.24  

Hotel, Gaming & Leisure

     30,372        29,970        2.15  

Investment Fund

     131,545        134,121        9.63  

Media: Advertising, Printing & Publishing

     57,440        58,665        4.21  

Metals & Mining

     10,207        10,237        0.74  

Non-durable Consumer Goods

     32,723        27,918        2.00  

Retail

     8,632        8,276        0.59  

Software

     11,115        11,305        0.81  

Sovereign & Public Finance

     1,783        1,800        0.13  

Structured Finance

     6,582        2,776        0.20  

Telecommunications

     85,076        85,034        6.11  

Transportation: Cargo

     34,243        34,550        2.48  

Transportation: Consumer

     26,800        27,502        1.97  

Wholesale

     33,012        30,076        2.16  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,395,007      $ 1,392,545        100.00
  

 

 

    

 

 

    

 

 

 

The geographical composition of investments at fair value as of March 31, 2017 was as follows:

 

Geography

   Amortized Cost      Fair Value      % of Fair Value  

Cayman Islands

   $ 6,582      $ 2,776        0.20

United Kingdom

     20,970        20,785        1.49  

United States

     1,367,455        1,368,984        98.31  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,395,007      $ 1,392,545        100.00
  

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

13


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2016

(dollar amounts in thousands)

 

Investments—non-controlled/
non-affiliated (1)

 

Industry

  Interest
Rate (2)
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage of
Net Assets
 

First Lien Debt (80.09%)

             

Access CIG, LLC (2) (3) (4) (13)

  Business Services    
L + 5.00%
(1.00% Floor)
 
 
    10/17/2021     $ 18,335     $ 18,222     $ 18,335       2.40

Advanced Instruments,
LLC (2) (3) (4) (5) (13) (15)

  Healthcare & Pharmaceuticals    
L + 5.25%
(1.00% Floor)
 
 
    10/31/2022       22,500       22,019       22,252       2.91  

AF Borrower LLC
(Accuvant) (2) (3) (4)

  High Tech Industries    
L + 5.25%
(1.00% Floor)
 
 
    1/28/2022       16,113       15,923       16,113       2.11  

Alpha Packaging Holdings,
Inc. (2) (3) (4) (13)

  Containers, Packaging & Glass    
L + 4.25%
(1.00% Floor)
 
 
    5/12/2020       11,322       11,313       11,322       1.48  

Anaren, Inc. (2) (3) (4) (13)

  Telecommunications    
L + 4.50%
(1.00% Floor)
 
 
    2/18/2021       10,869       10,800       10,869       1.42  

Audax AAMP Holdings,
Inc. (2) (3) (4) (13)

  Durable Consumer Goods    
L + 6.00%
(1.00% Floor)
 
 
    6/24/2017       10,424       10,400       10,348       1.35  

BAART Programs, Inc. (2) (4) (16)

  Healthcare & Pharmaceuticals    
L + 7.75%
(0.00% Floor)
 
 
    10/9/2021       7,406       7,355       7,534       0.99  

Brooks Equipment Company,
LLC (2) (3) (4) (13)

  Construction & Building    
L + 5.00%
(1.00% Floor)
 
 
    8/29/2020       6,694       6,657       6,683       0.87  

Capstone Logistics Acquisition,
Inc. (2) (3) (4) (13)

  Transportation: Cargo    
L + 4.50%
(1.00% Floor)
 
 
    10/7/2021       19,478       19,337       19,212       2.51  

Captive Resources Midco,
LLC (2) (3) (4) (13) (15)

  Banking, Finance, Insurance & Real Estate    
L + 5.75%
(1.00% Floor)
 
 
    6/30/2020       29,050       28,683       29,009       3.80  

Central Security Group,
Inc. (2) (3) (4) (13) (16)

  Consumer Services    
L + 5.63%
(1.00% Floor)
 
 
    10/6/2020       28,658       28,300       28,557       3.74  

CIP Revolution Holdings,
LLC (2) (3) (5) (15)

  Media: Advertising, Printing & Publishing    
L + 6.00%
(1.00% Floor)
 
 
    8/19/2021       16,500       16,325       16,585       2.17  

Colony Hardware
Corporation (2) (3) (4) (13)

  Construction & Building    
L + 6.00%
(1.00% Floor)
 
 
    10/23/2021       17,038       16,806       17,038       2.23  

Datapipe, Inc. (2) (3) (13) (16)

  Telecommunications    
L + 4.75%
(1.00% Floor)
 
 
    3/15/2019       9,750       9,666       9,764       1.28  

Dent Wizard International
Corporation (2) (3) (4) (13) (16)

  Automotive    
L + 4.75%
(1.00% Floor)
 
 
    4/7/2020       7,216       7,190       7,216       0.94  

Derm Growth Partners III, LLC (Dermatology
Associates) (2) (3) (4) (5) (13) (15)

  Healthcare & Pharmaceuticals    
L + 6.50%
(1.00% Floor)
 
 
    5/31/2022       32,929       32,393       32,958       4.31  

Dimensional Dental Management,
LLC (2) (3) (5) (12) (15)

  Healthcare & Pharmaceuticals    
L + 7.00%
(1.00% Floor)
 
 
    2/12/2021       18,000       17,601       17,811       2.33  

Dimora Brands, Inc. (fka TK USA Enterprises, Inc.) (2) (3) (5) (15)

  Construction & Building    
L + 4.50%
(1.00% Floor)
 
 
    4/4/2022       —         (60     (30     0.00  

Direct Travel, Inc. (2) (3) (4) (5) (13) (15)

  Hotel, Gaming & Leisure    
L + 6.50%
(1.00% Floor)
 
 
    12/1/2021       12,842       12,420       12,712       1.66  

EIP Merger Sub, LLC (Evolve
IP) (2) (3) (5) (12)

  Telecommunications    
L + 6.25%
(1.00% Floor)
 
 
    6/7/2021       23,750       23,098       23,242       3.04  

Emerging Markets Communications,
LLC (2) (3) (4) (8) (13)

  Telecommunications    
L + 5.75%
(1.00% Floor)
 
 
    7/1/2021       17,730       16,299       17,730       2.32  

EP Minerals, LLC (2) (3) (4) (13)

  Metals & Mining    
L + 4.50%
(1.00% Floor)
 
 
    8/20/2020       10,264       10,232       10,259       1.34  

FCX Holdings Corp. (2) (3) (4) (13) (16)

  Capital Equipment    
L + 4.50%
(1.00% Floor)
 
 
    8/4/2020       9,856       9,852       9,856       1.29  

Genex Holdings, Inc. (2) (3) (13) (16)

  Banking, Finance, Insurance & Real Estate    
L + 4.25%
(1.00% Floor)
 
 
    5/30/2021       4,200       4,187       4,196       0.55  

Global Software,
LLC (2) (3) (4) (13) (16)

  High Tech Industries    
L + 5.50%
(1.00% Floor)
 
 
    5/2/2022       16,163       15,880       16,163       2.12  

Green Energy Partners/Stonewall
LLC (2) (3) (5) (13)

  Energy: Electricity    
L + 5.50%
(1.00% Floor)
 
 
    11/13/2021       16,600       16,475       16,598       2.17  

Green Plains II
LLC (2) (3) (4) (5) (13) (15)

  Beverage, Food & Tobacco    
L + 7.00%
(1.00% Floor)
 
 
    10/03/2022       15,205       15,059       15,379       2.01  

 

14


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

Investments—non-controlled/
non-affiliated (1)

 

Industry

  Interest
Rate (2)
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage of
Net Assets
 

First Lien Debt (80.09%) (continued)

             

Hummel Station LLC (2) (3) (5) (13) (16)

  Energy: Electricity    
L + 6.00%
(1.00% Floor)
 
 
    10/27/2022     $ 21,000     $ 20,308     $ 20,160       2.64

Imagine! Print Solutions,
LLC (2) (3) (4) (13)

  Media: Advertising, Printing & Publishing    
L + 6.00%
(1.00% Floor)
 
 
    3/30/2022       18,461       18,213       18,603       2.43  

Imperial Bag & Paper Co.
LLC (2) (3) (4) (13) (16)

  Forest Products & Paper    
L + 6.00%
(1.00% Floor)
 
 
    1/7/2022       24,074       23,752       23,924       3.13  

Indra Holdings Corp. (Totes
Isotoner) (2) (3) (5) (13)

  Non-durable Consumer Goods    
L + 4.25%
(1.00% Floor)
 
 
    5/1/2021       14,224       14,130       10,553       1.38  

International Medical Group,
Inc.(2) (3) (5) (12)

  Banking, Finance, Insurance & Real Estate    
L + 6.50%
(1.00% Floor)
 
 
    10/30/2020       30,000       29,505       30,237       3.96  

Jackson Hewitt Inc. (2) (3) (4) (13)

  Retail    
L + 7.00%
(1.00% Floor)
 
 
    7/30/2020       8,758       8,625       8,320       1.09  

Metrogistics LLC (2) (3) (4) (5) (13)

  Transportation: Cargo    
L + 6.50%
(1.00% Floor)
 
 
    9/30/2022       15,200       14,986       15,094       1.98  

MSX International, Inc. (2) (3) (4) (13)

  Automotive    
L + 5.00%
(1.00% Floor)
 
 
    8/21/2020       8,940       8,882       8,940       1.17  

National Technical Systems,
Inc. (2) (3) (4) (13) (15)

  Aerospace & Defense    
L + 6.25%
(1.00% Floor)
 
 
    6/12/2021       25,123       24,854       23,927       3.13  

NES Global Talent Finance US LLC (United
Kingdom) (2) (3) (4) (8) (13)

  Energy: Oil & Gas    
L + 5.50%
(1.00% Floor)
 
 
    10/3/2019       11,250       11,132       10,911       1.43  

OnCourse Learning
Corporation (2) (3) (4) (5) (13) (15) (16)

  Consumer Services    
L + 6.50%
(1.00% Floor)
 
 
    9/12/2021       26,141       25,770       26,220       3.43  

Paradigm Acquisition
Corp. (2) (3) (4) (13)

  Business Services    
L + 5.00%
(1.00% Floor)
 
 
    6/2/2022       23,246       22,963       23,223       3.04  

Pelican Products, Inc. (2) (3) (4) (13)

  Containers, Packaging & Glass    
L + 4.25%
(1.00% Floor)
 
 
    4/11/2020       7,643       7,654       7,593       0.99  

Plano Molding Company,
LLC (2) (3) (4) (5) (13)

  Hotel, Gaming & Leisure    
L + 7.00%
(1.00% Floor)
 
 
    5/12/2021       18,163       18,030       17,302       2.26  

PPT Management Holdings,
LLC (2) (3) (5)

  Healthcare & Pharmaceuticals    
L + 6.00%
(1.00% Floor)
 
 
    12/16/2022       22,500       22,288       22,426       2.93  

Premier Senior Marketing,
LLC (2) (3) (5) (16)

  Banking, Finance, Insurance & Real Estate    
L + 5.00%
(1.00% Floor)
 
 
    7/1/2022       3,741       3,690       3,741       0.49  

Product Quest Manufacturing,
LLC (2) (3) (4) (5) (12)

  Containers, Packaging & Glass    
L + 5.75%
(1.00% Floor)
 
 
    9/9/2020       28,000       27,565       25,838       3.38  

Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) (2) (3) (4)

  Wholesale    
L + 4.50%
(1.00% Floor)
 
 
    1/28/2020       10,798       10,739       8,101       1.06  

PSC Industrial Holdings
Corp (2) (3) (4) (13)

  Environmental Industries    
L + 4.75%
(1.00% Floor)
 
 
    12/5/2020       11,760       11,679       11,290       1.48  

PSI Services LLC (2) (3) (4) (5) (12) (16)

  Business Services    
L + 6.75%
(1.00% Floor)
 
 
    2/27/2021       32,705       32,022       34,784       4.56  

PT Intermediate Holdings III, LLC (Parts Town) (2) (3) (4) (5) (13) (15)

  Wholesale    
L + 6.50%
(1.00% Floor)
 
 
    6/23/2022       17,417       17,215       17,563       2.30  

QW Holding Corporation
(Quala) (2) (3) (4) (5) (13)

  Environmental Industries    
L + 6.75%
(1.00% Floor)
 
 
    8/31/2022       29,925       29,084       30,009       3.93  

Reliant Pro Rehab, LLC (2) (3) (5) (12)

  Healthcare & Pharmaceuticals    
L + 10.00%
(1.00% Floor)
 
 
    12/29/2017       22,331       22,024       22,331       2.92  

SolAero Technologies
Corp. (2) (3) (4) (5)

  Telecommunications    
L + 5.25%
(1.00% Floor)
 
 
    12/10/2020       19,677       19,541       18,901       2.47  

Superior Health Linens,
LLC (2) (3) (4) (5) (13) (15)

  Business Services    
L + 6.50%
(1.00% Floor)
 
 
    9/30/2021       19,206       18,891       19,068       2.50  

T2 Systems,
Inc. (2) (3) (4) (5) (13) (15) (16)

  Transportation: Consumer    
L + 6.75%
(1.00% Floor)
 
 
    9/28/2022       22,950       22,333       23,208       3.04  

T2 Systems Canada, Inc. (2) (3) (5) (16)

  Transportation: Consumer    
L + 6.75%
(1.00% Floor)
 
 
    9/28/2022       4,050       3,952       4,090       0.54  

 

15


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

Investments—non-controlled/
non-affiliated (1)

 

Industry

  Interest
Rate (2)
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

First Lien Debt (80.09%) (continued)

             

Teaching Strategies, LLC (2) (3) (4) (13)

  Media: Advertising, Printing & Publishing    
L + 5.50%
(0.50% Floor)
 
 
    10/1/2019     $ 13,369     $ 13,333     $ 13,369       1.75

The Hilb Group, LLC (2) (3) (5) (12) (15)

  Banking, Finance, Insurance & Real Estate    
L + 6.50%
(1.00% Floor)
 
 
    6/24/2021       29,682       29,113       29,826       3.90  

The SI Organization, Inc. (2) (3) (4) (13)

  Aerospace & Defense    
L + 4.75%
(1.00% Floor)
 
 
    11/23/2019       8,574       8,527       8,676       1.15  

The Topps Company, Inc. (2) (3) (4) (13)

  Non-durable Consumer Goods    
L + 6.00%
(1.25% Floor)
 
 
    10/2/2020       18,707       18,629       18,795       2.46  

TruckPro, LLC (2) (3) (4) (13) (16)

  Automotive    
L + 5.00%
(1.00% Floor)
 
 
    8/6/2018       9,292       9,267       9,262       1.21  

Tweddle Group, Inc. (2) (3) (4) (13)

  Media: Advertising, Printing & Publishing    
L + 6.00%
(1.00% Floor)
 
 
    10/24/2022       16,200       15,885       16,114       2.11  

TwentyEighty, Inc. (fka Miller
Heiman, Inc.) (2) (3) (5) (10) (13)

  Business Services    
L + 6.00%
(1.00% Floor)
 
 
    9/30/2019       18,719       18,571       7,628       1.00  

U.S. Farathane, LLC (2) (3) (4) (13)

  Automotive    
L + 4.75%
(1.00% Floor)
 
 
    12/23/2021       1,925       1,895       1,925       0.25  

U.S. TelePacific Holdings
Corp. (2) (3) (5)

  Telecommunications    
L + 8.50%
(1.00% Floor)
 
 
    2/24/2021       30,000       29,149       29,853       3.91  

Vetcor Professional Practices,
LLC (2) (3) (4) (5) (13) (15)

  Consumer Services    
L + 6.25%
(1.00% Floor)
 
 
    4/20/2021       25,001       24,623       25,164       3.29  

Violin Finco S.A.R.L. (Alexander
Mann Solutions) (United
Kingdom) (2) (3) (4) (8) (13)

  Business Services    
L + 4.75%
(1.00% Floor)
 
 
    12/20/2019       10,065       10,012       10,058       1.32  

Vistage Worldwide, Inc. (2) (3) (4) (13) (16)

  Business Services    
L + 5.50%
(1.00% Floor)
 
 
    8/19/2021       28,757       28,524       28,688       3.75  

Vitera Healthcare Solutions,
LLC (2) (3) (4) (13)

  Healthcare & Pharmaceuticals    
L + 5.00%
(1.00% Floor)
 
 
    11/4/2020       9,104       9,050       9,078       1.19  

Winchester Electronics
Corporation (2) (3) (4) (5) (13) (15)

  Capital Equipment    
L + 6.50%
(1.00% Floor)
 
 
    6/30/2022       27,367       26,959       27,460       3.59  

Zest Holdings, LLC (2) (3) (4) (13)

  Durable Consumer Goods    
L + 4.75%
(1.00% Floor)
 
 
    8/16/2020       9,530       9,530       9,584       1.25  
         

 

 

   

 

 

   

 

 

 

First Lien Debt Total

          $ 1,145,326     $ 1,139,548       149.13
         

 

 

   

 

 

   

 

 

 

Second Lien Debt (12.08%)

             

AF Borrower LLC (Accuvant) (2) (3) (5)

  High Tech Industries    
L + 9.00%
(1.00% Floor)
 
 
    1/30/2023     $ 8,000     $ 7,934     $ 8,000       1.05

AIM Group USA Inc. (2) (3) (5) (13)

  Aerospace & Defense    
L + 9.00%
(1.00% Floor)
 
 
    8/2/2022       23,000       22,701       23,196       3.04  

AmeriLife Group, LLC (2) (3) (5)

  Banking, Finance, Insurance & Real Estate    
L + 8.75%
(1.00% Floor)
 
 
    1/10/2023       20,000       19,656       19,208       2.51  

Argon Medical Devices,
Inc. (2) (3) (4) (5)

  Healthcare & Pharmaceuticals    
L + 9.50%
(1.00% Floor)
 
 
    6/23/2022       24,000       23,363       24,233       3.17  

Berlin Packaging L.L.C. (2) (3) (5) (13)

  Containers, Packaging & Glass    
L + 6.75%
(1.00% Floor)
 
 
    10/1/2022       2,927       2,910       2,953       0.39  

Charter NEX US Holdings,
Inc. (2) (3) (5) (13)

  Chemicals, Plastics & Rubber    
L + 8.25%
(1.00% Floor)
 
 
    2/5/2023       7,394       7,303       7,468       0.98  

Confie Seguros Holding II
Co. (2) (3) (5) (16)

  Banking, Finance, Insurance & Real Estate    
L + 9.00%
(1.25% Floor)
 
 
    5/8/2019       12,000       11,921       11,918       1.56  

Drew Marine Group Inc. (2) (3) (4) (5) (13)

  Chemicals, Plastics & Rubber    
L + 7.00%
(1.00% Floor)
 
 
    5/19/2021       12,500       12,481       12,333       1.61  

Genex Holdings, Inc. (2) (3) (5)

  Banking, Finance, Insurance & Real Estate    
L + 7.75%
(1.00% Floor)
 
 
    5/30/2022       7,990       7,915       7,978       1.04  

 

16


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

Investments—non-controlled/
non-affiliated (1)

 

Industry

  Interest
Rate (2)
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

Second Lien Debt (12.08%) (continued)

             

Institutional Shareholder
Services Inc. (2) (3) (5) (13)

  Banking, Finance, Insurance & Real Estate    
L + 8.50%
(1.00% Floor)
 
 
    4/29/2022     $ 12,500     $ 12,408     $ 12,359       1.62

Jazz Acquisition, Inc.
(Wencor) (2) (3) (5) (13)

  Aerospace & Defense    
L + 6.75%
(1.00% Floor)
 
 
    6/19/2022       6,700       6,677       5,572       0.73  

MRI Software, LLC (2) (3) (5)

  Software    
L + 8.00%
(1.00% Floor)
 
 
    6/23/2022       11,250       11,110       11,265       1.47  

Power Stop, LLC (5) (9)

  Automotive     11.00%       5/29/2022       10,000       9,831       9,863       1.29  

Prowler Acquisition Corp. (Pipeline
Supply and Service, LLC) (2) (3) (5)

  Wholesale    
L + 8.50%
(1.00% Floor)
 
 
    7/28/2020       3,000       2,960       1,682       0.22  

Vitera Healthcare Solutions,
LLC (2) (3) (4)

  Healthcare & Pharmaceuticals    
L + 8.25%
(1.00% Floor)
 
 
    11/4/2021       2,000       1,979       1,945       0.26  

Watchfire Enterprises, Inc. (2) (3) (5) (13)

  Media: Advertising, Printing & Publishing    
L + 8.00%
(1.00% Floor)
 
 
    10/2/2021       7,000       6,932       6,976       0.91  

Zywave, Inc. (2) (3) (5)

  High Tech Industries    
L + 9.00%
(1.00% Floor)
 
 
    11/17/2023       4,950       4,879       4,915       0.64  
         

 

 

   

 

 

   

 

 

 

Second Lien Debt Total

          $ 172,960     $ 171,864       22.49
         

 

 

   

 

 

   

 

 

 

 

Investments—non-controlled/non-affiliated (1)

  Industry     Maturity
Date
    Par
Amount
    Amortized
Cost (6)
    Fair
Value (7)
    Percentage
of Net
Assets
 

Structured Finance Obligations (0.37%) (5) (8) (11)

           

1776 CLO I, Ltd., Subordinated Notes

    Structured Finance       5/8/2020     $ 11,750     $ 6,739     $ 2,761       0.36

Clydesdale CLO 2005, Ltd., Subordinated Notes

    Structured Finance       12/6/2017       5,750       —         10       0.00  

MSIM Peconic Bay, Ltd., Subordinated Notes

    Structured Finance       7/20/2019       4,500       63       5       0.00  

Nautique Funding Ltd., Income Notes

    Structured Finance       4/15/2020       5,000       2,437       2,440       0.32  
       

 

 

   

 

 

   

 

 

 

Structured Finance Obligations Total

        $ 9,239     $ 5,216       0.68
       

 

 

   

 

 

   

 

 

 

 

Investments—non-controlled/non-affiliated (1)

   Industry      Shares/
Units
     Cost      Fair
Value (7)
     Percentage
of Net
Assets
 

Equity Investments (0.46%) (5)

              

CIP Revolution Investments, LLC

    
Media: Advertising,
Printing & Publishing
 
 
     30,000      $ 300      $ 352        0.05

Derm Growth Partners III, LLC (Dermatology Associates)

    
Healthcare &
Pharmaceuticals
 
 
     1,000,000        1,000        976        0.13  

GS Holdco LLC (Global Software, LLC)

     High Tech Industries        1,000,000        1,001        1,126        0.15  

Power Stop Intermediate Holdings, LLC

     Automotive        7,150        715        1,208        0.16  

T2 Systems Parent Corporation

     Transportation: Consumer        555,556        556        584        0.07  

THG Acquisition, LLC (The Hilb Group, LLC)

    
Banking, Finance,
Insurance & Real Estate
 
 
     1,500,000        1,499        2,228        0.29  
        

 

 

    

 

 

    

 

 

 

Equity Investments Total

         $ 5,071      $ 6,474        0.85
        

 

 

    

 

 

    

 

 

 

Total investments—non-controlled/non-affiliated

         $ 1,332,596      $ 1,323,102        173.15
        

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

Investments—controlled/affiliated

  Industry     Interest
Rate (2)
    Maturity
Date
    Par
Amount/

LLC
Interest
    Cost     Fair
Value (7)
    Percentage
of Net
Assets
 

Investment Fund (7.00%) (8)

             

Middle Market Credit Fund, LLC, Mezzanine Loan (2) (5) (9) (14)

    Investment Fund       L + 9.50%       6/24/2017     $ 62,384     $ 62,384     $ 62,384       8.16

Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest (5) (14)

    Investment Fund       0.001       3/1/2021       35,001       35,001       37,273       4.88  
         

 

 

   

 

 

   

 

 

 

Investment Fund Total

          $ 97,385     $ 99,657       13.04
         

 

 

   

 

 

   

 

 

 

Total investments—controlled/affiliated

          $ 97,385     $ 99,657       13.04
         

 

 

   

 

 

   

 

 

 

Total investments

          $ 1,429,981     $ 1,422,759       186.19
         

 

 

   

 

 

   

 

 

 

 

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States and issuers of structured finance obligations are domiciled in the Cayman Islands. Under the Investment Company Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2016, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2016, the Company is not an “affiliated person” of any of these portfolio companies.
(2) Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has provided the interest rate in effect as of December 31, 2016. As of December 31, 2016, all of our LIBOR loans were indexed to the 90-day LIBOR rate at 1.00%, except for those loans as indicated in Note 16 below.
(3) Loan includes interest rate floor feature.
(4) Denotes that all or a portion of the assets are owned by the SPV. The SPV has entered into the SPV Credit Facility. The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or the 2015-1 Issuer, a wholly owned and consolidated subsidiary of the Company.
(5) Denotes that all or a portion of the assets are owned by the Company. The Company has entered into the Credit Facility. The lenders of the Credit Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the SPV or the 2015-1 Issuer.
(6) Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. Equity tranche CLO fund investments, which are referred to as “structured finance obligations”, are recorded at amortized cost using the effective interest method.
(7) Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy.
(8) The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
(9) Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company/investment fund.
(10) Loan was on non-accrual status as of December 31, 2016.
(11) As of December 31, 2016, the Company has a greater than 25% but less than 50% equity or subordinated notes ownership interest in certain structured finance obligations. These investments have governing documents that preclude the Company from controlling management of the entity and therefore the Company has determined that the issuer of the investment is not a controlled affiliate or a non-controlled affiliate because the investments are not “voting securities”.
(12) In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.54%), EIP Merger Sub, LLC (Evolve IP) (3.84%), International Medical Group, Inc. (4.64%), Product Quest Manufacturing, LLC (3.54%), PSI Services LLC (4.40%), Reliant Pro Rehab, LLC (nil) and The Hilb Group, LLC (3.96%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

 

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Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

(13) Denotes that all or a portion of the assets are owned by the 2015-1 Issuer and secure the notes issued in connection with a $400 million term debt securitization completed by the Company on June 26, 2015 (see Note 7, 2015-1 Notes). Accordingly, such assets are not available to the creditors of the SPV or the Company.
(14) Under the Investment Company Act, the Company is deemed to be an “affiliated person” of and “control” this investment fund because the Company owns more than 25% of the investment fund’s outstanding voting securities and/or has the power to exercise control over management or policies of such investment fund. See Note 5, Middle Market Credit Fund, LLC, for more details.
(15) As of December 31, 2016, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

 

Investments—non-controlled/non-affiliated

   Type      Unused
Fee
    Par/
Principal
Amount
     Fair Value  

First Lien Debt—unfunded delayed draw and revolving term loans commitments

          

Advanced Instruments, LLC

     Revolver        0.50   $ 2,500      $ (25

Captive Resources Midco, LLC

     Revolver        0.50     1,875        (2

Captive Resources Midco, LLC

     Delayed Draw        1.25     3,125        (4

CIP Revolution Holdings, LLC

     Revolver        0.50     1,331        6  

CIP Revolution Holdings, LLC

     Delayed Draw        0.75     1,331        6  

Derm Growth Partners III, LLC (Dermatology Associates)

     Revolver        0.50     1,672        1  

Derm Growth Partners III, LLC (Dermatology Associates)

     Delayed Draw        1.00     5,247        4  

Dimensional Dental Management, LLC

     Delayed Draw        1.00     2,507        (23

Dimora Brands, Inc. (fka TK USA Enterprises, Inc.)

     Revolver        0.50     4,750        (30

Direct Travel, Inc.

     Delayed Draw        1.00     9,658        (56

Green Plains II LLC

     Revolver        0.50     1,352        14  

National Technical Systems, Inc.

     Revolver        0.50     2,031        (102

National Technical Systems, Inc.

     Delayed Draw        1.00     4,469        (165

OnCourse Learning Corporation

     Revolver        0.50     859        2  

PT Intermediate Holdings III, LLC (Parts Town)

     Revolver        0.50     2,025        15  

Superior Health Linens, LLC

     Revolver        0.50     2,735        (17

T2 Systems, Inc.

     Revolver        0.50     2,933        29  

The Hilb Group, LLC

     Delayed Draw        1.00     3,810        16  

Vetcor Professional Practices, LLC

     Delayed Draw        1.00     3,057        18  

Winchester Electronics Corporation

     Delayed Draw        1.00     2,500        8  
       

 

 

    

 

 

 

Total unfunded commitments

        $ 59,767      $ (305
       

 

 

    

 

 

 

 

(16) As of December 31, 2016, this LIBOR loan was indexed to the 30-day LIBOR rate at 0.77%.

As of December 31, 2016, investments at fair value consisted of the following:

 

Type—% of Fair Value

   Amortized Cost      Fair Value      % of Fair Value  

First Lien Debt

   $ 1,145,326      $ 1,139,548        80.09

Second Lien Debt

     172,960        171,864        12.08  

Structured Finance Obligations

     9,239        5,216        0.37  

Equity Investments

     5,071        6,474        0.46  

Investment Fund

     97,385        99,657        7.00  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,429,981      $ 1,422,759        100.00
  

 

 

    

 

 

    

 

 

 

Type—% of Fair Value of First and Second Lien Debt

   Amortized Cost      Fair Value      % of Fair Value  

Floating Rate

   $ 1,308,455      $ 1,301,549        99.25

Fixed Rate

     9,831        9,863        0.75  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,318,286      $ 1,311,412        100.00
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

TCG BDC, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

 

The industry composition of investments at fair value as of December 31, 2016 was as follows:

 

Industry

   Amortized Cost      Fair Value      % of Fair Value  

Aerospace & Defense

   $ 62,759      $ 61,371        4.31

Automotive

     37,780        38,414        2.70  

Banking, Finance, Insurance & Real Estate

     148,577        150,700        10.59  

Beverage, Food & Tobacco

     15,059        15,379        1.08  

Business Services

     149,205        141,784        9.97  

Capital Equipment

     36,811        37,316        2.62  

Chemicals, Plastics & Rubber

     19,784        19,801        1.39  

Construction & Building

     23,403        23,691        1.67  

Consumer Services

     78,693        79,941        5.62  

Containers, Packaging & Glass

     49,442        47,706        3.35  

Durable Consumer Goods

     19,930        19,932        1.04  

Energy: Electricity

     36,783        36,758        2.59  

Energy: Oil & Gas

     11,132        10,911        0.77  

Environmental Industries

     40,763        41,299        2.90  

Forest Products & Paper

     23,752        23,924        1.68  

Healthcare & Pharmaceuticals

     159,072        161,544        11.36  

High Tech Industries

     45,617        46,317        3.26  

Hotel, Gaming & Leisure

     30,450        30,014        2.11  

Investment Fund

     97,385        99,657        7.00  

Media: Advertising, Printing & Publishing

     70,988        71,999        5.06  

Metals & Mining

     10,232        10,259        0.72  

Non-durable Consumer Goods

     32,759        29,348        2.06  

Retail

     8,625        8,320        0.58  

ware

     11,110        11,265        0.79  

Structured Finance

     9,239        5,216        0.37  

Telecommunications

     108,553        110,359        7.76  

Transportation: Cargo

     34,323        34,306        2.41  

Transportation: Consumer

     26,841        27,882        1.96  

Wholesale

     30,914        27,346        1.92  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,429,981      $ 1,422,759        100.00
  

 

 

    

 

 

    

 

 

 

The geographical composition of investments at fair value as of December 31, 2016 was as follows:

 

Geography

   Amortized Cost      Fair Value      % of Fair Value  

Cayman Islands

   $ 9,239      $ 5,216        0.37

United Kingdom

     21,144        20,969        1.47  

United States

     1,399,598        1,396,574        98.16  
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,429,981      $ 1,422,759        100.00
  

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

20


Table of Contents

TCG BDC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of March 31, 2017

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) is a Maryland corporation formed on February 8, 2012, and structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle GMS Investment Management L.L.C. (“CGMSIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group L.P. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

The Company’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which the Company defines as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company seeks to achieve its investment objective primarily through direct originations of secured debt, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of our assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities). The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. Depending on market conditions, the Company expects that between 70% and 80% of the value of its assets will be invested in Middle Market Senior Loans. The Company expects that the composition of its portfolio will change over time given the Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.

On May 2, 2013, the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations. If the Company has not consummated an initial public offering of its common stock that results in an unaffiliated public float of at least 15% of the aggregate capital commitments received prior to the date of such initial public offering (a “Qualified IPO”) by May 2, 2018, then the Board of Directors of the Company (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve.

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. The Company will remain an emerging growth company for up to five years following an initial public offering, although if the market value of the common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, the Company would cease to be an emerging growth company as of the following December 31.

The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle GMS Finance Administration L.L.C. (the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group L.P. “Carlyle” refers to The Carlyle Group L.P. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global alternative asset manager publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

 

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Effective March 15, 2017, the Company changed its name from “Carlyle GMS Finance, Inc.” to “TCG BDC, Inc.”

TCG BDC SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on January 3, 2013. The SPV invests in first and second lien senior secured loans. The SPV is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 3, 2013. Effective March 15, 2017, the SPV changed its name from “Carlyle GMS Finance SPV LLC” to “TCG BDC SPV LLC”.

On June 26, 2015, the Company completed a $400 million term debt securitization (the “2015-1 Debt Securitization”). The notes offered in the 2015-1 Debt Securitization (the “2015-1 Notes”) were issued by Carlyle GMS Finance MM CLO 2015-1 LLC (the “2015-1 Issuer”), a wholly owned and consolidated subsidiary of the Company, and are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. Refer to Note 7 for details. The 2015-1 Issuer is consolidated in these consolidated financial statements commencing from the date of its formation, May 8, 2015.

On February 29, 2016, the Company and Credit Partners USA LLC (“Credit Partners”) entered into an amended and restated limited liability company agreement, which was subsequently amended on June 24, 2016 (as amended, the “Limited Liability Company Agreement”) to co-manage Middle Market Credit Fund, LLC (“Credit Fund”). Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Refer to Note 5, Middle Market Credit Fund, LLC, for details.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“US GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Accounting Standards Update (“ASU”) 2013-08, Financial Services—Investment Companies (“ASU 2013-08”): Amendments to the Scope, Measurement and Disclosure Requirements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the SPV and the 2015-1 Issuer. All significant intercompany balances and transactions have been eliminated. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X.

 

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Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with US GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim period presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2016. The results of operations for the three month period ended March 31, 2017 are not necessarily indicative of the operating results to be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on base management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 for further information about fair value measurements.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan

 

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principal on the respective capitalization dates, and is generally due at maturity. As of March 31, 2017, the fair value of the loan in the portfolio with PIK provisions was $8,861, which represents approximately 0.6% of total investments at fair value. For the three month period ended March 31, 2017, there was no PIK interest accrued. As of December 31, 2016, no loans in the portfolio contained PIK provisions.

Interest income from investments in the “equity” class of collateralized loan obligation (“CLO”) funds, which are included in “structured finance obligations”, is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with Accounting Standards Codification (“ASC”) 325-40, Beneficial Interests in Securitized Financials Assets. The Company monitors the expected cash inflows from its CLO equity investments, including the expected residual payments and the effective yield is determined and updated at least quarterly. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties, including the amount and timing of principal payments which are impacted by prepayments, repurchases, defaults, delinquencies and liquidations of or within the CLO funds. These uncertainties are difficult to predict and are subject to future events that could have impacted the Company’s estimates if the information was known at the time. As a result, actual results may differ significantly from these estimates.

Dividend Income

Dividend income from the investment fund is recorded on the record date for the investment fund to the extent that such amounts are payable by the investment fund and are expected to be collected.

Other Income

Other income may include income such as consent, waiver, amendment, syndication and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three month periods ended March 31, 2017 and 2016, the Company earned $2,536 and $999, respectively, in other income, primarily from syndication and prepayment fees.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2017, the fair value of the loan in the portfolio on non-accrual status was $8,858, which represents approximately 0.6% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2017. All first and second lien debt investments were performing and current on their interest payments as of March 31, 2016.

SPV Credit Facility, Credit Facility and 2015-1 Notes Related Costs, Expenses and Deferred Financing Costs (See Note 6, Borrowings, and Note 7, 2015-1 Notes)

Interest expense and unused commitment fees on the SPV Credit Facility and Credit Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.

 

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The SPV Credit Facility and Credit Facility are recorded at carrying value, which approximates fair value.

Deferred financing costs include capitalized expenses related to the closing or amendments of the SPV Credit Facility and Credit Facility. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility, except for a portion that was accelerated in connection with the amendment of the SPV Credit Facility as described in Note 6. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.

Debt issuance costs include capitalized expenses including structuring and arrangement fees related to the offering of the 2015-1 Notes. Amortization of debt issuance costs for the 2015-1 Notes is computed on the effective yield method over the term of the 2015-1 Notes. The unamortized balance of such costs is presented as a direct deduction to the carrying amount of the 2015-1 Notes in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in interest expense in the accompanying Consolidated Statements of Operations.

The 2015-1 Notes are recorded at carrying value, which approximates fair value.

Organization and Offering Costs

The Company agreed to reimburse the Investment Adviser for initial organization and offering costs incurred on behalf of the Company up to $1,500. As of March 31, 2017 and December 31, 2016, $1,500 of organization and offering costs had been incurred by the Company and $57 of excess organization and offering costs had been incurred by the Investment Adviser since inception. The $1,500 of incurred organization and offering costs are allocated to all stockholders based on their respective capital commitment and are re-allocated amongst all stockholders at the time of each capital drawdown subsequent to the Initial Closing. The Company’s organization costs incurred are expensed and the offering costs are charged against equity when incurred.

Income Taxes

For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

 

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The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense. The SPV and the 2015-1 Issuer are disregarded entities for tax purposes and are consolidated with the tax return of the Company.

Capital Calls and Dividends and Distributions to Common Stockholders

The Company records the shares issued in connection with capital calls as of the effective date of the capital call. To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions on behalf of its stockholders, for those who have elected to participate in the plan. As a result of adopting such a plan, if the Board of Directors authorizes, and The Company declares, a cash dividend or distribution, the stockholders who have elected to participate in the dividend reinvestment plan would have their cash dividends or distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash. Prior to a Qualified IPO, the Company intends to use primarily newly issued shares of its common stock to implement the plan issued at the net asset value per share most recently determined by the Board of Directors. After a Qualified IPO, the Company intends to use primarily newly issued shares to implement the plan so long as the market value per share is equal to or greater than the net asset value per share as of the close of business on the relevant payment date for such dividend or distribution. If the market value per share is less than the net asset value per share as of the close of business on the relevant payment date, the plan administrator would purchase the common stock on behalf of participants in the open market, unless the Company instructs the plan administrator otherwise.

Functional Currency

The functional currency of the Company is the U.S. Dollar and all transactions were in U.S. Dollars.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date

 

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using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment other than Credit Fund is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

 

    the nature and realizable value of any collateral;

 

    call features, put features and other relevant terms of debt;

 

    the portfolio company’s leverage and ability to make payments;

 

    the portfolio company’s public or private credit rating;

 

    the portfolio company’s actual and expected earnings and discounted cash flow;

 

    prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

 

    the markets in which the portfolio company does business and recent economic and/or market events; and

 

    comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificate received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of March 31, 2017 and December 31, 2016.

US GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of

 

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factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:

 

    Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The types of financial instruments in Level 1 generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

 

    Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. The type of financial instruments in this category generally includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

    Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are in this category generally include investments in privately-held entities, CLOs, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month periods ended March 31, 2017 and 2016, there were no transfers between levels.

 

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The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2017 and December 31, 2016:

 

     March 31, 2017  
     Level 1      Level 2      Level 3      Total  

Assets

 

     

First Lien Debt

   $ —        $ —        $ 1,085,554      $ 1,085,554  

Second Lien Debt

     —          —          161,643        161,643  

Structured Finance Obligations

     —          —          2,776        2,776  

Equity Investments

     —          —          8,451        8,451  

Investment Fund

           

Mezzanine Loan

     —          —          86,044        86,044  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

   $ —        $ —        $ 1,344,468      $ 1,344,468  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investments measured at net asset value (1)

            $ 48,077  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

            $ 1,392,545  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2016  
     Level 1      Level 2      Level 3      Total  

Assets

        

First Lien Debt

   $ —        $ —        $ 1,139,548      $ 1,139,548  

Second Lien Debt

     —          —          171,864        171,864  

Structured Finance Obligations

     —          —          5,216        5,216  

Equity Investments

     —          —          6,474        6,474  

Investment Fund

           

Mezzanine Loan

     —          —          62,384        62,384  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

   $ —        $ —        $ 1,385,486      $ 1,385,486  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investments measured at net asset value (1)

            $ 37,273  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

            $ 1,422,759  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Amount represents the Company’s subordinated loan and member’s interest investments in Credit Fund. The fair value of these investments has been estimated using the net asset value of the Company’s ownership interests in Credit Fund.

 

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The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:

 

     Financial Assets
For the three month period ended March 31, 2017
 
     First Lien
Debt
    Second
Lien Debt
    Structured
Finance
Obligations
    Equity
Investments
     Investment
Fund -

Mezzanine
Loan
    Total  

Balance, beginning of period

   $ 1,139,548     $ 171,864     $ 5,216     $ 6,474      $ 62,384     $ 1,385,486  

Purchases

     92,793       1,782       —         1,500        45,660       141,735  

Sales

     (24,723     (2,978     —         —          —         (27,701

Paydowns

     (120,872     (10,000     (2,518     —          (22,000     (155,390

Accretion of discount

     3,425       151       —         —          —         3,576  

Net realized gains (losses)

     (7,552     (3     (139     —          —         (7,694

Net change in unrealized appreciation (depreciation)

     2,935       827       217       477        —         4,456  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance, end of period

   $ 1,085,554     $ 161,643     $ 2,776     $ 8,451      $ 86,044     $ 1,344,468  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2017 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations

   $ (3,472   $ 859     $ 220     $ 477      $ —       $ (1,916
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

     Financial Assets
For the three month period ended March 31, 2016
 
     First Lien
Debt
    Second
Lien Debt
    Structured
Finance
Obligations
    Equity
Investments
     Total  

Balance, beginning of period

   $ 785,459     $ 210,396     $ 44,812     $ 2,424      $ 1,043,091  

Purchases

     98,802       33,488       —         —          132,290  

Sales

     (2,193     (10,835     (9,805     —          (22,833

Paydowns

     (3,326     —         —         —          (3,326

Accretion of discount

     532       97       (31     —          598  

Net realized gains (losses)

     4       —         (3,581     —          (3,577

Net change in unrealized appreciation (depreciation)

     (5,608     (5,256     (1,040     371        (11,533
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, end of period

   $ 873,670     $ 227,890     $ 30,355     $ 2,795      $ 1,134,710  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2016 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations

   $ (5,602   $ (5,256   $ (4,298   $ 371      $ (14,785
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

Investments in structured finance obligations are generally valued using a discounted cash flow and/or consensus pricing.

Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in the subordinated loan and member’s interest of the investment fund are valued using the net asset value of the Company’s ownership interest in the investment fund and investments in the mezzanine loan of the investment fund are valued using discounted cash flow analysis with expected repayment rate of principal and interest.

 

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The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of March 31, 2017 and December 31, 2016:

 

    Fair Value as of
March 31,

2017
   

Valuation Techniques

 

Significant

Unobservable Inputs

  Range        
          Low     High     Weighted
Average
 

Investments in First Lien Debt

  $ 1,010,923     Discounted Cash Flow   Discount Rate     4.13     16.25     8.01
    72,386     Consensus Pricing   Indicative Quotes     65.13       101.00       94.09  
    2,245     Income Approach   Discount Rate     19.53     19.53     19.53
    Market Approach   Comparable Multiple     4.06     4.51     4.28
 

 

 

           

Total First Lien Debt

    1,085,554            
 

 

 

           

Investments in Second Lien Debt

    156,836     Discounted Cash Flow   Discount Rate     7.93     11.01     9.65
    2,949     Consensus Pricing   Indicative Quotes     100.75       100.75       100.75  
    1,858     Income Approach   Discount Rate     10.68     10.68     10.68
    Market Approach   Comparable Multiple     8.87     9.60x       9.24x  
 

 

 

           

Total Second Lien Debt

    161,643            
 

 

 

           

Investments in Structured Finance Obligations

    2,776     Discounted Cash Flow   Discount Rate     22.00     22.00     22.00
      Default Rate     0.78       0.78       0.78  
      Prepayment Rate     35.00       35.00       35.00  
      Recovery Rate     65.00       65.00       65.00  
 

 

 

           

Total Structured Finance Obligations

    2,776            
 

 

 

           

Investments in Equity

    8,451     Income Approach   Discount Rate     8.37     10.30     9.13
    Market Approach   Comparable Multiple     7.55     14.52     10.92
 

 

 

           

Total Equity Investments

    8,451            
 

 

 

           

Investments in Investment Fund—Mezzanine Loan

    86,044     Income Approach   Repayment Rate     100.00     100.00     100.00
 

 

 

           

Total Investment Fund—Mezzanine Loan

    86,044            
 

 

 

           

Total Level 3 Investments

  $ 1,344,468            
 

 

 

           

 

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    Fair Value as of
December 31,
2016
   

Valuation Techniques

 

Significant

Unobservable Inputs

  Range        
          Low     High     Weighted
Average
 

Investments in First Lien Debt

  $ 986,695     Discounted Cash Flow   Discount Rate     4.50     16.33     7.94
    152,853     Consensus Pricing   Indicative Quotes     40.75       106.36       97.29  
 

 

 

           

Total First Lien Debt

    1,139,548            
 

 

 

           

Investments in Second Lien Debt

    153,657     Discounted Cash Flow   Discount Rate     7.93     11.05     9.75
    16,525     Consensus Pricing   Indicative Quotes     83.17       100.88       94.48  
    1,682     Income Approach   Discount Rate     15.32     15.32     15.32
    Market Approach   Comparable Multiple     8.01     8.68     8.34
 

 

 

           

Total Second Lien Debt

    171,864            
 

 

 

           

Investments in Structured Finance Obligations

    2,761     Discounted Cash Flow   Discount Rate     22.00     22.00     22.00
      Default Rate     1.13       1.13       1.13  
      Prepayment Rate     35.00       35.00       35.00  
      Recovery Rate     65.00       65.00       65.00  
    2,455     Consensus Pricing   Indicative Quotes     0.10       48.79       48.50  
 

 

 

           

Total Structured Finance Obligations

    5,216            
 

 

 

           

Investments in Equity

    6,474     Income Approach   Discount Rate     8.68     10.40     9.41
    Market Approach   Comparable Multiple     7.22     13.71     11.00
 

 

 

           

Total Equity Investments

    6,474            
 

 

 

           

Investments in Investment Fund—Mezzanine Loan

    62,384     Income Approach   Repayment Rate     100.00     100.00     100.00

Total Investment Fund—Mezzanine Loan

    62,384            
 

 

 

           

Total Level 3 Investments

  $ 1,385,486            
 

 

 

           

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation may result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in structured finance obligations are discount rates, default rates, prepayment rates, recovery rates and indicative quotes. Significant increases in discount rates, default rates or prepayment rates in isolation would result in a significantly lower fair value measurement, while a significant increase in recovery rates in isolation would result in a significantly higher fair value. Significant decreases in indicative quotes in isolation may result in a significantly lower fair value measurement.

 

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The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples would result in a significantly lower fair value measurement.

Financial instruments disclosed but not carried at fair value

The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of March 31, 2017 and December 31, 2016:

 

     March 31, 2017      December 31, 2016  
     Carrying Value      Fair Value      Carrying Value      Fair Value  

Secured borrowings

   $ 390,608      $ 390,608      $ 421,885      $ 421,885  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 390,608      $ 390,608      $ 421,885      $ 421,885  
  

 

 

    

 

 

    

 

 

    

 

 

 

The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

The following table represents the carrying values (before debt issuance costs) and fair values of the Company’s 2015-1 Notes disclosed but not carried at fair value as of March 31, 2017 and December 31, 2016:

 

     March 31, 2017      December 31, 2016  
     Carrying Value      Fair Value      Carrying Value      Fair Value  

Aaa/AAA Class A-1A Notes

   $ 160,000      $ 160,110      $ 160,000      $ 160,072  

Aaa/AAA Class A-1B Notes

     40,000        40,001        40,000        39,960  

Aaa/AAA Class A-1C Notes

     27,000        27,030        27,000        26,951  

Aa2 Class A-2 Notes

     46,000        46,027        46,000        45,784  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 273,000      $ 273,168      $ 273,000      $ 272,767  
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value determination of the Company’s 2015-1 Notes was based on the market quotation(s) received from broker/dealer(s). These fair value measurements were based on significant inputs not observable and thus represent Level 3 measurements as defined in the accounting guidance for fair value measurement.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On April 3, 2013, the Company’s Board of Directors, including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”), approved an investment advisory agreement (the “Investment Advisory Agreement”) between the Company and the Investment Adviser in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, Section 15(c) of the Investment Company Act. The initial term of the Investment Advisory Agreement is two years from April 3, 2013 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the Independent

 

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Directors. On March 20, 2017, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Investment Advisory Agreement for a one year period. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a base management fee and an incentive fee.

Prior to a Qualified IPO, the base management fee is calculated and payable quarterly in arrears at an annual rate of 1.50% of the average daily gross assets of the Company for the period adjusted for share issuances or repurchases, excluding any cash and cash equivalents and including assets acquired through the incurrence of debt from use of the SPV Credit Facility, Credit Facility and 2015-1 Notes (see Note 6, Borrowings, and Note 7, 2015-1 Notes). For purposes of this calculation, cash and cash equivalents include any temporary investments in cash-equivalents, U.S. government securities and other high quality investment grade debt investments that mature in 12 months or less from the date of investment. Base management fees for any partial quarter are prorated. The Investment Adviser waived its right to receive one-third (0.50%) of the 1.50% base management fee prior to a Qualified IPO. The fee waiver will terminate if and when a Qualified IPO has been consummated. Any waived base management fees are not subject to recoupment by the Investment Adviser.

The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter. The second part is determined and payable in arrears based on capital gains as of the end of each calendar year.

Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the operating expenses accrued for the quarter (including the base management fee, expenses payable under the administration agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include, in the case of investments with a deferred interest feature (such as original issue discount (“OID”), debt instruments with pay-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Prior to any Qualified IPO of the Company’s common stock, pre-incentive fee net investment income, expressed as a rate of return on the average daily Hurdle Calculation Value (as defined below) throughout the immediately preceding calendar quarter, is compared to a “hurdle rate” of 1.50% per quarter (6% annualized) or a “catch-up” of 1.875% per quarter (7.50% annualized), as applicable. “Hurdle Calculation Value” means, on any given day, the sum of (x) the value of net assets as of the end of the calendar quarter immediately preceding such day plus (y) the aggregate amount of capital drawn from investors (or reinvested in the Company pursuant to a dividend reinvestment plan) from the beginning of the current quarter to such day minus (z) the aggregate amount of distributions (including share repurchases) made by the Company from the beginning of the current quarter to such day, but only to the extent such distributions were not declared and accounted for on the books and records in a previous quarter.

The Company pays its Investment Adviser an incentive fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

    no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which its pre-incentive fee net investment income does not exceed the hurdle rate of 1.50%;

 

   

100% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.875% in any calendar

 

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quarter (7.50% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.875%) as the “catch-up.” The “catch-up” is meant to provide the Investment Adviser with approximately 20% of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.875% in any calendar quarter; and

 

    20% of the amount of pre-incentive fee net investment income, if any, that exceeds 1.875% in any calendar quarter (7.50% annualized) will be payable to the Investment Adviser. This reflects that once the hurdle rate is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to the Investment Adviser.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of realized capital gains, if any, on a cumulative basis from inception through the date of determination, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees, provided that, the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation.

The Company will defer payment of any incentive fee otherwise earned by the Investment Adviser if, during the most recent four full calendar quarter periods (or, if less, the number of full calendar quarters completed since the initial drawdown of capital from the stockholders, “Initial Drawdown”) ending on or prior to the date such payment is to be made, the sum of (a) the aggregate distributions to stockholders and (b) the change in net assets (defined as gross assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 6.0% of net assets (defined as gross assets less indebtedness) at the beginning of such period, provided, that such percentage will be appropriately prorated during the four full calendar quarters immediately following the Initial Drawdown. These calculations are adjusted for any share issuances or repurchases. Any deferred incentive fees are carried over for payment in subsequent calculation periods. The Investment Adviser may earn an incentive fee under the Investment Advisory Agreement on the Company’s repurchase of debt issued by the Company at a gain.

For the three month periods ended March 31, 2017 and 2016, base management fees were $3,417 and $2,760, respectively (net of waiver of $1,708 and $1,380, respectively), incentive fees related to pre-incentive fee net investment income were $4,777 and $2,990, respectively, and there were no incentive fees related to realized capital gains. For the three month periods ended March 31, 2017 and 2016, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of March 31, 2017 and 2016, respectively. The accrual for any capital gains incentive fee under US GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.

As of March 31, 2017 and December 31, 2016, $11,764 and $8,157, respectively, was included in base management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

On April 3, 2013, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Administration Agreement

On April 3, 2013, the Company’s Board of Directors approved an administration agreement (the “Administration Agreement”) between the Company and the Administrator. Pursuant to the Administration

 

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Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company’s Sarbanes-Oxley Act internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.

The initial term of the Administration Agreement is two years from April 3, 2013 and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. On March 20, 2017, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Administration Agreement for a one year period. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party.

For the three month periods ended March 31, 2017 and 2016, the Company incurred $173 and $148, respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of March 31, 2017 and December 31, 2016, $115 and $137, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On April 3, 2013, the Administrator entered into sub-administration agreements with Carlyle Employee Co. and CELF Advisors LLP (“CELF”) (the “Carlyle Sub-Administration Agreements”). Pursuant to the Carlyle Sub-Administration Agreements, Carlyle Employee Co. and CELF provide the Administrator with access to personnel.

On April 3, 2013, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”). On March 11, 2015, the Company’s Board of Directors, including a majority of the Independent Directors, approved an amendment to the State Street Sub-Administration Agreement. The initial term of the State Street Sub-Administration Agreement ends on April 1, 2017 and, unless terminated earlier, the State Street Sub-Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by the vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The State Street Sub-Administration Agreement may be terminated upon at least 60 days’ written notice and without penalty by the vote of a majority of the outstanding securities of the Company, or by the vote of the Board of Directors or by either party to the State Street Sub-Administration Agreement.

For the three month periods ended March 31, 2017 and 2016, fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $160 and $140, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of March 31, 2017 and December 31, 2016, $160 and $159, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

 

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Placement Fees

On April 3, 2013, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.

For the three month periods ended March 31, 2017 and 2016, TCG earned placement fees of $0 and $3, respectively, from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock.

Board of Directors

The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. On April 3, 2013, the Board of Directors established an Audit Committee consisting of its Independent Directors. The Board of Directors also established a Pricing Committee of the Board of Directors (the “Pricing Committee”) and may establish additional committees in the future. For the three month periods ended March 31, 2017 and 2016, the Company incurred $103 and $120, respectively, in fees and expenses associated with its Independent Directors and the Audit Committee. As of March 31, 2017 and December 31, 2016, $0 was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities. As of March 31, 2017 and December 31, 2016, current directors had committed $821 in capital commitments to the Company.

Transactions

For the three month period ended March 31, 2017, the Company sold three investments to Credit Fund for proceeds of $30,743 and realized gains of $177. See Note 5, Middle Market Credit Fund, LLC, for further information about Credit Fund.

5. MIDDLE MARKET CREDIT FUND, LLC

Overview

On February 29, 2016, the Company and Credit Partners entered into the Limited Liability Company Agreement to co-manage Credit Fund, an unconsolidated Delaware limited liability company. Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. Establishing a quorum for Credit Fund’s board of managers requires at least four members to be present at a meeting, including at least two of the Company’s representatives and two of Credit Partners’ representatives. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company. By virtue of its membership interest, the Company and Credit Partners each indirectly bear an allocable share of all expenses and other obligations of Credit Fund.

Together with Credit Partners, the Company co-invests through Credit Fund. Investment opportunities for Credit Fund are sourced primarily by the Company and its affiliates. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Fund’s investment committee consisting of an equal number of representatives of the Company and Credit Partners. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company Act). Middle Market Credit Fund SPV, LLC (the “Credit Fund Sub”), a Delaware limited liability company, was formed on April 5, 2016. Credit Fund Sub primarily invests in first lien loans of middle market companies. Credit Fund Sub is a wholly owned subsidiary of Credit Fund and is consolidated in Credit Fund’s consolidated financial statements commencing from the date of its formation. Credit Fund follows the same Internal Risk Rating System as the Company.

 

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Credit Fund, the Company and Credit Partners entered into an administration agreement with Carlyle GMS Finance Administration L.L.C., the administrative agent of Credit Fund (in such capacity, the “Administrative Agent”), pursuant to which the Administrative Agent is delegated certain administrative and non-discretionary functions, is authorized to enter into sub-administration agreements at our expense with the approval of the board of managers of Credit Fund, and is reimbursed by Credit Fund for its costs and expenses and Credit Fund’s allocable portion of overhead incurred by the Administrative Agent in performing its obligations thereunder

Selected Financial Data

Since inception of Credit Fund and through March 31, 2017 and December 31, 2016, the Company and Credit Partners each made capital contributions of $1 in members’ equity and $45,500 and $35,000, respectively, in subordinated loans to Credit Fund. As of March 31, 2017 and December 31, 2016, Credit Fund had net borrowings of $86,044 and $62,384, respectively, in mezzanine loans under a revolving credit facility with the Company (the “Credit Fund Facility”). As of March 31, 2017 and December 31, 2016, Credit Fund had subordinated loans and members’ capital of $96,155 and $74,547, respectively. As of March 31, 2017 and December 31, 2016, the Company’s ownership interest in such subordinated loans and members’ capital was $48,077 and $37,273 respectively, and in such mezzanine loans was $86,044 and $62,384, respectively.

As of March 31, 2017 and December 31, 2016, Credit Fund held cash and cash equivalents totaling $10,533 and $6,103, respectively.

As of March 31, 2017 and December 31, 2016, Credit Fund had total investments at fair value of $558,694 and $437,829, respectively, which was comprised of first lien senior secured loans and second lien senior secured loans to 35 and 28 portfolio companies, respectively. As of March 31, 2017 and December 31, 2016, no loans in Credit Fund’s portfolio were on non-accrual status or contained PIK provisions. All investments in the portfolio were floating rate debt investments. The portfolio companies in Credit Fund are U.S. middle market companies in industries similar to those in which the Company may invest directly. Additionally, as of March 31, 2017 and December 31, 2016, Credit Fund had commitments to fund various undrawn revolvers and delayed draw investments to its portfolio companies totaling $32,012 and $30,361, respectively.

Below is a summary of Credit Fund’s portfolio, followed by a listing of the loans in Credit Fund’s portfolio as of March 31, 2017 and December 31, 2016:

 

     As of
March 31,

2017
    As of
December 31,
2016
 

Senior secured loans (1)

   $ 560,196     $ 439,086  

Weighted average yields of senior secured loans based on amortized cost (2)

     6.53     6.47

Weighted average yields of senior secured loans based on fair value (2)

     6.46     6.41

Number of portfolio companies in Credit Fund

     35       28  

Average amount per portfolio company (1)

   $ 16,006     $ 15,682  

 

(1) At par/principal amount.
(2) Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2017 and December 31, 2016. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

 

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Consolidated Schedule of Investments as of March 31, 2017 (unaudited)

 

Investments (1)

  Industry     Interest
Rate
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (5)
    Fair
Value (6)
 

First Lien Debt (99.42% of fair value)

           

Advanced Instruments,
LLC (2) (3) (4) (10) (11)

   
Healthcare &
Pharmaceuticals
 
 
   
L + 5.25%
(1.00% Floor)
 
 
    10/31/2022     $ 12,000     $ 11,867     $ 11,972  

AM Conservation Holding
Corporation (2) (3) (4)

    Energy: Electricity      
L + 4.75%
(1.00% Floor)
 
 
    10/31/2022       29,925       29,657       30,185  

Anaren, Inc. (2) (3) (4)

    Telecommunications      
L + 4.50%
(1.00% Floor)
 
 
    2/18/2021       6,963       6,935       6,963  

Borchers, Inc. (2) (3) (4) (7) (10) (11)

   
Chemicals,
Plastics & Rubber
 
 
   
L + 4.75%
(1.00% Floor)
 
 
    1/13/2024       8,142       8,096       8,170  

Datapipe, Inc. (2) (3) (4) (11)

    Telecommunications      
L + 4.75%
(1.00% Floor)
 
 
    3/15/2019       9,725       9,650       9,753  

DBI Holding LLC (2) (3) (4)

    Business Services      
L + 5.25%
(1.00% Floor)
 
 
    8/1/2021       19,950       19,774       19,754  

Dent Wizard International
Corporation (2) (3) (4) (11)

    Automotive      
L + 4.75%
(1.00% Floor)
 
 
    4/7/2020       15,000       14,861       14,984  

Dimora Brands, Inc. (fka TK USA
Enterprises, Inc.) (2) (3) (4) (11)

   
Construction &
Building
 
 
   
L + 4.50%
(1.00% Floor)
 
 
    4/4/2023       19,800       19,539       19,743  

Diversitech Corporation (2) (4) (10)

    Capital Equipment       P + 3.50%       11/19/2021       14,766       14,589       14,766  

DTI Holdco, Inc. (2) (3) (4) (7)

   
High Tech
Industries
 
 
   
L + 5.25%
(1.00% Floor)
 
 
    9/30/2023       19,900       19,704       19,639  

EAG, Inc. (2) (3) (4) (11)

    Business Services      
L + 4.25%
(1.00% Floor)
 
 
    7/28/2018       8,440       8,430       8,469  

EIP Merger Sub, LLC
(Evolve IP) (2) (3) (4) (8) (11)

    Telecommunications      
L + 6.25%
(1.00% Floor)
 
 
    6/7/2021       22,894       22,280       22,539  

EIP Merger Sub, LLC
(Evolve IP) (2) (3) (4) (9) (11)

    Telecommunications      
L + 6.25%
(1.00% Floor)
 
 
    6/7/2021       1,500       1,458       1,475  

Empower Payments Acquisitions,
Inc. (2) (3) (7)

   

Media: Advertising,
Printing &
Publishing
 
 
 
   
L + 5.50%
(1.00% Floor)
 
 
    11/30/2023       17,456       17,115       17,411  

Jensen Hughes, Inc. (2) (3) (4) (10) (11)

    Utilities: Electric      
L + 5.00%
(1.00% Floor)
 
 
    12/4/2021       20,408       20,197       20,275  

Kestra Financial, Inc. (2) (3) (4)

   

Banking, Finance,
Insurance & Real
Estate
 
 
 
   
L + 5.25%
(1.00% Floor)
 
 
    6/24/2022       19,850       19,593       19,725  

MSHC, Inc. (2) (3) (4) (10)

   
Construction &
Building
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    7/19/2021       13,543       13,440       13,423  

PAI Holdco, Inc.
(Parts Authority) (2) (3) (4)

    Automotive      
L + 4.75%
(1.00% Floor)
 
 
    12/30/2022       9,925       9,864       9,925  

Paradigm Acquisition Corp. (2) (3) (4)

    Business Services      
L + 5.00%
(1.00% Floor)
 
 
    6/2/2022       11,970       11,874       11,970  

Pasternack Enterprises, Inc.
(Infinite RF) (2) (3) (4)

    Capital Equipment      
L + 5.00%
(1.00% Floor)
 
 
    5/27/2022       11,910       11,817       11,885  

PSI Services LLC (2) (3) (4) (7) (10)

    Business Services      
L + 5.00%
(1.00% Floor)
 
 
    1/19/2023       29,623       29,052       29,333  

Q Holding Company (2) (3) (4)

    Automotive      
L + 5.00%
(1.00% Floor)
 
 
    12/18/2021       13,929       13,798       13,958  

QW Holding Corporation
(Quala) (2) (3) (4) (7) (10)

   
Environmental
Industries
 
 
   
L + 6.75%
(1.00% Floor)
 
 
    8/31/2022       10,983       10,447       11,121  

Ramundsen Public Sector,
LLC (2) (3) (4)

   
Sovereign & Public
Finance
 
 
   
L + 4.25%
(1.00% Floor)
 
 
    2/1/2024       4,000       3,983       4,008  

RelaDyne Inc. (2) (3) (4) (10)

    Wholesale      
L + 5.25%
(1.00% Floor)
 
 
    7/22/2022       26,228       25,834       25,978  

Restaurant Technologies,
Inc. (2) (3) (4)

    Retail      
L + 4.75%
(1.00% Floor)
 
 
    11/23/2022       14,000       13,876       14,021  

Systems Maintenance Services
Holding, Inc. (2) (3) (4) (11)

   
High Tech
Industries
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    10/30/2023       24,439       24,266       24,561  

T2 Systems Canada, Inc. (2) (3) (4)

   
Transportation:
Consumer
 
 
   
L + 6.75%
(1.00% Floor)
 
 
    9/28/2022       2,693       2,630       2,696  

 

40


Table of Contents

Consolidated Schedule of Investments as of March 31, 2017 (unaudited)

 

Investments (1)

  Industry     Interest
Rate
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (5)
    Fair
Value (6)
 

First Lien Debt (99.42% of fair value) (continued)

           

T2 Systems, Inc. (2) (3) (4) (10)

   
Transportation:
Consumer
 
 
   
L + 6.75%
(1.00% Floor)
 
 
    9/28/2022     $ 15,262     $ 14,865     $ 15,282  

Teaching Strategies,
LLC (2) (3) (4) (10)

   

Media: Advertising,
Printing &
Publishing
 
 
 
   
L + 4.75%
(1.00% Floor)
 
 
    2/27/2023       18,100       17,915       17,980  

The Original Cakerie, Ltd.
(Canada) (2) (3) (4) (10) (11)

   
Beverage, Food &
Tobacco
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    7/20/2021       6,992       6,932       6,992  

The Original Cakerie, Co.
(Canada) (2) (3) (4) (11)

   
Beverage, Food &
Tobacco
 
 
   
L + 5.50%
(1.00% Floor)
 
 
    7/20/2021       3,612       3,585       3,612  

U.S. Acute Care Solutions,
LLC (2) (3) (4)

   
Healthcare &
Pharmaceuticals
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    5/15/2021       26,334       26,099       26,275  

U.S. Anesthesia Partners,
Inc. (2) (3) (4) (11)

   
Healthcare &
Pharmaceuticals
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    12/31/2019       10,348       10,257       10,366  

Vantage Specialty Chemicals,
Inc. (2) (3) (4) (11)

   
Chemicals, Plastics
& Rubber
 
 
   
L + 4.50%
(1.00% Floor)
 
 
    2/5/2021       17,865       17,748       17,775  

WIRB—Copernicus Group,
Inc. (2) (3) (4)

   
Healthcare &
Pharmaceuticals
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    8/12/2022       12,315       12,232       12,281  

Zest Holdings, LLC (2) (3) (4)

   
Durable Consumer
Goods
 
 
   
L + 4.75%
(1.00% Floor)
 
 
    8/16/2020       8,700       8,661       8,693  

Zywave, Inc. (2) (3) (4) (7) (10)

   
High Tech
Industries
 
 
   
L + 5.00%
(1.00% Floor)
 
 
    11/17/2022       17,456       17,279       17,494  
         

 

 

   

 

 

 

First Lien Debt Total

          $ 550,199     $ 555,452  
         

 

 

   

 

 

 

Second Lien Debt (0.58% of fair value)

           

Ramundsen Public Sector,
LLC (2) (3) (4) (7)

   
Sovereign & Public
Finance
 
 
   
L + 8.50%
(1.00% Floor)
 
 
    1/31/2025     $ 200     $ 198     $ 200  

Vantage Specialty Chemicals,
Inc. (2) (3) (4) (11)

   
Chemicals, Plastics
& Rubber
 
 
   
L + 8.75%
(1.00% Floor)
 
 
    2/5/2022       2,000       1,969       1,992  

Zywave, Inc. (2) (3) (4)

   
High Tech
Industries
 
 
   
L + 9.00%
(1.00% Floor)
 
 
    11/17/2023       1,050       1,035       1,050  
         

 

 

   

 

 

 

Second Lien Debt Total

          $ 3,202     $ 3,242  
         

 

 

   

 

 

 

Total Investments

          $ 553,401     $ 558,694  
         

 

 

   

 

 

 

 

(1) Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of March 31, 2017, the geographical composition of investments as a percentage of fair value was 1.90% in Canada and 98.10% in the United States.
(2) Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate (“P”)), which generally resets quarterly. For each such loan, Credit Fund has provided the interest rate in effect as of March 31, 2017. As of March 31, 2017, all of Credit Fund’s LIBOR loans were indexed to the 90-day LIBOR rate at 1.15%, except for those loans as indicated in Note 11 below, and the U.S. Prime Rate loan was indexed at 4.00%.
(3) Loan includes interest rate floor feature.
(4) Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund.
(5) Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(6) Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements.
(7) Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into the Credit Fund Facility. The lenders of the Credit Fund Facility have a first lien security interest in substantially all of the assets of Credit Fund. Accordingly, such assets are not available to creditors of Credit Fund Sub.
(8)

Credit Fund receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.25% on EIP Merger Sub, LLC (Evolve IP). Pursuant to the agreement among lenders in respect of this

 

41


Table of Contents
  loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments.
(9) In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: EIP Merger Sub, LLC (Evolve IP) (3.91%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.
(10) As of March 31, 2017, Credit Fund had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

 

First Lien Debt—unfunded delayed draw and revolving term
loans commitments

   Type      Unused
Fee
    Par/
Principal
Amount
     Fair Value  

Advanced Instruments, LLC

     Revolver        0.50   $ 1,333      $ (3

Borchers, Inc.

     Revolver        0.50     1,858        5  

Diversitech Corporation

     Delayed Draw        1.00     5,000        —    

Jensen Hughes, Inc.

     Delayed Draw        0.50     1,461        (8

Jensen Hughes, Inc.

     Revolver        0.50     2,000        (11

MSHC, Inc.

     Delayed Draw        1.50     1,399        (11

PSI Services LLC

     Revolver        0.50     377        (4

QW Holding Corporation (Quala)

     Delayed Draw        1.00     4,762        33  

QW Holding Corporation (Quala)

     Revolver        1.00     4,234        29  

RelaDyne Inc.

     Delayed Draw        0.50     135        (1

RelaDyne Inc.

     Revolver        0.50     2,433        (21

T2 Systems, Inc.

     Revolver        1.00     1,955        2  

Teaching Strategies, LLC

     Revolver        0.50     1,900        (11

The Original Cakerie, Ltd. (Canada)

     Revolver        0.50     1,665        —    

Zywave, Inc.

     Revolver        0.50     1,500        3  
       

 

 

    

 

 

 

Total unfunded commitments

        $ 32,012      $ 2  
       

 

 

    

 

 

 

 

(11) As of March 31, 2017, this LIBOR loan was indexed to the 30-day LIBOR rate at 0.98%.

 

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Table of Contents

Consolidated Schedule of Investments as of December 31, 2016

 

Investments (1)

 

Industry

  Interest
Rate (2)
    Maturity
Date
    Par/
Principal
Amount
    Amortized
Cost (5)
    Fair
Value (6)
 

First Lien Debt (99.31% of fair value)

           

AM Conservation Holding
Corporation (2) (3) (4)

  Energy: Electricity    
L + 4.75%
(1.00% Floor)
 
 
    10/31/2022     $ 30,000     $ 29,721     $ 29,925  

Datapipe, Inc. (2) (3) (4) (11)

  Telecommunications    
L + 4.75%
(1.00% Floor)
 
 
    3/15/2019       9,750       9,654       9,764  

Dimora Brands, Inc. (fka TK USA
Enterprises, Inc.) (2) (3) (4) (11)

  Construction & Building    
L + 4.50%
(1.00% Floor)
 
 
    4/4/2023       19,850       19,580       19,723  

Diversitech Corporation (2) (4) (10) (11)

  Capital Equipment     P + 3.50%       11/19/2021       14,803       14,617       14,803  

DTI Holdco, Inc. (2) (3) (4) (7)

  High Tech Industries    
L + 5.25%
(1.00% Floor)
 
 
    9/30/2023       19,950       19,751       19,651  

DYK Prime Acquisition LLC (2) (3) (4)

  Chemicals, Plastics & Rubber    
L + 4.75%
(1.00% Floor)
 
 
    4/1/2022       5,775       5,735       5,775  

EAG, Inc. (2) (3) (4) (11)

  Business Services    
L + 4.25%
(1.00% Floor)
 
 
    7/28/2018       8,713       8,686       8,720  

EIP Merger Sub, LLC (Evolve
IP) (2) (3) (4) (8)

  Telecommunications    
L + 6.25%
(1.00% Floor)
 
 
    6/7/2021       22,971       22,323       22,509  

EIP Merger Sub, LLC (Evolve
IP) (2) (3) (4) (9)

  Telecommunications    
L + 6.25%
(1.00% Floor)
 
 
    6/7/2021       1,500       1,455       1,468  

Empower Payments Acquisitions,
Inc. (2) (3) (7)

  Media: Advertising, Printing & Publishing    
L + 5.50%
(1.00% Floor)
 
 
    11/30/2023       17,500       17,154       17,279  

Generation Brands Holdings,
Inc. (2) (3) (4)

  Durable Consumer Goods    
L + 5.00%
(1.00% Floor)
 
 
    6/10/2022       19,900       19,712       20,099  

Jensen Hughes, Inc. (2) (3) (4) (10)

  Utilities: Electric    
L + 5.00%
(1.00% Floor)
 
 
    12/4/2021       20,409       20,188       20,327  

Kestra Financial, Inc. (2) (3) (4)

  Banking, Finance, Insurance & Real Estate    
L + 5.25%
(1.00% Floor)
 
 
    6/24/2022       19,900       19,632       19,814  

MSHC, Inc. (2) (3) (4) (10)

  Construction & Building    
L + 5.00%
(1.00% Floor)
 
 
    7/19/2021       13,177       13,062       13,003  

PAI Holdco, Inc. (Parts
Authority) (2) (3) (4)

  Automotive    
L + 4.75%
(1.00% Floor)
 
 
    12/30/2022       9,950