Attached files

file filename
EX-99.1 - EX-99.1 - TCW Direct Lending LLCd154381dex991.htm
EX-32.2 - EX-32.2 - TCW Direct Lending LLCd154381dex322.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLCd154381dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLCd154381dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLCd154381dex311.htm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended June 30, 2021

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 814-01069

 

 

TCW DIRECT LENDING LLC

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   46-5327366

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

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

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

Not applicable

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

 

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

None   Not applicable   Not applicable

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-Accelerated filer

 

  

Smaller reporting company

 

    

Emerging growth company

 

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

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

As of June 30, 2021, there was no established public market for the Registrant’s common units. The number of the Registrant’s common units outstanding at August 9, 2021 was 20,134,698.

 

 

 


Table of Contents

TCW DIRECT LENDING LLC

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021

Table of Contents

 

   

INDEX

   PAGE 
NO. 
 

PART I.

 

FINANCIAL INFORMATION

  
Item 1.   Financial Statements   
  Consolidated Schedules of Investments as of June 30, 2021 (unaudited) and December 31, 2020      2  
  Consolidated Statements of Assets and Liabilities as of June 30, 2021 (unaudited) and December 31, 2020      11  
  Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)      12  
  Consolidated Statements of Changes in Members’ Capital for the three and six months ended June 30, 2021 and 2020 (unaudited)      13  
  Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)      14  
  Notes to Consolidated Financial Statements (unaudited)      15  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      31  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      42  

Item 4.

  Controls and Procedures      42  

PART II.

  OTHER INFORMATION      43  

Item 1.

  Legal Proceedings      43  

Item 1A.

  Risk Factors      43  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      43  

Item 3.

  Defaults Upon Senior Securities      43  

Item 4.

  Mine Safety Disclosures      43  

Item 5.

  Other Information      43  
Item 6.   Exhibits      44  
  SIGNATURES      45  


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited)

As of June 30, 2021

 

Industry

  

Issuer

   Acquisition
Date
    

Investment

   % of Net
Assets
     Par
Amount
     Maturity
Date
   Amortized
Cost
     Fair Value  
  

DEBT (1)

                    

Distributors

                       
   ASC Acquisition Holdings, LLC (3)      08/14/20      Term Loan 9.50% inc PIK (LIBOR + 8.50%, 1.00% Floor, all PIK)      3.9%      $  21,292,720      08/14/25      $ 21,292,720        $ 21,292,720  
   ASC Acquisition Holdings, LLC (2) (3)      08/14/20      Subordinated Loan 7.00% inc PIK (7.00% Fixed Coupon, all PIK)      1.9%        25,941,282      11/14/25      23,151,200        10,298,689  
           

 

 

          

 

 

    

 

 

 
              5.8%              44,443,920        31,591,409  
           

 

 

          

 

 

    

 

 

 

Diversified Consumer Services

                    
   School Specialty, Inc. (4)      09/15/20      Term Loan 9.25% inc PIK (LIBOR + 8.00%, 1.25% Floor, 4.00% PIK)      6.5%        35,263,423      09/15/25      35,065,281        35,263,423  
           

 

 

          

 

 

    

 

 

 
              6.5%              35,065,281        35,263,423  
           

 

 

          

 

 

    

 

 

 

Diversified Financial Services

                    
   Guardia LLC (2) (3)      07/02/18      Revolver 8.75% inc PIK (LIBOR + 7.25%, 1.50% Floor, all PIK)      0.5%        10,048,152      07/02/23      2,318,730        2,763,242  
           

 

 

          

 

 

    

 

 

 
              0.5%              2,318,730        2,763,242  
           

 

 

          

 

 

    

 

 

 

Hotels, Restaurants & Leisure

                    
   OTG Management, LLC      10/07/20      Delayed Draw Term Loan 10.00% inc PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      0.4%        2,279,074      08/26/21      2,279,074        1,946,329  
   OTG Management, LLC      10/07/20      Term Loan 10.00% inc PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      1.1%        6,869,553      08/26/21      6,869,553        5,866,598  
   OTG Management, LLC      06/30/16      Term Loan 10.00% inc PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      9.3%        59,225,430      08/26/21      59,189,996        50,578,517  
   OTG Management, LLC      06/30/16      Term Loan 10.00% inc PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      3.0%        18,776,077      08/26/21      18,770,842        16,034,770  
   Ruby Tuesday, Inc. (4)      02/24/21      Term Loan 13.25% inc PIK (LIBOR + 12.00%, 1.25% Floor, 6.00% PIK)      2.2%        12,114,661      02/24/25      12,114,661        12,114,661  
           

 

 

          

 

 

    

 

 

 
              16.0%              99,224,126        86,540,875  
           

 

 

          

 

 

    

 

 

 

Household Durables

                       
   Cedar Electronics Holdings, Corp. (4)      05/19/15      Term Loan 9.50% (LIBOR + 8.00%, 1.50% Floor)      3.5%        19,147,847      12/18/23      19,145,599        19,147,847  
   Cedar Electronics Holdings, Corp. (4)      01/30/19      Incremental Term Loan 15.00% inc PIK (15.00% Fixed Coupon, all PIK)      0.6%        3,440,089      12/18/23      3,440,089        3,440,089  
           

 

 

          

 

 

    

 

 

 
              4.1%              22,585,688        22,587,936  
           

 

 

          

 

 

    

 

 

 

Industrial Conglomerates

                    
   H-D Advanced Manufacturing Company      06/30/15      Term Loan 8.50% inc PIK (LIBOR + 7.00%, 1.50% Floor, 6.38% PIK)      13.5%        108,427,970      01/01/23      108,275,837        73,297,308  
           

 

 

          

 

 

    

 

 

 
              13.5%              108,275,837        73,297,308  
           

 

 

          

 

 

    

 

 

 

Internet & Direct Marketing Retail

                    
   Lulu’s Fashion Lounge, LLC      08/28/17      Term Loan 10.50% inc PIK (LIBOR + 9.50%, 1.00% Floor, 2.50% PIK)      2.2%        11,791,496      08/28/22      11,711,504        11,791,496  
           

 

 

          

 

 

    

 

 

 
              2.2%              11,711,504        11,791,496  
           

 

 

          

 

 

    

 

 

 

Metals & Mining

                       
   Pace Industries, Inc. (2) (4)      06/01/20      HoldCo Term Loan 3.50% inc PIK (LIBOR + 2.00%, 1.50% Floor, all PIK)      14.0%        84,098,877      06/01/40      78,137,869        75,857,187  
   Pace Industries, Inc. (4)      06/01/20      Term Loan 9.75% inc PIK (LIBOR + 8.25%, 1.50% Floor, 2.25% PIK)      9.8%        53,351,233      06/01/25      53,316,932        53,351,233  
           

 

 

          

 

 

    

 

 

 
              23.8%              131,454,801        129,208,420  
           

 

 

          

 

 

    

 

 

 

Pharmaceuticals

                       
   Noramco, LLC      07/01/16      Term Loan 9.38% inc PIK (LIBOR + 8.38%, 1.00% Floor, 0.38% PIK)      9.3%        50,365,409      12/31/23      50,213,802        50,466,140  
           

 

 

          

 

 

    

 

 

 
              9.3%              50,213,802        50,466,140  
           

 

 

          

 

 

    

 

 

 
   Total Debt Investments            81.7%              505,293,689        443,510,249  
           

 

 

          

 

 

    

 

 

 

 

2


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2021

 

Industry

  

Issuer                

  

Investment

   % of Net
Assets
   Shares      Amortized
Cost
     Fair Value  
  

EQUITY

              

Distributors

                 
  

Animal Supply Holdings LLC (2) (3) (5) (9)

  

Class A Common

   0.0%      224,156        $ 1,572,727        $ -       
        

 

     

 

 

    

 

 

 
         0.0%         1,572,727        -       
        

 

     

 

 

    

 

 

 

Diversified Consumer Services

              
  

School Specialty, Inc. (2) (4) (7) (9)

  

Class A Preferred Stock

   2.2%      806,264        8,062,637        11,916,578  
  

School Specialty, Inc. (2) (4) (7) (9)

  

Class B Preferred Stock

   0.0%      359,474        356,635        -       
  

School Specialty, Inc. (2) (4) (7) (9)

  

Common Stock

   0.0%      80,700        53,889        -       
        

 

     

 

 

    

 

 

 
         2.2%         8,473,161        11,916,578  
        

 

     

 

 

    

 

 

 

Diversified Financial Services

                 
  

Carrier & Technology Holdings, LLC (2) (3) (6) (9)

  

Common Stock

   0.0%      2,143        -             -       
        

 

     

 

 

    

 

 

 
         0.0%         -             -       
        

 

     

 

 

    

 

 

 

Hotels, Restaurants & Leisure

              
  

RTI Holding Company, LLC (2) (4) (9)

  

Class A Units

   1.7%      5,475,885        5,133,708        9,214,272  
  

RTI Holding Company, LLC (2) (4) (9)

  

Warrant, expires 2/26/24

   0.3%      912,647        -             1,535,711  
        

 

     

 

 

    

 

 

 
         2.0%         5,133,708        10,749,983  
        

 

     

 

 

    

 

 

 

Household Durables

                 
  

Cedar Ultimate Parent, LLC (2) (4) (9)

  

Class A Preferred Units

   2.8%      9,297,990        9,187,902        15,035,966  
  

Cedar Ultimate Parent, LLC (2) (4) (9)

  

Class E Common Units

   0.0%      300,000        -             -       
  

Cedar Ultimate Parent, LLC (2) (4) (9)

  

Class D Preferred Units

   0.0%      2,900,000        -             261,000  
        

 

     

 

 

    

 

 

 
         2.8%         9,187,902        15,296,966  
        

 

     

 

 

    

 

 

 

Investment Funds & Vehicles

                 
  

TCW Direct Lending Strategic Ventures (2) (4) (8)

  

Common membership Interests

   0.0%      800        -             -       
  

TCW Direct Lending Strategic Ventures (4) (8)

  

Preferred membership Interests

   25.1%      154,400        154,400,000        136,303,948  
        

 

     

 

 

    

 

 

 
         25.1%         154,400,000        136,303,948  
        

 

     

 

 

    

 

 

 

Metals & Mining

                 
  

Pace Industries, Inc. (2) (4) (9)

  

Common Stock

   0.0%      917,418        2,110,522        -       
        

 

     

 

 

    

 

 

 
         0.0%         2,110,522        -       
        

 

     

 

 

    

 

 

 

Technologies Hardware, Storage and Peripherals

        
  

Quantum Corporation (2)

  

Common Stock

   2.2%      1,766,327        6,481,788        12,169,993  
        

 

     

 

 

    

 

 

 
         2.2%         6,481,788        12,169,993  
        

 

     

 

 

    

 

 

 
  

Total Equity Investments

      34.3%         187,359,808        186,437,468  
        

 

     

 

 

    

 

 

 
  

Total Debt & Equity Investments (10)

   116.0%         692,653,497        629,947,717  
     

 

     

 

 

    

 

 

 
  

Short-term Investments

              
  

U.S. Treasury Bill, Yield 0.05%

      92.0%      500,000,000        499,942,265        499,942,265  
        

 

     

 

 

    

 

 

 
  

Total Short-term Investments

      92.0%         499,942,265        499,942,265  
        

 

     

 

 

    

 

 

 
  

Cash Equivalents

              
  

Fixed Income Clearing Corporation Repo, Yield 0.00%

      5.2%      28,487,620        28,487,620        28,487,620  
        

 

     

 

 

    

 

 

 
  

Total Cash Equivalents

      5.2%         28,487,620        28,487,620  
        

 

     

 

 

    

 

 

 
  

Total Investments (213.3%)

              $ 1,221,083,382        $ 1,158,377,602  
              

 

 

    

 

 

 
  

Net unrealized depreciation on unfunded commitments (-0.8%)

                 (4,374,297)  
                 

 

 

 
  

Liabilities in Excess of Other Assets (-112.5%)

                 (610,862,738)  
                 

 

 

 
  

Net Assets (100.0%)

                 $ 543,140,567  
                 

 

 

 

 

3


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2021

 

(1) 

Certain debt investments are subject to contractual restrictions on resale, such as approval of the agent or borrower.

 

(2) 

Non-income producing.

 

(3) 

As defined in the Investment Company Act of 1940, the investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, between 5% and 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. Fair value as of December 31, 2020 and June 30, 2021 along with transactions during the period ended June 30, 2021 in these affiliated investments are as follows:

 

Name of Investment

   Fair Value at
12/31/2020
     Gross Addition (a)      Gross Reduction (b)      Realized Gains
(Losses)
     Net Change in
Unrealized
Appreciation/
Depreciation
     Fair Value at
June 30, 2021
     Interest/Dividend/
Other income
 

Animal Supply Holdings LLC Class A Common

     $ -            $ -            $ -            $ -            $ -            $ -            $ -      

ASC Acquisition Holdings LLC Term Loan - 9.50%

         20,398,360          992,692          (98,332)         -            -            21,292,720          1,203,518    

ASC Acquisition Holdings LLC Term Loan - 7.00%

     9,617,957          -            (275,367)         -            956,099              10,298,689          (271,935)   

Carrier & Technology, LLC Common Stock

     -            -            -            -            -            -            -      

Carrier & Technology Holdings, LLC Term Loan—11.75%

     -            231,173          (1,369,948)         (41,407,285)            42,546,060        -            231,174    

Guardia LLC (fka Carrier & Technology, LLC) Revolver - 8.75%

     5,782,424          293,635          (282,857)         (7,361,653)        4,331,693        2,763,242        68,403    

Guardia LLC (fka Carrier & Technology Solutions, LLC) Term loan—8.75%

     -            669,509          -            (10,057,378)        9,387,869        -            421,861    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Non-Controlled Affiliated Investments

     $ 35,798,741          $ 2,187,009        $ (2,026,504)         $ (58,826,316)        $ 57,221,721        $ 34,354,651        $ 1,653,021    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

Gross additions include new purchases, PIK income and amortization of original issue and market discounts.

 

  (b)

Gross reductions include decreases in the cost basis from sales, paydown and the amortization of premium.

 

(4) 

As defined in the Investment Company Act of 1940, the investment is deemed to be a “controlled person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. Fair value as of December 31, 2020 and June 30, 2021 along with transactions during the period ended June 30, 2021 in these controlled investments are as follows:

 

Name of Investment

   Fair Value at
12/31/2020
     Gross Addition (a)      Gross Reduction (b)      Realized Gains
(Losses)
     Net Change in
Unrealized
Appreciation/
Depreciation
     Fair Value at
June 30, 2021
     Interest/Dividend/
Other income
 

Cedar Electronics Holdings, Corp Incremental Term Loan - 15.00%

     $ 3,177,284          $ 262,805          $ -            $ -            $ -            $ 3,440,089          $ 280,063    

Cedar Electronics Holdings, Corp Term Loan - 9.50%

         20,795,847          700          (1,648,000)         -            (700)         19,147,847          1,092,246    

Cedar Ultimate Parent, LLC Class A Preferred Unit

     9,598,036          -            -            -                5,437,930              15,035,966          -      

Cedar Ultimate Parent, LLC Class D Preferred Unit

     -            -            -            -            261,000          261,000          -      

Cedar Ultimate Parent, LLC Class E Preferred Unit

     -            -            -            -            -            -            -      

Pace Industries, Inc. Common Stock

     -            -            -            -            -            -            -      

Pace Industries, Inc. Term Loan - 3.50%

     66,352,141          -            (19,165)         -            9,524,211          75,857,187          8,230    

Pace Industries, Inc. Term Loan - 9.75%

     52,749,501          606,071          -            -            (4,339)         53,351,233          2,821,902    

RT Holdings Parent, LLC Class A Unit

     -            5,133,708          -            -            4,080,564          9,214,272          -      

RT Holdings Parent, LLC Warrant

     -            -            -            -            1,535,711          1,535,711          -      

Ruby Tuesday Operations, LLC Term Loan - 13.25%

     -            14,867,126          (2,752,465)         -            -            12,114,661          658,234    

School Specialty, Inc. Common Stock

     -            -            -            -            -            -            -      

School Specialty, Inc. Preferred Stock A

     4,386,075          -            -            -            7,530,503          11,916,578          -      

School Specialty, Inc. Preferred Stock B

     -            -            -            -            -            -            -      

School Specialty, Inc. Term Loan - 9.25%

     34,562,488          724,269          -            -            (23,334)         35,263,423          1,752,796    

TCW Direct Lending Strategic Ventures LLC Common Membership Interests

     -            -            -            -            -            -            -      

TCW Direct Lending Strategic Ventures LLC Preferred Membership Interests

     138,889,888          -            (10,800,000)         -            8,214,060          136,303,948          5,600,000    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Controlled Affiliated Investments

     $ 330,511,260          $ 21,594,679          $ (15,219,630)         $ -            $ 36,555,606          $ 373,441,915          $ 12,213,471    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

Gross additions include new purchases, PIK income and amortization of original issue and market discounts.

 

  (b)

Gross reductions include decreases in the cost basis from sales, paydown and the amortization of premium.

 

(5) 

Holding of Animal Supply Holdings, LLC Class A units are held through TCW DL ASH LLC, a special purpose vehicle.

 

(6) 

Holdings of Carrier & Technology Holdings, LLC common stock are held through TCW DL CTH LLC, a special purpose vehicle.

 

(7) 

Holdings of School Specialty, Inc. Class A & B preferred stock and common stock are held through TCW DL SSP LLC, a special purpose vehicle.

 

(8) 

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of June 30, 2021, $136,303,948 or 11.7% of the Company’s total assets were represented by “non-qualifying assets.”

 

4


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2021

 

(9) 

All or a portion of such security was acquired in a transaction exempt from registration under the Securities Act of 1933, and may be deemed “restricted securities” under the Securities Act. As of June 30, 2021, the aggregate fair value of these securities was $37,963,527, or 3.3% of the Company’s total assets.

 

(10) 

The fair value of the Quantum Corporation Common Stock held by the Company is based on the quoted market price of the issuer’s stock as of June 30, 2021. Such common stock is considered to be a Level 1 security within the Fair Value Hierarchy. Otherwise, the fair value of each debt and equity investment was determined using significant unobservable inputs and such investments are considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

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

PRIME - Prime Rate

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $16,987,739 and $80,003,090, respectively, for the period ended June 30, 2021. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.

 

Geographic Breakdown of Portfolio

          

United States

     100

See Notes to Consolidated Financial Statements.

 

5


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments

As of December 31, 2020

 

Industry

 

Issuer

   Acquisition
Date
   

Investment

   % of Net
Assets
     Par Amount      Maturity
Date
     Amortized
Cost
     Fair Value  
  Debt (1)                    
Distributors                      
  ASC Acquisition Holdings, LLC(2)(3)      08/14/20     Term Loan - 7.00% inc. PIK (7.00% Fixed Coupon, all PIK)      1.7%      $ 25,046,760        08/03/25      $ 23,426,565      $ 9,617,957  
  ASC Acquisition Holdings, LLC(3)      08/14/20     Term Loan - 9.50% inc. PIK (LIBOR + 8.50%, 1.00% Floor, 9.5% PIK)      3.6%        20,398,360        08/03/25        20,398,360        20,398,360  
         

 

 

    

 

 

       

 

 

    

 

 

 
            5.3%        45,445,120           43,824,925        30,016,317  
         

 

 

    

 

 

       

 

 

    

 

 

 
Diversified Consumer Services                      
  School Specialty, Inc.(4)      09/15/20     Term Loan - 9.25% inc. PIK (LIBOR + 8.00%, 1.25% Floor, 4.00% PIK)      6.1%        34,562,488        09/15/25        34,341,012        34,562,488  
         

 

 

    

 

 

       

 

 

    

 

 

 
            6.1%        34,562,488           34,341,012        34,562,488  
         

 

 

    

 

 

       

 

 

    

 

 

 
Diversified Financial Services                      
  Carrier & Technology Holdings,
LLC(2)(3)
     07/02/18     Term Loan - 11.75% inc. PIK (11.75%, Fixed Coupon, all PIK)      0.0%        46,908,147        07/02/23        42,546,059        —    
  Guardia LLC (fka Carrier & Technology Solutions, LLC)(2)(3)      07/02/18     Revolver - 8.75% inc. PIK (LIBOR + 7.25%, 1.50% Floor, all PIK)      1.0%        9,669,605        07/02/23        9,669,605        5,782,424  
  Guardia LLC (fka Carrier & Technology Solutions, LLC)(2)(3)      07/02/18     Term Loan - 8.75% inc. PIK (LIBOR + 7.25%, 1.50% Floor, all PIK)      0.0%        11,087,550        07/02/23        9,387,868        —    
         

 

 

    

 

 

       

 

 

    

 

 

 
            1.0%        20,757,155           19,057,473        5,782,424  
         

 

 

    

 

 

       

 

 

    

 

 

 
            1.0%        67,665,302           61,603,532        5,782,424  
         

 

 

    

 

 

       

 

 

    

 

 

 
Hotels, Restaurants & Leisure                      
  OTG Management, LLC      10/07/20     Incremental Delayed Draw Term Loan - 10.00% inc. PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      1.3%        9,102,189        08/26/21        9,102,189        7,299,956  
  OTG Management, LLC      06/30/16     Term Loan - 10.00% inc. PIK (LIBOR + 9.00%, 1.00% Floor, 2.00% PIK)      10.9%        77,605,399        08/26/21        77,432,408        62,239,530  
         

 

 

    

 

 

       

 

 

    

 

 

 
            12.2%        86,707,588           86,534,597        69,539,486  
         

 

 

    

 

 

       

 

 

    

 

 

 
  Ruby Tuesday, Inc.      10/09/20     DIP Term Loan -11.00% (LIBOR + 10.00%, 1.00% Floor)      0.3%        1,836,034        03/08/21        1,836,034        1,836,034  
  Ruby Tuesday, Inc.      12/21/17     Term Loan - 11.00% inc. PIK (LIBOR + 10.0%, 1.00% Floor, 2.00% PIK)      1.7%        9,647,259        12/21/22        9,466,906        9,647,259  
         

 

 

    

 

 

       

 

 

    

 

 

 
            2.0%        11,483,293           11,302,940        11,483,293  
         

 

 

    

 

 

       

 

 

    

 

 

 
            14.2%      98,190,881           97,837,537        81,022,779  
         

 

 

    

 

 

       

 

 

    

 

 

 
Household Durables                      
  Cedar Electronics Holdings, Corp.(4)      01/30/19     Incremental Term Loan - 15.00% inc. PIK (15.00%, Fixed Coupon, all PIK)      0.5%        3,177,284        12/18/23        3,177,284        3,177,284  
  Cedar Electronics Holdings, Corp.(4)      05/19/15     Term Loan 9.50% (LIBOR + 8.00%, 1.50% Floor)      3.7%        20,795,847        12/18/23        20,792,899        20,795,847  
         

 

 

    

 

 

       

 

 

    

 

 

 
            4.2%        23,973,131           23,970,183        23,973,131  
         

 

 

    

 

 

       

 

 

    

 

 

 

 

6


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

 

 

Industry

 

Issuer

   Acquisition
Date
   

Investment

   % of Net
Assets
  Par
Amount
   Maturity
Date
     Amortized
Cost
   Fair Value
Industrial Conglomerates                     
  H-D Advanced Manufacturing Company      06/30/15     First Lien Last Out Term Loan - 8.50% inc. PIK (LIBOR + 7.00%, 1.50% Floor, All PIK)      12.8   $ 108,376,477        01/01/23      $     108,166,430      $ 72,612,240  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            12.8     108,376,477           108,166,430        72,612,240  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Information Technology Services                     
  ENA Holding Corporation      05/06/16     First Lien Term Loan -10.00% inc. PIK (LIBOR + 9.25%, 0.75% Floor, 4.75% PIK)      7.3     41,682,875        05/06/21        41,613,205        41,307,729  
  ENA Holding Corporation      05/06/16     Revolver - 10.00% inc. PIK (LIBOR + 9.25%, 0.75% Floor, 4.75% PIK)      1.4     8,150,861        05/06/21        8,150,861        8,077,503  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            8.7     49,833,736           49,764,066        49,385,232  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Internet & Direct Marketing Retail                     
  Lulu’s Fashion Lounge, LLC      08/28/17     First Lien Term Loan - 10.50% inc. PIK (LIBOR + 9.50%, 1.00% Floor, 2.50% PIK)      2.1     12,194,025        08/28/22        12,074,279        12,047,697  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            2.1     12,194,025           12,074,279        12,047,697  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Metals & Mining                     
  Pace Industries, Inc.(2)(4)      06/01/20     HoldCo Term Loan - 3.50% inc. PIK (LIBOR + 2.00%, 1.50% Floor, all PIK)      11.6     82,630,313        06/01/40        78,157,034        66,352,141  
  Pace Industries, Inc.(4)      06/01/20     Opco Term Loan - 9.75% inc. PIK (LIBOR + 8.25%, 1.50% Floor, 2.25% PIK)      9.3     52,749,501        06/01/25        52,710,862        52,749,501  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            20.9     135,379,814           130,867,896        119,101,642  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Pharmaceuticals                     
  Noramco, LLC      07/01/16     Senior Term Loan - 9.38% inc. PIK (LIBOR + 8.38%, 1.00% Floor, 0.38% PIK)      8.4     50,315,714        12/31/23        50,133,886        47,548,349  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            8.4     50,315,714           50,133,886        47,548,349  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

  Total Debt Investments           83.7           612,583,746        476,052,299  
         

 

 

 

       

 

 

 

  

 

 

 

  Equity             Shares           
Distributors                     
  Animal Supply Holdings, LLC(2)(3)(5)(8)      Class A Common      0.0     224,156           1,572,726        —    
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            0.0     224,156           1,572,726        —    
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Diversified Consumer Services                     
  School Specialty, Inc.(2)(4)(8)      Class A Preferred Stock      0.8     806,264           8,062,637        4,386,075  
  School Specialty, Inc.(2)(4)(8)      Class B Preferred Stock      0.0     359,474           356,635        —    
  School Specialty, Inc.(2)(4)(8)      Common Stock      0.0     80,700           53,889        —    
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            0.8     1,246,438           8,473,161        4,386,075  
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

Diversified Financial Services                     
  Carrier & Technology Holdings, LLC(2)(3)(6)      Common Stock      0.0     2,143           —          —    
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

            0.0     2,143           —          —    
         

 

 

 

 

 

 

 

     

 

 

 

  

 

 

 

 

7


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

 

Industry

  

Issuer

  

Investment

   % of Net
Assets
    
Shares
     Amortized
Cost
     Fair Value

Hotels, Restaurants & Leisure

                 
   RTI Holding Company, LLC (an affiliate of Ruby Tuesday, Inc.)(2)(8)    Warrant, expires 12/21/27      0.0%        1,470,632      $ 1,379,747      $ —  
        

 

 

    

 

 

    

 

 

    

 

 

 

           0.0%        1,470,632        1,379,747        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Household Durables

                 
   Cedar Ultimate Parent LLC(2)(4)(8)    Class A Preferred Units      1.7%        9,297,990        9,187,900        9,598,036  
   Cedar Ultimate Parent LLC(2)(4)(8)    Class D Preferred Units      0.0%        2,900,000        —          —    
   Cedar Ultimate Parent LLC(2)(4)(8)    Class E Common Units      0.0%        300,000        —          —    
        

 

 

    

 

 

    

 

 

    

 

 

 

           1.7%        12,497,990        9,187,900        9,598,036  
        

 

 

    

 

 

    

 

 

    

 

 

 

Investment Funds & Vehicles

                 
   TCW Direct Lending Strategic Ventures LLC(2)(4)(7)    Common membership interests      0.0%        800        —          —    
      TCW Direct Lending Strategic Ventures LLC(4)(7)    Preferred membership interests      24.4%        165,200        165,200,000        138,889,888  
        

 

 

    

 

 

    

 

 

    

 

 

 

           24.4%        166,000        165,200,000        138,889,888  
        

 

 

    

 

 

    

 

 

    

 

 

 

Metals & Mining

                 
   Pace Industries, Inc.(2)(4)(8)    Common Stock      0.0%        917,418        2,110,522        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

           0.0%        917,418        2,110,522        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Technologies Hardware, Storage and Peripherals

                 
   Quantum Corporation(2)(3)    Common Stock      2.9%        2,670,416        9,799,470        16,342,946  
        

 

 

    

 

 

    

 

 

    

 

 

 

           2.9%        2,670,416        9,799,470        16,342,946  
        

 

 

    

 

 

    

 

 

    

 

 

 

   Total Equity Investments         29.8%           197,723,526        169,216,945  
        

 

 

       

 

 

    

 

 

 

   Total Debt & Equity Investments(9)         113.5%         $ 810,307,272      $ 645,269,244  
     

 

 

       

 

 

    

 

 

 

   Cash Equivalents

 

   Blackrock Liquidity Funds, Yield 0.01%         4.8%        27,031,770        27,031,770        27,031,770  
   U.S. Treasury Bill, Yield 0.08%         105.5%        600,000,000        599,747,833        599,747,832  
        

 

 

    

 

 

    

 

 

    

 

 

 

           110.3%        627,031,770        626,779,603        626,779,602  
        

 

 

    

 

 

    

 

 

    

 

 

 

   Total Cash Equivalents         110.3%         $ 626,779,603      $ 626,779,602  
     

 

 

       

 

 

    

 

 

 

   Total Investments 223.8%          $ 1,437,086,875      $ 1,272,048,846  
        

 

 

    

 

 

 

   Net unrealized depreciation on unfunded commitments (0.1%)          $ (713,058
           

 

 

 

   Liabilities in Excess of Other Assets (123.7%)          $ (703,060,436
           

 

 

 

   Net Assets 100.0%          $ 568,275,352  
                 

 

 

 

 

8


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $153,637,845 and $416,887,805, respectively, for the period ended December 31, 2020. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.

 

(1)

Certain debt investments are subject to contractual restrictions on resale, such as approval of the agent or borrower.

(2)

Non-income producing.

(3)

As defined in the Investment Company Act of 1940, the investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, between 5% and 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. Fair value as of December 31, 2019 and December 31, 2020 along with transactions during the year ended December 31, 2020 in these affiliated investments are as follows:

 

                      Net Change in         
     Fair Value at            Realized   Unrealized   Fair Value at    Interest/
     December 31,    Gross   Gross   Gains   Appreciation/   December 31,    Dividend/

Name of Investment

   2019      Additions(a)       Reductions(b)     (Losses)   Depreciation   2020    Other income

Animal Supply Holdings, LLC Class A Common

     $ —        $ 1,572,727       $ —       $ (708,537     $ (864,190     $ —        $ 15,767  

ASC Acquisition Holdings, LLC Term Loan—7.00%

     —          23,426,565       —         —         (13,808,608     9,617,957        873,444  

ASC Acquisition Holdings, LLC Term Loan—9.50%

     —          20,398,360       —         —         —         20,398,360        1,503,104  

ASC Acquisition Holdings, LLC Term Loan—11.80%

     16,973,303        12,091,695       (34,771,688     —         5,706,690       —          3,053,968  

Carrier & Technology Holdings, LLC Term Loan—11.75%

     —          —         —         —         —         —          (417,901

Carrier & Technology Holdings, LLC Common Stock

     —          —           —       —         —         —          —    

Guardia LLC (fka Carrier & Technology Solutions, LLC) Revolver—8.75%

     8,494,311        (469,870     1,645,164       —         (3,887,181     5,782,424        1,649,576  

Guardia LLC (fka Carrier & Technology Solutions, LLC) Term loan—8.75%

     7,740,609        552,378       (2,819,690     —         (5,473,297     —          999,895  

Quantum Corporation Common Stock

     19,814,479        —         —         —         (3,471,533     16,342,946        —    
  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Total non-controlled affiliated investments

     $     53,022,702        $     57,571,855       $     (35,946,214)       $     (708,537)       $     (21,798,119)       $     52,141,687        $     7,677,853  
  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

(a)

Gross additions include new purchases, PIK income and amortization of original issue and market discounts.

(b)

Gross reductions include decreases in the cost basis from sales, paydown and the amortization of premium.

 

9


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

 

(4)

As defined in the Investment Company Act of 1940, the investment is deemed to be a “controlled person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. Fair value as of December 31, 2019 and December 31, 2020 along with transactions during the year ended December 31, 2020 in these controlled investments are as follows:

 

                      

Net

Change in

        
     Fair Value at             Realized   Unrealized   Fair Value at    Interest/
     December 31,    Gross    Gross   Gains   Appreciation/   December 31,    Dividend/

Name of Investment

   2019    Additions(a)    Reductions(b)   (Losses)   Depreciation   2020    Other income

Cedar Electronics Holdings, Corp. Incremental Term Loan—15.00%

     $ 2,738,388        $ 438,897        $  —         $  —         $ (1     $ 3,177,284        $ 885,745  

Cedar Electronics Holdings, Corp. Term Loan—9.50%

     19,817,479        1,019,695        —         —         (41,327     20,795,847        2,898,179  

Cedar Ultimate Parent LLC Class A Preferred Units

     1,640,937        —          —         —         7,957,099       9,598,036        —    

Cedar Ultimate Parent LLC Class D Preferred Units

     —          —          —         —         —         —          —    

Cedar Ultimate Parent LLC Class E Common Units

     —          —          —         —         —         —          —    

Pace Industries, Inc. Common Stock

     —          2,110,522        —         —         (2,110,522     —          —    

Pace Industries, Inc. First Lien Term Loan—12.70%

     87,910,865        18,431,418        (110,306,182     —         3,963,899       —          8,786,785  

Pace Industries, Inc. HoldCo Term Loan—3.50%

     —          110,746,735        (32,589,701     —         (11,804,893     66,352,141        19,164  

Pace Industries, Inc. Opco Term Loan—9.75%

     —          52,710,862        —         —         38,639       52,749,501        3,344,140  

School Specialty, Inc. Class A Preferred Stock

     —          8,062,637        —         —         (3,676,562     4,386,075        —    

School Specialty, Inc. Class B Preferred Stock

     —          356,635        —         —         (356,635     —          —    

School Specialty, Inc. Common Stock

     —          59,124        —         (5,235     (53,889     —          —    

School Specialty, Inc. Delayed Draw Term Loan—16.75%

     3,768,338        4,400,424        (8,396,541     —         227,779       —          718,873  

School Specialty, Inc. Term Loan—9.25%

     —          34,341,012        —         —         221,476       34,562,488        961,647  

School Specialty, Inc. Term Loan A—16.75%

     28,294,179        11,202,554        (38,039,495     (2,866,190     1,408,952       —          5,843,440  

School Specialty, Inc. Warrant

     124,508        —          —         (124,655     147       —          —    

TCW Direct Lending Strategic Ventures LLC Common Membership Interests

     —          —          —         —         —         —          —    

TCW Direct Lending Strategic Ventures LLC Preferred Membership Interests

     195,726,195        —          (46,000,000     (3     (10,836,304     138,889,888        22,000,000  
  

 

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Total controlled affiliated investments

     $     340,020,889        $     243,880,515        $     (235,331,919)       $     (2,996,083)       $      (15,062,142)       $     330,511,260        $     45,457,973  
  

 

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

(a)

Gross additions include new purchases, PIK income and amortization of original issue and market discounts.

 

(b)

Gross reductions include decreases in the cost basis from sales, paydown and the amortization of premium.

 

(5)

Holding of Animal Supply Holdings, LLC Class A units are held through TCW DL ASH LLC, a special purpose vehicle.

 

(6)

Holdings of Carrier & Technology Holdings, LLC common stock are held through TCW DL CTH LLC, a special purpose vehicle.

 

(7)

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2020, $138,889,888 or 10.8% of the Company’s total assets were represented by “non-qualifying assets.”

 

(8)

All or a portion of such security was acquired in a transaction exempt from registration under the Securities Act of 1933 and may be deemed “restricted securities” under the Securities Act. As of December 31, 2020, the aggregate fair value of these securities was $13,984,111, or 1.1% of the Company’s total assets.

 

(9)

The fair value of the Quantum Corporation Common Stock held by the Company is based on the quoted market price of the issuer’s stock as of December 31, 2020. Such common stock is considered to be a Level 1 security within the Fair Value Hierarchy. Otherwise, the fair value of each debt and equity investment was determined using significant unobservable inputs and such investments are considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

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

 

Country Breakdown Portfolio

          

United States

     100.0

See Notes to Consolidated Financial Statements.

 

10


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

     As of June 30,
2021
(unaudited)
  As of December 31,
2020

Assets

    

Investments, at fair value

    

Non-controlled/non-affiliated investments (amortized cost of $263,793 and $319,356, respectively)

     $ 222,151       $ 262,616  

Non-controlled affiliated investments (amortized cost of $48,335 and $$116,801, respectively)

     34,355       52,142  

Controlled affiliated investments (amortized cost of $380,526 and $374,150, respectively)

     373,442       330,511  

Cash and cash equivalents

     31,860       34,802  

Short-term investments

     499,942       599,748  

Interest receivable

     1,852       5,360  

Deferred financing costs

     1,434       1,235  

Prepaid and other assets

     -            82  
  

 

 

 

 

 

 

 

Total Assets

     $ 1,165,036       $ 1,286,496  
  

 

 

 

 

 

 

 

Liabilities

    

Payable for short-term investments purchased

     $ 499,942       $ 599,748  

Credit facility payable

     115,250       115,250  

Unrealized depreciation on unfunded commitments

     4,374       713  

Management fees payable

     1,420       1,698  

Interest and credit facility expense payable

     255       457  

Directors’ fees payable

     135       -       

Other accrued expenses and other liabilities

     519       355  
  

 

 

 

 

 

 

 

Total Liabilities

     $ 621,895       $ 718,221  
  

 

 

 

 

 

 

 

Commitments and Contingencies (Note 5)

    

Members’ Capital

    

Common Unitholders’ commitment: (20,134,698 units issued and outstanding)

     $  2,013,470       $ 2,013,470  

Common Unitholders’ undrawn commitment: (20,134,698 units issued and outstanding)

     (409,125     (409,125

Common Unitholders’ return of capital

     (921,303     (854,503

Common Unitholders’ offering costs

     (853     (853

Accumulated Common Unitholders’ tax reclassification

     (13,733     (13,733
  

 

 

 

 

 

 

 

Common Unitholders’ capital

     668,456       735,256  

Accumulated loss

     (125,315     (166,981
  

 

 

 

 

 

 

 

Total Members’ Capital

     $ 543,141       $ 568,275  
  

 

 

 

 

 

 

 

Total Liabilities and Members’ Capital

     $             1,165,036       $             1,286,496  
  

 

 

 

 

 

 

 

Net Asset Value Per Unit (accrual base) (Note 9)

     $ 47.29       $ 48.54  
  

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

11


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

     For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
     2021   2020    2021   2020

Investment Income

         

Non-controlled/non-affiliated investments:

         

Interest income(1)

     $ 3,924       $ 13,678        $ 9,531       $ 30,939  

Interest income paid-in-kind (1)

     2,318       4,839        4,642       9,456  

Dividend income

     -            21        -            216  

Other fee income (1)

     7       18        10       76  

Non-controlled affiliated investments:

         

Interest income(1)

     325       473        579       942  

Interest income paid-in-kind (1)

     504       467        1,063       931  

Other fee income

     7       -             11       -       

Controlled affiliated investments:

         

Interest income(1)

     2,631       1,596        4,772       2,269  

Interest income paid-in-kind (1)

     1,001       588        1,793       692  

Dividend income

     2,800       -             5,600       -       

Other fee income (1)

     28       36        48       36  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Total investment income

     13,545       21,716        28,049       45,557  

Expenses

         

Management fees

     1,420       1,935        2,939       3,947  

Interest and credit facility expenses

     1,148       2,882        2,475       6,316  

Administrative fees

     200       241        407       490  

Professional fees

     125       451        291       568  

Directors’ fees

     86       86        164       164  

Other expenses

     94       46        218       117  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Total expenses

     3,073       5,641        6,494       11,602  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net investment income

     $         10,472       $         16,075        $         21,555       $         33,955  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments

         

Net realized (loss) gain:

         

Non-controlled/non-affiliated investments

   $ 457     $ 43      $ 3,438     $ 2,201  

Non-controlled affiliated investments

     -            -             (58,826     -       

Net change in unrealized appreciation/depreciation:

         

Non-controlled/non-affiliated investments(1)

     (3,192     (3,034      4,893       (32,495

Non-controlled affiliated investments(1)

     438       1,186        57,222       (15,831

Controlled affiliated investments(1)

     24,977       (21,871      36,556       (20,669

Net realized (loss) gain on short-term investments

     (9     -             27       -       
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments

     $ 22,671       $ (23,676      $ 43,310       $ (66,794
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net increase (decrease) in Members’ Capital from operations

     $ 33,143       $ (7,601      $ 64,865       $ (32,839
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Basic and diluted:

         

Income (Loss) per unit

     $ 1.65       $ (0.38      $ 3.22       $ (1.63

(1) Amounts disclosed for the three and six months ended June 30, 2020 have been restated, as described in Note 2.

See Notes to Consolidated Financial Statements.

 

12


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

     Common
Unitholders’
Capital
  Accumulated
Earnings (Loss)
  Total

Members’ Capital at December 31, 2019

     $         971,647       $         (97,419     $         874,228  

Net Increase (Decrease) in Members’ Capital Resulting from Operations:

      

Net investment income

     -            17,880       17,880  

Net realized gain on investments

     -            2,158       2,158  

Net change in unrealized appreciation/depreciation on investments

     -            (45,276     (45,276

Distributions to Members from:

      

Distributable earnings

     -            (69,650     (69,650

Return of capital

     (62,000     -            (62,000
  

 

 

 

 

 

 

 

 

 

 

 

Total Decrease in Members’ Capital for the three months ended March 31, 2020

     (62,000     (94,888     (156,888
  

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital at March 31, 2020

     $ 909,647       $ (192,307     $ 717,340  
  

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Members’ Capital Resulting from Operations:

      

Net investment income

     -            16,075       16,075  

Net realized gain on investments

     -            43       43  

Net change in unrealized appreciation/depreciation on investments

     -            (23,719     (23,719
  

 

 

 

 

 

 

 

 

 

 

 

Total Decrease in Members’ Capital for the three months ended June 30, 2020

     -            (7,601     (7,601
  

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital at June 30, 2020

     $ 909,647       $ (199,908     $ 709,739  
  

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital at December 31, 2020

     $ 735,256       $ (166,981     $ 568,275  

Net Increase (Decrease) in Members’ Capital Resulting from Operations:

      

Net investment income

     -            11,084       11,084  

Net realized loss on investments

     -            (55,809     (55,809

Net change in unrealized appreciation/depreciation on investments

     -            76,448       76,448  

Distributions to Members from:

      

Distributable earnings

     -            (15,000     (15,000
  

 

 

 

 

 

 

 

 

 

 

 

Total Increase in Members’ Capital for the three months ended March 31, 2021

     -            16,723       16,723  
  

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital at March 31, 2021

     $ 735,256       $ (150,258     $ 584,998  
  

 

 

 

 

 

 

 

 

 

 

 

Net Increase in Members’ Capital Resulting from Operations:

      

Net investment income

     -            10,472       10,472  

Net realized gain on investments

     -            448       448  

Net change in unrealized appreciation/depreciation on investments

     -            22,223       22,223  

Distributions to Members from:

      

Distributable earnings

     -            (8,200     (8,200
  

 

 

 

 

 

 

 

 

 

 

 

Return of capital

     (66,800     -            (66,800
  

 

 

 

 

 

 

 

 

 

 

 

Total (Decrease) Increase in Members’ Capital for the three months ended June 30, 2021

     (66,800     24,943       (41,857
  

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital at June 30, 2021

     $ 668,456       $ (125,315     $ 543,141  
  

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

13


Table of Contents

TCW DIRECT LENDING LLC

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

     For the Six Months Ended June 30,  
     2021     2020  

Cash Flows from Operating Activities

    

Net increase (decrease) in net assets resulting from operations

     $ 64,865       $ (32,839

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

    

Purchases of investments

     (9,490     (66,136

Purchases of short-term investments

     (499,942     -      

Interest income paid in-kind

     (7,498     (11,079

Proceeds from sales and paydowns of investments

     80,003       156,915  

Proceeds from sales of short-term investments

     599,748       -      

Net realized loss (gain) on investments

     55,388       (2,201

Change in net unrealized appreciation/depreciation on investments

     (98,671     68,995  

Amortization of premium and accretion of discount, net

     (749     (69

Amortization of deferred financing costs

     684       972  

Increase (decrease) in operating assets and liabilities:

    

(Increase) decrease in interest receivable

     3,508       (5,203

(Increase) decrease in prepaid and other assets

     82       (97

Increase (decrease) in payable for short-term investments purchased

     (99,806     -      

Increase (decrease) in management fees payable

     (278     (2,094

Increase (decrease) in interest and credit facility expense payable

     (202     767  

Increase (decrease) in directors’ fees payable

     135       135  

Increase (decrease) in other accrued expenses and liabilities

     164       206  
  

 

 

   

 

 

 

Net cash provided by operating activities

     $ 87,941       $ 108,272  
  

 

 

   

 

 

 

Cash Flows from Financing Activities

    

Return of capital

     $ (66,800     $ (62,000

Distributions to Members

     (23,200     (69,650

Deferred financing costs paid

     (883     (1,913

Proceeds from credit facility

     -           353,000  

Repayments of credit facility

     -           (317,065
  

 

 

   

 

 

 

Net cash used in financing activities

     $ (90,883     $ (97,628
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     $ (2,942     $ 10,644  

Cash and cash equivalents, beginning of period

     $ 34,802       $ 254,474  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

     $             31,860       $             265,118  
  

 

 

   

 

 

 

Supplemental and non-cash financing activities

    

Interest expense paid

     $ 1,785       $ 3,653  

See Notes to Consolidated Financial Statements.

 

14


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except unit data)

June 30, 2021

1. Organization and Basis of Presentation

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

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

The Company has wholly-owned subsidiaries, each of which is a Delaware limited liability company designed to hold an equity investment of the Company. Most recently in 2020, the Company established TCW DL SSP LLC, also a Delaware limited liability company, also designed to hold an equity investment of the Company.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Term: The initial term of the Company continued until the sixth anniversary of the Initial Closing Date (as defined below), September 14, 2020. The Company may extend the term for two additional one-year periods upon written notice to the holders of the Common Units and holders of preferred units, if any, (collectively the “Unitholders” or “Members”) at least 90 days prior to the expiration of the term or the end of the first one-year period. Thereafter, the term may be extended for successive one-year periods, with the vote or consent of a supermajority in interest of the holders of the Common Units. On April 30, 2021, the Company’s Board of Directors approved the second one year extension of the Company’s term from September 14, 2021 to September 14, 2022.

Commitment Period: The Commitment Period commenced on September 19, 2014 (the “Initial Closing Date”) and ended on September 19, 2017, the third anniversary of the Initial Closing Date. In accordance with the Company’s Limited Liability Company Agreement, the Company may complete investment transactions that were significantly in process as of the end of the Commitment Period and which the Company reasonably expects to be consummated prior to 90 days subsequent to the expiration date of the Commitment Period. The Company may also effect follow-on investments up to an aggregate maximum of 10% of Capital Commitments (as defined below), provided that any such follow-on investment to be made after the third anniversary of the expiration of the Commitment Period shall require the prior consent of a majority in interest of the Common Unitholders.

In October 2020, the Company’s Members approved a proposal to allow the Company to make pre-identified follow-on investments in specific portfolio companies as well as their holding companies, subsidiaries, successors or other affiliates, up to an aggregate maximum of 10% of Capital Commitments.

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

 

15


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

1. Organization and Basis of Presentation (Continued)

 

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members’ as unused capital. As of June 30, 2021, aggregate Commitments, Undrawn Commitments, the percentage of Commitments funded and the number of subscribed for Units of the Company were as follows:

 

     Commitments      Undrawn
Commitments
     % of
    Commitments    
Funded
     Units  

Common Unitholder

     $         2,013,470        $         409,125        79.7%                   20,134,698   

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

The Recallable Amount as of June 30, 2021 was $100,875.

2. Significant Accounting Policies

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

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

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

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

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

The Company has entered into certain intercreditor agreements that entitle the Company to the “last out” tranche of first lien secured loans, whereby the “first out” tranche will receive priority as to the “last out” tranche with respect to payments of principal, interest, and any other amounts due thereunder. In certain cases, the Company may receive a higher interest rate than the contractual stated interest rate as disclosed on the Company’s Consolidated Schedule of Investments.

 

16


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

2. Significant Accounting Policies (Continued)

 

Certain investments have an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused commitment fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier than the maturity date of the investment stated above. See Note 5—Commitments and Contingencies.

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection.

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

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

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. As of June 30, 2021, cash and cash equivalents is comprised of demand deposits and highly liquid investments with maturities of three months or less. Cash equivalents are carried at amortized costs which approximates fair value and are classified as Level 1 in the GAAP valuation hierarchy.

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

Recent Accounting Pronouncements: In March 2020, the FASB issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.

Correction of Affiliates Disclosure: Subsequent to the issuance of the Company’s consolidated financial statements as of and for the three and six months ended June 30, 2020, management identified certain disclosures required by Article 6 of Regulation S-X relating to income from non-affiliates versus affiliates that should have been separately disclosed in the Company’s Consolidated Statement of Operations for the three and six months ended June 30, 2020, which are included as comparative periods in the Company’s consolidated financial statement as of and for the three and six months ended June 30, 2021.

The resulting adjustments to the comparative period presented had no impact on the Company’s Net Asset Values (“NAVs”), Net increase in Members’ Capital from operations, or Distributions to Members. The adjustments also had no impact on any of the disclosures appearing on the Company’s Financial Highlights. The adjustments pertain solely to investment income and net change in unrealized appreciation/depreciation from non-controlled/non-affiliated investments to non-controlled affiliated investments and controlled affiliated investments on the Company’s Consolidated Statements of Operations.

 

17


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

2. Significant Accounting Policies (Continued)

 

The following table summarizes the effect of the adjustments on the Company’s Consolidated Statements of Operations for the three months ended June 30, 2020:

 

             For the Three Months Ended June 30, 2020         
     As Previously
Reported
  Total
Adjustment
  As
Corrected

Consolidated Statement of Operations

      

Non-controlled/non-affiliated investments:

      

Interest income

     $         15,747       $           (2,069     $         13,678  

Interest income paid-in-kind

     5,894       (1,055     4,839  

Other fee income

     54       (36     18  

Non-controlled affiliated investments:

      

Interest income

     -            473       473  

Interest income paid-in-kind

     -            467       467  

Controlled affiliated investments:

      

Interest income

     -            1,596       1,596  

Interest income paid-in-kind

     -            588       588  

Other fee income

     -            36       36  

Net change in unrealized appreciation/depreciation:

      

Non-controlled/non-affiliated investments

     (27,962     24,928       (3,034

Non-controlled affiliated investments

     -            1,186       1,186  

Controlled affiliated investments

     4,243       (26,114     (21,871

 

18


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

2. Significant Accounting Policies (Continued)

 

The following table summarizes the effect of the adjustments on the Company’s Consolidated Statements of Operations for the six months ended June 30, 2020:

 

             For the Six Months Ended June 30, 2020         
     As Previously
Reported
  Total
Adjustment
  As
Corrected

Consolidated Statement of Operations

      

Non-controlled/non-affiliated investments:

      

Interest income

     $         34,150       $         (3,211     $         30,939  

Interest income paid-in-kind

     11,079       (1,623     9,456  

Other fee income

     112       (36     76  

Non-controlled affiliated investments:

      

Interest income

     -           942       942  

Interest income paid-in-kind

     -           931       931  

Controlled affiliated investments:

      

Interest income

     -           2,269       2,269  

Interest income paid-in-kind

     -           692       692  

Other fee income

     -           36       36  

Net change in unrealized appreciation/depreciation:

      

Non-controlled/non-affiliated investments

     (74,630     42,135       (32,495

Non-controlled affiliated investments

     -           (15,831     (15,831

Controlled affiliated investments

     5,635       (26,304     (20,669

 

19


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

3. Investment Valuations and Fair Value Measurements

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

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

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

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

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

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

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

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

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

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

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

Equity, (Level 3), includes common stock, preferred stock and warrants. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health and relevant business developments of the issuer; EBITDA; market multiples of comparable companies; comparable market transactions and recent trades or transactions; issuer, industry and market events; and contractual or legal restrictions on the sale of the security. When a Black-Scholes pricing model is used it follows the income approach. The pricing model takes into account the contract terms as well as multiple inputs, including: time value, implied volatility, equity prices and interest rates. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

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

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (Strategic Ventures) are valued based on the NAV reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the fund’s management committee. On February 25, 2021, Company extended the fund’s term one additional year, until June 5, 2022. The Company is entitled to income and principal distributed by the fund.

 

20


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

3. Investment Valuations and Fair Value Measurements (Continued)

 

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of June 30, 2021:

 

Investments

   Level 1      Level 2      Level 3      NAV      Total  

Debt

    $ —       $ —       $ 443,510        $ —       $ 443,510   

Equity

     12,170         —          37,964         —          50,134   

Investment Funds & Vehicles (1)

     —          —          —          136,304         136,304   

Short- term investments

     499,942         —          —          —          499,942   

Cash equivalents

     28,488         —          —          —          28,488   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

    $     540,600        $     —       $     481,474        $       136,304        $       1,158,378   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

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

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of December 31, 2020:

 

Investments

   Level 1      Level 2      Level 3      NAV      Total  

Debt

    $ —         $ —         $ 476,052        $ —         $ 476,052     

Equity

     16,343         —          13,984         —          30,327     

Investment Funds & Vehicles (1)

     —          —          —          138,890         138,890     

Short- term investments

     599,748         —          —          —          599,748     

Cash equivalents

     27,032         —          —          —          27,032     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

    $   643,123        $     —         $   490,036        $   138,890        $   1,272,049     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

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

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2021:

 

     Debt   Equity    Total

Balance, April 1, 2021

     $ 490,154       $ 21,721        $ 511,875  

Purchases, including payments received in-kind

     3,907              3,907  

Sales and paydowns of investments

     (57,744            (57,744

Amortization of premium and accretion of discount, net

     261              261  

Net realized losses

                   

Net change in unrealized appreciation/depreciation

     6,932       16,243        23,175  
  

 

 

 

 

 

 

 

  

 

 

 

Balance, June 30, 2021

     $         443,510       $         37,964        $         481,474  
  

 

 

 

 

 

 

 

  

 

 

 

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2021

     $ 6,552       $ 16,243        $ 22,795  

 

21


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

3. Investment Valuations and Fair Value Measurements (Continued)

 

     Debt   Equity   Total

Balance, January 1, 2021

    $         476,052      $         13,984      $         490,036  

Purchases, including payments received in-kind

     22,394       5,134       27,528  

Sales and paydowns of investments

     (72,012     —         (72,012

Amortization of premium and accretion of discount, net

     749       —         749  

Net realized losses

     (58,421     (1,380     (59,801

Net change in unrealized appreciation/depreciation

     74,748       20,226       94,974  
  

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2021

    $         443,510      $         37,964      $         481,474  
  

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2021

    $         22,614      $         18,846      $         41,460  

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2020:

 

     Debt   Equity   Total

Balance, April 1, 2020

    $         716,719      $         8,994      $         725,713  

Purchases, including payments received in-kind

     52,702       419       53,121  

Sales and paydowns of investments

     (90,203     —         (90,203

Amortization of premium and accretion of discount, net

     751       —         751  

Net realized gains

     43       —         43  

Net change in unrealized appreciation/depreciation

     (26,631     (3,686     (30,317
  

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

    $         653,381      $         5,727      $         659,108  
  

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized appreciation/depreciation in
investments held as of June 30, 2020

    $         (30,371    $         (3,268    $         (33,639

 

     Debt   Equity   Total

Balance, January 1, 2020

    $         752,242      $         10,822      $         763,064  

Purchases, including payments received in-kind

     76,796       419       77,215  

Sales and paydowns of investments

     (118,515     —         (118,515

Amortization of premium and accretion of discount, net

     69       —         69  

Net realized gains

     2,201       —         2,201  

Net change in unrealized appreciation/depreciation

     (59,412     (5,514     (64,926
  

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

    $         653,381      $         5,727      $         659,108  
  

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized appreciation/depreciation in
investments held as of June 30, 2020

    $         (62,088    $         (4,971    $         (67,059

The Company did not have any transfers between levels during the three and six months ended June 30, 2021 and 2020.

 

22


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

3. Investment Valuations and Fair Value Measurements (Continued)

 

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of June 30, 2021.

 

Investment Type    

   Fair Value     

Valuation

Technique

  

Unobservable Input

  

Range

  

Weighted

Average*

  

Impact to
Valuation if
Input
Increases

Debt

   $ 62,258       Income Method      Discount Rate    8.8% to 11.0%    10.0%        Decrease    

Debt

   $ 151,796       Market Method    EBITDA Multiple    6.3x to 7.8x    N/A    Increase

Debt

   $ 2,763       Market Method    Indicative Bid    26.1% to 29.0%    N/A    Increase

Debt

   $             226,693       Market Method    EBITDA Multiple    2.5x to 18.0x    N/A    Increase
               Revenue Multiple    0.2x to 1.8x    N/A    Increase

Equity

   $ 15,297       Market Method    EBITDA Multiple    6.3x to 7.8x    N/A    Increase

Equity

   $ —        Market Method    Indicative Bid    0.0% to 0.0%    N/A    Increase

Equity

   $ 22,667       Market Method    EBITDA Multiple    2.5x to 8.8x    N/A    Increase

Equity

         Revenue Multiple    0.2x to 0.3x    N/A    Increase

 

*

Weighted based on fair value

The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of December 31, 2020.

 

Investment Type    

   Fair Value     

Valuation

Technique

  

Unobservable

Input

  

Range

  

Weighted    

Average*

  

Impact to

Valuation if    

Input

Increases

Debt

   $ 108,981       Income Method      Discount Rate    10.6% to 14.0%    12.2%    Decrease

Debt

   $             143,075       Market Method    EBITDA Multiple    5.8x to 8.0x    N/A    Increase

Debt

   $ 72,612       Market Method    Revenue Multiple    1.2x to 1.4x    N/A    Increase

Debt

   $ 17,266       Market Method    Indicative Bid    0.0% to 100.0%    86.6%    Increase

Debt

   $ 99,556       Market Method   

EBITDA Multiple

Revenue Multiple

  

5.3x to 9.5x

0.2x to 1.6x

  

N/A

N/A

  

Increase

Increase

Debt

   $ 34,562       Income Method    Discount Rate    22.0% to 24.0%    N/A        Decrease    

Equity

   $ —     

Market Method

Market Method

  

EBITDA Multiple

Revenue Multiple

Indicative Bid

  

3.5x to 4.5x

0.2x to 0.4x

0.0% to 0.0%

  

N/A

N/A

N/A

  

Increase

Increase

Increase

Equity

   $ 9,598       Market Method    EBITDA Multiple    5.8x to 8.0x    N/A    Increase

Equity

   $ —      Market Method   

EBITDA Multiple

Revenue Multiple

  

5.3x to 6.3x

0.2x to 0.2x

  

N/A

N/A

  

Increase

Increase

Equity

   $ 4,386      

Income Method

Market Method

  

Discount Rate

EBITDA Multiple

Revenue Multiple

  

22.0% to 24.0%

3.5x to 4.5x

0.2x to 0.4x

  

N/A

N/A

N/A

  

Decrease

Increase

Increase

 

*

Weighted based on fair value

Unless noted, the Company generally utilizes the midpoint of a valuation range provided by an external, independent valuation firm.

4. Agreements and Related Party Transactions

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

 

23


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

by (i) the vote of the Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of the independent directors of the Board. On August 10, 2020, the Company’s Board reapproved the Advisory Agreement.

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

For the three and six months ended June 30, 2021, Management Fees incurred were $1,420 and $2,939, respectively, of which $1,420 remained payable as of June 30, 2021. For the three and six months ended June 30, 2020, Management Fees incurred amounted to $1,935 and $3,947, respectively, of which $0 remained payable at June 30, 2020.

Transaction and Other Fees: Any (i) transaction, advisory, consulting, management, monitoring, directors’ or similar fees, (ii) closing, investment banking, finders’, transaction or similar fees, (iii) commitment, breakup or topping fees or litigation proceeds and (iv) other fee or payment of services performed or to be performed with respect to an investment or proposed investment received from or with respect to Portfolio Companies or prospective Portfolio Companies in connection with the Company’s activities will be will be the property of the Company. Since inception, the Company received $2,615 in such fees, none of which were during three and six months ended June 30, 2021 and 2020.

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

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

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

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

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

 

24


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

4. Agreements and Related Party Transactions (Continued)

 

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

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

No Incentive Fees were incurred during the three and six months ended June 30, 2021 and 2020.

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

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

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

The Company’s capital commitment is $481,600, representing approximately 80% of the preferred and common equity ownership of Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to Strategic Ventures. Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. On April 30, 2021, Strategic Ventures’ revolving credit facility was terminated.

 

25


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized depreciation by investment as of June 30, 2021 and December 31, 2020:

 

          June 30, 2021      December 31, 2020  

Unfunded Commitments

   Maturity/
Expiration
       Amount          Unrealized
    Depreciation    
         Amount          Unrealized
    Depreciation    
 

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   July 2023      $ 313      $ 227        $ 1,769        $ 713  

H-D Advanced Manufacturing Company

   July 2021      12,800      4,147        —          —    

Ruby Tuesday, Inc.

   February 2025      6,824      —          —          —    

Ruby Tuesday, Inc.

   March 2021      —          —          4,941        —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

        $ 19,937        $ 4,374        $ 6,710        $ 713  
     

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of June 30, 2021 and December 31, 2020, the Company’s unfunded commitment to Strategic Ventures is $219,646.

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of June 30, 2021, management is not aware of any pending or threatened litigation.

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

6. Members’ Capital

During the three and six months ended June 30, 2021 and 2020, the Company did not sell or issue any Common Units. The activity for the three and six months ended June 30, 2021 and 2020 was as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2020      2021      2020  

Units at beginning of period

     20,134,698        20,134,698        20,134,698        20,134,698  
  

 

 

    

 

 

    

 

 

    

 

 

 

Units issued and committed at end of period

     20,134,698        20,134,698        20,134,698        20,134,698  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company did not process any deemed distributions and re-contributions during the three and six months ended June 30, 2021 and 2020.

7. Credit Facility

The Company has a secured revolving credit agreement (the “Credit Agreement”) with Natixis, New York Branch (“Natixis”) as administrative agent and committed lender. The Credit Agreement provides for a revolving credit line of up to $750,000 (the “Maximum Commitment”) (the “Credit Facility”), subject to the lesser of the “Borrowing Base” assets or the Maximum Commitment (the “Available Commitment”). The Borrowing Base assets generally equal the sum of (a) a percentage of certain eligible investments in a controlled account, (b) a percentage of unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Credit Agreement is generally secured by the Borrowing Base assets.

On April 10, 2017, the Company and Natixis entered into a Third Amended and Restated Revolving Credit Agreement. Under the Third Amended and Restated Revolving Credit Agreement borrowings bear interest at a rate equal to either the (a) adjusted eurodollar rate calculated in a customary manner plus 2.35%, (b) commercial paper rate plus 2.35%, or (c) a base rate calculated in a customary manner (using the higher of the Federal Funds Rate plus 0.50%, the Prime Rate and the Floating LIBOR Rate plus 1.00%) plus 1.35%.

 

26


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

Moreover, the Credit Agreement’s stated maturity date was extended from November 10, 2017 to April 10, 2020. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of June 30, 2021, the Company was in compliance with such covenants.

On April 6, 2020, the Company entered into a First Amendment to the Third Amended and Restated Revolving Credit Agreement (the “Amended Credit Agreement”), by and among the Company, as borrower, and Natixis, New York Branch, as administrative agent and the lenders party thereto. The Amended Credit Agreement provides for a revolving credit line of up to $375,000 (with an option for the Company to increase this amount to $450,000 subject to consent of the lenders and satisfaction of certain other conditions), subject to the available borrowing base, which is generally the sum of (a) a percentage of certain eligible investments, (b) a percentage of remaining unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Amended Credit Agreement is generally secured by the unfunded commitments (together with the recallable amounts) of the Company’s investors, portfolio investments and substantially all other assets of the Company. The stated maturity date of the Amended Credit Agreement was April 9, 2021, which date (subject to the satisfaction of certain conditions) could have been extended by the Company for up to an additional 364 days. Borrowings under the Amended Credit Agreement bore interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 2.50%, (b) commercial paper rate plus 2.50%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 1.50%, provided however in each case the commercial paper rate and the eurocurrency rate shall have a floor of 1.00%.

On May 27, 2020, the Company entered into a Lender Group Joinder Agreement pursuant to which Zions Bancorporation, N.A. d/b/a California Bank & Trust was added as a committed lender (with a commitment of $25,000) under the Amended Credit Agreement. Concurrently therewith, the Company elected to increase the size of its revolving credit line under the Amended Credit Agreement to $400,000. On December 29, 2020, the Company elected to permanently decrease the size of its revolving credit line under the Amended Credit Agreement to $177,000.

On April 6, 2021, the Company entered into a Third Amendment to the Amended Credit Agreement (the “Third Amended Credit Agreement”). The Third Amended Credit Agreement provides for a revolving credit line of up to $177,000, subject to the available borrowing base, which is generally a percentage of remaining unfunded commitments from certain eligible investors in the Company. The Third Amended Credit Agreement is generally secured by the unfunded commitments (together with the recallable amounts) of the Company’s investors. The stated maturity date of the Third Amended Credit Agreement is April 8, 2022, which (subject to the satisfaction of certain conditions) may be extended by the Company for up to an additional 364 days. Borrowings under the Third Amended Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.95%, (b) commercial paper rate plus 1.95%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.95%, provided however in each case the CP Rate and the Eurocurrency Rate shall have a floor of 0.00%.

As of June 30, 2021 and December 31, 2020, the Available Commitment under the Amended Credit Agreement was $177,000.

As of June 30, 2021 and December 31, 2020, the amounts outstanding under the Credit Facility were $115,250. The carrying amount of the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of June 30, 2021 and December 31, 2020, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details; credit, market and liquidity risk and events; financial health of the Company; place in the capital structure; interest rate; and terms and conditions of the Credit Facility. The Company incurred financing costs of $10,123 in connection with the April 10, 2017 Third Amended and Restated Revolving Credit Agreement. The Company also incurred additional financing costs of $1,848 in connection with the Amended Credit Agreement on April 6, 2020 and May 27, 2020 as well as an additional $883 in connection with the April 6, 2021 Third Amended Credit Agreement. The Company recorded these costs as deferred financing costs on its Consolidated Statements of Asset and Liabilities and the costs are being amortized over the life of the Credit Facility. As of June 30, 2021 and December 31, 2020, $1,434 and $1,235, respectively, of such prepaid deferred financing costs had yet to be amortized.

 

27


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

7. Credit Facility (Continued)

 

The summary information regarding the Credit Facility for the three and six months ended June 30, 2021 and 2020 was as follows:

 

     Three Months Ended June 30,   Six Months Ended June 30,
     2021   2020   2021   2020

Credit facility interest expense

   $ 625     $ 2,466     $ 1,634     $ 4,381  

Undrawn commitment fees

     62       110       124       930  

Administrative fees

     17       17       33       33  

Amortization of deferred financing costs

     444       289       684       972  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

   $ 1,148     $ 2,882     $ 2,475     $ 6,316  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average interest rate

     2.18     3.59     2.86     3.70

Average outstanding balance

     115,250       275,975       115,250       238,101  

On December 31, 2019, the Company’s ratio of aggregate fair value of all eligible portfolio assets (as defined in the Credit Agreement) to the principal amount outstanding (“Ratio of Eligible Portfolio Assets”) fell below 150%, which triggered a mandatory prepayment provision in the Credit Agreement requiring the Company to utilize all cash receipts attributable to the eligible portfolio assets as a prepayment to the outstanding principal obligation, within five days of collecting such cash receipts, until such a time when the Ratio of Eligible Portfolio Assets exceeds 150%. The Company’s Ratio of Eligible Portfolio Assets exceeded 150% on January 10, 2020 through March 26, 2020. On March 27, 2020, the Company’s Ratio of Eligible Portfolio Assets fell below 150%. However, in connection with the Amended Credit Agreement executed on April 6, 2020, the mandatory repayment was waived by Natixis. The Company’s Ratio of Eligible Portfolio Assets has exceeded 150% since April 6, 2020.

8. Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. Federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its common unitholders as dividends. The Company elected to be taxed as a RIC in 2015. The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

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

As of June 30, 2021 and December 31, 2020, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes were as follows:

 

     June 30, 2021        December 31, 2020    

Cost of investments for federal income tax purposes

   $         1,192,597      $         1,401,101  

Unrealized appreciation

   $ 22,279      $ 7,397  

Unrealized depreciation

   $ (89,359    $ (145,449

Net unrealized depreciation on investments

   $ (67,080    $ (138,052

The Company did not have any unrecognized tax benefits at December 31, 2020, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; and therefore no interest or penalties were accrued. The Company is subject to examination by U.S. federal and state tax authorities regarding returns filed for the prior three and four years, respectively.

 

28


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

9. Financial Highlights

Selected data for a unit outstanding throughout the six months ended June 30, 2021 and 2020 is presented below. The accrual base Net Asset Value is calculated by subtracting the per unit loss from investment operations from the beginning Net Asset Value per unit and reflects all units issued and outstanding.

 

     For the Six Months Ended June 30,
                     2021                                      2020                 

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

     $ 48.54       $ 63.74  

Income from Investment Operations:

    

Net investment income(1)

     1.07       1.69  

Net realized and unrealized gain (loss)

     2.15       (3.32
  

 

 

 

 

 

 

 

Total from investment operations

     3.22       (1.63

Less Distributions:

  

From net investment income

     (1.15     (3.46

Return of capital

     (3.32     (3.08
  

 

 

 

 

 

 

 

Total distributions(2)

     (4.47     (6.54
  

 

 

 

 

 

 

 

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

     $ 47.29       $ 55.57  
  

 

 

 

 

 

 

 

Common Unitholder Total Return(3)(4)

     11.37     (4.19 )% 
  

 

 

 

 

 

 

 

Common Unitholder IRR(5)

     7.98     6.93
  

 

 

 

 

 

 

 

Ratios and Supplemental Data

  

Members’ Capital, end of period

     $             543,141       $             709,739  

Units outstanding, end of period

     20,134,698       20,134,698  

Ratios based on average net assets of Members’ Capital:

  

Ratio of total expenses to average net assets(6)

     2.33     2.95

Ratio of financing cost to average net assets(4)

     0.44     0.80

Ratio of net investment income to average net assets(6)

     7.72     8.64

Credit facility payable

     $ 115,250       $ 400,000  

Asset coverage ratio

     5.71       2.77  

Portfolio turnover rate(4)

     1.49     7.31

 

(1) 

Per unit data was calculated using the number of Common Units issued and outstanding as of June 30, 2021 and 2020.

(2) 

Includes distributions which have an offsetting capital re-contribution (“deemed distributions”). Excludes return of unused capital.

(3) 

The Total Return for the six months ended June 30, 2021 and 2020 was calculated by taking the net investment income of the Company for the period divided by the weighted average capital contributions from the Members during the period. The return does not reflect sales load and is net of management fees and expenses.

(4) 

Not annualized.

(5) 

The Internal Rate of Return (IRR) since inception for the Common Unitholders, after management fees, financing costs and operating expenses is 7.98% through June 30, 2021. The IRR is computed based on cash flow due dates contained in notices to Members (contributions from and distributions to the Common Unitholders) and the net assets (residual value) of the Members’ Capital account at period end. The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the return may vary significantly upon realization.

(6) 

Annualized.

 

29


Table of Contents

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except unit data)

June 30, 2021

 

10. Subsequent Events

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

On August 9, 2021, the Company’s Board reapproved the Advisory Agreement.

 

30


Table of Contents

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

The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or future performance or financial condition of TCW Direct Lending LLC. For simplicity, this report uses the terms “Company,” “we,” “us,” and “our” to include TCW Direct Lending LLC and where appropriate in the context, its wholly-owned subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

 

   

our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our and their respective objectives as a result of the current COVID-19 pandemic;

 

   

an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

 

   

a contraction of available credit, including as a result of the current COVID-19 pandemic, could impair our lending and investment activities;

 

   

interest rate volatility could affect our results, particularly in light of our use of leverage as part of our investment strategy;

 

   

our future operating results;

 

   

our contractual arrangements and relationships with third parties;

 

   

the ability of our portfolio companies to achieve their financial and other business objectives and the impact of the COVID-19 pandemic thereon;

 

   

competition with other entities and our affiliates for investment opportunities;

 

   

the impact of changing market conditions and lending standards on our ability to compete with other industry participants, including other business development companies, private and public funds, individual and institutional investors, and financial institutions for investment opportunities;

 

   

uncertainty surrounding the impact of the current COVID-19 pandemic on the financial stability of the United States and global economies;

 

   

the social, geopolitical, financial, trade and legal implications of the trade and cooperation agreement arising from Brexit, as well as future agreements between the United Kingdom and various countries in the European Union;

 

   

pandemics or other serious public health events, such as the ongoing global outbreak of COVID-19;

 

   

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

 

   

the speculative and illiquid nature of our investments;

 

   

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

 

   

the adequacy of our financing sources and working capital;

 

   

the costs associated with being an entity registered with the Securities and Exchange Commission (“SEC”);

 

   

the loss of key personnel;

 

   

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

 

   

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

 

   

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

 

31


Table of Contents
   

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

 

   

the effect of legal, tax and regulatory changes; and

 

   

the other risks, uncertainties and other factors we identify under “Part I—Item 1A. Risk Factors” in our Form 10-K filed with the SEC on March 22, 2021.

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

Overview

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

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

We have several wholly-owned subsidiaries, each of which is a Delaware limited liability company designed to hold an equity investment of ours. Most recently in 2020, we established TCW DL SSP LLC, also a Delaware limited liability company, also designed to hold an equity investment ours.

Revenues

We generate revenues in the form of interest income and capital appreciation by providing private capital to middle market companies operating in a broad range of industries primarily in the United States. As our investment period has ended, we will not originate new loans, but may increase credit facilities to existing borrowers or affiliates. The historical investment philosophy, strategy and approach of the private credit team of the Adviser (the “Private Credit Team” fka the “Direct Lending Team”) has generally not involved the use of payment-in-kind (“PIK”) interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, or similar arrangements. Although the Private Credit Team generally did not originate a significant amount of investments for us with PIK interest features, from time to time we made, and currently have, investments that contain such features. We have investments with PIK interest features in certain circumstances involving debt restructurings or work-outs of current investments. Our highly negotiated private investments may include senior secured loans, unsecured senior loans, subordinated and mezzanine loans, convertible securities, equity securities, and equity-linked securities such as options and warrants. However, historically, our investment bias has been towards adjustable-rate, senior secured loans. We do not anticipate a secondary market developing for our private investments.

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

 

32


Table of Contents

Expenses

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

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

Critical Accounting Policies and Estimates

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

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

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

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

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

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

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

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

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

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

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

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

 

33


Table of Contents

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (TCW Strategic Ventures) are valued based on the net asset value reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. On February 25, 2021, Company extended the fund’s term one additional year, until June 5, 2022. The Company is entitled to income and principal distributed by the fund. The Company is entitled to income and principal distributed by the fund.

Investment Activity

As of June 30, 2021, our portfolio consisted of debt and equity investments in 10 and eight portfolio companies, respectively, including TCW Strategic Ventures. Based on fair values as of June 30, 2021, our portfolio was comprised of 70.4% debt investments which were primarily senior secured, first lien term loans and 29.6% equity investments, which were primarily common and preferred stocks; warrants; and our common and preferred membership interests in TCW Strategic Ventures. Debt investments in three portfolio companies were on non-accrual status as of June 30, 2021, representing 14.1% and 15.0% of our portfolio’s fair value and cost, respectively.

As of December 31, 2020, our portfolio consisted of debt and equity investments in 11 and eight portfolio companies, respectively, including TCW Strategic Ventures. Based on fair values as of December 31, 2020, our portfolio was comprised of 73.8% debt investments which were primarily senior secured, first lien term loans and 26.2% equity investments, which were primarily common and preferred stocks; warrants; and our common and preferred membership interests in TCW Strategic Ventures. Debt investments in three portfolio companies were on non-accrual status as of December 31, 2020, representing 12.7% and 20.1% of our portfolio’s fair value and cost, respectively.

The table below describes our debt and equity investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets by industry as of June 30, 2021:

 

Industry

   Percent of Total Investments      

Investment Funds & Vehicles

                                     22%  

Metals & Mining

     21%  

Hotels, Restaurants & Leisure

     15%  

Industrial Conglomerates

     12%  

Pharmaceuticals

     8%  

Diversified Consumer Services

     7%  

Household Durables

     6%  

Distributors

     5%  

Technologies Hardware, Storage and Peripherals

     2%  

Internet & Direct Marketing Retail

     2%  

Diversified Financial Services

     0%  
  

 

 

 

Total

     100%  
  

 

 

 

Interest income, including interest income paid-in-kind, was $10.7 million and $21.6 million, for the three months ended June 30, 2021 and 2020, respectively. During the three months ended June 30, 2021 and 2020, we also earned $2.8 million and $21 thousand, respectively, of dividend income; as well as $42 thousand and $0.1 million, respectively, of other fee income for administration fees.

Interest income, including interest income paid-in-kind, was $22.4 million and $45.2 million, for the six months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021 and 2020, we also earned $5.6 million and $0.2 million, respectively, of dividend income; as well as $0.1 million of other fee income for administration fees for both periods.

 

34


Table of Contents

Results of Operations

Our operating results for the three and six months ended June 30, 2021 and 2020 were as follows (dollar amounts in thousands):

 

         For the Three Months Ended    
June 30,
       For the Six Months Ended    
June 30,
     2021   2020    2021   2020

Total investment income

     $  13,545       $ 21,716        $ 28,049       $ 45,557  

Net expenses

     3,073       5,641        6,494       11,602  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net investment income

     10,472       16,075        21,555       33,955  

Net realized (loss) gain on investments

     457       43        (55,388     2,201  

Net change in unrealized appreciation/depreciation on investments

     22,223       (23,719      98,671       (68,995

Net realized gain on short-term investments

     (9     -        27       -  
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Net increase (decrease) in Members’ Capital from operations

     $ 33,143       $ (7,601      $ 64,865       $ (32,839
  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Total investment income

Total investment income for the three months ended June 30, 2021 and 2020 was $13.5 million and $21.7 million, respectively, and included interest income (including interest income paid-in-kind) of $10.7 million and $21.6 million, respectively. Total investment income for the three months ended June 30, 2021 and 2020 included dividend income of $2.8 million and $21 thousand, respectively, as well as $42 thousand and $0.1 million, respectively, of other income.

Total investment income for the six months ended June 30, 2021 and 2020 was $28.0 million and $45.6 million, respectively, and included interest income (including interest income paid-in-kind) of $22.4 million and $45.2 million, respectively. Total investment income for the six months ended June 30, 2021 and 2020 included dividend income of $5.6 million and $0.2 million, respectively, as well as other income of $0.1 million for both periods.

The decreases in total investment income during the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, were primarily due to the decrease in interest income and interest income paid-in-kind during the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, respectively, commensurate with the decrease in the number of our debt investments. As of June 30, 2020, our portfolio included debt investments in 18 portfolio companies, whereas as of June 30, 2021, our portfolio included debt investments in 10 portfolio companies.

Net investment income

Net investment income for the three months ended June 30, 2021 and 2020 was $10.5 million and $16.1 million, respectively. Net investment income for the six months ended June 30, 2021 and 2020 was $21.6 million and $34.0 million, respectively.

The decreases in net investment income during the three and six months ended June 30, 2021 versus the three and six months ended June 30, 2020, respectively, were primarily due to lower total investment income (as previously described) partially offset by lower total expenses.

 

35


Table of Contents

Expenses for the three and six months ended June 30, 2021 and 2020 were as follows (dollar amounts in thousands):

 

         For the Three Months Ended    
June 30,
         For the Six Months Ended    
June 30,
     2021    2020      2021    2020

Expenses

             

Management fees

     $ 1,420        $ 1,935          $ 2,939        $ 3,947  

Interest and credit facility expenses

     1,148        2,882          2,475        6,316  

Administrative fees

     200        241          407        490  

Professional fees

     125        451          291        568  

Directors’ fees

     86        86          164        164  

Other expenses

     94        46          218        117  
  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

Total expenses

     $ 3,073        $ 5,641          $ 6,494        $ 11,602  
  

 

 

 

  

 

 

 

    

 

 

 

  

 

 

 

Our total expenses for the three months ended June 30, 2021 and 2020 were $3.1 million and $5.6 million, respectively. Our total expenses included management fees attributed to the Adviser of $1.4 million and $1.9 million for the three months ended June 30, 2021 and 2020, respectively.

Our total expenses for the six months ended June 30, 2021 and 2020 were $6.5 million and $11.6 million, respectively. Our total expenses included management fees attributed to the Adviser of $2.9 million and $3.9 million for the six months ended June 30, 2021 and 2020, respectively.

The decreases in total operating expenses during the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, were primarily due to lower interest and credit facility expenses driven by our lower average outstanding debt balance during the three and six months ended June 30, 2021, in addition to lower undrawn commitment fees, resulting from lower undrawn balances coupled with a lower interest rate on undrawn balances. Lastly, management fees also decreased during the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, resulting from the overall decrease in our investment portfolio’s size.

Net realized (loss) gain on investments

Our net realized gain on investments for the three months ended June 30, 2021 and 2020 was $0.5 million and $43 thousand, respectively. Our net realized gain on investments during the three months ended June 30, 2021 was entirely attributable to the partial disposition of our Quantum Corp. common stock.

Our net realized gain investments during the three months ended June 30, 2020 was primarily attributable to our term loan to Help at Home, LLC.

Our net realized (loss) gain on investments for the six months ended June 30, 2021 and 2020 was ($55.4) million and $2.2 million, respectively. Our net realized loss on investments during the six months ended June 30, 2021 was attributable to a permanent impairment that we took on our term loan to Carrier & Technology Holdings, LLC and our term loan and revolver to Guardia LLC, which resulted in an aggregate realized loss of $58.8 million. Of the $58.8 million of aggregate realized loss, $56.5 million were from unrealized depreciation recognized in prior periods and $2.3 million were additional losses taken during the current period. We also recognized a realized loss of $1.4 million on the partial disposition of our warrants to RTI Holding Company, LLC. These realized losses were partially offset by $4.4 million of realized gains on the partial disposition of our Quantum Corp. common stock.

Our net realized gain on investments during the six months ended June 30, 2020 was primarily due to the disposition of our term loans to Bumble Bee Holdings, Inc. which resulted in a realized gain of $2.1 million. We did not recognize any realized losses during the six months ended June 30, 2020.

 

36


Table of Contents

Net change in unrealized appreciation/depreciation on investments

Our net change in unrealized appreciation/depreciation on investments for the three months ended June 30, 2021 and 2020 was $22.2 million and ($23.7) million, respectively. Our net change in unrealized appreciation/depreciation for the three months ended June 30, 2021 was primarily attributable to the following investments (dollar amounts in thousands):

 

Issuer

  

Investment

   Change in
Unrealized
Appreciation/
          Depreciation          

School Specialty, Inc.

   Preferred Stock      $ 7,498  

TCW Strategic Ventures

       Preferred Membership Interests          5,215  

Cedar Ultimate Parent LLC

   Preferred Stock      4,383  

RTI Holding Company, LLC

   Class A Units      3,738  

Pace Industries, Inc.

   Term Loan      3,532  

Noramco, LLC

   Term Loan      1,445  

ASC Acquisition Holdings, LLC

   Term Loan      1,143  

Quantum Corporation

   Common Stock      (2,942

H-D Advanced Manufacturing Company

   Term Loan      (3,407

All others

   Various      1,618  
     

 

 

 

Net change in unrealized appreciation/depreciation

        $ 22,223
     

 

 

 

Our net change in unrealized appreciation/depreciation for the three months ended June 30, 2020 was primarily attributable to the following investments (dollar amounts in thousands):

 

Issuer

   Investment    Change in
Unrealized
Appreciation/
          Depreciation          
 

H-D Advanced Manufacturing Company

   Term Loan      $ (19,491)          

ASC Acquisition Holdings, LLC

   Term Loans      (7,110)          

Pace Industries, Inc.

   Term Loans      (4,079)          

Verus Financial, LLC

   Common Stock      (1,761)          

Cedar Ultimate Parent LLC

   Preferred Stock      (1,406)          

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   Term Loan      (776)          

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   Revolver      (554)          

Noramco, LLC

   Term Loan      4,867           

TCW Strategic Ventures

       Preferred Membership Interests          4,243           

Quantum Corporation

   Common Stock      2,430           

Harvest Hill Beverage Company

   Term Loan      1,276           

All others

   Various      (1,358)          
     

 

 

 

Net change in unrealized appreciation/depreciation

        $ (23,719)          
     

 

 

 

Our net change in unrealized appreciation/depreciation during the three months ended June 30, 2020 was affected by significant business disruptions and various other consequences experienced by our portfolio companies due to the uncertainty and economic volatility caused by COVID-19, in addition to other business conditions unique to our respective issuers.

 

37


Table of Contents

Our net change in unrealized appreciation/depreciation on investments for the six months ended June 30, 2021 and 2020 was $98.7 million and ($69.0) million, respectively. Our net change in unrealized appreciation/depreciation for the six months ended June 30, 2021 was primarily attributable to the following investments (dollar amounts in thousands):

 

Issuer

   Investment    Change in
Unrealized
Appreciation/
          Depreciation          

Carrier & Technology Holdings, LLC

   Term Loan      $ 42,546

Pace Industries, Inc.

   Term Loan      9,520  

Guardia LLC

   Term Loan      9,387

TCW Strategic Ventures

       Preferred Membership Interests          8,214  

School Specialty, Inc.

   Preferred Stock      7,531  

Cedar Ultimate Parent LLC

   Preferred Stock      5,699  

Guardia LLC

   Revolver      4,816

RTI Holding Company, LLC

   Class A Units      4,081  

OTG Management, LLC

   Term Loan      4,312  

Noramco, LLC

   Term Loan      2,838  

RTI Holding Company, LLC

   Warrants      1,536  

RTI Holding Company, LLC

   Warrants      1,380

H-D Advanced Manufacturing Company

   Revolver      (4,147

All others

   Various      958  
     

 

 

 

Net change in unrealized appreciation/depreciation

        $ 98,671
     

 

 

 

 

*

Includes reversals of previously recognized unrealized depreciation (appreciation). Recognized as realized (gains) losses and/or accelerated original issue discount during the six months ended June 30, 2021.

Our net change in unrealized appreciation/depreciation for the six months ended June 30, 2020 was primarily attributable to the following investments (dollar amounts in thousands):

 

Issuer

   Investment    Change in
Unrealized
Appreciation/
          Depreciation          

H-D Advanced Manufacturing Company

   Term Loan      $ (21,906)            

Pace Industries, Inc.

   Term Loan      (18,617)            

OTG Management, LLC

   Term Loan      (11,433)            

Quantum Corporation

   Common Stock      (9,507)            

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   Term Loan      (5,725)            

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   Revolver      (716)            

ASC Acquisition Holdings, LLC

   Term Loans      (4,888)            

School Specialty. Inc.

   Term Loan      (2,290)            

Verus Financial, LLC

   Common Stock      (2,503)            

Cedar Ultimate Parent LLC

   Preferred Stock      (1,572)            

Challenge Manufacturing Company LLC

   Term Loan      (1,148)            

TCW Strategic Ventures

       Preferred Membership Interests          5,635             

Noramco, LLC

   Term Loan      9,104             

All others

   Various      (3,429)            
     

 

 

 

Net change in unrealized appreciation/depreciation

        $ (68,995)            
     

 

 

 

Net realized gain on short-term investments

During the three and six months ended June 30, 2021 we earned $27 thousand and $0, respectively, in realized gains from our short-term investments in government treasuries. We did not earn any realized gains from short-term investments in government treasuries during the three and six months ended June 30, 2020 as the strategy to invest in short-term government investments did not begin until the third quarter of fiscal year 2020.

 

38


Table of Contents

Net increase (decrease) in members’ capital from operations

Our net increase (decrease) in members’ capital from operations during the three months ended June 30, 2021 and 2020 was $33.1 million and ($7.6) million, respectively.

Our net increase (decrease) in members’ capital from operations during the six months ended June 30, 2021 and 2020 was $64.9 million and ($32.8) million, respectively.

The relative net increases in members’ capital from operations during the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, were primarily due to net realized and unrealized gains on our investments during the three and six months ended June 30, 2021, compared to net realized and unrealized losses during the three and six months ended June 30, 2020, respectively. These were partially offset by lower net investment income during the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, respectively.

Direct Lending Strategic Ventures LLC

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Strategic Ventures. TCW Strategic Ventures focuses primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015. The Company’s capital commitment is $481.6 million, representing approximately 80% of the preferred and common equity ownership of TCW Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to TCW Strategic Ventures. TCW Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. The revolving credit facility is for up to $600 million. TCW Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of TCW Strategic Ventures, the Company does not believe that it has control over TCW Strategic Ventures (other than for purposes of the 1940 Act). The Company’s ability to withdraw from the fund is subject to restrictions.

On April 30, 2021, TCW Strategic Ventures’ revolving credit facility was terminated.

Financial Condition, Liquidity and Capital Resources

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

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

As of June 30, 2021 and December 31, 2020, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company are as follows (dollar amounts in thousands):

 

                     June 30, 2021                                       December 31, 2020                   

Commitments

     $ 2,013,470                $ 2,013,470          

Undrawn commitments

     $ 409,125                $ 409,125          

Percentage of commitments funded

     79.7%           79.7%     

Units

     20,134,698                20,134,698          

Natixis Credit Agreement

We have a secured revolving credit agreement (the “Credit Agreement”) with Natixis, New York Branch (“Natixis”) as administrative agent and committed lender. The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment”) (the “Credit Facility”), subject to the lesser of the “Borrowing Base” assets or the Maximum Commitment (the “Available Commitment”). The Borrowing Base assets generally equal the sum of (a) a percentage of certain eligible investments in a controlled account, (b) a percentage of unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Credit Agreement is generally secured by the Borrowing Base assets.

 

39


Table of Contents

On April 10, 2017, we entered into a Third Amended and Restated Revolving Credit Agreement. Under the April 10, 2017 Credit Agreement borrowings bear interest at a rate equal to either the (a) adjusted eurodollar rate calculated in a customary manner plus 2.35%, (b) commercial paper rate plus 2.35%, or (c) a base rate calculated in a customary manner (using the higher of the Federal Funds Rate plus 0.50%, the Prime Rate and the Floating LIBOR Rate plus 1.00%) plus 1.35%. Moreover, the Credit Agreement’s stated maturity date was extended from November 10, 2017 to April 10, 2020. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of June 30, 2021, we were in compliance with such covenants.

On April 6, 2020, we entered into a First Amendment to the Third Amended and Restated Revolving Credit Agreement (the “Amended Credit Agreement”), with Natixis, New York Branch, as administrative agent and the lenders party thereto. The Amended Credit Agreement provides for a revolving credit line of up to $375.0 million (with an option for us to increase this amount to $450.0 million subject to consent of the lenders and satisfaction of certain other conditions), subject to the available borrowing base, which is generally the sum of (a) a percentage of certain eligible investments, (b) a percentage of remaining unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Amended Credit Agreement is generally secured by the unfunded commitments (together with the recallable amounts) of our investors, portfolio investments and substantially all other assets of the Company. The stated maturity date of the Amended Credit Agreement was April 9, 2021, which date (subject to the satisfaction of certain conditions) could have been extended by the Company for up to an additional 364 days. Borrowings under the Amended Credit Agreement bore interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 2.50%, (b) commercial paper rate plus 2.50%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 1.50%, provided however in each case the commercial paper rate and the eurocurrency rate shall have a floor of 1.00%.

On May 27, 2020, we entered into a Lender Group Joinder Agreement pursuant to which Zions Bancorporation, N.A. d/b/a California Bank & Trust was added as a committed lender (with a commitment of $25.0 million) under the Amended Credit Agreement. Concurrently therewith, we elected to increase the size of our revolving credit line under the Credit Agreement to $400.0 million. On December 29, 2020, we elected to permanently decrease the size of our revolving credit line under the Credit Agreement to $177.0 million.

On April 6, 2021, we entered into a Third Amendment to the Amended Credit Agreement (the “Third Amended Credit Agreement”). The Third Amended Credit Agreement provides for a revolving credit line of up to $177,000, subject to the available borrowing base, which is generally a percentage of remaining unfunded commitments from certain eligible investors in the Company. The Third Amended Credit Agreement is generally secured by the unfunded commitments (together with the recallable amounts) of the Company’s investors. The stated maturity date of the Third Amended Credit Agreement is April 8, 2022, which (subject to the satisfaction of certain conditions) may be extended by us for up to an additional 364 days. Borrowings under the Third Amended Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.95%, (b) commercial paper rate plus 1.95%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.95%, provided however in each case the CP Rate and the Eurocurrency Rate shall have a floor of 0.00%.

As of June 30, 2021 and December 31, 2020, the Available Commitment under the Credit Facility $177.0 million.

As of June 30, 2021 and December 31, 2020 the amounts outstanding under the Credit Facility were $115.3 million. The carrying amount of the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of June 30, 2021 and December 31, 2020, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and conditions of the Credit Facility. We incurred financing costs of $10.1 million in connection with the April 10, 2017 Third Amended and Restated Revolving Credit Agreement. We also incurred additional financing costs totaling $1.8 million in connection with the Amended Credit Agreement on April 6, 2020 and May 27, 2020 as well as an additional $0.9 million in connection with the April 6, 2021 Third Amended Credit Agreement. We recorded these costs as deferred financing costs on its Consolidated Statements of Asset and Liabilities and the costs are being amortized over the life of the Credit Facility. As of June 30, 2021 and December 31, 2020, $1.4 million and $1.2 million, respectively, of such prepaid deferred financing costs had yet to be amortized.

 

40


Table of Contents

The summary information regarding the Credit Facility for the three and six months ended June 30, 2021 and 2020 was as follows (dollar amounts in thousands):

 

         Three Months Ended June 30,           Six Months Ended June 30,    
     2021   2020   2021   2020

Credit facility interest expense

    $ 625      $ 2,466      $ 1,634      $ 4,381  

Undrawn commitment fees

     62       110       124       930  

Administrative fees

     17       17       33       33  

Amortization of deferred financing costs

     444       289       684       972  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

    $ 1,148      $ 2,882      $ 2,475      $ 6,316  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average interest rate

     2.18     3.59     2.86     3.70

Average outstanding balance

     115,250       275,975       115,250       238,101  

A summary of our contractual payment obligations as of June 30, 2021 and December 31, 2020 is as follows (dollar amounts in thousands):

 

Revolving Credit Agreement

   Total Facility
        Commitment        
     Borrowings
        Outstanding        
     Available
             Amount(1)            
 

Total Debt Obligations – June 30, 2021

     $ 177,000        $ 115,250        $ 61,750  

Total Debt Obligations – December 31, 2020

     $ 177,000        $ 115,250        $ 61,750  

 

(1)

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

On December 31, 2019, our ratio of aggregate fair value of all eligible portfolio assets (as defined in the Credit Agreement) to the principal amount outstanding (“Ratio of Eligible Portfolio Assets”) fell below 150%, which triggered a mandatory prepayment provision in the Credit Agreement requiring us to utilize all cash receipts attributable to the eligible portfolio assets as a prepayment to the outstanding principal obligation, within five days of collecting such cash receipts, until such a time when the Ratio of Eligible Portfolio Assets exceeds 150%. Our Ratio of Eligible Portfolio Assets exceeded 150% on January 10, 2020 through March 26, 2020. On March 27, 2020, our Ratio of Eligible Portfolio Assets fell below 150%. However, in connection with the First Amendment to the Third Amended and Restated Revolving Credit Agreement executed on April 6, 2020, the mandatory repayment was waived by Natixis. Our Ratio of Eligible Portfolio Assets has exceeded 150% since April 6, 2020.

We had the following unfunded commitments and unrealized losses by investment as of June 30, 2021 and December 31, 2020 (dollar amounts in thousands):

 

          June 30, 2021      December 31, 2020  

Unfunded Commitments

   Maturity/
Expiration
       Amount          Unrealized
    Depreciation    
         Amount          Unrealized
    Depreciation    
 

Guardia LLC (fka Carrier & Technology Solutions, LLC)

   July 2023      $ 313      $ 227        $ 1,769        $ 713  

H-D Advanced Manufacturing Company

   July 2021      12,800      4,147                

Ruby Tuesday, Inc.

       February 2025          6,824                     

Ruby Tuesday, Inc.

   March 2021                    4,941         
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

        $ 19,937        $ 4,374        $ 6,710        $ 713  
     

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of June 30, 2021 and December 31, 2020, the Company’s unfunded commitment to Strategic Ventures was $219,646.

In accordance with our Second Amended and Restated Limited Liability Company Agreement, we may make follow-on investments up to an aggregate maximum of 10% of Capital Commitments (as defined in our Second Amended and Restated Limited Liability Company Agreement), provided that any such follow-on investment to be made after September 19, 2020, the third anniversary of the expiration of our commitment period, shall require the prior consent of a majority in interest of our Common Unitholders.

In October 2020, our Members approved a proposal to allow us to make pre-identified follow-on investments in specific portfolio companies as well as their holding companies, subsidiaries, successors or other affiliates, up to an aggregate maximum of 10% of Capital Commitments.

 

41


Table of Contents

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. At June 30, 2021, 96.9% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to nine months. At June 30, 2021, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 96.9%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates. Based on our June 30, 2021 consolidated balance sheet, the following table shows the annual impact on net investment income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):

 

             Interest Income                      Interest Expense                     Net Investment        
Income (Loss)
 

Up 300 basis points

     $ 11,284        $ 3,506       $ 7,778  

Up 200 basis points

     5,663        2,337       3,326  

Up 100 basis points

     789        1,169       (380

Down 100 basis points

     -        (117     117

Item 4. CONTROLS AND PROCEDURES

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

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

 

42


Table of Contents

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies.

 

Item 1A.

Risk Factors

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

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

Sales of unregistered securities

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

Issuer purchases of equity securities

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

None.

Item 5.   Other Information

None.

 

43


Table of Contents
Item 6.

Exhibits.

(a) Exhibits

 

Exhibits     
  3.1    Certificate of Formation (incorporated by reference to Exhibit 3.1 to a registration on Form 10 filed on April 18, 2014)
  3.4    Second Amended and Restated Limited Liability Company Agreement, dated September  19, 2014 (incorporated by reference to Exhibit 3.4 to a filing on Form 10-Q filed on November 7, 2014)
10.1    Investment Advisory and Management Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 25, 2014).
10.2    Administration Agreement dated September  15, 2014, by and between TCW Direct Lending LLC and TCW Asset Management Company (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q filed on November  7, 2014).
10.6    Final form of the TCW Direct Lending Strategic Ventures LLC Amended and Restated Limited Liability Company Agreement, dated June 5, 2015 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 10, 2015).
10.8    Third Amended and Restated Revolving Credit Agreement, dated April  10, 2017, by and among TCW Direct Lending LLC, as borrower, Natixis, New York Branch, as administrative agent, sole lead arranger and sole book manager, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 14, 2017).
10.10    First Amendment to the Third Amended and Restated Revolving Credit Agreement, dated April  6, 2020, by and among TCW Direct Lending LLC, as borrower, Natixis, New York Branch, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 13, 2020).
10.11    Lender Group Joinder Agreement, dated May 27, 2020 by and among Zions Bancorporation, N.A. d/b/a California Bank  & Trust, Natixis, New York Branch (as Administrative Agent) and TCW Direct Lending LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 2, 2020).
10.12    Third Amendment to the Third Amended and Restated Revolving Credit Agreement, dated April  6, 2021, by and among TCW Direct Lending LLC, as borrower, Natixis, New York Branch, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 12, 2021).
31.1*    Certification of President Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*    Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32.2*    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
99.1*    Financial Statements of TCW Direct Lending Strategic Ventures LLC for the three and six months ended June 30, 2021

 

*

Filed herewith

 

44


Table of Contents

    

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

 

    TCW DIRECT LENDING LLC
Date: August 9, 2021     By:  

/s/ Richard T. Miller

      Richard T. Miller
      President
Date: August 9, 2021     By:  

/s/ James G. Krause

      James G. Krause
      Chief Financial Officer

 

45