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EX-32.2 - EXHIBIT 32.2 - Audax Credit BDC Inc.tm2014680d1_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Audax Credit BDC Inc.tm2014680d1_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Audax Credit BDC Inc.tm2014680d1_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Audax Credit BDC Inc.tm2014680d1_ex31-1.htm
EX-10.1 - EXHIBIT 10.1 - Audax Credit BDC Inc.tm2014680d1_ex10-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

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

 

For the quarterly period ended March 31, 2020

 

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: 814-01154

 

 

 

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   47-3039124
(State or other jurisdiction of
incorporation or organization)
 
  (I.R.S. Employer
Identification No.)  

 

101 HUNTINGTON AVENUE    
BOSTON, MASSACHUSETTS   02199
(Address of principal executive office)   (Zip Code)

 

(617) 859-1500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)  

 

 

 

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

None.

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  x    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 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 12 b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer x   Smaller reporting company ¨
       
Emerging growth company x    

 

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  x

 

The registrant had 37,793,520 shares of common stock, par value $0.001 per share, outstanding as of June 18, 2020.

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION:  
     
Item 1. Financial Statements  
     
  Statements of Assets and Liabilities as of March 31, 2020 (unaudited) and December 31, 2019   2
  Statements of Operations for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited) 3
  Statements of Changes in Net Assets for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited) 4
  Statements of Cash Flows for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited) 5
  Schedules of Investments as of  March 31, 2020 (unaudited) and December 31, 2019 6
  Notes to Financial Statements (unaudited) 16
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  
     
  Overview 36
  Results of Operations 38
  Financial Condition, Liquidity and Capital Resources 40
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 46
     
Item 4. Controls and Procedures 47
     
PART II. OTHER INFORMATION:  
     
Item 1. Legal Proceedings 48
     
Item 1A. Risk Factors 49
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 49
     
Item 3. Defaults Upon Senior Securities 50
     
Item 4. Mine Safety Disclosures 50
     
Item 5. Other Information 50
     
Item 6. Exhibits 50
   
SIGNATURES 51

 

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

March 31, 2020 and December 31, 2019

(Expressed in U.S. Dollars)

 

 

   March 31, 2020   December 31, 2019 
   (unaudited)     
Assets          
Investments, at fair value          
Non-Control/Non-Affiliate investments (Cost of $343,249,842 and $332,722,006, respectively)  $325,865,214   $330,874,911 
Cash and cash equivalents   23,294,471    5,506,217 
Interest receivable   898,785    942,329 
Receivable from investments sold   -    1,993,379 
Receivable from bank loan repayment   4,984,417    80,161 
Other assets   147,795    - 
           
Total assets  $355,190,682   $339,396,997 
           
Liabilities          
Accrued expenses and other liabilities  $415,912   $297,938 
Fee due to administrator(a)   66,250    66,250 
Fees due to investment advisor, net of waivers(a)   670,135    688,136 
Payable for investments purchased   18,869,115    6,945,000 
           
Total liabilities  $20,021,412   $7,997,324 
Commitments and contingencies(b)          
           
Net Assets          
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 36,698,229 and 35,109,246 shares issued and outstanding, respectively  $

36,698

   $

35,110

 
Capital in excess of par value   349,093,820    334,095,408 
Total distributable earnings   (13,961,248)   (2,730,845)
Total Net Assets  $335,169,270   $331,399,673 
           
Net Asset Value per Share of Common Stock at End of Period  $9.13   $9.44 
           
Shares Outstanding   36,698,229    35,109,246 
           

 

(a) Refer to Note 4-Related Party Transactions for additional information.
(b) Refer to Note 8-Commitments and Contingencies for additional information.
(c) As of December 31, 2017, components of total distributable earnings were comprised of accumulated net appreciation
  on investments of $160,604 and accumulated distributions in excess of net investment income of $253,938.

 

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

 

 2 

 

 

Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

 

 

   Three Months Ended   Three Months Ended 
   March 31, 2020   March 31, 2019 
Investment Income          
Interest income          
Non-Control/Non-Affiliate  $5,202,708   $4,870,004 
Other   28,670    50,720 
Total interest income   5,231,378    4,920,724 
Other income          
Non-Control/Non-Affiliate   14,740    17,810 
Total income   5,246,118    4,938,534 
           
Expenses          
Base management fee(a)  $880,852   $738,654 
Incentive fee(a)   661,359    612,128 
Administrative fee(a)   66,250    66,250 
Directors' fees   52,500    52,500 
Professional fees   97,942    154,681 
Other expenses   48,385    104,601 
           
Expenses before waivers from investment adviser and administrator   1,807,288    1,728,814 
Base management fee waivers(a)   (308,298)   (258,529)
Incentive fee waivers(a)   (563,778)   (489,291)
Total expenses, net of waivers   935,212    980,994 
Net Investment Income   4,310,906    3,957,540 
           
Realized and Unrealized (Loss) Gain on Investments          
Net realized (loss) gain on investments   (3,776)   27,919 
Net change in unrealized depreciation on investments   (15,537,533)   (343,522)
Net realized and unrealized loss on investments   (15,541,309)   (315,603)
           
Net Decrease in Net Assets Resulting from Operations  $(11,230,403)  $3,641,937 
           
Basic and Diluted per Share of Common Stock:          
Net investment income  $0.12   $0.13 
Net decrease in net assets resulting from operations  $(0.31)  $0.12 
           
Weighted average shares of common stock outstanding basic          
diluted   36,541,077    30,148,907 

 

(a) Refer to Note 4-Related Party Transactions for additional information

 

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

 

 3 

 

 

Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

 

 

   Three Months Ended
March 31, 2020
   Three Months Ended
March 31, 2019
 
Operations          
Net investment income  $4,310,906   $3,957,540 
Net realized (loss) gain on investments   (3,776)   27,919 
Net change in unrealized depreciation on investments   (15,537,533)   (343,522)
Net (decrease) increase in net assets resulting from operations   (11,230,403)   3,641,937 
           
Capital Share Transactions:          
Issuance of common stock   15,000,000    20,000,000 
Net increase in net assets from capital share transactions   15,000,000    20,000,000 
           
Net Increase in Net Assets   3,769,597    23,641,937 
           
Net Assets, Beginning of Period   331,399,673    267,423,235 
           
Net Assets, End of Period  $335,169,270   $291,065,172 

 

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

 

 4 

 

 

 

Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

 

   Three Months Ended   Three Months Ended 
   March 31, 2020   March 31, 2019 
Cash flows from operating activities:          
Net (decrease) increase in net assets resulting from operations  $(11,230,403)  $3,641,937 
Adjustments to reconcile net (decrease) increase in net assets from           
operations to net cash provided by (used in) operating activities:          
Net realized loss (gain) on investments   3,776    (27,919)
Net change in unrealized depreciation on investments   15,537,533    343,522 
Accretion of original issue discount interest and payment-in-kind interest   (93,473)   (62,751)
Decrease in receivable from investments sold   1,993,379    - 
Decrease (increase) in interest receivable   43,544    (66,050)
Increase in receivable from bank loan repayment   (4,904,256)   (9,660)
Increase in other assets   (147,795)   (135,000)
Increase in accrued expenses and other liabilities   117,974    131,552 
(Decrease) increase in fees due to investment advisor(a)   (18,001)   67,048 
Increase in payable for investments purchased   11,924,115    995,087 
Investment activity:          
Investments purchased   (34,327,808)   (45,273,530)
Proceeds from investments sold   5,743,556    - 
Repayment of bank loans   18,146,113    11,648,671 
Total investment activity   (10,438,139)   (33,624,859)
           
Net cash provided by (used in) operating activities   2,788,254    (28,747,093)
           
Cash flows from financing activities:          
Issuance of shares of common stock   15,000,000    20,000,000 
           
Net cash provided by financing activities   15,000,000    20,000,000 
           
Net decrease in cash and cash equivalents   17,788,254    (8,747,093)
           
Cash and cash equivalents:          
Cash and cash equivalents, beginning of period   5,506,217    17,715,145 
           
Cash and cash equivalents, end of period  $23,294,471   $8,968,052 
           
Supplemental non-cash information          
Payment-in-kind ("PIK") interest income  $-   $32,822 

 

(a) Refer to Note 4-Related Party Transactions for additional information  

 

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

 

 5 

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (97.0%)(g)(h):            
             
Healthcare & Pharmaceuticals            
             
Radiology Partners, Senior Secured Term B Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/9/25  $4,215,792   $4,342,655   $4,066,004 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/24   3,949,239    3,933,261    3,837,673 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26   3,929,554    3,890,897    3,760,582 
Young, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/7/24   3,824,327    3,814,380    3,688,448 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 9/1/23   3,334,426    3,337,779    3,201,049 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/14/25   3,324,731    3,345,661    3,032,155 
Veritext, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/1/25   3,177,508    3,163,144    2,977,166 
Confluent Health, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 6/24/26   2,977,500    2,950,902    2,871,709 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/18/23   2,899,394    2,880,320    2,789,333 
Waystar, Senior Secured Term Loan B, 5.45% (Libor + 4.00%), maturity 10/22/26   2,500,000    2,488,844    2,411,175 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 12/27/24   2,443,750    2,448,739    2,374,714 
PharMedQuest, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 10/31/24   2,493,750    2,460,203    2,363,751 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 9/23/24   2,439,891    2,421,247    2,347,272 
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/10/25   2,323,888    2,331,548    2,252,591 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/1/24   2,316,088    2,305,879    2,250,658 
MedRisk, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 12/29/25(i)   2,100,000    2,075,814    2,100,000 
Zelis RedCard, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 9/30/26   1,995,000    1,977,754    1,924,118 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/24/26   1,990,000    1,983,068    1,919,295 
CareCentrix, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 4/3/25   1,900,000    1,892,744    1,846,325 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/22/25   1,975,000    1,959,003    1,818,975 
Alpaca, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 4/19/24   1,669,921    1,647,042    1,606,530 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.70% (Libor + 5.25%), maturity 3/3/22(i)   1,569,378    1,545,837    1,545,837 
Upstream Rehabilitation, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 11/20/26(i)   1,500,000    1,497,678    1,507,500 
CPS, Unitranche, 6.95% (Libor + 5.50%), maturity 2/28/25   1,488,777    1,469,751    1,439,498 
Stepping Stones, Unitranche, 7.20% (Libor + 5.75%), maturity 12/12/24   1,480,325    1,473,482    1,424,132 
Athena, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/11/26(i)   994,981    985,502    980,056 
Ensemble, Senior Secured Closing Date Term Loan, 5.20% (Libor + 3.75%), maturity 8/3/26(i)   995,000    990,380    970,125 
Dermatologists of Central States, Senior Secured Term Loan, 7.95% (Libor + 6.50%), maturity 4/20/22   974,827    974,827    967,516 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/30/23   982,143    987,442    949,634 
Alcami, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/14/25   985,000    981,058    942,645 
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.45% (Libor + 7.00%), maturity 7/31/26   1,000,000    995,741    936,950 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.95% (Libor + 5.50%), maturity 5/9/25   985,000    973,442    902,024 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/10/23   919,633    924,176    884,724 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 9/1/24   850,000    843,619    825,988 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 2/6/25   438,887    437,920    436,692 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26   380,952    373,333    364,571 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/22/20   377,202    377,022    358,440 
Alpaca, Senior Secured Revolver, 5.95% (Libor + 4.50%), maturity 4/19/24   258,852    254,969    249,026 

                
High Tech Industries               
Qlik, Senior Secured 2019 Incremental Term Loan, 5.70% (Libor + 4.25%), maturity 4/26/24   3,970,000    3,945,860    3,692,100 
Masergy, Senior Secured Initial Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/16/24(i)   3,428,571    3,420,539    3,428,571 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 2/12/25(i)   3,442,462    3,454,895    3,339,188 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 7.70% (Libor + 6.25%), maturity 8/16/24   3,413,025    3,389,664    3,277,596 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26   3,146,440    3,141,918    3,052,110 
Infogroup, Senior Secured Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 4/3/23   2,912,431    2,889,605    2,803,914 
McAfee, Senior Secured Term B USD Loan, 5.20% (Libor + 3.75%), maturity 9/30/24(i)   2,857,180    2,867,708    2,732,104 
Idera, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/28/24   2,639,307    2,637,390    2,560,180 
ECi Software Solutions, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 9/27/24   2,457,278    2,446,283    2,365,720 
EverCommerce, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 8/23/25   2,431,370    2,386,387    2,352,569 
Intermedia , Senior Secured New Term Loan (First Lien), 7.45% (Libor + 6.00%), maturity 7/21/25   1,975,000    1,960,535    1,970,063 
QuickBase, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/2/26   1,985,000    1,976,321    1,911,039 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/5/27(i)(q)   2,000,000    1,878,750    1,900,000 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 2/26/25   1,960,000    1,965,675    1,896,476 
Corsair, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/28/24   1,977,384    1,963,954    1,861,925 
GlobalLogic, Senior Secured Initial Term Loan, 4.20% (Libor + 2.75%), maturity 8/1/25   1,728,438    1,720,243    1,676,619 
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/18/25   1,719,375    1,729,039    1,646,972 
Liaison, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 12/20/26   1,496,250    1,492,500    1,447,757 
OEConnection, Senior Secured Initial Term Loan, 5.45% (Libor + 4.00%), maturity 9/25/26   1,492,500    1,485,199    1,405,935 
Navex Global, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 9/5/25   1,477,500    1,463,903    1,429,614 
Compusearch Software Systems, Senior Secured Term Loan C, 5.70% (Libor + 4.25%), maturity 5/8/23   1,429,387    1,428,902    1,379,602 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 5/4/26(i)   1,077,917    1,079,712    1,013,242 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26   997,500    992,880    965,171 

 

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

 

 6 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):            
             
High Tech Industries (continued)            
LANDesk, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 1/20/24  $976,252   $967,968   $936,323 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 12/2/22   832,133    828,548    799,114 
Sparta, Senior Secured New Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/21/24   794,008    794,411    749,020 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 11.70% (Libor + 10.25%), maturity 1/20/22   1,000,000    995,949    650,000 
Idera, Senior Secured Loan (Second Lien), 10.45% (Libor + 9.00%), maturity 6/28/27   500,000    505,000    485,010 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/19/26   500,000    498,750    496,250 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)   500,000    471,250    495,000 
McAfee, Senior Secured Initial Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/29/25(i)   500,000    492,500    492,500 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 12/15/23   483,658    482,237    465,763 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.20% (Libor + 3.75%), maturity 2/9/23   402,181    401,518    388,173 

 

Services: Business               
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/11/25   3,950,000    3,945,880    3,821,981 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/23/25   3,980,000    3,943,810    3,562,100 
Fleetwash, Senior Secured Incremental Term Loan, 6.20% (Libor + 4.75%), maturity 10/1/24   2,955,169    2,931,780    2,933,005 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.20% (Libor + 3.75%), maturity 2/2/26   2,975,050    2,966,038    2,895,765 
Addison, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 4/15/26   2,977,500    2,925,889    2,782,742 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/31/24(i)   2,749,451    2,740,030    2,721,956 
Duff & Phelps, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 5/15/27(i)   2,500,000    2,475,000    2,484,375 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/9/26(i)   2,475,000    2,478,286    2,406,938 
HireRight, Senior Secured Initial Term Loan (Second Lien), 8.70% (Libor + 7.25%), maturity 7/10/26   2,500,000    2,480,208    2,336,475 
Allied Universal, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/10/26   2,484,804    2,465,749    2,322,273 
Vistage, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 2/10/25   2,458,728    2,453,168    2,315,261 
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/12/25   2,464,975    2,452,564    2,282,715 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 6/19/24   2,388,079    2,388,079    2,237,511 
Eliassen Group, Senior Secured Initial Term B Loan, 5.95% (Libor + 4.50%), maturity 11/5/24   1,491,247    1,485,110    1,439,307 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 3/27/24   1,470,641    1,466,226    1,419,419 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 9.00%), maturity 2/2/26   1,268,869    1,268,869    1,268,869 
First Advantage, Senior Secured Term Facility (First Lien), 4.95% (Libor + 3.50%), maturity 1/31/27(i)   1,000,000    995,000    995,000 
WCG, Senior Secured Term Loan, 5.45% (Libor + 4.00%), maturity 1/8/27(i)   1,000,000    990,000    995,000 
Diversified, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 12/23/23   990,019    983,903    953,131 
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26   995,000    992,622    913,410 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/3/26   497,494    493,659    497,200 

 

Chemicals, Plastics & Rubber               
Plaskolite, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/15/25   3,950,000    3,889,059    3,610,300 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/30/24   3,418,856    3,406,134    3,146,886 
DuBois Chemicals, Senior Secured Term Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/30/27   3,000,000    2,963,450    2,810,910 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 10/4/21   2,803,961    2,799,472    2,571,457 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 1/31/25   2,675,400    2,684,261    2,462,572 
Unifrax, Senior Secured USD Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 12/12/25   2,469,987    2,449,064    2,057,500 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 9/6/26   2,000,000    2,002,152    1,873,940 
Q Holding, Senior Secured Term B Loan (2019), 6.45% (Libor + 5.00%), maturity 12/29/23   1,990,000    1,980,976    1,840,750 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.95% (Libor + 4.50%), maturity 9/30/26   1,813,558    1,770,824    1,699,249 
Zep, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/12/24   1,951,222    1,949,345    1,580,490 
Spartech, Senior Secured Term Loan, 6.45% (Libor + 5.00%), maturity 10/17/25   997,500    983,035    936,982 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/31/25   980,000    976,253    899,728 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 10/28/24(i)   984,887    968,736    925,793 
                
Services: Consumer               
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 6/3/24   5,410,358    5,394,083    4,663,728 
A Place For Mom, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 8/10/24   2,659,325    2,658,718    2,538,990 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/18/25   2,468,750    2,362,772    2,396,934 
Weld North, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 2/15/25   2,457,406    2,436,216    2,336,993 
Smart Start, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/21/22   2,411,410    2,411,410    2,286,017 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/14/26   2,084,750    2,080,140    2,029,191 
Valet Living, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 9/28/25   1,978,696    1,974,504    1,865,911 
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/25   1,940,510    1,928,009    1,944,236 
Ned Stevens, Senior Secured Term A Loan, 7.20% (Libor + 5.75%), maturity 9/30/25   1,580,980    1,553,332    1,531,132 
Spring Education, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/30/25   985,000    983,031    956,346 
LegalShield, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 5/1/26   500,000    500,000    499,705 
StubHub, Senior Secured USD Term B Loan, 4.95% (Libor + 3.50%), maturity 2/12/27   498,750    496,250    472,715 
Ned Stevens, Senior Secured Revolver, 6.20% (Libor + 4.75%), maturity 9/30/25   -    (2,614)   - 

 

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

 

 7 

 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
Aerospace & Defense               
CPI International, Senior Secured TL, 6.20% (Libor + 4.75%), maturity 7/26/24  $3,855,880   $3,817,321   $3,667,597 
StandardAero, Senior Secured 2020 Term B-1 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26   3,559,038    3,547,949    3,310,689 
Whitcraft, Unitranche, 7.45% (Libor + 6.00%), maturity 4/3/23(i)   1,997,493    1,987,493    1,987,506 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 4/30/26(i)   2,000,000    2,009,421    1,980,000 
StandardAero, Senior Secured 2020 Term B-2 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26   1,913,462    1,907,499    1,779,940 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 9/8/23   1,452,374    1,446,531    1,333,962 
Amentum, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 1/29/27(i)   1,000,000    967,500    990,000 
API Technologies, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 5/9/26   997,487    967,487    927,883 
Eton, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 5/1/25   498,731    498,731    472,797 
Eton, Senior Secured Initial Term Loan (Second Lien), 9.45% (Libor + 8.00%), maturity 5/1/26   500,000    495,000    466,285 
Novaria Group, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 1/27/27   500,000    495,000    466,285 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 4/30/25   497,481    495,126    463,936 
                
Banking, Finance, Insurance & Real Estate               
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 4/30/23(i)   2,500,000    2,506,250    2,531,250 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.20% (Libor + 5.75%), maturity 10/31/22   1,980,672    1,947,667    1,939,712 
Kestra Financial, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 6/3/26   1,990,000    1,972,030    1,852,153 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 9/6/24   1,466,250    1,463,785    1,456,177 
Advisor Group, Senior Secured Initial Term B Loan, 6.45% (Libor + 5.00%), maturity 7/31/26   1,496,250    1,482,294    1,390,016 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 3/18/27   1,329,545    1,326,222    1,319,574 
Aperio, Senior Secured Loan, 6.45% (Libor + 5.00%), maturity 10/25/24   933,889    929,820    871,374 
Sedgwick Claims, Senior Secured Initial Term Loan, 4.70% (Libor + 3.25%), maturity 12/31/25   498,737    498,112    473,801 
                
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24   2,437,500    2,437,500    2,286,375 
BAS, Senior Secured Repricing Term Loan, 5.20% (Libor + 3.75%), maturity 5/21/24   1,964,586    1,966,296    1,836,731 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/1/25(i)   1,500,000    1,477,500    1,477,500 
Edward Don, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/2/25   1,475,025    1,469,390    1,361,699 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 11/4/26   1,000,000    995,442    957,000 
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/19/24(i)   498,737    498,737    498,737 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/2/24   492,443    495,992    467,220 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 7.95% (Libor + 6.50%), maturity 10/1/26   500,000    503,750    465,110 
TriMark, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/28/24   489,951    491,337    453,459 
                
Construction & Building               
PlayPower, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 5/8/26   1,929,861    1,929,861    1,775,472 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/30/24   1,824,977    1,810,785    1,709,949 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 9/29/25   1,500,000    1,467,188    1,400,310 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 6/3/24   1,471,052    1,459,806    1,368,402 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24   974,414    972,639    909,654 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 7/29/22   626,806    621,609    588,953 
Hoffman Southwest, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 8/14/23   527,876    524,122    492,108 
Acuren, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 1/23/27   500,000    497,500    467,295 
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 6/2/25   500,000    488,750    466,285 
                
Containers, Packaging & Glass               
ProAmpac, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 11/20/23   2,992,801    3,008,486    2,837,176 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/18/26   1,990,000    1,980,702    1,878,660 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26(i)   997,500    995,208    988,772 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/26/26   995,000    990,861    932,285 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.45% (Libor + 6.00%), maturity 11/12/21(i)   487,587    487,085    482,712 
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25(i)   498,731    476,288    481,275 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 11/30/23(i)   493,627    493,627    464,009 
                
Consumer Goods: Non-durable               
Manna Pro, Senior Secured Term Loan, 7.45% (Libor + 6.00%), maturity 12/8/23   3,430,000    3,392,420    3,285,940 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 10/26/23   2,221,890    2,208,700    1,981,926 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/11/23   1,906,766    1,896,071    1,757,638 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/16/24   984,902    990,954    929,964 
                
Automotive               
Mavis, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 3/20/25   3,927,708    3,913,101    3,428,889 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 4/21/25   1,800,000    1,798,564    1,708,200 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/3/25   985,000    961,944    920,896 
IXS, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 3/15/27   500,000    495,000    474,500 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 2/2/26   500,000    488,750    466,285 
                
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/12/24   3,615,344    3,611,340    3,358,654 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 10/7/24   2,460,182    2,453,888    2,285,509 
Capstone Logistics, Senior Secured Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 10/7/21   1,161,707    1,161,868    1,144,282 

   

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

 

 8 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
Wholesale               
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 3/20/25  $3,925,708   $3,926,133   $3,548,840 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 8/19/22   1,910,184    1,890,605    1,661,860 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 6/15/23   1,451,146    1,449,084    1,378,429 
                
Forest Products & Paper               
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/21/23   2,919,733    2,908,514    2,636,519 
Loparex, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 7/31/26   1,492,500    1,478,641    1,402,950 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.95% (Libor + 9.50%), maturity 11/21/24   1,250,000    1,250,000    1,181,775 
                
Media: Advertising, Printing & Publishing               
Ansira, Unitranche, 7.20% (Libor + 5.75%), maturity 12/20/22   1,900,675    1,889,359    1,615,575 
Northstar, Senior Secured Term Loan, 7.70% (Libor + 6.25%), maturity 6/7/22   1,445,268    1,445,268    1,391,417 
Vestcom International, Senior Secured L/C Collaterilized, 5.45% (Libor + 4.00%), maturity 12/19/23   783,878    786,538    732,605 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.20% (Libor + 4.75%), maturity 6/21/22   1,455,000    1,448,210    727,500 
                
Beverage, Food & Tobacco               
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.45% (Libor + 5.00%), maturity 11/20/25   1,975,000    1,958,320    1,892,050 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.20% (Libor + 3.75%), maturity 8/25/25   1,970,000    1,962,468    1,876,721 
                
Consumer Goods: Durable               
Strategic Partners, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 6/30/23   2,303,551    2,300,565    2,211,409 
                
Retail               
Grocery Outlet, Senior Secured 2020 Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 10/22/25   1,269,483    1,267,102    1,206,009 
                
Hotel, Gaming & Leisure               
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.45% (Libor + 5.00%), maturity 10/21/23   1,119,231    1,111,339    1,039,765 
                
Metals & Mining               
Dynatect, Senior Secured Term B Loan, 5.95% (Libor + 4.50%), maturity 9/30/22   995,159    990,249    925,717 
                
Health Care Equipment & Services               
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/31/26   584,789    579,029    562,590 
                
 Total Bank Loans       $342,129,261   $325,175,888 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)(g)(h):               
                
Services: Business               
DBi Services, Class A-1 Preferred Units (800.53 units)(k)       $800,535   $400,267 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)        -    - 
                
Services: Consumer               
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)(f)(j)(m)(n)(o)        261,438    241,379 
                
Healthcare & Pharmaceuticals               
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)(f)(j)(m)(o)(p)        58,608    47,680 
Total Equity and Preferred Shares       $1,120,581   $689,326 
                
                
Total Portfolio Investments(r)       $343,249,842   $325,865,214 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g)Percentages are calculated using fair value of investments over net assets.
(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P., 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k)Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.

 

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

 

 9 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m)Investment is non-income producing.
(n)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(r)At March 31, 2020, the cost of investments for income tax purposes was $343,249,842 the gross unrealized depreciation for federal tax purposes was $17,605,839, the gross unrealized appreciation for federal income tax purposes was $221,211, and the net unrealized depreciation was $17,384,628.

 

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

 

 10 

 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.6%)(g)(h):               
                
Healthcare & Pharmaceuticals               
Radiology Partners, Senior Secured Term B Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/9/25(i)  $5,187,469   $5,149,488   $5,211,316 
Pathway, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/20/24   4,956,161    4,911,269    4,943,769 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/24   3,959,391    3,942,690    3,949,491 
Advarra, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26(j)   3,939,427    3,899,562    3,909,879 
Young, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/7/24   3,834,156    3,823,748    3,805,398 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 9/1/23   3,342,954    3,346,536    3,334,596 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/14/25(i)   3,333,213    3,356,177    3,199,884 
Veritext, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 8/1/25   3,187,891    3,173,500    3,171,951 
Confluent Health, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 6/24/26   2,985,000    2,957,225    2,962,613 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/18/23   2,906,775    2,886,868    2,874,073 
PharMedQuest, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 10/31/24   2,500,000    2,463,488    2,481,250 
Waystar, Senior Secured Term Loan B, 5.91% (Libor + 4.00%), maturity 10/22/26   2,500,000    2,487,836    2,481,250 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.66% (Libor + 2.75%), maturity 12/27/24   2,450,000    2,455,219    2,450,000 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 9/23/24   2,446,014    2,426,873    2,421,554 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/1/24   2,316,088    2,305,375    2,316,088 
MedRisk, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 12/29/25   2,100,000    2,074,832    2,100,000 
Zelis RedCard, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 9/30/26(i)   2,000,000    1,980,688    2,014,889 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/24/26(i)   1,995,000    1,987,841    2,011,774 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/22/25   1,980,000    1,962,728    1,957,725 
CareCentrix, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 4/3/25   1,912,500    1,904,900    1,912,500 
Premise Health, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/10/25   1,829,786    1,838,127    1,825,212 
Alpaca, Senior Secured Term Loan, 6.16% (Libor + 4.25%), maturity 4/19/24(j)   1,674,127    1,650,502    1,669,942 
CPS, Unitranche, 7.16% (Libor + 5.25%), maturity 2/28/25   1,492,500    1,472,625    1,488,769 
Stepping Stones, Unitranche, 7.41% (Libor + 5.50%), maturity 12/12/24   1,484,409    1,477,320    1,467,709 
Ensemble, Senior Secured Closing Date Term Loan, 5.66% (Libor + 3.75%), maturity 8/3/26(i)   997,500    992,719    1,006,949 
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.91% (Libor + 7.00%), maturity 7/31/26   1,000,000    995,613    995,000 
Upstream Rehabilitation, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/20/26   1,000,000    995,045    992,500 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/30/23(i)   984,694    990,391    978,540 
Alcami, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/14/25   987,500    983,389    972,688 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 7.41% (Libor + 5.50%), maturity 5/9/25   987,500    975,453    960,344 
Dermatologists of Central States, Senior Secured Term Loan, 8.41% (Libor + 6.50%), maturity 4/20/22   977,310    970,785    960,207 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/10/23(i)   922,022    926,900    920,657 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 9/1/24   850,000    843,325    850,000 
Athena, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/11/26(i)   497,494    495,129    500,973 
RMP & MedA/Rx, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 3/2/22   441,647    440,553    441,647 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/22/20   378,724    375,038    375,883 
Alpaca, Senior Secured Revolver, 6.16% (Libor + 4.25%), maturity 4/19/24(j)   134,215    130,332    133,879 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26(j)   -    (7,619)   - 
                
High Tech Industries               
Qlik, Senior Secured 2019 Incremental Term Loan, 6.16% (Libor + 4.25%), maturity 4/26/24   3,980,000    3,954,501    3,950,150 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 2/12/25(i)   3,451,222    3,464,246    3,477,852 
Masergy, Senior Secured Initial Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 12/16/24   3,428,571    3,420,116    3,411,429 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 8/16/24   3,421,688    3,397,118    3,387,471 
Sparta, Senior Secured New Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/21/24   3,421,250    3,423,008    3,344,272 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26(i)   3,154,345    3,150,077    3,166,174 
Infogroup, Senior Secured Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 4/3/23   2,919,937    2,895,405    2,890,738 
McAfee, Senior Secured Term B USD Loan, 5.66% (Libor + 3.75%), maturity 9/30/24(i)   2,864,431    2,875,358    2,883,023 
eResearch (ERT), Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 5/2/23(i)   2,538,022    2,538,022    2,538,022 
ECi Software Solutions, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 9/27/24(i)   2,463,579    2,451,402    2,468,662 
EverCommerce, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 8/23/25   2,184,679    2,142,420    2,179,217 
Idera, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/28/24   2,146,089    2,145,337    2,146,089 
Intermedia , Senior Secured New Term Loan (First Lien), 7.91% (Libor + 6.00%), maturity 7/21/25(i)   1,980,000    1,963,699    1,985,107 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 2/26/25(i)   1,965,000    1,970,591    1,973,626 
QuickBase, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/2/26   1,990,000    1,981,139    1,970,100 
GlobalLogic, Senior Secured Initial Term Loan, 5.16% (Libor + 3.25%), maturity 8/1/25(i)   1,728,438    1,719,948    1,728,438 
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/18/25   1,723,750    1,733,891    1,702,203 
Liaison, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 12/20/26(i)   1,500,000    1,496,250    1,496,250 
OEConnection, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/25/26   1,496,250    1,488,267    1,485,028 
Navex Global, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 9/5/25(i)   1,481,250    1,467,074    1,484,310 
Compusearch Software Systems, Senior Secured Term Loan C, 6.16% (Libor + 4.25%), maturity 5/8/23   1,432,979    1,432,391    1,425,814 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 5/4/26(i)   1,080,625    1,082,379    1,089,829 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26   1,000,000    995,219    997,500 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 12.16% (Libor + 10.25%), maturity 1/20/22   1,000,000    995,441    988,750 
LANDesk, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 1/20/24(i)   978,627    969,988    981,924 
Corsair, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/28/24   982,444    978,622    967,707 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 12/2/22   834,254    830,477    825,912 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/19/26(i)   500,000    498,750    498,750 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 12/15/23   484,908    483,405    482,484 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.66% (Libor + 3.75%), maturity 2/9/23(i)   404,507    403,788    401,013 

 

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

 

 11 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Services: Business               
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/23/25  $3,990,000   $3,950,952   $3,970,050 
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/11/25   3,960,000    3,955,758    3,950,100 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.66% (Libor + 3.75%), maturity 2/2/26   2,982,525    2,973,315    2,975,069 
Addison, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 4/15/26   2,985,000    2,931,090    2,962,613 
Fleetwash, Senior Secured Incremental Term Loan, 6.66% (Libor + 4.75%), maturity 10/1/24   2,962,613    2,938,051    2,947,799 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 6/19/24(i)   2,894,218    2,894,218    2,883,365 
Allied Universal, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/10/26(i)   2,613,149    2,591,810    2,635,788 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/9/26(i)   2,481,250    2,484,662    2,497,618 
HireRight, Senior Secured Initial Term Loan (Second Lien), 9.16% (Libor + 7.25%), maturity 7/10/26   2,500,000    2,479,365    2,481,250 
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/12/25   2,471,231    2,458,304    2,452,697 
First Advantage, Senior Secured Term Loan (First Lien), 7.16% (Libor + 5.25%), maturity 6/30/22   2,000,000    1,996,094    1,990,000 
Vistage, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/10/25   1,965,000    1,961,739    1,960,088 
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/31/24   2,339,998    2,333,703    2,316,598 
Eliassen Group, Senior Secured Initial Term B Loan, 6.41% (Libor + 4.50%), maturity 11/5/24   1,493,123    1,486,683    1,489,390 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 3/27/24   1,474,855    1,470,192    1,467,481 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 8.00%), maturity 2/2/26   1,268,869    1,268,869    1,268,869 
Diversified, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 12/23/23   992,500    986,007    990,019 
WCG, Senior Secured Term Loan, 5.91% (Libor + 4.00%), maturity 1/8/27(i)   1,000,000    990,000    990,000 
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26   997,500    995,123    987,525 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/3/26(i)   498,747    494,694    498,747 
                
Chemicals, Plastics & Rubber               
Plaskolite, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/15/25   3,960,000    3,896,852    3,920,400 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/30/24   3,427,599    3,413,966    3,341,909 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 10/4/21   2,811,462    2,806,249    2,741,176 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 1/31/25   2,682,225    2,691,463    2,615,169 
Unifrax, Senior Secured USD Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 12/12/25(i)   2,476,241    2,454,997    2,286,895 
Q Holding, Senior Secured Term B Loan (2019), 6.91% (Libor + 5.00%), maturity 12/29/23   1,995,000    1,985,388    1,985,025 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 9/6/26   2,000,000    2,002,217    1,985,000 
DuBois Chemicals 2019, Senior Secured Term Loan (Second Lien), 10.41% (Libor + 8.50%), maturity 9/30/27   2,000,000    1,950,862    1,985,000 
Borchers, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/1/24   1,910,136    1,905,332    1,900,585 
Zep, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/12/24   1,956,225    1,954,251    1,584,542 
DuBois Chemicals 2019, Senior Secured Term Loan B (First Lien), 6.41% (Libor + 4.50%), maturity 9/30/26   1,560,865    1,516,107    1,549,159 
Spartech, Senior Secured Term Loan, 6.91% (Libor + 5.00%), maturity 10/17/25   1,000,000    985,134    992,500 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/28/24   987,406    970,460    967,657 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/31/25(i)   982,500    978,584    892,145 
                
Services: Consumer               
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 6/3/24   5,424,266    5,407,341    5,370,023 
A Place For Mom, Senior Secured Term Loan, 5.66% (Libor + 3.75%), maturity 8/10/24   2,666,144    2,665,484    2,599,490 
Weld North, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 2/15/25   2,463,674    2,441,530    2,463,674 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/18/25   2,475,000    2,365,058    2,462,625 
Smart Start, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/21/22   2,417,625    2,417,625    2,399,493 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/14/26(i)   1,990,000    1,985,439    2,002,726 
SMG, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 1/23/25(i)   1,976,118    1,963,737    1,976,118 
Valet Living, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/28/25   1,983,718    1,979,195    1,973,800 
LegalShield, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/25   1,940,510    1,927,273    1,935,659 
Ned Stevens, Senior Secured Term A Loan, 7.66% (Libor + 5.75%), maturity 9/30/25(j)   1,603,824    1,572,794    1,591,795 
Spring Education, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/30/25   987,500    985,450    982,563 
Ned Stevens, Senior Secured Revolver, 6.66% (Libor + 4.75%), maturity 9/30/25(j)   -    (2,614)   - 
                
Aerospace & Defense               
CPI International, Senior Secured TL, 6.66% (Libor + 4.75%), maturity 7/26/24   4,000,000    3,960,000    3,970,000 
StandardAero, Senior Secured Initial Term B-1 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26(i)   3,567,981    3,556,378    3,599,650 
StandardAero, Senior Secured Initial Term B-2 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26(i)   1,918,269    1,912,031    1,935,296 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.66% (Libor + 7.75%), maturity 4/30/26   1,500,000    1,514,877    1,485,000 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 9/8/23   1,459,899    1,453,639    1,427,051 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 4/30/25(i)   497,481    495,124    494,358 
                
Banking, Finance, Insurance & Real Estate               
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 4/30/23   2,000,000    2,000,000    1,995,000 
Kestra Financial, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 6/3/26   1,995,000    1,976,368    1,990,013 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.66% (Libor + 5.75%), maturity 10/31/22   1,989,457    1,951,565    1,939,721 
Advisor Group, Senior Secured Initial Term B Loan, 6.91% (Libor + 5.00%), maturity 7/31/26(i)   1,490,625    1,465,245    1,478,349 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 9/6/24   1,470,000    1,467,280    1,458,975 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26   978,070    973,369    970,735 
Aperio, Senior Secured Loan, 6.91% (Libor + 5.00%), maturity 10/25/24   933,889    929,619    933,889 
                
Consumer Goods: Non-durable               
Manna Pro, Senior Secured Term Loan, 7.91% (Libor + 6.00%), maturity 12/8/23   3,438,750    3,399,412    3,412,959 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 10/26/23   2,228,517    2,214,540    2,211,804 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/11/23   1,906,766    1,895,349    1,873,398 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/16/24(i)   987,418    993,636    973,861 

 

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

 

 12 

 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
             
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Containers, Packaging & Glass               
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23(i)  $3,000,535   $3,017,391   $2,972,870 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26   1,995,000    1,985,448    1,995,000 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26(i)   997,500    993,032    1,003,416 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26   1,000,000    997,605    995,000 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23(i)   494,901    494,901    491,978 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20   488,837    488,275    483,338 
                
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24   2,443,750    2,443,750    2,419,313 
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24   1,969,661    1,971,159    1,959,812 
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25   1,478,769    1,472,799    1,452,890 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26   1,000,000    995,111    992,500 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24   493,703    497,366    490,000 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24(i)   491,207    492,665    406,376 
                
Wholesale               
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25   3,935,671    3,936,089    3,906,153 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22   1,915,184    1,893,658    1,891,245 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23   1,454,906    1,452,426    1,422,170 
                
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24   3,615,344    3,611,340    3,588,229 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24(i)   2,466,458    2,459,768    2,460,292 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21   1,161,707    1,161,868    1,144,282 
                
Construction & Building               
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26   1,934,722    1,934,722    1,920,212 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24   1,496,238    1,480,815    1,488,757 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24   1,474,832    1,462,983    1,460,084 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24(i)   976,912    975,059    964,701 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22(i)   628,442    623,246    630,799 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23   527,876    523,556    525,237 
                
Automotive               
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25(i)   3,592,566    3,578,510    3,516,090 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25   1,800,000    1,798,507    1,795,500 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25   987,500    963,545    982,563 
                
Media: Advertising, Printing & Publishing               
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22   1,905,523    1,893,460    1,872,177 
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22   1,449,510    1,449,510    1,438,639 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22   1,458,750    1,451,152    1,035,712 
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23   783,878    786,703    777,999 
                
Forest Products & Paper               
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23   2,927,277    2,915,319    2,898,005 
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26   1,496,250    1,481,906    1,481,288 
                
Beverage, Food & Tobacco               
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25   1,980,000    1,962,677    1,960,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25   1,975,000    1,966,820    1,970,063 
                
Hotel, Gaming & Leisure               
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21   2,396,566    2,384,489    2,384,584 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23   1,119,231    1,110,756    1,119,231 
                
Consumer Goods: Durable               
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23   2,309,428    2,306,211    2,309,428 
                
Retail               
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25(i)   1,269,483    1,266,905    1,286,070 
                
Metals & Mining               
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22   997,579    990,633    987,604 
                
Health Care Equipment & Services               
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26(i)   525,311    519,256    526,851 
                
Total Bank Loans       $331,601,425   $330,155,654 

 

 13 

 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
             
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Containers, Packaging & Glass               
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23(i)  $3,000,535   $3,017,391   $2,972,870 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26   1,995,000    1,985,448    1,995,000 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26(i)   997,500    993,032    1,003,416 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26   1,000,000    997,605    995,000 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23(i)   494,901    494,901    491,978 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20   488,837    488,275    483,338 
                
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24   2,443,750    2,443,750    2,419,313 
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24   1,969,661    1,971,159    1,959,812 
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25   1,478,769    1,472,799    1,452,890 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26   1,000,000    995,111    992,500 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24   493,703    497,366    490,000 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24(i)   491,207    492,665    406,376 
                
Wholesale               
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25   3,935,671    3,936,089    3,906,153 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22   1,915,184    1,893,658    1,891,245 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23   1,454,906    1,452,426    1,422,170 
                
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24   3,615,344    3,611,340    3,588,229 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24(i)   2,466,458    2,459,768    2,460,292 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21   1,161,707    1,161,868    1,144,282 
                
Construction & Building               
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26   1,934,722    1,934,722    1,920,212 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24   1,496,238    1,480,815    1,488,757 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24   1,474,832    1,462,983    1,460,084 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24(i)   976,912    975,059    964,701 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22(i)   628,442    623,246    630,799 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23   527,876    523,556    525,237 
                
Automotive               
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25(i)   3,592,566    3,578,510    3,516,090 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25   1,800,000    1,798,507    1,795,500 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25   987,500    963,545    982,563 
                
Media: Advertising, Printing & Publishing               
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22   1,905,523    1,893,460    1,872,177 
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22   1,449,510    1,449,510    1,438,639 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22   1,458,750    1,451,152    1,035,712 
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23   783,878    786,703    777,999 
                
Forest Products & Paper               
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23   2,927,277    2,915,319    2,898,005 
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26   1,496,250    1,481,906    1,481,288 
                
Beverage, Food & Tobacco               
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25   1,980,000    1,962,677    1,960,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25   1,975,000    1,966,820    1,970,063 
                
Hotel, Gaming & Leisure               
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21   2,396,566    2,384,489    2,384,584 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23   1,119,231    1,110,756    1,119,231 
                
Consumer Goods: Durable               
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23   2,309,428    2,306,211    2,309,428 
                
Retail               
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25(i)   1,269,483    1,266,905    1,286,070 
                
Metals & Mining               
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22   997,579    990,633    987,604 
                
Health Care Equipment & Services               
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26(i)   525,311    519,256    526,851 
                
Total Bank Loans       $331,601,425   $330,155,654 

 

 14 

 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)(g)(h):               
                
Services: Business              
DBi Services, Class A-1 Preferred Units (800.53 units)(k)       $800,535   $400,267 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)        -    - 
               
Services: Consumer               
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)(f)(j)(m)(n)(o)        261,438    261,438 
               
Healthcare & Pharmaceuticals               
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)(f)(i)(j)(m)(o)(p)        58,608    57,552 
                
 Total Equity and Preferred Shares       $1,120,581   $719,257 
               
Total Portfolio Investments(q)       $332,722,006   $330,874,911 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(g)Percentages are calculated using fair value of investments over net assets.
(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(j)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.," 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k)Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.
(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m)Investment is non-income producing.
(n)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)At December 31, 2019, the cost of investments for income tax purposes was $332,722,006 the gross unrealized depreciation for federal tax purposes was 2,951,506, the gross unrealized appreciation for federal income tax purposes was $1,104,411, and the net unrealized depreciation was $1,847,095.

 

 15 

 

 

 

Audax Credit BDC Inc.

Notes to Financial Statements

March 31, 2020

(unaudited)

 

Note 1. Organization

 

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company has been formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies. During the period prior to July 8, 2015, the Company was a development stage company, as defined in Paragraph 915-10-05, Development Stage Entity, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended (“ASC”). During this time, the Company was devoting substantially all of its efforts to establishing its business and its planned principal operations had not commenced. All losses incurred during the period prior to July 8, 2015 have been considered a part of the Company’s development stage activities.

 

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles in the United States of America (“GAAP”).

 

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

 

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Cash and Cash Equivalents

 

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held at March 31, 2020 and December 31, 2019. At such dates, cash was not subject to any restrictions on withdrawal.

 

Expenses

 

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

 

Investment Valuation Policy

 

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors, with the assistance of the Company’s Audit Committee, determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

 

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

 

Level 2 — Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

Level 3 — Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management

judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

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In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows: (i) each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of the Company’s valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company; (ii) preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team; (iii) the Company’s Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Company’s Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and (iv) the Company’s Board of Directors discusses the valuation recommendations of the Company’s Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

 

The Company’s Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

·the nature and realizable value of any collateral;

 

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

 

·the portfolio company’s ability to make payments;

 

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

 

·prevailing interest rates for like securities and expected volatility in future interest rates;

 

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

 

·comparisons to publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

 

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

 

The Company’s Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the

Company’s financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

 

Realized gains and losses on investments are determined based on the identified cost method.

 

Refer to Note 3 — Investments for additional information regarding fair value measurements and the Company’s application of ASC 820.

 

Interest Income Recognition

 

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible.

 

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The Company currently holds loans in the portfolio that contain OID and expects to hold loans in the future that contain payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

 

As of March 31, 2020, the Company held 179 investments in loans with OID. The Company accrued OID income of $93,473 for the three months ended March 31, 2020. The unamortized balance of OID on debt investments as of March 31, 2020, totaled $1,797,901. As of December 31, 2019, the Company held 162 investments in loans with OID. The Company accrued OID income of $62,751 for the three months ended March 31, 2019. The unamortized balance of OID investments as of December 31, 2019, totaled $1,733,632.

 

As of March 31, 2020, the Company held one investment which had a PIK interest component. The Company did not record any PIK interest income for three months ended March 31, 2020. As of March 31, 2019, the Company held one investment which had a PIK interest component. The Company recorded $32,822 of PIK interest income for three months ended March 31, 2019.

 

As of March 31, 2020 and December 31, 2019, the Company held $23,294,471 and $5,506,217 cash and cash equivalents, respectively. For the three months ended March 31, 2020 and 2019, the Company earned $28,670 and $50,720, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

 

Other Income Recognition

 

The Company generally records prepayment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment.

 

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

 

Prepayment fees and dividend income are both accrued in other income in the accompanying statements of operations.

 

For the three months ended March 31, 2020 and 2019, the Company accrued $14,740 and $17,810 of other income, respectively, related to amendment fees.

 

New Accounting Pronouncements

 

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of ASU 2018-13 did not have a material impact on the Company’s disclosures.

 

Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the fair value of the Company’s investments is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note–2 – Significant Accounting Policies.

 

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As of March 31, 2020, $282,476,467 of the Company’s investments were valued using unobservable inputs, and $43,388,747 were valued using observable inputs. During the three months ended March 31, 2020, $65,946,077 transferred into Level 3 due to a decrease in observable prices in the market and $20,650,498 out of Level 3 due to price transparency.

 

As of December 31, 2019, $249,452,590 of the Company’s investments were valued using unobservable inputs, and $81,422,321 were valued using observable inputs. During the three months ended March 31, 2019, $46,005,506 and $22,977,630 of investments transferred into and out of Level 3, respectively.

 

The following table presents the Company’s investments carried at fair value as of March 31, 2020 and December 31, 2019, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

   Assets at Fair Value as of March 31, 2020 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $31,378,926   $263,945,044   $295,323,970 
Second lien debt   -    12,009,821    17,842,097    29,851,918 
Equity and Preferred Shares   -    -    689,326    689,326 
Total  $-   $43,388,747   $282,476,467   $325,865,214 

 

   Assets at Fair Value as of December 31, 2019 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $81,422,321   $227,392,535   $308,814,856 
Second lien debt   -    -    21,340,798    21,340,798 
Equity and Preferred Shares   -    -    719,257    719,257 
Total  $-   $81,422,321   $249,452,590   $330,874,911 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of March 31, 2020. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

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             As of March 31, 2020
   Fair   Valuation  Unobservable     Weighted 
   Value   Technique    Inputs (1)  Range (2)    Average (3) 
First lien debt  $176,718,387    Matrix Pricing   Senior Leverage  2.47x - 7.02x   4.84x
            Total Leverage  3.10x - 9.80x   6.01x
            Interest Coverage  1.14x - 5.09x   2.23x
            Debt Service Coverage  0.93x - 4.44x   1.85x
            TEV Coverage  1.27x - 5.70x   2.51x
            Liquidity  5.75% - 587.90%   145.94%
            Spread Comparison  275bps - 625bps   423bps
                    
    83,303,092    Discounted Cash Flow   Market Yield  4.43% - 11.89%   8.00%
                    
Second lien debt   15,923,228    Matrix Pricing   Senior Leverage  4.89x - 7.11x   6.11x
            Total Leverage  4.89x - 7.11x   6.11x
            Interest Coverage  1.38x - 3.06x   2.09x
            Debt Service Coverage  1.20x - 2.55x   1.77x
            TEV Coverage  1.07x - 2.44x   1.79x
            Liquidity  79.62% - 307.12%   131.34%
            Spread Comparison  650bps - 950bps   782bps
                    
Total  $275,944,707               

 

(1) For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.
 
 
 
(2) Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.
 
(3) Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $6,531,760 of debt, equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2019. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

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             As of December 31, 2019
                  
   Fair   Valuation  Unobservable     Weighted 
   Value   Technique  Inputs (1)    Range (2)    Average (3) 
First lien debt  $224,772,281   Matrix Pricing  Senior Leverage  2.33x - 7.55x   4.89x
           Total Leverage  3.10x - 9.79x   6.07x
           Interest Coverage  1.14x - 4.80x   2.10x
           Debt Service Coverage  0.93x - 3.68x   1.76x
           TEV Coverage  1.27x - 5.70x   2.42x
           Liquidity  5.75% - 587.90%   141.43%
           Spread Comparison  275bps - 650bps   435bps
                    
Second lien debt   20,071,929   Matrix Pricing  Senior Leverage  4.60x - 7.06x   5.87x
           Total Leverage  4.60x - 7.06x   5.88x
           Interest Coverage  1.54x - 3.21x   2.17x
           Debt Service Coverage  1.38x - 2.86x   1.89x
           TEV Coverage  1.52x - 2.44x   1.98x
           Liquidity  52.00% - 347.60%   149.91%
           Spread Comparison  675bps - 1025bps   764bps
                    
Total  $244,844,210               

 

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

 

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.

 

(3)Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $4,608,380 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rates, leverage, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or a decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

 

The following tables provide the changes in fair value, broken out by security type, during the three months ended March 31, 2020 and 2019 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

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Three Months Ended March 31, 2020  First lien debt   Second lien debt   Equity and Preferred Shares   Total 
Fair Value as of December 31, 2019  $227,392,535   $21,340,798   $719,257   $249,452,590 
Transfers into Level 3   65,946,077    -    -    65,946,077 
Transfers out of Level 3   (11,659,069)   (8,991,429)   -    (20,650,498)
Total gains:                    
Net realized (loss) gain(a)   (53,247)   -    -    (53,247)
Net unrealized (depreciation) appreciation(b)   (13,839,089)   (1,220,061)   (29,931)   (15,089,081)
New investments, repayments and settlements:(c)                    
Purchases    11,440,787    6,708,438    -    18,149,225 
Settlements/repayments   (9,624,849)   -    -    (9,624,849)
Net amortization of premiums, PIK, discounts and fees   85,455    4,351    -    89,806 
Sales   (5,743,556)   -    -    (5,743,556)
Fair Value as of March 31, 2020  $263,945,044   $17,842,097   $689,326   $282,476,467 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2020.

 

(b)Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2020.

 

(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

Three Months Ended March 31, 2019  First lien debt   Second lien debt   Equity and Preferred Shares   Total 
Fair Value as of December 31, 2018  $124,975,467   $17,044,607   $-   $142,020,074 
Transfers into Level 3   41,904,236    4,101,270    -    46,005,506 
Transfers out of Level 3   (21,885,880)   (1,091,750)   -    (22,977,630)
Total gains:                    
Net realized gain(a)   20,496    -    -    20,496 
Net unrealized appreciation (depreciation)(b)   246,724    7,725    (400,268)   (145,819)
New investments, repayments and settlements:(c)                    
Purchases    8,653,557    1,209,731    800,535    10,663,823 
Settlements/repayments   (9,257,506)   -    -    (9,257,506)
Net amortization of premiums, PIK, discounts and fees   56,942    2,397    -    59,339 
Sales   -    -    -    - 
Fair Value as of March 31, 2019  $144,714,036   $21,273,980   $400,267   $166,388,283 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2019.
(b)Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2019.
(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

The change in unrealized value attributable to investments still held at March 31, 2020 and 2019 was $(1,046,694) and $(324,446), respectively.

 

Investment Activities

 

The Company held a total of 196 investments with an aggregate fair value of $325,865,214 as of March 31, 2020. During the three months ended March 31, 2020, the Company invested in 28 new investments for a combined $25,224,701 and in existing investments for a combined $9,103,107. The Company also received $18,146,113 in repayments from investments and $5,743,556 from investments sold during the three months ended March 31, 2020.

 

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The Company held a total of 176 investments with an aggregate fair value of $330,874,911 as of December 31, 2019. During the three months ended March 31, 2019, the Company invested in 14 new investments for a combined $29,730,870 and in existing investments for a combined $15,542,660. The Company also received $11,648,671 in repayments from investments during the three months ended March 31, 2019.

 

Investment Concentrations

 

As of March 31, 2020, the Company’s investment portfolio consisted of investments in 172 companies located in 34 states across 22 different industries, with an aggregate fair value of $325,865,214. The five largest investments at fair value as of March 31, 2020 totaled $20,149,968, or 6.18% of the Company’s total investment portfolio as of such date. As of March 31, 2020, the Company’s average investment by obligor was $1,751,725 at cost.

 

As of December 31, 2019, the Company’s investment portfolio consisted of investments in 164 companies located in 33 states across 22 different industries, with an aggregate fair value of $330,874,911. The five largest investments at fair value as of December 31, 2019 totaled $21,465,158, or 7.16% of the Company’s total investment portfolio as of such date. As of December 31, 2019, the Company’s average investment by obligor was $2,028,793 at cost.

 

The following table outlines the Company’s investments by security type as of March 31, 2020 and December 31, 2019:

 

 

   March 31, 2020   December 31, 2019 
   Cost   Percentage of Total Investments   Fair Value   Percentage of Total Investments   Cost   Percentage of Total Investments   Fair Value   Percentage of Total Investments 
First lien debt  $311,100,247    90.63%  $295,323,970    90.63%  $310,257,401    93.25%  $308,814,856    93.33%
Second lien debt   31,029,014    9.04%   29,851,918    9.17%   21,344,024    6.41%   21,340,798    6.46%
Total Debt Investments   342,129,261    99.67%   325,175,888    99.80%   331,601,425    99.66%   330,155,654    99.79%
Equity and Preferred Shares   1,120,581    0.33%   689,326    0.20%   1,120,581    0.34%   719,257.00    0.21%
Total Equity Investments   1,120,581    0.33%   689,326    0.20%   1,120,581    0.34%   719,257    0.21%
Total Investments  $343,249,842    100.00%  $325,865,214    100.00%  $332,722,006    100.00%  $330,874,911    100.00%

 

 

Investments at fair value consisted of the following industry classifications as of March 31, 2020 and December 31, 2019:

 

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     March 31, 2020   December 31, 2019 
  Industry  Fair Value   Percentage of Total Investments   Fair Value   Percentage of Total Investments 
  Healthcare & Pharmaceuticals  $71,172,561    21.84%  $76,108,451    23.00%
  High Tech Industries   56,065,620    17.21    58,327,844    17.63 
  Services: Business   44,226,079    13.57    44,376,771    13.41 
  Chemicals, Plastics & Rubber   26,416,557    8.11    28,747,162    8.69 
  Services: Consumer   23,521,898    7.22    25,757,966    7.78 
  Aerospace & Defense   17,846,880    5.48    12,911,355    3.90 
  Banking, Finance, Insurance & Real Estate   11,834,057    3.63    10,766,682    3.25 
  Capital Equipment   9,803,831    3.01    7,720,891    2.33 
  Construction & Building   9,178,428    2.82    6,989,790    2.11 
  Consumer Goods: Non-durable   7,955,468    2.44    8,472,022    2.56 
  Containers, Packaging & Glass   8,064,889    2.47    7,941,602    2.40 
  Automotive   6,998,770    2.15    6,294,153    1.90 
  Wholesale   6,589,129    2.02    7,219,568    2.18 
  Transportation: Cargo   6,788,445    2.08    7,192,803    2.17 
  Forest Products & Paper   5,221,244    1.60    4,379,293    1.32 
  Media: Advertising, Printing & Publishing   4,467,097    1.37    5,124,527    1.55 
  Beverage, Food & Tobacco   3,768,771    1.16    3,930,263    1.19 
  Consumer Goods: Durable   2,211,409    0.68    2,309,428    0.70 
  Retail   1,206,009    0.37    1,286,070    0.39 
  Hotel, Gaming & Leisure   1,039,765    0.32    3,503,815    1.06 
  Metals & Mining   925,717    0.28    987,604    0.31 
  Health Care Equipment & Services   562,590    0.17    526,851    0.17 
     $325,865,214    100.00%  $330,874,911    100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of March 31, 2020 and December 31, 2019:

 

   March 31, 2020   December 31, 2019 
       Percentage of Total        Percentage of Total  
Geographic Region   Fair Value    Investments    Fair Value    Investments 
Northeast  $83,401,228    25.59%  $87,146,010    26.34%
Midwest   67,487,094    20.71    68,357,102    20.66 
West   51,633,872    15.85    52,320,288    15.81 
Southwest   39,143,872    12.01    42,469,487    12.84 
Southeast   36,169,835    11.10    35,674,150    10.78 
East   39,446,104    12.11    39,053,575    11.80 
Northwest   3,968,605    1.22    4,083,800    1.23 
South   2,714,604    0.83    1,770,499    0.54 
Other (a)   1,900,000    0.58    -    - 
Total Investments  $325,865,214    100.00%  $330,874,911    100.00%

 

(a) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

 

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

 

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Investment Principal Repayments

 

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2020:

 

For the Fiscal Years Ending December 31:  Amount 
2020  $2,641,641 
2021   10,234,648 
2022   24,729,641 
2023   45,545,325 
2024   80,048,648 
Thereafter   180,727,259 
               Total contractual repayments   343,927,162 
Adjustments to cost basis on debt investments(a)   (1,797,901)
               Total Cost Basis of Debt Investments Held at March 31, 2020:  $342,129,261 

 

(a)     Adjustment to cost basis related to unamortized balance of OID investments.

 

COVID-19 Developments

 

In addition, during the three months ended March 31, 2020 and subsequent to March 31, 2020, the COVID-19 pandemic has had a significant impact on the U.S economy. To the extent the Company's portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on the Company's future net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.

 

Note 4. Related Party Transactions

 

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Company’s Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

 

Management Fee

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

 

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For the three months ended March 31, 2020, the Company recorded base management fees of $880,852 and waivers to the base management fees of $308,298, as set forth within the accompanying statements of operations. For the three months ended March 31, 2019, the Company recorded base management fees of $738,654 and waivers to the base management fees of $258,529, as set forth within the accompanying statements of operations.

 

Incentive Fee

 

The Incentive Fee has two parts, as follows: one is calculated and payable quarterly in arrears based on the Company’s 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 commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

 

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as debt instruments with PIK interest, OID securities and accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter.  As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows: