Fifth Street Senior Floating Rate Corp.
Consolidated Schedule of Investments
September 30, 2015
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Portfolio Company/Type of Investment (1)(2)
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Industry
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Principal (5)
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Cost
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Fair Value
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Kellermeyer Bergensons Services, LLC
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Diversified support services
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First Lien Term Loan, LIBOR+5% (1% floor) cash due 10/29/2021 (8)(13)
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$
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5,359,500
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$
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5,295,190
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$
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5,292,506
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Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 4/29/2022 (8)(13)
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280,000
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280,000
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281,400
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5,575,190
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5,573,906
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GOBP Holdings Inc.
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Food retail
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Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (8)(10)(13)
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6,400,000
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6,328,892
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6,384,000
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6,328,892
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6,384,000
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NAVEX Global, Inc.
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Internet software & services
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First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/19/2021 (8)(13)
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6,802,442
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6,726,246
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6,768,430
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Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 11/18/2022 (8)
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1,500,000
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1,500,000
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1,485,000
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8,226,246
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8,253,430
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Executive Consulting Group, LLC
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Healthcare services
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First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)(10)(13)
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7,000,000
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7,000,000
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6,988,039
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Delayed Draw Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)(10)
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—
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—
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7,000,000
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6,988,039
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TIBCO Software, Inc.
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Internet software & services
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First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/4/2020 (8)(10)
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7,999,800
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7,571,941
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7,939,802
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First Lien Revolver, LIBOR+4% cash due 11/25/2020 (8)
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—
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—
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7,571,941
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7,939,802
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Metamorph US 3, LLC
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Internet software & services
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First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(10)(13)
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17,310,731
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17,200,848
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17,131,150
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First Lien Revolver, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(13)
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600,000
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567,664
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600,000
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17,768,512
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17,731,150
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Compuware Corporation
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Internet software & services
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First Lien Term Loan B1, LIBOR+5.25% (1% floor) cash due 12/15/2019 (8)(10)(13)
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8,254,351
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8,140,683
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7,994,339
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First Lien Term Loan B2, LIBOR+5.25% (1% floor) cash due 12/15/2021 (8)(10)
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6,451,250
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6,164,940
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6,233,520
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14,305,623
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14,227,859
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Novetta Solutions, LLC
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Diversified support services
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First Lien Term Loan, LIBOR+5% (1% floor) cash due 10/2/2020 (8)(13)
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5,742,000
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5,693,114
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5,742,000
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5,693,114
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5,742,000
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AF Borrower, LLC
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IT consulting & other services
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First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 1/28/2022 (8)(10)
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8,258,500
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8,078,315
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8,217,208
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8,078,315
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8,217,208
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Ameritox Ltd.
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Healthcare services
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First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 6/23/2019 (8)(10)(13)
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19,680,542
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19,677,876
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17,815,474
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First Lien Revolver, LIBOR+7.5% (1% floor) cash due 6/23/2019 (8)
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1,000,000
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999,810
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1,000,000
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20,677,686
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18,815,474
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TrialCard Incorporated
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Healthcare services
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First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(9)(10)(13)
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10,085,815
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10,080,571
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9,947,755
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First Lien Revolver, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(9)(11)
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(375
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)
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—
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10,080,196
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9,947,755
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Motion Recruitment Partners LLC
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Diversified support services
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First Lien Term Loan, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(10)(13)
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14,917,500
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14,906,741
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14,757,057
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First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(11)
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(960
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)
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—
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14,905,781
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14,757,057
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See notes to Consolidated Financial Statements.
Fifth Street Senior Floating Rate Corp.
Consolidated Schedule of Investments
September 30, 2015
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Portfolio Company/Type of Investment (1)(2)
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Industry
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Principal (5)
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Cost
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Fair Value
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PowerPlan, Inc.
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Internet software & services
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First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (8)(10)(13)
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$
|
13,668,333
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$
|
13,668,333
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$
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13,665,537
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First Lien Revolver, LIBOR+5.25% (1% floor) cash due 2/23/2021 (8)
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—
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—
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13,668,333
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13,665,537
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Digital River, Inc.
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Internet software & services
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First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 2/12/2021 (8)(10)(13)
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9,937,500
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9,751,027
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9,937,500
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9,751,027
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9,937,500
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Curo Health Services Holdings, Inc.
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Healthcare services
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First Lien Term Loan B, LIBOR+5.5% (1% floor) cash due 2/5/2022 (8)(10)
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5,392,950
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5,344,819
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5,410,936
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5,344,819
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5,410,936
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Research Now Group, Inc.
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Data processing & outsourced services
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First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 3/18/2021 (8)(13)
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3,731,250
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3,708,681
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3,721,922
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Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 3/18/2022 (8)(10)
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4,000,000
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3,945,000
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|
3,990,000
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|
7,653,681
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7,711,922
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Fineline Technologies, Inc.
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Electronic equipment & instruments
|
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First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 5/5/2017 (8)(10)(13)
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13,720,000
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|
13,720,000
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|
13,717,288
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|
|
13,720,000
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|
13,717,288
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My Alarm Center, LLC
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Security & alarm services
|
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First Lien Term Loan A, LIBOR+8% (1% floor) cash due 1/9/2018 (8)(10)(13)
|
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|
16,047,619
|
|
|
16,047,619
|
|
|
16,046,254
|
|
First Lien Term Loan B, LIBOR+8% (1% floor) cash due 1/9/2018 (8)(10)
|
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|
|
960,356
|
|
|
960,356
|
|
|
966,015
|
|
First Lien Term Loan C, LIBOR+8% (1% floor) cash due 1/9/2018 (8)
|
|
|
|
618,812
|
|
|
618,812
|
|
|
617,504
|
|
First Lien Term Revolver, LIBOR+8% (1% floor) cash due 1/9/2018 (8)
|
|
|
|
133,333
|
|
|
133,333
|
|
|
133,333
|
|
|
|
|
|
|
|
17,760,120
|
|
|
17,763,106
|
|
Legalzoom.com, Inc.
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|
Specialized consumer services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+7% (1% floor) cash due 5/13/2020 (8)(10)(13)
|
|
|
|
19,900,000
|
|
|
19,874,564
|
|
|
19,912,601
|
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 5/13/2020 (8)(11)
|
|
|
|
|
|
(2,210
|
)
|
|
—
|
|
|
|
|
|
|
|
19,872,354
|
|
|
19,912,601
|
|
TWCC Holding Corp.
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|
Specialized consumer services
|
|
|
|
|
|
|
First Lien Term Loan B1, LIBOR+5% (0.75% floor) cash due 2/11/2020 (8)(13)
|
|
|
|
6,368,000
|
|
|
6,309,614
|
|
|
6,342,528
|
|
|
|
|
|
|
|
6,309,614
|
|
|
6,342,528
|
|
Raley's
|
|
Food retail
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 5/18/2022 (8)(13)
|
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|
|
4,048,750
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|
|
3,971,631
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|
|
4,048,750
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|
|
|
|
|
|
3,971,631
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|
|
4,048,750
|
|
Retail Solutions Group, Inc.
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Data processing & outsourced services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+5.25% (0.75% floor) cash due 6/23/2022 (8)(13)
|
|
|
|
5,985,000
|
|
|
5,927,667
|
|
|
5,970,038
|
|
|
|
|
|
|
|
5,927,667
|
|
|
5,970,038
|
|
All Web Leads, Inc.
|
|
Advertising
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 6/30/2020 (8)(10)(13)
|
|
|
|
17,598,366
|
|
|
17,578,629
|
|
|
17,604,775
|
|
First Lien Revolver, LIBOR+6.5% (1% floor) cash due 6/30/2020 (8)
|
|
|
|
1,636,381
|
|
|
1,633,468
|
|
|
1,636,381
|
|
|
|
|
|
|
|
19,212,097
|
|
|
19,241,156
|
|
Too Faced Cosmetics, LLC
|
|
Personal products
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/7/2021 (8)(13)
|
|
|
|
6,000,000
|
|
|
6,000,000
|
|
|
6,000,000
|
|
|
|
|
|
|
|
6,000,000
|
|
|
6,000,000
|
|
Internet Pipeline, Inc.
|
|
Internet software & services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+7.25% (1% floor) cash due 8/4/2022 (8)(13)
|
|
|
|
12,000,000
|
|
|
12,000,000
|
|
|
12,000,000
|
|
First Lien Revolver, LIBOR+7.25% (1% floor) cash due 8/4/2021 (8)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
12,000,000
|
|
|
12,000,000
|
|
Poseidon Merger Sub, Inc.
|
|
Advertising
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/15/2022 (8)(13)
|
|
|
|
4,000,000
|
|
|
4,000,000
|
|
|
4,000,000
|
|
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 8/15/2023 (8)
|
|
|
|
7,000,000
|
|
|
6,980,768
|
|
|
7,000,000
|
|
|
|
|
|
|
|
10,980,768
|
|
|
11,000,000
|
|
See notes to Consolidated Financial Statements.
Fifth Street Senior Floating Rate Corp.
Consolidated Schedule of Investments
September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company/Type of Investment (1)(2)
|
|
Industry
|
|
Principal (5)
|
|
|
Cost
|
|
Fair Value
|
American Seafoods Group LLC
|
|
Food distributors
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash due 8/19/2021 (8)(13)
|
|
|
|
$
|
6,000,000
|
|
|
$
|
5,942,222
|
|
|
$
|
5,970,000
|
|
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 2/19/2022 (8)
|
|
|
|
3,000,000
|
|
|
2,970,769
|
|
|
3,000,000
|
|
|
|
|
|
|
|
8,912,991
|
|
|
8,970,000
|
|
Accentcare, Inc.
|
|
Healthcare services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 9/3/2021 (8)
|
|
|
|
8,000,000
|
|
|
7,921,111
|
|
|
7,960,000
|
|
|
|
|
|
|
|
7,921,111
|
|
|
7,960,000
|
|
CRGT Inc.
|
|
IT consulting & other services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 12/19/2020 (8)(13)
|
|
|
|
3,875,316
|
|
|
3,875,316
|
|
|
3,865,628
|
|
|
|
|
|
|
|
3,875,316
|
|
|
3,865,628
|
|
Valet Merger Sub, Inc.
|
|
Environmental & facilities services
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/24/2021 (8)(13)
|
|
|
|
10,000,000
|
|
|
9,998,007
|
|
|
10,000,000
|
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/24/2021 (8)(11)
|
|
|
|
|
|
(200
|
)
|
|
—
|
|
|
|
|
|
|
|
9,997,807
|
|
|
10,000,000
|
|
Total Non-Control/Non-Affiliate Investments (158.8% of net assets)
|
|
|
|
|
|
$
|
574,538,984
|
|
|
$
|
566,490,553
|
|
Total Portfolio Investments (174.8% of net assets)
|
|
|
|
|
|
$
|
633,516,957
|
|
|
$
|
623,647,474
|
|
See notes to Consolidated Financial Statements.
Fifth Street Senior Floating Rate Corp.
Consolidated Schedule of Investments
September 30, 2015
|
|
(1)
|
All debt investments are income producing unless otherwise noted. Equity investments are non-income producing unless otherwise noted.
|
|
|
(2)
|
See Note 4 to the Consolidated Financial Statements for portfolio composition by geographic region.
|
|
|
(3)
|
Control Investments generally are defined by the 1940 Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
|
|
|
(4)
|
Affiliate Investments generally are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
|
|
|
(5)
|
Principal amount is net of repayments, if any.
|
|
|
(6)
|
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
|
|
|
(7)
|
Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
|
|
|
(8)
|
The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.
|
|
|
(9)
|
Interest rates have been adjusted on certain term loans from the stated rates in the original credit agreement as shown in the Consolidated Schedule of Investments. These rate adjustments are temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements, or permanent in nature per loan amendment or waiver documents. The table below summarizes these rate adjustments by portfolio company:
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
Effective date
|
|
Cash interest
|
|
Reason
|
TrialCard Incorporated
|
|
April 1, 2015
|
|
- 0.25% on Term Loan and Revolver
|
|
Tier pricing per loan agreement
|
Accruent, LLC
|
|
November 14, 2014
|
|
+ 1.50% on First Lien Term Loan
|
|
Per loan amendment
|
|
|
(10)
|
Investment pledged as collateral under the Company's credit facility, in whole or in part.
|
|
|
(11)
|
Investment has undrawn commitments. A negative cost basis may result from unamortized fees. Unamortized fees are classified as unearned income which reduces cost basis.
|
|
|
(12)
|
As defined in the 1940 Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).
|
|
|
(13)
|
Investment pledged as collateral under the Company's 2015 Debt Securitization, in whole or in part.
|
|
|
(14)
|
Income producing through payment of dividends or distributions.
|
See notes to Consolidated Financial Statements.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
Fifth Street Senior Floating Rate Corp. (together with its consolidated subsidiaries, the "Company") is a specialty finance company that is a closed-end, non-diversified management investment company and has elected to be regulated as a business development company under the 1940 Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for tax purposes.
The Company's investment objective is to maximize its portfolio's total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests primarily in senior secured loans, including first lien, unitranche and second lien debt instruments, that pay interest at rates which are determined periodically on the basis of a floating base lending rate, made to private middle market companies whose debt is rated below investment grade. The Company also has an investment in a joint venture that invests in similar types of loans. The Company may also invest in senior unsecured loans issued by private middle market companies and, to a lesser extent, subordinated loans issued by private middle market companies, senior and subordinated loans issued by public companies and equity investments.
The Company is externally managed by Fifth Street Management LLC (the "Investment Adviser"), a subsidiary of Fifth Street Asset Management Inc. ("FSAM"), a publicly traded alternative asset manager, pursuant to an investment advisory agreement. FSC CT LLC, a subsidiary of the Investment Adviser, also provides certain administrative and other services necessary for the Company to operate.
Note 2. Revision of Previously Issued Financial Statements for Correction of Immaterial Errors
The Company previously identified accounting errors from the commencement of operations through September 30, 2015 related to revenue recognition. The revenue recognition errors were the result of certain fees which were historically recognized on the deal closing date, but should have been amortized over the life of the loan since the fees did not represent a separately identifiable revenue contract. These errors were partially offset by the net overpayment of Part I and Part II Incentive Fees paid to the Investment Adviser. The Company assessed the materiality of the errors on its prior quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, in accordance with the Securities and Exchange Commission's ("SEC") Staff Accounting Bulletin ("SAB") No. 99 and SAB 108, and concluded that the errors were not material to any of the previously issued financial statements. However, the Company concluded the cumulative corrections of these errors would be qualitatively material to the Company's quarterly financial statements within in any quarter during the September 30, 2015 fiscal year end. Accordingly, all prior period financial statements since the commencement of operations have been revised in Note 2 and Note 14 to the Consolidated Financial Statements for the year ended September 30, 2015 contained in the Form 10-K. These errors did not impact the financial information
for the three and nine months ended
June 30, 2016
. The revisions
for the three and nine months ended
June 30, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2015
|
Consolidated Statement of Operations:
|
|
As previously reported
|
|
Adjustment
|
|
As revised (1)
|
Interest income
|
|
$
|
10,624,147
|
|
|
$
|
587,471
|
|
|
$
|
11,211,618
|
|
Fee income
|
|
3,008,068
|
|
|
(153,886
|
)
|
|
2,854,182
|
|
Total investment income
|
|
13,706,590
|
|
|
433,585
|
|
|
14,140,175
|
|
Part I incentive fee
|
|
833,515
|
|
|
274,446
|
|
|
1,107,961
|
|
Part II incentive fee
|
|
—
|
|
|
(587,855
|
)
|
|
(587,855
|
)
|
Total expenses
|
|
7,367,678
|
|
|
(313,409
|
)
|
|
7,054,269
|
|
Net investment income
|
|
6,338,912
|
|
|
746,994
|
|
|
7,085,906
|
|
Net unrealized depreciation on investments
|
|
(2,481,571
|
)
|
|
(815,178
|
)
|
|
(3,296,749
|
)
|
Net realized loss on investments
|
|
(1,716,501
|
)
|
|
381,593
|
|
|
(1,334,908
|
)
|
Net increase in net assets resulting from operations
|
|
$
|
2,140,840
|
|
|
$
|
313,409
|
|
|
$
|
2,454,249
|
|
Total investment income per common share - basic and diluted
|
|
$
|
0.47
|
|
|
$
|
0.01
|
|
|
$
|
0.48
|
|
Net investment income per common share - basic and diluted
|
|
$
|
0.22
|
|
|
$
|
0.02
|
|
|
$
|
0.24
|
|
Earnings per common share - basic and diluted
|
|
$
|
0.07
|
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2015
|
Consolidated Statement of Operations:
|
|
As previously reported
|
|
Adjustment
|
|
As revised (1)
|
Interest income
|
|
$
|
28,138,540
|
|
|
$
|
1,227,544
|
|
|
$
|
29,366,084
|
|
Fee income
|
|
13,245,872
|
|
|
(5,281,853
|
)
|
|
7,964,019
|
|
Total investment income
|
|
41,458,787
|
|
|
(4,054,309
|
)
|
|
37,404,478
|
|
Part I incentive fee
|
|
4,587,918
|
|
|
(752,568
|
)
|
|
3,835,350
|
|
Part II incentive fee
|
|
(54,826
|
)
|
|
(711,726
|
)
|
|
(766,552
|
)
|
Total expenses
|
|
17,993,008
|
|
|
(1,464,294
|
)
|
|
16,528,714
|
|
Net investment income
|
|
23,465,779
|
|
|
(2,590,015
|
)
|
|
20,875,764
|
|
Net unrealized depreciation on investments
|
|
(6,032,786
|
)
|
|
1,170,952
|
|
|
(4,861,834
|
)
|
Net realized loss on investments
|
|
(3,272,536
|
)
|
|
2,883,357
|
|
|
(389,179
|
)
|
Net increase in net assets resulting from operations
|
|
$
|
14,160,457
|
|
|
$
|
1,464,294
|
|
|
$
|
15,624,751
|
|
Total investment income per common share - basic and diluted
|
|
$
|
1.41
|
|
|
$
|
(0.14
|
)
|
|
$
|
1.27
|
|
Net investment income per common share - basic and diluted
|
|
$
|
0.80
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.71
|
|
Earnings per common share - basic and diluted
|
|
$
|
0.48
|
|
|
$
|
0.05
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2015
|
Consolidated Statement of Changes in Net Assets:
|
|
As previously reported
|
|
Adjustment
|
|
As revised (1)
|
Net investment income
|
|
$
|
23,465,779
|
|
|
$
|
(2,590,015
|
)
|
|
$
|
20,875,764
|
|
Net unrealized depreciation on investments
|
|
(6,032,786
|
)
|
|
1,170,952
|
|
|
(4,861,834
|
)
|
Net realized loss on investments
|
|
(3,272,536
|
)
|
|
2,883,357
|
|
|
(389,179
|
)
|
Net increase in net assets resulting from operations
|
|
14,160,457
|
|
|
1,464,294
|
|
|
15,624,751
|
|
Total decrease in net assets
|
|
(12,359,634
|
)
|
|
1,464,294
|
|
|
(10,895,340
|
)
|
Net assets at beginning of period
|
|
372,686,925
|
|
|
(9,247
|
)
|
|
372,677,678
|
|
Net assets at end of period
|
|
$
|
360,327,291
|
|
|
$
|
1,455,047
|
|
|
$
|
361,782,338
|
|
Net asset value per common share at period end
|
|
$
|
12.23
|
|
|
$
|
0.05
|
|
|
$
|
12.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2015
|
Consolidated Statement of Cash Flows:
|
|
As previously reported
|
|
Adjustment
|
|
As revised (1)
|
Net increase in net assets resulting from operations
|
|
$
|
14,160,457
|
|
|
$
|
1,464,294
|
|
|
$
|
15,624,751
|
|
Net unrealized depreciation on investments
|
|
6,032,786
|
|
|
(1,170,952
|
)
|
|
4,861,834
|
|
Net realized loss on investments
|
|
3,272,536
|
|
|
(2,883,357
|
)
|
|
389,179
|
|
Recognition of fee income
|
|
(13,245,872
|
)
|
|
5,281,853
|
|
|
(7,964,019
|
)
|
Accretion of original issue discount on investments
|
|
(196,574
|
)
|
|
(1,227,544
|
)
|
|
(1,424,118
|
)
|
Fee income received
|
|
13,368,856
|
|
|
(5,281,853
|
)
|
|
8,087,003
|
|
Increase (decrease) in base management fee and incentive fee payable
|
|
971,936
|
|
|
(1,464,294
|
)
|
|
(492,358
|
)
|
Purchases of investments and net revolver activity
|
|
(842,624,902
|
)
|
|
5,281,851
|
|
|
(837,343,051
|
)
|
Net cash used in operating activities
|
|
(309,794,435
|
)
|
|
—
|
|
|
(309,794,435
|
)
|
Net decrease in cash and cash equivalents
|
|
(40,986,195
|
)
|
|
—
|
|
|
(40,986,195
|
)
|
Cash and cash equivalents, beginning of period
|
|
107,429,760
|
|
|
—
|
|
|
107,429,760
|
|
Cash and cash equivalents, end of period
|
|
$
|
66,443,565
|
|
|
$
|
—
|
|
|
$
|
66,443,565
|
|
____________
(1) Revised amounts may not sum due to rounding.
Note 3. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. The Company is an investment company following the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946,
Financial Services-Investment Company
("ASC 946").
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. The subsidiaries hold investments which are treated as pass through entities for tax purposes. The assets of the Company's consolidated subsidiaries are not directly available to satisfy the claims of the creditors of the Company or any of its other subsidiaries.
Since the Company is an investment company, portfolio investments held by the Company and its subsidiaries are not consolidated into the Consolidated Financial Statements. The portfolio investments held by the Company and its subsidiaries are included on the Statements of Assets and Liabilities as Investments at fair value.
Fair Value Measurements:
The Company values its investments in accordance with FASB ASC 820,
Fair Value Measurements and Disclosures
("ASC 820"), which defines fair value as the amount 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. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
|
|
•
|
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
|
|
|
•
|
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
|
|
|
•
|
Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
|
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Generally, it is expected that all of the Company's investment securities will be valued using Level 3 inputs. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments are generally classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, the Investment Adviser's capital markets group obtains and analyzes readily available market quotations provided by independent pricing services for all of the Company's senior secured debt investments for which quotations are available. In determining the fair value of a particular investment, pricing services use observable market information, including both binding and non-binding indicative quotations.
The Investment Adviser evaluates the prices obtained from independent pricing services based on available market information and company specific data that could affect the credit quality and/or fair value of the investment. Investments for which market quotations are readily available may be valued at such market quotations. In order to validate market quotations, the Investment Adviser looks at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. The Investment Adviser does not adjust the prices unless it has a reason to believe any such market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently causing a quoted purchase or sale price to become stale or in the event of a "fire sale" by a distressed seller. In these instances, the Company values such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available (as discussed below).
If the quotation provided by the pricing service is based on only one or two market sources, the Company performs additional procedures to corroborate such information, generally including, but not limited to, the bond yield approach discussed below and a quantitative and qualitative assessment of the credit quality and market trends affecting the portfolio company.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company performs detailed valuations of its debt and equity investments for which market quotations are not readily available or are deemed not to represent fair value of the investments. The Company typically uses two different valuation techniques. The first valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company's EBITDA (generally defined as earnings before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Company may also employ other valuation multiples to determine EV, such as revenues. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is typically performed to determine the value of equity investments and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other alternative methods such as an asset liquidation model, expected recovery model or a recent observable or pending transaction may be utilized to estimate EV. The second valuation technique is a bond yield approach, which is typically performed for non-credit impaired debt investments. To determine fair value using a bond yield approach, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the bond yield approach, the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions including, but not limited to, the current stock price (by analyzing the portfolio company's operating performance and financial condition and general market conditions), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
|
|
•
|
The quarterly valuation process begins with each portfolio company or investment being initially valued by the Investment Adviser's valuation team in conjunction with the Investment Adviser's portfolio management and capital markets teams;
|
•
Preliminary valuations are then reviewed and discussed with principals of the Investment Adviser;
|
|
•
|
Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to the Investment Adviser and the Audit Committee of the Board of Directors;
|
|
|
•
|
The Investment Adviser compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee of the Board of Directors;
|
|
|
•
|
The Audit Committee of the Board of Directors reviews the preliminary valuations with the portfolio managers of the Investment Adviser and, the Investment Adviser responds and supplements the preliminary valuations to reflect any discussion between the Investment Adviser and the Audit Committee;
|
|
|
•
|
The Audit Committee of the Board of Directors makes a recommendation to the Board of Directors regarding the fair value of the investments in the Company's portfolio for which market quotations are not readily available; and
|
|
|
•
|
The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio for which market quotations are not readily available in good faith.
|
The fair value of each of the Company's investments at
June 30, 2016
and
September 30, 2015
was determined in good faith by the Board of Directors. In addition, the Company will continue to utilize independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, with a substantial portion being valued over the course of each fiscal year. As of
June 30, 2016
, 66.1% of the Company's portfolio at fair value was valued using market quotations or by independent valuation firms. However, the Board of Directors is ultimately and solely responsible for the
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.
Investment Income:
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. In connection with its investment, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the particular portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in its investment between its debt securities and its nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
The Company generally recognizes dividend income on the ex-dividend date.
The Company has two investments in debt securities which contains PIK interest provisions. PIK interest is computed at the contractual rate specified in each investment agreement and added to the principal balance of the investment and recorded as income. The Company stops accruing PIK interest on investments when it is determined that PIK interest is no longer collectible.
Fee income consists of the monthly servicing fees, advisory fees, amendment fees, structuring fees and prepayment fees that the Company receives in connection with its debt investments. These fees are recognized as earned.
Cash and Cash Equivalents:
Cash, cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less, when acquired. The Company places its cash, cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insured limit.
Restricted Cash:
As of
June 30, 2016
, included in restricted cash is
$8.0 million
that was held at Wells Fargo Bank, N.A. in connection with the Company's Citibank facility (as defined in Note 7
— Borrowings). Pursuant to the terms of the Citibank facility, the Company is restricted in terms of access to $4.1 million until such time as the Company submits its required monthly reporting schedules. As of
June 30, 2016
, $3.9 million of restricted cash could only be used for the payment of interest expense on the notes issued in the 2015 Debt Securitization.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (
e.g.
, principal payments on the scheduled amortization payment date).
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses in connection with the closing or amending of the Company's credit facilities or debt securitizations and are capitalized at the time of payment. Deferred financing costs are amortized either using the straight line method or effective interest method over the terms of the respective credit arrangement, as appropriate. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination of a credit facility, the remaining balance of unamortized fees related to such facility is accelerated into interest expense.
Offering Costs:
Offering costs consist of fees and expenses incurred in connection with the public offer and sale of the Company's common stock, including legal, accounting and printing fees. There were
no
offering costs charged to capital
during the nine months ended
June 30, 2016
and
June 30, 2015
.
Income Taxes:
In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of net taxable income and net realized short-term capital gains in excess of net realized long-term capital losses, or “investment company taxable income,” as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. The
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company is not subject to U.S. federal income tax on the portion of its taxable income and gains distributed to its stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company anticipates timely distribution of its taxable income within the tax rules; however, the Company incurred a de minimis U.S. federal excise tax for calendar year 2013. The Company did not incur a U.S. federal excise tax for calendar year 2014 and does not expect to incur a U.S. federal excise tax for calendar years 2015 and 2016. The Company may incur a U.S. federal excise tax in future years.
The Company holds certain portfolio investments through taxable subsidiaries. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the "source income" requirements contained in the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s consolidated financial statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the asset and liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
ASC 740
Accounting for Uncertainty in Income Taxes
("ASC 740") provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. The Company identifies its major tax jurisdictions as U.S. Federal and Connecticut, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Recent Accounting Pronouncements:
In May 2014, the FASB issued
ASU 2014-09, Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. In March 2016, the FASB issued
ASU 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations
. This ASU is intended to clarify revenue recognition accounting when a third party is involved in providing goods or services to a customer. In April 2016, the FASB issued
ASU 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing
. This ASU is intended to clarify two aspects of Topic 606: identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued
ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients
. This ASU amends certain aspects of ASU 2014-09, addresses certain implementation issues identified and clarifies the new revenue standards’ core revenue recognition principles. The new standards will be effective for the Company on January 1, 2018 and early adoption is permitted on the original effective date of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that new standards will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of this standard on its consolidated financial statements and its ongoing financial reporting.
In April 2015, the FASB issued
ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
, that requires debt issuance costs (deferred financing costs) related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the related debt liability, similar to the presentation of debt discounts. The update is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Additionally, in August 2015, the FASB issued ASU 2015-15, which provides further clarification on the same topic and states that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance is not expected to have a material effect on the consolidated financial statements as it will result in a reclassification on the Consolidated Statements of Assets and Liabilities. Accordingly, there will be no impact on net asset value or net increase in net assets resulting from operations as a result of adoption of this guidance.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 2016, the FASB issued
ASU 2016-01, Financial Instruments - Overall
, which makes limited amendments to the guidance in GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted specifically for the amendments pertaining to the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption of all other amendments is not permitted. Upon adoption, the Company will be required to make a cumulative-effect adjustment to the Consolidated Statement of Assets and Liabilities as of the beginning of the first reporting period in which the guidance is effective. The Company did not early adopt the new guidance
during the nine months ended
June 30, 2016
. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.
Note 4. Portfolio Investments
At
June 30, 2016
,
184.7%
of net assets at fair value, or
$598.3 million
, was invested in
64
portfolio investments, including
19.6%
of net assets, or
$63.4 million
, in subordinated notes and limited liability company ("LLC") equity interests of FSFR Glick JV LLC ("FSFR Glick JV"), and
7.1%
of net assets, or
$23.0 million
, was in cash and cash equivalents (including restricted cash). In comparison, at
September 30, 2015
,
174.8%
of net assets at fair value, or
$623.6 million
, was invested in
64
portfolio investments, including 16.0% of net assets, or $57.2 million, in subordinated notes and LLC equity interests of FSFR Glick JV, and
14.8%
of net assets, or $52.7 million, was invested in cash and cash equivalents (including restricted cash). As of
June 30, 2016
,
88.0%
of the Company's portfolio at fair value consisted of senior secured debt investments that bore interest at floating rates and that are secured by first or second priority liens on the assets of the portfolio companies,
9.7%
consisted of investments in the subordinated notes of FSFR Glick JV, 0.9% consisted of investments in the LLC equity interests of FSFR Glick JV and 1.4% consisted of equity investments in other portfolio companies. As of
September 30, 2015
, 90.7% of the Company's portfolio at cost and fair value, consisted of senior secured debt investments that bore interest at floating rates which are secured by first or second priority liens on the assets of the portfolio companies, 8.4% consisted of investments in the subordinated notes of FSFR Glick JV, 0.7% consisted of investments in the LLC equity interests of FSFR Glick JV and 0.2% consisted of equity investments on other portfolio companies.
During the three and nine months ended
June 30, 2016
, the Company recorded net unrealized appreciation (depreciation) of
$3.3 million
and
$(18.6) million
, respectively.
During the three and nine months ended
June 30, 2015
, the Company recorded net unrealized depreciation of
$3.3 million
and
$4.9 million
, respectively.
During the three and nine months ended
June 30, 2016
, the Company recorded net realized losses of
$8.5 million
and
$13.4 million
, respectively.
During the three and nine months ended
June 30, 2015
, the Company recorded net losses of
$1.3 million
and $0.4 million, respectively.
The composition of the Company's investments as of
June 30, 2016
and
September 30, 2015
at cost and fair value was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
|
|
Cost
|
|
Fair Value
|
|
Cost
|
|
Fair Value
|
Investments in debt securities (senior secured)
|
|
$
|
545,199,955
|
|
|
$
|
526,371,271
|
|
|
$
|
574,038,984
|
|
|
$
|
565,526,453
|
|
Investments in equity securities (common stock, preferred stock and warrants)
|
|
10,572,965
|
|
|
8,478,406
|
|
|
500,000
|
|
|
964,100
|
|
Debt investment in FSFR Glick JV
|
|
63,927,005
|
|
|
58,262,450
|
|
|
53,095,597
|
|
|
52,603,346
|
|
Equity investment in FSFR Glick JV
|
|
7,103,001
|
|
|
5,180,782
|
|
|
5,882,376
|
|
|
4,553,575
|
|
Total
|
|
$
|
626,802,926
|
|
|
$
|
598,292,909
|
|
|
$
|
633,516,957
|
|
|
$
|
623,647,474
|
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the financial instruments carried at fair value as of
June 30, 2016
, on the Company's Consolidated Statements of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Investments in debt securities (senior secured)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
526,371,271
|
|
|
$
|
526,371,271
|
|
Investments in debt securities (subordinated notes of FSFR Glick JV)
|
|
—
|
|
|
—
|
|
|
58,262,450
|
|
|
58,262,450
|
|
Investment in equity securities (common stock, preferred stock and warrants, including LLC equity interests of FSFR Glick JV)
|
|
—
|
|
|
—
|
|
|
13,659,188
|
|
|
13,659,188
|
|
Total investments at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
598,292,909
|
|
|
$
|
598,292,909
|
|
The following table presents the financial instruments carried at fair value as of
September 30, 2015
, on the Company's Consolidated Statements of Assets and Liabilities for each of the levels of hierarchy established by ASC 820:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Investments in debt securities (senior secured)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
565,526,453
|
|
|
$
|
565,526,453
|
|
Investments in debt securities (subordinated notes of FSFR Glick JV)
|
|
—
|
|
|
—
|
|
|
52,603,346
|
|
|
52,603,346
|
|
Investment in equity securities (common stock, preferred stock and warrants, including LLC equity interests of FSFR Glick JV)
|
|
—
|
|
|
—
|
|
|
5,517,675
|
|
|
5,517,675
|
|
Total investments at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
623,647,474
|
|
|
$
|
623,647,474
|
|
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a roll-forward in the changes in fair value from
March 31, 2016
to
June 30, 2016
, for all investments for which the Company determines fair value using unobservable (Level 3) factors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt
|
|
Subordinated Debt (subordinated notes of FSFR Glick JV)
|
|
Common Equity (including LLC equity interests of FSFR Glick JV)/Warrants
|
|
Total
|
Fair value as of March 31, 2016
|
|
$
|
513,827,239
|
|
|
$
|
56,327,567
|
|
|
$
|
5,234,285
|
|
|
$
|
575,389,091
|
|
New investments & net revolver activity
|
|
105,313,380
|
|
|
4,291,875
|
|
|
10,049,841
|
|
|
119,655,096
|
|
Redemptions/repayments
|
|
(91,594,851
|
)
|
|
(154,217
|
)
|
|
—
|
|
|
(91,749,068
|
)
|
Net accrual of PIK interest income
|
|
(89,962
|
)
|
|
—
|
|
|
—
|
|
|
(89,962
|
)
|
Accretion of original issue discount
|
|
318,048
|
|
|
—
|
|
|
—
|
|
|
318,048
|
|
Net change in unearned income
|
|
17,162
|
|
|
—
|
|
|
—
|
|
|
17,162
|
|
Net unrealized appreciation (depreciation) on investments
|
|
7,087,191
|
|
|
(2,202,775
|
)
|
|
(1,624,938
|
)
|
|
3,259,478
|
|
Net realized loss on investments
|
|
(8,506,936
|
)
|
|
—
|
|
|
—
|
|
|
(8,506,936
|
)
|
Fair value as of June 30, 2016
|
|
$
|
526,371,271
|
|
|
$
|
58,262,450
|
|
|
$
|
13,659,188
|
|
|
$
|
598,292,909
|
|
Net unrealized depreciation relating to Level 3 assets still held at June 30, 2016 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the three months ended June 30, 2016
|
|
$
|
(1,959,713
|
)
|
|
$
|
(2,202,775
|
)
|
|
$
|
(1,624,938
|
)
|
|
$
|
(5,787,426
|
)
|
The following table provides a roll-forward in the changes in fair value from
March 31, 2015
to
June 30, 2015
, for all investments for which the Company determines fair value using unobservable (Level 3) factors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt
|
|
Subordinated Debt (subordinated notes of FSFR Glick JV)
|
|
Common Equity (including LLC equity interests of FSFR Glick JV)/Warrants
|
|
Total
|
Fair value at March 31, 2015
|
|
$
|
582,871,055
|
|
|
$
|
—
|
|
|
$
|
688,366
|
|
|
$
|
583,559,421
|
|
New investments & net revolver activity
|
|
225,795,463
|
|
|
48,098,255
|
|
|
8,844,251
|
|
|
282,737,969
|
|
Redemptions/repayments
|
|
(230,654,247
|
)
|
|
—
|
|
|
(3,528,125
|
)
|
|
(234,182,372
|
)
|
Accretion of original issue discount
|
|
102,755
|
|
|
—
|
|
|
—
|
|
|
102,755
|
|
Net change in unearned income
|
|
(822
|
)
|
|
—
|
|
|
—
|
|
|
(822
|
)
|
Net unrealized depreciation on investments
|
|
(2,841,007
|
)
|
|
(43,237
|
)
|
|
(412,505
|
)
|
|
(3,296,749
|
)
|
Net realized gain (loss) on investments
|
|
(1,363,033
|
)
|
|
—
|
|
|
28,125
|
|
|
(1,334,908
|
)
|
Fair value as of June 30, 2015
|
|
$
|
573,910,164
|
|
|
$
|
48,055,018
|
|
|
$
|
5,620,112
|
|
|
$
|
627,585,294
|
|
Net unrealized depreciation relating to Level 3 assets still held at June 30, 2015 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the three months ended June 30, 2015
|
|
$
|
(2,490,349
|
)
|
|
$
|
(43,237
|
)
|
|
$
|
(412,505
|
)
|
|
$
|
(2,946,091
|
)
|
The following table provides a roll-forward in the changes in fair value from
September 30, 2015
to
June 30, 2016
, for all investments for which the Company determines fair value using unobservable (Level 3) factors:
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt
|
|
Subordinated Debt (subordinated notes of FSFR Glick JV)
|
|
Common Equity (including LLC equity interests of FSFR Glick JV)/Warrants
|
|
Total
|
Fair value as of September 30, 2015
|
|
$
|
565,526,453
|
|
|
$
|
52,603,346
|
|
|
$
|
5,517,675
|
|
|
$
|
623,647,474
|
|
New investments & net revolver activity
|
|
250,338,322
|
|
|
10,985,625
|
|
|
11,293,591
|
|
|
272,617,538
|
|
Redemptions/repayments
|
|
(267,045,164
|
)
|
|
(154,217
|
)
|
|
—
|
|
|
(267,199,381
|
)
|
Net accrual of PIK interest income
|
|
(48,929
|
)
|
|
—
|
|
|
—
|
|
|
(48,929
|
)
|
Accretion of original issue discount
|
|
1,281,598
|
|
|
—
|
|
|
—
|
|
|
1,281,598
|
|
Net change in unearned income
|
|
(4,191
|
)
|
|
—
|
|
|
—
|
|
|
(4,191
|
)
|
Net unrealized depreciation on investments
|
|
(10,316,152
|
)
|
|
(5,172,304
|
)
|
|
(3,152,078
|
)
|
|
(18,640,534
|
)
|
Net realized loss on investments
|
|
(13,360,666
|
)
|
|
—
|
|
|
—
|
|
|
(13,360,666
|
)
|
Fair value as of June 30, 2016
|
|
$
|
526,371,271
|
|
|
$
|
58,262,450
|
|
|
$
|
13,659,188
|
|
|
$
|
598,292,909
|
|
Net unrealized depreciation relating to Level 3 assets still held at June 30, 2016 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the nine months ended June 30, 2016
|
|
$
|
(12,043,738
|
)
|
|
$
|
(5,172,304
|
)
|
|
$
|
(3,152,077
|
)
|
|
$
|
(20,368,119
|
)
|
The following table provides a roll-forward in the changes in fair value from
September 30, 2014
to
June 30, 2015
, for all investments for which the Company determines fair value using unobservable (Level 3) factors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt
|
|
Subordinated Debt (subordinated notes of FSFR Glick JV)
|
|
Common Equity (including LLC equity interests of FSFR Glick JV)/Warrants
|
|
Total
|
Fair value as of September 30, 2014
|
|
$
|
299,333,407
|
|
|
$
|
—
|
|
|
$
|
667,990
|
|
|
$
|
300,001,397
|
|
New investments & net revolver activity
|
|
780,400,545
|
|
|
48,098,255
|
|
|
8,844,251
|
|
|
837,343,051
|
|
Redemptions/repayments
|
|
(502,281,150
|
)
|
|
—
|
|
|
(3,528,125
|
)
|
|
(505,809,275
|
)
|
Accretion of original issue discount
|
|
1,424,118
|
|
|
—
|
|
|
—
|
|
|
1,424,118
|
|
Net change in unearned income
|
|
(122,984
|
)
|
|
—
|
|
|
—
|
|
|
(122,984
|
)
|
Net unrealized depreciation on investments
|
|
(4,426,468
|
)
|
|
(43,237
|
)
|
|
(392,129
|
)
|
|
(4,861,834
|
)
|
Net realized gain (loss) on investments
|
|
(417,304
|
)
|
|
—
|
|
|
28,125
|
|
|
(389,179
|
)
|
Fair value as of June 30, 2015
|
|
$
|
573,910,164
|
|
|
$
|
48,055,018
|
|
|
$
|
5,620,112
|
|
|
$
|
627,585,294
|
|
Net unrealized appreciation (depreciation) relating to Level 3 assets still held at June 30, 2015 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the nine months ended June 30, 2015
|
|
$
|
(6,098,098
|
)
|
|
$
|
—
|
|
|
$
|
(392,129
|
)
|
|
$
|
(6,490,227
|
)
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value as of
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
|
Weighted
Average (c)
|
Senior secured debt
|
|
$
|
294,030,946
|
|
|
Bond yield approach
|
|
Capital structure premium
|
|
(a)
|
0.0
|
%
|
-
|
2.0%
|
|
0.2%
|
|
|
|
|
|
|
Tranche specific risk premium / (discount)
|
|
(a)
|
(6.0
|
)%
|
-
|
2.0%
|
|
(1.7)%
|
|
|
|
|
|
|
Size premium
|
|
(a)
|
0.0
|
%
|
-
|
1.5%
|
|
0.9%
|
|
|
|
|
|
|
Industry premium / (discount)
|
|
(a)
|
(1.0
|
)%
|
-
|
1.1%
|
|
0.5%
|
|
|
11,185,075
|
|
|
Transactions precedent approach
|
|
Transaction price
|
|
(d)
|
N/A
|
|
-
|
N/A
|
|
N/A
|
|
|
221,155,250
|
|
|
Market quotations
|
|
Broker quoted price
|
|
(e)
|
N/A
|
|
-
|
N/A
|
|
N/A
|
FSFR Glick JV subordinated notes
|
|
58,262,450
|
|
|
Bond yield approach
|
|
Capital structure premium
|
|
(a)
|
2.0
|
%
|
-
|
2.0%
|
|
2.0%
|
|
|
|
|
|
|
Tranche specific risk premium / (discount)
|
|
(a)
|
(1.4
|
)%
|
-
|
(1.4)%
|
|
(1.4)%
|
|
|
|
|
|
|
Size premium
|
|
(a)
|
2.0
|
%
|
-
|
2.0%
|
|
2.0%
|
|
|
|
|
|
|
Industry premium / (discount)
|
|
(a)
|
0.5
|
%
|
-
|
0.5%
|
|
0.5%
|
FSFR Glick JV equity interests
|
|
5,180,782
|
|
|
Net asset value
|
|
Net asset value
|
|
|
N/A
|
|
-
|
N/A
|
|
N/A
|
Common equity/warrants
|
|
8,478,406
|
|
|
Market and income approaches
|
|
Weighted average cost of capital
|
|
|
13.0
|
%
|
-
|
18.0%
|
|
13.6%
|
|
|
|
|
|
|
Company specific risk premium
|
|
(a)
|
1.0
|
%
|
-
|
2.0%
|
|
1.9%
|
|
|
|
|
|
|
Revenue growth rate
|
|
|
(24.3
|
)%
|
-
|
57.8%
|
|
(14.4)%
|
|
|
|
|
|
|
EBITDA/Revenue multiple
|
|
(b)
|
1.0x
|
|
-
|
18.0x
|
|
3.2x
|
Total
|
|
$
|
598,292,909
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________
(a) Used when market participant would take into account this premium or discount when pricing the investment.
(b) Used when market participant would use such multiples when pricing the investment.
(c) Weighted averages are calculated based on fair value of investments.
(d) Used when there is an observable transaction or pending event for the investment.
(e) The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. Each quoted price is evaluated by the Audit Committee in conjunction with additional information compiled by the Company, including financial performance, recent business developments and various other factors.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value as of
September 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
|
Weighted
Average (c)
|
Senior secured debt
|
|
$
|
319,401,727
|
|
|
Bond yield approach
|
|
Capital structure premium
|
|
(a)
|
0.0
|
%
|
-
|
2.0%
|
|
0.03%
|
|
|
|
|
|
|
Tranche specific risk premium / (discount)
|
|
(a)
|
(7.5
|
)%
|
-
|
6.0%
|
|
(0.8)%
|
|
|
|
|
|
|
Size premium
|
|
(a)
|
0.5
|
%
|
-
|
2.0%
|
|
1.1%
|
|
|
|
|
|
|
Industry premium / (discount)
|
|
(a)
|
(2.2
|
)%
|
-
|
7.3%
|
|
(0.02)%
|
|
|
246,124,726
|
|
|
Market quotations
|
|
Broker quoted price
|
|
(d)
|
N/A
|
|
-
|
N/A
|
|
N/A
|
FSFR Glick JV subordinated notes
|
|
52,603,346
|
|
|
Bond yield approach
|
|
Capital structure premium
|
|
(a)
|
2.0
|
%
|
-
|
2.0%
|
|
2.0%
|
|
|
|
|
|
|
Tranche specific risk premium / (discount)
|
|
(a)
|
(1.4
|
)%
|
-
|
(1.4)%
|
|
(1.4)%
|
|
|
|
|
|
|
Size premium
|
|
(a)
|
2.0
|
%
|
-
|
2.0%
|
|
2.0%
|
|
|
|
|
|
|
Industry premium / (discount)
|
|
(a)
|
(1.9
|
)%
|
-
|
(1.9)%
|
|
(1.9)%
|
FSFR Glick JV equity interests
|
|
4,553,575
|
|
|
Net asset value
|
|
Net asset value
|
|
|
N/A
|
|
-
|
N/A
|
|
N/A
|
Common equity/warrants
|
|
964,100
|
|
|
Market and income approaches
|
|
Weighted average cost of capital
|
|
|
17.0
|
%
|
-
|
17.0%
|
|
17.0%
|
|
|
|
|
|
|
Company specific risk premium
|
|
(a)
|
1.0
|
%
|
-
|
1.0%
|
|
1.0%
|
|
|
|
|
|
|
Revenue growth rate
|
|
|
34.3
|
%
|
-
|
34.3%
|
|
34.3%
|
|
|
|
|
|
|
EBITDA multiple
|
|
(b)
|
12.2x
|
|
-
|
12.2x
|
|
12.2x
|
Total
|
|
$
|
623,647,474
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________
(a) Used when market participant would take into account this premium or discount when pricing the investment.
(b) Used when market participant would use such multiples when pricing the investment.
(c) Weighted averages are calculated based on fair value of investments.
(d) The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. Each quoted price is evaluated by the Audit Committee in conjunction with additional information compiled by the Company, including financial performance, recent business developments and various other factors.
Under the bond yield approach, the significant unobservable inputs used in the fair value measurement of the Company's investments in debt securities are capital structure premium, tranche specific risk premium/(discount), size premium and industry premium/(discount). Increases or decreases in any of those inputs in isolation may result in a lower or higher fair value measurement, respectively.
Under the market and income approaches, the significant unobservable inputs used in the fair value measurement of the Company's investments in debt or equity securities are the weighted average cost of capital, company specific risk premium, revenue growth rate and EBITDA/Revenue multiple. Increases or decreases in a portfolio company's weighted average cost of capital or company specific risk premium in isolation may result in a lower or higher fair value measurement, respectively. Increases or decreases in the revenue growth rate or valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of
June 30, 2016
, and the level of each financial liability within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Citibank facility payable
|
|
$
|
100,426,800
|
|
|
$
|
100,426,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,426,800
|
|
East West Bank facility payable
|
|
15,400,000
|
|
|
15,400,000
|
|
|
|
|
|
|
15,400,000
|
|
Notes payable
|
|
180,000,000
|
|
|
180,000,000
|
|
|
—
|
|
|
—
|
|
|
180,000,000
|
|
Total
|
|
$
|
295,826,800
|
|
|
$
|
295,826,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
295,826,800
|
|
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of September 30, 2015, and the level of each financial liability within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Citibank facility payable
|
|
$
|
136,659,800
|
|
|
$
|
136,659,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
136,659,800
|
|
Notes payable
|
|
186,366,000
|
|
|
186,366,000
|
|
|
—
|
|
|
—
|
|
|
186,366,000
|
|
Total
|
|
$
|
323,025,800
|
|
|
$
|
323,025,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
323,025,800
|
|
The carrying value of the Citibank credit facility payable, East West Bank facility payable and notes payable approximate their fair values and are included in Level 3 of the hierarchy.
Portfolio Composition
Summaries of the composition of the Company's investment portfolio at cost and fair value as a percentage of total investments are shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Cost:
|
|
|
|
|
|
|
|
|
Senior secured debt
|
|
$
|
545,199,955
|
|
|
86.98
|
%
|
|
$
|
574,038,984
|
|
|
90.61
|
%
|
Subordinated notes of FSFR Glick JV
|
|
63,927,005
|
|
|
10.20
|
|
|
53,095,597
|
|
|
8.38
|
|
LLC equity interests of FSFR Glick JV
|
|
7,103,001
|
|
|
1.13
|
|
|
5,882,376
|
|
|
0.93
|
|
Purchased equity
|
|
10,572,965
|
|
|
1.69
|
|
|
500,000
|
|
|
0.08
|
|
Total
|
|
$
|
626,802,926
|
|
|
100.00
|
%
|
|
$
|
633,516,957
|
|
|
100.00
|
%
|
Fair Value:
|
|
|
|
|
|
|
|
|
Senior secured debt
|
|
$
|
526,371,271
|
|
|
87.97
|
%
|
|
$
|
565,526,453
|
|
|
90.68
|
%
|
Subordinated notes of FSFR Glick JV
|
|
58,262,450
|
|
|
9.74
|
|
|
52,603,346
|
|
|
8.43
|
|
LLC equity interests of FSFR Glick JV
|
|
5,180,782
|
|
|
0.87
|
|
|
4,553,575
|
|
|
0.73
|
|
Purchased equity
|
|
8,354,428
|
|
|
1.40
|
|
|
809,394
|
|
|
0.13
|
|
Equity grants
|
|
123,978
|
|
|
0.02
|
|
|
154,706
|
|
|
0.03
|
|
Total
|
|
$
|
598,292,909
|
|
|
100.00
|
%
|
|
$
|
623,647,474
|
|
|
100.00
|
%
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company primarily invests in portfolio companies located in North America. The following tables show the portfolio composition by geographic region at cost and fair value as a percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Cost:
|
|
|
|
|
|
|
|
|
Northeast U.S.
|
|
$
|
232,277,048
|
|
|
37.06
|
%
|
|
$
|
215,112,970
|
|
|
33.96
|
%
|
Southwest U.S.
|
|
114,570,039
|
|
|
18.28
|
|
|
124,389,488
|
|
|
19.63
|
|
West U.S.
|
|
113,584,295
|
|
|
18.12
|
|
|
117,699,067
|
|
|
18.58
|
|
Midwest U.S.
|
|
77,741,256
|
|
|
12.40
|
|
|
80,106,244
|
|
|
12.64
|
|
Southeast U.S.
|
|
74,003,702
|
|
|
11.81
|
|
|
80,767,518
|
|
|
12.75
|
|
International
|
|
14,626,586
|
|
|
2.33
|
|
|
15,441,670
|
|
|
2.44
|
|
Total
|
|
$
|
626,802,926
|
|
|
100.00
|
%
|
|
$
|
633,516,957
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
Fair Value:
|
|
|
|
|
|
|
|
|
Northeast U.S.
|
|
$
|
219,556,074
|
|
|
36.70
|
%
|
|
$
|
211,240,832
|
|
|
33.87
|
%
|
Southwest U.S.
|
|
112,457,944
|
|
|
18.80
|
|
|
125,336,010
|
|
|
20.10
|
|
West U.S.
|
|
112,445,760
|
|
|
18.79
|
|
|
116,741,778
|
|
|
18.72
|
|
Southeast U.S.
|
|
73,730,277
|
|
|
12.32
|
|
|
80,689,139
|
|
|
12.94
|
|
Midwest U.S.
|
|
66,947,186
|
|
|
11.19
|
|
|
74,335,868
|
|
|
11.92
|
|
International
|
|
13,155,668
|
|
|
2.20
|
|
|
15,303,847
|
|
|
2.45
|
|
Total
|
|
$
|
598,292,909
|
|
|
100.00
|
%
|
|
$
|
623,647,474
|
|
|
100.00
|
%
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The composition of the Company's portfolio by industry at cost and fair value as a percentage of total investments as of
June 30, 2016
and
September 30, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Cost:
|
|
|
|
|
|
|
|
Internet software & services
|
$
|
144,121,999
|
|
|
23.01
|
%
|
|
$
|
144,406,294
|
|
|
22.79
|
%
|
Healthcare services
|
90,370,266
|
|
|
14.42
|
|
|
89,505,451
|
|
|
14.13
|
|
Multi-sector holdings
|
71,030,006
|
|
|
11.33
|
|
|
58,977,973
|
|
|
9.31
|
|
Advertising
|
48,770,758
|
|
|
7.78
|
|
|
43,467,983
|
|
|
6.86
|
|
Integrated telecommunication services
|
38,726,296
|
|
|
6.18
|
|
|
38,058,587
|
|
|
6.01
|
|
Application software
|
23,631,527
|
|
|
3.77
|
|
|
21,328,091
|
|
|
3.37
|
|
Specialized consumer services
|
22,243,973
|
|
|
3.55
|
|
|
28,717,092
|
|
|
4.53
|
|
Diversified support services
|
20,072,810
|
|
|
3.20
|
|
|
29,579,949
|
|
|
4.67
|
|
Research & consulting services
|
18,170,010
|
|
|
2.90
|
|
|
9,283,714
|
|
|
1.47
|
|
Security & alarm services
|
17,746,057
|
|
|
2.83
|
|
|
17,760,120
|
|
|
2.80
|
|
Education services
|
15,813,370
|
|
|
2.52
|
|
|
21,743,979
|
|
|
3.43
|
|
Electronic equipment & instruments
|
12,686,780
|
|
|
2.02
|
|
|
13,720,000
|
|
|
2.17
|
|
Food retail
|
10,163,177
|
|
|
1.62
|
|
|
10,300,523
|
|
|
1.63
|
|
Data processing & outsourced services
|
9,849,096
|
|
|
1.57
|
|
|
13,581,348
|
|
|
2.14
|
|
Healthcare technology
|
9,795,471
|
|
|
1.56
|
|
|
4,959,398
|
|
|
0.78
|
|
Pharmaceuticals
|
9,186,425
|
|
|
1.47
|
|
|
9,825,000
|
|
|
1.55
|
|
Food distributors
|
8,795,898
|
|
|
1.40
|
|
|
8,912,991
|
|
|
1.41
|
|
Diversified capital markets
|
8,702,931
|
|
|
1.39
|
|
|
8,756,158
|
|
|
1.38
|
|
Environmental & facilities services
|
6,404,468
|
|
|
1.02
|
|
|
9,997,807
|
|
|
1.58
|
|
Commercial printing
|
5,972,104
|
|
|
0.95
|
|
|
—
|
|
|
—
|
|
IT consulting & other services
|
5,943,962
|
|
|
0.95
|
|
|
11,953,631
|
|
|
1.89
|
|
Construction and engineering
|
5,918,017
|
|
|
0.94
|
|
|
5,945,467
|
|
|
0.94
|
|
Wireless telecommunication services
|
5,726,449
|
|
|
0.91
|
|
|
5,746,610
|
|
|
0.91
|
|
Oil & gas equipment & services
|
4,237,497
|
|
|
0.68
|
|
|
4,418,746
|
|
|
0.70
|
|
Computer hardware
|
4,021,862
|
|
|
0.64
|
|
|
4,099,489
|
|
|
0.65
|
|
Industrial machinery
|
3,836,203
|
|
|
0.61
|
|
|
3,970,000
|
|
|
0.63
|
|
Fertilizers & agricultural chemicals
|
3,570,265
|
|
|
0.57
|
|
|
3,713,056
|
|
|
0.57
|
|
Personal products
|
1,295,249
|
|
|
0.21
|
|
|
10,787,500
|
|
|
1.70
|
|
Total
|
$
|
626,802,926
|
|
|
100.00
|
%
|
|
$
|
633,516,957
|
|
|
100.00
|
%
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Fair Value:
|
|
|
|
|
|
|
|
Internet software & services
|
$
|
131,983,226
|
|
|
22.08
|
%
|
|
$
|
139,324,155
|
|
|
22.34
|
%
|
Healthcare services
|
85,554,184
|
|
|
14.30
|
|
|
86,013,066
|
|
|
13.79
|
|
Multi-sector holdings
|
63,443,232
|
|
|
10.60
|
|
|
57,156,921
|
|
|
9.16
|
|
Advertising
|
48,516,722
|
|
|
8.11
|
|
|
43,579,408
|
|
|
6.99
|
|
Integrated telecommunication services
|
38,484,402
|
|
|
6.43
|
|
|
38,288,184
|
|
|
6.14
|
|
Application software
|
23,758,075
|
|
|
3.97
|
|
|
21,882,649
|
|
|
3.51
|
|
Specialized consumer services
|
22,152,507
|
|
|
3.70
|
|
|
28,795,048
|
|
|
4.62
|
|
Diversified support services
|
19,759,737
|
|
|
3.30
|
|
|
29,476,672
|
|
|
4.73
|
|
Research & consulting services
|
18,195,010
|
|
|
3.04
|
|
|
9,316,658
|
|
|
1.49
|
|
Security & alarm services
|
17,651,800
|
|
|
2.95
|
|
|
17,763,106
|
|
|
2.85
|
|
Education services
|
15,878,240
|
|
|
2.65
|
|
|
21,386,129
|
|
|
3.43
|
|
Electronic equipment & instruments
|
12,593,881
|
|
|
2.10
|
|
|
13,717,288
|
|
|
2.20
|
|
Food retail
|
10,024,394
|
|
|
1.68
|
|
|
10,432,750
|
|
|
1.67
|
|
Data processing & outsourced services
|
9,775,450
|
|
|
1.63
|
|
|
13,681,960
|
|
|
2.19
|
|
Healthcare technology
|
9,668,446
|
|
|
1.62
|
|
|
4,838,813
|
|
|
0.78
|
|
Pharmaceuticals
|
8,905,251
|
|
|
1.49
|
|
|
9,819,438
|
|
|
1.57
|
|
Diversified capital markets
|
8,764,216
|
|
|
1.46
|
|
|
8,831,807
|
|
|
1.42
|
|
Food distributors
|
8,721,403
|
|
|
1.46
|
|
|
8,970,000
|
|
|
1.44
|
|
Environmental & facilities services
|
6,511,705
|
|
|
1.09
|
|
|
10,000,000
|
|
|
1.60
|
|
IT consulting & other services
|
6,095,872
|
|
|
1.02
|
|
|
12,082,836
|
|
|
1.94
|
|
Commercial printing
|
5,972,104
|
|
|
1.00
|
|
|
—
|
|
|
—
|
|
Construction and engineering
|
5,843,419
|
|
|
0.98
|
|
|
5,908,869
|
|
|
0.95
|
|
Wireless telecommunication services
|
4,359,516
|
|
|
0.73
|
|
|
5,454,246
|
|
|
0.87
|
|
Computer hardware
|
3,959,550
|
|
|
0.66
|
|
|
4,121,614
|
|
|
0.66
|
|
Industrial machinery
|
3,788,251
|
|
|
0.63
|
|
|
3,867,602
|
|
|
0.62
|
|
Fertilizers & agricultural chemicals
|
3,415,647
|
|
|
0.57
|
|
|
3,754,945
|
|
|
0.61
|
|
Oil & gas equipment & services
|
3,234,372
|
|
|
0.54
|
|
|
4,364,794
|
|
|
0.70
|
|
Personal products
|
1,282,297
|
|
|
0.21
|
|
|
10,818,516
|
|
|
1.73
|
|
Total
|
$
|
598,292,909
|
|
|
100.00
|
%
|
|
$
|
623,647,474
|
|
|
100.00
|
%
|
The Company's investments are generally in middle market companies in a variety of industries. The investments that represented greater than 10% of the total investment portfolio at fair value at
June 30, 2016
are as follows:
|
|
|
|
|
|
|
June 30, 2016
|
FSFR Glick JV LLC
|
|
10.6
|
%
|
As of September 30, 2015, no individual investment exceeded 10% of total investments at fair value.
Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, can fluctuate upon repayment or sale of an investment and in any given year can be highly concentrated among several investments. The individual investments that produced investment income that exceeded 10% of total investment income
for the three and nine months ended
June 30, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
|
|
Investment Income
|
|
Percent of Total Investment Income
|
FSFR Glick JV LLC
|
|
$
|
2,051,422
|
|
|
15.6
|
%
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2016
|
|
|
Investment Income
|
|
Percent of Total Investment Income
|
FSFR Glick JV LLC
|
|
$
|
5,694,441
|
|
|
14.2
|
%
|
For the three and nine months ended June 30, 2015, no individual investment produced income that exceeded 10% of total investment income.
FSFR Glick JV LLC
In October 2014, the Company entered into an LLC agreement with GF Equity Funding 2014 LLC ("GF Equity Funding") to form FSFR Glick JV. On April 21, 2015, FSFR Glick JV began investing primarily in senior secured loans of middle market companies. The Company co-invests in these securities with GF Equity Funding through its investment in FSFR Glick JV. FSFR Glick JV is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by GF Equity Funding. FSFR Glick JV is capitalized as transactions are completed, and portfolio decisions and investment decisions in respect of FSFR Glick JV must be approved by an investment committee of FSFR Glick JV consisting of one representative of the Company and one representative of GF Equity Funding (with approval of each required). The members provide capital to FSFR Glick JV in exchange for LLC equity interests, and the Company and GF Debt Funding 2014 LLC ("GF Debt Funding"), an entity advised by affiliates of GF Equity Funding, provide capital to FSFR Glick JV in exchange for subordinated notes (the "Subordinated Notes"). As of
June 30, 2016
, the Company and GF Equity Funding owned
87.5%
and
12.5%
, respectively, of the outstanding LLC equity interests and the Company and GF Debt Funding owned
87.5%
and
12.5%
, respectively, of the Subordinated Notes. FSFR Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the 1940 Act.
The Company has determined that FSFR Glick JV is an investment company under ASC 946; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company does not consolidate its noncontrolling interest in FSFR Glick JV.
As of
June 30, 2016
and
September 30, 2015
, FSFR Glick JV had total assets of
$220.3 million
and $190.4 million, respectively. The Company's investment in FSFR Glick JV consisted of LLC equity interests of
$5.2 million
and Subordinated Notes of
$58.3 million
, at fair value as of
June 30, 2016
. As of
September 30, 2015
, the Company's investment consisted of LLC equity interests of $4.6 million and Subordinated Notes of $52.6 million, at fair value. The Subordinated Notes are junior in right of payment to the repayment of temporary contributions made by the Company to fund investments of FSFR Glick JV. FSFR Glick JV's portfolio consisted of middle market and other corporate debt securities of
36
and 29 "eligible portfolio companies" (as defined in the Section 2(a)(46) of the 1940 Act) as of
June 30, 2016
and
September 30, 2015
, respectively. The portfolio companies in FSFR Glick JV are in industries similar to those in which the Company may invest directly.
As of
June 30, 2016
and
September 30, 2015
, FSFR Glick JV had total capital commitments of
$100.0 million
,
$87.5 million
of which was from the Company and the remaining
$12.5 million
from GF Equity Funding and GF Debt Funding. Approximately
$81.2 million
and $67.4 million in aggregate commitments were funded as of
June 30, 2016
and
September 30, 2015
, respectively, of which
$71.0 million
and $59.0 million, respectively, was from the Company. As of
June 30, 2016
, the Company had commitments to fund Subordinated Notes to FSFR Glick JV of
$78.8 million
, of which
$14.8 million
was unfunded. As of
June 30, 2016
, the Company had commitments to fund LLC equity interests in FSFR Glick JV of
$8.7 million
, of which
$1.6 million
was unfunded. As of
September 30, 2015
, the Company had commitments to fund Subordinated Notes to FSFR Glick JV of $78.8 million, of which $25.7 million was unfunded. As of
September 30, 2015
, the Company had commitments to fund LLC equity interests in FSFR Glick JV of $8.7 million, of which $2.9 million was unfunded.
Additionally, FSFR Glick JV has a senior revolving credit facility with Credit Suisse AG, Cayman Island Branch ("Credit Suisse facility") with a stated maturity date of April 17, 2023, which permitted up to
$200.0 million
of borrowings as of both
June 30, 2016
and
September 30, 2015
. Borrowings under the Credit Suisse facility are secured by all of the assets of FSFR Glick JV and all of the equity interests in FSFR Glick JV and bore interest at a rate equal to the 3-month LIBOR plus 2.5% per annum with no LIBOR floor as of
June 30, 2016
and
September 30, 2015
. Under the Credit Suisse facility,
$136.3 million
and $122.4 million of borrowings were outstanding as of
June 30, 2016
and
September 30, 2015
, respectively.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below is a summary of FSFR Glick JV's portfolio, followed by a listing of the individual loans in FSFR Glick JV's portfolio as of
June 30, 2016
and
September 30, 2015
:
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Senior secured loans (1)
|
|
$201,666,232
|
|
$186,764,451
|
Weighted average current interest rate on senior secured loans (2)
|
|
6.85%
|
|
6.93%
|
Number of borrowers in FSFR Glick JV
|
|
36
|
|
29
|
Largest loan exposure to a single borrower (1)
|
|
$12,649,543
|
|
$14,777,933
|
Total of five largest loan exposures to borrowers (1)
|
|
$48,903,827
|
|
$58,331,216
|
__________
(1) At principal amount.
(2) Computed using the annual interest rate on accruing senior secured loans.
FSFR Glick JV Portfolio as of
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company (4)
|
|
Business Description
|
|
Investment Type
|
|
Maturity Date
|
|
Stated Interest Rate (1)
|
|
Principal
|
|
Cost
|
|
Fair Value (2)
|
Ameritox Ltd. (3)
|
|
Healthcare services
|
|
First Lien Term Loan
|
|
4/11/2021
|
|
LIBOR+5% (1% floor) cash 3% PIK
|
|
$2,321,349
|
|
$2,317,890
|
|
$2,321,349
|
|
|
Healthcare services
|
|
119,910.76 Class B Preferred Units in Ameritox Holdings II, LLC
|
|
|
|
|
|
—
|
|
|
119,911
|
|
|
125,240
|
|
|
|
Healthcare services
|
|
368.96 Class A Common Units in Ameritox Holdings II, LLC
|
|
|
|
|
|
—
|
|
|
2,174,034
|
|
|
1,239,389
|
|
Total Ameritox, Ltd
|
|
|
|
|
|
|
|
|
|
2,321,349
|
|
|
4,611,835
|
|
|
3,685,978
|
|
Answers Corporation (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
10/1/2021
|
|
LIBOR+5.25% (1% floor) cash
|
|
7,899,749
|
|
|
7,636,708
|
|
|
4,759,599
|
|
Beyond Trust Software, Inc. (3)
|
|
Application software
|
|
First Lien Term Loan
|
|
9/25/2019
|
|
LIBOR+7% (1% floor) cash
|
|
12,649,543
|
|
|
12,555,697
|
|
|
12,487,629
|
|
Compuware Corporation (3)
|
|
Internet software & services
|
|
First Lien Term Loan B1
|
|
12/15/2019
|
|
LIBOR+5.25% (1% floor) cash
|
|
7,493,671
|
|
|
7,400,923
|
|
|
7,273,544
|
|
Metamorph US 3, LLC (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
12/1/2020
|
|
LIBOR+6.5% (1% floor) cash
|
|
6,953,774
|
|
|
6,855,850
|
|
|
6,422,398
|
|
Motion Recruitment Partners LLC (3)
|
|
Diversified support services
|
|
First Lien Term Loan
|
|
2/13/2020
|
|
LIBOR+6% (1% floor) cash
|
|
9,187,500
|
|
|
9,187,500
|
|
|
9,046,627
|
|
NAVEX Global, Inc. (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
11/19/2021
|
|
LIBOR+4.75% (1% floor) cash
|
|
2,362,048
|
|
|
2,347,447
|
|
|
2,326,617
|
|
Teaching Strategies, LLC (3)
|
|
Education services
|
|
First Lien Term Loan
|
|
10/1/2019
|
|
LIBOR+5.5% (0.5% floor) cash
|
|
2,568,976
|
|
|
2,565,831
|
|
|
2,556,948
|
|
|
|
Education services
|
|
First Lien Delayed Draw Term Loan
|
|
10/1/2019
|
|
LIBOR+5.5% (0.5% floor) cash
|
|
6,885,000
|
|
|
6,877,091
|
|
|
6,852,043
|
|
Total Teaching Strategies, LLC
|
|
|
|
|
|
|
|
|
|
9,453,976
|
|
|
9,442,922
|
|
|
9,408,991
|
|
TrialCard Incorporated (3)
|
|
Healthcare services
|
|
First Lien Term Loan
|
|
12/31/2019
|
|
LIBOR+4.5% (1% floor) cash
|
|
7,179,097
|
|
|
7,141,656
|
|
|
7,178,169
|
|
Air Newco LLC
|
|
IT consulting & other services
|
|
First Lien Term Loan B
|
|
3/20/2022
|
|
LIBOR+5.5% (1% floor) cash
|
|
8,312,909
|
|
|
8,287,903
|
|
|
7,897,264
|
|
Fineline Technologies, Inc. (3)
|
|
Electronic equipment & instruments
|
|
First Lien Term Loan
|
|
5/5/2017
|
|
LIBOR+5.5% (1% floor) cash
|
|
8,155,787
|
|
|
8,120,570
|
|
|
8,096,067
|
|
LegalZoom.com, Inc. (3)
|
|
Specialized consumer services
|
|
First Lien Term Loan
|
|
5/13/2020
|
|
LIBOR+7% (1% floor) cash
|
|
9,875,000
|
|
|
9,684,322
|
|
|
9,777,575
|
|
GK Holdings, Inc.
|
|
IT consulting & other services
|
|
First Lien Term Loan
|
|
1/20/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
3,447,500
|
|
|
3,461,569
|
|
|
3,430,263
|
|
Vitera Healthcare Solutions, LLC
|
|
Healthcare technology
|
|
Second Lien Term Loan
|
|
11/4/2021
|
|
LIBOR+8.25% (1% floor) cash
|
|
3,000,000
|
|
|
2,956,364
|
|
|
2,655,000
|
|
TIBCO Software, Inc. (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
12/4/2020
|
|
LIBOR+5.5% (1% floor) cash
|
|
2,310,750
|
|
|
2,314,900
|
|
|
2,124,446
|
|
CM Delaware LLC
|
|
Advertising
|
|
First Lien Term Loan
|
|
3/18/2021
|
|
LIBOR+5.25% (1% floor) cash
|
|
2,135,655
|
|
|
2,133,534
|
|
|
2,063,577
|
|
New Trident Holdcorp, Inc. (3)
|
|
Healthcare services
|
|
First Lien Term Loan B
|
|
7/31/2019
|
|
LIBOR+5.25% (1.25% floor) cash
|
|
2,047,145
|
|
|
2,017,554
|
|
|
1,750,309
|
|
Central Security Group, Inc. (3)
|
|
Specialized consumer services
|
|
First Lien Term Loan
|
|
10/6/2020
|
|
LIBOR+5.625% (1% floor) cash
|
|
5,924,812
|
|
|
5,931,030
|
|
|
5,784,098
|
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Language Line, LLC (3)
|
|
Integrated telecommunication services
|
|
First Lien Term Loan
|
|
7/7/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
8,878,875
|
|
|
8,890,509
|
|
|
8,889,974
|
|
Auction.com, LLC
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
5/12/2019
|
|
LIBOR+5% (1% floor) cash
|
|
3,950,000
|
|
|
3,935,370
|
|
|
3,950,000
|
|
Aptos, Inc. (3)
|
|
Data processing & outsourced services
|
|
First Lien Term Loan B
|
|
6/23/2022
|
|
LIBOR+5.25% (0.75% floor) cash
|
|
7,920,000
|
|
|
7,937,108
|
|
|
7,860,600
|
|
Vubiquity, Inc.
|
|
Application software
|
|
First Lien Term Loan
|
|
8/12/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
4,179,000
|
|
|
4,142,400
|
|
|
4,158,105
|
|
Too Faced Cosmetics, LLC (3)
|
|
Personal products
|
|
First Lien Term Loan B
|
|
7/7/2021
|
|
LIBOR+5% (1% floor) cash
|
|
647,625
|
|
|
583,339
|
|
|
641,148
|
|
American Seafoods Group LLC (3)
|
|
Food distributors
|
|
First Lien Term Loan
|
|
8/19/2021
|
|
LIBOR+5% (1% floor) cash
|
|
3,912,963
|
|
|
3,895,780
|
|
|
3,854,269
|
|
Worley Claims Services, LLC
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
10/31/2020
|
|
LIBOR+8% (1% floor) cash
|
|
5,745,476
|
|
|
5,720,586
|
|
|
5,716,749
|
|
Poseidon Merger Sub, Inc. (3)
|
|
Advertising
|
|
Second Lien Term Loan
|
|
8/15/2023
|
|
LIBOR+8.5% (1% floor) cash
|
|
3,000,000
|
|
|
2,919,474
|
|
|
3,010,059
|
|
AccentCare, Inc.
|
|
Healthcare services
|
|
First Lien Term Loan
|
|
9/3/2021
|
|
LIBOR+5.75% (1% floor) cash
|
|
7,900,000
|
|
|
7,819,490
|
|
|
7,761,750
|
|
Novetta Solutions, LLC
|
|
Diversified support services
|
|
First Lien Term Loan
|
|
9/3/2021
|
|
LIBOR+5.75% (1% floor) cash
|
|
7,062,256
|
|
|
6,972,881
|
|
|
6,806,249
|
|
SHO Holding I Corporation
|
|
Footwear
|
|
First Lien Term Loan
|
|
10/27/2022
|
|
LIBOR+5% (1% floor) cash
|
|
6,467,500
|
|
|
6,407,315
|
|
|
6,435,163
|
|
Valet Merger Sub, Inc. (3)
|
|
Environmental & facilities services
|
|
First Lien Term Loan
|
|
9/24/2021
|
|
LIBOR+7% (1% floor) cash
|
|
3,970,000
|
|
|
3,913,777
|
|
|
4,007,803
|
|
RSC Acquisition, Inc.
|
|
Insurance brokers
|
|
First Lien Term Loan
|
|
11/30/2022
|
|
LIBOR+5.25% (1% floor) cash
|
|
3,805,238
|
|
|
3,782,713
|
|
|
3,786,212
|
|
|
|
Insurance brokers
|
|
Delayed Draw term loan
|
|
11/30/2022
|
|
LIBOR+5.25% (1% floor) cash
|
|
175,610
|
|
|
174,575
|
|
|
174,732
|
|
Total RSC Acquisition, Inc.
|
|
|
|
|
|
|
|
|
|
3,980,848
|
|
|
3,957,288
|
|
|
3,960,944
|
|
Integro Parent Inc.
|
|
Insurance brokers
|
|
First Lien Term Loan
|
|
10/31/2022
|
|
LIBOR+5.75% (1% floor) cash
|
|
4,721,794
|
|
|
4,566,222
|
|
|
4,650,967
|
|
|
|
Insurance brokers
|
|
Delayed Draw term loan
|
|
10/31/2022
|
|
LIBOR+5.75% (1% floor) cash
|
|
254,630
|
|
|
244,176
|
|
|
250,810
|
|
Total Integro Parent Inc.
|
|
|
|
|
|
|
|
|
|
4,976,424
|
|
|
4,810,398
|
|
|
4,901,777
|
|
TruckPro, LLC
|
|
Auto parts & equipment
|
|
First Lien Term Loan
|
|
8/6/2018
|
|
LIBOR+5% (1% floor) cash
|
|
1,940,000
|
|
|
1,936,150
|
|
|
1,938,739
|
|
Falmouth Group Holdings Corp.
|
|
Specialty chemicals
|
|
First Lien Term Loan
|
|
12/13/2021
|
|
LIBOR+6.75% (1% floor) cash
|
|
4,975,000
|
|
|
4,922,719
|
|
|
4,903,978
|
|
Sundial Group Holdings LLC
|
|
Personal products
|
|
First Lien Term Loan
|
|
10/19/2021
|
|
LIBOR+6.25% (1% floor) cash
|
|
3,950,000
|
|
|
3,886,985
|
|
|
3,859,676
|
|
Onvoy, LLC (3)
|
|
Integrated telecommunication services
|
|
First Lien Term Loan
|
|
4/29/2021
|
|
LIBOR+6.25% (1% floor) cash
|
|
7,500,000
|
|
|
7,350,000
|
|
|
7,350,000
|
|
Total Portfolio Investments
|
|
|
|
|
|
|
|
|
|
$
|
201,666,232
|
|
|
$
|
202,089,853
|
|
|
$
|
196,175,134
|
|
__________
(1) Represents the current interest rate as of
June 30, 2016
. All interest rates are payable in cash, unless otherwise noted.
(2) Represents the current determination of fair value as of
June 30, 2016
utilizing a similar process as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(3) This investment is held by both the Company and FSFR Glick JV as of
June 30, 2016
.
(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FSFR Glick JV Portfolio as of
September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company (4)
|
|
Business Description
|
|
Investment Type
|
|
Maturity Date
|
|
Stated Interest Rate (1)
|
|
Principal
|
|
Cost
|
|
Fair Value (2)
|
Accruent, LLC (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
11/25/2019
|
|
LIBOR +6.25% (1% floor) cash
|
|
$
|
14,777,933
|
|
|
$
|
14,576,963
|
|
|
$
|
14,853,895
|
|
Ameritox Ltd. (3)
|
|
Healthcare services
|
|
First Lien Term Loan
|
|
6/23/2019
|
|
LIBOR+7.5% (1% floor) cash
|
|
7,794,458
|
|
|
7,661,251
|
|
|
7,048,923
|
|
Answers Corporation (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
10/1/2021
|
|
LIBOR+5.25% (1% floor) cash
|
|
7,959,900
|
|
|
7,658,675
|
|
|
5,857,173
|
|
Beyond Trust Software, Inc. (3)
|
|
Application software
|
|
First Lien Term Loan
|
|
9/25/2019
|
|
LIBOR+7% (1% floor) cash
|
|
13,665,783
|
|
|
13,549,710
|
|
|
13,549,671
|
|
Compuware Corporation (3)
|
|
Internet software & services
|
|
First Lien Term Loan B1
|
|
12/15/2019
|
|
LIBOR+5.25% (1% floor) cash
|
|
7,797,468
|
|
|
7,684,361
|
|
|
7,551,848
|
|
Idera, Inc. (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
11/5/2020
|
|
LIBOR+5.5% (0.5% floor) cash
|
|
3,160,000
|
|
|
3,134,841
|
|
|
3,160,000
|
|
Metamorph US 3, LLC (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
12/1/2020
|
|
LIBOR+5.5% (1% floor) cash
|
|
8,398,019
|
|
|
8,283,147
|
|
|
8,310,898
|
|
Motion Recruitment Partners LLC (3)
|
|
Diversified support services
|
|
First Lien Term Loan
|
|
2/13/2020
|
|
LIBOR+6% (1% floor) cash
|
|
9,562,500
|
|
|
9,562,500
|
|
|
9,459,652
|
|
NAVEX Global, Inc. (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
11/19/2021
|
|
LIBOR+4.75% (1% floor) cash
|
|
2,435,442
|
|
|
2,429,788
|
|
|
2,423,265
|
|
Teaching Strategies, LLC (3)
|
|
Education services
|
|
First Lien Term Loan
|
|
10/1/2019
|
|
LIBOR+5.5% (0.5% floor) cash
|
|
2,695,442
|
|
|
2,691,552
|
|
|
2,673,135
|
|
|
|
Education services
|
|
First Lien Delayed Draw Term Loan
|
|
10/1/2019
|
|
LIBOR+5.5% (0.5% floor) cash
|
|
7,020,000
|
|
|
7,010,218
|
|
|
6,961,725
|
|
Total Teaching Strategies, LLC
|
|
|
|
|
|
|
|
|
|
9,715,442
|
|
|
9,701,770
|
|
|
9,634,860
|
|
TrialCard Incorporated (3)
|
|
Healthcare services
|
|
First Lien Term Loan
|
|
12/31/2019
|
|
LIBOR+5% (1% floor) cash
|
|
7,332,387
|
|
|
7,286,727
|
|
|
7,232,017
|
|
Air Newco LLC
|
|
IT consulting & other services
|
|
First Lien Term Loan B
|
|
3/20/2022
|
|
LIBOR+5.5% (1% floor) cash
|
|
5,970,000
|
|
|
6,004,722
|
|
|
5,977,463
|
|
Fineline Technologies, Inc. (3)
|
|
Electronic equipment & instruments
|
|
First Lien Term Loan
|
|
5/5/2017
|
|
LIBOR+5.5% (1% floor) cash
|
|
8,820,000
|
|
|
8,749,565
|
|
|
8,818,256
|
|
LegalZoom.com, Inc. (3)
|
|
Specialized consumer services
|
|
First Lien Term Loan
|
|
5/13/2020
|
|
LIBOR+7% (1% floor) cash
|
|
9,950,000
|
|
|
9,721,186
|
|
|
9,882,838
|
|
GK Holdings, Inc.
|
|
IT consulting & other services
|
|
First Lien Term Loan
|
|
1/20/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
3,473,750
|
|
|
3,490,164
|
|
|
3,460,723
|
|
Vitera Healthcare Solutions, LLC
|
|
Healthcare technology
|
|
Second Lien Term Loan
|
|
11/4/2021
|
|
LIBOR+8.25% (1% floor) cash
|
|
3,000,000
|
|
|
2,950,227
|
|
|
2,925,000
|
|
TIBCO Software, Inc. (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
12/4/2020
|
|
LIBOR+5.5% (1% floor) cash
|
|
2,328,300
|
|
|
2,333,155
|
|
|
2,310,838
|
|
CM Delaware LLC
|
|
Advertising
|
|
First Lien Term Loan
|
|
3/18/2021
|
|
LIBOR+5.25% (1% floor) cash
|
|
2,152,041
|
|
|
2,149,579
|
|
|
2,143,971
|
|
New Trident Holdcorp, Inc. (3)
|
|
Healthcare services
|
|
First Lien Term Loan B
|
|
7/31/2019
|
|
LIBOR+5.25% (1.25% floor) cash
|
|
2,064,508
|
|
|
2,027,520
|
|
|
2,000,003
|
|
Central Security Group, Inc. (3)
|
|
Specialized consumer services
|
|
First Lien Term Loan
|
|
10/6/2020
|
|
LIBOR+5.25% (1% floor) cash
|
|
5,969,925
|
|
|
5,977,239
|
|
|
5,910,225
|
|
Language Line, LLC (3)
|
|
Integrated telecommunication services
|
|
First Lien Term Loan
|
|
7/7/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
10,000,000
|
|
|
10,013,409
|
|
|
10,020,850
|
|
All Web Leads, Inc. (3)
|
|
Advertising
|
|
First Lien Term Loan
|
|
6/30/2020
|
|
LIBOR+6.5% (1% floor) cash
|
|
9,937,500
|
|
|
9,700,212
|
|
|
9,884,905
|
|
Auction.com, LLC
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
5/12/2019
|
|
LIBOR+5% (1% floor) cash
|
|
3,980,000
|
|
|
3,961,380
|
|
|
3,970,050
|
|
Aptos, Inc. (3)
|
|
Data processing & outsourced services
|
|
First Lien Term Loan B
|
|
6/23/2022
|
|
LIBOR+5.25% (0.75% floor) cash
|
|
7,980,000
|
|
|
7,999,277
|
|
|
7,960,050
|
|
Vubiquity, Inc.
|
|
Application software
|
|
First Lien Term Loan
|
|
8/12/2021
|
|
LIBOR+5.5% (1% floor) cash
|
|
4,200,000
|
|
|
4,158,000
|
|
|
4,179,000
|
|
Too Faced Cosmetics, LLC (3)
|
|
Personal products
|
|
First Lien Term Loan B
|
|
7/7/2021
|
|
LIBOR+5% (1% floor) cash
|
|
3,000,000
|
|
|
2,926,072
|
|
|
3,000,000
|
|
American Seafoods Group LLC (3)
|
|
Food distributors
|
|
First Lien Term Loan
|
|
8/19/2021
|
|
LIBOR+5% (1% floor) cash
|
|
4,000,000
|
|
|
3,980,282
|
|
|
3,980,000
|
|
Worley Claims Services, LLC (3)
|
|
Internet software & services
|
|
First Lien Term Loan
|
|
10/31/2020
|
|
LIBOR+8% (1% floor) cash
|
|
4,339,095
|
|
|
4,317,702
|
|
|
4,317,400
|
|
Poseidon Merger Sub, Inc. (3)
|
|
Advertising
|
|
Second Lien Term Loan
|
|
8/15/2023
|
|
LIBOR+8.5% (1% floor) cash
|
|
3,000,000
|
|
|
2,910,947
|
|
|
3,000,000
|
|
Total Portfolio Investments
|
|
|
|
|
|
|
|
|
|
$
|
186,764,451
|
|
|
$
|
184,900,371
|
|
|
$
|
182,823,774
|
|
__________
(1) Represents the current interest rate as of
September 30, 2015
. All interest rates are payable in cash, unless otherwise noted.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Represents the fair value determined utilizing a similar process as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(3) This investment is held by both the Company and FSFR Glick JV as of
September 30, 2015
.
(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.
The amortized cost and fair value of the Subordinated Notes held by the Company was
$63.9 million
and
$58.3 million
, respectively, as of
June 30, 2016
and $53.1 million and $52.6 million, respectively, as of
September 30, 2015
. The Subordinated Notes pay a weighted average interest rate of LIBOR plus 8.0% per annum.
For the three and nine months ended
June 30, 2016
, the Company earned interest income of
$1.4 million
and
$3.7 million
, respectively, on its investment in the Subordinated Notes. The cost and fair value of the LLC equity interests held by the Company was
$7.1 million
and
$5.2 million
, respectively, as of
June 30, 2016
and $5.9 million and $4.6 million, respectively, as of
September 30, 2015
. The Company earned dividend income of
$0.7 million
and
$2.0 million
, respectively,
for the three and nine months ended
June 30, 2016
with respect to its LLC equity interests. The LLC equity interests are dividend producing to the extent there is residual income to be distributed on a quarterly basis.
Below is certain summarized financial information for FSFR Glick JV as of
June 30, 2016
and
September 30, 2015
and
for the three and nine months ended
June 30, 2016 and June 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Selected Balance Sheet Information:
|
|
|
|
|
Investments in loans at fair value (cost June 30, 2016: $202,089,853; cost September 30, 2015: $184,900,371)
|
|
$
|
196,175,134
|
|
|
$
|
182,823,774
|
|
Cash and cash equivalents
|
|
17,781,525
|
|
|
3,127,824
|
|
Restricted cash
|
|
3,083,781
|
|
|
2,188,133
|
|
Other assets
|
|
3,300,298
|
|
|
2,253,143
|
|
Total assets
|
|
$
|
220,340,738
|
|
|
$
|
190,392,874
|
|
|
|
|
|
|
Senior credit facility payable
|
|
$
|
136,315,636
|
|
|
$
|
122,380,636
|
|
Subordinated notes payable at fair value (proceeds June 30, 2016: $73,059,434; proceeds September 30, 2015: $60,680,682)
|
|
66,585,657
|
|
|
60,118,109
|
|
Other liabilities
|
|
11,518,551
|
|
|
2,690,043
|
|
Total liabilities
|
|
$
|
214,419,844
|
|
|
$
|
185,188,788
|
|
Members' equity
|
|
5,920,894
|
|
|
5,204,086
|
|
Total liabilities and members' equity
|
|
$
|
220,340,738
|
|
|
$
|
190,392,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
|
Three months ended June 30, 2015
|
|
Nine months ended June 30, 2016
|
|
Nine months ended June 30, 2015
|
Selected Statement of Operations Information:
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
3,732,459
|
|
|
$
|
1,427,775
|
|
|
$
|
10,606,543
|
|
|
$
|
1,427,775
|
|
PIK interest income
|
|
15,373
|
|
|
—
|
|
|
15,373
|
|
|
—
|
|
Fee income
|
|
5,687
|
|
|
—
|
|
|
93,028
|
|
|
—
|
|
Total investment income
|
|
3,753,519
|
|
|
1,427,775
|
|
|
10,714,944
|
|
|
1,427,775
|
|
Interest expense
|
|
2,850,832
|
|
|
1,344,369
|
|
|
7,895,486
|
|
|
1,344,369
|
|
Other expenses
|
|
58,600
|
|
|
24,179
|
|
|
182,177
|
|
|
24,179
|
|
Total expenses (1)
|
|
2,909,432
|
|
|
1,368,548
|
|
|
8,077,663
|
|
|
1,368,548
|
|
Net unrealized appreciation (depreciation)
|
|
4,030,887
|
|
|
(587,375
|
)
|
|
2,170,718
|
|
|
(587,375
|
)
|
Realized loss on investments
|
|
(3,098,475
|
)
|
|
—
|
|
|
(3,098,475
|
)
|
|
—
|
|
Net income (loss)
|
|
$
|
1,776,499
|
|
|
$
|
(528,148
|
)
|
|
$
|
1,709,524
|
|
|
$
|
(528,148
|
)
|
__________
(1) There are no management fees or incentive fees charged at FSFR Glick JV.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FSFR Glick JV has elected to fair value the Subordinated Notes issued to the Company and GF Debt Funding under ASC 825 —
Financial Instruments
. The Subordinated Notes are valued by calculating the net present value of the future expected cash flow streams using an appropriate risk-adjusted discount rate model.
During the three months ended
June 30, 2016
, the Company sold
$18.2 million
of senior secured debt investments at fair value to FSFR Glick JV in exchange for
$18.2 million
cash consideration.
The Company realized a
loss of $0.1 million on these transactions.
Note 5. Fee Income
The Company receives a variety of fees in the ordinary course of business including servicing, advisory, amendment, structuring and prepayment fees, which are classified as fee income and recognized as they are earned. The majority of fee income is comprised of advisory fees which are recognized at investment close and are non-recurring in nature.
For the three and nine months ended
June 30, 2016
, the Company recorded total fee income of
$0.8 million
, $0.2 million of which was recurring in nature, and
$2.9 million
, $0.5 million of which was recurring in nature, respectively.
For the three and nine months ended
June 30, 2015
, the Company recorded total fee income of
$2.9 million
, $0.1 million of which was recurring in nature, and
$8.0 million
, $0.4 million of which was recurring in nature, respectively.
Note 6. Share Data and Distributions
Earnings per Share
The following sets forth the computation of basic and diluted earnings per share, pursuant to ASC 260-10
Earnings per Share
,
for the three and nine months ended
June 30, 2016 and June 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Three months ended
June 30, 2015
|
|
Nine months ended
June 30, 2016
|
|
Nine months ended
June 30, 2015
|
Earnings per common share — basic and diluted:
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
916,059
|
|
|
$
|
2,454,249
|
|
|
$
|
(13,050,566
|
)
|
|
$
|
15,624,751
|
|
Weighted average common shares outstanding
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
Earnings (loss) per common share — basic and diluted
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
(0.44
|
)
|
|
$
|
0.53
|
|
Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The Company is required to distribute dividends each taxable year to its stockholders of an amount at least 90% of its investment company taxable income in order to be eligible for tax benefits allowed to a RIC under Subchapter M of the Code. The Company anticipates paying out as a distribution all or substantially all of those amounts. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such net realized capital gains for investment.
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors authorizes, and the Company declares, a cash dividend, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash dividends automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash dividend. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP. However, the Company reserves the right to issue new shares of the Company’s common stock in connection with the Company’s obligations under the DRIP even if the Company’s shares are trading below net asset value.
For income tax purposes, the Company estimates that its distributions will be composed primarily of ordinary income, and the actual character of such distributions will be reflected on the Company’s Form 1099-DIVs for the calendar year. To the extent that the Company’s taxable earnings fall below the amount of dividends declared, however, a portion of the total amount of the Company’s dividends for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects the distributions per share that the Company has recorded, including shares issued under the DRIP, on its common stock
during the nine months ended
June 30, 2016 and June 30, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount
per Share
|
|
Total Distribution
|
|
DRIP Shares Issued (1)
|
|
DRIP Shares Value
|
July 10, 2015
|
|
October 6, 2015
|
|
October 15, 2015
|
|
$0.075
|
|
$2,210,008
|
|
12,080
|
|
$108,563
|
July 10, 2015
|
|
November 5, 2015
|
|
November 16, 2015
|
|
0.075
|
|
2,210,008
|
|
13,269
|
|
116,730
|
November 30, 2015
|
|
December 11, 2015
|
|
December 22, 2015
|
|
0.075
|
|
2,210,007
|
|
11,103
|
|
94,563
|
November 30, 2015
|
|
January 4, 2016
|
|
January 15, 2016
|
|
0.075
|
|
2,210,007
|
|
8,627
|
|
61,079
|
November 30, 2015
|
|
February 5, 2016
|
|
February 16, 2016
|
|
0.075
|
|
2,210,008
|
|
4,542
|
|
32,923
|
February 8, 2016
|
|
March 15, 2016
|
|
March 31, 2016
|
|
0.075
|
|
2,210,008
|
|
4,383
|
|
34,577
|
February 8, 2016
|
|
April 15, 2016
|
|
April 29, 2016
|
|
0.075
|
|
2,210,008
|
|
4,452
|
|
35,033
|
February 8, 2016
|
|
May 13, 2016
|
|
May 31, 2016
|
|
0.075
|
|
2,210,007
|
|
4,256
|
|
33,494
|
May 6, 2016
|
|
June 15, 2016
|
|
June 30, 2016
|
|
0.075
|
|
2,210,007
|
|
5,822
|
|
46,881
|
Total for the nine months ended June 30, 2016
|
|
$0.68
|
|
$19,890,068
|
|
68,534
|
|
$563,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount
per Share
|
|
Cash
Distribution
|
|
DRIP Shares
Issued
|
|
DRIP Shares
Value
|
September 9, 2014
|
|
December 15, 2014
|
|
January 15, 2015
|
|
0.30
|
|
8,840,030
|
|
23,183
|
|
242,678
|
November 20, 2014
|
|
April 2, 2015
|
|
April 15, 2015
|
|
0.30
|
|
8,840,030
|
|
28,296
|
|
307,794
|
February 4, 2015
|
|
May 1, 2015
|
|
May 15, 2015
|
|
0.10
|
|
2,946,677
|
|
5,045
|
|
50,830
|
February 4, 2015
|
|
June 1, 2015
|
|
June 15, 2015
|
|
0.10
|
|
2,946,677
|
|
5,296
|
|
53,237
|
February 4, 2015
|
|
July 1, 2015
|
(2)
|
July 15, 2015
|
|
0.10
|
|
2,946,677
|
|
14,572
|
|
137,464
|
Total for the nine months ended June 30, 2015
|
|
$0.80
|
|
$26,520,091
|
|
$76,392
|
|
$792,003
|
__________
(1) Shares were purchased on the open market and distributed.
(2) Amount represents accrued dividend at June 30, 2015 as ex-dividend date was June 29, 2015.
Common Stock Offering
There were no common stock offerings during the nine months ended
June 30, 2016 and June 30, 2015
.
Note 7. Borrowings
Natixis Facility
On November 1, 2013, FS Senior Funding LLC, the Company's wholly-owned, special purpose financing subsidiary, entered into a $100 million revolving credit facility (the "Natixis facility") with the lenders referred to therein, Natixis, New York Branch, as administrative agent, and U.S. Bank National Association, as collateral agent and custodian.
Borrowings under the Natixis facility were subject to certain customary advance rates and accrued interest at a rate equal to either the applicable commercial paper rate (subject to an overall cap) plus 1.90% in the case of a lender that is a commercial paper conduit or otherwise the three-month LIBOR plus 2.00% per annum. In addition, there was a commitment fee payable on the undrawn amount under the Natixis facility equal to 1.00% (or 0.50% for the first six months after the closing date) of such undrawn amount. Interest and commitment fees were payable quarterly in arrears. The reinvestment period under the Natixis facility ended 18 months after the closing date and the Natixis facility was scheduled to mature on November 1, 2021.
On October 16, 2014, the Company entered into agreements to expand the Natixis facility from $100 million to $200 million, including a $100 million term loan and a $100 million revolving credit facility. Fifth Third Bank ("Fifth Third") also joined the facility as a term loan lender. The $50 million term loan provided by Fifth Third was priced at LIBOR plus 2% per annum, and the $100 million revolving credit facility and $50 million term loan provided by Natixis, New York Branch, were priced at the applicable commercial paper rate plus 1.9% per annum. The facility maturity date remained unchanged.
Borrowings under the Natixis facility were secured by all of the assets of FS Senior Funding LLC and all of the Company's equity interest in FS Senior Funding LLC. The Company used the Natixis facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Natixis facility was subject to the satisfaction of certain conditions. The Company's borrowings under the Natixis facility bore interest at a weighted average interest rate of 2.247%
for the nine months ended
June 30, 2015
.
For the three and nine months ended
June 30, 2015
, the Company recorded interest expense of $2.7 million and $4.8 million, respectively, related to the Natixis facility.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 28, 2015, the Company completed a $309.0 million debt securitization transaction (the "2015 Debt Securitization"), the proceeds of which were used to repay the entire amount outstanding under the Natixis facility. In connection therewith, the Amended and Restated Loan and Servicing Agreement and other related documents governing the Natixis facility were also terminated. Upon termination of the Natixis facility, the Company accelerated the $2.1 million remaining unamortized fee balance into interest expense during the three months ended June 30, 2015. As such, the Company had no borrowings outstanding or capacity available under the Natixis facility as of
June 30, 2016
.
Citibank Facility
On January 15, 2015, FS Senior Funding II LLC, the Company's wholly-owned, special purpose financing subsidiary, entered into a $175 million revolving credit facility (the "Citibank facility") with the lenders referred to therein, Citibank, N.A., as administrative agent, and Wells Fargo Bank, N.A., as collateral agent and custodian.
Borrowings under the Citibank facility are subject to certain customary advance rates and accrued interest at a rate equal to LIBOR plus 2.00% per annum on broadly syndicated loans and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period, and rates equal to LIBOR plus 3.50% per annum and LIBOR plus 4.00% per annum during the subsequent two years, respectively. In addition, there is a commitment fee payable on the undrawn amount under the Citibank facility of either 0.50% per annum on the unused amount of the Citibank facility (if the advances outstanding on the Citibank facility exceed 50% of the aggregate commitments by lenders to make advances on such day) or 0.75% per annum on the unused amount of the credit facility (if the advances outstanding on the Citibank facility do not exceed 50% of the aggregate commitments by lenders to make advances on such day) for the duration of the reinvestment period. Interest and commitment fees are payable quarterly in arrears. The reinvestment period under the Citibank facility ends January 15, 2018 and the Citibank facility will mature on January 15, 2020. The Citibank facility does not require the Company to comply with significant financial covenants.
As of
June 30, 2016
, the Company had
$100.4 million
outstanding under the Citibank facility. Borrowings under the Citibank facility are secured by all of the assets of FS Senior Funding II LLC and all of the Company's equity interests in FS Senior Funding II LLC. The Company may use the Citibank facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Citibank facility is subject to the satisfaction of certain conditions. The Company's borrowings under the Citibank facility bore interest at a weighted average interest rate of
2.770%
and 2.809%
for the nine months ended
June 30, 2016
and
June 30, 2015
, respectively.
For the three and nine months ended
June 30, 2016
, the Company recorded interest expense of
$1.0 million
and
$3.1 million
, respectively, related to the Citibank facility.
For the three and nine months ended
June 30, 2015
, the Company recorded interest expense of $1.0 million and $1.5 million related to the Citibank facility, respectively.
East West Bank Facility
On January 6, 2016, the Company entered into a five-year $25 million senior secured revolving credit facility with the lenders referenced therein, U.S. Bank National Association, as Custodian, and East West Bank as Secured Lender (the "East West Bank Facility"). The East West Bank Facility bears an interest rate of either (i) LIBOR plus 3.75% per annum for borrowings in year one, 3.50% per annum for borrowings in year two, 3.25% per annum for borrowings in years three and four and 3.00% per annum for borrowings in year five, or (ii) East West Bank’s prime rate plus 0.75% per annum for borrowings in year one, 0.50% per annum for borrowings in year two, 0.25% per annum for borrowings in years three and four, and 0.00% per annum for borrowings in year five. The East West Bank Facility matures on January 6, 2021.
As of
June 30, 2016
, the Company had
$15.4 million
outstanding under the East West Bank Facility. Borrowings under the East West Bank Facility are secured by the loans pledged as collateral thereunder from time to time as well as certain other assets of the Company. The Company may use the East West Bank Facility to fund a portion of its loan origination activities and for general corporate purposes. The Company’s borrowings under the East West Bank facility bore interest at a weighted average interest rate of
4.202%
for the period from January 6, 2016 through
June 30, 2016
. For the three and nine months ended
June 30, 2016
, the Company recorded interest expense of
$0.2 million
and
$0.3 million
related to the East West Bank Facility.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Securitization
On May 28, 2015, the Company completed its $309.0 million 2015 Debt Securitization consisting of $222.6 million in senior secured notes ("2015 Notes") and $86.4 million of unsecured subordinated notes ("2015 Subordinated Notes"). The notes offered in the 2015 Debt Securitization were issued by FS Senior Funding Ltd. (the "2015 Issuer"), a wholly-owned subsidiary of the Company, through a private placement. The 2015 Notes are secured by the assets held by the 2015 Issuer. The 2015 Debt Securitization consists of $126.0 million Class A-T Senior Secured 2015 Notes of the 2015 Issuer which bear interest at three-month LIBOR plus 1.80% per annum; $29.0 million Class A-S Senior Secured Notes of the 2015 Issuer which bear interest at a rate of three-month LIBOR plus 1.55% per annum, with a step-up in spread to 2.10% to occur in October 2016; $20.0 million Class A-R Senior Secured Revolving Notes of the 2015 Issuer which bear interest at a rate of Commercial Paper ("CP") plus 1.80% per annum, collectively, the "Class A Notes;" and $25.0 million Class B Senior Secured Notes of the 2015 Issuer which bear interest at a rate of three-month LIBOR plus 2.65% per annum (the "Class B Notes"). In partial consideration for the loans transferred to the 2015 Issuer as part of the 2015 Debt Securitization, the Company currently retains the entire $22.6 million of the Class C Senior Secured Notes (which the Company purchased at 98.0% of par value) (the "Class C Notes") and the entire $86.4 million of the 2015 Subordinated Notes. The Class A Notes and Class B Notes are included in the Company's
June 30, 2016
Consolidated Statements of Assets and Liabilities as notes payable. As of
June 30, 2016
, the Class C Notes and the 2015 Subordinated Notes were eliminated in consolidation.
The proceeds of the private placement of the 2015 Notes, net of expenses, were used to repay the entire amount outstanding under the Natixis facility. As part of the 2015 Debt Securitization, FS Senior Funding LLC, the borrower under the Natixis facility, merged with and into 2015 Issuer, with the 2015 Issuer remaining as the surviving entity. Upon completion of the 2015 Debt Securitization, the Natixis facility was paid off and terminated.
The Company serves as collateral manager to the 2015 Issuer under a collateral management agreement. The Company is entitled
to a fee for its services as collateral manager. The Company has retained Fifth Street Management LLC, the Company’s Investment Adviser, to furnish collateral management sub-advisory services to the Company pursuant to a sub-collateral management agreement. Fifth Street Management LLC has waived and intends to continue to waive its right to such sub-collateral management fees in respect of the 2015 Debt Securitization.
The collateral management agreement does not include any incentive fee payable to the Company as collateral manager or payable to Fifth Street Management LLC as sub-advisor under the sub-collateral management agreement.
Through May 28, 2019, all principal collections received on the underlying collateral may be used by the 2015 Issuer to purchase new collateral under the direction of the Investment Adviser in its capacity as sub-collateral manager of the 2015 Issuer and in accordance with the Company's investment strategy. All note classes are scheduled to mature on May 28, 2025.
As of
June 30, 2016
, there were
50
investments in portfolio companies with a total fair value of
$270.2 million
, securing the 2015 Notes. The pool of loans in the 2015 Debt Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.
The aggregate accrued interest payable on the 2015 Notes at
June 30, 2016
was approximately
$1.0 million
.
For the nine months ended
June 30, 2016
, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the 2015 Debt Securitization were as follows:
|
|
|
|
|
|
Interest expense
|
|
$
|
3,448,626
|
|
Loan administration fees
|
|
61,941
|
|
Amortization of debt issuance costs
|
|
217,578
|
|
Total interest and other debt financing expenses
|
|
$
|
3,728,145
|
|
Cash paid for interest expense
|
|
$
|
3,891,220
|
|
Annualized average interest rate
|
|
2.528
|
%
|
Average outstanding balance
|
|
$
|
182,380,887
|
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The classes, interest rates, spread over LIBOR, cash paid for interest and interest expense of each of the Class A-T, A-S, A-R, B and C notes
the three and nine months ended
June 30, 2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
|
Nine months ended June 30, 2016
|
|
|
Stated Interest Rate
|
|
LIBOR Spread (basis points)
|
|
Cash Paid for Interest
|
|
Interest Expense
|
|
Cash Paid for Interest
|
|
Interest Expense
|
Class A-T Notes
|
|
2.42985%
|
|
180
|
|
$
|
771,439
|
|
|
$
|
773,582
|
|
|
$
|
2,493,220
|
|
|
$
|
2,216,469
|
|
Class A-S Notes
|
|
2.17985%
|
|
155
|
(1)
|
159,227
|
|
|
159,720
|
|
|
509,191
|
|
|
454,959
|
|
Class A-R Notes
|
|
2.42985%
|
|
180
|
(2)
|
51,152
|
|
|
38,509
|
|
|
204,644
|
|
|
175,686
|
|
Class B Notes
|
|
3.27985%
|
|
265
|
|
206,778
|
|
|
207,204
|
|
|
684,165
|
|
|
601,512
|
|
Class C Notes
|
|
3.60103%
|
|
325
|
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
|
|
$
|
1,188,596
|
|
|
$
|
1,179,015
|
|
|
$
|
3,891,220
|
|
|
$
|
3,448,626
|
|
_______________________
(1) Spread to step-up to 2.10% in October 2016.
(2) Interest expense includes 1.0% undrawn fee. Class A-R Notes were partially undrawn
during the three and nine months ended
June 30, 2016
.
(3) The Company holds all Class C Notes outstanding and thus has not recorded any related interest expense.
The classes, amounts, ratings and interest rates (expressed as a spread to three-month LIBOR) of the Class A, B, C and Subordinated Notes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Class A-T Notes
|
|
Class A-S Notes
|
|
Class A-R
Notes
|
|
Class B Notes
|
|
Class C Notes
|
|
Subordinated Notes
|
Type
|
|
Senior Secured Floating Rate Term Debt
|
|
Senior Secured Floating Rate Term Debt
|
|
Senior Secured Floating Rate Revolver
|
|
Senior Secured Floating Rate Term Debt
|
|
Senior Secured Floating Rate Term Debt
|
|
Subordinated Term Notes
|
Amount Outstanding
|
|
$126,000,000
|
|
$29,000,000
|
|
$—
|
|
$25,000,000
|
|
$22,575,680
|
|
$86,400,000
|
Moody's Rating
|
|
"Aaa"
|
|
"Aaa"
|
|
"Aaa"
|
|
"Aa2"
|
|
"Aa2"
|
|
NR
|
S&P Rating
|
|
"AAA"
|
|
"AAA"
|
|
"AAA"
|
|
NR
|
|
NR
|
|
NR
|
Interest Rate
|
|
LIBOR + 1.80%
|
|
LIBOR + 1.55%*
|
|
CP + 1.80% **
|
|
LIBOR + 2.65%
|
|
LIBOR + 3.25%
|
|
NA
|
Stated Maturity
|
|
May 28, 2025
|
|
May 28, 2025
|
|
May 28, 2025
|
|
May 28, 2025
|
|
May 28, 2025
|
|
May 28, 2025
|
_______________________
* Spread to step-up to 2.10% in October 2016.
** Carries a 1.0% undrawn fee.
The proceeds of the private placement of the Class A Notes and the Class B Notes of the 2015 Securitization Issuer, net of discount and debt issuance costs, may be used to fund a portion of the 2015 Issuer's loan origination activities and for general corporate purposes. The creditors of the 2015 Issuer have received security interests in the assets owned by the 2015 Issuer and such assets are not intended to be available to the Creditors of the Company (or any other affiliate of the Company). As part of the 2015 Debt Securitization, the Company entered into master loan sale agreements under which the Company agreed to directly or indirectly sell or contribute certain senior secured debt investments (or participation interests therein) to the 2015 Issuer, and to purchase or otherwise acquire the 2015 Subordinated Notes of the 2015 Issuer, as applicable. The 2015 Notes (other than the Class C Notes) are the secured obligations of the 2015 Issuer and indentures governing the 2015 Notes include customary covenants and events of default.
The 2015 Debt Securitization requires the Company to comply with certain monthly financial covenants, including overcollateralization and interest coverage tests. As of
June 30, 2016
, the Company was in compliance with all financial covenants under the Debt Securitization.
Note 8. Interest and Dividend Income
Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. In accordance with the Company's policy, accrued interest is evaluated periodically for collectability. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Distributions of income from portfolio companies are generally recorded as dividend income on the ex-dividend date.
As of
June 30, 2016
, there was
one
investment on which the Company stopped accruing cash and/or PIK interest or OID income. As of
September 30, 2015
, there was one investment on which the Company stopped accruing cash and/or PIK interest or OID income. As of
June 30, 2015
, there were no investments on which the Company had stopped accruing cash and/or PIK interest or OID income.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The percentages of the Company's debt investments at cost and fair value by accrual status as of
June 30, 2016
and
September 30, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
|
|
Cost
|
|
% of Debt
Portfolio
|
|
Fair
Value
|
|
% of Debt
Portfolio
|
|
Cost
|
|
% of Debt
Portfolio
|
|
Fair
Value
|
|
% of Debt
Portfolio
|
Accrual
|
|
$
|
601,521,703
|
|
|
98.75
|
%
|
|
$
|
583,433,721
|
|
|
99.79
|
%
|
|
$
|
619,529,324
|
|
|
98.79
|
%
|
|
$
|
613,701,960
|
|
|
99.28
|
%
|
PIK non-accrual (paying) (1)
|
|
7,605,257
|
|
|
1.25
|
|
|
1,200,000
|
|
|
0.21
|
|
|
7,605,257
|
|
|
1.21
|
|
|
4,427,839
|
|
|
0.72
|
|
Total
|
|
$
|
609,126,960
|
|
|
100.00
|
%
|
|
$
|
584,633,721
|
|
|
100.00
|
%
|
|
$
|
627,134,581
|
|
|
100.00
|
%
|
|
$
|
618,129,799
|
|
|
100.00
|
%
|
__________________
|
|
(1)
|
PIK non-accrual status is inclusive of other noncash income, where applicable. Cash non-accrual status is inclusive of PIK and other noncash income, where applicable.
|
The non-accrual status of the Company's portfolio investments as of
June 30, 2016
and
September 30, 2015
was as follows:
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
Answers Corporation - second lien term loan
|
|
PIK non-accrual (1)
|
|
PIK non-accrual (1)
|
__________________
|
|
(1)
|
PIK non-accrual status is inclusive of other noncash income, where applicable.
|
Income non-accrual amounts for
the three and nine months ended
June 30, 2016
are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Nine months ended
June 30, 2016
|
Cash interest income
|
|
$
|
50,277
|
|
|
$
|
1,008,423
|
|
OID income
|
|
13,816
|
|
|
41,447
|
|
Total
|
|
$
|
64,093
|
|
|
$
|
1,049,870
|
|
Note 9. Taxable/Distributable Income and Dividend Distributions
Taxable income may differ from net increase (decrease) in net assets resulting from operations primarily due to unrealized appreciation (depreciation) on investments, as investment gains and losses are not included in taxable income until they are realized.
Listed below is a reconciliation of net increase in net assets resulting from operations to taxable income
for the three and nine months ended
June 30, 2016
, including cumulative prior period items related to the Revision:
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Nine months ended
June 30, 2016
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
916,059
|
|
|
$
|
(13,050,566
|
)
|
Net unrealized (appreciation) depreciation on investments
|
|
(3,259,478
|
)
|
|
18,640,534
|
|
Book/tax difference due to deferred loan fees
|
|
(19,252
|
)
|
|
(12,178
|
)
|
Book/tax difference due to capital losses not recognized
|
|
8,506,936
|
|
|
13,360,666
|
|
Other book/tax differences
|
|
(700,000
|
)
|
|
(2,012,500
|
)
|
Taxable/Distributable Income (1)
|
|
$
|
5,444,265
|
|
|
$
|
16,925,956
|
|
__________________
|
|
(1)
|
The Company's taxable income
for the three and nine months ended
June 30, 2016
is an estimate and will not be finally determined until the Company files its tax return for the fiscal and taxable year ending September 30, 2016. Therefore, the final taxable income may be different than the estimate.
|
As of September 30, 2015, the components of accumulated undistributed income on a tax basis were as follows:
|
|
|
|
|
Undistributed ordinary income, net
|
$
|
2,028,702
|
|
Net realized capital gains (losses)
|
691,260
|
|
Unrealized gains, net
|
(17,295,681
|
)
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The effect of the permanent book/tax reclassifications during the fiscal year ended September 30, 2015 resulted in an increase (decrease) to the components of net assets on the Consolidated Statements of Assets and Liabilities as of September 30, 2015 as follows:
|
|
|
|
|
Undistributed Net Investment Income
|
$
|
(278,397
|
)
|
Accumulated Net Realized Gain/(Loss) on Investments
|
278,397
|
|
Paid-In Capital
|
—
|
|
For financial reporting purposes, capital accounts have been adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to the tax treatment of prepayment fees, nondeductible excise taxes paid, reclassification of distributions paid and return of capital distributions.
The Company is permitted to carry forward any net capital losses, if any, incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during such taxable years will be required to be utilized prior to the capital losses incurred in taxable years ended prior to December 23, 2010, which are subject to an expiration date. As a result of this ordering rule, capital loss carryforwards may be more likely to expire unused.
As a RIC, the Company is also subject to a U.S. federal excise tax based on distributive requirements of its taxable income generally determined on a calendar year basis. The Company incurred a de minimis U.S. federal excise tax for calendar year 2013. The Company did not incur a U.S. federal excise tax for calendar year 2014 and does not expect to incur a U.S. federal excise tax for calendar years 2015 and 2016.
Note 10. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation on Investments
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
During the nine months ended
June 30, 2016
, the Company recorded investment realization events, including the following:
|
|
•
|
In October 2015, the Company received a cash payment of $7.4 million from Reliant Hospital Partners, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In October 2015, the Company received a cash payment of $16.8 million from Idera, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In October 2015, the Company received a cash payment of $5.7 million from Novetta Solutions, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In December 2015, the Company received a cash payment of $17.6 million from All Web Leads, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In January 2016, the Company received a cash payment of $6.4 million from TWCC Holding Corp. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In February 2016, the Company received a cash payment of $1.4 million from B&H Education Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited and a realized loss of $4.3 million was recorded on the transaction;
|
|
|
•
|
In March 2016, the Company received a cash payment of $3.4 million from Pacific Architects and Engineers Incorporated in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
•
|
In April 2016, the Company restructured its debt investment in Ameritox Ltd. As a part of the restructuring, the Company exchanged its debt securities for debt and equity securities in the restructured entity. The fair value of the debt securities exchanged on the restructuring date was $12.6 million, which approximated its fair value as of March 31, 2016. A realized loss of $8.7 million was recorded on the transaction;
|
|
|
•
|
In May 2016, the Company received a cash payment of $20.8 million from Accruent, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In June 2016, the Company received a cash payment of $13.3 million from GTCR Valor Companies, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction; and
|
|
|
•
|
During the nine months ended
June 30, 2016
, the Company received cash payments of $139.3 million in connection with syndications and sales of debt investments and recorded a net realized loss of $0.4 million.
|
During the nine months ended
June 30, 2015
, the Company recorded investment realization events, including the following:
|
|
•
|
In October 2014, the Company received a cash payment of $6.8 million from Answers Corporation in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par (plus additional fees) and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In December 2014, the Company received a cash payment of $4.9 million from Survey Sampling International, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In April 2015, the Company received a cash payment of $9.4 million from Travel Leaders Group, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In April 2015, the Company received a cash payment of $11.2 million from IPC Systems, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction;
|
|
|
•
|
In April 2015, the Company received a cash payment of $2.5 million from Symphony Teleca Services, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par (plus additional fees) and no realized gain or loss was recorded on the transaction; and
|
|
|
•
|
In May 2015, the Company received a cash payment of $4.1 million from GOBP Holdings, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par (plus additional fees) and no realized gain or loss was recorded on the transaction; and
|
|
|
•
|
During the nine months ended
June 30, 2015
, the Company received cash payments of $451.4 million in connection with full or partial sales of debt investments and recorded a net realized loss of $0.4 million.
|
During the three and nine months ended
June 30, 2016
, the Company recorded net unrealized
appreciation
(depreciation) of
$3.3 million
and
$(18.6) million
, respectively.
During the three and nine months ended
June 30, 2015
, the Company recorded net unrealized depreciation of
$3.3 million
and
$4.9 million
, respectively.
For the three months ended
June 30, 2016
this consisted of
$4.2 million
of net unrealized depreciation on debt investments and
$1.6 million
of net unrealized depreciation on equity investments, offset by
$9.1 million
of net reclassifications to realized loss (resulting in unrealized appreciation).
For the nine months ended
June 30, 2016
this consisted of
$17.2 million
of net unrealized depreciation on debt investments and
$3.1 million
of net unrealized depreciation on equity investments, offset by
$1.7 million
of net reclassifications to realized loss (resulting in unrealized appreciation).
For the three months ended
June 30, 2015
, the Company's net unrealized depreciation consisted of $2.5 million of net unrealized depreciation on debt investments, $0.4 million of net reclassifications to realized gains on debt and equity investments (resulting in unrealized depreciation), and $0.4 million of net unrealized depreciation on equity investments.
For the nine months ended
June 30, 2015
, the Company's net unrealized depreciation consisted of $6.1 million of net unrealized depreciation on debt investments and $0.4 million of net unrealized depreciation on equity investments, offset by $1.6 million of net reclassifications to realized loss on debt and equity investments (resulting in unrealized appreciation).
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Concentration of Credit Risks
The Company places its cash in financial institutions and at times such balances may be in excess of the FDIC insured limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
Note 12. Related Party Transactions
The Company has entered into an investment advisory agreement with the Investment Adviser. Under the investment advisory agreement, the Company pays the Investment Adviser a fee for its services consisting of two components — a base management fee and an incentive fee.
Base Management Fee
The base management fee is calculated at an annual rate of 1% of the Company's gross assets (i.e., total assets held before deduction of any liabilities), which includes any investments acquired with the use of leverage and excludes any cash, cash equivalents and restricted cash. The base management fee is calculated based on the average value of the Company's gross assets at the end of the two most recently completed quarters. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated.
For the three and nine months ended
June 30, 2016
, base management fees (net of waivers, if any) were
$1.5 million
and
$4.6 million
, respectively.
For the three and nine months ended
June 30, 2015
, base management fees (net of waivers, if any) were $1.6 million and $4.3 million, respectively.
Incentive Fee
The incentive fee portion of the investment advisory agreement has two parts. The first part ("Part I incentive fee") is calculated and payable quarterly in arrears based on the Company's "Pre-Incentive Fee Net Investment Income" for the immediately preceding fiscal quarter. For this purpose, "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the fiscal quarter, minus the Company's operating expenses for the quarter (including the base management fee, expenses payable under the Company's administration agreement, and any interest expense and dividends paid on any issued and outstanding indebtedness or preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company's net assets at the end of the immediately preceding fiscal quarter, will be compared to a "hurdle rate" of 1.5% per quarter (6% annualized), subject to a "catch-up" provision measured as of the end of each fiscal quarter. The Company's net investment income used to calculate this part of the incentive fee is also included in the amount of its gross assets used to calculate the 1% base management fee. The operation of the incentive fee with respect to the Company's Pre-Incentive Fee Net Investment Income for each quarter is as follows:
|
|
•
|
No incentive fee is payable to the Investment Adviser in any fiscal quarter in which the Company's Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.5% (the "preferred return" or "hurdle");
|
|
|
•
|
50% of the Company's Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than or equal to 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser. The Company refers to this portion of its Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than or equal to 2.5%) as the "catch-up." The "catch-up" provision is intended to provide the Investment Adviser with an incentive fee of 20% on all of the Company's Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when the Company's Pre-Incentive Fee Net Investment Income exceeds 2.5% in any fiscal quarter; and
|
|
|
•
|
20% of the amount of the Company's Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser once the hurdle is reached and the catch-up is achieved.
|
For the three and nine months ended
June 30, 2016
, the Part I incentive fee was
$1.2 million
and
$3.7 million
, respectively.
For the three and nine months ended
June 30, 2015
, the Part I incentive fee was
$1.1 million
and
$3.8 million
, respectively.
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The second part ("Part II Incentive Fee" or "capital gain incentive fee") of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory agreement, as of the termination date) and equals 20% of the Company's realized capital gains, if any, on a cumulative basis from inception through the end of each fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.
For the three and nine months ended
June 30, 2015
, the Part II incentive fee was
$(0.6) million
and
$(0.8) million
, respectively.
For the three and nine months ended
June 30, 2016
, there was no Part II incentive fee.
GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the investment advisory and management agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gain incentive fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 20% of such cumulative amount, less the aggregate amount of actual capital gain incentive fees paid or capital gains incentive fees accrued under GAAP in all prior periods. As of
June 30, 2016
, the Company
has paid $145,898 of capital gain incentive fees since inception. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior periods or a reversal of previously recorded expense if such cumulative amount is less than in the prior periods. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future. The Company does not currently accrue for capital gain incentive fees due to the accumulated realized and unrealized losses in the portfolio.
At
June 30, 2016
and
September 30, 2015
, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of
$2.7 million
and
$2.1 million
, respectively, reflecting the unpaid portion of the base management fee and incentive fees payable to the Investment Adviser.
Indemnification
The investment advisory agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, the Company's Investment Adviser and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of the Investment Adviser's services under the investment advisory agreement or otherwise as the Company's Investment Adviser.
Administration Agreement
On January 1, 2015, the Company entered into an administration agreement with its administrator, FSC CT LLC ("FSC CT"), under substantially similar terms as its prior administration agreement with FSC CT, Inc. Under the administration agreement with FSC CT, administrative services are provided to the Company, including office facilities and equipment, and clerical, bookkeeping and recordkeeping services at such facilities. Under the administration agreement, FSC CT also performs or oversees the performance of the Company's required administrative services, which includes being responsible for the financial records which the Company is required to maintain and preparing reports to the Company's stockholders and reports filed with the SEC. In addition, FSC CT assists the Company in determining and publishing the Company's net asset value, overseeing the preparation and filing of the Company's tax returns and the printing and dissemination of reports to the Company's stockholders, and generally overseeing the payment of the Company's expenses and the performance of administrative and professional services rendered to the Company by others. For providing these services, facilities and personnel, the Company provides reimbursement for the allocable portion of overhead and other expenses incurred in connection with payments of rent at market rates and the Company's allocable portion of the costs of compensation and related expenses of the Company's chief financial officer and chief compliance officer and their staffs. Such reimbursement is at cost with no profit to, or markup by, FSC CT. FSC CT may also provide, on the Company's behalf, managerial assistance to the Company's portfolio companies. The administration agreement may be terminated by either party without penalty upon 60 days' written notice to the other party.
For the three and nine months ended
June 30, 2016
, the Company accrued administrative expenses of $0.3 million, including $0.2 million of general and administrative expenses, and $0.9 million, including $0.5 million of general and administrative expenses, respectively.
For the three and nine months ended
June 30, 2015
, the Company accrued administrative expenses of $0.2 million, including $0.1 million of general and administrative expenses, and $0.8 million, including $0.3 million of general and administrative
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
expenses, respectively. At
June 30, 2016
and
September 30, 2015
,
$0.4 million
and
$0.4 million
, respectively, was included in Due to FSC CT in the Consolidated Statements of Assets and Liabilities.
Note 13. Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Three months ended
June 30, 2015
(revised)
|
|
Nine months ended
June 30, 2016
|
|
Nine months ended
June 30, 2015
(revised)
|
Net asset value at beginning of period
|
|
$
|
11.18
|
|
|
$
|
12.49
|
|
|
$
|
12.11
|
|
|
$
|
12.65
|
|
Net investment income (5)
|
|
0.21
|
|
|
0.24
|
|
|
0.64
|
|
|
0.71
|
|
Net unrealized appreciation (depreciation) on investments (5)
|
|
0.12
|
|
|
(0.11
|
)
|
|
(0.63
|
)
|
|
(0.17
|
)
|
Net realized loss on investments (5)
|
|
(0.29
|
)
|
|
(0.04
|
)
|
|
(0.45
|
)
|
|
(0.01
|
)
|
Distributions to stockholders
|
|
(0.23
|
)
|
|
(0.30
|
)
|
|
(0.68
|
)
|
|
(0.90
|
)
|
Net asset value at end of period
|
|
$
|
10.99
|
|
|
$
|
12.28
|
|
|
$
|
10.99
|
|
|
$
|
12.28
|
|
Per share market value at beginning of period
|
|
$
|
7.93
|
|
|
$
|
10.63
|
|
|
$
|
8.73
|
|
|
$
|
11.82
|
|
Per share market value at end of period
|
|
$
|
7.96
|
|
|
$
|
9.22
|
|
|
$
|
7.96
|
|
|
$
|
9.22
|
|
Total return (1)
|
|
3.25
|
%
|
|
(9.09
|
)%
|
|
(0.82
|
)%
|
|
(13.64
|
)%
|
Common shares outstanding at beginning of period
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
Common shares outstanding at end of period
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
|
29,466,768
|
|
Net assets at beginning of period
|
|
$
|
329,580,431
|
|
|
$
|
368,168,120
|
|
|
$
|
356,807,103
|
|
|
$
|
372,677,678
|
|
Net assets at end of period
|
|
$
|
323,866,469
|
|
|
$
|
361,782,338
|
|
|
$
|
323,866,469
|
|
|
$
|
361,782,338
|
|
Average net assets (2)
|
|
$
|
326,522,054
|
|
|
$
|
367,433,485
|
|
|
$
|
335,051,091
|
|
|
$
|
371,804,998
|
|
Ratio of net investment income to average net assets (3)
|
|
7.57
|
%
|
|
7.74
|
%
|
|
7.53
|
%
|
|
7.51
|
%
|
Ratio of total expenses to average net assets (3)
|
|
8.54
|
%
|
|
7.70
|
%
|
|
8.46
|
%
|
|
5.94
|
%
|
Ratio of portfolio turnover to average investments at fair value
|
|
8.12
|
%
|
|
5.65
|
%
|
|
23.12
|
%
|
|
15.73
|
%
|
Weighted average outstanding debt (4)
|
|
$
|
297,089,437
|
|
|
$
|
287,795,516
|
|
|
$
|
304,125,103
|
|
|
$
|
219,225,181
|
|
Average debt per share (5)
|
|
$
|
10.08
|
|
|
$
|
9.77
|
|
|
$
|
10.32
|
|
|
$
|
7.44
|
|
_______________
|
|
|
(1)
|
Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP. Total return is not annualized during interim periods.
|
(2)
|
Calculated based upon the weighted average net assets for the period.
|
(3)
|
Periods less than twelve months are annualized.
|
(4)
|
Calculated based upon the weighted average of loans payable for the period.
|
(5)
|
Calculated based upon weighted average shares outstanding for the period.
|
Note 14. Commitments and Contingencies
SEC Examination and Investigation
On March 23, 2016, the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) sent document subpoenas and document-preservation notices to the Company, FSAM, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P. (“FSOF”), and Fifth Street Finance Corp (“FSC”). The subpoenas sought production of documents relating to a variety of issues, including those raised in an ordinary-course examination of Fifth Street Management LLC by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in the FSC and FSAM securities class actions and the FSC derivative actions. The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of our portfolio companies and investments, (ii) the expenses allocated or charged to the Company and FSC, (iii) FSOF’s trading in the securities of publicly traded business-development companies, (iv) statements to the board, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of the Company’s portfolio companies or investments as well as expenses
FIFTH STREET SENIOR FLOATING RATE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allocated or charged to the Company and FSC, (v) various issues relating to adoption and implementation of policies and procedures under the Investment Advisers Act of 1940 (the “Advisers Act”), (vi) statements and/or potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Advisers Act, as well as rules promulgated under those Acts, as the bases of the investigation. The subpoenaed Fifth Street entities are cooperating with the Division of Enforcement investigation, have produced requested documents, and have been communicating with Division of Enforcement personnel.
Off-Balance Sheet Arrangements
The Company's off-balance sheet arrangements consisted of
$57.8 million
and
$76.8 million
of unfunded commitments to provide debt and equity financing to its portfolio companies as of
June 30, 2016
and
September 30, 2015
, respectively. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities and are not reflected in the Company's Consolidated Statements of Assets and Liabilities.
A summary of the composition of the unfunded commitments (consisting of revolvers, term loans and FSFR Glick JV subordinated notes and LLC equity interests) as of
June 30, 2016
and
September 30, 2015
is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
FSFR Glick JV LLC
|
|
$
|
16,469,994
|
|
|
$
|
28,522,027
|
|
Triple Point Group Holdings, Inc.
|
|
4,968,590
|
|
|
4,968,590
|
|
Executive Consulting Group, Inc.
|
|
4,800,000
|
|
|
4,800,000
|
|
TIBCO Software, Inc.
|
|
4,452,000
|
|
|
5,300,000
|
|
Legalzoom.com, Inc.
|
|
3,607,018
|
|
|
2,607,018
|
|
BeyondTrust Software, Inc.
|
|
3,605,000
|
|
|
3,605,000
|
|
All Web Leads, Inc.
|
|
3,458,537
|
|
|
2,454,572
|
|
Motion Recruitment Partners LLC
|
|
2,628,125
|
|
|
2,900,000
|
|
PowerPlan, Inc.
|
|
2,100,000
|
|
|
2,100,000
|
|
Teaching Strategies, LLC
|
|
1,920,000
|
|
|
2,400,000
|
|
Metamorph US 3, LLC
|
|
1,800,000
|
|
|
1,800,000
|
|
Dynatect Group Holdings, Inc.
|
|
1,800,000
|
|
|
1,800,000
|
|
My Alarm Center, LLC
|
|
1,301,562
|
|
|
1,287,499
|
|
Landslide Holdings, Inc.
|
|
1,250,000
|
|
|
5,000,000
|
|
Baart Programs, Inc.
|
|
1,000,000
|
|
|
—
|
|
TrialCard Incorporated
|
|
850,000
|
|
|
850,000
|
|
Internet Pipeline, Inc.
|
|
800,000
|
|
|
800,000
|
|
NextCare, Inc.
|
|
420,375
|
|
|
1,221,621
|
|
Valet Merger Sub, Inc.
|
|
333,333
|
|
|
1,000,000
|
|
OBHG Management Services, LLC
|
|
100,000
|
|
|
—
|
|
Accruent, LLC
|
|
85,000
|
|
|
—
|
|
4 Over International, LLC
|
|
36,508
|
|
|
—
|
|
Idera, Inc.
|
|
—
|
|
|
2,400,000
|
|
Ameritox Ltd.
|
|
—
|
|
|
1,000,000
|
|
Total
|
|
$
|
57,786,042
|
|
|
$
|
76,816,327
|
|
Note 15. Subsequent Events
The Company's management evaluates subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the Consolidated Financial Statements as of and
for the nine months ended
June 30, 2016
.
Schedule 12-14
Fifth Street Senior Floating Rate Corp.
Schedule of Investments in and Advances to Affiliates
Nine months ended
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company/Type of Investment (1)
|
|
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
|
|
Fair Value
at October 1, 2015
|
|
Gross
Additions (3)
|
|
Gross
Reductions (4)
|
|
Fair Value at
June 30, 2016
|
Control Investments
|
|
|
|
|
|
|
|
|
|
|
FSFR Glick JV LLC
|
|
|
|
|
|
|
|
|
|
|
Subordinated Note, LIBOR+8% cash due 10/20/2021
|
|
$
|
3,681,941
|
|
|
$
|
52,603,346
|
|
|
$
|
10,831,408
|
|
|
$
|
(5,172,304
|
)
|
|
$
|
58,262,450
|
|
87.5% equity interest (5)
|
|
2,012,500
|
|
|
4,553,575
|
|
|
3,651,781
|
|
|
(3,024,574
|
)
|
|
5,180,782
|
|
Total Control Investments
|
|
$
|
5,694,441
|
|
|
$
|
57,156,921
|
|
|
$
|
14,483,189
|
|
|
$
|
(8,196,878
|
)
|
|
$
|
63,443,232
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate Investments
|
|
|
|
|
|
|
|
|
|
|
Ameritox Ltd.
|
|
|
|
|
|
|
|
|
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021
|
|
$
|
130,653
|
|
|
$
|
—
|
|
|
$
|
6,351,124
|
|
|
$
|
(12,592
|
)
|
|
$
|
6,338,532
|
|
3,309,873.6 Class A Preferred Units
|
|
—
|
|
|
—
|
|
|
3,456,979
|
|
|
—
|
|
|
3,456,979
|
|
327,393.6 Class B Preferred Units
|
|
—
|
|
|
—
|
|
|
341,945
|
|
|
—
|
|
|
341,945
|
|
1,007.36 Class A Units
|
|
—
|
|
|
—
|
|
|
5,935,698
|
|
|
(2,551,834
|
)
|
|
3,383,864
|
|
Total Affiliate Investments
|
|
$
|
130,653
|
|
|
$
|
—
|
|
|
$
|
16,085,746
|
|
|
$
|
(2,564,426
|
)
|
|
$
|
13,521,320
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Control & Affiliate Investments
|
|
$
|
5,825,094
|
|
|
$
|
57,156,921
|
|
|
$
|
30,568,935
|
|
|
$
|
(10,761,304
|
)
|
|
$
|
76,964,552
|
|
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
|
|
(1)
|
The principal amount and ownership detail as shown in the Company's Consolidated Schedules of Investments.
|
|
|
(2)
|
Represents the total amount of interest, fees and dividends credited to income for the portion of the year an investment was included in the Control or Affiliate categories.
|
|
|
(3)
|
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on Investments and accrued interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
|
|
|
(4)
|
Gross reductions include decreases in the cost basis of investment resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
|
|
|
(5)
|
Together with GF Equity Funding, the Company co-invests through FSFR Glick JV. FSFR Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to FSFR Glick JV must be approved by the FSFR Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).
|
Schedule of Investments in and Advances to Affiliates
Nine months ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company/Type of Investment (1)
|
|
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
|
|
Fair Value
at October 1,
2014
|
|
Gross
Additions (3)
|
|
Gross
Reductions (4)
|
|
Fair Value at
June 30, 2015
|
Control Investments
|
|
|
|
|
|
|
|
|
|
|
FSFR Glick JV LLC
|
|
|
|
|
|
|
|
|
|
|
Subordinated Note, LIBOR+8% cash due 10/20/2021
|
|
$
|
754,216
|
|
|
$
|
—
|
|
|
$
|
48,098,255
|
|
|
$
|
(43,237
|
)
|
|
$
|
48,055,018
|
|
87.5% equity interest (5)
|
|
74,375
|
|
|
—
|
|
|
5,344,251
|
|
|
(528,473
|
)
|
|
4,815,778
|
|
Total Control Investments
|
|
$
|
828,591
|
|
|
$
|
—
|
|
|
$
|
53,442,506
|
|
|
$
|
(571,710
|
)
|
|
$
|
52,870,796
|
|
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
|
|
(1)
|
The principal amount and ownership detail as shown in the Company's Consolidated Schedules of Investments.
|
|
|
(2)
|
Represents the total amount of interest, fees and dividends credited to income for the portion of the year an investment was included in the Control or Affiliate categories.
|
|
|
(3)
|
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on Investments and accrued interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
|
|
|
(4)
|
Gross reductions include decreases in the cost basis of investment resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
|
|
|
(5)
|
Together with GF Equity Funding, the Company co-invests through FSFR Glick JV. FSFR Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to FSFR Glick JV must be approved by the FSFR Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).
|