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EX-32.2 - EX-32.2 - PennantPark Floating Rate Capital Ltd.pflt-ex322_6.htm
EX-32.1 - EX-32.1 - PennantPark Floating Rate Capital Ltd.pflt-ex321_7.htm
EX-31.2 - EX-31.2 - PennantPark Floating Rate Capital Ltd.pflt-ex312_9.htm
EX-31.1 - EX-31.1 - PennantPark Floating Rate Capital Ltd.pflt-ex311_8.htm

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7 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2019

OR

 

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

FOR THE TRANSITION PERIOD FROM              TO            

COMMISSION FILE NUMBER: 814-00891 

 

PENNANTPARK FLOATING RATE CAPITAL LTD.

(Exact name of registrant as specified in its charter)

 

MARYLAND

 

27-3794690

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

590 Madison Avenue, 15th Floor

New York, N.Y.

 

10022

(Address of principal executive offices)

 

(Zip Code)

(212) 905-1000

(Registrant’s Telephone Number, Including Area Code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

PFLT

The Nasdaq Stock Market LLC

 

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 every Interactive Data File required to be submitted 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 such files).    Yes    No  

 

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

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  

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of February 5, 2020 was 38,772,074. 

 


PENNANTPARK FLOATING RATE CAPITAL LTD.

FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2019

TABLE OF CONTENTS

 

 

 

 

PART I. CONSOLIDATED FINANCIAL INFORMATION

  

 

 

 

Item 1. Consolidated Financial Statements

  

 

 

 

Consolidated Statements of Assets and Liabilities as of December 31, 2019 (unaudited) and September 30, 2019

  

4

 

 

Consolidated Statements of Operations for the three months ended December 31, 2019 and 2018 (unaudited)

  

5

 

 

Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2019 and 2018 (unaudited)

  

6

 

 

Consolidated Statements of Cash Flows for the three months ended December 31, 2019 and 2018 (unaudited)

  

7

 

 

Consolidated Schedules of Investments as of December 31, 2019 (unaudited) and September 30, 2019

  

8

 

 

Notes to Consolidated Financial Statements (unaudited)

  

16

 

 

Report of Independent Registered Public Accounting Firm

  

30

 

 

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

  

31

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  

42

 

 

Item 4. Controls and Procedures

  

43

 

 

PART II. OTHER INFORMATION

  

 

 

 

Item 1. Legal Proceedings

  

44

 

 

Item 1A. Risk Factors

  

44

 

 

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

  

44

 

 

Item 3. Defaults Upon Senior Securities

  

44

 

 

Item 4. Mine Safety Disclosures

  

45

 

 

Item 5. Other Information

  

45

 

 

Item 6. Exhibits

  

46

 

 

SIGNATURES

  

47


 

2


PART I—CONSOLIDATED FINANCIAL INFORMATION

We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where the context suggests otherwise, the terms “Company,” “we,” “our” or “us” refer to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; “Funding I” refers to PennantPark Floating Rate Funding I, LLC; “Taxable Subsidiary” refers to PFLT Investment Holdings, LLC; “PSSL” refers to PennantPark Senior Secured Loan Fund I LLC, an unconsolidated joint venture; “PennantPark Investment Advisers” or “Investment Adviser” refers to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “2023 Notes” refers to our 3.83% Series A notes due 2023; “1940 Act” refers to the Investment Company Act of 1940, as amended; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; “RIC” refers to a regulated investment company under the Code; “BDC” refers to a business development company under the 1940 Act; “MCG” refers to MCG Capital Corporation; and “Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended and restated with Truist Bank (formerly SunTrust Bank) and other lenders, or the Lenders; “Securitization Issuer” refers to PennantPark CLO I, Ltd.; “Securitization Issuers” refers to the Securitization Issuer and PennantPark CLO I, LLC; “Debt Securitization” refers to the $301.4 million term debt securitization completed by the Securitization Issuers; “2031 Asset-Backed Debt” refers to (i) the issuance of the Class A-1 Senior Secured Floating Rate Notes due 2031, the Class A-2 Senior Secured Fixed Rate Notes due 2031, the Class B-1 Senior Secured Floating Rate Notes due 2031, the Class B-2 Senior Secured Fixed Rate Notes due 2031, the Class C-1 Secured Deferrable Floating Rate Notes due 2031, the Class C-2 Notes Secured Deferrable Fixed Rate Notes due 2031, and the Class D Secured Deferrable Floating Notes due 2031 and (ii) the borrowing of the Class A‑1 Senior Secured Floating Rate Notes due 2031 by the Securitization Issuers in connection with the Debt Securitization; “Depositor” refers to PennantPark CLO I Depositor, LLC. References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and our business include investments we make through our subsidiaries.

 

 

3

 


Item 1.

Consolidated Financial Statements

 

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

 

 

 

December 31, 2019

 

 

September 30, 2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments (cost—$983,709,595 and $886,955,156, respectively)

 

$

988,154,489

 

 

$

889,113,264

 

Non-controlled, affiliated investments (cost—$24,922,178 and $23,645,693, respectively)

 

 

16,039,827

 

 

 

20,430,565

 

Controlled, affiliated investments (cost—$174,562,500 and $174,562,500, respectively)

 

 

171,921,598

 

 

 

172,163,080

 

Total of investments (cost—$1,183,194,273 and $1,085,172,349, respectively)

 

 

1,176,115,914

 

 

 

1,081,706,909

 

Cash and cash equivalents (cost—$56,261,842 and $63,367,237, respectively)

 

 

56,292,541

 

 

 

63,337,728

 

Interest receivable

 

 

3,144,695

 

 

 

3,892,292

 

Receivable for investments sold

 

 

58,425,962

 

 

 

2,997,546

 

Prepaid expenses and other assets

 

 

402,760

 

 

 

441,337

 

Total assets

 

 

1,294,381,872

 

 

 

1,152,375,812

 

Liabilities

 

 

 

 

 

 

 

 

Distributions payable

 

 

3,683,347

 

 

 

3,683,347

 

Payable for investments purchased

 

 

85,457,647

 

 

 

12,033,794

 

Credit Facility payable, at fair value (cost—$335,307,500 and $265,307,500, respectively) (See Notes 5 and 10)

 

 

334,040,510

 

 

 

263,988,583

 

2023 Notes payable, at fair value (par—$138,579,858) (See Notes 5 and 10)

 

 

133,826,569

 

 

 

135,240,084

 

2031 Asset-Backed Debt, net (par—$228,000,000) (See Notes 5 and 10)

 

 

224,393,947

 

 

 

224,321,845

 

Interest payable on debt

 

 

4,085,056

 

 

 

3,275,481

 

Base management fee payable (See Note 3)

 

 

2,830,159

 

 

 

2,728,019

 

Performance-based incentive fee payable (See Note 3)

 

 

2,315,834

 

 

 

2,532,205

 

Accrued other expenses

 

 

1,768,439

 

 

 

1,514,943

 

Total liabilities

 

 

792,401,508

 

 

 

649,318,301

 

Commitments and contingencies (See Note 11)

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

Common stock, 38,772,074 shares issued and outstanding Par value $0.001 per share and 100,000,000

   shares authorized

 

 

38,772

 

 

 

38,772

 

Paid-in capital in excess of par value

 

 

538,632,828

 

 

 

538,632,828

 

Distributable income

 

 

(36,691,236

)

 

 

(35,614,089

)

Total net assets

 

$

501,980,364

 

 

$

503,057,511

 

Total liabilities and net assets

 

$

1,294,381,872

 

 

$

1,152,375,812

 

Net asset value per share

 

$

12.95

 

 

$

12.97

 

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

4


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Investment income:

 

 

 

 

 

 

 

 

From non-controlled, non-affiliated investments:

 

 

 

 

 

 

 

 

Interest

 

$

18,909,894

 

 

$

18,169,998

 

Other income

 

 

773,103

 

 

 

621,189

 

From non-controlled, affiliated investments:

 

 

 

 

 

 

 

 

Interest

 

 

225,353

 

 

 

 

From controlled, affiliated investments:

 

 

 

 

 

 

 

 

Interest

 

 

3,155,324

 

 

 

2,818,045

 

Dividend

 

 

1,575,000

 

 

 

1,575,000

 

Total investment income

 

 

24,638,674

 

 

 

23,184,232

 

Expenses:

 

 

 

 

 

 

 

 

Base management fee (See Note 3)

 

 

2,830,159

 

 

 

2,498,766

 

Performance-based incentive fee (See Note 3)

 

 

2,315,834

 

 

 

(1,192,409

)

Interest and expenses on debt (See Note 10)

 

 

7,307,264

 

 

 

5,305,478

 

Administrative services expenses (See Note 3)

 

 

350,000

 

 

 

500,000

 

Other general and administrative expenses

 

 

616,077

 

 

 

616,075

 

Expenses before amendment costs, debt issuance costs and provision for taxes

 

 

13,419,334

 

 

 

7,727,910

 

Credit Facility amendment costs and debt issuance costs (See Notes 5 and 10)

 

 

 

 

 

4,512,279

 

Provision for taxes

 

 

100,000

 

 

 

 

Total expenses

 

 

13,519,334

 

 

 

12,240,189

 

Net investment income

 

 

11,119,340

 

 

 

10,944,043

 

Realized and unrealized loss on investments and debt:

 

 

 

 

 

 

 

 

Net realized gain on investments:

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

1,012,313

 

 

 

923,466

 

Net realized gain on investments

 

 

1,012,313

 

 

 

923,466

 

Net change in unrealized depreciation on:

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

2,379,358

 

 

 

(10,041,539

)

Controlled and non-controlled, affiliated investments

 

 

(5,899,705

)

 

 

(2,364,468

)

Debt depreciation (See Notes 5 and 10)

 

 

1,361,588

 

 

 

5,533,693

 

Net change in unrealized depreciation on investments and debt

 

 

(2,158,759

)

 

 

(6,872,314

)

Net realized and unrealized loss from investments and debt

 

 

(1,146,446

)

 

 

(5,948,848

)

Net increase in net assets resulting from operations

 

$

9,972,894

 

 

$

4,995,195

 

Net increase in net assets resulting from operations per common share (See Note 7)

 

$

0.26

 

 

$

0.13

 

Net investment income per common share

 

$

0.29

 

 

$

0.28

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

5


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Net increase in net assets resulting from operations:

 

 

 

 

 

 

 

 

Net investment income

 

$

11,119,340

 

 

$

10,944,043

 

Net realized gain on investments

 

 

1,012,313

 

 

 

923,466

 

Net change in unrealized depreciation on investments

 

 

(3,520,347

)

 

 

(12,406,007

)

Net change in unrealized depreciation on debt

 

 

1,361,588

 

 

 

5,533,693

 

Net increase in net assets resulting from operations

 

 

9,972,894

 

 

 

4,995,195

 

Distributions to stockholders

 

 

(11,050,041

)

 

 

(11,050,041

)

Net decrease in net assets

 

 

(1,077,147

)

 

 

(6,054,846

)

Net assets:

 

 

 

 

 

 

 

 

Beginning of period

 

 

503,057,511

 

 

 

535,841,568

 

End of period

 

$

501,980,364

 

 

$

529,786,722

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

6


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

9,972,894

 

 

$

4,995,195

 

Adjustments to reconcile net increase in net assets resulting from operations to net cash

   used in operating activities:

 

 

 

 

 

 

 

 

Net change in unrealized depreciation on investments

 

 

3,520,347

 

 

 

12,406,007

 

Net change in unrealized depreciation on debt

 

 

(1,361,588

)

 

 

(5,533,693

)

Net realized gain on investments

 

 

(1,012,313

)

 

 

(923,466

)

Net accretion of discount and amortization of premium

 

 

(486,937

)

 

 

(416,480

)

Purchases of investments

 

 

(239,443,417

)

 

 

(180,731,899

)

Payment-in-kind interest

 

 

(822,850

)

 

 

(90,696

)

Proceeds from dispositions of investments

 

 

143,743,301

 

 

 

190,294,479

 

Amortization of deferred financing costs

 

 

72,101

 

 

 

 

Decrease (increase) in interest receivable

 

 

747,597

 

 

 

(368,312

)

Increase in receivable for investments sold

 

 

(55,428,416

)

 

 

 

Decrease in prepaid expenses and other assets

 

 

38,577

 

 

 

140,442

 

Increase (decrease) in payable for investments purchased

 

 

73,423,853

 

 

 

(59,425,597

)

Increase (decrease) in interest payable on debt

 

 

809,575

 

 

 

(1,017,444

)

Increase in base management fee payable

 

 

102,140

 

 

 

79,137

 

Decrease in performance-based incentive fee payable

 

 

(216,371

)

 

 

(3,111,202

)

Increase in accrued other expenses

 

 

253,496

 

 

 

117,770

 

Net cash used in operating activities

 

 

(66,088,011

)

 

 

(43,585,759

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Distributions paid to stockholders

 

 

(11,050,041

)

 

 

(11,050,041

)

Borrowings under Credit Facility (See Notes 5 and 10)

 

 

86,000,000

 

 

 

104,500,000

 

Repayments under Credit Facility (See Notes 5 and 10)

 

 

(16,000,000

)

 

 

(87,320,020

)

Net cash provided by financing activities

 

 

58,949,959

 

 

 

6,129,939

 

Net decrease in cash and cash equivalents

 

 

(7,138,052

)

 

 

(37,455,820

)

Effect of exchange rate changes on cash

 

 

92,865

 

 

 

412,033

 

Cash and cash equivalents, beginning of period

 

 

63,337,728

 

 

 

72,224,183

 

Cash and cash equivalents, end of period

 

$

56,292,541

 

 

$

35,180,396

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

6,425,587

 

 

$

6,322,922

 

Taxes paid

 

$

37,086

 

 

$

 

Non-cash exchanges and conversions

 

$

 

 

$

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

DECEMBER 31, 2019

(Unaudited)

 

Issuer Name

 

Maturity

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

Investments in Non-Controlled, Non-Affiliated Portfolio Companies—196.9% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—182.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18 Freemont Street Acquisition, LLC

 

08/11/2025

 

Hotels, Restaurants and Leisure

 

 

10.04

%

 

1M L+800

 

 

 

15,000,000

 

 

$

14,709,949

 

 

$

15,075,000

 

Advantage Sales & Marketing

 

07/23/2021

 

Food and Staples Retailing

 

 

4.98

%

 

1M L+325

 

 

 

11,324,401

 

 

 

10,826,427

 

 

 

10,923,291

 

Altamira Technologies, LLC

 

07/24/2025

 

IT Services

 

 

7.93

%

 

3M L+600

 

 

 

6,459,375

 

 

 

6,366,284

 

 

 

6,459,375

 

Altamira Technologies, LLC (Revolver) (7), (9)

 

07/24/2025

 

IT Services

 

 

 

 

 

 

 

2,156,250

 

 

 

 

 

 

 

American Auto Auction Group, LLC

 

01/02/2024

 

Transportation: Consumer

 

 

6.60

%

 

3M L+475

 

 

 

7,446,285

 

 

 

7,366,113

 

 

 

7,371,822

 

American Insulated Glass, LLC

 

12/21/2023

 

Building Products

 

 

7.79

%

 

3M L+550

 

 

 

14,887,500

 

 

 

14,645,994

 

 

 

14,589,750

 

American Insulated Glass, LLC (7), (9)

 

12/21/2023

 

Building Products

 

 

 

 

 

 

 

649,351

 

 

 

 

 

 

(12,987

)

American Teleconferencing Services, Ltd.

 

12/08/2021

 

Telecommunications

 

 

8.40

%

 

3M L+650

 

 

 

9,664,269

 

 

 

9,590,682

 

 

 

6,958,274

 

API Holdings III Corp.

 

05/11/2026

 

Electronic Equipment, Instruments, and Components

 

 

6.05

%

 

 

1M L+425

 

 

 

5,970,000

 

 

 

5,940,568

 

 

 

5,940,150

 

BEI Precision Systems & Space Company, Inc.

 

04/28/2023

 

Aerospace and Defense

 

 

7.45

%

 

3M L+550

 

 

 

11,695,406

 

 

 

11,621,807

 

 

 

11,578,452

 

By Light Professional IT Services, LLC

 

05/16/2022

 

High Tech Industries

 

 

7.98

%

 

3M L+625

 

 

 

29,597,884

 

 

 

29,384,020

 

 

 

29,597,884

 

By Light Professional IT Services, LLC (Revolver) (7), (9)

 

05/16/2022

 

High Tech Industries

 

 

 

 

 

 

 

2,504,092

 

 

 

 

 

 

 

Cadence Aerospace, LLC

 

11/14/2023

 

Aerospace and Defense

 

 

8.43

%

 

3M L+650

 

 

 

2,860,808

 

 

 

2,842,366

 

 

 

2,857,375

 

Cano Health, LLC

 

12/23/2021

 

Healthcare and Pharmaceuticals

 

 

7.98

%

 

1M L+650

 

 

 

33,743,008

 

 

 

33,449,063

 

 

 

33,743,008

 

Cardenas Markets LLC

 

11/29/2023

 

Beverage, Food and Tobacco

 

 

7.45

%

 

1M L+575

 

 

 

3,825,025

 

 

 

3,829,551

 

 

 

3,672,024

 

Centauri Group Holdings, LLC

 

02/12/2024

 

Aerospace and Defense

 

 

7.20

%

 

3M L+525

 

 

 

3,273,579

 

 

 

3,267,972

 

 

 

3,257,212

 

CHA Holdings, Inc.

 

04/10/2025

 

Environmental Industries

 

 

6.46

%

 

3M L+450

 

 

 

7,347,589

 

 

 

7,321,580

 

 

 

7,310,851

 

CHA Holdings, Inc. (7), (9)

 

04/10/2025

 

Environmental Industries

 

 

 

 

 

 

 

53,571

 

 

 

 

 

 

(268

)

Challenger Performance Optimization, Inc. (Revolver) (7)

 

08/31/2023

 

Business Services

 

 

7.51

%

 

1M L+575

 

 

 

569,158

 

 

 

569,158

 

 

 

549,237

 

Challenger Performance Optimization, Inc. (Revolver) (7), (9)

 

08/31/2023

 

Business Services

 

 

 

 

 

 

 

142,289

 

 

 

 

 

 

(4,980

)

Confluent Health, LLC

 

06/24/2026

 

Health Providers and Services

 

 

6.80

%

 

1M L+500

 

 

 

3,980,000

 

 

 

3,940,819

 

 

 

3,960,100

 

Digital Room Holdings, Inc.

 

05/22/2026

 

Media: Advertising, Printing and Publishing

 

 

6.80

%

 

 

1M L+500

 

 

 

9,950,000

 

 

 

9,806,465

 

 

 

9,800,750

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

 

14,304,044

 

 

 

14,135,098

 

 

 

14,161,004

 

Douglas Products and Packaging Company LLC (Revolver) (7)

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

9.50

%

 

P+475

 

 

 

585,490

 

 

 

585,490

 

 

 

579,635

 

Douglas Products and Packaging Company LLC (Revolver) (7), (9)

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

3,805,686

 

 

 

 

 

 

(38,057

)

Douglas Sewer Intermediate, LLC

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

 

9,791,985

 

 

 

9,734,134

 

 

 

9,694,065

 

DRS Holdings III, Inc.

 

11/03/2025

 

Personal Products

 

 

7.61

%

 

1M L+575

 

 

 

5,000,000

 

 

 

4,950,412

 

 

 

4,951,000

 

DRS Holdings III, Inc. (Revolver) (7)

 

11/03/2025

 

Personal Products

 

 

7.55

%

 

1M L+575

 

 

 

36,149

 

 

 

36,149

 

 

 

35,794

 

DRS Holdings III, Inc. (Revolver) (7), (9)

 

11/03/2025

 

Personal Products

 

 

 

 

 

 

 

867,568

 

 

 

 

 

 

(8,503

)

East Valley Tourist Development Authority

 

09/30/2020

 

Hotel, Gaming and Leisure

 

 

10.06

%

 

3M L+800

 

 

 

18,540,775

 

 

 

18,437,131

 

 

 

18,355,367

 

ECM Industries, LLC

 

12/23/2025

 

Electronic Equipment, Instruments, and Components

 

 

6.29

%

 

 

1M L+450

 

 

 

5,101,476

 

 

 

5,050,601

 

 

 

5,050,461

 

ECM Industries, LLC (Revolver) (7)

 

12/23/2025

 

Electronic Equipment, Instruments, and Components

 

 

6.29

%

 

1M L+450

 

 

 

310,215

 

 

 

310,215

 

 

 

310,215

 

ECM Industries, LLC (Revolver) (7), (9)

 

12/23/2025

 

Electronic Equipment, Instruments, and Components

 

 

 

 

 

 

 

 

 

604,200

 

 

 

 

 

 

 

 

 

eCommission Financial Services, Inc. (10)

 

10/05/2023

 

Banking, Finance, Insurance & Real Estate

 

 

6.70

%

 

1M L+500

 

 

 

16,502,500

 

 

 

16,502,500

 

 

 

16,502,500

 

eCommission Financial Services, Inc. (Revolver) (7), (9), (10)

 

10/05/2023

 

Banking, Finance, Insurance & Real Estate

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

Education Networks of America, Inc.

 

05/06/2021

 

Telecommunications

 

 

9.41

%

 

1M L+750

 

 

 

10,308,317

 

 

 

10,308,317

 

 

 

10,205,234

 

Education Networks of America, Inc. (Revolver) (7), (9)

 

05/06/2021

 

Telecommunications

 

 

9.42

%

 

1M L+750

 

 

 

2,196,986

 

 

 

2,196,986

 

 

 

2,175,016

 

Efficient Collaborative Retail Marketing Company, LLC

 

06/15/2022

 

Media: Diversified and Production

 

 

8.69

%

 

3M L+675

 

 

 

7,189,139

 

 

 

7,161,466

 

 

 

7,117,247

 

FlexPrint, LLC

 

01/02/2024

 

Professional Services

 

 

8.41

%

 

3M L+649

 

 

 

4,281,014

 

 

 

4,213,816

 

 

 

4,216,798

 

FlexPrint, LLC (7), (9)

 

01/02/2024

 

Professional Services

 

 

 

 

 

 

 

3,772,226

 

 

 

 

 

 

(28,291

)

GCOM Software LLC

 

11/14/2022

 

High Tech Industries

 

 

8.12

%

 

1M L+625

 

 

 

14,196,100

 

 

 

13,921,708

 

 

 

14,196,100

 

GCOM Software LLC (Revolver) (7)

 

11/14/2022

 

High Tech Industries

 

 

9.00

%

 

P+425

 

 

 

1,520,000

 

 

 

1,520,000

 

 

 

1,520,000

 

GCOM Software LLC (Revolver) (7), (9)

 

11/14/2022

 

High Tech Industries

 

 

 

 

 

 

 

1,146,667

 

 

 

 

 

 

 

Good2Grow LLC

 

11/18/2024

 

Beverages

 

 

6.19

%

 

3M L+425

 

 

 

6,797,549

 

 

 

6,739,179

 

 

 

6,729,574

 

Good2Grow LLC (Revolver) (7), (9)

 

11/16/2023

 

Beverages

 

 

 

 

 

 

 

3,137,000

 

 

 

 

 

 

(31,370

)

GSM Holdings, Inc.

 

06/03/2024

 

Consumer Goods: Durable

 

 

6.51

%

 

3M L+450

 

 

 

19,276,633

 

 

 

19,171,231

 

 

 

19,083,867

 

GSM Holdings, Inc. (Revolver) (7)

 

06/03/2024

 

Consumer Goods: Durable

 

 

8.00

%

 

3M L+450

 

 

 

1,662,846

 

 

 

1,662,846

 

 

 

1,646,218

 

GSM Holdings, Inc. (Revolver) (7), (9)

 

06/03/2024

 

Consumer Goods: Durable

 

 

 

 

 

 

 

5,463,638

 

 

 

 

 

 

(54,636

)

Holdco Sands Intermediate, LLC

 

12/19/2025

 

Aerospace and Defense

 

 

7.76

%

 

3M L+600

 

 

 

21,704,762

 

 

 

21,379,190

 

 

 

21,379,190

 

HW Holdco, LLC

 

12/10/2024

 

Media

 

 

8.14

%

 

1M L+625

 

 

 

7,472,903

 

 

 

7,406,970

 

 

 

7,472,903

 

HW Holdco, LLC (Revolver) (7)

 

12/10/2024

 

Media

 

 

8.14

%

 

1M L+625

 

 

 

92,903

 

 

 

92,903

 

 

 

92,903

 

HW Holdco, LLC (Revolver) (7), (9)

 

12/10/2024

 

Media

 

 

 

 

 

 

 

1,358,710

 

 

 

 

 

 

 

IMIA Holdings, Inc. (Revolver) (7), (9)

 

10/28/2024

 

Aerospace and Defense

 

 

 

 

 

 

 

1,968,504

 

 

 

 

 

 

 

Impact Group, LLC

 

06/27/2023

 

Wholesale

 

 

8.50

%

 

1M L+650

 

 

 

12,773,147

 

 

 

12,711,909

 

 

 

12,581,550

 

Innova Medical Ophthalmics Inc. (5), (10)

 

04/13/2023

 

Capital Equipment

 

 

8.19

%

 

3M L+625

 

 

 

3,305,640

 

 

 

3,272,670

 

 

 

3,272,584

 

Innova Medical Ophthalmics Inc. (Revolver) (5), (7), (10)

 

04/13/2023

 

Capital Equipment

 

 

8.84

%

 

P+500

 

 

 

150,442

 

 

 

150,442

 

 

 

149,690

 

Innova Medical Ophthalmics Inc. (Revolver) (5), (7), (9), (10)

 

04/13/2023

 

Capital Equipment

 

 

 

 

 

 

 

380,531

 

 

 

 

 

 

(1,903

)

Integrative Nutrition, LLC

 

09/29/2023

 

Consumer Services

 

 

6.69

%

 

3M L+475

 

 

 

25,690,251

 

 

 

25,488,027

 

 

 

25,433,349

 

Integrative Nutrition, LLC (Revolver) (7), (9)

 

09/29/2023

 

Consumer Services

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

(50,000

)

Inventus Power, Inc.

 

04/30/2020

 

Consumer Goods: Durable

 

 

8.30

%

 

1M L+650

 

 

 

3,734,390

 

 

 

3,731,734

 

 

 

3,547,670

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

7.02

%

 

1M L+525

 

 

 

714,286

 

 

 

714,286

 

 

 

702,357

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7), (9)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

714,286

 

 

 

 

 

 

(11,928

)

Kentucky Downs, LLC

 

03/07/2025

 

Hotels, Restaurants and Leisure

 

 

9.94

%

 

1M L+800

 

 

 

5,429,692

 

 

 

5,329,756

 

 

 

5,429,692

 

Kentucky Downs, LLC (7), (9)

 

03/07/2025

 

Hotels, Restaurants and Leisure

 

 

 

 

 

 

 

1,344,828

 

 

 

 

 

 

 

KHC Holdings, Inc.

 

10/31/2022

 

Wholesale

 

 

7.94

%

 

3M L+600

 

 

 

6,662,994

 

 

 

6,607,314

 

 

 

6,662,994

 

KHC Holdings, Inc. (Revolver) (7)

 

10/30/2020

 

Wholesale

 

 

5.97

%

 

1M L+425

 

 

 

572,581

 

 

 

572,581

 

 

 

572,581

 

KHC Holdings, Inc. (Revolver) (7), (9)

 

10/30/2020

 

Wholesale

 

 

 

 

 

 

 

637,097

 

 

 

 

 

 

 

Lago Resort & Casino, LLC

 

03/07/2022

 

Hotel, Gaming and Leisure

 

 

11.44

%

 

3M L+950

 

 

 

9,290,500

 

 

 

9,207,521

 

 

 

9,151,143

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

Capital Equipment

 

 

7.44

%

 

1M L+550

 

 

 

8,336,111

 

 

 

8,291,649

 

 

 

8,372,790

 

LAV Gear Holdings, Inc. (Revolver) (7)

 

10/31/2024

 

Capital Equipment

 

 

7.45

%

 

1M L+550

 

 

 

507,937

 

 

 

507,937

 

 

 

510,171

 

LAV Gear Holdings, Inc. (Revolver) (7), (9)

 

10/31/2024

 

Capital Equipment

 

 

 

 

 

 

 

 

1,079,365

 

 

 

 

 

 

4,747

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

8


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

DECEMBER 31, 2019

(Unaudited)

 

Issuer Name

 

Maturity

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

Lash Opco, LLC

 

12/12/2024

 

Personal Products

 

 

9.25

%

 

P+450

 

 

 

9,060,240

 

 

$

8,790,344

 

 

$

8,788,432

 

Lash Opco, LLC (Revolver) (7)

 

12/12/2024

 

Personal Products

 

 

9.25

%

 

P+450

 

 

 

1,094,901

 

 

 

1,094,901

 

 

 

1,094,901

 

Lash Opco, LLC (Revolver) (7), (9)

 

12/12/2024

 

Personal Products

 

 

 

 

 

 

 

 

648,282

 

 

 

 

 

 

 

LifeCare Holdings LLC (7)

 

11/30/2021

 

Healthcare and Pharmaceuticals

 

 

0.00

%

(6)

 

 

 

 

4,736,107

 

 

 

4,599,788

 

 

 

236,805

 

Lombart Brothers, Inc.

 

04/13/2023

 

Capital Equipment

 

 

8.19

%

 

3M L+625

 

 

 

13,783,976

 

 

 

13,635,354

 

 

 

13,646,136

 

Lombart Brothers, Inc. (Revolver) (7)

 

04/13/2023

 

Capital Equipment

 

 

9.75

%

 

P+500

 

 

 

510,151

 

 

 

510,151

 

 

 

507,600

 

Lombart Brothers, Inc. (Revolver) (7), (9)

 

04/13/2023

 

Capital Equipment

 

 

 

 

 

 

 

728,787

 

 

 

 

 

 

(3,644

)

Long Island Vision Management, LLC

 

09/11/2023

 

Healthcare and Pharmaceuticals

 

 

6.71

%

 

3M L+475

 

 

 

8,986,333

 

 

 

8,937,856

 

 

 

8,936,009

 

Long Island Vision Management, LLC (7), (9)

 

09/11/2023

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

930,906

 

 

 

 

 

 

(5,213

)

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

Retail

 

 

7.74

%

 

1M L+600

 

 

 

13,593,750

 

 

 

13,504,921

 

 

 

12,511,959

 

Manna Pro Products, LLC

 

12/08/2023

 

Consumer Goods: Non-Durable

 

 

7.80

%

 

1M L+600

 

 

 

8,368,750

 

 

 

8,309,166

 

 

 

8,133,588

 

Marketplace Events LLC

 

01/27/2023

 

Media: Diversified and Production

 

 

7.19

%

 

3M L+525

 

 

 

5,298,467

 

 

 

5,231,575

 

 

 

5,245,483

 

Marketplace Events LLC (11)

 

01/27/2023

 

Media: Diversified and Production

 

 

7.31

%

 

P+275

 

C

$

16,256,630

 

 

 

11,402,136

 

 

 

12,473,759

 

Marketplace Events LLC (Revolver) (7), (9)

 

01/27/2023

 

Media: Diversified and Production

 

 

 

 

 

 

 

1,703,163

 

 

 

 

 

 

 

MeritDirect, LLC

 

05/23/2024

 

Media

 

 

7.44

%

 

3M L+550

 

 

 

39,082,675

 

 

 

38,547,549

 

 

 

38,691,848

 

MeritDirect, LLC (Revolver) (7), (9)

 

05/23/2024

 

Media

 

 

 

 

 

 

 

 

4,481,655

 

 

 

 

 

 

(44,816

)

Mission Critical Electronics, Inc. (7)

 

09/28/2021

 

Capital Equipment

 

 

6.70

%

 

1M L+500

 

 

 

618,375

 

 

 

612,444

 

 

 

617,508

 

Mission Critical Electronics, Inc. (Revolver) (7)

 

09/28/2021

 

Capital Equipment

 

 

6.70

%

 

1M L+500

 

 

 

176,678

 

 

 

176,678

 

 

 

176,431

 

Mission Critical Electronics, Inc. (Revolver) (7), (9)

 

09/28/2021

 

Capital Equipment

 

 

 

 

 

 

 

1,148,410

 

 

 

 

 

 

(1,608

)

Montreign Operating Company, LLC

 

01/24/2023

 

Hotel, Gaming and Leisure

 

 

10.16

%

 

3M L+825

 

 

 

27,120,836

 

 

 

27,309,681

 

 

 

23,307,104

 

Nuvei Technologies Corp. (5), (10)

 

09/28/2025

 

Diversified Financial Services

 

 

6.80

%

 

1M L+500

 

 

 

6,269,637

 

 

 

6,178,434

 

 

 

6,300,986

 

Olde Thompson, LLC

 

05/14/2024

 

Beverage, Food and Tobacco

 

 

6.05

%

 

1M L+425

 

 

 

1,513,571

 

 

 

1,498,436

 

 

 

1,513,571

 

Olde Thompson, LLC - Revolver (7), (9)

 

05/14/2024

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

2,642,857

 

 

 

 

 

 

 

Output Services Group, Inc.

 

03/27/2024

 

Business Services

 

 

6.38

%

 

1M L+450

 

 

 

4,501,465

 

 

 

3,896,309

 

 

 

4,276,392

 

Output Services Group, Inc. (7), (9)

 

03/27/2024

 

Business Services

 

 

 

 

 

 

 

74,527

 

 

 

 

 

 

(3,354

)

Ox Two, LLC

 

02/27/2023

 

Construction and Building

 

 

8.05

%

 

1M L+625

 

 

 

12,716,974

 

 

 

12,649,154

 

 

 

12,716,974

 

Ox Two, LLC (Revolver) (7)

 

02/27/2023

 

Construction and Building

 

 

8.05

%

 

1M L+625

 

 

 

230,666

 

 

 

230,666

 

 

 

230,666

 

Ox Two, LLC (Revolver) (7), (9)

 

02/27/2023

 

Construction and Building

 

 

 

 

 

 

 

324,889

 

 

 

 

 

 

 

Peninsula Pacific Entertainment LLC

 

11/13/2024

 

Hotel, Gaming and Leisure

 

 

9.19

%

 

1M L+725

 

 

 

13,275,810

 

 

 

13,226,830

 

 

 

13,209,431

 

Plant Health Intermediate, Inc.

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

 

2,108,380

 

 

 

2,083,705

 

 

 

2,087,296

 

PlayPower, Inc.

 

05/08/2026

 

Leisure Products

 

 

7.46

%

 

1M L+550

 

 

 

5,572,000

 

 

 

5,518,678

 

 

 

5,502,350

 

PRA Events, Inc.

 

08/08/2022

 

Business Services

 

 

8.95

%

 

1M L+700

 

 

 

2,572,032

 

 

 

2,533,353

 

 

 

2,572,032

 

Questex, LLC

 

09/09/2024

 

Media: Diversified and Production

 

 

6.89

%

 

3M L+500

 

 

 

7,406,250

 

 

 

7,284,808

 

 

 

7,332,188

 

Questex, LLC (Revolver) (7)

 

09/09/2024

 

Media: Diversified and Production

 

 

6.91

%

 

3M L+500

 

 

 

319,149

 

 

 

319,149

 

 

 

315,957

 

Questex, LLC (Revolver) (7), (9)

 

09/09/2024

 

Media: Diversified and Production

 

 

 

 

 

 

 

877,660

 

 

 

 

 

 

(8,777

)

Research Horizons, LLC

 

06/28/2022

 

Media: Advertising, Printing and Publishing

 

 

7.95

%

 

 

3M L+625

 

 

 

7,170,861

 

 

 

 

7,103,425

 

 

 

6,955,736

 

Research Now Group, Inc. and Survey Sampling

 

12/20/2024

 

Business Services

 

 

7.41

%

 

3M L+550

 

 

 

30,451,426

 

 

 

29,507,638

 

 

 

30,405,749

 

International LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverpoint Medical, LLC

 

06/20/2025

 

Healthcare Equipment and Supplies

 

 

6.97

%

 

3M L+500

 

 

 

4,975,000

 

 

 

4,928,165

 

 

 

4,938,683

 

Riverpoint Medical, LLC (Revolver) (7), (9)

 

06/20/2025

 

Healthcare Equipment and Supplies

 

 

 

 

 

 

 

909,091

 

 

 

 

 

 

(6,636

)

Sales Benchmark Index LLC

 

01/3/2025

 

Professional Services

 

 

7.76

%

 

3M L+600

 

 

 

14,004,065

 

 

 

13,723,984

 

 

 

13,723,984

 

Sales Benchmark Index LLC (7), (9)

 

06/3/2021

 

Professional Services

 

 

 

 

 

 

 

3,231,707

 

 

 

 

 

 

 

Sales Benchmark Index LLC (Revolver) (7), (9)

 

01/3/2025

 

Professional Services

 

 

 

 

 

 

 

1,292,683

 

 

 

 

 

 

 

Salient CRGT Inc.

 

02/28/2022

 

High Tech Industries

 

 

8.29

%

 

1M L+600

 

 

 

1,759,183

 

 

 

1,741,579

 

 

 

1,653,632

 

Sargent & Greenleaf Inc.

 

12/20/2024

 

Electronic Equipment, Instruments, and Components

 

 

 

7.30

 

%

 

 

1M L+550

 

 

 

9,772,237

 

 

 

9,626,210

 

 

 

9,625,654

 

Sargent & Greenleaf Inc. (Revolver) (7), (9)

 

12/20/2024

 

Electronic Equipment, Instruments, and Components

 

 

 

 

 

 

 

 

 

1,056,367

 

 

 

 

 

 

 

 

 

Schlesinger Global, Inc.

 

07/14/2025

 

Professional Services

 

 

6.91

%

 

1M L+500

 

 

 

17,313,723

 

 

 

17,119,560

 

 

 

17,313,723

 

Schlesinger Global, Inc. (Revolver) (7), (9)

 

07/14/2025

 

Professional Services

 

 

 

 

 

 

 

1,870,302

 

 

 

 

 

 

 

Signature Systems Holding Company

 

05/03/2024

 

Commercial Services & Supplies

 

 

8.44

%

 

1M L+650

 

 

 

12,837,500

 

 

 

12,661,474

 

 

 

12,837,500

 

Signature Systems Holding Company (Revolver) (7)

 

05/03/2024

 

Commercial Services & Supplies

 

 

10.25

%

 

P+550

 

 

 

768,817

 

 

 

768,817

 

 

 

768,817

 

Signature Systems Holding Company (Revolver) (7), (9)

 

05/03/2024

 

Commercial Services & Supplies

 

 

 

 

 

 

 

978,495

 

 

 

 

 

 

 

Smile Brands Inc. (7)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

6.60

%

 

1M L+450

 

 

 

2,136,667

 

 

 

2,136,667

 

 

 

2,115,300

 

Smile Brands Inc. (7), (9)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

2,362,585

 

 

 

 

 

 

(23,626

)

Smile Brands Inc. (Revolver) (7)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

8.25

%

 

P+350

 

 

 

215,500

 

 

 

215,500

 

 

 

211,578

 

Smile Brands Inc. (Revolver) (7), (9)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

1,400,750

 

 

 

 

 

 

(25,494

)

Snak Club, LLC (Revolver) (7)

 

07/19/2021

 

Beverage, Food and Tobacco

 

 

7.69

%

 

3M L+600

 

 

 

50,000

 

 

 

50,000

 

 

 

48,000

 

Snak Club, LLC (Revolver) (7), (9)

 

07/19/2021

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

445,136

 

 

 

 

 

 

(17,805

)

Solutionreach, Inc.

 

01/17/2024

 

Healthcare Technology

 

 

7.55

%

 

3M L+575

 

 

 

6,664,125

 

 

 

6,552,013

 

 

 

6,628,805

 

Solutionreach, Inc. (Revolver) (7), (9)

 

01/17/2024

 

Healthcare Technology

 

 

 

 

 

 

 

1,665,000

 

 

 

 

 

 

(8,824

)

Spectacle Gary Holdings, LLC

 

12/20/2025

 

Hotels, Restaurants and Leisure

 

 

11.00

%

 

1M L+900

 

 

 

13,427,027

 

 

 

13,024,619

 

 

 

13,561,297

 

Spectacle Gary Holdings, LLC (7), (9)

 

12/20/2025

 

Hotels, Restaurants and Leisure

 

 

 

 

 

 

972,973

 

 

 

 

 

 

9,730

 

STV Group Incorporated

 

12/11/2026

 

Construction & Engineering

 

 

7.01

%

 

1M L+525

 

 

 

21,269,646

 

 

 

21,056,949

 

 

 

21,056,949

 

TeleGuam Holdings, LLC

 

11/20/2025

 

Telecommunications

 

 

6.30

%

 

1M L+450

 

 

 

6,679,822

 

 

 

6,610,971

 

 

 

6,646,423

 

Teneo Holdings LLC

 

07/18/2025

 

Diversified Financial Services

 

 

6.99

%

 

1M L+525

 

 

 

9,975,000

 

 

 

9,593,287

 

 

 

9,451,313

 

Tensar Corporation

 

07/09/2021

 

Construction and Building

 

 

6.69

%

 

3M L+475

 

 

 

22,620,696

 

 

 

22,535,398

 

 

 

21,433,110

 

The Infosoft Group, LLC

 

09/16/2024

 

Media: Broadcasting and Subscription

 

 

7.34

%

 

3M L+525

 

 

 

18,550,054

 

 

 

18,402,291

 

 

 

18,364,553

 

The Original Cakerie, Co. (5), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

6.84

%

 

2M L+500

 

 

 

7,605,623

 

 

 

7,536,794

 

 

 

7,567,595

 

The Original Cakerie Ltd. (5), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

6.34

%

 

2M L+450

 

 

 

5,417,507

 

 

 

5,386,521

 

 

 

5,390,418

 

The Original Cakerie Ltd. (Revolver) (5), (7), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

6.30

%

 

3M L+450

 

 

 

397,175

 

 

 

397,175

 

 

 

395,190

 

The Original Cakerie Ltd. (Revolver) (5), (7), (9), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

 

 

 

 

 

1,021,308

 

 

 

 

 

 

(5,107

)

TPC Canada Parent, Inc. and TPC US Parent, LLC (5), (10)

 

11/24/2025

 

Food Products

 

 

7.04

%

 

3M L+525

 

 

 

5,000,000

 

 

 

4,950,401

 

 

 

4,973,500

 

Triad Manufacturing, Inc.

 

12/28/2020

 

Capital Equipment

 

 

13.05

%

 

1M L+1,125

 

 

 

7,314,323

 

 

 

7,278,869

 

 

 

7,314,323

 

TVC Enterprises, LLC

 

01/18/2024

 

Professional Services

 

 

7.20

%

 

1M L+550

 

 

 

5,913,870

 

 

 

5,814,454

 

 

 

5,913,870

 

TVC Enterprises, LLC (7), (9)

 

01/18/2024

 

Professional Services

 

 

 

 

 

 

 

1,955,719

 

 

 

 

 

 

 

TVC Enterprises, LLC (Revolver) (7)

 

01/18/2024

 

Professional Services

 

 

8.01

%

 

1M L+550

 

 

 

733,273

 

 

 

733,273

 

 

 

733,273

 

TVC Enterprises, LLC (Revolver) (7), (9)

 

01/18/2024

 

Professional Services

 

 

 

 

 

 

 

570,539

 

 

 

 

 

 

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

9


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

DECEMBER 31, 2019

(Unaudited)

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

TWS Acquisition Corporation

 

06/16/2025

 

 

Diversified Consumer Services

 

 

7.99

%

 

1M L+625

 

 

 

7,075,000

 

 

$

6,910,632

 

 

$

7,075,000

 

TWS Acquisition Corporation (Revolver) (7)

 

06/16/2025

 

 

Diversified Consumer Services

 

 

7.99

%

 

1M L+625

 

 

 

808,571

 

 

 

808,571

 

 

 

808,571

 

TWS Acquisition Corporation (Revolver) (7), (9)

 

06/16/2025

 

 

Diversified Consumer Services

 

 

 

 

 

 

 

1,819,286

 

 

 

 

 

 

 

Tyto Athene, LLC

 

08/27/2024

 

 

Aerospace and Defense

 

 

7.55

%

 

1M L+575

 

 

 

17,954,637

 

 

 

17,725,805

 

 

 

17,306,475

 

Tyto Athene, LLC (Revolver) (7)

 

08/27/2024

 

 

Aerospace and Defense

 

 

7.55

%

 

1M L+575

 

 

 

4,011,364

 

 

 

4,011,364

 

 

 

3,866,553

 

Tyto Athene, LLC (Revolver) (7), (9)

 

08/27/2024

 

 

Aerospace and Defense

 

 

 

 

 

 

 

2,806,818

 

 

 

 

 

 

(101,326

)

UBEO, LLC

 

04/03/2024

 

 

Capital Equipment

 

 

6.76

%

 

3M L+450

 

 

 

14,154,326

 

 

 

14,062,790

 

 

 

14,012,783

 

UBEO, LLC (Revolver) (7), (9)

 

04/03/2024

 

 

Capital Equipment

 

 

 

 

 

 

 

2,933,333

 

 

 

 

 

 

(38,661

)

UniTek Global Services, Inc.

 

08/20/2024

 

 

Telecommunications

 

 

7.29

%

 

3M L+550

 

 

 

10,395,361

 

 

 

10,217,115

 

 

 

9,875,593

 

Urology Management Associates, LLC

 

08/30/2024

 

 

Healthcare Providers and Services

 

 

6.91

%

 

3M L+500

 

 

 

5,000,000

 

 

 

4,913,865

 

 

 

5,000,000

 

US Med Acquisition, Inc. (7)

 

08/13/2021

 

 

Healthcare and Pharmaceuticals

 

 

10.44

%

 

1M L+850

 

 

 

2,988,281

 

 

 

2,988,281

 

 

 

2,988,281

 

Vision Purchaser Corporation

 

06/10/2025

 

 

Media

 

 

8.05

%

 

1M L+625

 

 

 

14,467,175

 

 

 

14,182,587

 

 

 

14,177,831

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

 

Aerospace and Defense

 

 

9.28

%

 

1M L+750

 

 

 

4,322,681

 

 

 

4,259,179

 

 

 

4,322,681

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

925,199,275

 

 

 

914,871,029

 

Second Lien Secured Debt—5.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Borrower, LLC (7)

 

04/25/2025

 

 

High Tech Industries

 

 

10.68

%

 

3M L+875

 

 

 

1,655,172

 

 

 

1,629,011

 

 

 

1,638,621

 

DBI Holdings, LLC, Term Loan B

 

02/01/2026

 

 

Business Services

 

 

8.00

%

 

 

 

 

 

11,157,124

 

 

 

11,157,124

 

 

 

11,101,338

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holdings, LLC, Term Loan C (7)

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

 

 

 

 

22,312

 

 

 

22,312

 

 

 

22,312

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DecoPac, Inc.

 

03/31/2025

 

 

Beverage, Food and Tobacco

 

 

10.19

%

 

3M L+825

 

 

 

9,738,580

 

 

 

9,644,869

 

 

 

9,738,580

 

MailSouth, Inc.

 

10/23/2024

 

 

Media: Advertising, Printing and Publishing

 

 

12.00

%

 

 

12M L+925

 

 

 

2,871,025

 

 

 

2,823,634

 

 

 

2,784,894

 

PT Network Intermediate Holdings, LLC (7)

 

11/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

12.00

%

 

3M L+1,000

 

 

 

1,923,030

 

 

 

1,905,664

 

 

 

1,913,414

 

 

 

 

 

 

 

 

 

 

(PIK 12.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,182,614

 

 

 

27,199,159

 

Preferred Equity— 1.9% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,458

 

 

 

21,870

 

 

 

465

 

(PT Network, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Holdings Limited (5), (7), (10)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

88,000

 

 

 

10,173

 

 

 

10,173

 

Condor Top Holdco Limited (5), (7), (10)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

88,000

 

 

 

77,827

 

 

 

77,827

 

DBI Holdings, LLC, Series A-1 (8)

 

 

 

 

Business Services

 

 

13.00

%

 

 

 

 

 

7,041

 

 

 

7,040,844

 

 

 

5,847,514

 

MeritDirect Holdings, LP (7), (8)

 

 

 

 

Media

 

 

 

 

 

 

 

 

960

 

 

 

960,000

 

 

 

1,032,476

 

NXOF Holdings, Inc. (NextiraOne Federal, LLC) (7)

 

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

490

 

 

 

490,000

 

 

 

348,112

 

PT Network Intermediate Holdings, LLC (7), (8)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

11.94

%

 

3M L+1,000

 

 

 

33

 

 

 

429,000

 

 

 

452,546

 

Signature CR Intermediate Holdco, Inc. (7)

 

 

 

 

Commercial Services & Supplies

 

 

12.00

%

 

 

 

 

 

1,167

 

 

 

1,166,993

 

 

 

1,169,035

 

TPC Holding Company, LP (5), (7), (10)

 

 

 

 

Food Products

 

 

 

 

 

 

 

 

409

 

 

 

409,011

 

 

 

411,056

 

UniTek Global Services, Inc. -

 

 

 

 

Telecommunications

 

 

20.00

%

 

 

 

 

 

343,861

 

 

 

343,861

 

 

 

353,670

 

Super Senior Preferred Equity (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UniTek Global Services, Inc. - Senior Preferred Equity (7)

 

 

 

 

Telecommunications

 

 

18.00

%

 

 

 

 

 

448,851

 

 

 

448,851

 

 

 

 

UniTek Global Services, Inc. (7)

 

 

 

 

Telecommunications

 

 

13.50

%

 

 

 

 

 

1,047,317

 

 

 

670,283

 

 

 

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,068,713

 

 

 

9,702,874

 

Common Equity/Warrants— 7.2% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affinion Group Holdings, Inc. (Warrants)(7)

 

 

 

 

Consumer Goods: Durable

 

 

 

 

 

 

 

 

8,893

 

 

 

244,998

 

 

 

66,213

 

AG Investco LP (7), (8)

 

 

 

 

Software

 

 

 

 

 

 

 

 

714,652

 

 

 

714,652

 

 

 

714,652

 

AG Investco LP (7), (8), (9)

 

 

 

 

Software

 

 

 

 

 

 

 

 

285,348

 

 

 

 

 

 

 

Altamira Intermediate Company II, Inc. (7)

 

 

 

 

IT Services

 

 

 

 

 

 

 

 

1,437,500

 

 

 

1,437,500

 

 

 

1,535,285

 

By Light Investco LP (7), (8)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

21,908

 

 

 

2,190,771

 

 

 

9,282,760

 

By Light Investco LP (7), (8),  (9)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

5,592

 

 

 

 

 

 

 

CI (Allied) Investment Holdings, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

120,962

 

 

 

1,243,217

 

 

 

1,607,180

 

(Allied America, Inc.) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

13,333

 

 

 

200,000

 

 

 

 

(PT Network, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (Summit) Investment Holdings, LLC

 

 

 

 

Construction and Building

 

 

 

 

 

 

 

 

54,907

 

 

 

581,995

 

 

 

714,198

 

(SFP Holding, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holdings, LLC, Series B (8)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

1,489,508

 

 

 

330,791

 

 

 

 

DecoPac Holdings Inc. (7)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,633

 

 

 

1,632,744

 

 

 

3,262,794

 

ECM Investors, LLC (7), (8)

 

 

 

 

Electronic Equipment, Instruments, and Components

 

 

 

 

 

 

 

 

240,636

 

 

 

240,636

 

 

 

240,636

 

eCommission Holding Corporation (7), (10)

 

 

 

 

 

Banking, Finance, Insurance & Real Estate

 

 

 

 

 

 

 

 

20

 

 

 

251,156

 

 

 

405,767

 

Faraday Holdings, LLC (7)

 

 

 

 

Construction and Building

 

 

 

 

 

 

 

 

1,141

 

 

 

58,044

 

 

 

312,388

 

Gauge InfosoftCoInvest, LLC

 

 

 

 

Media: Broadcasting and Subscription

 

 

 

 

 

 

 

 

500

 

 

 

143,663

 

 

 

608,738

 

(The Infosoft Group, LLC) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gauge Lash Coinvest LLC (7)

 

 

 

 

 

Personal Products

 

 

 

 

 

 

 

 

 

 

1,089,489

 

 

 

1,089,489

 

 

 

1,089,489

 

Gauge Schlesinger Coinvest LLC (7)

 

 

 

 

 

Professional Services

 

 

 

 

 

 

 

 

403

 

 

 

403,005

 

 

 

557,727

 

Gauge TVC Coinvest, LLC (TVC Enterprises, LLC) (7)

 

 

 

 

 

Professional Services

 

 

 

 

 

 

 

 

391,144

 

 

 

391,144

 

 

 

385,691

 

GCOM InvestCo LP (7), (8)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

1,549,209

 

 

 

1,423,211

 

 

 

2,741,340

 

GCOM InvestCo LP (7), (8), (9)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

450,791

 

 

 

 

 

 

 

Go Dawgs Capital III, LP

 

 

 

 

Building Products

 

 

 

 

 

 

 

 

324,675

 

 

 

324,675

 

 

 

337,662

 

(American Insulated Glass, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IIN Group Holdings, LLC

 

 

 

 

Consumer Services

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000,000

 

 

 

941,558

 

(Integrative Nutrition, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITC Rumba, LLC (Cano Health, LLC) (7), (8)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

25,006

 

 

 

543,578

 

 

 

816,563

 

ITC Rumba, LLC (Cano Health, LLC) (7), (8), (9)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,352

 

 

 

 

 

 

 

JWC/UMA Holdings, L.P. (7)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000,000

 

 

 

1,401,387

 

JWC-WE Holdings, L.P.

 

 

 

 

Wholesale

 

 

 

 

 

 

 

 

1,381,741

 

 

 

1,381,741

 

 

 

3,782,562

 

(Walker Edison Furniture Company LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

10


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

DECEMBER 31, 2019

(Unaudited)

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

Kentucky Racing Holdco, LLC (Warrants) (7), (8)

 

 

 

 

 

Hotels, Restaurants and Leisure

 

 

 

 

 

 

 

 

 

 

87,345

 

 

$

 

 

$

194,143

 

MeritDirect Holdings, LP (7), (8)

 

 

 

 

Media

 

 

 

 

 

 

 

 

960

 

 

 

 

 

 

245,108

 

NXOF Holdings, Inc. (NextiraOne Federal, LLC) (7)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

10,000

 

 

 

10,000

 

 

 

 

PT Network Intermediate Holdings, LLC (7), (8)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

 

 

25

 

 

 

286,000

 

 

 

741,851

 

SBI Holdings Investments LLC (Sales Benchmark Index LLC) (7), (8)

 

 

 

 

Professional Services

 

 

 

 

 

 

 

 

64,634

 

 

 

646,341

 

 

 

646,341

 

Signature CR Intermediate Holdco, Inc. (7)

 

 

 

 

Commercial Services & Supplies

 

 

 

 

 

 

 

 

61

 

 

 

61,421

 

 

 

 

SSC Dominion Holdings, LLC

 

 

 

 

Capital Equipment

 

 

 

 

 

 

 

 

500

 

 

 

500,000

 

 

 

540,000

 

Class A (US Dominion, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SSC Dominion Holdings, LLC

 

 

 

 

Capital Equipment

 

 

 

 

 

 

 

 

500

 

 

 

 

 

 

925,795

 

Class B (US Dominion, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TPC Broadband Investors, LP (7), (8)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

763,837

 

 

 

763,837

 

 

 

1,631,544

 

TPC Broadband Investors, LP (7), (8), (9)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

236,163

 

 

 

 

 

 

 

TPC Holding Company, LP (5), (7), (10)

 

 

 

 

Food Products

 

 

 

 

 

 

 

 

21,527

 

 

 

21,527

 

 

 

12,055

 

UniTek Global Services, Inc. (7)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

213,739

 

 

 

 

 

 

 

UniTek Global Services, Inc. (Warrants) (7)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

23,889

 

 

 

 

 

 

 

WBB Equity, LLC (7), (8)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

142,857

 

 

 

142,857

 

 

 

640,000

 

Total Common Equity/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,258,993

 

 

 

36,381,427

 

Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

983,709,595

 

 

 

988,154,489

 

Investments in Non-Controlled, Affiliated Portfolio Companies—3.2% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—1.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC (7)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

6.94

%

 

3M L+500

 

 

1,544,161

 

 

 

1,507,881

 

 

 

1,544,161

 

Country Fresh Holdings, LLC (Revolver) (7)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.01

%

 

3M L+500

 

 

 

1,867,664

 

 

 

1,867,664

 

 

 

1,867,664

 

Country Fresh Holdings, LLC (Revolver) (7), (9)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

878,901

 

 

 

 

 

 

 

Quick Weight Loss Centers, LLC (7)

 

10/12/2023

 

 

Beverage, Food and Tobacco

 

 

4.00

%

 

 

 

 

 

2,036,833

 

 

 

2,036,833

 

 

 

2,036,833

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

(PIK 4.00

%)

 

 

 

 

 

 

 

 

 

 

5,412,378

 

 

 

5,448,658

 

Second Lien Secured Debt—1.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.44

%

 

1M L+850

 

 

 

5,458,138

 

 

 

5,458,138

 

 

 

5,458,138

 

 

 

 

 

 

 

 

 

 

(PIK 10.44

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quick Weight Loss Centers, LLC

 

10/12/2023

 

 

Beverage, Food and Tobacco

 

 

4.00

%

 

 

 

 

 

235,960

 

 

 

235,960

 

 

 

235,960

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

(PIK 4.00

%)

 

 

 

 

 

 

 

 

 

 

5,694,098

 

 

 

5,694,098

 

Preferred Equity—0.0% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quick Weight Loss Centers Holdings, LLC (8)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

9,568,216

 

 

 

842,352

 

 

 

149,004

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

842,352

 

 

 

149,004

 

Common Equity/Warrants—0.9% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

8,034

 

 

 

10,453,350

 

 

 

4,364,922

 

Quick Weight Loss Centers, LLC (7), (8)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

60

 

 

 

2,520,000

 

 

 

383,145

 

Total Common Equity/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,973,350

 

 

 

4,748,067

 

Total Investments in Non-Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,922,178

 

 

 

16,039,827

 

Investments in Controlled, Affiliated Portfolio Companies—34.2% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—24.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennantPark Senior Secured Loan Fund I LLC (7), (9), (10)

 

05/06/2024

 

 

Financial Services

 

 

10.10

%

 

3M L+800

 

 

 

122,193,750

 

 

 

122,193,750

 

 

 

122,193,750

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

122,193,750

 

 

 

122,193,750

 

Equity Interests—9.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennantPark Senior Secured Loan Fund I LLC (7), (9), (10)

 

 

 

 

Financial Services

 

 

 

 

 

 

 

 

52,369

 

 

 

52,368,750

 

 

 

49,727,848

 

Total Equity Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,368,750

 

 

 

49,727,848

 

Total Investments in Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174,562,500

 

 

 

171,921,598

 

Total Investments—234.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,183,194,273

 

 

 

1,176,115,914

 

Cash and Cash Equivalents—11.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,918,014

 

 

 

7,918,015

 

BNY Mellon Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,343,828

 

 

 

48,374,526

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,261,842

 

 

 

56,292,541

 

Total Investments and Cash Equivalents—245.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,239,456,115

 

 

$

1,232,408,455

 

Liabilities in Excess of Other Assets—(145.5)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(730,428,091

)

Net Assets—100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

501,980,364

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes payment-in-kind, or PIK, interest and other fee rates, if any.

(2)

Valued based on our accounting policy (See Note 2). The value of all securities was determined using significant unobservable inputs (See Note 5).

(3)

The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.

(4)

The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities.

(5)

Non-U.S. company or principal place of business outside the United States.

(6)

Non-income producing securities.

(7)

The securities, or a portion thereof, are not 1) pledged as collateral under the Credit Facility and held through Funding I; or, 2) securing the 2031 Asset-Backed Debt (See Note 10) and held through PennantPark CLO I, Ltd.

(8)

Investment is held through our Taxable Subsidiary (See Note 1).

(9)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

(10)

The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of December 31, 2019, qualifying assets represent 82% of our total assets and non-qualifying assets represent 18% of our total assets.

(11)

Par amount is denominated in Canadian Dollars (C$) as denoted.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

11


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

Investments in Non-Controlled, Non-Affiliated Portfolio Companies—176.7% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—162.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18 Freemont Street Acquisition, LLC

 

08/11/2025

 

Hotels, Restaurants and Leisure

 

 

10.04

%

 

1M L+800

 

 

 

15,000,000

 

 

$

14,702,672

 

 

$

15,000,000

 

Altamira Technologies, LLC

 

07/24/2025

 

IT Services

 

 

8.28

%

 

3M L+600

 

 

 

6,500,000

 

 

 

6,404,125

 

 

 

6,500,000

 

Altamira Technologies, LLC (Revolver) (7), (9)

 

07/24/2025

 

IT Services

 

 

 

 

 

 

 

 

2,156,250

 

 

 

 

 

 

 

American Auto Auction Group, LLC

 

01/02/2024

 

Transportation: Consumer

 

 

7.07

%

 

3M L+475

 

 

 

5,798,444

 

 

 

5,727,667

 

 

 

5,740,459

 

American Insulated Glass, LLC

 

12/21/2023

 

Building Products

 

 

8.10

%

 

3M L+550

 

 

 

14,925,000

 

 

 

14,670,272

 

 

 

14,701,125

 

American Insulated Glass, LLC (7), (9)

 

12/21/2023

 

Building Products

 

 

 

 

 

 

 

 

649,351

 

 

 

 

 

 

(9,740

)

American Teleconferencing Services, Ltd.

 

12/08/2021

 

Telecommunications

 

 

8.69

%

 

3M L+650

 

 

 

9,672,954

 

 

 

9,590,848

 

 

 

6,771,068

 

API Holdings III Corp.

 

05/11/2026

 

Electronic Equipment, Instruments, and Components

 

 

6.45

%

 

1M L+425

 

 

 

5,985,000

 

 

 

5,955,320

 

 

 

5,783,006

 

BEI Precision Systems & Space Company, Inc.

 

04/28/2023

 

Aerospace and Defense

 

 

7.61

%

 

3M L+550

 

 

 

11,730,000

 

 

 

11,651,612

 

 

 

11,612,700

 

By Light Professional IT Services, LLC

 

05/16/2022

 

High Tech Industries

 

 

8.56

%

 

3M L+625

 

 

 

13,096,955

 

 

 

12,864,397

 

 

 

13,096,955

 

By Light Professional IT Services, LLC (7)

 

05/16/2022

 

High Tech Industries

 

 

 

 

 

 

 

 

15,745,817

 

 

 

 

 

 

 

By Light Professional IT Services, LLC (Revolver) (7), (9)

 

05/16/2022

 

High Tech Industries

 

 

 

 

 

 

 

 

2,504,092

 

 

 

 

 

 

 

Cadence Aerospace, LLC

 

11/14/2023

 

Aerospace and Defense

 

 

8.54

%

 

3M L+650

 

 

 

2,868,106

 

 

 

2,848,592

 

 

 

2,854,626

 

Cano Health, LLC

 

12/23/2021

 

Healthcare and Pharmaceuticals

 

 

8.36

%

 

1M L+650

 

 

 

23,306,224

 

 

 

23,094,603

 

 

 

23,306,224

 

Cardenas Markets LLC

 

11/29/2023

 

Beverage, Food and Tobacco

 

 

7.86

%

 

1M L+575

 

 

 

3,834,884

 

 

 

3,840,082

 

 

 

3,719,837

 

CHA Holdings, Inc.

 

04/10/2025

 

Environmental Industries

 

 

6.79

%

 

3M L+450

 

 

 

7,366,205

 

 

 

7,340,067

 

 

 

7,329,374

 

CHA Holdings, Inc. (7), (9)

 

04/10/2025

 

Environmental Industries

 

 

 

 

 

 

 

 

53,571

 

 

 

 

 

 

(268

)

Challenger Performance Optimization, Inc. (Revolver) (7)

 

08/31/2023

 

Business Services

 

 

7.87

%

 

1M L+575

 

 

 

284,579

 

 

 

284,579

 

 

 

277,464

 

Challenger Performance Optimization, Inc. (Revolver) (7), (9)

 

08/31/2023

 

Business Services

 

 

 

 

 

 

 

 

426,868

 

 

 

 

 

 

(10,672

)

Confluent Health, LLC

 

06/24/2026

 

Health Providers and Services

 

 

7.40

%

 

1M L+500

 

 

 

4,000,000

 

 

 

3,960,046

 

 

 

3,940,000

 

Deva Holdings, Inc.

 

10/31/2023

 

Consumer Goods: Non-Durable

 

 

7.60

%

 

3M L+550

 

 

 

944,900

 

 

 

931,008

 

 

 

944,900

 

Deva Holdings, Inc. (Revolver) (7), (9)

 

10/31/2022

 

Consumer Goods: Non-Durable

 

 

 

 

 

 

 

 

2,115,000

 

 

 

 

 

 

 

Digital Room Holdings, Inc. (7)

 

05/22/2026

 

Media: Advertising, Printing and Publishing

 

 

7.09

%

 

1M L+500

 

 

 

9,975,000

 

 

 

9,827,383

 

 

 

9,495,003

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

8.08

%

 

3M L+575

 

 

 

14,340,441

 

 

 

14,159,516

 

 

 

14,197,037

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

9.75

%

 

P+475

 

 

 

439,118

 

 

 

439,118

 

 

 

434,726

 

(Revolver) (7), (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

3,952,059

 

 

 

 

 

 

(39,522

)

(Revolver) (7), (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Douglas Sewer Intermediate, LLC (7)

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

7.85

%

 

3M L+575

 

 

 

9,816,712

 

 

 

9,755,921

 

 

 

9,718,545

 

East Valley Tourist Development Authority

 

03/07/2022

 

Hotel, Gaming and Leisure

 

 

10.06

%

 

3M L+800

 

 

 

18,592,082

 

 

 

18,478,010

 

 

 

18,406,161

 

eCommission Financial Services, Inc. (10)

 

10/05/2023

 

Banking, Finance, Insurance & Real Estate

 

 

7.07

%

 

1M L+500

 

 

 

21,564,375

 

 

 

21,564,375

 

 

 

21,564,375

 

eCommission Financial Services, Inc. (Revolver) (7), (9), (10)

 

10/05/2023

 

Banking, Finance, Insurance & Real Estate

 

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

Education Networks of America, Inc.

 

05/06/2021

 

Telecommunications

 

 

9.62

%

 

1M L+750

 

 

 

10,401,338

 

 

 

10,401,338

 

 

 

10,349,331

 

 

 

 

 

 

 

 

 

 

 

 

(PIK 2.50

%)

 

 

 

 

 

 

 

 

 

 

 

 

Education Networks of America, Inc. (Revolver) (7), (9)

 

05/06/2021

 

Telecommunications

 

 

9.66

%

 

1M L+750

 

 

 

2,189,535

 

 

 

2,189,535

 

 

 

2,178,587

 

Efficient Collaborative Retail Marketing Company, LLC

 

06/15/2022

 

Media: Diversified and Production

 

 

8.85

%

 

3M L+675

 

 

 

7,250,797

 

 

 

7,220,335

 

 

 

7,178,290

 

FlexPrint, LLC

 

01/02/2024

 

Professional Services

 

 

8.61

%

 

3M L+620

 

 

 

4,281,014

 

 

 

4,213,518

 

 

 

4,216,799

 

FlexPrint, LLC (7), (9)

 

01/02/2024

 

Professional Services

 

 

 

 

 

 

 

 

3,772,226

 

 

 

 

 

 

(28,292

)

GCOM Software LLC

 

11/14/2022

 

High Tech Industries

 

 

8.37

%

 

1M L+625

 

 

 

12,112,187

 

 

 

11,880,407

 

 

 

12,112,187

 

GCOM Software LLC (Revolver) (7), (9)

 

11/14/2022

 

High Tech Industries

 

 

 

 

 

 

 

 

2,666,667

 

 

 

 

 

 

 

Good2Grow LLC (Revolver) (7), (9)

 

11/16/2023

 

Beverages

 

 

 

 

 

 

 

 

3,137,000

 

 

 

 

 

 

(31,370

)

GSM Holdings, Inc.

 

06/03/2024

 

Consumer Goods: Durable

 

 

6.66

%

 

3M L+450

 

 

 

19,325,409

 

 

 

19,215,204

 

 

 

19,132,154

 

GSM Holdings, Inc. (Revolver) (7)

 

06/03/2024

 

Consumer Goods: Durable

 

 

6.69

%

 

3M L+450

 

 

 

5,938,737

 

 

 

5,938,737

 

 

 

5,879,350

 

GSM Holdings, Inc. (Revolver) (7), (9)

 

06/03/2024

 

Consumer Goods: Durable

 

 

 

 

 

 

 

 

1,187,747

 

 

 

 

 

 

(11,877

)

HW Holdco, LLC

 

12/10/2024

 

Media

 

 

8.39

%

 

1M L+625

 

 

 

7,491,774

 

 

 

7,422,604

 

 

 

7,491,774

 

HW Holdco, LLC (Revolver) (7)

 

12/10/2024

 

Media

 

 

8.39

%

 

1M L+625

 

 

 

209,032

 

 

 

209,032

 

 

 

209,032

 

HW Holdco, LLC (Revolver) (7), (9)

 

12/10/2024

 

Media

 

 

 

 

 

 

 

 

1,242,581

 

 

 

 

 

 

 

IMIA Holdings, Inc. (Revolver) (7), (9)

 

10/28/2024

 

Aerospace and Defense

 

 

 

 

 

 

 

 

1,968,504

 

 

 

 

 

 

 

Impact Group, LLC

 

06/27/2023

 

Wholesale

 

 

8.72

%

 

1M L+650

 

 

 

12,807,129

 

 

 

12,742,367

 

 

 

12,679,058

 

Innova Medical Ophthalmics Inc. (5), (10)

 

04/13/2023

 

Capital Equipment

 

 

8.35

%

 

3M L+625

 

 

 

3,305,640

 

 

 

3,271,191

 

 

 

3,272,584

 

Innova Medical Ophthalmics Inc. (Revolver) (5), (7), (10)

 

04/13/2023

 

Capital Equipment

 

 

10.00

%

 

P+500

 

 

 

159,292

 

 

 

159,292

 

 

 

158,495

 

Innova Medical Ophthalmics Inc. (Revolver) (5), (7), (9), (10)

 

04/13/2023

 

Capital Equipment

 

 

 

 

 

 

 

 

371,681

 

 

 

 

 

 

(1,858

)

Integrative Nutrition, LLC

 

09/29/2023

 

Consumer Services

 

 

6.85

%

 

3M L+475

 

 

 

25,755,126

 

 

 

25,541,479

 

 

 

25,755,126

 

Integrative Nutrition, LLC (Revolver) (7), (9)

 

09/29/2023

 

Consumer Services

 

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

Inventus Power, Inc.

 

04/30/2020

 

Consumer Goods: Durable

 

 

8.54

%

 

1M L+650

 

 

 

4,105,494

 

 

 

4,100,506

 

 

 

3,777,055

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

7.30

%

 

1M L+525

 

 

 

500,000

 

 

 

500,000

 

 

 

493,950

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7), (9)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

928,571

 

 

 

 

 

 

(11,236

)

Kentucky Downs, LLC

 

03/07/2025

 

Hotels, Restaurants and Leisure

 

 

10.60

%

 

1M L+850

 

 

 

5,429,692

 

 

 

5,327,414

 

 

 

5,429,692

 

Kentucky Downs, LLC (7), (9)

 

03/07/2025

 

Hotels, Restaurants and Leisure

 

 

 

 

 

 

 

 

1,344,828

 

 

 

 

 

 

 

KHC Holdings, Inc.

 

10/31/2022

 

Wholesale

 

 

8.23

%

 

3M L+600

 

 

 

12,031,250

 

 

 

11,925,121

 

 

 

12,031,250

 

KHC Holdings, Inc. (Revolver) (7)

 

10/30/2020

 

Wholesale

 

 

6.29

%

 

1M L+425

 

 

 

479,839

 

 

 

479,839

 

 

 

479,839

 

KHC Holdings, Inc. (Revolver) (7), (9)

 

10/30/2020

 

Wholesale

 

 

 

 

 

 

 

 

729,839

 

 

 

 

 

 

 

Lago Resort & Casino, LLC

 

03/07/2022

 

Hotel, Gaming and Leisure

 

 

11.60

%

 

3M L+950

 

 

 

9,316,000

 

 

 

9,224,654

 

 

 

9,176,260

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

Capital Equipment

 

 

7.60

%

 

1M L+550

 

 

 

8,357,143

 

 

 

8,311,279

 

 

 

8,349,621

 

LAV Gear Holdings, Inc. (Revolver) (7)

 

10/31/2024

 

Capital Equipment

 

 

7.61

%

 

1M L+550

 

 

 

126,984

 

 

 

126,984

 

 

 

126,870

 

LAV Gear Holdings, Inc. (Revolver) (7), (9)

 

10/31/2024

 

Capital Equipment

 

 

 

 

 

 

 

 

1,460,317

 

 

 

 

 

 

(1,314

)

LifeCare Holdings LLC (7)

 

11/30/2021

 

Healthcare and Pharmaceuticals

 

 

0.00

%

(6)

 

 

 

 

4,736,107

 

 

 

4,599,788

 

 

 

94,722

 

Lombart Brothers, Inc.

 

04/13/2022

 

Capital Equipment

 

 

8.35

%

 

3M L+625

 

 

 

13,783,976

 

 

 

13,628,111

 

 

 

13,646,136

 

Lombart Brothers, Inc. (Revolver) (7)

 

04/13/2022

 

Capital Equipment

 

 

10.00

%

 

P+500

 

 

 

437,272

 

 

 

437,272

 

 

 

435,086

 

Lombart Brothers, Inc. (Revolver) (7), (9)

 

04/13/2022

 

Capital Equipment

 

 

 

 

 

 

 

 

801,666

 

 

 

 

 

 

(4,009

)

Long Island Vision Management, LLC

 

09/11/2023

 

Healthcare and Pharmaceuticals

 

 

7.05

%

 

3M L+475

 

 

 

8,165,763

 

 

 

8,114,887

 

 

 

8,124,934

 

Long Island Vision Management, LLC (7), (9)

 

09/11/2023

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,788,843

 

 

 

 

 

 

(8,944

)

Long’s Drugs Incorporated

 

08/19/2022

 

Healthcare and Pharmaceuticals

 

 

7.10

%

 

1M L+500

 

 

 

9,900,000

 

 

 

9,830,562

 

 

 

9,801,000

 

Long’s Drugs Incorporated (Revolver) (7), (9)

 

08/19/2022

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

3,000,000

 

 

 

 

 

 

(60,000

)

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

12


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

Retail

 

 

8.04

%

 

1M L+600

 

 

 

13,684,375

 

 

$

13,590,322

 

 

$

12,711,826

 

Manna Pro Products, LLC

 

12/08/2023

 

Consumer Goods: Non-Durable

 

 

8.11

%

 

1M L+600

 

 

 

8,390,000

 

 

 

8,327,947

 

 

 

8,159,275

 

Marketplace Events LLC

 

01/27/2023

 

Media: Diversified and Production

 

 

7.35

%

 

3M L+525

 

 

 

5,312,015

 

 

 

5,243,388

 

 

 

5,245,616

 

Marketplace Events LLC (11)

 

01/27/2023

 

Media: Diversified and Production

 

 

7.20

%

 

P+275

 

C

$

16,299,990

 

 

 

11,428,057

 

 

 

12,311,171

 

Marketplace Events LLC (Revolver) (7)

 

01/27/2023

 

Media: Diversified and Production

 

 

7.75

%

 

P+275

 

 

 

476,886

 

 

 

476,886

 

 

 

476,886

 

Marketplace Events LLC (Revolver) (7), (9)

 

01/27/2023

 

Media: Diversified and Production

 

 

 

 

 

 

 

 

1,226,277

 

 

 

 

 

 

 

MeritDirect, LLC

 

05/23/2024

 

Media

 

 

8.06

%

 

3M L+550

 

 

 

34,772,838

 

 

 

34,280,848

 

 

 

34,251,245

 

MeritDirect, LLC (Revolver) (7), (9)

 

05/23/2024

 

Media

 

 

 

 

 

 

 

 

4,481,655

 

 

 

 

 

 

(67,225

)

Mission Critical Electronics, Inc. (Revolver) (7)

 

09/28/2021

 

Capital Equipment

 

 

7.18

%

 

1M L+500

 

 

 

212,014

 

 

 

212,014

 

 

 

212,014

 

Mission Critical Electronics, Inc. (Revolver) (7), (9)

 

09/28/2021

 

Capital Equipment

 

 

 

 

 

 

 

 

1,113,074

 

 

 

 

 

 

 

Montreign Operating Company, LLC

 

01/24/2023

 

Hotel, Gaming and Leisure

 

 

10.37

%

 

3M L+825

 

 

 

27,189,858

 

 

 

27,394,375

 

 

 

24,344,712

 

Nuvei Technologies Corp. (5), (10)

 

09/28/2025

 

Diversified Financial Services

 

 

8.43

%

 

P+400

 

 

 

19,949,780

 

 

 

19,652,494

 

 

 

19,650,534

 

Olde Thompson, LLC

 

05/14/2024

 

Beverage, Food and Tobacco

 

 

6.54

%

 

1M L+450

 

 

 

1,575,476

 

 

 

1,559,721

 

 

 

1,575,476

 

Olde Thompson, LLC - Revolver (7), (9)

 

05/14/2024

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

2,642,857

 

 

 

 

 

 

 

Output Services Group, Inc.

 

03/27/2024

 

Business Services

 

 

6.54

%

 

1M L+450

 

 

 

2,962,422

 

 

 

2,684,289

 

 

 

2,547,683

 

Ox Two, LLC

 

02/27/2023

 

Construction and Building

 

 

8.29

%

 

1M L+625

 

 

 

12,780,524

 

 

 

12,708,453

 

 

 

12,780,524

 

Ox Two, LLC (Revolver) (7)

 

02/27/2023

 

Construction and Building

 

 

12.25

%

 

P+725

 

 

 

508,444

 

 

 

508,444

 

 

 

508,444

 

Ox Two, LLC (Revolver) (7), (9)

 

02/27/2023

 

Construction and Building

 

 

 

 

 

 

 

 

47,111

 

 

 

 

 

 

 

Peninsula Pacific Entertainment LLC (7)

 

11/13/2024

 

Hotel, Gaming and Leisure

 

 

9.35

%

 

1M L+725

 

 

 

13,275,810

 

 

 

13,225,232

 

 

 

13,275,810

 

Pestell Minerals and Ingredients Inc. (5), (10)

 

06/01/2023

 

Beverage, Food and Tobacco

 

 

7.57

%

 

3M L+525

 

 

 

14,887,500

 

 

 

14,769,736

 

 

 

14,738,625

 

Plant Health Intermediate, Inc. (7)

 

10/19/2022

 

Chemicals, Plastics and Rubber

 

 

8.00

%

 

3M L+575

 

 

 

2,113,704

 

 

 

2,087,235

 

 

 

2,092,567

 

PlayPower, Inc.

 

05/08/2026

 

Leisure Products

 

 

7.60

%

 

1M L+550

 

 

 

5,586,000

 

 

 

5,531,151

 

 

 

5,579,018

 

PRA Events, Inc.

 

08/08/2022

 

Business Services

 

 

9.11

%

 

1M L+700

 

 

 

2,585,319

 

 

 

2,543,697

 

 

 

2,585,319

 

Quantum Spatial, Inc.

 

09/04/2024

 

Aerospace and Defense

 

 

7.32

%

 

1M L+525

 

 

 

19,000,000

 

 

 

18,717,745

 

 

 

18,715,000

 

Questex, LLC

 

09/09/2024

 

Media: Diversified and Production

 

 

7.11

%

 

3M L+500

 

 

 

7,425,000

 

 

 

7,297,539

 

 

 

7,350,750

 

Questex, LLC (Revolver) (7), (9)

 

09/09/2024

 

Media: Diversified and Production

 

 

 

 

 

 

 

 

1,196,809

 

 

 

 

 

 

(11,968

)

Research Horizons, LLC

 

06/28/2022

 

Media: Advertising, Printing and Publishing

 

 

8.36

%

 

3M L+625

 

 

 

7,241,807

 

 

 

7,167,727

 

 

 

7,096,971

 

Research Now Group, Inc. and Survey Sampling

 

12/20/2024

 

Business Services

 

 

7.84

%

 

3M L+550

 

 

 

24,562,500

 

 

 

23,577,849

 

 

 

24,600,818

 

International LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverpoint Medical, LLC

 

06/20/2025

 

Healthcare Equipment and Supplies

 

 

7.39

%

 

3M L+500

 

 

 

4,987,500

 

 

 

4,938,821

 

 

 

4,961,565

 

Riverpoint Medical, LLC (Revolver) (7), (9)

 

06/20/2025

 

Healthcare Equipment and Supplies

 

 

 

 

 

 

 

 

909,091

 

 

 

 

 

 

(4,727

)

Salient CRGT Inc.

 

02/28/2022

 

High Tech Industries

 

 

8.05

%

 

1M L+600

 

 

 

1,771,740

 

 

 

1,752,209

 

 

 

1,674,294

 

Schlesinger Global, Inc.

 

07/14/2025

 

Professional Services

 

 

7.14

%

 

1M L+500

 

 

 

18,256,482

 

 

 

17,988,515

 

 

 

18,256,482

 

Schlesinger Global, Inc. (7), (9)

 

07/14/2025

 

Professional Services

 

 

 

 

 

 

 

 

4,007,789

 

 

 

 

 

 

 

Schlesinger Global, Inc. (Revolver) (7)

 

07/14/2025

 

Professional Services

 

 

7.82

%

 

3M L+500

 

 

 

667,965

 

 

 

667,965

 

 

 

667,965

 

Schlesinger Global, Inc. (Revolver) (7), (9)

 

07/14/2025

 

Professional Services

 

 

 

 

 

 

 

 

1,202,337

 

 

 

 

 

 

 

Signature Systems Holding Company

 

05/03/2024

 

Commercial Services & Supplies

 

 

8.60

%

 

1M L+650

 

 

 

12,918,768

 

 

 

12,735,120

 

 

 

12,918,768

 

Signature Systems Holding Company (Revolver) (7), (9)

 

05/03/2024

 

Commercial Services & Supplies

 

 

 

 

 

 

 

 

1,747,312

 

 

 

 

 

 

 

Smile Brands Inc. (7)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

6.64

%

 

1M L+450

 

 

 

2,136,667

 

 

 

2,136,667

 

 

 

2,115,300

 

Smile Brands Inc. (7), (9)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

2,362,585

 

 

 

 

 

 

(23,626

)

Smile Brands Inc. (Revolver) (7)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

8.61

%

 

P+350

 

 

 

242,438

 

 

 

242,438

 

 

 

238,025

 

Smile Brands Inc. (Revolver) (7), (9)

 

10/14/2024

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,373,813

 

 

 

 

 

 

(25,003

)

Snak Club, LLC (Revolver) (7)

 

07/19/2021

 

Beverage, Food and Tobacco

 

 

8.23

%

 

3M L+600

 

 

 

50,000

 

 

 

50,000

 

 

 

46,500

 

Snak Club, LLC (Revolver) (7), (9)

 

07/19/2021

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

445,136

 

 

 

 

 

 

(31,160

)

Solutionreach, Inc.

 

01/17/2024

 

Healthcare Technology

 

 

7.83

%

 

3M L+575

 

 

 

13,253,400

 

 

 

13,019,272

 

 

 

13,082,432

 

Solutionreach, Inc. (7), (9)

 

01/17/2024

 

Healthcare Technology

 

 

 

 

 

 

 

 

1,665,000

 

 

 

 

 

 

(21,478

)

TeleGuam Holdings, LLC

 

07/25/2023

 

Telecommunications

 

 

7.10

%

 

1M L+500

 

 

 

7,473,846

 

 

 

7,393,786

 

 

 

7,399,108

 

Teneo Holdings LLC

 

07/18/2025

 

Diversified Financial Services

 

 

7.45

%

 

1M L+525

 

 

 

10,000,000

 

 

 

9,600,726

 

 

 

9,525,000

 

Tensar Corporation

 

07/09/2021

 

Construction and Building

 

 

6.85

%

 

3M L+475

 

 

 

22,620,696

 

 

 

22,523,390

 

 

 

21,715,869

 

The Infosoft Group, LLC

 

09/16/2024

 

Media: Broadcasting and Subscription

 

 

7.37

%

 

3M L+525

 

 

 

18,667,460

 

 

 

18,511,339

 

 

 

18,480,783

 

The Original Cakerie, Co. (5), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

7.15

%

 

2M L+500

 

 

 

7,624,976

 

 

 

7,550,542

 

 

 

7,586,851

 

The Original Cakerie Ltd. (5), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

6.65

%

 

2M L+450

 

 

 

5,431,292

 

 

 

5,398,553

 

 

 

5,404,135

 

The Original Cakerie Ltd. (Revolver) (5), (7), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

6.65

%

 

3M L+450

 

 

 

170,218

 

 

 

170,218

 

 

 

169,367

 

The Original Cakerie Ltd. (Revolver) (5), (7), (9), (10)

 

07/20/2022

 

Consumer Goods: Non-Durable

 

 

 

 

 

 

 

 

1,248,266

 

 

 

 

 

 

(6,241

)

Triad Manufacturing, Inc.

 

12/28/2020

 

Capital Equipment

 

 

13.29

%

 

1M L+1,125

 

 

 

7,710,575

 

 

 

7,664,214

 

 

 

7,633,469

 

TVC Enterprises, LLC

 

01/18/2024

 

Professional Services

 

 

7.61

%

 

1M L+550

 

 

 

5,928,804

 

 

 

5,824,179

 

 

 

5,928,804

 

TVC Enterprises, LLC (7), (9)

 

01/18/2024

 

Professional Services

 

 

 

 

 

 

 

 

1,955,719

 

 

 

 

 

 

 

TVC Enterprises, LLC (Revolver) (7)

 

01/18/2024

 

Professional Services

 

 

7.61

%

 

1M L+550

 

 

 

467,022

 

 

 

467,022

 

 

 

467,022

 

TVC Enterprises, LLC (Revolver) (7), (9)

 

01/18/2024

 

Professional Services

 

 

 

 

 

 

 

 

836,791

 

 

 

 

 

 

 

TWS Acquisition Corporation

 

06/16/2025

 

Diversified Consumer Services

 

 

8.28

%

 

1M L+625

 

 

 

7,075,000

 

 

 

6,906,190

 

 

 

6,933,500

 

TWS Acquisition Corporation (Revolver) (7)

 

06/16/2025

 

Diversified Consumer Services

 

 

8.28

%

 

1M L+625

 

 

 

808,571

 

 

 

808,571

 

 

 

792,400

 

TWS Acquisition Corporation (Revolver) (7), (9)

 

06/16/2025

 

Diversified Consumer Services

 

 

 

 

 

 

 

 

1,819,286

 

 

 

 

 

 

(36,385

)

Tyto Athene, LLC

 

08/27/2024

 

Aerospace and Defense

 

 

7.80

%

 

1M L+575

 

 

 

18,000,068

 

 

 

17,763,278

 

 

 

17,463,665

 

Tyto Athene, LLC (Revolver) (7)

 

08/27/2024

 

Aerospace and Defense

 

 

7.80

%

 

1M L+575

 

 

 

4,465,909

 

 

 

4,465,909

 

 

 

4,332,825

 

Tyto Athene, LLC (Revolver) (7), (9)

 

08/27/2024

 

Aerospace and Defense

 

 

 

 

 

 

 

 

2,352,273

 

 

 

 

 

 

(70,098

)

UBEO, LLC

 

04/03/2024

 

Capital Equipment

 

 

6.75

%

 

3M L+450

 

 

 

14,169,914

 

 

 

14,069,246

 

 

 

14,028,214

 

UBEO, LLC (Revolver) (7), (9)

 

04/03/2024

 

Capital Equipment

 

 

 

 

 

 

 

 

2,933,333

 

 

 

 

 

 

(38,661

)

UniTek Global Services, Inc.

 

08/20/2024

 

Telecommunications

 

 

8.42

%

 

3M L+550

 

 

 

10,395,000

 

 

 

10,209,742

 

 

 

9,771,301

 

US Med Acquisition, Inc. (7)

 

08/13/2021

 

Healthcare and Pharmaceuticals

 

 

11.10

%

 

1M L+900

 

 

 

2,996,094

 

 

 

2,996,094

 

 

 

2,996,094

 

Vision Purchaser Corporation

 

06/10/2025

 

Media

 

 

8.30

%

 

1M L+625

 

 

 

3,440,998

 

 

 

3,373,821

 

 

 

3,406,588

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

Aerospace and Defense

 

 

9.55

%

 

1M L+750

 

 

 

5,187,498

 

 

 

5,083,748

 

 

 

5,187,498

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

829,387,687

 

 

 

818,357,018

 

Second Lien Secured Debt—5.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Borrower, LLC (7)

 

04/25/2025

 

High Tech Industries

 

 

11.01

%

 

3M L+875

 

 

 

1,655,172

 

 

 

1,628,190

 

 

 

1,638,621

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

13


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

DBI Holdings, LLC, Term Loan B

 

02/01/2026

 

 

Business Services

 

 

8.00

%

 

 

 

 

 

10,639,343

 

 

$

10,639,343

 

 

$

10,586,145

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holdings, LLC, Term Loan C (7)

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

 

 

 

 

21,276

 

 

 

21,276

 

 

 

21,276

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DecoPac, Inc. (7)

 

03/31/2025

 

 

Beverage, Food and Tobacco

 

 

10.35

%

 

3M L+825

 

 

 

9,738,580

 

 

 

9,643,427

 

 

 

9,738,580

 

MailSouth, Inc.

 

10/23/2024

 

 

Media: Advertising, Printing and Publishing

 

 

12.00

%

 

12M L+925

 

 

 

2,871,025

 

 

 

2,822,554

 

 

 

2,784,894

 

McAfee, LLC (7)

 

09/29/2025

 

 

High Tech Industries

 

 

10.62

%

 

1M L+850

 

 

 

2,187,500

 

 

 

2,158,107

 

 

 

2,205,284

 

PT Network Intermediate Holdings, LLC (7), (8)

 

11/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

12.30

%

 

3M L+1,000

 

 

 

1,864,409

 

 

 

1,846,555

 

 

 

1,845,765

 

 

 

 

 

 

 

 

 

 

(PIK 12.30

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,759,453

 

 

 

28,820,565

 

Preferrred Equity— 1.9% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,458

 

 

 

21,870

 

 

 

450

 

(PT Network, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Holdings Limited (5), (7), (10)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

88,000

 

 

 

10,173

 

 

 

11,325

 

Condor Top Holdco Limited (5), (7), (10)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

88,000

 

 

 

77,827

 

 

 

86,640

 

DBI Holdings, LLC, Series A-1 (8)

 

 

 

 

Business Services

 

 

13.00

%

 

 

 

 

 

7,041

 

 

 

7,040,844

 

 

 

6,545,361

 

MeritDirect Holdings, LP (7), (8)

 

 

 

 

Media

 

 

 

 

 

 

 

 

960

 

 

 

960,000

 

 

 

1,002,057

 

NXOF Holdings, Inc. (NextiraOne Federal, LLC) (7)

 

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

490

 

 

 

490,000

 

 

 

362,645

 

PT Network Intermediate Holdings, LLC (7), (8)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

12.14

%

 

3M L+1,000

 

 

 

33

 

 

 

359,000

 

 

 

370,570

 

Signature CR Intermediate Holdco, Inc. (7)

 

 

 

 

Commercial Services & Supplies

 

 

12.00

%

 

 

 

 

 

1,167

 

 

 

1,166,993

 

 

 

1,224,860

 

UniTek Global Services, Inc. -

 

 

 

 

Telecommunications

 

 

20.00

%

 

 

 

 

 

343,861

 

 

 

343,861

 

 

 

30,743

 

Super Senior Preferred Equity (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UniTek Global Services, Inc. - Senior Preferred Equity (7)

 

 

 

 

Telecommunications

 

 

18.00

%

 

 

 

 

 

448,851

 

 

 

448,851

 

 

 

 

UniTek Global Services, Inc. (7)

 

 

 

 

Telecommunications

 

 

13.50

%

 

 

 

 

 

1,047,317

 

 

 

670,283

 

 

 

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,589,702

 

 

 

9,634,652

 

Common Equity/Warrants— 6.4% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affinion Group Holdings, Inc. (Warrants)(7)

 

 

 

 

Consumer Goods: Durable

 

 

 

 

 

 

 

 

8,893

 

 

 

244,998

 

 

 

94,129

 

AG Investco LP (7), (8)

 

 

 

 

Software

 

 

 

 

 

 

 

 

714,652

 

 

 

714,652

 

 

 

714,652

 

AG Investco LP (7), (8), (9)

 

 

 

 

Software

 

 

 

 

 

 

 

 

285,348

 

 

 

 

 

 

 

Altamira Intermediate Company II, Inc. (7)

 

 

 

 

IT Services

 

 

 

 

 

 

 

 

1,437,500

 

 

 

1,437,500

 

 

 

1,437,500

 

By Light Investco LP (7), (8)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

21,908

 

 

 

2,190,771

 

 

 

9,218,753

 

By Light Investco LP (7), (8),  (9)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

5,592

 

 

 

 

 

 

 

CI (Allied) Investment Holdings, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

120,962

 

 

 

1,243,217

 

 

 

1,260,269

 

(Allied America, Inc.) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

13,333

 

 

 

200,000

 

 

 

 

(PT Network, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (Summit) Investment Holdings, LLC

 

 

 

 

Construction and Building

 

 

 

 

 

 

 

 

54,907

 

 

 

581,995

 

 

 

720,588

 

(SFP Holding, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holdings, LLC, Series B (10), (8)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

1,489,508

 

 

 

330,791

 

 

 

 

DecoPac Holdings Inc. (7)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,633

 

 

 

1,632,744

 

 

 

3,149,261

 

eCommission Holding Corporation (7), (10)

 

 

 

 

 

Banking, Finance, Insurance & Real Estate

 

 

 

 

 

 

 

 

20

 

 

 

251,156

 

 

 

370,436

 

Faraday Holdings, LLC (7)

 

 

 

 

Construction and Building

 

 

 

 

 

 

 

 

1,141

 

 

 

58,044

 

 

 

331,562

 

Gauge InfosoftCoInvest, LLC

 

 

 

 

Media: Broadcasting and Subscription

 

 

 

 

 

 

 

 

500

 

 

 

143,663

 

 

 

497,465

 

(The Infosoft Group, LLC) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gauge Schlesinger Coinvest LLC (7)

 

 

 

 

 

Professional Services

 

 

 

 

 

 

 

 

403

 

 

 

403,005

 

 

 

403,005

 

Gauge TVC Coinvest, LLC (TVC Enterprises, LLC) (7)

 

 

 

 

 

Professional Services

 

 

 

 

 

 

 

 

391,144

 

 

 

391,144

 

 

 

399,678

 

GCOM InvestCo LP (7), (8)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

1,549,209

 

 

 

1,549,209

 

 

 

2,233,506

 

GCOM InvestCo LP (7), (8), (9)

 

 

 

 

High Tech Industries

 

 

 

 

 

 

 

 

450,791

 

 

 

 

 

 

 

Go Dawgs Capital III, LP

 

 

 

 

Building Products

 

 

 

 

 

 

 

 

324,675

 

 

 

324,675

 

 

 

331,169

 

(American Insulated Glass, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IIN Group Holdings, LLC

 

 

 

 

Consumer Services

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000,000

 

 

 

1,392,905

 

(Integrative Nutrition, LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITC Rumba, LLC (Cano Health, LLC) (10)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

21,529

 

 

 

430,576

 

 

 

607,059

 

JWC/UMA Holdings, L.P. (7)

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000,000

 

 

 

1,210,541

 

JWC-WE Holdings, L.P.

 

 

 

 

Wholesale

 

 

 

 

 

 

 

 

1,381,741

 

 

 

1,381,741

 

 

 

3,595,627

 

(Walker Edison Furniture Company LLC) (7), (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kentucky Racing Holdco, LLC (Warrants) (7), (8)

 

 

 

 

 

Hotels, Restaurants and Leisure

 

 

 

 

 

 

 

 

 

 

87,345

 

 

 

 

 

 

166,773

 

MeritDirect Holdings, LP (7), (8)

 

 

 

 

Media

 

 

 

 

 

 

 

 

960

 

 

 

 

 

 

98,635

 

NXOF Holdings, Inc. (NextiraOne Federal, LLC) (7)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

10,000

 

 

 

10,000

 

 

 

 

PT Network Intermediate Holdings, LLC (7), (8)

 

 

 

 

 

Healthcare and Pharmaceuticals

 

 

 

 

 

 

 

 

 

 

25

 

 

 

239,333

 

 

 

680,580

 

Signature CR Intermediate Holdco, Inc. (7)

 

 

 

 

Commercial Services & Supplies

 

 

 

 

 

 

 

 

61

 

 

 

61,421

 

 

 

29,886

 

SSC Dominion Holdings, LLC

 

 

 

 

Capital Equipment

 

 

 

 

 

 

 

 

500

 

 

 

500,000

 

 

 

540,000

 

Class A (US Dominion, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SSC Dominion Holdings, LLC

 

 

 

 

Capital Equipment

 

 

 

 

 

 

 

 

500

 

 

 

 

 

 

728,601

 

Class B (US Dominion, Inc.) (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TPC Broadband Investors, LP (7)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

754,821

 

 

 

754,820

 

 

 

1,589,878

 

TPC Broadband Investors, LP (7), (8), (9)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

245,179

 

 

 

 

 

 

 

UniTek Global Services, Inc. (7)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

213,739

 

 

 

 

 

 

 

UniTek Global Services, Inc. (Warrants) (7)

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

23,889

 

 

 

 

 

 

 

WBB Equity, LLC (7), (8)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

142,857

 

 

 

142,857

 

 

 

498,572

 

Total Common Equity/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,218,314

 

 

 

32,301,030

 

Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

886,955,156

 

 

 

889,113,264

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

14


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread

Above

Index (1)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (2)

 

Investments in Non-Controlled, Affiliated Portfolio Companies—4.1% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—0.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC (7)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

3M L+500

 

 

1,544,161

 

 

$

1,505,589

 

 

$

1,544,161

 

Country Fresh Holdings, LLC (Revolver) (7)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

3M L+500

 

 

 

769,038

 

 

 

769,038

 

 

 

769,038

 

Country Fresh Holdings, LLC (Revolver) (7), (9)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,977,526

 

 

 

 

 

 

 

Quick Weight Loss Centers, LLC (7)

 

10/12/2023

 

 

Beverage, Food and Tobacco

 

 

4.00

%

 

 

 

 

 

2,016,667

 

 

 

2,016,667

 

 

 

2,036,833

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

(PIK 4.00

%)

 

 

 

 

 

 

 

 

 

 

4,291,294

 

 

 

4,350,032

 

Second Lien Secured Debt—1.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC (7)

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.60

%

 

1M L+850

 

 

 

5,314,125

 

 

 

5,314,125

 

 

 

5,314,125

 

 

 

 

 

 

 

 

 

 

(PIK 10.60

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quick Weight Loss Centers, LLC (7)

 

10/12/2023

 

 

Beverage, Food and Tobacco

 

 

4.00

%

 

 

 

 

 

233,572

 

 

 

233,572

 

 

 

235,908

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

(PIK 4.00

%)

 

 

 

 

 

 

 

 

 

 

5,547,697

 

 

 

5,550,033

 

Preferred Equity—0.2% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quick Weight Loss Centers Holdings, LLC (7), (8)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

9,568,216

 

 

 

842,352

 

 

 

891,816

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

842,352

 

 

 

891,816

 

Common Equity/Warrants—1.9% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc. (7)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

8,034

 

 

 

10,453,350

 

 

 

6,864,302

 

Quick Weight Loss Centers, LLC (7), (8)

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

60

 

 

 

2,520,000

 

 

 

2,774,382

 

Total Common Equity/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,973,350

 

 

 

9,638,684

 

Total Investments in Non-Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,654,693

 

 

 

20,430,565

 

Investments in Controlled, Affiliated Portfolio Companies—34.2% (3), (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—24.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennantPark Senior Secured Loan Fund I LLC (7), (9), (10)

 

05/06/2024

 

 

Financial Services

 

 

10.10

%

 

3M L+800

 

 

 

122,193,750

 

 

 

122,193,750

 

 

 

122,193,750

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

122,193,750

 

 

 

122,193,750

 

Equity Interests—9.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennantPark Senior Secured Loan Fund I LLC (7), (9), (10)

 

 

 

 

Financial Services

 

 

 

 

 

 

 

 

52,369

 

 

 

52,368,750

 

 

 

49,969,330

 

Total Equity Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,368,750

 

 

 

49,969,330

 

Total Investments in Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174,562,500

 

 

 

172,163,080

 

Total Investments—215.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,085,172,349

 

 

 

1,081,706,909

 

Cash and Cash Equivalents—12.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,053,873

 

 

 

18,053,873

 

BNY Mellon Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,313,364

 

 

 

45,283,855

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63,367,237

 

 

 

63,337,728

 

Total Investments and Cash Equivalents—227.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,148,539,586

 

 

$

1,145,044,637

 

Liabilities in Excess of Other Assets—(127.6)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(641,987,126

)

Net Assets—100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

503,057,511

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes payment-in-kind, or PIK, interest and other fee rates, if any.

(2)

Valued based on our accounting policy (See Note 2). The value of all securities was determined using significant unobservable inputs (See Note 5).

(3)

The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.

(4)

The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities.

(5)

Non-U.S. company or principal place of business outside the United States.

(6)

Non-income producing securities.

(7)

The securities, or a portion thereof, are not 1) pledged as collateral under the Credit Facility and held through Funding I; or, 2) securing the 2031 Asset-Backed Debt (See Note 10) and held through PennantPark CLO I, Ltd.

(8)

Investment is held through our Taxable Subsidiary (See Note 1).

(9)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

(10)

The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2019, qualifying assets represent 79% of our total assets and non-qualifying assets represent 21% of our total assets.

(11)

Par amount is denominated in Canadian Dollars (C$) as denoted.

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

15


 

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

(Unaudited)

 

 

1. ORGANIZATION

 

PennantPark Floating Rate Capital Ltd. was organized as a Maryland corporation in October 2010. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act.

 

Our investment objectives are to generate both current income and capital appreciation while seeking to preserve capital. We seek to achieve our investment objective by investing primarily in loans bearing variable rates of interest, or Floating Rate Loans, and other investments made to U.S. middle-market private companies whose debt is rated below investment grade. Interest on Floating Rate Loans is determined periodically, on the basis of a floating base lending rate such as LIBOR, with or without a floor, plus a fixed spread. Under normal market conditions, we generally expect that at least 80% of the value of our Managed Assets, which means our net assets plus any borrowings for investment purposes, will be invested in Floating Rate Loans and other investments bearing a variable rate of interest, which may include, from time to time, variable rate derivative instruments. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt, subordinated debt, and, to a lesser extent, equity investments.

 

We have entered into an investment management agreement, or the Investment Management Agreement, with the Investment Adviser, an external adviser that manages our day-to-day operations. We have also entered into an administration agreement, or the Administration Agreement, with the Administrator, which provides the administrative services necessary for us to operate.

 

Funding I, our wholly owned subsidiary and a special purpose entity, was organized in Delaware as a limited liability company in May 2011. We formed Funding I in order to establish the Credit Facility. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that the management fee owed with respect to such services is to be paid to us so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. The Credit Facility allows Funding I to borrow up to $520 million at LIBOR plus 200 basis points during the revolving period. The Credit Facility is secured by all of the assets held by Funding I. See Note 10.

 

We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

 

In May 2017, we and a subsidiary of Kemper Corporation (NYSE: KMPR), Trinity Universal Insurance Company, or Kemper, formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. See Note 4.

 

In November 2017, we issued $138.6 million of our 2023 Notes. The principal on the 2023 Notes will be payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% on December 15, 2023. The 2023 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2023 Notes are listed on the Tel Aviv Stock Exchange, or the TASE. In connection with this offering, we have dual listed our common stock on the TASE.

 

In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by a diversified portfolio of the Securitization Issuer consisting primarily of middle market loans and participation interests in middle market loans. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly owned subsidiaries, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. See Note 10.

 

We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.

 

Our Consolidated Financial Statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.

 

Our significant accounting policies consistently applied are as follows:

 

(a) Investment Valuations

 

We expect that there may not be readily available market values for many of the investments, which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our

16


 

valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.

 

Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

 

(1)

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;

 

 

(2)

Preliminary valuation conclusions are then documented and discussed with the management of the Investment Adviser;

 

 

(3)

Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment. The independent valuation firms review management’s preliminary valuations in light of their own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker;

 

 

(4)

The audit committee of our board of directors reviews the preliminary valuations of the Investment Adviser and those of the independent valuation firms on a quarterly basis, periodically assesses the valuation methodologies of the independent valuation firms, and responds to and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and

 

 

(5)

Our board of directors discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment Adviser, the respective independent valuation firms and the audit committee.

 

Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.

 

(b) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses

 

Security transactions are recorded on a trade-date basis. We measure realized gains or losses 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, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects, as applicable, the change in the fair values of our portfolio investments, the Credit Facility and the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, or OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties earned on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.

 

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued 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. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. As of December 31, 2019, we had one portfolio company on non-accrual, representing 0.4% and zero of our overall portfolio on a cost and fair value basis, respectively.

 

(c) Income Taxes

 

We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC for U.S. federal income tax purposes, we typically do not incur material U.S. federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of a U.S. federal excise tax, or we may incur taxes through our taxable subsidiaries, including the Taxable Subsidiary. For the three months ended December 31, 2019 and 2018, we recorded a provision for taxes of $0.1 million and zero, respectively, pertaining to U.S. federal excise tax.

 

We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although the Company files both federal and state income tax returns, the Company’s major tax jurisdiction is federal.

 

Because U.S. federal income tax regulations differ from GAAP, distributions characterized in accordance with tax regulations may differ from net investment income and net realized gains recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences

17


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

are reclassified among capital accounts in the Consolidated Financial Statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

(d) Distributions and Capital Transactions

 

Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains, but may also include certain tax-qualified dividends and/or a return of capital.

 

Capital transactions in connection with offerings of our common stock are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.

 

(e) Foreign Currency Translation

 

Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

 

 

1.

Fair value of investment securities, other assets and liabilities – at the exchange rates prevailing at the end of the applicable period; and

 

 

2.

Purchases and sales of investment securities, income and expenses – at the exchange rates prevailing on the respective dates of such transactions.

 

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.

 

Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.

 

(f) Consolidation

 

As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, we will generally not consolidate our investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our taxable subsidiaries, including the Taxable Subsidiary, Funding I and the Securitization Issuer in our Consolidated Financial Statements. We do not consolidate our non-controlling interest in PSSL. See further description of our investment in PSSL in Note 4.

 

(g) Asset Transfers and Servicing

 

Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and Consolidated Schedules of Investments as investments. The creditors of Funding I have received a security interest in all its assets and such assets are not intended to be available to the creditors of PennantPark Floating Rate Capital Ltd. or any of its affiliates.

 

(h) Recent Accounting Pronouncements

 

In August 2018, the FASB issued Accounting Standards Update, or ASU, 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The key provisions include new, eliminated and modified disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early application is permitted. The Company has adopted this accounting standard update effective October 1, 2019 and the impact its of adoption was not material to the Company’s financial statements and related disclosures.

 

3. AGREEMENTS AND RELATED PARTY TRANSACTIONS

 

The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2020. Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of and provides investment advisory services to us. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. For providing these services, the Investment Adviser receives a fee from us consisting of two components—a base management fee and an incentive fee.

 

The base management fee is calculated at an annual rate of 1.00% of our “average adjusted gross assets,” which equals our gross assets (exclusive of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the three months ended December 31, 2019 and 2018, the Investment Adviser earned a base management fee of $2.8 million and $2.5 million, respectively, from us.

 

The incentive fee has two parts, as follows:

 

One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, 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 amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains,

 

18


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre-Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar  quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 50% of our 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 2.9167% in any calendar quarter (11.67% annualized) (we refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the hurdle but is less than 2.9167%) as the “catch-up,” which is meant to provide our Investment Adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a hurdle did not apply, if this net investment income exceeds 2.9167% in any calendar quarter), and (3) 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.9167% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable. For the three months ended December 31, 2019 and 2018, the Investment Adviser earned $2.3 million and $0.2 million, respectively, in incentive fees on net investment income from us.

 

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 Management Agreement, as of the termination date) and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For both periods presented herein, the Investment Adviser did not accrue an incentive fee on capital gains, as calculated under the Investment Management Agreement (as described above).

 

Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. The incentive fee accrued for, but not payable, under GAAP on our unrealized and realized capital gains for the three months ended December 31, 2019 and 2018 was zero and $(1.4) million, respectively.

 

The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of the directors who are not interested persons of us, in February 2020. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. For providing these services, facilities and personnel, we have agreed to reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the three months ended December 31, 2019 and 2018, we reimbursed the Investment Adviser approximately $0.3 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for services described above.

 

There were no transactions subject to Rule 17a-7 under the 1940 Act during both the three months ended December 31, 2019 and 2018.

 

For the three months ended December 31, 2019 and 2018, we sold $68.9 and $38.0 million in investments, respectively, to PSSL at fair value and recognized $0.5 and $0.2 million of net realized gains, respectively.

 

4. INVESTMENTS

 

Purchases of investments, including PIK interest, for the three months ended December 31, 2019 and 2018 totaled $240.3 million and $180.8 million, respectively. Sales and repayments of investments for the three months ended December 31, 2019 and 2018 totaled $143.7 million and $190.3 million, respectively.

Investments, cash and cash equivalents consisted of the following:

 

 

 

December 31, 2019

 

 

September 30, 2019

 

Investment Classification

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

First lien

 

$

930,611,653

 

 

$

920,319,687

 

 

$

833,678,981

 

 

$

822,707,050

 

First lien in PSSL

 

 

122,193,750

 

 

 

122,193,750

 

 

 

122,193,750

 

 

 

122,193,750

 

Second lien

 

 

32,876,712

 

 

 

32,893,257

 

 

 

34,307,150

 

 

 

34,370,598

 

Equity

 

 

45,143,408

 

 

 

50,981,372

 

 

 

42,623,718

 

 

 

52,466,181

 

Equity in PSSL

 

 

52,368,750

 

 

 

49,727,848

 

 

 

52,368,750

 

 

 

49,969,330

 

Total investments

 

 

1,183,194,273

 

 

 

1,176,115,914

 

 

 

1,085,172,349

 

 

 

1,081,706,909

 

Cash and cash equivalents

 

 

56,261,843

 

 

 

56,292,541

 

 

 

63,367,237

 

 

 

63,337,728

 

Total investments and cash and cash equivalents

 

$

1,239,456,116

 

 

$

1,232,408,455

 

 

$

1,148,539,586

 

 

$

1,145,044,637

 

 

 

19


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries:

 

Industry Classification

 

December 31, 2019 (1)

 

 

September 30, 2019 (1)

 

Aerospace and Defense

 

 

7

%

 

 

7

%

Business Services

 

 

6

 

 

 

5

 

High Tech Industries

 

 

6

 

 

 

5

 

Hotel, Gaming and Leisure

 

 

6

 

 

 

7

 

Media

 

 

6

 

 

 

5

 

Capital Equipment

 

 

5

 

 

 

5

 

Healthcare and Pharmaceuticals

 

 

5

 

 

 

6

 

Construction and Building

 

 

4

 

 

 

4

 

Professional Services

 

 

4

 

 

 

3

 

Beverage, Food and Tobacco

 

 

3

 

 

 

6

 

Chemicals, Plastics and Rubber

 

 

3

 

 

 

3

 

Consumer Services

 

 

3

 

 

 

3

 

Hotels, Restaurants and Leisure

 

 

3

 

 

 

7

 

Media: Diversified and Production

 

 

3

 

 

 

4

 

Telecommunications

 

 

3

 

 

 

4

 

Banking, Finance, Insurance & Real Estate

 

 

2

 

 

 

2

 

Construction & Engineering

 

 

2

 

 

 

 

Consumer Goods: Durable

 

 

2

 

 

 

3

 

Consumer Goods: Non-Durable

 

 

2

 

 

 

3

 

Diversified Financial Services

 

 

2

 

 

 

3

 

Electronic Equipment, Instruments, and Components

 

 

2

 

 

 

1

 

Media: Advertising, Printing and Publishing

 

 

2

 

 

 

2

 

Media: Broadcasting and Subscription

 

 

2

 

 

 

2

 

Personal Products

 

 

2

 

 

 

 

Wholesale

 

 

2

 

 

 

3

 

Building Products

 

 

1

 

 

 

2

 

Commercial Services & Supplies

 

 

1

 

 

 

2

 

Diversified Consumer Services

 

 

1

 

 

 

1

 

Environmental Industries

 

 

1

 

 

 

 

Food and Staples Retailing

 

 

1

 

 

 

 

IT Services

 

 

1

 

 

 

1

 

Retail

 

 

1

 

 

 

1

 

Transportation: Consumer

 

 

1

 

 

 

 

All Other

 

 

5

 

 

 

 

Total

 

 

100

%

 

 

100

%

 

(1)

Excludes investments in PSSL.

 

PennantPark Senior Secured Loan Fund I LLC

 

In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of December 31, 2019, PSSL had total assets of $507.8 million. As of the same date, we and Kemper had remaining commitments to fund first lien secured debt and equity interests in PSSL in an aggregate amount of $30.5 million. PSSL invests in portfolio companies in the same industries in which we may directly invest.

 

We provide capital to PSSL in the form of first lien secured debt and equity interests. As of December 31, 2019, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of the same date, our investment in PSSL consisted of first lien secured debt of $122.2 million and equity interests of $52.4 million. As of the same date, we had commitments to fund first lien secured debt to PSSL of $140.9 million, of which $18.7 million was unfunded. As of December 31, 2019, we had commitments to fund equity interests in PSSL of $60.4 million, of which $8.0 million was unfunded.

 

We and Kemper each appointed two members to PSSL’s four person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee, provided that at least one individual is present that was elected, designated or appointed by each member; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each member.

 

Additionally, PSSL has entered into a $420.0 million senior secured revolving credit facility which bears interest at LIBOR plus 200 basis points, or the PSSL Credit Facility, with Capital One, N.A. through its wholly-owned subsidiary, PennantPark Senior Secured Loan Facility LLC, or PSSL Subsidiary, subject to leverage and borrowing restrictions.  

 

Below is a summary of PSSL’s portfolio at fair value:

 

 

 

December 31, 2019

 

 

September 30, 2019

 

Total investments

 

$

493,190,805

 

 

$

488,549,847

 

Weighted average yield on debt investments

 

 

7.4

%

 

 

7.6

%

Number of portfolio companies in PSSL

 

 

49

 

 

 

45

 

Largest portfolio company investment

 

$

21,972,451

 

 

$

22,026,186

 

Total of five largest portfolio company investments

 

$

100,061,867

 

 

$

102,872,275

 

 

 

20


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

Below is a listing of PSSL’s individual investments as of December 31, 2019:

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (1)

 

Par

 

 

Cost

 

 

Fair Value (2)

 

First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altamira Technologies, LLC

 

07/24/2025

 

 

High Tech Industries

 

 

7.93

%

 

3M L+600

 

 

4,968,750

 

 

$

4,898,753

 

 

$

4,968,750

 

American Auto Auction Group, LLC

 

01/02/2024

 

 

Transportation: Consumer

 

 

6.55

%

 

3M L+475

 

 

7,729,555

 

 

 

7,654,681

 

 

 

7,652,259

 

By Light Professional IT Services, LLC

 

05/16/2022

 

 

High Tech Industries

 

 

7.96

%

 

1M L+625

 

 

13,675,154

 

 

 

13,455,820

 

 

 

13,675,154

 

Cadence Aerospace, LLC

 

11/14/2023

 

 

Aerospace and Defense

 

 

8.43

%

 

3M L+650

 

 

11,705,417

 

 

 

11,618,814

 

 

 

11,691,369

 

Cardenas Markets LLC

 

11/29/2023

 

 

Beverage, Food and Tobacco

 

 

7.45

%

 

1M L+575

 

 

7,329,975

 

 

 

7,293,805

 

 

 

7,036,776

 

Centauri Group Holdings, LLC

 

02/12/2024

 

 

Aerospace and Defense

 

 

7.20

%

 

1M L+525

 

 

10,396,599

 

 

 

10,387,355

 

 

 

10,344,616

 

Challenger Performance Optimization, Inc.

 

08/31/2023

 

 

Business Services

 

 

7.55

%

 

1M L+575

 

 

10,127,447

 

 

 

10,043,474

 

 

 

9,772,987

 

Country Fresh Holdings, LLC

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

182,403

 

 

 

179,362

 

 

 

182,403

 

Country Fresh Holdings, LLC (Revolver)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.01

%

 

1M L+500

 

 

306,075

 

 

 

306,075

 

 

 

306,075

 

Country Fresh Holdings, LLC - (Revolver) (5)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

144,036

 

 

 

 

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

12,281,250

 

 

 

12,136,773

 

 

 

12,158,438

 

Douglas Sewer Intermediate, LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

8,146,023

 

 

 

8,098,916

 

 

 

8,064,563

 

DRS Holdings III, Inc.

 

11/03/2025

 

 

Consumer Goods: Non-Durable

 

 

7.55

%

 

1M L+575

 

 

8,082,770

 

 

 

8,004,468

 

 

 

8,003,559

 

Findex Group Limited (3), (4)

 

05/31/2024

 

 

Banking, Finance, Insurance and Real Estate

 

 

6.19

%

 

3M L+525

A

$

10,000,000

 

 

 

7,385,187

 

 

 

6,818,615

 

GCOM Software LLC

 

11/14/2022

 

 

High Tech Industries

 

 

7.96

%

 

1M L+625

 

 

17,237,379

 

 

 

17,124,994

 

 

 

17,237,379

 

Good2Grow LLC

 

11/18/2024

 

 

Beverages

 

 

6.19

%

 

3M L+425

 

 

11,329,248

 

 

 

11,233,370

 

 

 

11,215,956

 

GSM Holdings, Inc.

 

06/03/2024

 

 

Consumer Goods: Durable

 

 

6.60

%

 

3M L+450

 

 

19,619,454

 

 

 

19,481,180

 

 

 

19,423,260

 

IMIA Holdings, Inc.

 

10/28/2024

 

 

Aerospace and Defense

 

 

6.44

%

 

3M L+450

 

 

12,375,000

 

 

 

12,321,890

 

 

 

12,313,125

 

Impact Group, LLC

 

06/27/2023

 

 

Wholesale

 

 

8.44

%

 

1M L+650

 

 

9,365,185

 

 

 

9,275,424

 

 

 

9,224,707

 

Infrastructure Supply Operations Pty Ltd. (3), (4)

 

12/12/2023

 

 

Wholesale

 

 

5.67

%

 

1M L+475

A

$

15,000,000

 

 

 

10,985,913

 

 

 

10,172,038

 

Integrative Nutrition, LLC

 

09/29/2023

 

 

Diversified Consumer Services

 

 

6.69

%

 

1M L+475

 

 

9,949,749

 

 

 

9,949,749

 

 

 

9,850,251

 

K2 Pure Solutions NoCal, L.P.

 

12/20/2023

 

 

Chemicals, Plastics and Rubber

 

 

7.05

%

 

1M L+525

 

 

19,800,000

 

 

 

19,546,364

 

 

 

19,469,340

 

KHC Holdings, Inc.

 

10/31/2022

 

 

Wholesale

 

 

7.94

%

 

3M L+600

 

 

5,350,904

 

 

 

5,350,904

 

 

 

5,350,904

 

Lash Opco, LLC - Term Loan

 

12/12/2024

 

 

Consumer Goods: Non-Durable

 

 

9.16

%

 

3M L+725

 

 

7,500,000

 

 

 

7,277,344

 

 

 

7,275,000

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

 

Capital Equipment

 

 

7.44

%

 

3M L+550

 

 

9,900,000

 

 

 

9,816,129

 

 

 

9,943,559

 

Leap Legal Software Pty Ltd (3), (4)

 

09/12/2022

 

 

High Tech Industries

 

 

6.76

%

 

3M L+575

A

$

14,718,247

 

 

 

10,461,364

 

 

 

10,346,192

 

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

 

Retail

 

 

7.74

%

 

1M L+600

 

 

7,031,250

 

 

 

7,068,566

 

 

 

6,471,703

 

Manna Pro Products, LLC

 

12/08/2023

 

 

Consumer Goods: Non-Durable

 

 

7.80

%

 

1M L+600

 

 

6,860,000

 

 

 

6,782,980

 

 

 

6,667,234

 

Marketplace Events LLC (4)

 

01/27/2023

 

 

Media: Diversified and Production

 

 

7.31

%

 

P+275

C

$

5,745,254

 

 

 

4,456,891

 

 

 

4,408,350

 

Mission Critical Electronics, Inc.

 

09/28/2022

 

 

Capital Equipment

 

 

6.94

%

 

3M L+500

 

 

5,994,919

 

 

 

5,965,076

 

 

 

5,986,521

 

New Milani Group LLC

 

06/06/2024

 

 

Consumer Goods: Non-Durable

 

 

6.94

%

 

1M L+425

 

 

14,775,000

 

 

 

14,660,510

 

 

 

14,479,500

 

Nuvei Technologies Corp.

 

09/28/2025

 

 

High Tech Industries

 

 

6.80

%

 

P+400

 

 

12,452,133

 

 

 

12,514,394

 

 

 

12,514,394

 

Olde Thompson, LLC

 

05/14/2024

 

 

Beverage, Food and Tobacco

 

 

6.05

%

 

1M L+425

 

 

11,410,000

 

 

 

11,295,900

 

 

 

11,410,000

 

Output Services Group, Inc.

 

03/27/2024

 

 

Business Services

 

 

6.30

%

 

1M L+425

 

 

7,865,895

 

 

 

7,890,564

 

 

 

7,472,600

 

PH Beauty Holdings III, Inc.

 

09/29/2025

 

 

Wholesale

 

 

6.80

%

 

1M L+500

 

 

9,867,538

 

 

 

9,781,830

 

 

 

9,768,863

 

Plant Health Intermediate, Inc.

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

1,753,977

 

 

 

1,733,464

 

 

 

1,736,437

 

PlayPower, Inc.

 

05/08/2026

 

 

Leisure Products

 

 

7.46

%

 

3M L+550

 

 

4,179,000

 

 

 

4,139,034

 

 

 

4,126,763

 

Schlesinger Global, Inc.

 

07/14/2025

 

 

Business Services

 

 

6.80

%

 

1M L+500

 

 

11,985,169

 

 

 

11,985,169

 

 

 

11,985,169

 

Smile Brands Inc.

 

10/14/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.55

%

 

3M L+450

 

 

11,261,250

 

 

 

11,164,187

 

 

 

11,148,638

 

Snak Club, LLC

 

07/19/2021

 

 

Beverage, Food and Tobacco

 

 

7.69

%

 

1M L+600

 

 

4,687,495

 

 

 

4,687,495

 

 

 

4,499,995

 

Solutionreach, Inc.

 

01/17/2024

 

 

Healthcare and Pharmaceuticals

 

 

7.55

%

 

3M L+475

 

 

6,555,975

 

 

 

6,474,016

 

 

 

6,521,229

 

Sonny's Enterprises, LLC

 

12/01/2022

 

 

Capital Equipment

 

 

6.10

%

 

3M L+425

 

 

15,186,105

 

 

 

15,189,151

 

 

 

15,034,245

 

TeleGuam Holdings, LLC

 

11/20/2025

 

 

Telecommunications

 

 

6.30

%

 

1M L+450

 

 

8,430,693

 

 

 

8,388,539

 

 

 

8,388,539

 

Teneo Holdings LLC

 

07/18/2025

 

 

Business Services

 

 

6.99

%

 

1M L+525

 

 

4,987,500

 

 

 

4,798,508

 

 

 

4,725,656

 

The Infosoft Group, LLC

 

09/16/2024

 

 

Media: Broadcasting and Subscription

 

 

7.32

%

 

6M L+525

 

 

8,799,611

 

 

 

8,769,767

 

 

 

8,711,615

 

TPC Canada Parent, Inc. and TPC US Parent, LLC

 

11/24/2025

 

 

Consumer Goods: Non-Durable

 

 

7.02

%

 

3M L+475

 

 

9,000,000

 

 

 

8,912,812

 

 

 

8,952,300

 

TVC Enterprises, LLC

 

01/18/2024

 

 

Diversified Consumer Services

 

 

7.30

%

 

1M L+550

 

 

9,949,749

 

 

 

9,949,749

 

 

 

9,949,749

 

TWS Acquisition Corporation

 

06/16/2025

 

 

Diversified Consumer Services

 

 

7.99

%

 

1M L+625

 

 

7,075,000

 

 

 

6,942,097

 

 

 

7,075,000

 

UBEO, LLC

 

04/03/2024

 

 

Capital Equipment

 

 

6.76

%

 

3M L+450

 

 

22,194,395

 

 

 

21,998,444

 

 

 

21,972,451

 

Urology Management Associates, LLC

 

08/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.80

%

 

3M L+500

 

 

11,550,932

 

 

 

11,374,716

 

 

 

11,550,932

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

 

Wholesale

 

 

8.60

%

 

3M L+650

 

 

15,899,813

 

 

 

15,634,610

 

 

 

15,995,211

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

 

Aerospace and Defense

 

 

9.30

%

 

1M L+750

 

 

5,395,982

 

 

 

5,325,863

 

 

 

5,395,982

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

482,172,440

 

 

 

479,446,351

 

Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.60

%

 

1M L+850

 

 

894,487

 

 

 

894,487

 

 

 

894,487

 

 

 

 

 

 

 

 

 

 

(PIK 10.60

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan B

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

 

 

 

15,946

 

 

 

15,946

 

 

 

15,946

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan C

 

02/02/2026

 

 

Business Services

 

 

8.00

%

 

 

 

7,977,513

 

 

 

7,977,513

 

 

 

7,937,625

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,887,946

 

 

 

8,848,058

 

Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,317

 

 

 

1,713,106

 

 

 

715,328

 

DBI Holding, LLC, Series A-1

 

 

 

 

Business Services

 

 

 

 

 

 

5,034

 

 

 

5,034,310

 

 

 

4,181,067

 

DBI Holding, LLC, Series B

 

 

 

 

Business Services

 

 

 

 

 

 

1,065,021

 

 

 

236,521

 

 

 

-

 

Total Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,983,937

 

 

 

4,896,395

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,874,900

 

 

 

8,874,900

 

US Bank Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,113,145

 

 

 

3,154,459

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,988,045

 

 

 

12,029,359

 

Total Investments and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

510,032,368

 

 

$

505,220,163

 

Liabilities in Excess of Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(448,388,336

)

Members' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

56,831,827

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSSL’s accounting policy.

(3)

Non-U.S. company or principal place of business outside the United States.

(4)

Par amount is denominated in Australian Dollars (A$) or in Canadian Dollars (C$) as denoted.

(5)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

 

21


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

 

Below is a listing of PSSL’s individual investments as of September 30, 2019:

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (1)

 

Par

 

 

Cost

 

 

Fair Value (2)

 

First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altamira Technologies, LLC

 

07/24/2025

 

 

High Tech Industries

 

 

8.28

%

 

3M L+600

 

 

5,000,000

 

 

$

4,927,149

 

 

$

5,000,000

 

American Auto Auction Group, LLC

 

01/02/2024

 

 

Transportation: Consumer

 

 

6.85

%

 

3M L+475

 

 

7,749,274

 

 

 

7,674,216

 

 

 

7,671,781

 

By Light Professional IT Services, LLC

 

05/16/2022

 

 

High Tech Industries

 

 

8.52

%

 

1M L+725

 

 

13,772,261

 

 

 

13,531,751

 

 

 

13,772,261

 

Cadence Aerospace, LLC

 

11/14/2023

 

 

Aerospace and Defense

 

 

8.54

%

 

3M L+650

 

 

11,735,208

 

 

 

11,644,440

 

 

 

11,680,054

 

Cardenas Markets LLC

 

11/29/2023

 

 

Beverage, Food and Tobacco

 

 

7.79

%

 

1M L+575

 

 

7,348,866

 

 

 

7,311,507

 

 

 

7,128,400

 

Centauri Group Holdings, LLC

 

02/12/2024

 

 

Aerospace and Defense

 

 

7.36

%

 

1M L+525

 

 

10,422,726

 

 

 

10,413,416

 

 

 

10,396,669

 

Challenger Performance Optimization, Inc.

 

08/31/2023

 

 

Business Services

 

 

7.87

%

 

1M L+575

 

 

10,127,447

 

 

 

10,040,432

 

 

 

9,874,261

 

Country Fresh Holdings, LLC

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

182,403

 

 

 

179,170

 

 

 

182,403

 

Country Fresh Holdings, LLC (Revolver)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

126,031

 

 

 

126,031

 

 

 

126,031

 

Country Fresh Holdings, LLC - (Revolver) (5)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

324,080

 

 

 

 

 

Deva Holdings, Inc.

 

10/31/2023

 

 

Consumer Goods: Non-Durable

 

 

7.54

%

 

3M L+625

 

 

19,748,744

 

 

 

19,748,744

 

 

 

19,748,744

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.85

%

 

3M L+575

 

 

12,312,500

 

 

 

12,157,345

 

 

 

12,189,375

 

Douglas Sewer Intermediate, LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.85

%

 

3M L+575

 

 

8,166,594

 

 

 

8,116,022

 

 

 

8,084,928

 

Findex Group Limited (3), (4)

 

05/31/2024

 

 

Banking, Finance, Insurance and Real Estate

 

 

6.26

%

 

3M L+525

A

$

10,000,000

 

 

 

7,376,173

 

 

 

6,542,165

 

GCOM Software LLC

 

11/14/2022

 

 

High Tech Industries

 

 

8.37

%

 

1M L+750

 

 

17,384,864

 

 

 

17,263,748

 

 

 

17,384,864

 

Good2Grow LLC

 

11/18/2024

 

 

Beverages

 

 

6.35

%

 

3M L+425

 

 

11,752,655

 

 

 

11,649,126

 

 

 

11,576,366

 

Good Source Solutions, Inc.

 

06/29/2023

 

 

Beverage, Food and Tobacco

 

 

6.37

%

 

3M L+600

 

 

14,357,813

 

 

 

14,241,579

 

 

 

14,135,267

 

GSM Holdings, Inc.

 

06/03/2024

 

 

Consumer Goods: Durable

 

 

6.60

%

 

3M L+450

 

 

19,669,098

 

 

 

19,524,460

 

 

 

19,472,406

 

IMIA Holdings, Inc.

 

10/28/2024

 

 

Aerospace and Defense

 

 

6.60

%

 

3M L+450

 

 

12,406,250

 

 

 

12,351,255

 

 

 

12,344,219

 

Impact Group, LLC

 

06/27/2023

 

 

Wholesale

 

 

8.60

%

 

1M L+650

 

 

9,390,185

 

 

 

9,296,753

 

 

 

9,296,283

 

Infrastructure Supply Operations Pty Ltd. (3), (4)

 

12/12/2023

 

 

Wholesale

 

 

5.80

%

 

1M L+425

A

$

15,000,000

 

 

 

10,973,919

 

 

 

9,717,138

 

Integrative Nutrition, LLC

 

09/29/2023

 

 

Diversified Consumer Services

 

 

6.85

%

 

1M L+475

 

 

9,974,874

 

 

 

9,974,874

 

 

 

9,974,874

 

K2 Pure Solutions NoCal, L.P.

 

12/20/2023

 

 

Chemicals, Plastics and Rubber

 

 

7.30

%

 

1M L+525

 

 

19,850,000

 

 

 

19,586,294

 

 

 

19,609,815

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

 

Capital Equipment

 

 

7.60

%

 

3M L+550

 

 

9,925,000

 

 

 

9,837,686

 

 

 

9,916,068

 

Leap Legal Software Pty Ltd (3), (4)

 

09/12/2022

 

 

High Tech Industries

 

 

6.80

%

 

3M L+575

A

$

14,755,747

 

 

 

10,483,859

 

 

 

9,952,014

 

Long's Drugs Incorporated

 

08/19/2022

 

 

Healthcare and Pharmaceuticals

 

 

7.10

%

 

1M L+500

 

 

17,820,000

 

 

 

17,688,160

 

 

 

17,641,800

 

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

 

Retail

 

 

8.04

%

 

1M L+600

 

 

7,078,125

 

 

 

7,118,977

 

 

 

6,575,083

 

Manna Pro Products, LLC

 

12/08/2023

 

 

Consumer Goods: Non-Durable

 

 

8.05

%

 

1M L+600

 

 

6,877,500

 

 

 

6,797,207

 

 

 

6,688,369

 

Marketplace Events LLC (4)

 

01/27/2021

 

 

Media: Diversified and Production

 

 

7.20

%

 

P+275

C

$

5,760,254

 

 

 

4,461,926

 

 

 

4,350,645

 

Mission Critical Electronics, Inc.

 

09/28/2022

 

 

Capital Equipment

 

 

7.10

%

 

3M L+500

 

 

6,009,982

 

 

 

5,977,867

 

 

 

6,009,982

 

New Milani Group LLC

 

06/06/2024

 

 

Consumer Goods: Non-Durable

 

 

6.35

%

 

1M L+425

 

 

14,812,500

 

 

 

14,691,710

 

 

 

14,664,375

 

Olde Thompson, LLC

 

05/14/2024

 

 

Beverage, Food and Tobacco

 

 

6.54

%

 

1M L+450

 

 

11,876,667

 

 

 

11,757,900

 

 

 

11,876,667

 

Output Services Group, Inc.

 

03/27/2024

 

 

Business Services

 

 

6.54

%

 

1M L+425

 

 

7,883,419

 

 

 

7,909,754

 

 

 

6,779,740

 

Pestell Minerals and Ingredients Inc.

 

06/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.57

%

 

3M L+525

 

 

9,925,000

 

 

 

9,840,202

 

 

 

9,825,750

 

Pestell Minerals and Ingredients Inc.

 

06/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.23

%

 

3M L+525

C

$

3,242,655

 

 

 

2,412,626

 

 

 

2,424,644

 

PH Beauty Holdings III, Inc.

 

09/29/2025

 

 

Wholesale

 

 

7.04

%

 

1M L+500

 

 

9,892,519

 

 

 

9,804,058

 

 

 

9,397,893

 

Plant Health Intermediate, Inc.

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

8.00

%

 

3M L+575

 

 

1,758,406

 

 

 

1,736,386

 

 

 

1,740,822

 

PlayPower, Inc.

 

05/8/2026

 

 

Leisure Products

 

 

7.60

%

 

3M L+550

 

 

4,189,500

 

 

 

4,148,451

 

 

 

4,184,263

 

Smile Brands Inc.

 

10/14/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.66

%

 

3M L+450

 

 

11,289,688

 

 

 

11,189,470

 

 

 

11,176,791

 

Snak Club, LLC

 

07/19/2021

 

 

Beverage, Food and Tobacco

 

 

8.10

%

 

1M L+600

 

 

4,687,495

 

 

 

4,687,495

 

 

 

4,359,370

 

Sonny's Enterprises, LLC

 

12/01/2022

 

 

Capital Equipment

 

 

6.35

%

 

3M L+425

 

 

15,224,842

 

 

 

15,227,900

 

 

 

15,224,842

 

Teneo Holdings LLC

 

07/18/2025

 

 

Business Services

 

 

7.29

%

 

1M L+525

 

 

5,000,000

 

 

 

4,804,110

 

 

 

4,762,500

 

The Infosoft Group, LLC

 

12/02/2021

 

 

Media: Broadcasting and Subscription

 

 

7.43

%

 

6M L+500

 

 

8,823,392

 

 

 

8,790,069

 

 

 

8,735,157

 

TVC Enterprises, LLC

 

01/18/2024

 

 

Diversified Consumer Services

 

 

7.55

%

 

1M L+550

 

 

9,974,874

 

 

 

9,974,874

 

 

 

9,974,874

 

TWS Acquisition Corporation

 

06/16/2025

 

 

Diversified Consumer Services

 

 

8.28

%

 

1M L+625

 

 

7,075,000

 

 

 

6,937,888

 

 

 

6,933,500

 

UBEO, LLC

 

04/03/2024

 

 

Capital Equipment

 

 

6.78

%

 

3M L+450

 

 

22,248,673

 

 

 

22,045,879

 

 

 

22,026,186

 

Urology Management Associates, LLC

 

08/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

7.04

%

 

3M L+450

 

 

11,572,122

 

 

 

11,388,612

 

 

 

11,572,122

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

 

Wholesale

 

 

8.83

%

 

3M L+650

 

 

16,001,734

 

 

 

15,724,459

 

 

 

16,121,747

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

 

Aerospace and Defense

 

 

9.55

%

 

1M L+750

 

 

5,466,024

 

 

 

5,389,938

 

 

 

5,466,024

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

478,935,867

 

 

 

474,289,532

 

Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.60

%

 

1M L+850

 

 

870,886

 

 

 

870,886

 

 

 

870,886

 

 

 

 

 

 

 

 

 

 

(PIK 10.60

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan B

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

6M L+525

 

 

15,206

 

 

 

15,206

 

 

 

15,206

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan C

 

02/02/2026

 

 

Business Services

 

 

8.00

%

 

 

 

7,607,291

 

 

 

7,607,291

 

 

 

7,569,255

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,493,383

 

 

 

8,455,347

 

Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,317

 

 

 

1,713,106

 

 

 

1,124,929

 

DBI Holding, LLC, Series A-1

 

 

 

 

Business Services

 

 

 

 

 

 

5,034

 

 

 

5,034,310

 

 

 

4,680,039

 

DBI Holding, LLC, Series B

 

 

 

 

Business Services

 

 

 

 

 

 

1,065,021

 

 

 

236,521

 

 

 

-

 

Total Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,983,937

 

 

 

5,804,968

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,166,301

 

 

 

12,166,301

 

US Bank Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,156,230

 

 

 

3,128,580

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,322,531

 

 

 

15,294,881

 

Total Investments and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

509,735,718

 

 

$

503,844,728

 

Liabilities in Excess of Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(446,736,922

)

Members' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

57,107,806

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSSL’s accounting policy.

(3)

Non-U.S. company or principal place of business outside the United States.

(4)

Par amount is denominated in Australian Dollars (A$) or in Canadian Dollars (C$) as denoted.

(5)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

 

 

22


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

Below is the financial information for PSSL:

 

Statements of Assets and Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

September 30, 2019

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value (cost—$498,044,324 and $494,413,190, respectively)

 

$

493,190,805

 

 

$

488,549,847

 

Cash and cash equivalents (cost—$11,988,045 and $15,322,531, respectively)

 

 

12,029,359

 

 

 

15,294,881

 

Interest receivable

 

 

1,464,930

 

 

 

1,855,545

 

Prepaid expenses and other assets

 

 

1,084,158

 

 

 

996,333

 

Total assets

 

 

507,769,252

 

 

 

506,696,606

 

Liabilities

 

 

 

 

 

 

 

 

Payable for investments purchased

 

 

55,448,462

 

 

 

 

PSSL Credit Facility payable

 

 

254,456,951

 

 

 

308,724,305

 

Notes payable to members

 

 

139,650,000

 

 

 

139,650,000

 

Interest payable on PSSL Credit Facility

 

 

963,362

 

 

 

1,015,468

 

Interest payable on notes to members

 

 

39,197

 

 

 

176,273

 

Accrued other expenses

 

 

379,453

 

 

 

22,754

 

Total liabilities

 

 

450,937,425

 

 

 

449,588,800

 

Commitments and contingencies (1)

 

 

 

 

 

 

Members' equity

 

 

56,831,827

 

 

 

57,107,806

 

Total liabilities and members' equity

 

$

507,769,252

 

 

$

506,696,606

 

 

(1)

As of December 31, 2019 and September 30, 2019, PSSL had unfunded commitments to fund investments of $0.1 million and $0.3 million, respectively.

 

Statements of Operations

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Investment income:

 

 

 

 

 

 

 

 

Interest

 

$

8,768,628

 

 

$

9,541,567

 

Other income

 

 

 

 

 

157,913

 

Total investment income

 

 

8,768,628

 

 

 

9,699,480

 

Expenses:

 

 

 

 

 

 

 

 

Interest and expenses on PSSL Credit Facility

 

 

3,606,085

 

 

 

4,087,476

 

Interest expense on notes to members

 

 

3,430,557

 

 

 

3,220,623

 

Administrative services expenses

 

 

300,000

 

 

 

250,000

 

Other general and administrative expenses (1)

 

 

113,710

 

 

 

113,650

 

Total expenses

 

 

7,450,352

 

 

 

7,671,749

 

Net investment income

 

 

1,318,276

 

 

 

2,027,731

 

Realized and unrealized gain (loss) on investments and credit facility foreign

   currency translations:

 

 

 

 

 

 

 

 

Net realized gain on investments

 

 

452,477

 

 

 

258,233

 

Net change in unrealized appreciation (depreciation) on:

 

 

 

 

 

 

 

 

Investments

 

 

1,078,789

 

 

 

(4,035,710

)

Credit facility (appreciation) depreciation of foreign currency translations

 

 

(1,325,522

)

 

 

847,498

 

Net change in unrealized appreciation (depreciation) on investments and

   credit facility foreign currency translations

 

 

(246,733

)

 

 

(3,188,212

)

Net realized and unrealized gain (loss) from investments and credit facility

   foreign currency translations

 

 

205,744

 

 

 

(2,929,979

)

Net increase in members' equity resulting from operations

 

$

1,524,020

 

 

$

(902,248

)

 

(1)

No management or incentive fees are payable by PSSL. If any fees were to be charged, they would be separately disclosed in the Statement of Operations.

 

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.

 

ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:

 

 

Level 1:

Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.

 

 

Level 2:

Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.

 

 

Level 3:

Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

 

 

23


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2031 Asset-Backed Debt and our Credit Facility are classified as Level 3. Our 2023 Notes are classified as Level 1, as they were valued using the closing price from the primary exchange. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

 

The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.

 

Our investments are generally structured as Floating Rate Loans, mainly first lien secured debt, but also may include second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.

 

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.

 

In addition to using the above inputs in cash equivalents, investments, our 2023 Notes, our 2031 Asset-Backed Debt and our Credit Facility valuations, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.

 

As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. In accordance with ASC 820, Fair Value Measurement), we do not categorize any investments for which fair value is measured using the net asset value per share as a practical expedient within the fair value hierarchy.

 

The remainder of our investment portfolio and our long-term Credit Facility are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.

 

Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:

 

Asset Category

 

Fair value at December 31, 2019

 

 

Valuation Technique

 

Unobservable Input

 

Range of Input

(Weighted Average) (1)

 

First lien

 

$

272,193,711

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

 

First lien

 

 

759,949,627

 

 

Market Comparable

 

Market Yield

 

4.1% – 15.5% (8.4%)

 

Second lien

 

 

27,435,119

 

 

Market Comparable

 

Market Yield

 

4.1% – 12.7% (10.7%)

 

First lien

 

 

10,370,100

 

 

Enterprise Market Value

 

EBITDA multiple

 

5.0x – 14.7x (8.2x)

 

Second lien

 

 

5,458,138

 

 

Enterprise Market Value

 

EBITDA multiple

 

14.7x

 

Equity

 

 

50,981,372

 

 

Enterprise Market Value

 

EBITDA multiple

 

6.5x – 14.7x (11.3x)

 

Total Level 3 investments

 

$

1,126,388,066

 

 

 

 

 

 

 

 

 

Long-Term Credit Facility

 

$

334,040,510

 

 

Market Comparable

 

Market Yield

 

4.1%

 

 

Asset Category

 

Fair value at September 30, 2019

 

 

Valuation Technique

 

Unobservable Input

 

Range of Input

(Weighted Average) (1)

 

First lien

 

$

274,095,799

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

 

Second lien

 

 

2,205,284

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

 

First lien

 

 

661,720,734

 

 

Market Comparable

 

Market Yield

 

3.9% – 29.2% (8.3%)

 

Second lien

 

 

26,851,188

 

 

Market Comparable

 

Market Yield

 

3.9% – 14.2% (10.6%)

 

First lien

 

 

9,084,267

 

 

Enterprise Market Value

 

EBITDA multiple

 

5.0x – 10.9x (6.5x)

 

Second lien

 

 

5,314,125

 

 

Enterprise Market Value

 

EBITDA multiple

 

10.9x

 

Equity

 

 

52,466,181

 

 

Enterprise Market Value

 

EBITDA multiple

 

6.3x – 50.8x (15.4x)

 

Total Level 3 investments

 

$

1,031,737,579

 

 

 

 

 

 

 

 

 

Long-Term Credit Facility

 

$

263,988,583

 

 

Market Comparable

 

Market Yield

 

4.0%

 

 

(1)The weighted averages disclosed in the table above were weighted by their relative fair value.

 

 

24


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

Our investments, cash and cash equivalents, Credit Facility, 2023 Notes, and the 2031 Asset-Backed Debt were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 

 

 

Fair Value at December 31, 2019

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Measured at Net

Asset Value (1)

 

First lien

 

$

1,042,513,437

 

 

$

 

 

$

 

 

$

1,042,513,437

 

 

$

 

Second lien

 

 

32,893,257

 

 

 

 

 

 

 

 

 

32,893,257

 

 

 

 

Equity

 

 

100,709,220

 

 

 

 

 

 

 

 

 

50,981,372

 

 

 

49,727,848

 

Total investments

 

 

1,176,115,914

 

 

 

 

 

 

 

 

 

1,126,388,066

 

 

 

49,727,848

 

Cash and cash equivalents

 

 

56,292,541

 

 

 

56,292,541

 

 

 

 

 

 

 

 

 

 

Total investments and cash and cash equivalents

 

$

1,232,408,455

 

 

$

56,292,541

 

 

$

 

 

$

1,126,388,066

 

 

$

49,727,848

 

Long-Term Credit Facility

 

$

334,040,510

 

 

$

 

 

$

 

 

$

334,040,510

 

 

$

 

2023 Notes

 

 

133,826,569

 

 

 

133,826,569

 

 

 

 

 

 

 

 

 

 

2031 Asset-Backed Debt (2)

 

 

224,393,947

 

 

 

 

 

 

 

 

 

224,393,947

 

 

 

 

Total debt

 

$

692,261,026

 

 

$

133,826,569

 

 

$

 

 

$

558,434,457

 

 

$

 

 

(1)

In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSSL is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, have not been classified in the fair value hierarchy.

(2)

We elected not to apply ASC 825-10 to the 2031 Asset-Backed Debt and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value, which approximates the fair value.

 

 

 

Fair Value at September 30, 2019

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Measured at Net

Asset Value (1)

 

First lien

 

$

944,900,800

 

 

$

 

 

$

 

 

$

944,900,800

 

 

$

 

Second lien

 

 

34,370,598

 

 

 

 

 

 

 

 

 

34,370,598

 

 

 

 

Equity

 

 

102,435,511

 

 

 

 

 

 

 

 

 

52,466,181

 

 

 

49,969,330

 

Total investments

 

 

1,081,706,909

 

 

 

 

 

 

 

 

 

1,031,737,579

 

 

 

49,969,330

 

Cash and cash equivalents

 

 

63,337,728

 

 

 

63,337,728

 

 

 

 

 

 

 

 

 

 

Total investments and cash and cash equivalents

 

$

1,145,044,637

 

 

$

63,337,728

 

 

$

 

 

$

1,031,737,579

 

 

$

49,969,330

 

Long-Term Credit Facility

 

$

263,988,583

 

 

$

 

 

$

 

 

$

263,988,583

 

 

$

 

2023 Notes

 

 

135,240,084

 

 

 

135,240,084

 

 

 

 

 

 

 

 

$

 

2031 Asset-Backed Debt(2)

 

 

224,321,845

 

 

 

 

 

 

 

 

 

224,321,845

 

 

 

 

Total debt

 

$

623,550,512

 

 

$

135,240,084

 

 

$

 

 

$

488,310,428

 

 

$

 

 

(1)

In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSSL is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, have not been classified in the fair value hierarchy.

(2)

We elected not to apply ASC 825-10 to the 2031 Asset-Backed Debt and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value, which approximates the fair value.

 

The tables below show a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3):

 

 

 

Three Months Ended December 31, 2019

 

Description

 

First Lien

 

 

Second lien,

subordinated debt

and equity

investments

 

 

Totals

 

Beginning Balance

 

$

944,900,800

 

 

$

86,836,779

 

 

$

1,031,737,579

 

Net realized gain

 

 

976,698

 

 

 

35,322

 

 

 

1,012,020

 

Net change in unrealized appreciation (depreciation)

 

 

679,968

 

 

 

(4,051,404

)

 

 

(3,371,436

)

Purchases, PIK interest, net discount accretion and non-cash exchanges

 

 

237,379,619

 

 

 

3,373,585

 

 

 

240,753,204

 

Sales, repayments and non-cash exchanges

 

 

(141,423,648

)

 

 

(2,319,653

)

 

 

(143,743,301

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

 

 

 

Ending Balance

 

$

1,042,513,437

 

 

$

83,874,629

 

 

$

1,126,388,066

 

Net change in unrealized (depreciation) appreciation reported within the net change in unrealized

   (depreciation) appreciation on investments in our Consolidated Statements of Operations

   attributable to our Level 3 assets still held at the reporting date.

 

$

534,054

 

 

$

(3,974,340

)

 

$

(3,440,286

)

 

 

25


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

 

 

Three Months Ended December 31, 2018

 

Description

 

First Lien

 

 

Second lien,

subordinated debt

and equity

investments

 

 

Totals

 

Beginning Balance

 

$

913,297,976

 

 

$

42,517,588

 

 

$

955,815,564

 

Net realized gains

 

 

271,716

 

 

 

 

 

 

271,716

 

Net change in unrealized (depreciation) appreciation

 

 

(9,982,247

)

 

 

180,425

 

 

 

(9,801,822

)

Purchases, PIK interest, net discount accretion and non-cash exchanges

 

 

174,081,000

 

 

 

1,908,075

 

 

 

175,989,075

 

Sales, repayments and non-cash exchanges

 

 

(190,086,145

)

 

 

(208,334

)

 

 

(190,294,479

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

 

 

 

Ending Balance

 

$

887,582,300

 

 

$

44,397,754

 

 

$

931,980,054

 

Net change in unrealized (depreciation) appreciation reported within the net change in unrealized

   appreciation (depreciation) on investments in our Consolidated Statements of Operations

   attributable to our Level 3 assets still held at the reporting date.

 

$

(10,488,442

)

 

$

180,425

 

 

$

(10,308,017

)

 

The table below shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3):

 

 

 

Three Months Ended December 31,

 

Long-Term Credit Facility

 

2019

 

 

2018

 

Beginning Balance (cost – $265,307,500 and $333,727,520, respectively)

 

$

263,988,583

 

 

$

332,128,815

 

Net change in unrealized depreciation included in earnings

 

 

51,927

 

 

 

(3,441,137

)

Borrowings

 

 

86,000,000

 

 

 

104,500,000

 

Repayments

 

 

(16,000,000

)

 

 

(87,320,020

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

Ending Balance (cost – $335,307,500 and $350,907,500, respectively)

 

$

334,040,510

 

 

$

345,867,658

 

 

As of December 31, 2019, we had outstanding non-U.S. dollar borrowings on the Credit Facility. Net change in fair value from foreign currency translation on outstanding borrowings is listed below:

 

Foreign Currency

 

Amount Borrowed

 

 

Borrowing Cost

 

 

Current Value

 

 

Reset Date

 

Change in Fair Value

 

Canadian Dollar

C

$

17,500,000

 

 

$

12,407,501

 

 

$

13,495,276

 

 

January 2, 2020

 

$

1,087,775

 

 

As of September 30, 2019, we had outstanding non-U.S. dollar borrowings on the Credit Facility. Net change in fair value from foreign currency translation on outstanding borrowings is listed below:

 

Foreign Currency

 

Amount Borrowed

 

 

Borrowing Cost

 

 

Current Value

 

 

Reset Date

 

Change in Fair Value

 

Canadian Dollar

C

$

17,500,000

 

 

$

12,407,501

 

 

$

13,217,523

 

 

October 1, 2019

 

$

810,022

 

 

The carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility and the 2023 Notes. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred expenses of zero and $4.5 million, respectively, relating to amendment costs on the Credit Facility during the three months ended December 31, 2019 and 2018. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility and the 2023 Notes are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including our 2031 Asset-Backed Debt.

 

For the three months ended December 31, 2019 and 2018, the Credit Facility and the 2023 Notes had a net change in unrealized depreciation of million $1.4 million and $5.5 million, respectively. As of December 31, 2019 and September 30, 2019, the net unrealized depreciation on the Credit Facility and the 2023 Notes totaled million $6.0 and $4.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments. Our 2023 Notes trade on the TASE and we use the closing price on the exchange to determine the fair value.

 

 

26


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

6. TRANSACTIONS WITH AFFILIATED COMPANIES

 

An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but 25% or less of its voting securities and a controlled affiliate when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the three months ended December 31, 2019 were as follows:

 

Name of Investment

 

Fair value at September 30, 2019

 

 

Purchases

of / Advances

to Affiliates

 

 

Sale of /

Distributions

from

Affiliates

 

 

Net Change in

Unrealized

Appreciation

(Depreciation)

 

 

Fair value at December 31, 2019

 

 

Interest

Income

 

 

Dividend

Income

 

 

Net

Realized

Gains

(Losses)

 

Non-Controlled Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding

   Company Inc.

 

$

14,491,626

 

 

$

1,244,931

 

 

$

 

 

$

(2,501,672

)

 

$

13,234,885

 

 

$

202,776

 

 

$

 

 

$

 

Quick Weight Loss Centers, LLC

 

 

5,938,939

 

 

 

22,554

 

 

 

 

 

 

(3,156,551

)

 

 

2,804,942

 

 

 

22,577

 

 

 

 

 

 

 

Total Non-Controlled

   Affiliates

 

$

20,430,565

 

 

$

1,267,485

 

 

$

 

 

$

(5,658,223

)

 

$

16,039,827

 

 

$

225,353

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controlled Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennantPark Senior Secured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan Fund I LLC *

 

$

172,163,080

 

 

$

 

 

$

 

 

$

(241,482

)

 

$

171,921,598

 

 

$

3,155,324

 

 

$

1,575,000

 

 

$

 

Total Controlled Affiliates

 

$

172,163,080

 

 

$

 

 

$

 

 

$

(241,482

)

 

$

171,921,598

 

 

$

3,155,324

 

 

$

1,575,000

 

 

$

 

Total Controlled and Non-Controlled Affiliates

 

$

192,593,645

 

 

$

1,267,485

 

 

$

 

 

$

(5,899,705

)

 

$

187,961,425

 

 

$

3,380,677

 

 

$

1,575,000

 

 

$

 

 

*

We and Kemper are the members of PSSL, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSSL make investments in the PSSL in the form of first lien secured debt and equity interests, and all portfolio and other material decision regarding PSSL must be submitted to PSSL’s board of directors or investment committee, both of which are comprised of two members appointed by each of us and Kemper. Because management of PSSL is shared equally between us and Kemper, we do not believe we control PSSL for purposes of the 1940 Act or otherwise.

 

7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE

 

The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations:

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Numerator for net increase in net assets resulting from operations

 

$

9,972,894

 

 

$

4,995,195

 

Denominator for basic and diluted weighted average shares

 

 

38,772,074

 

 

 

38,772,074

 

Basic and diluted net increase in net assets per share resulting from operations

 

$

0.26

 

 

$

0.13

 

 

8. CASH AND CASH EQUIVALENTS

 

Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facility, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of December 31, 2019 and September 30, 2019, cash and cash equivalents consisted of money market funds in the amounts of $56.3million and $63.3 million at fair value, respectively.

 

27


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

9. FINANCIAL HIGHLIGHTS

 

Below are the financial highlights:

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Per Share Data:

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

12.97

 

 

$

13.82

 

Net investment income (1)

 

 

0.29

 

 

 

0.28

 

Net change in realized and unrealized loss (1)

 

 

(0.03

)

 

 

(0.15

)

Net increase in net assets resulting from operations (1)

 

 

0.26

 

 

 

0.13

 

Distributions to stockholders (1), (2)

 

 

(0.29

)

 

 

(0.29

)

Net asset value, end of period

 

$

12.95

 

 

$

13.66

 

Per share market value, end of period

 

$

12.18

 

 

$

11.57

 

Total return* (3)

 

 

7.56

%

 

 

13.06

%

Shares outstanding at end of period

 

 

38,772,074

 

 

 

38,772,074

 

Ratios** / Supplemental Data:

 

 

 

 

 

 

 

 

Ratio of operating expenses to average net assets (4)

 

 

4.96

%

 

 

1.82

%

Ratio of debt related expenses to average net assets (5)

 

 

5.83

%

 

 

4.84

%

Ratio of total expenses to average net assets (5)

 

 

10.79

%

 

 

6.66

%

Ratio of net investment income to average net assets (5)

 

 

8.88

%

 

 

10.78

%

Net assets at end of period

 

$

501,980,364

 

 

$

529,786,722

 

Weighted average debt outstanding

 

$

647,164,200

 

 

$

486,048,277

 

Weighted average debt per share (1)

 

$

16.69

 

 

$

12.54

 

Asset coverage per unit (6)

 

$

1,704

 

 

$

2,103

 

Portfolio turnover ratio

 

 

51.44

%

 

 

74.40

%

 

*

Not annualized for periods less than one year.

**

Annualized for periods less than one year.

(1)

Based on the weighted average shares outstanding for the respective periods.

(2)

The tax status of distributions is calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP, and reported on Form 1099-DIV each calendar year.

(3)

Based on the change in market price per share during the periods and assumes distributions, if any, are reinvested.

(4)

Excludes debt related costs.

(5)

Includes interest and expenses on debt (annualized) as well as  Credit Facility amendment and debt issuance costs, if any, (not annualized).

(6)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated on our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness at par (changed from fair value). This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit.

 

10. DEBT

 

The annualized weighted average cost of debt for the three months ended December 31, 2019 and 2018, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 4.5% and 5.3%, respectively. As of December 31, 2019, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing.

 

On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of December 31, 2019 and September 30, 2019, our asset coverage ratio, as computed in accordance with the 1940 Act, was 170% and 179%, respectively.

 

Credit Facility

 

Funding I’s multi-currency Credit Facility with affiliates of Truist Bank (formerly SunTrust Bank), or the Lenders, was $520 million as of December 31, 2019, subject to satisfaction of certain conditions and regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above LIBOR of 200 basis points, a maturity date of October 2023 and a revolving period that ends in October 2021. As of December 31, 2019 and September 30, 2019, Funding I borrowed $335.3 million and $265.3 million under the Credit Facility, respectively. The Credit Facility had a weighted average interest rate of 3.7% and 4.1%, exclusive of the fee on undrawn commitments as of December 31, 2019 and September 30, 2019, respectively. As of December 31, 2019 and September 30, 2019, we had $184.7 million and $254.7 million of unused borrowing capacity under the Credit Facility, respectively, subject to the regulatory restrictions.

 

During the revolving period, the Credit Facility bears interest at LIBOR plus 200 basis points and, after the revolving period, the rate sets to LIBOR plus 425 basis points for the remaining two years, maturing in October 2023. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.

 

The Credit Facility contains covenants, including, but not limited to, restrictions of loan size, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of December 31, 2019, we were in compliance with the covenants relating to the Credit Facility.

 

We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.

 

28


PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

DECEMBER 31, 2019

(Unaudited)

 

 

Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.

2023 Notes

 

In November 2017, we issued $138.6 million of our 2023 Notes pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd., as trustee.

 

The 2023 Notes pay interest at a rate of 3.8% per year. Interest on the 2023 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes is payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023.

 

The 2023 Notes are general, unsecured obligations, rank equal in right of payment with all of our existing and future senior unsecured indebtedness and are generally redeemable at our option. The deed of trust governing the 2023 Notes includes certain customary covenants, including minimum equity requirements, and events of default. Please refer to the deed of trust filed as Exhibit (d)(8) to our post-effective amendment filed on December 13, 2017 for further information. The 2023 Notes are rated ilA+ by S&P Global Ratings Maalot Ltd. and are listed on the TASE. In connection with this offering, we have dual listed our common stock on the TASE.

 

The 2023 Notes have not been and will not be registered under the Securities Act of 1933, as amended, or the Securities Act, and may not be offered or sold in the United States absent registration under the Securities Act or in transactions exempt from, or not subject to, such registration requirements.

 

2031 Asset-Backed Debt

 

In September 2019, the Company completed the 301.4 million term debt securitization. Term debt securitizations, also known as CLOs, are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company’s asset coverage requirements. The 2031 Asset-Backed Debt was issued by the Securitization Issuer. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Loans maturing 2031, which bear interest at the three-month LIBOR plus 1.80%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.66%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 2.90%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.266%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 4.00%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear interest at 5.379%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 4.75% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 1.80%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The annualized interest on the 2031 Asset-Backed Debt will be paid, to the extent of funds available. The reinvestment period of the Debt Securitization ends on October 15, 2023 and the 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031.

 

On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly owned subsidiaries, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of approximately $55.4 million at the closing of the Debt Securitization.

 

The 2031 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Class D Secured Deferrable Floating Rate Notes and the Preferred Shares of the Securitization Issuer were eliminated in consolidation. As of December 31, 2019 and September 30, 2019, the Company had $228.0 million of 2031 Asset-Backed Debt outstanding, respectively, with a weighted average interest rate of 4.1% and 4.2%. As of December 31, 2019 and September 30, 2019, the unamortized fees on the 2031 Asset-Backed Debt were $3.6 million and $3.7, respectively.

 

Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.

 

11. COMMITMENTS AND CONTINGENCIES

 

From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. As of December 31, 2019 and September 30, 2019, we had $85.1 million and $101.1 million, respectively, in commitments to fund investments. Additionally, as described in Note 4, the Company had unfunded commitments of up to $26.7 million and $9.2 million to PSSL as of December 31, 2019 and September 30, 2019, respectively, that may be contributed primarily for the purpose of funding new investments approved by the PSSL board of directors or investment committee.

 

 

 

 

 

 

 

 

29


 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and Board of Directors of PennantPark Floating Rate Capital Ltd. and its Subsidiaries

 

Results of Review of Interim Financial Statements

 

We have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Floating Rate Capital Ltd. and its Subsidiaries (collectively referred to as the “Company”), including the consolidated schedule of investments, as of December 31, 2019, and the related consolidated statements of operations, changes in net assets, and cash flows for the three-month periods ended December 31, 2019 and 2018, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2019, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein); and in our report dated November 20, 2019, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities as of September 30, 2019, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

 

Basis for Review Results

 

These interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

/s/ RSM US LLP


New York, New York

February 5, 2020

 

30


 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to us and our consolidated subsidiaries regarding future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our Company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Report involve risks and uncertainties, including statements as to:

 

 

our future operating results;

 

 

our business prospects and the prospects of our prospective portfolio companies;

 

 

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

 

the impact of a protracted decline in the liquidity of credit markets on our business;

 

 

the impact of investments that we expect to make;

 

 

the impact of fluctuations in interest rates and foreign exchange rates on our business and our portfolio companies;

 

 

our contractual arrangements and relationships with third parties;

 

 

the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

 

 

the ability of our prospective portfolio companies to achieve their objectives;

 

 

our expected financings and investments and ability to fund capital commitments to PSSL;

 

 

the adequacy of our cash resources and working capital;

 

 

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

 

 

the impact of price and volume fluctuations in the stock market;

 

 

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

 

 

the impact of future legislation and regulation on our business and our portfolio companies; and

 

 

the impact of Brexit and other world economic and political issues.

 

We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and similar expressions to identify forward-looking statements. You should not place undue influence on the forward-looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason.

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Report should not be regarded as a representation by us that our plans and objectives will be achieved.

 

We have based the forward-looking statements included in this Report on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including reports on Form 10-Q/K and current reports on Form 8-K.

 

You should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act.

 

The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Report.

 

Overview

 

PennantPark Floating Rate Capital Ltd. is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital by investing primarily in Floating Rate Loans and other investments made to U.S. middle-market companies.

 

We believe that Floating Rate Loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans” or “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt, senior secured Floating Rate Loans typically have more robust capital-preserving qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrower’s capital structure and often have certain of the borrower’s assets pledged as collateral. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.

 

 

31


 

Under normal market conditions, we generally expect that at least 80% of the value of our Managed Assets will be invested in Floating Rate Loans and other investments bearing a variable-rate of interest. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt and subordinated debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment size between $5 million and $30 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.

 

Our investment activity depends on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.

 

Organization and Structure of PennantPark Floating Rate Capital Ltd.

 

PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we elected to be treated, and intend to qualify annually, as a RIC under the Code.

 

Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.

 

Revenues

 

We generate revenue in the form of interest income on the debt securities we hold and capital gains and dividends, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of first lien secured debt, second lien secured debt or subordinated debt, typically have a term of three to ten years and bear interest at a floating or fixed rate. Interest on debt securities is generally payable quarterly. In some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of amendment, commitment, origination, structuring or diligence fees, fees for providing significant managerial assistance and possibly consulting fees. Loan origination fees, OID and market discount or premium are capitalized and accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC 450-30.

 

Expenses

 

Our primary operating expenses include the payment of a management fee and the payment of an incentive fee to our Investment Adviser, if any, our allocable portion of overhead under our Administration Agreement and other operating costs as detailed below. Our management fee compensates our Investment Adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments. Additionally, we pay interest expense on the outstanding debt and unused commitment fees on undrawn amounts, under our various debt facilities. We bear all other direct or indirect costs and expenses of our operations and transactions, including:

 

 

the cost of calculating our net asset value, including the cost of any third-party valuation services;

 

 

the cost of effecting sales and repurchases of shares of our common stock and other securities;

 

 

fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complementary businesses;

 

 

expenses incurred by the Investment Adviser in performing due diligence and reviews of investments;

 

 

transfer agent and custodial fees;

 

 

fees and expenses associated with marketing efforts;

 

 

federal and state registration fees and any exchange listing fees;

 

 

federal, state, local and foreign taxes;

 

 

independent directors’ fees and expenses;

 

 

brokerage commissions;

 

 

fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;

 

 

direct costs such as printing, mailing, long distance telephone and staff;

 

 

fees and expenses associated with independent audits and outside legal costs;

 

 

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and

 

 

all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under our Administration Agreement that will be based upon our allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

 

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Generally, during periods of asset growth, we expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities would be additive to the expenses described above.

 

PORTFOLIO AND INVESTMENT ACTIVITY

As of December 31, 2019, our portfolio totaled $1,176.1 million and consisted of $1,042.5 million of first lien secured debt (including $122.2 million in PSSL), $32.9 million of second lien secured debt and $100.7 million of preferred and common equity (including $49.7 million in PSSL). Our debt portfolio consisted of 99% variable-rate investments. As of December 31, 2019, we had one portfolio company on non-accrual, representing 0.4% and zero of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $7.0 million. Our overall portfolio consisted of 102 companies with an average investment size of $11.5 million, had a weighted average yield on debt investments of 8.4%, and was invested 89% in first lien secured debt (including 10% invested in PSSL), 3% in second lien secured debt and 8% in preferred and common equity (including 4% in PSSL). As of December 31, 2019, 97% of the investments held by PSSL were first lien secured debt.

 

As of September 30, 2019, our portfolio totaled $1,081.7 million and consisted of $944.9 million of first lien secured debt (including $122.2 million in PSSL), $34.4 million of second lien secured debt and $102.4 million of preferred and common equity (including $50.0 million in PSSL). Our debt portfolio consisted of 99% variable-rate investments. As of September 30, 2019, we had one portfolio company on non-accrual, representing 0.4% and zero of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $3.5 million. Our overall portfolio consisted of 95 companies with an average investment size of $11.4 million, had a weighted average yield on debt investments of 8.7%, and was invested 87% in first lien secured debt (including 11% in PSSL), 3% in second lien secured debt and 10% in preferred and common equity (including 5% in PSSL). As of September 30, 2019, 97% of the investments held by PSSL were first lien secured debt.

 

For the three months ended December 31, 2019, we invested $239.4 million in 10 new and 31 existing portfolio companies with a weighted average yield on debt investments of 8.2%. Sales and repayments of investments for the three months ended December 31, 2019 totaled $143.7 million.

 

For the three months ended December 31, 2018, we invested $180.7 million in nine new and 24 existing portfolio companies with a weighted average yield on debt investments of 8.6%. Sales and repayments of investments for the three months ended December 31, 2018 totaled $190.3 million.

 

PennantPark Senior Secured Loan Fund I LLC

 

As of December 31, 2019, PSSL’s portfolio totaled $493.2 million, consisted of 49 companies with an average investment size of $10.1 million and had a weighted average yield on debt investments of 7.4%. As of September 30, 2019, PSSL’s portfolio totaled $488.5 million, consisted of 45 companies with an average investment size of $10.9 million and had a weighted average yield on debt investments of 7.6%.

 

For the three months ended December 31, 2019, PSSL invested $69.1 million (of which $68.9 million was purchased from the Company) in eight new and one existing portfolio companies with a weighted average yield on debt investments of 7.5%. Sales and repayments of investments for the three months ended December 31, 2019 totaled $66.4 million.

 

For the three months ended December 31, 2018, PSSL invested $142.4 million (of which $38.0 million was purchased from the Company) in nine new and three existing portfolio companies with a weighted average yield on debt investments of 8.1%. PSSL’s sales and repayments of investments for the three months ended December 31, 2018 totaled $70.7 million.

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements.

 

Investment Valuations

 

We expect that there may not be readily available market values for many of the investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material.

 

Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

 

(1)

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our Investment Adviser responsible for the portfolio investment;

 

 

(2)

Preliminary valuation conclusions are then documented and discussed with the management of our Investment Adviser;

 

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(3)

Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment. The independent valuation firms review management’s preliminary valuations in light of their own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker;

 

 

(4)

The audit committee of our board of directors reviews the preliminary valuations of our Investment Adviser and those of the independent valuation firms on a quarterly basis, periodically assesses the valuation methodologies of the independent valuation firms, and responds to and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and

 

 

(5)

Our board of directors discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment Adviser, the respective independent valuation firms and the audit committee.

 

Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.

 

Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.

 

ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:

 

 

Level 1:

Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.

 

 

Level 2:

Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.

 

 

Level 3:

Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2031 Asset-Backed Debt and our Credit Facility are classified as Level 3. Our 2023 Notes are classified as Level 1. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

 

In addition to using the above inputs in cash equivalents, investments, our 2023 Notes, our 2031 Asset-Backed Debt and our Credit Facility valuations, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

 

The carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility and the 2023 Notes. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred expenses of zero and $4.5 million, respectively, relating to amendment costs on the Credit Facility during the three months ended December 31, 2019 and 2018. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility and the 2023 Notes are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including our 2031 Asset-Backed Debt.

 

For the three months ended December 31, 2019 and 2018, the Credit Facility and the 2023 Notes had a net change in unrealized depreciation of $1.4 million and $5.5 million, respectively. As of December 31, 2019 and September 30, 2019, the net unrealized depreciation on the Credit Facility and the 2023 Notes totaled million $6.0 and $4.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments. Our 2023 Notes trade on the TASE and we use the closing price on the exchange to determine the fair value.

 

Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned.

 

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Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure realized gains or losses 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, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in fair values of our portfolio investments, our Credit Facility and the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

Foreign Currency Translation

 

Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

 

 

1.

Fair value of investment securities, other assets and liabilities – at the exchange rates prevailing at the end of the applicable period; and

 

 

2.

Purchases and sales of investment securities, income and expenses – at the exchange rates prevailing on the respective dates of such transactions.

 

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.

 

PIK Interest

 

We have investments in our portfolio which contain a PIK interest provision. PIK interest is added to the principal balance of the investment and is recorded as income. In order for us to maintain our ability to be subject to tax as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends for U.S. federal income tax purposes, even though we may not have collected any cash with respect to interest on PIK securities.

 

Federal Income Taxes

 

We have elected to be treated, and intend to qualify annually to maintain our election to be treated, as a RIC under Subchapter M of the Code. To maintain our RIC tax election, we must, among other requirements, meet certain annual source-of-income and quarterly asset diversification requirements. We also must annually distribute dividends for U.S. federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of the sum of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, or investment company taxable income, determined without regard to any deduction for dividends paid.

 

Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our net ordinary income (subject to certain deferrals and elections) for the calendar year, (2) 98.2% of the excess, if any, of our capital gains over our capital losses, or capital  gain net income (adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year plus (3) the sum of any net ordinary income plus capital gain net income for preceding years that was not distributed during such years and on which we did not incur any federal income tax, or the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, contingent on our ability to be subject to tax as a RIC, in order to provide us with additional liquidity.

 

Because federal income tax regulations differ from GAAP, distributions characterized in accordance with tax regulations may differ from net investment income and net realized gain recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

 

RESULTS OF OPERATIONS

 

Set forth below are the results of operations for the three months ended December 31, 2019 and 2018.

 

Investment Income

 

Investment income for the three months ended December 31, 2019 was $24.6 million and was attributable to $22.4 million from first lien secured debt and $2.2 million from other investments. This compares to investment income for the three months ended December 31, 2018, which was $23.2 million and was attributable to $21.1 million from first lien secured debt and $2.1 million from other investments. The increase in investment income compared to the same period in the prior year was primarily due to the growth of our portfolio.

 

Expenses

 

Expenses for the three months ended December 31, 2019 totaled $13.5 million. Base management fee for the same period totaled $2.8 million, incentive fee totaled $2.3 million (including $2.3 million on net investment income and zero accrued but not payable on realized gains), debt related interest and expenses totaled $7.3 million, general and administrative expenses totaled $1.0 million, and provision for taxes of $0.1 million. This compares to expenses for the three months ended December 31, 2018, which totaled $12.2 million. Base management fee for the same period totaled $2.5 million, incentive fee totaled $(1.2) million (including $0.2 million on net investment income and $(1.4) million accrued but not payable on realized gains), debt related interest and expenses totaled $9.8 million (including $4.5 million in Credit Facility amendment costs) and general and administrative expenses totaled $1.1 million. The increase in expenses for the three months ended December 31, 2019 compared to the same period in the prior year was primarily due to increase in management and incentive fees and debt related interest and expenses due to the growth of our portfolio in the current period.

 

 

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Net Investment Income

 

Net investment income totaled $11.1 million or $0.29 per share for the three months ended December 31, 2019. Net investment income totaled $10.9 million or $0.28 per share for the three months ended December 31, 2018, respectively. The change in net investment income compared to the same period in the prior year was primarily due to the growth of our portfolio in the current year as well as financing costs incurred in the prior year.

 

Net Realized Gains or Losses

 

Sales and repayments of investments for the three months ended December 31, 2019 totaled $143.7 million and net realized gains totaled $1.0 million. Sales and repayments of investments for the three months ended December 31, 2018 totaled $190.3 million, and net realized gains totaled $0.9 million. The change in realized gains/losses was primarily due to changes in the market conditions of our investments and the values at which they were realized.

 

Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2023 Notes

 

For the three months ended December 31, 2019, we reported net change in unrealized depreciation on investments of $3.5 million. For the three months ended December 31, 2018, we reported net change in unrealized depreciation on investments of $12.4 million. As of December 31, 2019 and 2018, our net unrealized depreciation on investments totaled $7.0 million and $13.3 million, respectively. The net change in unrealized depreciation on our investments compared to the same period in the prior year was primarily due to changes in the capital market conditions, the financial performance of certain portfolio companies and the reversal of unrealized appreciation/depreciation on investments that were realized.

 

For the three months ended December 31, 2019 and 2018, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation of $1.4 million and $5.5 million, respectively. As of December 31, 2019 and 2018, the net unrealized depreciation on the Credit Facility and the 2023 Notes totaled $6.0 million and $4.7 million, respectively. The net change in net unrealized depreciation compared to the same period in the prior year was primarily due to changes in the capital markets.

 

Net Change in Net Assets Resulting from Operations

 

Net change in net assets resulting from operations totaled $10.0 million or $0.26 per share, respectively, for the three months ended December 31, 2019. This compares to a net change in net assets resulting from operations of $5.0 million or $0.13 per share for the three months ended December 31, 2018. The increase net assets from operations compared to the same period in the prior year was primarily due to appreciation of the portfolio in the current period.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. As of December 31, 2019, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing.

 

On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of December 31, 2019 and September 30, 2019, our asset coverage ratio, as computed in accordance with the 1940 Act, was 170% and 179%, respectively.

 

The annualized weighted average cost of debt for the three months ended December 31, 2019 and 2018, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 4.5% and 5.3%. As of December 31, 2019 and September 30, 2019, we had $184.7 million and $254.7 million of unused borrowing capacity under the Credit Facility, respectively, subject to the regulatory restrictions.

 

Funding I’s multi-currency Credit Facility with the Lenders was $520 million as of December 31, 2019, subject to satisfaction of certain conditions and regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above LIBOR of 200 basis points, a maturity date of October 2023 and a revolving period that ends in October 2021. As of December 31, 2019 and September 30, 2019, Funding I borrowed $335.3 million and $265.3 under the Credit Facility, respectively. The Credit Facility had a weighted average interest rate of 3.7% and 4.1%, exclusive of the fee on undrawn commitments as of December 31, 2019 and September 30, 2019, respectively.

 

During the revolving period, the Credit Facility bears interest at LIBOR plus 200 basis points and, after the revolving period, the rate sets to LIBOR plus 425 basis points for the remaining two years, maturing in October 2023. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.

 

The Credit Facility contains covenants, including but not limited to, restrictions of loan size, currency types and amounts, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of December 31, 2019, we were in compliance with the covenants relating to the Credit Facility.

 

We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.

 

Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. We cannot assure you that there will be sufficient funds available to make any distributions to us or that such distributions will meet our expectations from Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.

 

 

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In November 2017, we issued $138.6 million of our 2023 Notes. The 2023 Notes were issued pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd., as trustee.

 

The 2023 Notes pay interest at a rate of 3.8% per year. Interest on the 2023 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes will be payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023.

 

The 2023 Notes are general, unsecured obligations, rank equal in right of payment with all of our existing and future senior unsecured indebtedness and are generally redeemable at our option. The deed of trust governing the 2023 Notes includes certain customary covenants, including minimum equity requirements, and events of default. Please refer to the deed of trust filed as Exhibit (d)(8) to our post-effective amendment filed on December 13, 2017 for more information. The 2023 Notes are rated ilA+ by S&P Global Ratings Maalot Ltd. and are listed on the TASE. In connection with this offering, we have dual listed our common stock on the TASE.

 

The 2023 Notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration under the Securities Act or in transactions exempt from, or not subject to, such registration requirements.

 

In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Notes maturing 2031, which bear interest at the three-month LIBOR plus 1.80%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.66%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 2.90%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.266%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 4.00%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear interest at 5.379%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month LIBOR plus 4.75% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Loans due 2031, which bear interest at the three-month LIBOR plus 1.80%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031.

 

On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by our wholly owned subsidiary, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of $55.4 million at the closing of the Debt Securitization.

 

The 2031 Asset-Backed Debt constitutes secured obligations of the Securitization Issuers, and the indenture governing the 2031 Asset-Backed Debt includes customary covenants and events of default. The 2031 Asset-Backed Debt has not been, and will not be, registered under the Securities Act or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration.

 

Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to a collateral management agreement between our Investment Adviser and the Securitization Issuer, or the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.

 

We may raise equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, securitizing a portion of our investments among other considerations or mergers and acquisitions. Furthermore, the Credit Facility availability depends on various covenants and restrictions as discussed in the preceding paragraphs. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes. For the three months ended December 31, 2019 and 2018, we issued zero shares, respectively.

 

As of December 31, 2019 and September 30, 2019, we had cash equivalents of $56.3 million and $63.3 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.

 

Our operating activities used cash of $66.1 million for the three months ended December 31, 2019, and our financing activities provided cash of $58.9 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from draws on our Credit Facility, partially offset by distributions paid to stockholders.

 

Our operating activities used cash of $43.6 million for the three months ended December 31, 2018 and our financing activities provided cash of $6.1 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from draws on our Credit Facility, partially offset by distributions paid to stockholders.

 

PennantPark Senior Secured Loan Fund I LLC

 

In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of December 31, 2019, PSSL had total assets of $507.8 million. As of the same date, we and Kemper had remaining commitments to fund first lien secured debt and equity interests in PSSL in an aggregate amount of $30.5 million. PSSL invests in portfolio companies in the same industries in which we may directly invest.

 

We provide capital to PSSL in the form of first lien secured debt and equity interests. As of December 31, 2019, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of the same date, our investment in PSSL consisted of first lien secured debt of $122.2 million and equity interests of $52.4 million. As of the same date, we had commitments to fund first lien secured debt to PSSL of $140.9 million, of which $18.7 million was unfunded. As of December 31, 2019, we had commitments to fund equity interests in PSSL of $60.4 million, of which $8.0 million was unfunded

 

We and Kemper each appointed two members to PSSL’s four person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee, provided that at least one individual is present that was elected, designated or appointed by each member; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each member.

 

 

37


 

Additionally, PSSL has entered into the PSSL Credit Facility, with Capital One, N.A. through its wholly-owned subsidiary, PSSL Subsidiary, which as of December 31, 2019 allowed PSSL Subsidiary to borrow up to $420.0 million at any one time outstanding, subject to leverage and borrowing base restrictions.  

 

Below is a summary of PSSL’s portfolio at fair value:

 

 

 

December 31, 2019

 

 

September 30, 2019

 

Total investments

 

$

493,190,805

 

 

$

488,549,847

 

Weighted average yield on debt investments

 

 

7.4

%

 

 

7.6

%

Number of portfolio companies in PSSL

 

 

49

 

 

 

45

 

Largest portfolio company investment

 

$

21,972,451

 

 

$

22,026,186

 

Total of five largest portfolio company investments

 

$

100,061,867

 

 

$

102,872,275

 

 

 

38


 

Below is a listing of PSSL’s individual investments as of December 31, 2019:

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (1)

 

Par

 

 

Cost

 

 

Fair Value (2)

 

First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altamira Technologies, LLC

 

07/24/2025

 

 

High Tech Industries

 

 

7.93

%

 

3M L+600

 

 

4,968,750

 

 

$

4,898,753

 

 

$

4,968,750

 

American Auto Auction Group, LLC

 

01/02/2024

 

 

Transportation: Consumer

 

 

6.55

%

 

3M L+475

 

 

7,729,555

 

 

 

7,654,681

 

 

 

7,652,259

 

By Light Professional IT Services, LLC

 

05/16/2022

 

 

High Tech Industries

 

 

7.96

%

 

1M L+625

 

 

13,675,154

 

 

 

13,455,820

 

 

 

13,675,154

 

Cadence Aerospace, LLC

 

11/14/2023

 

 

Aerospace and Defense

 

 

8.43

%

 

3M L+650

 

 

11,705,417

 

 

 

11,618,814

 

 

 

11,691,369

 

Cardenas Markets LLC

 

11/29/2023

 

 

Beverage, Food and Tobacco

 

 

7.45

%

 

1M L+575

 

 

7,329,975

 

 

 

7,293,805

 

 

 

7,036,776

 

Centauri Group Holdings, LLC

 

02/12/2024

 

 

Aerospace and Defense

 

 

7.20

%

 

1M L+525

 

 

10,396,599

 

 

 

10,387,355

 

 

 

10,344,616

 

Challenger Performance Optimization, Inc.

 

08/31/2023

 

 

Business Services

 

 

7.55

%

 

1M L+575

 

 

10,127,447

 

 

 

10,043,474

 

 

 

9,772,987

 

Country Fresh Holdings, LLC

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

182,403

 

 

 

179,362

 

 

 

182,403

 

Country Fresh Holdings, LLC (Revolver)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.01

%

 

1M L+500

 

 

306,075

 

 

 

306,075

 

 

 

306,075

 

Country Fresh Holdings, LLC - (Revolver) (5)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

144,036

 

 

 

 

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

12,281,250

 

 

 

12,136,773

 

 

 

12,158,438

 

Douglas Sewer Intermediate, LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

8,146,023

 

 

 

8,098,916

 

 

 

8,064,563

 

DRS Holdings III, Inc.

 

11/03/2025

 

 

Consumer Goods: Non-Durable

 

 

7.55

%

 

1M L+575

 

 

8,082,770

 

 

 

8,004,468

 

 

 

8,003,559

 

Findex Group Limited (3), (4)

 

05/31/2024

 

 

Banking, Finance, Insurance and Real Estate

 

 

6.19

%

 

3M L+525

A

$

10,000,000

 

 

 

7,385,187

 

 

 

6,818,615

 

GCOM Software LLC

 

11/14/2022

 

 

High Tech Industries

 

 

7.96

%

 

1M L+625

 

 

17,237,379

 

 

 

17,124,994

 

 

 

17,237,379

 

Good2Grow LLC

 

11/18/2024

 

 

Beverages

 

 

6.19

%

 

3M L+425

 

 

11,329,248

 

 

 

11,233,370

 

 

 

11,215,956

 

GSM Holdings, Inc.

 

06/03/2024

 

 

Consumer Goods: Durable

 

 

6.60

%

 

3M L+450

 

 

19,619,454

 

 

 

19,481,180

 

 

 

19,423,260

 

IMIA Holdings, Inc.

 

10/28/2024

 

 

Aerospace and Defense

 

 

6.44

%

 

3M L+450

 

 

12,375,000

 

 

 

12,321,890

 

 

 

12,313,125

 

Impact Group, LLC

 

06/27/2023

 

 

Wholesale

 

 

8.44

%

 

1M L+650

 

 

9,365,185

 

 

 

9,275,424

 

 

 

9,224,707

 

Infrastructure Supply Operations Pty Ltd. (3), (4)

 

12/12/2023

 

 

Wholesale

 

 

5.67

%

 

1M L+475

A

$

15,000,000

 

 

 

10,985,913

 

 

 

10,172,038

 

Integrative Nutrition, LLC

 

09/29/2023

 

 

Diversified Consumer Services

 

 

6.69

%

 

1M L+475

 

 

9,949,749

 

 

 

9,949,749

 

 

 

9,850,251

 

K2 Pure Solutions NoCal, L.P.

 

12/20/2023

 

 

Chemicals, Plastics and Rubber

 

 

7.05

%

 

1M L+525

 

 

19,800,000

 

 

 

19,546,364

 

 

 

19,469,340

 

KHC Holdings, Inc.

 

10/31/2022

 

 

Wholesale

 

 

7.94

%

 

3M L+600

 

 

5,350,904

 

 

 

5,350,904

 

 

 

5,350,904

 

Lash Opco, LLC - Term Loan

 

12/12/2024

 

 

Consumer Goods: Non-Durable

 

 

9.16

%

 

3M L+725

 

 

7,500,000

 

 

 

7,277,344

 

 

 

7,275,000

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

 

Capital Equipment

 

 

7.44

%

 

3M L+550

 

 

9,900,000

 

 

 

9,816,129

 

 

 

9,943,559

 

Leap Legal Software Pty Ltd (3), (4)

 

09/12/2022

 

 

High Tech Industries

 

 

6.76

%

 

3M L+575

A

$

14,718,247

 

 

 

10,461,364

 

 

 

10,346,192

 

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

 

Retail

 

 

7.74

%

 

1M L+600

 

 

7,031,250

 

 

 

7,068,566

 

 

 

6,471,703

 

Manna Pro Products, LLC

 

12/08/2023

 

 

Consumer Goods: Non-Durable

 

 

7.80

%

 

1M L+600

 

 

6,860,000

 

 

 

6,782,980

 

 

 

6,667,234

 

Marketplace Events LLC (4)

 

01/27/2023

 

 

Media: Diversified and Production

 

 

7.31

%

 

P+275

C

$

5,745,254

 

 

 

4,456,891

 

 

 

4,408,350

 

Mission Critical Electronics, Inc.

 

09/28/2022

 

 

Capital Equipment

 

 

6.94

%

 

3M L+500

 

 

5,994,919

 

 

 

5,965,076

 

 

 

5,986,521

 

New Milani Group LLC

 

06/06/2024

 

 

Consumer Goods: Non-Durable

 

 

6.94

%

 

1M L+425

 

 

14,775,000

 

 

 

14,660,510

 

 

 

14,479,500

 

Nuvei Technologies Corp.

 

09/28/2025

 

 

High Tech Industries

 

 

6.80

%

 

P+400

 

 

12,452,133

 

 

 

12,514,394

 

 

 

12,514,394

 

Olde Thompson, LLC

 

05/14/2024

 

 

Beverage, Food and Tobacco

 

 

6.05

%

 

1M L+425

 

 

11,410,000

 

 

 

11,295,900

 

 

 

11,410,000

 

Output Services Group, Inc.

 

03/27/2024

 

 

Business Services

 

 

6.30

%

 

1M L+425

 

 

7,865,895

 

 

 

7,890,564

 

 

 

7,472,600

 

PH Beauty Holdings III, Inc.

 

09/29/2025

 

 

Wholesale

 

 

6.80

%

 

1M L+500

 

 

9,867,538

 

 

 

9,781,830

 

 

 

9,768,863

 

Plant Health Intermediate, Inc.

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.69

%

 

3M L+575

 

 

1,753,977

 

 

 

1,733,464

 

 

 

1,736,437

 

PlayPower, Inc.

 

05/08/2026

 

 

Leisure Products

 

 

7.46

%

 

3M L+550

 

 

4,179,000

 

 

 

4,139,034

 

 

 

4,126,763

 

Schlesinger Global, Inc.

 

07/14/2025

 

 

Business Services

 

 

6.80

%

 

1M L+500

 

 

11,985,169

 

 

 

11,985,169

 

 

 

11,985,169

 

Smile Brands Inc.

 

10/14/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.55

%

 

3M L+450

 

 

11,261,250

 

 

 

11,164,187

 

 

 

11,148,638

 

Snak Club, LLC

 

07/19/2021

 

 

Beverage, Food and Tobacco

 

 

7.69

%

 

1M L+600

 

 

4,687,495

 

 

 

4,687,495

 

 

 

4,499,995

 

Solutionreach, Inc.

 

01/17/2024

 

 

Healthcare and Pharmaceuticals

 

 

7.55

%

 

3M L+475

 

 

6,555,975

 

 

 

6,474,016

 

 

 

6,521,229

 

Sonny's Enterprises, LLC

 

12/01/2022

 

 

Capital Equipment

 

 

6.10

%

 

3M L+425

 

 

15,186,105

 

 

 

15,189,151

 

 

 

15,034,245

 

TeleGuam Holdings, LLC

 

11/20/2025

 

 

Telecommunications

 

 

6.30

%

 

1M L+450

 

 

8,430,693

 

 

 

8,388,539

 

 

 

8,388,539

 

Teneo Holdings LLC

 

07/18/2025

 

 

Business Services

 

 

6.99

%

 

1M L+525

 

 

4,987,500

 

 

 

4,798,508

 

 

 

4,725,656

 

The Infosoft Group, LLC

 

09/16/2024

 

 

Media: Broadcasting and Subscription

 

 

7.32

%

 

6M L+525

 

 

8,799,611

 

 

 

8,769,767

 

 

 

8,711,615

 

TPC Canada Parent, Inc. and TPC US Parent, LLC

 

11/24/2025

 

 

Consumer Goods: Non-Durable

 

 

7.02

%

 

3M L+475

 

 

9,000,000

 

 

 

8,912,812

 

 

 

8,952,300

 

TVC Enterprises, LLC

 

01/18/2024

 

 

Diversified Consumer Services

 

 

7.30

%

 

1M L+550

 

 

9,949,749

 

 

 

9,949,749

 

 

 

9,949,749

 

TWS Acquisition Corporation

 

06/16/2025

 

 

Diversified Consumer Services

 

 

7.99

%

 

1M L+625

 

 

7,075,000

 

 

 

6,942,097

 

 

 

7,075,000

 

UBEO, LLC

 

04/03/2024

 

 

Capital Equipment

 

 

6.76

%

 

3M L+450

 

 

22,194,395

 

 

 

21,998,444

 

 

 

21,972,451

 

Urology Management Associates, LLC

 

08/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.80

%

 

3M L+500

 

 

11,550,932

 

 

 

11,374,716

 

 

 

11,550,932

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

 

Wholesale

 

 

8.60

%

 

3M L+650

 

 

15,899,813

 

 

 

15,634,610

 

 

 

15,995,211

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

 

Aerospace and Defense

 

 

9.30

%

 

1M L+750

 

 

5,395,982

 

 

 

5,325,863

 

 

 

5,395,982

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

482,172,440

 

 

 

479,446,351

 

Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.60

%

 

1M L+850

 

 

894,487

 

 

 

894,487

 

 

 

894,487

 

 

 

 

 

 

 

 

 

 

(PIK 10.60

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan B

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

 

 

 

15,946

 

 

 

15,946

 

 

 

15,946

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan C

 

02/02/2026

 

 

Business Services

 

 

8.00

%

 

 

 

7,977,513

 

 

 

7,977,513

 

 

 

7,937,625

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,887,946

 

 

 

8,848,058

 

Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,317

 

 

 

1,713,106

 

 

 

715,328

 

DBI Holding, LLC, Series A-1

 

 

 

 

Business Services

 

 

 

 

 

 

5,034

 

 

 

5,034,310

 

 

 

4,181,067

 

DBI Holding, LLC, Series B

 

 

 

 

Business Services

 

 

 

 

 

 

1,065,021

 

 

 

236,521

 

 

 

-

 

Total Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,983,937

 

 

 

4,896,395

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,874,900

 

 

 

8,874,900

 

US Bank Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,113,145

 

 

 

3,154,459

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,988,045

 

 

 

12,029,359

 

Total Investments and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

510,032,368

 

 

$

505,220,163

 

Liabilities in Excess of Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(448,388,336

)

Members' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

56,831,827

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSSL’s accounting policy.

(3)

Non-U.S. company or principal place of business outside the United States.

(4)

Par amount is denominated in Australian Dollars (A$) or in Canadian Dollars (C$) as denoted.

(5)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

 

 

39


 

Below is a listing of PSSL’s individual investments as of September 30, 2019:

 

Issuer Name

 

Maturity

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (1)

 

Par

 

 

Cost

 

 

Fair Value (2)

 

First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altamira Technologies, LLC

 

07/24/2025

 

 

High Tech Industries

 

 

8.28

%

 

3M L+600

 

 

5,000,000

 

 

$

4,927,149

 

 

$

5,000,000

 

American Auto Auction Group, LLC

 

01/02/2024

 

 

Transportation: Consumer

 

 

6.85

%

 

3M L+475

 

 

7,749,274

 

 

 

7,674,216

 

 

 

7,671,781

 

By Light Professional IT Services, LLC

 

05/16/2022

 

 

High Tech Industries

 

 

8.52

%

 

1M L+725

 

 

13,772,261

 

 

 

13,531,751

 

 

 

13,772,261

 

Cadence Aerospace, LLC

 

11/14/2023

 

 

Aerospace and Defense

 

 

8.54

%

 

3M L+650

 

 

11,735,208

 

 

 

11,644,440

 

 

 

11,680,054

 

Cardenas Markets LLC

 

11/29/2023

 

 

Beverage, Food and Tobacco

 

 

7.79

%

 

1M L+575

 

 

7,348,866

 

 

 

7,311,507

 

 

 

7,128,400

 

Centauri Group Holdings, LLC

 

02/12/2024

 

 

Aerospace and Defense

 

 

7.36

%

 

1M L+525

 

 

10,422,726

 

 

 

10,413,416

 

 

 

10,396,669

 

Challenger Performance Optimization, Inc.

 

08/31/2023

 

 

Business Services

 

 

7.87

%

 

1M L+575

 

 

10,127,447

 

 

 

10,040,432

 

 

 

9,874,261

 

Country Fresh Holdings, LLC

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

182,403

 

 

 

179,170

 

 

 

182,403

 

Country Fresh Holdings, LLC (Revolver)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.10

%

 

1M L+500

 

 

126,031

 

 

 

126,031

 

 

 

126,031

 

Country Fresh Holdings, LLC - (Revolver) (5)

 

05/01/2023

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

324,080

 

 

 

 

 

Deva Holdings, Inc.

 

10/31/2023

 

 

Consumer Goods: Non-Durable

 

 

7.54

%

 

3M L+625

 

 

19,748,744

 

 

 

19,748,744

 

 

 

19,748,744

 

Douglas Products and Packaging Company LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.85

%

 

3M L+575

 

 

12,312,500

 

 

 

12,157,345

 

 

 

12,189,375

 

Douglas Sewer Intermediate, LLC

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

7.85

%

 

3M L+575

 

 

8,166,594

 

 

 

8,116,022

 

 

 

8,084,928

 

Findex Group Limited (3), (4)

 

05/31/2024

 

 

Banking, Finance, Insurance and Real Estate

 

 

6.26

%

 

3M L+525

A

$

10,000,000

 

 

 

7,376,173

 

 

 

6,542,165

 

GCOM Software LLC

 

11/14/2022

 

 

High Tech Industries

 

 

8.37

%

 

1M L+750

 

 

17,384,864

 

 

 

17,263,748

 

 

 

17,384,864

 

Good2Grow LLC

 

11/18/2024

 

 

Beverages

 

 

6.35

%

 

3M L+425

 

 

11,752,655

 

 

 

11,649,126

 

 

 

11,576,366

 

Good Source Solutions, Inc.

 

06/29/2023

 

 

Beverage, Food and Tobacco

 

 

6.37

%

 

3M L+600

 

 

14,357,813

 

 

 

14,241,579

 

 

 

14,135,267

 

GSM Holdings, Inc.

 

06/03/2024

 

 

Consumer Goods: Durable

 

 

6.60

%

 

3M L+450

 

 

19,669,098

 

 

 

19,524,460

 

 

 

19,472,406

 

IMIA Holdings, Inc.

 

10/28/2024

 

 

Aerospace and Defense

 

 

6.60

%

 

3M L+450

 

 

12,406,250

 

 

 

12,351,255

 

 

 

12,344,219

 

Impact Group, LLC

 

06/27/2023

 

 

Wholesale

 

 

8.60

%

 

1M L+650

 

 

9,390,185

 

 

 

9,296,753

 

 

 

9,296,283

 

Infrastructure Supply Operations Pty Ltd. (3), (4)

 

12/12/2023

 

 

Wholesale

 

 

5.80

%

 

1M L+425

A

$

15,000,000

 

 

 

10,973,919

 

 

 

9,717,138

 

Integrative Nutrition, LLC

 

09/29/2023

 

 

Diversified Consumer Services

 

 

6.85

%

 

1M L+475

 

 

9,974,874

 

 

 

9,974,874

 

 

 

9,974,874

 

K2 Pure Solutions NoCal, L.P.

 

12/20/2023

 

 

Chemicals, Plastics and Rubber

 

 

7.30

%

 

1M L+525

 

 

19,850,000

 

 

 

19,586,294

 

 

 

19,609,815

 

LAV Gear Holdings, Inc.

 

10/31/2024

 

 

Capital Equipment

 

 

7.60

%

 

3M L+550

 

 

9,925,000

 

 

 

9,837,686

 

 

 

9,916,068

 

Leap Legal Software Pty Ltd (3), (4)

 

09/12/2022

 

 

High Tech Industries

 

 

6.80

%

 

3M L+575

A

$

14,755,747

 

 

 

10,483,859

 

 

 

9,952,014

 

Long's Drugs Incorporated

 

08/19/2022

 

 

Healthcare and Pharmaceuticals

 

 

7.10

%

 

1M L+500

 

 

17,820,000

 

 

 

17,688,160

 

 

 

17,641,800

 

LSF9 Atlantis Holdings, LLC

 

05/01/2023

 

 

Retail

 

 

8.04

%

 

1M L+600

 

 

7,078,125

 

 

 

7,118,977

 

 

 

6,575,083

 

Manna Pro Products, LLC

 

12/08/2023

 

 

Consumer Goods: Non-Durable

 

 

8.05

%

 

1M L+600

 

 

6,877,500

 

 

 

6,797,207

 

 

 

6,688,369

 

Marketplace Events LLC (4)

 

01/27/2021

 

 

Media: Diversified and Production

 

 

7.20

%

 

P+275

C

$

5,760,254

 

 

 

4,461,926

 

 

 

4,350,645

 

Mission Critical Electronics, Inc.

 

09/28/2022

 

 

Capital Equipment

 

 

7.10

%

 

3M L+500

 

 

6,009,982

 

 

 

5,977,867

 

 

 

6,009,982

 

New Milani Group LLC

 

06/06/2024

 

 

Consumer Goods: Non-Durable

 

 

6.35

%

 

1M L+425

 

 

14,812,500

 

 

 

14,691,710

 

 

 

14,664,375

 

Olde Thompson, LLC

 

05/14/2024

 

 

Beverage, Food and Tobacco

 

 

6.54

%

 

1M L+450

 

 

11,876,667

 

 

 

11,757,900

 

 

 

11,876,667

 

Output Services Group, Inc.

 

03/27/2024

 

 

Business Services

 

 

6.54

%

 

1M L+425

 

 

7,883,419

 

 

 

7,909,754

 

 

 

6,779,740

 

Pestell Minerals and Ingredients Inc.

 

06/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.57

%

 

3M L+525

 

 

9,925,000

 

 

 

9,840,202

 

 

 

9,825,750

 

Pestell Minerals and Ingredients Inc.

 

06/01/2023

 

 

Beverage, Food and Tobacco

 

 

7.23

%

 

3M L+525

C

$

3,242,655

 

 

 

2,412,626

 

 

 

2,424,644

 

PH Beauty Holdings III, Inc.

 

09/29/2025

 

 

Wholesale

 

 

7.04

%

 

1M L+500

 

 

9,892,519

 

 

 

9,804,058

 

 

 

9,397,893

 

Plant Health Intermediate, Inc.

 

10/19/2022

 

 

Chemicals, Plastics and Rubber

 

 

8.00

%

 

3M L+575

 

 

1,758,406

 

 

 

1,736,386

 

 

 

1,740,822

 

PlayPower, Inc.

 

05/8/2026

 

 

Leisure Products

 

 

7.60

%

 

3M L+550

 

 

4,189,500

 

 

 

4,148,451

 

 

 

4,184,263

 

Smile Brands Inc.

 

10/14/2024

 

 

Healthcare and Pharmaceuticals

 

 

6.66

%

 

3M L+450

 

 

11,289,688

 

 

 

11,189,470

 

 

 

11,176,791

 

Snak Club, LLC

 

07/19/2021

 

 

Beverage, Food and Tobacco

 

 

8.10

%

 

1M L+600

 

 

4,687,495

 

 

 

4,687,495

 

 

 

4,359,370

 

Sonny's Enterprises, LLC

 

12/01/2022

 

 

Capital Equipment

 

 

6.35

%

 

3M L+425

 

 

15,224,842

 

 

 

15,227,900

 

 

 

15,224,842

 

Teneo Holdings LLC

 

07/18/2025

 

 

Business Services

 

 

7.29

%

 

1M L+525

 

 

5,000,000

 

 

 

4,804,110

 

 

 

4,762,500

 

The Infosoft Group, LLC

 

12/02/2021

 

 

Media: Broadcasting and Subscription

 

 

7.43

%

 

6M L+500

 

 

8,823,392

 

 

 

8,790,069

 

 

 

8,735,157

 

TVC Enterprises, LLC

 

01/18/2024

 

 

Diversified Consumer Services

 

 

7.55

%

 

1M L+550

 

 

9,974,874

 

 

 

9,974,874

 

 

 

9,974,874

 

TWS Acquisition Corporation

 

06/16/2025

 

 

Diversified Consumer Services

 

 

8.28

%

 

1M L+625

 

 

7,075,000

 

 

 

6,937,888

 

 

 

6,933,500

 

UBEO, LLC

 

04/03/2024

 

 

Capital Equipment

 

 

6.78

%

 

3M L+450

 

 

22,248,673

 

 

 

22,045,879

 

 

 

22,026,186

 

Urology Management Associates, LLC

 

08/30/2024

 

 

Healthcare and Pharmaceuticals

 

 

7.04

%

 

3M L+450

 

 

11,572,122

 

 

 

11,388,612

 

 

 

11,572,122

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

 

Wholesale

 

 

8.83

%

 

3M L+650

 

 

16,001,734

 

 

 

15,724,459

 

 

 

16,121,747

 

Whitney, Bradley & Brown, Inc.

 

10/18/2022

 

 

Aerospace and Defense

 

 

9.55

%

 

1M L+750

 

 

5,466,024

 

 

 

5,389,938

 

 

 

5,466,024

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

478,935,867

 

 

 

474,289,532

 

Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holdings, LLC

 

04/29/2024

 

 

Beverage, Food and Tobacco

 

 

10.60

%

 

1M L+850

 

 

870,886

 

 

 

870,886

 

 

 

870,886

 

 

 

 

 

 

 

 

 

 

(PIK 10.60

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan B

 

03/26/2021

 

 

Business Services

 

 

8.00

%

 

6M L+525

 

 

15,206

 

 

 

15,206

 

 

 

15,206

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DBI Holding, LLC, Term Loan C

 

02/02/2026

 

 

Business Services

 

 

8.00

%

 

 

 

7,607,291

 

 

 

7,607,291

 

 

 

7,569,255

 

 

 

 

 

 

 

 

 

 

(PIK 8.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,493,383

 

 

 

8,455,347

 

Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Fresh Holding Company Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

1,317

 

 

 

1,713,106

 

 

 

1,124,929

 

DBI Holding, LLC, Series A-1

 

 

 

 

Business Services

 

 

 

 

 

 

5,034

 

 

 

5,034,310

 

 

 

4,680,039

 

DBI Holding, LLC, Series B

 

 

 

 

Business Services

 

 

 

 

 

 

1,065,021

 

 

 

236,521

 

 

 

-

 

Total Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,983,937

 

 

 

5,804,968

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,166,301

 

 

 

12,166,301

 

US Bank Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,156,230

 

 

 

3,128,580

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,322,531

 

 

 

15,294,881

 

Total Investments and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

509,735,718

 

 

$

503,844,728

 

Liabilities in Excess of Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(446,736,922

)

Members' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

57,107,806

 

 

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSSL’s accounting policy.

(3)

Non-U.S. company or principal place of business outside the United States.

(4)

Par amount is denominated in Australian Dollars (A$) or in Canadian Dollars (C$) as denoted.

(5)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

 

 

40


 

Below is the financial information for PSSL:

 

Statements of Assets and Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

September 30, 2019

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value (cost—$498,044,324 and $494,413,190, respectively)

 

$

493,190,805

 

 

$

488,549,847

 

Cash and cash equivalents (cost—$11,988,045 and $15,322,531, respectively)

 

 

12,029,359

 

 

 

15,294,881

 

Interest receivable

 

 

1,464,930

 

 

 

1,855,545

 

Prepaid expenses and other assets

 

 

1,084,158

 

 

 

996,333

 

Total assets

 

 

507,769,252

 

 

 

506,696,606

 

Liabilities

 

 

 

 

 

 

 

 

Payable for investments purchased

 

 

55,448,462

 

 

 

 

PSSL Credit Facility payable

 

 

254,456,951

 

 

 

308,724,305

 

Notes payable to members

 

 

139,650,000

 

 

 

139,650,000

 

Interest payable on PSSL Credit Facility

 

 

963,362

 

 

 

1,015,468

 

Interest payable on notes to members

 

 

39,197

 

 

 

176,273

 

Accrued other expenses

 

 

379,453

 

 

 

22,754

 

Total liabilities

 

 

450,937,425

 

 

 

449,588,800

 

Commitments and contingencies (1)

 

 

 

 

 

 

Members' equity

 

 

56,831,827

 

 

 

57,107,806

 

Total liabilities and members' equity

 

$

507,769,252

 

 

$

506,696,606

 

 

(1)

As of December 31, 2019 and September 30, 2019, PSSL had unfunded commitments to fund investments of $0.1 million and $0.3 million, respectively.

 

Statements of Operations

 

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Investment income:

 

 

 

 

 

 

 

 

Interest

 

$

8,768,628

 

 

$

9,541,567

 

Other income

 

 

 

 

 

157,913

 

Total investment income

 

 

8,768,628

 

 

 

9,699,480

 

Expenses:

 

 

 

 

 

 

 

 

Interest and expenses on PSSL Credit Facility

 

 

3,606,085

 

 

 

4,087,476

 

Interest expense on notes to members

 

 

3,430,557

 

 

 

3,220,623

 

Administrative services expenses

 

 

300,000

 

 

 

250,000

 

Other general and administrative expenses (1)

 

 

113,710

 

 

 

113,650

 

Total expenses

 

 

7,450,352

 

 

 

7,671,749

 

Net investment income

 

 

1,318,276

 

 

 

2,027,731

 

Realized and unrealized gain (loss) on investments and credit facility foreign

   currency translations:

 

 

 

 

 

 

 

 

Net realized gain on investments

 

 

452,477

 

 

 

258,233

 

Net change in unrealized appreciation (depreciation) on:

 

 

 

 

 

 

 

 

Investments

 

 

1,078,789

 

 

 

(4,035,710

)

Credit facility (appreciation) depreciation of foreign currency translations

 

 

(1,325,522

)

 

 

847,498

 

Net change in unrealized appreciation (depreciation) on investments and

   credit facility foreign currency translations

 

 

(246,733

)

 

 

(3,188,212

)

Net realized and unrealized gain (loss) from investments and credit facility

   foreign currency translations

 

 

205,744

 

 

 

(2,929,979

)

Net increase in members' equity resulting from operations

 

$

1,524,020

 

 

$

(902,248

)

 

(1)

Currently, no management or incentive fees are payable by PSSL. If any fees were to be charged, they would be separately disclosed in the Statements of Operations.

Contractual Obligations

 

A summary of our significant contractual payment obligations at cost as of December 31, 2019, including borrowings under our Credit Facility, 2023 Notes, 2031 Asset-Backed Debt and other contractual obligations, is as follows:

 

 

 

Payments due by period (millions)

 

 

 

Total

 

 

Less than

1 year

 

 

1-3

years

 

 

3-5

years

 

 

More than

5 years

 

Credit Facility

 

$

335.3

 

 

$

 

 

$

 

 

$

335.3

 

 

$

 

2023 Notes

 

 

138.6

 

 

 

20.8

 

 

 

41.6

 

 

 

76.2

 

 

 

 

2031 Asset-Backed Debt

 

 

228.0

 

 

 

 

 

 

 

 

 

 

 

 

228.0

 

Total debt outstanding (1)

 

$

701.9

 

 

$

20.8

 

 

$

41.6

 

 

$

411.5

 

 

$

228.0

 

Unfunded commitments to PSSL

 

 

26.7

 

 

 

 

 

 

 

 

 

 

 

 

26.7

 

Unfunded investments (2)

 

 

85.1

 

 

 

 

 

 

13.9

 

 

 

57.7

 

 

 

13.5

 

Total contractual obligations

 

$

813.7

 

 

$

20.8

 

 

$

55.5

 

 

$

469.2

 

 

$

268.2

 

 

(1)

The annualized weighted average cost of debt as of December 31, 2019, excluding amendment costs and debt issuance costs, was 3.9% exclusive of the fee on the undrawn commitment on the Credit Facility.

(2)

Unfunded debt and equity investments are disclosed in the Consolidated Schedule of Investments and Note 11 of our Consolidated Financial Statements.

 

 

41


 

We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2020, PennantPark Investment Advisers serves as our investment adviser. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.

 

Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2020, the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

 

If any of our contractual obligations discussed above are terminated, our costs under new agreements that we enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.

 

Off-Balance Sheet Arrangements

 

We currently engage in no off-balance sheet arrangements other than our funding requirements for the unfunded investments described above.

 

Distributions

 

In order to be treated as a RIC for federal income tax purposes and to not be subject to corporate-level tax on undistributed income or gains, we are required, under Subchapter M of the Code, to annually distribute dividends for U.S. federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of investment company taxable income, determined without regard to any deduction for dividends paid.

 

Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, contingent on maintaining our ability to be subject to tax as a RIC, in order to provide us with additional liquidity.

 

During the three months ended December 31, 2019 and 2018, we declared distributions of $0.285 per share for total distributions of $11.1 million. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

 

We intend to continue to make monthly distributions to our stockholders. Our monthly distributions, if any, are determined by our board of directors quarterly.

 

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage ratio for borrowings applicable to us as a BDC under the 1940 Act and due to provisions in future credit facilities. If we do not distribute at least a certain percentage of our income annually, we could suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions at a particular level.

 

Recent Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update, or ASU, 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The key provisions include new, eliminated and modified disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early application is permitted. The Company has adopted this accounting standard update effective October 1, 2019 and the impact its of adoption was not material to the Company’s financial statements and related disclosures.

 

Item 3.

Quantitative And Qualitative Disclosures About Market Risk

 

We are subject to financial market risks, including changes in interest rates. As of December 31, 2019, our debt portfolio consisted of 99% variable-rate investments. The variable-rate loans are usually based on a LIBOR rate and typically have durations of three months, after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

 

Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:

 

Change In Interest Rates

 

Change In Interest Income,

Net Of Interest Expense

(in thousands)

 

 

Change In Interest Income,

Net of Interest

Expense Per Share

 

Down 1%

 

$

(5,129

)

 

$

(0.13

)

Up 1%

 

 

5,129

 

 

 

0.13

 

Up 2%

 

 

10,258

 

 

 

0.26

 

Up 3%

 

 

15,714

 

 

 

0.41

 

Up 4%

 

$

21,194

 

 

$

0.55

 

 

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

 

 

42


 

Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds, as well as our level of leverage. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income or net assets.

 

We may hedge against interest rate and foreign currency fluctuations by using standard hedging instruments such as futures, options and forward contracts or our Credit Facility subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates and foreign currencies, they may also limit our ability to participate in benefits of lower interest rates or higher exchange rates with respect to our portfolio of investments with fixed interest rates or investments denominated in foreign currencies. During the periods covered by this Report, we did not engage in interest rate hedging activities or foreign currency derivatives hedging activities.

 

Item 4.

Controls and Procedures

 

As of the period covered by this Report, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

43


 

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

 

None of us, our Investment Adviser or our Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator, may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these and any future legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

 

In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 filed on November 20, 2019, which could materially affect our business, financial condition and/or operating results. The risks described below, as well as in our Annual Report on Form 10-K are not the only risks facing PennantPark Floating Rate Capital Ltd. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

 

Legislation enacted in 2018 allows us to incur additional leverage.

 

A BDC has historically been able to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that its asset coverage, as defined in Section 61(a)(2) of the 1940 Act, equals at least 200% after such incurrence or issuance. In March 2018, the Consolidated Appropriations Act of 2018 (which includes the SBCAA) was enacted which amended the 1940 Act to decrease this percentage from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity) for a BDC that has received either stockholder approval or approval of a “required majority” (as defined in Section 57(o) of the 1940 Act) of its board of directors of the application of such lower asset coverage ratio to the BDC. On April 5, 2018, our board of directors approved such reduction. As of April 5, 2019, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirement, which may increase the risk of investing in us. Under the 200% minimum asset coverage ratio, the Company was permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity and, under the 150% minimum asset coverage ratio, the Company is permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a)(2) of the 1940 Act permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1-to-1 to a maximum of 2-to-1. In addition, since our base management fee is determined and payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expense may increase if we incur additional leverage.

 

Because we intend to distribute substantially all of our income to our stockholders to maintain our ability to be subject to tax as a RIC, we may need to raise additional capital to finance our growth. If funds are not available to us, we may need to curtail new investments, and our common stock value could decline.

 

In connection with satisfying the requirements to be subject to tax as a RIC for federal income tax purposes, we intend to distribute to our stockholders substantially all of our investment company taxable income and net capital gains each taxable year. However, we may retain all or a portion of our net capital gains and incur applicable income taxes with respect thereto and elect to treat such retained net capital gains as deemed dividend distributions to our stockholders.

 

As noted above, on April 5, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), approved a reduction of our asset coverage ratio from 200% to 150%. As a result, as of April 5, 2019, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). If we incur additional indebtedness under this provision, the risk of investing in us will increase. If the value of our assets declines, we may be unable to satisfy this asset coverage test. If that happens, we may be required to sell a portion of our investments or sell additional common stock and, depending on the nature of our leverage, to repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous. In addition, the issuance of additional securities could dilute the percentage ownership of our current stockholders in us.

 

We are partially dependent on our subsidiary Funding I for cash distributions to enable us to meet the distribution requirements in order to permit us to be subject to tax as a RIC. In this regard, Funding I is limited by its covenants from making certain distributions to us that may be necessary to fulfill our requirements to be subject to tax as a RIC. In such case, we would need to request a waiver of these covenants’ restrictions for Funding I to make certain distributions to enable us to be subject to tax as a RIC. We cannot assure you that Funding I will be granted such a waiver, and if Funding I is unable to obtain a waiver, compliance with the covenants may cause us to incur a corporate-level income tax.

 

If we incur additional debt, it could increase the risk of investing in our shares.

 

We have indebtedness outstanding pursuant to our Credit Facility, 2023 Notes and the 2031 Asset-Backed Debt and expect in the future to borrow additional amounts under our Credit Facility or other debt securities, subject to market availability, and, may increase the size of our Credit Facility. We cannot assure you that our leverage will remain at current levels. The amount of leverage that we employ will depend upon our assessment of the market and other factors at the time of any proposed borrowing. Lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders or preferred stockholders, if any, and we have granted a security interest in Funding I’s assets in connection with our Credit Facility borrowings. In the case of a liquidation event, those lenders would receive proceeds before our stockholders. Any future debt issuance will increase our leverage and may be subordinate to our Credit Facility. In addition, borrowings or debt issuances, also known as leverage, magnify the potential for loss or gain on amounts invested and, therefore, increase the risks associated with investing in our securities. Leverage is generally considered a speculative investment technique. If the value of our assets decreases, then leveraging would cause the net asset value attributable to our common stock to decline more than it otherwise would have had we not utilized leverage. Similarly, any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common or preferred stock. Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures.

 

As noted above, on April 5, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), and our stockholders, respectively, approved a reduction of our asset coverage ratio. As a result, as of April 5, 2019, the asset coverage requirement applicable to us for senior securities was reduced from 200% to 150%. As of such date, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirements, which may increase the risk of investing in us.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

Item 3.

Defaults Upon Senior Securities

 

None.

 

44


 

Item 4.

Mine Safety Disclosures

 

Not applicable.

Item 5.

Other Information

 

None.

 

45


 

Item 6.

Exhibits

Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:

 

  3.1

Articles of Amendment and Restatement of the Registrant (Incorporated by reference to Exhibit 99(A) to the Registrant's Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-170243), filed on March 29, 2011).

 

 

  3.2

Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00891), filed on December 2, 2015).

 

 

  4.1

Form of Share Certificate (Incorporated by reference to Exhibit 99(D) to the Registrant's Pre-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-170243), filed on April 5, 2011).

 

 

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

 

 

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

 

 

32.1*

Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.

 

 

32.2*

Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.

 

 

99.1

Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K (File No. 814-00891), filed on November 17, 2011).

 

*

Filed herewith.

 

 

46


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

PENNANTPARK FLOATING RATE CAPITAL LTD.

 

 

 

Date: February 5, 2020

 

By:

/s/ Arthur H. Penn

 

 

 

Arthur H. Penn

 

 

 

Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

 

 

 

Date: February 5, 2020

 

By: 

/s/ Aviv Efrat

 

 

 

Aviv Efrat

 

 

 

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

 

 

47