P U.S. Prime
Rate (which as of December 31, 2016 was 3.75%)
Notes to the Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
Goldman Sachs BDC, Inc. (the Company, which term refers to
either Goldman Sachs BDC, Inc. or Goldman Sachs BDC, Inc. together with its consolidated subsidiaries, as the context may require) was initially established as Goldman Sachs Liberty Harbor Capital, LLC, a single member Delaware limited liability
company (SMLLC), on September 26, 2012 and commenced operations on November 15, 2012 with The Goldman Sachs Group, Inc. (Group Inc.) as its sole member. On March 29, 2013, the Company elected to be regulated as
a business development company (BDC) under the Investment Company Act of 1940, as amended (the Investment Company Act). Effective April 1, 2013, the Company converted from a SMLLC to a Delaware corporation. In addition,
the Company has elected to be treated as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), commencing with its taxable year ended December 31, 2013.
The Companys investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through direct
originations of secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.
Goldman Sachs Asset Management, L.P. (GSAM), a Delaware limited partnership and an affiliate of Goldman Sachs & Co. LLC
(including its predecessors, GS & Co.), is the investment adviser (the Investment Adviser) of the Company. The term Goldman Sachs refers to Group Inc., together with GS & Co., GSAM and its other
subsidiaries.
On March 23, 2015, the Company completed its initial public offering (IPO) and the Companys common
stock began trading on the New York Stock Exchange (NYSE) under the symbol GSBD.
The Company has formed wholly
owned subsidiaries, which are structured as Delaware limited liability companies, to hold certain equity or equity-like investments in portfolio companies.
2.
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SIGNIFICANT ACCOUNTING POLICIES
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Basis of Presentation
The Companys functional currency is U.S. dollars and these consolidated financial statements have been prepared in that currency. The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and pursuant to Regulation S-X. This requires the Company to make
certain estimates and assumptions that may affect the amounts reported in the consolidated financial statements and accompanying notes. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for
the fair statement of the results for the periods presented. Actual results may differ from the estimates and assumptions included in the consolidated financial statements.
Certain financial information that is included in annual consolidated financial statements, including certain financial statement disclosures,
prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These consolidated financial statements should be read in conjunction with the Companys audited consolidated financial
statements and notes related thereto for the year ended December 31, 2016, included in the Companys Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission (the SEC) on February 28,
2017. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year, any other interim period or any future year or period.
Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on
the Companys consolidated financial position or the consolidated results of operations as previously reported.
As an investment
company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (ASC) Topic 946,
Financial Services Investment Companies
(ASC 946) issued by the Financial Accounting
Standards Board (FASB)
.
Basis of Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a
controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the financial position and results of operations of its wholly owned subsidiaries, My-On BDC Blocker, LLC and, prior to
its dissolution in February 2016, DDDS BL, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
14
The Company does not consolidate its equity interest in Senior Credit Fund, LLC (the Senior
Credit Fund). For further description of the Companys investment in the Senior Credit Fund, see Note 4 Investments.
Revenue
Recognition
The Company records its investment transactions on a trade date basis. Realized gains and losses are based on the specific
identification method.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis.
Discounts and premiums to par value on investments purchased are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue
discount (OID) and market discounts or premiums are capitalized and amortized into interest income using the effective interest method or straight-line method, as applicable. Upon prepayment of a loan or debt security, any prepayment
premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income. For the three and nine months ended September 30, 2017, the Company earned $726 and $2,538, respectively, in prepayment premiums and
$696 and $4,364, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts. For the three and nine months ended September 30, 2016, the Company earned $434 and $704, respectively, in prepayment premiums
and $551 and $1,111, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts.
Fees received
from portfolio companies (directors fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) are paid to the Company, unless, to the extent required by applicable law or exemptive relief, if any, therefrom,
the Company only receives its allocable portion of such fees when invested in the same portfolio company as another account managed by Goldman Sachs.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio
company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income
are presented net of withholding tax, if any.
Certain investments may have contractual payment-in-kind (PIK) interest or
dividends. PIK represents accrued interest or accumulated dividends that are added to the principal amount or shares (if equity) of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally
becomes due at maturity or upon the investment being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be
placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively.
Certain structuring fees, amendment fees and syndication fees are recorded as other income when earned. Administrative agent fees received by
the Company are recorded as other income when the services are rendered over time.
Non-Accrual Investments
Loans or debt securities are placed on non-accrual status when it is probable that principal or interest will not be collected according to the
contractual terms. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending
upon managements judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest are paid and, in managements judgment, principal and interest payments are likely to remain current. The
Company may make exceptions to this treatment if a loan or debt security has sufficient collateral value and is in the process of collection. As of September 30, 2017, the Company had two investments on non-accrual status, which represented
3.4% and 1.5% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $3) at amortized cost and at fair value, respectively. As of December 31, 2016, the Company had two investments on
non-accrual status, which represented 3.8% and 1.4% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $1) at amortized cost and at fair value, respectively.
Investments
The Company carries its
investments in accordance with ASC Topic 820,
Fair Value Measurements and Disclosures
(ASC 820), issued by the FASB, which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair
value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations or alternative price sources. In the absence of quoted market prices, broker or dealer quotations or
alternative price sources, investments are measured at fair value as determined by the board of directors (the Board of Directors) within the meaning of the Investment Company Act.
15
Due to the inherent uncertainties of valuation, certain estimated fair values may differ
significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See Note 5 Fair Value Measurement.
The Company generally invests in illiquid securities, including debt and equity investments, of middle-market companies. The Board of
Directors has delegated to the Investment Adviser day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Companys portfolio investments. Under valuation procedures adopted by
the Board of Directors, market quotations are generally used to assess the value of the investments for which market quotations are readily available. The Investment Adviser obtains these market quotations from independent pricing services or at the
bid prices obtained from at least two brokers or dealers, if available; otherwise from a principal market maker or a primary market dealer. To assess the continuing appropriateness of pricing sources and methodologies, the Investment Adviser
regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. If the Board of Directors or
Investment Adviser has a bona fide reason to believe any such market quotation does not reflect the fair value of an investment, it may independently value such investment in accordance with valuation procedures for investments for which market
quotations are not readily available.
With respect to investments for which market quotations are not readily available, or for which
market quotations are deemed not reflective of the fair value, the valuation procedures adopted by the Board of Directors contemplate a multi-step valuation process each quarter, as described below:
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(1)
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The quarterly valuation process begins with each portfolio company or investment being initially valued by the
investment professionals of the Investment Adviser responsible for the portfolio investment;
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(2)
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The Board of Directors also engages independent valuation firms (the Independent Valuation
Advisors) to provide independent valuations of the investments for which market quotations are not readily available, or are readily available but deemed not reflective of the fair value of an investment. The Independent Valuation Advisors
independently value such investments using quantitative and qualitative information provided by the investment professionals of the Investment Adviser as well as any market quotations obtained from independent pricing services, brokers, dealers or
market dealers. The Independent Valuation Advisors also provide analyses to support their valuation methodology and calculations. The Independent Valuation Advisors provide an opinion on a final range of values on such investments to the Board of
Directors or the Audit Committee. The Independent Valuation Advisors define fair value in accordance with ASC 820 and utilize valuation approaches including the market approach, the income approach or both. A portion of the portfolio is reviewed on
a quarterly basis, and all investments in the portfolio for which market quotations are not readily available, or are readily available, but deemed not reflective of the fair value of an investment, are reviewed at least annually by an Independent
Valuation Advisor;
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(3)
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The Independent Valuation Advisors preliminary valuations are reviewed by the Investment Adviser and the
Valuation Oversight Group (VOG), a team that is part of the Controllers Department within the Finance Division of Goldman Sachs. The Independent Valuation Advisors valuation ranges are compared to the Investment Advisers
valuations to ensure the Investment Advisers valuations are reasonable. VOG presents the valuations to the Private Investment Valuation and Side Pocket Sub-Committee of the Investment Management Division Valuation Committee, which is comprised
of representatives from GSAM who are independent of the investment decision making process;
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(4)
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The Investment Management Division Valuation Committee ratifies fair valuations and makes recommendations to
the Audit Committee of the Board of Directors;
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(5)
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The Audit Committee of the Board of Directors reviews valuation information provided by the Investment
Management Division Valuation Committee, the Investment Adviser and the Independent Valuation Advisors. The Audit Committee then assesses such valuation recommendations; and
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(6)
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The Board of Directors discusses the valuations and, within the meaning of the Investment Company Act,
determines the fair value of the investments in good faith, based on the inputs of the Investment Adviser, the Independent Valuation Advisors and the Audit Committee.
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Money Market Funds
Investments in money
market funds are valued at net asset value (NAV) per share. See Note 3 Significant Agreements and Related Party Transactions.
16
Cash
Cash consists of deposits held at a custodian bank. As of September 30, 2017 and December 31, 2016, the Company held $11,967 and
$4,565, respectively, in cash.
Foreign Currency Translation
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the date of valuation; and (ii) purchases and sales of investments and income and expense items denominated in
foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.
The Company
does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included within the net
realized and unrealized gains or losses on investment transactions.
Income Taxes
The Company recognizes tax positions in its consolidated financial statements only when it is more likely than not that the position will be
sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement.
The Company reports any interest expense related to income tax matters in income tax expense, and any income tax penalties under expenses in the Consolidated Statements of Operations.
The Companys tax positions have been reviewed based on applicable statutes of limitation for tax assessments, which may vary by
jurisdiction, and based on such review, the Company has concluded that no additional provision for income tax is required in the Companys consolidated financial statements. The Company is subject to potential examination by certain taxing
authorities in various jurisdictions. The Companys tax positions are subject to ongoing interpretation of laws and regulations by taxing authorities.
The Company has elected to be treated as a RIC commencing with its taxable year ended December 31, 2013. So long as the Company maintains
its status as a RIC, it will generally not be subject to corporate-level U.S. federal income tax on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. As a result, any U.S. federal income tax
liability related to income earned and distributed by the Company represents obligations of the Companys stockholders and will not be reflected in the consolidated financial statements of the Company.
To maintain its status as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute
to its stockholders for each taxable year at least 90% of its investment company taxable income (generally, its net ordinary income plus the excess of its realized net short-term capital gains over realized net long-term capital losses, determined
without regard to the dividends paid deduction). In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account
certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains
in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on
this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. The Company will accrue excise tax on estimated undistributed taxable income as required. For the
three and nine months ended September 30, 2017, the Company accrued excise taxes of $383 and $1,116, respectively. As of September 30, 2017, $1,079 of accrued excise taxes remained payable. For the three and nine months ended
September 30, 2016, the Company accrued excise taxes of $294 and $728, respectively.
Distributions
Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations,
which may differ from those amounts determined in accordance with GAAP. The Company may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the
stockholders tax basis in its shares. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent they are charged or credited to paid-in capital in excess of par, accumulated
undistributed net investment income or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain
loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Companys annual RIC tax return. Distributions to common stockholders are recorded
on the ex-dividend date. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by the Investment Adviser. The Company may pay distributions to its
stockholders in a year in excess of its net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The Company intends to timely
distribute to its stockholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of the Companys taxable income earned in a
year, the Company may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. The specific tax characteristics of the Companys distributions will be reported to stockholders
after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.
17
The Company has adopted a dividend reinvestment plan that provides for reinvestment of all cash
distributions declared by the Board of Directors unless a stockholder elects to opt out of the plan. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not opted out of the
dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution. Stockholders who receive distributions in the form of shares of common stock
will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions and, for this purpose, stockholders receiving distributions in the form of stock will generally be treated as receiving
distributions equal to the fair market value of the stock received through the plan; however, since their cash distributions will be reinvested, those stockholders will not receive cash with which to pay any applicable taxes. Due to regulatory
considerations, Group Inc. has opted out of the dividend reinvestment plan, and GS & Co. has opted out of the dividend reinvestment plan in respect of shares of the Companys common stock acquired through its 10b5-1 plan. See Note 3
Significant Agreements and Related Party Transactions.
Deferred Financing and Debt Issuance Costs
Deferred financing and debt issuance costs consist of fees and expenses paid in connection with the closing of and amendments to the
Companys senior secured revolving credit agreement (as amended, the Revolving Credit Facility) with SunTrust Bank, as administrative agent, and Bank of America, N.A., as syndication agent, and the offering of the Companys
4.50% Convertible Notes due 2022 (the Convertible Notes). These costs are amortized using the straight-line method over the respective term of the Revolving Credit Facility and Convertible Notes. Deferred financing costs related to the
Revolving Credit Facility are presented separately as an asset on the Companys Consolidated Statements of Assets and Liabilities. Deferred debt issuance costs related to the Convertible Notes are presented net against the outstanding debt
balance on the Consolidated Statements of Assets and Liabilities.
Deferred Offering Costs
The Company records expenses related to registration statement filings and applicable offering costs as deferred offering costs. To the extent
such expenses relate to equity offerings, these expenses are charged as a reduction of paid-in-capital upon each such offering.
3.
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SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
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Investment Management Agreement
The Company has entered into an investment management agreement (as amended and restated as of January 1, 2015, the Investment
Management Agreement) with the Investment Adviser, pursuant to which the Investment Adviser manages the Companys investment program and related activities.
Management Fee
The Company pays the
Investment Adviser a management fee (the Management Fee), accrued and payable quarterly in arrears. The Management Fee is calculated at an annual rate of 1.50% (0.375% per quarter) of the average value of the Companys gross assets
(excluding cash or cash equivalents (such as investments in money market funds), but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters (and, in the case of our first quarter,
our gross assets as of such quarter-end). The Management Fee for any partial quarter will be appropriately prorated.
For the three and
nine months ended September 30, 2017, Management Fees amounted to $4,369 and $13,181, respectively. As of September 30, 2017, $4,369 remained payable. For the three and nine months ended September 30, 2016, Management Fees amounted to
$4,292 and $12,606, respectively.
18
Incentive Fee
The incentive fee (the Incentive Fee) consists of two components that are determined independent of each other, with the result
that one component may be payable even if the other is not. Effective as of January 1, 2015, the Incentive Fee is calculated as follows:
A portion of the Incentive Fee is based on income and a portion is based on capital gains, each as described below. The Investment Adviser is
entitled to receive the Incentive Fee based on income if Ordinary Income (as defined below) exceeds a quarterly hurdle rate of 1.75%. For this purpose, the hurdle is computed by reference to the Companys NAV and does not take into
account changes in the market price of the Companys common stock.
Beginning with the calendar quarter that commenced on
January 1, 2015, the Incentive Fee based on income is determined and paid quarterly in arrears at the end of each calendar quarter by reference to the Companys aggregate net investment income, as adjusted as described below, from the
calendar quarter then ending and the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2015) (such period the Trailing Twelve Quarters). The Incentive Fee based on capital
gains is determined and paid annually in arrears at the end of each calendar year by reference to an Annual Period, which means the period beginning on January 1 of each calendar year and ending on December 31 of such calendar
year or, in the case of the first and last year, the appropriate portion thereof.
The hurdle amount for the Incentive Fee based on income
is determined on a quarterly basis and is equal to 1.75% multiplied by the Companys NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is calculated after making
appropriate adjustments for subscriptions (which includes all of the Companys issuances of shares of its common stock, including issuances pursuant to its dividend reinvestment plan) and distributions that occurred during the relevant Trailing
Twelve Quarters. The Incentive Fee for any partial period will be appropriately prorated.
i. Quarterly Incentive Fee Based on Income
For the portion of the Incentive Fee based on income, the Company pays the Investment Adviser a quarterly Incentive Fee based on the amount by
which (A) aggregate net investment income (Ordinary Income) in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over
(B) described in this paragraph for such Trailing Twelve Quarters is referred to as the Excess Income Amount. Ordinary Income is net of all fees and expenses, including the Management Fee but excluding any Incentive Fee.
The Incentive Fee based on income for each quarter is determined as follows:
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No Incentive Fee based on income is payable to the Investment Adviser for any calendar quarter for which there
is no Excess Income Amount;
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100% of the Ordinary Income, if any, that exceeds the hurdle amount, but is less than or equal to an amount,
referred to as the Catch-up Amount, determined as the sum of 2.1875% multiplied by the Companys NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters is included in the
calculation of the Incentive Fee based on income; and
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20% of the Ordinary Income that exceeds the Catch-up Amount is included in the calculation of the Incentive
Fee based on income.
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The amount of the Incentive Fee based on income that is paid to the Investment Adviser for a
particular quarter equals the excess of the Incentive Fee so calculated minus the aggregate Incentive Fees based on income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing
Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).
The Incentive Fee based on income that is paid to the
Investment Adviser for a particular quarter is subject to a cap (the Incentive Fee Cap). The Incentive Fee Cap for any quarter is an amount equal to (a) 20% of the Cumulative Net Return (as defined below) during the relevant
Trailing Twelve Quarters minus (b) the aggregate Incentive Fees based on income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.
Cumulative Net Return means (x) the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any
Net Capital Loss, if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company pays no Incentive Fee based on income to the Investment Adviser for such quarter. If,
in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Incentive Fee based on income that is payable to the Investment Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as
described above, the Company pays an Incentive Fee based on income to the Investment Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Incentive Fee
based on income that is payable to the Investment Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company pays an Incentive Fee based on income to the Investment Adviser equal to the
Incentive Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.
19
Net Capital Loss in respect of a particular period means the difference, if positive,
between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
ii. Annual Incentive Fee Based on Capital Gains
.
The portion of the Incentive Fee based on capital gains is calculated on an annual basis. For each Annual Period, the Company pays the
Investment Adviser an amount equal to (A) 20% of the difference, if positive, of the sum of the Companys aggregate realized capital gains, if any, computed net of the Companys aggregate realized capital losses, if any, and the
Companys aggregate unrealized capital depreciation, in each case from April 1, 2013 until the end of such Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to the Investment
Adviser from April 1, 2013. For the avoidance of doubt, unrealized capital appreciation is excluded from the calculation in clause (A) above.
The Company accrues, but does not pay, a portion of the Incentive Fee based on capital gains with respect to net unrealized appreciation.
Under GAAP, the Company is required to accrue an Incentive Fee based on capital gains that includes net realized capital gains and losses and net unrealized capital appreciation and depreciation on investments held at the end of each period. In
calculating the accrual for the Incentive Fee based on capital gains, the Company considers the cumulative aggregate unrealized capital appreciation in the calculation, since an Incentive Fee based on capital gains 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 payable under the Investment Management Agreement. This accrual is calculated using the
aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then the Company records a capital gains incentive fee equal to 20%
of such amount, minus the aggregate amount of actual Incentive Fees based on capital gains paid in all prior periods. If such amount is negative, then there is no accrual for such period. There can be no assurance that such unrealized capital
appreciation will be realized in the future.
For the three and nine months ended September 30, 2017, the Company incurred Incentive
Fees based on income of $4,624 and $9,595, respectively. As of September 30, 2017, $4,624 remained payable. For the three and nine months ended September 30, 2016, the Company incurred Incentive Fees based on income of $5,459 and $8,948,
respectively. For the three and nine months ended September 30, 2017 and 2016, the Company did not accrue any Incentive Fees based on capital gains.
Administration and Custodian Fees
The
Company has entered into an administration agreement with State Street Bank and Trust Company (the Administrator) under which the Administrator provides various accounting and administrative services to the Company. The Company pays the
Administrator fees for its services as it determines to be commercially reasonable in its sole discretion. The Company also reimburses the Administrator for all reasonable expenses. To the extent that the Administrator outsources any of its
functions, the Administrator pays any compensation associated with such functions. The Administrator also serves as the Companys custodian (the Custodian).
For the three and nine months ended September 30, 2017, the Company incurred expenses for services provided by the Administrator and the
Custodian of $213 and $594, respectively. As of September 30, 2017, $94 remained payable. For the three and nine months ended September 30, 2016, the Company incurred expenses for services provided by the Administrator and the Custodian of
$212 and $633, respectively.
Transfer Agent Fees
Effective May 2, 2016, the Company entered into a transfer agency and services agreement pursuant to which Computershare Trust Company,
N.A. serves as the Companys transfer agent (the Transfer Agent), dividend agent and registrar. From the IPO to May 1, 2016, State Street Bank and Trust Company served as the Transfer Agent and dividend agent. Prior to the IPO,
GS & Co. was the Transfer Agent. For the three and nine months ended September 30, 2017, the Company incurred expenses for services provided by the Transfer Agent of $6 and $14, respectively. As of September 30, 2017, none
remained payable. For the three and nine months ended September 30, 2016, the Company incurred expenses for services provided by the Transfer Agent of $1 and $21, respectively.
10b5-1 Plan
GS & Co. adopted a
10b5-1 plan (the GS 10b5-1 Plan) in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the Exchange Act), which provided for the purchase by GS & Co. in the open market up
to the lesser of (i) $25,000 in the aggregate of the Companys common stock and (ii) such amount that would not bring its collective ownership (with Group Inc.) of the Companys common stock over 19.9%. The GS 10b5-1 Plan expired
on March 18, 2016. The GS 10b5-1 Plan required GS & Co. to purchase shares of the Companys common stock when the market price per share was below the Companys most recently reported NAV per share (including any updates,
corrections or adjustments publicly announced by the Company to any previously announced NAV per share). The purchase of shares by GS & Co. pursuant to the GS 10b5-1 Plan was intended to satisfy the conditions of Rules 10b5-1 and 10b-18
under the Exchange Act, and was otherwise subject to applicable law, including Regulation M. Under the GS 10b5-1 Plan, GS & Co. increased the volume of purchases made anytime the market price per share of the Companys common stock
declined below the most recently reported NAV per share, subject to volume restrictions. Purchases of the Companys common stock by GS & Co. under the GS 10b5-1 Plan may have resulted in the price of the Companys common stock
being higher than the price that otherwise might have existed in the open market. For the period January 1, 2016 through March 18, 2016, GS & Co. purchased 432,638 shares of the Companys common stock pursuant to the GS
10b5-1 Plan.
20
Common Stock Repurchase Plan
In February 2015, the Board of Directors approved a common stock repurchase plan (the Company Repurchase Plan), which authorized
the Companys purchase of up to $35,000 of its common stock in the open market during open trading periods. No repurchases were made pursuant to the Company Repurchase Plan which expired on March 18, 2016.
In February 2016, the Board of Directors authorized the Company to repurchase up to $25,000 of the Companys common stock if the stock
trades below the most recently announced NAV per share (including any updates, corrections or adjustments publicly announced by the Company to any previously announced NAV per share), from March 18, 2016 to March 18, 2017, subject to
certain limitations. In February 2017, the Companys Board of Directors renewed its authorization of the stock repurchase plan to extend the expiration to March 18, 2018.
In connection with this authorization, the Company entered into a 10b5-1 plan (the Company 10b5-1 Plan). The Company 10b5-1 Plan
provides that purchases will be conducted on the open market on a programmatic basis in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act and will otherwise be subject to applicable law, including Regulation M, which may
prohibit purchases under certain circumstances. No purchases will be effected pursuant to the Company 10b5-1 Plan if such purchase would (i) cause the aggregate ownership of the Companys outstanding common stock by Group Inc. and
GS & Co. to equal or exceed 25.0% (due to the reduction in outstanding shares of stock as a result of such purchase) or (ii) cause the Companys debt/equity ratio to exceed 0.75. The Company 10b5-1 Plan initially took effect on
March 18, 2016 (with any purchases to commence after the opening of NYSE trading on March 21, 2016), was subsequently renewed and is scheduled to expire on March 18, 2018. Further, no purchases will be effected during the applicable
restricted period under Regulation M as a result of an offering of securities by the Company or for a period of 60 days after the expiration of any overallotment option included in any common equity offering.
The Companys repurchase of its common stock under the Company 10b5-1 Plan or otherwise may result in the price of the Companys
common stock being higher than the price that otherwise might exist in the open market. For the three and nine months ended September 30, 2017 and 2016, the Company did not repurchase any of its common stock pursuant to the Company 10b5-1 Plan
or otherwise.
Co-investment Activity
In certain circumstances, negotiated co-investments by the Company and other funds managed by the Investment Adviser may be made only
pursuant to an order from the SEC permitting the Company to do so. On January 4, 2017, the SEC granted GSAM, Goldman Sachs Private Middle Market Credit LLC (GS PMMC), Goldman Sachs Middle Market Lending Corp. (GS MMLC)
and the Company exemptive relief (Exemptive Relief) that permits the Company to co-invest with GS PMMC, GS MMLC and certain other funds that may be managed by GSAM, including the GSAM Credit Alternatives Team, in the future,
subject to certain terms and conditions in the Exemptive Relief. The GSAM Credit Alternatives Team is comprised of investment professionals dedicated to the Companys investment strategy and other funds that share a similar investment strategy
with the Company, who are responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, negotiating and structuring the Companys investments and monitoring and servicing the
Companys investments, together with investment professionals who are primarily focused on investment strategies in syndicated, liquid credit. Under the terms of the Exemptive Relief, a required majority (as defined in
Section 57(o) of the Investment Company Act) of the Companys independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are
reasonable and fair to the Company and the Companys stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests
of the Companys stockholders and is consistent with the then-current investment objectives and strategies of the Company. As a result of the Exemptive Relief, there could be significant overlap in the Companys investment portfolio and
the investment portfolios of GS PMMC, GS MMLC and/or other funds established by the GSAM Credit Alternatives Team that could avail themselves of the Exemptive Relief.
21
Affiliates
At September 30, 2017 and December 31, 2016, Group Inc. owned 16.16% and 17.85%, respectively, of the outstanding shares of the
Companys common stock.
The Companys investments in affiliates for the nine months ended September 30, 2017, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
December 31,
2016
|
|
|
Gross
Additions
(3)
|
|
|
Gross
Reductions
(4)
|
|
|
Net
Realized Gains/
(Losses)
|
|
|
Change in
Unrealized Gains/
(Losses)
|
|
|
Fair Value as of
September 30,
2017
|
|
|
Dividend,
Interest and
PIK
Income
|
|
|
Other
Income
|
|
Controlled Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Credit Fund, LLC
(1)
|
|
$
|
78,394
|
|
|
$
|
16,750
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(30
|
)
|
|
$
|
95,114
|
|
|
$
|
7,250
|
|
|
$
|
1,096
|
|
Total Controlled Affiliates
|
|
$
|
78,394
|
|
|
$
|
16,750
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(30
|
)
|
|
$
|
95,114
|
|
|
$
|
7,250
|
|
|
$
|
1,096
|
|
Non-Controlled Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Financial Square Government Fund
(2)
|
|
$
|
1
|
|
|
$
|
253,829
|
|
|
$
|
(253,827
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
20
|
|
|
$
|
|
|
CB-HDT Holdings, Inc.
|
|
|
18,510
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
1,254
|
|
|
|
19,948
|
|
|
|
284
|
|
|
|
|
|
Conergy Asia Holdings, Ltd
|
|
|
|
|
|
|
5,300
|
|
|
|
|
|
|
|
|
|
|
|
(1,226
|
)
|
|
|
4,074
|
|
|
|
|
|
|
|
|
|
Iracore International Holdings, Ltd
|
|
|
|
|
|
|
10,392
|
|
|
|
|
|
|
|
|
|
|
|
(790
|
)
|
|
|
9,602
|
|
|
|
164
|
|
|
|
|
|
Kawa Solar Holdings Limited
|
|
|
15,917
|
|
|
|
3,927
|
|
|
|
(5,025
|
)
|
|
|
(2,495
|
)
|
|
|
(2,653
|
)
|
|
|
9,671
|
|
|
|
1,072
|
|
|
|
|
|
Prairie Provident Resources, Inc.
|
|
|
2,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,047
|
)
|
|
|
1,131
|
|
|
|
|
|
|
|
|
|
NTS Communications, Inc.
|
|
|
47,498
|
|
|
|
5,225
|
|
|
|
|
|
|
|
|
|
|
|
(3,480
|
)
|
|
|
49,243
|
|
|
|
5,243
|
|
|
|
19
|
|
Total Non-Controlled Affiliates
|
|
$
|
84,104
|
|
|
$
|
278,857
|
|
|
$
|
(258,852
|
)
|
|
$
|
(2,495
|
)
|
|
$
|
(7,942
|
)
|
|
$
|
93,672
|
|
|
$
|
6,783
|
|
|
$
|
19
|
|
Total Affiliates
|
|
$
|
162,498
|
|
|
$
|
$295,607
|
|
|
$
|
(258,852
|
)
|
|
$
|
(2,495
|
)
|
|
$
|
(7,972
|
)
|
|
$
|
188,786
|
|
|
$
|
14,033
|
|
|
$
|
1,115
|
|
(1)
|
|
Together with The Regents of the University of California
(Cal Regents, and collectively with the Company, the Members), the Company invests through the Senior Credit Fund. Although the Company owns more than 25% of the voting securities of the Senior Credit Fund, the Company does
not believe that it has control over the Senior Credit Fund (other than for purposes of the Investment Company Act). See Note 4 Investments.
|
(2)
|
|
Fund advised by an affiliate of Goldman Sachs.
|
(3)
|
|
Gross additions may include increases in the cost basis of investments resulting from new portfolio
investments, PIK interest or dividends, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
|
(4)
|
|
Gross reductions may include decreases in the cost basis of investments resulting from principal collections
related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
|
The Companys investments in affiliates for the year ended December 31, 2016, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
December 31,
2015
|
|
|
Gross
Additions
(4)
|
|
|
Gross
Reductions
(5)
|
|
|
Net
Realized Gains/
(Losses)
|
|
|
Change in
Unrealized Gains/
(Losses)
|
|
|
Fair Value as of
December 31,
2016
|
|
|
Dividend,
Interest and
PIK
Income
|
|
|
Other
Income
|
|
Controlled Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Credit Fund, LLC
(1)
|
|
$
|
44,897
|
|
|
$
|
31,425
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,072
|
|
|
$
|
78,394
|
|
|
$
|
6,575
|
|
|
$
|
2,212
|
|
Total Controlled Affiliates
|
|
$
|
44,897
|
|
|
$
|
31,425
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,072
|
|
|
$
|
78,394
|
|
|
$
|
6,575
|
|
|
$
|
2,212
|
|
Non-Controlled Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Financial Square Government
Fund
(2)
|
|
$
|
10,117
|
|
|
$
|
381,895
|
|
|
$
|
(392,011
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
37
|
|
|
$
|
|
|
CB-HDT Holdings, Inc.
|
|
|
|
|
|
|
15,694
|
|
|
|
|
|
|
|
|
|
|
|
2,816
|
|
|
|
18,510
|
|
|
|
18
|
|
|
|
|
|
Kawa Solar Holdings Limited
|
|
|
|
|
|
|
15,931
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
15,917
|
|
|
|
851
|
|
|
|
|
|
Prairie Provident Resources, Inc.
(3)
|
|
|
4,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,870
|
)
|
|
|
2,178
|
|
|
|
|
|
|
|
|
|
NTS Communications, Inc.
|
|
|
|
|
|
|
42,929
|
|
|
|
|
|
|
|
|
|
|
|
4,569
|
|
|
|
47,498
|
|
|
|
1,669
|
|
|
|
13
|
|
Total Non-Controlled Affiliates
|
|
$
|
14,165
|
|
|
$
|
456,449
|
|
|
$
|
(392,011
|
)
|
|
$
|
|
|
|
$
|
5,501
|
|
|
$
|
84,104
|
|
|
$
|
2,575
|
|
|
$
|
13
|
|
Total Affiliates
|
|
$
|
59,062
|
|
|
$
|
487,874
|
|
|
$
|
(392,011
|
)
|
|
$
|
|
|
|
$
|
7,573
|
|
|
$
|
162,498
|
|
|
$
|
9,150
|
|
|
$
|
2,225
|
|
(1)
|
|
Together with Cal Regents, the Company invests through the Senior Credit Fund. Although the Company owns more
than 25% of the voting securities of the Senior Credit Fund, the Company does not believe that it has control over the Senior Credit Fund (other than for purposes of the Investment Company Act). See Note 4 Investments.
|
(2)
|
|
Fund advised by an affiliate of Goldman Sachs.
|
(3)
|
|
Formerly known as Lone Pine Resources CDA, Ltd.
|
(4)
|
|
Gross additions may include increases in the cost basis of investments resulting from new portfolio
investments, PIK interest or dividends, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
|
(5)
|
|
Gross reductions may include decreases in the cost basis of investments resulting from principal collections
related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
|
22
As of the dates indicated, the Companys investments (excluding an
investment in a money market fund managed by an affiliate of Group Inc. of $3 and $1, respectively) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Investment Type
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
1st Lien/Senior Secured Debt
|
|
$
|
359,269
|
|
|
$
|
355,727
|
|
|
$
|
436,896
|
|
|
$
|
421,026
|
|
1st Lien/Last-Out Unitranche
|
|
|
303,874
|
|
|
|
274,409
|
|
|
|
329,455
|
|
|
|
310,254
|
|
2nd Lien/Senior Secured Debt
|
|
|
418,344
|
|
|
|
419,360
|
|
|
|
352,696
|
|
|
|
336,178
|
|
Unsecured Debt
|
|
|
3,300
|
|
|
|
3,300
|
|
|
|
3,115
|
|
|
|
3,115
|
|
Preferred Stock
|
|
|
11,750
|
|
|
|
12,415
|
|
|
|
11,123
|
|
|
|
11,833
|
|
Common Stock
|
|
|
26,126
|
|
|
|
18,362
|
|
|
|
11,633
|
|
|
|
6,490
|
|
Investment Funds & Vehicles
(1)
|
|
|
94,342
|
|
|
|
95,114
|
|
|
|
77,592
|
|
|
|
78,394
|
|
Total Investments
|
|
$
|
1,217,005
|
|
|
$
|
1,178,687
|
|
|
$
|
1,222,510
|
|
|
$
|
1,167,290
|
|
(1)
|
|
Includes equity investments in the Senior Credit Fund.
|
As of the dates indicated, the industry composition of the Companys portfolio at fair value was as follows:
|
|
|
|
|
|
|
|
|
Industry
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Software
|
|
|
11.0
|
%
|
|
|
9.8
|
%
|
Diversified Telecommunication Services
|
|
|
8.2
|
|
|
|
8.0
|
|
Investment Funds & Vehicles
|
|
|
8.1
|
|
|
|
6.7
|
|
Health Care Providers & Services
|
|
|
6.8
|
|
|
|
3.2
|
|
Health Care Equipment & Supplies
|
|
|
6.4
|
|
|
|
4.7
|
|
Distributors
|
|
|
5.5
|
|
|
|
5.1
|
|
Real Estate Management & Development
|
|
|
4.9
|
|
|
|
4.9
|
|
Electronic Equipment, Instruments & Components
|
|
|
4.8
|
|
|
|
4.8
|
|
Household Products
|
|
|
4.2
|
|
|
|
2.5
|
|
Professional Services
|
|
|
3.8
|
|
|
|
4.8
|
|
Chemicals
|
|
|
3.7
|
|
|
|
|
|
Media
|
|
|
3.6
|
|
|
|
3.7
|
|
Aerospace & Defense
|
|
|
3.2
|
|
|
|
3.1
|
|
Diversified Financial Services
|
|
|
2.9
|
|
|
|
|
|
Machinery
|
|
|
2.8
|
|
|
|
3.1
|
|
Food Products
|
|
|
2.7
|
|
|
|
1.0
|
|
Specialty Retail
|
|
|
2.5
|
|
|
|
2.6
|
|
Internet Software & Services
|
|
|
2.3
|
|
|
|
8.3
|
|
Air Freight & Logistics
|
|
|
2.1
|
|
|
|
3.8
|
|
Internet Catalog & Retail
|
|
|
1.8
|
|
|
|
|
|
IT Services
|
|
|
1.8
|
|
|
|
|
|
Auto Components
|
|
|
1.7
|
|
|
|
1.7
|
|
Commercial Services & Supplies
|
|
|
1.5
|
|
|
|
1.7
|
|
Construction & Engineering
|
|
|
1.2
|
|
|
|
1.4
|
|
Leisure Equipment & Products
|
|
|
0.9
|
|
|
|
0.9
|
|
Energy Equipment & Services
|
|
|
0.8
|
|
|
|
0.6
|
|
Containers & Packaging
|
|
|
0.7
|
|
|
|
|
|
Oil, Gas & Consumable Fuels
|
|
|
0.1
|
|
|
|
0.2
|
|
Health Care Technology
|
|
|
|
|
|
|
6.0
|
|
Building Products
|
|
|
|
|
|
|
6.4
|
|
Computers & Peripherals
|
|
|
|
|
|
|
1.0
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
As of the dates indicated, the geographic composition of the Companys portfolio at fair value was as follows:
|
|
|
|
|
|
|
|
|
Geographic
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
United States
|
|
|
98.8
|
%
|
|
|
98.5
|
%
|
Germany
|
|
|
0.8
|
|
|
|
1.3
|
|
Singapore
|
|
|
0.3
|
|
|
|
|
|
Canada
|
|
|
0.1
|
|
|
|
0.2
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
23
Senior Credit Fund, LLC
The Senior Credit Fund, an unconsolidated Delaware limited liability company, was formed on May 7, 2014 and commenced operations on
October 1, 2014. The Company invests together with Cal Regents through the Senior Credit Fund. The Senior Credit Funds principal purpose is to make investments, either directly or indirectly through its wholly owned subsidiary, Senior
Credit Fund SPV I, LLC (SPV I), primarily in senior secured loans to middle-market companies. Each of the Company and Cal Regents are responsible for sourcing the Senior Credit Funds investments. Each of the Company and Cal Regents
has a 50% economic ownership in the Senior Credit Fund and each has subscribed to fund $100,000. Except under certain circumstances, contributions to the Senior Credit Fund cannot be redeemed. The Senior Credit Fund is managed by a six member
board of managers, on which the Company and Cal Regents have equal representation. Investment decisions generally must be unanimously approved by a quorum of the board of managers. On July 31, 2017, the Company and Cal Regents, as members of
the Senior Credit Fund, entered into an amendment to the amended and restated limited liability company agreement of the Senior Credit Fund to extend the investment period for the Senior Credit Fund from August 1, 2017 to November 1, 2017.
On December 19, 2016, SPV I entered into an amended and restated credit facility (as amended, the Asset Based Facility),
which, consists of a revolving credit facility (the SPV I Revolving Credit Facility), a term loan facility (the SPV I Term Loan Facility) and a Class B loan facility (the SPV I Class B Facility), with
various lenders. For the Asset Based Facility, Natixis, New York Branch (Natixis) serves as the facility agent, and State Street Bank and Trust Company serves as the collateral agent. The Asset Based Facility includes a maximum borrowing
capacity of $400,000. The SPV I Revolving Credit Facility provided for borrowings in an aggregate amount up to $120,000 on a committed basis as of September 30, 2017. As of September 30, 2017, the SPV I Term Loan Facility consisted of a
$240,000 fully drawn term loan and the SPV I Class B Facility consisted of a $40,000 fully drawn Class B loan. As of September 30, 2017 and December 31, 2016, the SPV Is outstanding borrowings under the Asset Based Facility
were $309,154 and $303,250, respectively.
The Senior Credit Fund had entered into a revolving credit facility (the Subscription
Facility) with Versailles Assets LLC, as lender, and Natixis, as the facility agent. The Subscription Facility provided for borrowings in an aggregate amount up to $50,000 on a committed basis. The Senior Credit Funds obligations to
Natixis and the lenders were secured by the unfunded subscriptions of the Company and Cal Regents, proceeds of such subscriptions and certain other assets. On September 30, 2016, the Senior Credit Fund paid in full all loans outstanding and the
Subscription Facility was terminated. In connection thereof, the related documents governing the Subscription Facility were also terminated.
As of September 30, 2017 and December 31, 2016, the Company and Cal Regents had subscribed to fund and contributed the following to
the Senior Credit Fund:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Member
|
|
Subscribed
to fund
|
|
|
Contributed
|
|
|
Subscribed
to fund
|
|
|
Contributed
|
|
Company
|
|
$
|
100,000
|
|
|
$
|
94,342
|
|
|
$
|
100,000
|
|
|
$
|
77,592
|
|
Cal Regents
|
|
|
100,000
|
|
|
|
94,342
|
|
|
|
100,000
|
|
|
|
77,592
|
|
Total
|
|
$
|
200,000
|
|
|
$
|
188,684
|
|
|
$
|
200,000
|
|
|
$
|
155,184
|
|
As of September 30, 2017 and December 31, 2016, the Senior Credit Fund had total investments in
senior secured debt at fair value of $471,530 and $479,526, respectively. As of September 30, 2017 and December 31, 2016, the Senior Credit Fund had no investments on non-accrual status. As of September 30, 2017 and December 31,
2016, the Senior Credit Fund had an investment in a money market fund managed by an affiliate of Group Inc. with a total fair value of $4,849 and $1,942, respectively. In addition, as of September 30, 2017, the Senior Credit Fund had eight
unfunded commitments totaling $13,478 and as of December 31, 2016, the Senior Credit Fund had three unfunded commitments totaling $6,296.
Below is a summary of the Senior Credit Funds portfolio, excluding an investment in a money market fund managed by an affiliate of Group
Inc., followed by a listing of the individual loans in the Senior Credit Funds portfolio as of September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Total senior secured debt
(1)
|
|
$
|
490,871
|
|
|
$
|
489,657
|
|
Weighted average current interest rate on senior secured debt
(2)
|
|
|
7.0%
|
|
|
|
6.6%
|
|
Number of borrowers in the Senior Credit Fund
|
|
|
34
|
|
|
|
37
|
|
Largest loan to a single borrower
(1)
|
|
$
|
24,897
|
|
|
$
|
24,618
|
|
(2)
|
|
Computed as the (a) annual stated interest rate on accruing senior secured debt, divided by (b) total
senior secured debt at par amount.
|
24
Senior Credit Fund Portfolio as of September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
Industry
|
|
Interest
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3SI Security Systems, Inc.
(+++)
|
|
Commercial Services & Supplies
|
|
L + 6.25% (1.00% Floor)
|
|
06/16/2023
|
|
$
|
15,000
|
|
|
$
|
14,784
|
|
|
$
|
14,775
|
|
A Place For Mom, Inc.
(+++)
|
|
Diversified Consumer Services
|
|
L + 4.00% (1.00% Floor)
|
|
08/10/2024
|
|
|
4,000
|
|
|
|
3,980
|
|
|
|
3,995
|
|
Ansira Partners, Inc.
(+++)
|
|
Media
|
|
L + 6.50% (1.00% Floor)
|
|
12/20/2022
|
|
|
8,662
|
|
|
|
8,583
|
|
|
|
8,575
|
|
Ansira Partners, Inc.
(+++) (1)
|
|
Media
|
|
L + 6.50% (1.00% Floor)
|
|
12/20/2022
|
|
|
1,271
|
|
|
|
693
|
|
|
|
692
|
|
ASC Acquisition Holdings, LLC
(+++) (2)
|
|
Distributors
|
|
L + 7.50% (1.00% Floor)
|
|
12/15/2021
|
|
|
10,828
|
|
|
|
10,734
|
|
|
|
10,720
|
|
ASC Acquisition Holdings, LLC
(
1) (2) (3)
|
|
Distributors
|
|
L + 7.50% (1.00% Floor)
|
|
12/15/2021
|
|
|
3,750
|
|
|
|
(38
|
)
|
|
|
(38
|
)
|
ATX Networks Corp.
(+++)
|
|
Communications Equipment
|
|
L + 6.00% (1.00% Floor)
|
|
06/11/2021
|
|
|
16,555
|
|
|
|
16,419
|
|
|
|
16,306
|
|
Badger Sportswear, Inc.
(+++)
|
|
Textiles, Apparel & Luxury Goods
|
|
L + 4.50% (1.00% Floor)
|
|
09/11/2023
|
|
|
14,850
|
|
|
|
14,720
|
|
|
|
14,776
|
|
Crowne Group, LLC
(+++)
|
|
Auto Components
|
|
L + 9.25% (1.00% Floor)
|
|
05/26/2021
|
|
|
16,490
|
|
|
|
16,359
|
|
|
|
16,655
|
|
CST Buyer Company
(++++)
|
|
Diversified Consumer Services
|
|
L + 6.25% (1.00% Floor)
|
|
03/01/2023
|
|
|
20,597
|
|
|
|
20,073
|
|
|
|
20,030
|
|
CST Buyer Company
(1) (3)
|
|
Diversified Consumer Services
|
|
L + 6.25% (1.00% Floor)
|
|
03/01/2023
|
|
|
1,800
|
|
|
|
(45
|
)
|
|
|
(50
|
)
|
DBRS Limited
(+++)
|
|
Capital Markets
|
|
L + 5.25% (1.00% Floor)
|
|
03/04/2022
|
|
|
11,700
|
|
|
|
11,619
|
|
|
|
11,583
|
|
DiscoverOrg, LLC
(+) (2)
|
|
Software
|
|
L + 4.50% (1.00% Floor)
|
|
08/25/2023
|
|
|
8,000
|
|
|
|
7,961
|
|
|
|
7,920
|
|
FWR Holding Corporation
(++++)
|
|
Hotels, Restaurants & Leisure
|
|
L + 6.00% (1.00% Floor)
|
|
08/21/2023
|
|
|
9,103
|
|
|
|
8,878
|
|
|
|
8,875
|
|
FWR Holding Corporation
(+++) (1)
|
|
Hotels, Restaurants & Leisure
|
|
L + 6.00% (1.00% Floor)
|
|
08/21/2023
|
|
|
1,175
|
|
|
|
294
|
|
|
|
294
|
|
FWR Holding Corporation
(1) (3)
|
|
Hotels, Restaurants & Leisure
|
|
L + 6.00% (1.00% Floor)
|
|
08/21/2019
|
|
|
2,936
|
|
|
|
(72
|
)
|
|
|
(73
|
)
|
GK Holdings, Inc.
(+++)
|
|
IT Services
|
|
L + 6.00% (1.00% Floor)
|
|
01/20/2021
|
|
|
17,505
|
|
|
|
17,433
|
|
|
|
16,455
|
|
HC Group Holdings III, Inc.
(+++)
|
|
Health Care Providers & Services
|
|
L + 5.00% (1.00% Floor)
|
|
04/07/2022
|
|
|
8,820
|
|
|
|
8,789
|
|
|
|
8,886
|
|
Help/Systems, LLC
(+++)
|
|
Software
|
|
L + 4.50% (1.00% Floor)
|
|
10/08/2021
|
|
|
17,766
|
|
|
|
17,318
|
|
|
|
17,810
|
|
Hygiena Borrower LLC
(+++)
|
|
Life Sciences Tools & Services
|
|
L + 4.75% (1.00% Floor)
|
|
08/26/2022
|
|
|
15,920
|
|
|
|
15,775
|
|
|
|
15,602
|
|
Hygiena Borrower LLC
(1) (3)
|
|
Life Sciences Tools & Services
|
|
L + 4.75% (1.00% Floor)
|
|
08/26/2022
|
|
|
1,667
|
|
|
|
(22
|
)
|
|
|
(33
|
)
|
Jill Acquisition LLC
(+++)
|
|
Textiles, Apparel & Luxury Goods
|
|
L + 5.00% (1.00% Floor)
|
|
05/08/2022
|
|
|
14,035
|
|
|
|
13,948
|
|
|
|
13,907
|
|
KMG Chemicals, Inc.
(+)
|
|
Chemicals
|
|
L + 4.25% (1.00% Floor)
|
|
06/15/2024
|
|
|
6,847
|
|
|
|
6,814
|
|
|
|
6,930
|
|
Lattice Semiconductor Corporation
(+)
|
|
Semiconductors & Semiconductor Equipment
|
|
L + 4.25% (1.00% Floor)
|
|
03/10/2021
|
|
|
10,775
|
|
|
|
10,629
|
|
|
|
10,829
|
|
Liquidnet Holdings, Inc.
(+)
|
|
Capital Markets
|
|
L + 4.25% (1.00% Floor)
|
|
07/15/2024
|
|
|
9,875
|
|
|
|
9,779
|
|
|
|
9,900
|
|
Loar Group, Inc.
(+)
|
|
Aerospace & Defense
|
|
L + 4.75% (1.00% Floor)
|
|
01/12/2022
|
|
|
14,133
|
|
|
|
13,808
|
|
|
|
14,062
|
|
MB Aerospace Holdings Inc.
(+)
|
|
Aerospace & Defense
|
|
L + 5.50% (1.00% Floor)
|
|
12/15/2022
|
|
|
15,729
|
|
|
|
15,603
|
|
|
|
15,689
|
|
Netsmart Technologies, Inc.
(+++)
|
|
Health Care Technology
|
|
L + 4.50% (1.00% Floor)
|
|
04/19/2023
|
|
|
18,795
|
|
|
|
18,742
|
|
|
|
18,983
|
|
Pomeroy Group LLC
(+++++)
|
|
IT Services
|
|
L + 6.00% (1.00% Floor)
|
|
11/30/2021
|
|
|
15,799
|
|
|
|
15,410
|
|
|
|
15,246
|
|
Professional Physical Therapy
(+++)
|
|
Health Care Providers & Services
|
|
L + 6.00% (1.00% Floor)
|
|
12/16/2022
|
|
|
10,421
|
|
|
|
10,328
|
|
|
|
10,317
|
|
RealD, Inc.
(++)
|
|
Media
|
|
L + 7.50% (1.00% Floor)
|
|
03/22/2021
|
|
|
16,703
|
|
|
|
16,572
|
|
|
|
16,577
|
|
Research Now Group, Inc.
(+++)
|
|
Professional Services
|
|
L + 4.50% (1.00% Floor)
|
|
03/18/2021
|
|
|
9,435
|
|
|
|
9,338
|
|
|
|
9,388
|
|
SciQuest, Inc.
(+)
|
|
Internet Software & Services
|
|
L + 4.75% (1.00% Floor)
|
|
07/28/2023
|
|
|
19,568
|
|
|
|
19,481
|
|
|
|
19,470
|
|
Smarte Carte, Inc.
(+++)
|
|
Air Freight & Logistics
|
|
L + 5.50% (1.00% Floor)
|
|
08/30/2021
|
|
|
10,702
|
|
|
|
10,615
|
|
|
|
10,622
|
|
SMS Systems Maintenance Services, Inc.
(+)
|
|
IT Services
|
|
L + 5.00% (1.00% Floor)
|
|
10/30/2023
|
|
|
14,888
|
|
|
|
14,819
|
|
|
|
14,478
|
|
Stackpath, LLC
(+++)
|
|
Internet Software & Services
|
|
L + 5.00% (1.00% Floor)
|
|
02/03/2023
|
|
|
16,958
|
|
|
|
16,801
|
|
|
|
16,788
|
|
Tronair Parent Inc.
(+++)
|
|
Air Freight & Logistics
|
|
L + 4.75% (1.00% Floor)
|
|
09/08/2023
|
|
|
13,860
|
|
|
|
13,740
|
|
|
|
13,721
|
|
U.S. Acute Care Solutions, LLC
(+++)
|
|
Health Care Providers & Services
|
|
L + 5.00% (1.00% Floor)
|
|
05/14/2021
|
|
|
12,903
|
|
|
|
12,791
|
|
|
|
12,773
|
|
VRC Companies, LLC
(+)
|
|
Commercial Services & Supplies
|
|
L + 6.50% (1.00% Floor)
|
|
03/31/2023
|
|
|
19,956
|
|
|
|
19,535
|
|
|
|
19,507
|
|
VRC Companies, LLC
(+++) (1)
|
|
Commercial Services & Supplies
|
|
L + 6.50% (1.00% Floor)
|
|
03/31/2023
|
|
|
3,529
|
|
|
|
2,184
|
|
|
|
2,179
|
|
VRC Companies, LLC
(1)
|
|
Commercial Services & Supplies
|
|
P + 5.50%
|
|
03/31/2022
|
|
|
1,412
|
|
|
|
748
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
445,920
|
|
|
|
445,866
|
|
|
|
|
|
|
|
|
1st Lien/First-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infogix, Inc.
(+++)
|
|
Software
|
|
L + 5.00% (1.00% Floor)
|
|
12/31/2021
|
|
|
9,653
|
|
|
|
9,579
|
|
|
|
9,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 1st Lien/First-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
9,579
|
|
|
|
9,629
|
|
|
|
|
|
|
|
|
2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DiscoverOrg, LLC
(+) (2)
|
|
Software
|
|
L + 8.50% (1.00% Floor)
|
|
02/23/2024
|
|
|
10,500
|
|
|
|
10,346
|
|
|
|
10,395
|
|
GK Holdings, Inc.
(+++)
|
|
IT Services
|
|
L + 10.25% (1.00% Floor)
|
|
01/20/2022
|
|
|
6,000
|
|
|
|
5,915
|
|
|
|
5,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
16,261
|
|
|
|
16,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Debt
|
|
|
|
|
|
|
|
|
|
|
471,760
|
|
|
|
471,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield
|
|
|
|
Shares
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
Investments in Affiliated Money Market Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Financial Square Government Fund - Institutional Shares
|
|
0.91%
(4)
|
|
|
|
|
4,849,420
|
|
|
$
|
4,849
|
|
|
$
|
4,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Affiliated Money Market Fund
|
|
|
|
|
|
|
|
|
4,849
|
|
|
|
4,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,609
|
|
|
$
|
476,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
(+)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 1 month LIBOR plus a base rate.
The 1 month LIBOR as of September 30, 2017 was 1.23%.
|
(++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 2 month LIBOR plus a base rate.
The 2 month LIBOR as of September 30, 2017 was 1.27%.
|
(+++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 3 month LIBOR plus a base rate.
The 3 month LIBOR as of September 30, 2017 was 1.33%.
|
(++++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 6 month LIBOR plus a base rate.
The 6 month LIBOR as of September 30, 2017 was 1.51%.
|
(+++++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 12 month LIBOR plus a base rate.
The 12 month LIBOR as of September 30, 2017 was 1.78%.
|
(1)
|
|
Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded
portion. The unfunded loan commitment may be subject to a commitment termination date, that may expire prior to the maturity date stated.
|
(2)
|
|
The Company also holds a portion of the 2nd lien/senior secured debt in this portfolio company.
|
(3)
|
|
The negative cost is the result of the capitalized discount being greater than the principal amount outstanding
on the loan. The negative fair value is the result of the capitalized discount on the loan.
|
(4)
|
|
The rate shown is the annualized seven-day yield as of September 30, 2017.
|
L LIBOR
P U.S. Prime
Rate (which as of September 30, 2017 was 4.25%)
26
Senior Credit Fund Portfolio as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
Industry
|
|
Interest
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affordable Care Holding Corp.
(+++)
|
|
Health Care Providers & Services
|
|
L + 4.75% (1.00% Floor)
|
|
10/22/2022
|
|
$
|
4,950
|
|
|
$
|
4,864
|
|
|
$
|
4,950
|
|
Ansira Partners, Inc.
(1)
|
|
Media
|
|
L + 6.50% (1.00% Floor)
|
|
12/20/2022
|
|
|
8,727
|
|
|
|
8,640
|
|
|
|
8,640
|
|
Ansira Partners, Inc.
(1)(2)
|
|
Media
|
|
L + 6.50% (1.00% Floor)
|
|
12/20/2022
|
|
|
1,273
|
|
|
|
|
|
|
|
|
|
ASC Acquisition Holdings, LLC
(+++)(3)
|
|
Distributors
|
|
L + 7.50% (1.00% Floor)
|
|
12/15/2021
|
|
|
11,250
|
|
|
|
11,138
|
|
|
|
11,137
|
|
ASC Acquisition Holdings, LLC
(+++)(2)(3)
|
|
Distributors
|
|
L + 7.50% (1.00% Floor)
|
|
12/15/2021
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
ATX Networks Corp.
(+++)
|
|
Communications Equipment
|
|
L + 6.00% (1.00% Floor)
|
|
06/11/2021
|
|
|
16,767
|
|
|
|
16,607
|
|
|
|
16,348
|
|
Badger Sportswear, Inc.
(+++)
|
|
Textiles, Apparel & Luxury Goods
|
|
L + 4.50% (1.00% Floor)
|
|
09/11/2023
|
|
|
14,963
|
|
|
|
14,861
|
|
|
|
14,850
|
|
ConvergeOne Holdings Corporation
(+++)(4)
|
|
Communications Equipment
|
|
L + 5.38% (1.00% Floor)
|
|
06/17/2020
|
|
|
17,401
|
|
|
|
17,261
|
|
|
|
17,314
|
|
Crowne Group, LLC
(+++)
|
|
Auto Components
|
|
L + 9.25% (1.00% Floor)
|
|
05/26/2021
|
|
|
16,873
|
|
|
|
16,717
|
|
|
|
17,041
|
|
DBRS Limited
(+++)
|
|
Capital Markets
|
|
L + 5.25% (1.00% Floor)
|
|
03/04/2022
|
|
|
11,790
|
|
|
|
11,697
|
|
|
|
10,729
|
|
DiscoverOrg, LLC
(+)(3)
|
|
Software
|
|
L + 4.25% (1.00% Floor)
|
|
06/02/2020
|
|
|
7,147
|
|
|
|
7,121
|
|
|
|
7,075
|
|
Edgewood Partners Insurance Center
(+)
|
|
Insurance
|
|
L + 6.00% (1.00% Floor)
|
|
03/16/2023
|
|
|
15,880
|
|
|
|
15,589
|
|
|
|
15,920
|
|
Explorer Holdings, Inc.
(+++)
|
|
Health Care Technology
|
|
L + 5.00% (1.00% Floor)
|
|
05/02/2023
|
|
|
9,950
|
|
|
|
9,855
|
|
|
|
10,025
|
|
GK Holdings, Inc.
(+++)
|
|
IT Services
|
|
L + 5.50% (1.00% Floor)
|
|
01/20/2021
|
|
|
17,640
|
|
|
|
17,555
|
|
|
|
17,464
|
|
HC Group Holdings III, Inc.
(+++)
|
|
Health Care Providers & Services
|
|
L + 5.00% (1.00% Floor)
|
|
04/07/2022
|
|
|
8,888
|
|
|
|
8,852
|
|
|
|
8,510
|
|
Help/Systems, LLC
(+++)
|
|
Software
|
|
L + 5.25% (1.00% Floor)
|
|
10/08/2021
|
|
|
17,955
|
|
|
|
17,407
|
|
|
|
17,910
|
|
Imagine! Print Solutions, Inc.
(+++)
|
|
Commercial Services & Supplies
|
|
L + 6.00% (1.00% Floor)
|
|
03/30/2022
|
|
|
4,965
|
|
|
|
4,909
|
|
|
|
5,039
|
|
Jill Acquisition LLC
(+++)
|
|
Textiles, Apparel & Luxury Goods
|
|
L + 5.00% (1.00% Floor)
|
|
05/08/2022
|
|
|
15,805
|
|
|
|
15,700
|
|
|
|
15,746
|
|
Lattice Semiconductor Corporation
(+++)
|
|
Semiconductors & Semiconductor Equipment
|
|
L + 4.25% (1.00% Floor)
|
|
03/10/2021
|
|
|
11,986
|
|
|
|
11,803
|
|
|
|
11,956
|
|
Liquidnet Holdings, Inc.
(+)(4)
|
|
Capital Markets
|
|
L + 6.75% (1.00% Floor)
|
|
05/22/2019
|
|
|
24,618
|
|
|
|
24,340
|
|
|
|
24,433
|
|
Loar Group, Inc.
(++)
|
|
Aerospace & Defense
|
|
L + 4.75% (1.00% Floor)
|
|
01/12/2022
|
|
|
9,925
|
|
|
|
9,684
|
|
|
|
9,875
|
|
MB Aerospace Holdings Inc.
(+++)
|
|
Aerospace & Defense
|
|
L + 5.50% (1.00% Floor)
|
|
12/15/2022
|
|
|
15,849
|
|
|
|
15,708
|
|
|
|
15,769
|
|
Mister Car Wash, Inc.
(1)
|
|
Automobiles
|
|
L + 4.25% (1.00% Floor)
|
|
08/20/2021
|
|
|
6,650
|
|
|
|
6,600
|
|
|
|
6,658
|
|
Mister Car Wash, Inc.
(1)(2)
|
|
Automobiles
|
|
L + 4.25% (1.00% Floor)
|
|
08/20/2021
|
|
|
1,333
|
|
|
|
|
|
|
|
12
|
|
Netsmart Technologies, Inc.
(+++)
|
|
Health Care Technology
|
|
L + 4.50% (1.00% Floor)
|
|
04/19/2023
|
|
|
18,937
|
|
|
|
18,878
|
|
|
|
18,997
|
|
Oasis Outsourcing Holdings, Inc.
(+)
|
|
Diversified Financial Services
|
|
L + 4.75% (1.00% Floor)
|
|
12/27/2021
|
|
|
3,979
|
|
|
|
3,970
|
|
|
|
3,989
|
|
PGX Holdings, Inc.
(+++)(4)
|
|
Professional Services
|
|
L + 5.25% (1.00% Floor)
|
|
09/29/2020
|
|
|
13,578
|
|
|
|
13,510
|
|
|
|
13,552
|
|
Playcore Wisconsin, Inc.
(+++)
|
|
Leisure Equipment & Products
|
|
L + 4.25% (1.00% Floor)
|
|
05/29/2020
|
|
|
18,000
|
|
|
|
17,820
|
|
|
|
17,820
|
|
Pomeroy Group LLC
(++++)
|
|
IT Services
|
|
L + 6.00% (1.00% Floor)
|
|
11/30/2021
|
|
|
15,920
|
|
|
|
15,472
|
|
|
|
15,760
|
|
Precyse Acquisition Corp.
(+)
|
|
Health Care Technology
|
|
L + 5.50% (1.00% Floor)
|
|
10/20/2022
|
|
|
7,469
|
|
|
|
7,369
|
|
|
|
7,553
|
|
Professional Physical Therapy
(+++)
|
|
Health Care Providers & Services
|
|
L + 6.00% (1.00% Floor)
|
|
12/16/2022
|
|
|
10,500
|
|
|
|
10,395
|
|
|
|
10,395
|
|
RealD, Inc.
(++)
|
|
Media
|
|
L + 7.50% (1.00% Floor)
|
|
03/22/2021
|
|
|
16,873
|
|
|
|
16,719
|
|
|
|
16,704
|
|
Research Now Group, Inc.
(+++)
|
|
Professional Services
|
|
L + 4.50% (1.00% Floor)
|
|
03/18/2021
|
|
|
9,592
|
|
|
|
9,476
|
|
|
|
9,448
|
|
SciQuest, Inc.
(++++)
|
|
Internet Software & Services
|
|
L + 4.75% (1.00% Floor)
|
|
07/28/2023
|
|
|
13,930
|
|
|
|
13,863
|
|
|
|
13,860
|
|
Smarte Carte, Inc.
(+++)
|
|
Air Freight & Logistics
|
|
L + 5.50% (1.00% Floor)
|
|
08/30/2021
|
|
|
11,213
|
|
|
|
11,107
|
|
|
|
11,100
|
|
Tronair Parent Inc.
(+++)
|
|
Air Freight & Logistics
|
|
L + 4.75% (1.00% Floor)
|
|
09/08/2023
|
|
|
13,860
|
|
|
|
13,762
|
|
|
|
13,721
|
|
U.S. Acute Care Solutions, LLC
(1)
|
|
Health Care Providers & Services
|
|
L + 5.00% (1.00% Floor)
|
|
05/14/2021
|
|
|
13,000
|
|
|
|
12,870
|
|
|
|
12,870
|
|
Veresen Midstream Limited Partnership
(+++)
|
|
Energy Equipment & Services
|
|
L + 4.25% (1.00% Floor)
|
|
03/31/2022
|
|
|
10,808
|
|
|
|
10,614
|
|
|
|
10,871
|
|
Zep Inc.
(+++)
|
|
Chemicals
|
|
L + 4.00% (1.00% Floor)
|
|
06/27/2022
|
|
|
11,901
|
|
|
|
11,879
|
|
|
|
11,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
454,612
|
|
|
|
456,002
|
|
|
|
|
|
|
|
|
1st Lien/First-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infogix, Inc.
(+++)
|
|
Software
|
|
L + 4.75% (1.00% Floor)
|
|
12/31/2021
|
|
|
9,762
|
|
|
|
9,676
|
|
|
|
9,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 1st Lien/First-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
9,676
|
|
|
|
9,664
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
Industry
|
|
Interest
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DiscoverOrg, LLC
(+++)(3)
|
|
Software
|
|
L + 9.00% (1.00% Floor)
|
|
02/10/2022
|
|
$
|
8,000
|
|
|
$
|
7,858
|
|
|
$
|
7,860
|
|
GK Holdings, Inc.
(+++)
|
|
IT Services
|
|
L + 9.50% (1.00% Floor)
|
|
01/20/2022
|
|
|
6,000
|
|
|
|
5,904
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
13,762
|
|
|
|
13,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Debt
|
|
|
|
|
|
|
|
|
|
|
478,050
|
|
|
|
479,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield
|
|
|
|
Shares
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
Investments in Affiliated Money Market Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Financial Square Government Fund
|
|
0.45%
(5)
|
|
|
|
|
1,941,599
|
|
|
$
|
1,942
|
|
|
$
|
1,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Affiliated Money Market Fund
|
|
|
|
|
|
|
|
|
|
|
1,942
|
|
|
|
1,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS
|
|
|
|
|
|
|
|
|
|
$
|
479,992
|
|
|
$
|
481,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(+)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 1 month LIBOR plus a base rate.
The 1 month LIBOR as of December 31, 2016 was 0.77%.
|
(++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 2 month LIBOR plus a base rate.
The 2 month LIBOR as of December 31, 2016 was 0.82%.
|
(+++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 3 month LIBOR plus a base rate.
The 3 month LIBOR as of December 31, 2016 was 1.00%.
|
(++++)
|
|
The interest rate on these loans is subject to the greater of a LIBOR floor or 12 month LIBOR plus a base rate.
The 12 month LIBOR as of December 31, 2016 was 1.69%.
|
(1)
|
|
Position or portion thereof unsettled as of December 31, 2016.
|
(2)
|
|
Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded
portion. The unfunded loan commitment may be subject to a commitment termination date, that may expire prior to the maturity date stated.
|
(3)
|
|
The Company also holds a portion of the 2nd lien/senior secured debt in this portfolio company.
|
(4)
|
|
Initial investment was purchased at fair value from the Company in October 2014.
|
(5)
|
|
The rate shown is the annualized seven-day yield as of December 31, 2016.
|
L LIBOR
Below
is selected balance sheet information for the Senior Credit Fund as of September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Selected Balance Sheet Information
|
|
|
|
|
|
|
|
|
Total investments, at fair value
|
|
$
|
476,379
|
|
|
$
|
481,468
|
|
Cash and other assets
|
|
|
29,402
|
|
|
|
10,930
|
|
Total assets
|
|
$
|
505,781
|
|
|
$
|
492,398
|
|
|
|
|
Debt
(1)
|
|
$
|
306,590
|
|
|
$
|
300,574
|
|
Other liabilities
|
|
|
8,963
|
|
|
|
35,036
|
|
Total liabilities
|
|
$
|
315,553
|
|
|
$
|
335,610
|
|
Members equity
|
|
|
190,228
|
|
|
|
156,788
|
|
Total liabilities and members equity
|
|
$
|
505,781
|
|
|
$
|
492,398
|
|
(1)
|
Net of deferred financing costs for the SPV I Term Loan Facility, which were in the amount of $2,564 and $2,676
as of September 30, 2017 and December 31, 2016, respectively.
|
28
Below is selected statements of operations information for the Senior Credit Fund for the three
and nine months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended
September 30,
|
|
|
For the
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Selected Statements of Operations Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
|
$
|
9,535
|
|
|
$
|
6,905
|
|
|
$
|
28,140
|
|
|
$
|
18,220
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other debt expenses
|
|
|
3,482
|
|
|
|
2,308
|
|
|
|
10,132
|
|
|
|
6,582
|
|
Excess loan origination and structuring fees
|
|
|
350
|
|
|
|
1,109
|
|
|
|
1,096
|
|
|
|
1,712
|
|
Professional fees
|
|
|
176
|
|
|
|
90
|
|
|
|
485
|
|
|
|
297
|
|
Administration and custodian fees
|
|
|
103
|
|
|
|
81
|
|
|
|
299
|
|
|
|
240
|
|
Other expenses
|
|
|
36
|
|
|
|
26
|
|
|
|
88
|
|
|
|
52
|
|
Total expenses
|
|
$
|
4,147
|
|
|
$
|
3,614
|
|
|
$
|
12,100
|
|
|
$
|
8,883
|
|
Total net income
|
|
|
5,388
|
|
|
|
3,291
|
|
|
|
16,040
|
|
|
|
9,337
|
|
Net realized gain (loss) on investments
|
|
|
29
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
(135
|
)
|
|
|
1,829
|
|
|
|
(1,706
|
)
|
|
|
3,823
|
|
Net increase (decrease) in members equity
|
|
$
|
5,282
|
|
|
$
|
5,120
|
|
|
$
|
14,440
|
|
|
$
|
13,160
|
|
Loan Origination and Structuring Fees
If the loan origination and structuring fees earned by the Senior Credit Fund (including directly or indirectly through SPV I or another
vehicle) during a period exceed the Senior Credit Funds expenses (excluding interest and other debt expenses), such excess is paid as a fee to the Member(s) responsible for the origination of the loans pro rata in accordance with the total
loan origination and structuring fees earned by the Senior Credit Fund with respect to the loans originated by such Member. The loan origination and structuring fee is accrued quarterly and included in other income from controlled affiliated
investments on the Consolidated Statements of Operations and paid annually. For the three and nine months ended September 30, 2017, the Company accrued income based on loan origination and structuring fees of $350 and $1,096, respectively. For
the three and nine months ended September 30, 2016, the Company accrued income based on loan origination and structuring fees of $1,074 and $1,618, respectively.
5.
|
FAIR VALUE MEASUREMENT
|
The fair value of a financial instrument is the amount that
would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not
necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
Basis of Fair Value Measurement
Level 1
Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including
equities and derivatives, listed in active markets.
Level 2 Inputs to the valuation methodology are other than quoted prices in
active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than
active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.
Level 3 Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the
determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value
is based on unobservable inputs.
A financial instruments level within the fair value hierarchy is based on the lowest level of any
input that is significant to the fair value measurement. Note 2 Significant Accounting Policies should be read in conjunction with the information outlined below.
29
The table below presents the valuation techniques and the nature of significant inputs generally
used in determining the fair value of Level 2 Instruments.
|
|
|
Level 2 Instruments
|
|
Valuation Techniques and Significant Inputs
|
Equity and Fixed Income
|
|
The types of instruments that trade in markets that are not considered to be
active but are valued based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include commercial paper, most government agency obligations, most corporate debt
securities, certain mortgage-backed securities, certain bank loans, less liquid publicly listed equities, certain state and municipal obligations, certain money market instruments and certain loan commitments.
Valuations of Level 2 Equity and Fixed Income
instruments can be verified to quoted prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g. indicative or firm) and the
relationship of recent market activity to the prices provided from alternative pricing sources.
|
The table below presents the valuation techniques and the nature of significant inputs generally used in
determining the fair value of Level 3 Instruments.
|
|
|
Level 3 Instruments
|
|
Valuation Techniques and Significant Inputs
|
Bank Loans, Corporate Debt, and Other Debt Obligations
|
|
Valuations are generally based on discounted cash flow techniques, for which the
significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit
default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market
comparables, transactions in similar instruments and recovery/liquidation analysis.
|
Equity
|
|
Recent third-party investments or pending transactions are considered to be the
best evidence for any change in fair value. When these are not available, the following valuation methodologies are used, as appropriate and available:
Transactions in similar instruments;
Discounted cash flow techniques;
Third party appraisals; and
Industry multiples and public comparables.
Evidence includes recent or pending reorganizations (for example, merger proposals, tender offers and debt restructurings) and significant
changes in financial metrics, including:
Current financial
performance as compared to projected performance;
Capitalization
rates and multiples; and
Market yields implied by transactions of
similar or related assets.
|
The tables below present the ranges of significant unobservable inputs used to value the Companys
Level 3 assets and liabilities as of September 30, 2017 and December 31, 2016. These ranges represent the significant unobservable inputs that were used in the valuation of each type of instrument, but they do not represent a range of
values for any one instrument. For example, the lowest yield in 1st Lien/Senior Secured is appropriate for valuing that specific debt investment, but may not be appropriate for valuing any other debt investments in this asset class. Accordingly, the
ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Companys Level 3 assets and liabilities.
30
|
|
|
|
|
|
|
Level 3 Instruments
|
|
Level 3 Assets as of
September 30, 2017
(1
)
|
|
Significant
Unobservable
Inputs by Valuation
Techniques
(2
)
|
|
Range
(3
)
of Significant
Unobservable
Inputs
(Weighted Average
(4
)
)
as
of
September 30, 2017
|
Bank Loans, Corporate Debt, and Other Debt Obligations
|
|
1st Lien/Senior Secured Debt
|
|
Discounted cash flows:
|
|
|
|
$274,856
|
|
Discount Rate
|
|
9.4% 16.9% (12.1%)
|
|
|
|
Collateral analysis:
|
|
|
|
|
|
|
Recovery Rate
|
|
92.3%
|
|
|
1st Lien/Last-Out Unitranche
|
|
Discounted cash flows:
|
|
|
|
|
$262,807
|
|
Discount Rate
|
|
10.0% 19.8% (13.3%)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/Revenue
|
|
0.3x 0.9x (0.7x)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/EBITDA
(5
)
|
|
8.2x 12.9x (7.1x)
|
|
|
|
|
|
|
2nd Lien/Senior Secured Debt
|
|
Discounted cash flows:
|
|
|
|
|
$212,367
|
|
Discount Rate
|
|
10.5% 15.1% (11.7%)
|
|
|
|
|
|
|
Unsecured Debt
|
|
Discounted cash flows:
|
|
|
|
|
$3,300
|
|
Discount Rate
|
|
3.7% 5.7% (12.0%)
|
Equity
|
|
Preferred Stock
|
|
Comparable multiples:
|
|
|
|
|
$11,815
|
|
EV/EBITDA
(5
)
|
|
6.5x 15.0x (7.3x)
|
|
|
Common Stock
|
|
Discounted cash flows:
|
|
|
|
|
$17,231
|
|
Discount Rate
|
|
9.7% 28.0% (24.2%)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/Revenue
|
|
2.1x 9.6x (3.0x)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/EBITDA
(5
)
|
|
7.3x 18.0x (7.4x)
|
|
|
|
|
Collateral analysis:
|
|
|
|
|
|
|
Recovery Rate
|
|
73.9%
|
(1)
|
|
Included within Level 3 Assets of $973,549 is an amount of $191,173 in which the Investment Adviser did not
develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions).
|
(2)
|
|
The fair value of any one instrument may be determined using multiple valuation techniques. For example, market
comparable and discounted cash flows may be used together to determine fair value. Therefore, the Level 3 balance encompasses both of these techniques.
|
(3)
|
|
The range for an asset category consisting of a single investment represents the relevant market data
considered in determining the fair value of the investment.
|
(4)
|
|
Weighted average for an asset category consisting of multiple investments is calculated by weighting the
significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment.
|
(5)
|
|
Enterprise value of portfolio company as a multiple of earnings before interest, taxes, depreciation and
amortization (EBITDA).
|
|
|
|
|
|
|
|
Level 3 Instruments
|
|
Level 3 Assets as
of
December 31, 2016
(1)
|
|
Significant Unobservable
Inputs by Valuation
Techniques
(2)
|
|
Range
(3)
of Significant
Unobservable
Inputs (Weighted Average
(4)
)
as of
December 31, 2016
|
Bank Loans, Corporate Debt, and Other Debt Obligations
|
|
1st Lien/Senior Secured Debt
|
|
Discounted cash flows:
|
|
|
|
$379,181
|
|
Discount Rate
|
|
9.1% 20% (11.6%)
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/EBITDA
(5)
|
|
2.9x 19.5x (5.0x)
|
|
|
1st Lien/Last-Out Unitranche
|
|
Discounted cash flows:
|
|
|
|
|
$310,254
|
|
Discount Rate
|
|
10.8% 15.6% (12.9%)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/EBITDA
(5)
|
|
7.7x 13.2x (7.9x)
|
|
|
2nd Lien/Senior Secured Debt
|
|
Discounted cash flows:
|
|
|
|
|
$214,643
|
|
Discount Rate
|
|
10.7% 48.1% (12.6%)
|
|
|
|
|
Comparable multiples:
|
|
|
|
|
|
|
EV/EBITDA
(5)
|
|
6.5x 9.1x (6.8x)
|
Equity
|
|
Preferred Stock
|
|
Comparable multiples:
|
|
|
|
|
$11,083
|
|
EV/EBITDA
(5)
|
|
5.6x 12.3x (6.3x)
|
|
|
Common Stock
|
|
Comparable multiples:
|
|
|
|
|
$4,312
|
|
EV/EBITDA
(5)
|
|
5.6x 12.3x (6.3x)
|
31
(1)
|
|
Included within Level 3 Assets of $977,713 is an amount of $58,240 in which the Investment Adviser did not
develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions).
|
(2)
|
|
The fair value of any one instrument may be determined using multiple valuation techniques. For example, market
comparable and discounted cash flows may be used together to determine fair value. Therefore, the Level 3 balance encompasses both of these techniques.
|
(3)
|
|
The range for an asset category consisting of a single investment represents the relevant market data
considered in determining the fair value of the investment.
|
(4)
|
|
Weighted average for an asset category consisting of multiple investments is calculated by weighting the
significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment.
|
(5)
|
|
Enterprise value of portfolio company as a multiple of EBITDA.
|
As noted above, the income and market approaches were used in the determination of fair value of certain Level 3 assets as of
September 30, 2017 and December 31, 2016. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying
investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates is risk of default,
rating of the investment, call provisions and comparable company investments. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies.
Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.
The following is a summary of the Companys assets categorized within the fair value hierarchy as of September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
1st Lien/Senior Secured Debt
|
|
$
|
|
|
|
$
|
20,100
|
|
|
$
|
335,627
|
|
|
$
|
355,727
|
|
1st Lien/Last-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
274,409
|
|
|
|
274,409
|
|
2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
88,793
|
|
|
|
330,567
|
|
|
|
419,360
|
|
Unsecured Debt
|
|
|
|
|
|
|
|
|
|
|
3,300
|
|
|
|
3,300
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
12,415
|
|
|
|
12,415
|
|
Common Stock
|
|
|
|
|
|
|
1,131
|
|
|
|
17,231
|
|
|
|
18,362
|
|
Affiliated Money Market Fund
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Subtotal
|
|
$
|
3
|
|
|
$
|
110,024
|
|
|
$
|
973,549
|
|
|
$
|
1,083,576
|
|
Investments measured at NAV
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,114
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,178,690
|
|
(1)
|
|
Includes equity investments in the Senior Credit Fund.
|
The following is a summary of the Companys assets categorized within the fair value hierarchy as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
1st Lien/Senior Secured Debt
|
|
$
|
|
|
|
$
|
41,845
|
|
|
$
|
379,181
|
|
|
$
|
421,026
|
|
1st Lien/Last-Out Unitranche
|
|
|
|
|
|
|
|
|
|
|
310,254
|
|
|
|
310,254
|
|
2nd Lien/Senior Secured Debt
|
|
|
|
|
|
|
67,160
|
|
|
|
269,018
|
|
|
|
336,178
|
|
Unsecured Debt
|
|
|
|
|
|
|
|
|
|
|
3,115
|
|
|
|
3,115
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
11,833
|
|
|
|
11,833
|
|
Common Stock
|
|
|
|
|
|
|
2,178
|
|
|
|
4,312
|
|
|
|
6,490
|
|
Affiliated Money Market Fund
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Subtotal
|
|
$
|
1
|
|
|
$
|
111,183
|
|
|
$
|
977,713
|
|
|
$
|
1,088,897
|
|
Investments measured at NAV
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,394
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,167,291
|
|
(1)
|
|
Includes equity investments in the Senior Credit Fund.
|
32
The following is a reconciliation of Level 3 assets for the nine months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3
|
|
Beginning
Balance
as of
January 1,
2017
|
|
|
Purchases
(1)
|
|
|
Net
Realized
Gain (Loss)
|
|
|
Net Change in
Unrealized
Appreciation
(Depreciation)
(2)
|
|
|
Sales and
Settlements
(1)
|
|
|
Net
Amortization
of Premium/
Discount
|
|
|
Transfers
In
|
|
|
Transfers
Out
|
|
|
Ending
Balance
as of
September 30,
2017
|
|
1st Lien/Senior Secured Debt
|
|
$
|
379,181
|
|
|
$
|
109,367
|
|
|
$
|
(16,900
|
)
|
|
$
|
9,714
|
|
|
$
|
(149,519
|
)
|
|
$
|
3,784
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
335,627
|
|
1st Lien/Last-Out Unitranche
|
|
|
310,254
|
|
|
|
44,550
|
|
|
|
|
|
|
|
(10,265
|
)
|
|
|
(72,425
|
)
|
|
|
2,295
|
|
|
|
|
|
|
|
|
|
|
|
274,409
|
|
2nd Lien/Senior Secured Debt
|
|
|
269,018
|
|
|
|
290,608
|
|
|
|
(23,565
|
)
|
|
|
14,295
|
|
|
|
(221,699
|
)
|
|
|
1,910
|
|
|
|
|
|
|
|
|
|
|
|
330,567
|
|
Unsecured Debt
|
|
|
3,115
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,300
|
|
Preferred Stock
|
|
|
11,833
|
|
|
|
628
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,415
|
|
Common Stock
|
|
|
4,312
|
|
|
|
14,493
|
|
|
|
|
|
|
|
(1,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,231
|
|
Total assets
|
|
$
|
977,713
|
|
|
$
|
459,831
|
|
|
$
|
(40,465
|
)
|
|
$
|
12,124
|
|
|
$
|
(443,643
|
)
|
|
$
|
7,989
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
973,549
|
|
(1)
|
|
Purchases may include securities received in corporate
actions and PIK. Sales and Settlements may include securities delivered in corporate actions.
|
(2)
|
|
Change in unrealized appreciation (depreciation) relating
to assets still held at September 30, 2017 totaled $1,499 consisting of the following: 1st Lien/Senior Secured Debt $12,588, 1st Lien/Last-Out Unitranche $(10,173), 2nd Lien/Senior Secured Debt $704, Unsecured Debt $0, Preferred Stock $(46) and
Common Stock $(1,574).
|
The following is a reconciliation of Level 3 assets for the nine months ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3
|
|
Beginning
Balance
as of
January 1,
2016
|
|
|
Purchases
(1)
|
|
|
Net
Realized
Gain (Loss)
|
|
|
Net Change in
Unrealized
Appreciation
(Depreciation)
(2)
|
|
|
Sales and
Settlements
(1)
|
|
|
Net
Amortization
of Premium/
Discount
|
|
|
Transfers
In
|
|
|
Transfers
Out
|
|
|
Ending
Balance
as of
September 30,
2016
|
|
1st Lien/Senior Secured Debt
|
|
$
|
362,331
|
|
|
$
|
99,430
|
|
|
$
|
|
|
|
$
|
611
|
|
|
$
|
(80,300
|
)
|
|
$
|
1,050
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
383,122
|
|
1st Lien/Last-Out Unitranche
|
|
|
305,727
|
|
|
|
53,379
|
|
|
|
123
|
|
|
|
(11,375
|
)
|
|
|
(34,407
|
)
|
|
|
999
|
|
|
|
|
|
|
|
|
|
|
|
314,446
|
|
2nd Lien/Senior Secured Debt
|
|
|
257,701
|
|
|
|
79,808
|
|
|
|
(22,116
|
)
|
|
|
(6,762
|
)
|
|
|
(73,138
|
)
|
|
|
1,368
|
|
|
|
|
|
|
|
(16,800
|
)
|
|
|
220,061
|
|
Preferred Stock
|
|
|
24,872
|
|
|
|
10,686
|
|
|
|
|
|
|
|
1,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,791
|
)
|
|
|
32,221
|
|
Common Stock
|
|
|
|
|
|
|
2,395
|
|
|
|
|
|
|
|
4,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,446
|
)
|
|
|
2,392
|
|
Total assets
|
|
$
|
950,631
|
|
|
$
|
245,698
|
|
|
$
|
(21,993
|
)
|
|
$
|
(11,629
|
)
|
|
$
|
(187,845
|
)
|
|
$
|
3,417
|
|
|
$
|
|
|
|
$
|
(26,037
|
)
|
|
$
|
952,242
|
|
(1)
|
|
Purchases may include PIK, securities received in corporate actions and restructurings. Sales and Settlements
may include securities delivered in corporate actions and restructuring of investments.
|
(2)
|
|
Change in unrealized appreciation (depreciation) relating to assets still held at September 30, 2016
totaled $(10,624), consisting of the following: 1st Lien/Senior Secured Debt $611, 1st Lien/Last-Out Unitranche $(11,375), 2nd Lien/Senior Secured Debt $(5,757), Preferred Stock $1,454 and Common Stock $4,443.
|
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. For the nine
months ended September 30, 2017, there were no transfers between levels. For the nine months ended September 30, 2016, transfers from Level 3 to Level 2 were primarily due to increased price transparency.
Debt Not Carried at Fair Value
The fair
value of the Revolving Credit Facility, which would be categorized as Level 3 within the fair value hierarchy as of September 30, 2017 and December 31, 2016, approximates its carrying value. The fair value of the Companys
Convertible Notes, which would be categorized as Level 2 within the fair value hierarchy, as of September 30, 2017 and December 31, 2016, was $118,809 and $116,006, respectively, based on broker quotes received by the Company.
In accordance with the Investment Company Act, with certain exceptions, the
Company is only allowed to borrow amounts such that its asset coverage ratio, as defined in the Investment Company Act, is at least 2 to 1 after such borrowing. As of September 30, 2017 and December 31, 2016, the Companys asset
coverage ratio based on aggregate borrowings outstanding was 2.63 to 1 and 2.32 to 1, respectively.
33
The Companys outstanding debt as of September 30, 2017 and December 31, 2016 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Aggregate
Borrowing
Amount
Committed
|
|
|
Outstanding
Borrowing
|
|
|
Amount
Available
|
|
|
Carrying
Value
|
|
|
Aggregate
Borrowing
Amount
Committed
|
|
|
Outstanding
Borrowing
|
|
|
Amount
Available
|
|
|
Carrying
Value
|
|
Revolving Credit Facility
(1)
|
|
$
|
605,000
|
|
|
$
|
332,750
|
|
|
$
|
272,250
|
|
|
$
|
332,750
|
|
|
$
|
605,000
|
|
|
$
|
387,750
|
|
|
$
|
217,250
|
|
|
$
|
387,750
|
|
Convertible Notes
(2)
|
|
|
115,000
|
|
|
|
115,000
|
|
|
|
|
|
|
|
111,055
|
|
|
|
115,000
|
|
|
|
115,000
|
|
|
|
|
|
|
|
110,402
|
|
Total Debt
|
|
$
|
720,000
|
|
|
$
|
447,750
|
|
|
$
|
272,250
|
|
|
$
|
443,805
|
|
|
$
|
720,000
|
|
|
$
|
502,750
|
|
|
$
|
217,250
|
|
|
$
|
498,152
|
|
(1)
|
|
Provides, under certain circumstances, a total borrowing capacity of $1,000,000.
|
(2)
|
|
The carrying value of the Companys Convertible Notes is presented net of unamortized debt issuance costs
of $3,323 and OID net of accretion of $622 as of September 30, 2017, and net of unamortized debt issuance costs of $3,884 and OID net of accretion of $714 as of December 31, 2016.
|
The combined weighted average interest rates of the aggregate borrowings outstanding for the nine months ended September 30, 2017 and the
year ended December 31, 2016 were 3.42% and 2.65%, respectively.
Revolving Credit Facility
On September 19, 2013, the Company entered into a Revolving Credit Facility with various lenders. SunTrust Bank serves as administrative
agent and Bank of America N.A. serves as syndication agent under the Revolving Credit Facility.
On October 3, 2014, the Company
amended and restated the Revolving Credit Facility to, among other things: increase the aggregate borrowing amount on a committed basis, increase the total borrowing capacity, extend the maturity date, and reduce the applicable margin of borrowings.
On January 16, 2015, the Company exercised the right under the accordion feature and increased the size of the Revolving Credit
Facility to $535,000, on a committed basis.
On March 27, 2015, the Company exercised the right under the accordion feature and
increased the size of the Revolving Credit Facility to $560,000, on a committed basis.
On November 3, 2015, the Company amended the Revolving Credit
Facility to, among other things:
|
|
|
increase the aggregate borrowing amount to $570,000 on a committed basis;
|
|
|
|
increase the total borrowing capacity to a maximum of $1,000,000;
|
|
|
|
extend the final maturity date to November 4, 2020; and
|
|
|
|
reduce the applicable margin of borrowings with respect to (i) any loan bearing interest at a rate
determined by reference to the alternate base rate from 1.25% to 0.75% or 1.00%, subject to borrowing base conditions and (ii) any loan bearing interest at a rate determined by reference to the adjusted LIBOR rate from 2.25% to 1.75% or 2.00%,
subject to borrowing base conditions.
|
On December 16, 2016, the Company further amended the Revolving Credit Facility to, among
other things:
|
|
|
increase aggregate borrowing amount to $605,000 on a committed basis; and
|
|
|
|
extend the final maturity date to December 16, 2021.
|
Borrowings under the Revolving Credit Facility, including amounts drawn in respect of letters of credit, bear interest (at the Companys
election) of either LIBOR plus an applicable margin or an applicable margin plus the higher of the Prime Rate, Federal Funds Rate plus 0.5% or overnight LIBOR plus 1.0%. Interest is payable quarterly in arrears. The Company pays a fee of
0.375% per annum on committed but undrawn amounts under the Revolving Credit Facility, payable quarterly in arrears. Any amounts borrowed under the Revolving Credit Facility will mature, and all accrued and unpaid interest will be due and
payable, on December 16, 2021.
The Revolving Credit Facility may be guaranteed by certain of the Companys domestic
subsidiaries that are formed or acquired by the Company in the future (collectively, the Guarantors). The Senior Credit Fund is not a Guarantor of the Revolving Credit Facility. Proceeds from borrowings may be used for general corporate
purposes, including the funding of portfolio investments.
34
The Companys obligations to the lenders under the Revolving Credit Facility are secured by
a first priority security interest in substantially all of the Companys portfolio of investments and cash, with certain exceptions. The Revolving Credit Facility contains certain covenants, including: (i) maintaining a minimum
stockholders equity of $478,513, subject to increase pending certain equity sales, (ii) maintaining an asset coverage ratio of at least 2 to 1, (iii) maintaining a minimum liquidity test of at least 10% of the covered debt amount
during any period when the adjusted covered debt balance is greater than 90% of the adjusted borrowing base, as defined in the Revolving Credit Facility, and (iv) complying with restrictions on industry concentrations in the Companys
investment portfolio. The Company is in compliance with these covenants.
Costs of $9,716 were incurred in connection with obtaining and
amending the Revolving Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Assets and Liabilities and are being amortized over the life of the Revolving Credit Facility using the straight-line
method. As of September 30, 2017 and December 31, 2016, deferred financing costs were $5,107 and $6,018, respectively.
The
summary information of the Revolving Credit Facility for the three and nine months ended September 30, 2017 and 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Borrowing interest expense
|
|
$
|
2,746
|
|
|
$
|
3,206
|
|
|
$
|
7,997
|
|
|
$
|
8,632
|
|
Facility fees
|
|
|
313
|
|
|
|
118
|
|
|
|
780
|
|
|
|
369
|
|
Amortization of financing costs
|
|
|
311
|
|
|
|
304
|
|
|
|
923
|
|
|
|
908
|
|
Total
|
|
$
|
3,370
|
|
|
$
|
3,628
|
|
|
$
|
9,700
|
|
|
$
|
9,909
|
|
Weighted average interest rate
|
|
|
3.30%
|
|
|
|
2.55%
|
|
|
|
3.06%
|
|
|
|
2.50%
|
|
Average outstanding balance
|
|
$
|
330,265
|
|
|
$
|
500,070
|
|
|
$
|
349,395
|
|
|
$
|
460,469
|
|
C
onvertible Notes
On October 3, 2016, the Company closed an offering of $115,000 aggregate principal amount of unsecured Convertible Notes, which includes
$15,000 aggregate principal amount issued pursuant to the initial purchasers exercise in full of an over-allotment option. The Convertible Notes bear interest at a rate of 4.50% per year, payable semi-annually in arrears on April 1
and October 1 of each year, commencing on April 1, 2017. The Convertible Notes will mature on April 1, 2022, unless repurchased or converted in accordance with their terms prior to such date. In certain circumstances, the Convertible
Notes will be convertible into cash, shares of the Companys common stock or a combination of cash and shares of the Companys common stock, based on an initial conversion rate of 40.8397 shares of the Companys common stock per
$1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $24.49 per share of common stock, subject to customary anti-dilution adjustments and the other terms of the indenture governing the
Convertible Notes. The conversion price is approximately 10.0% above the $22.26 per share closing price of the Companys common stock on September 27, 2016. The Company will not have the right to redeem the Convertible Notes prior to
maturity. The sale of the Convertible Notes generated net proceeds of approximately $110,900. The Company used the net proceeds of the offering to pay down debt under the Revolving Credit Facility.
Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding
October 1, 2021 only under the following circumstances: (1) during any calendar quarter commencing after December 31, 2016, if the last reported sale price of the Companys common stock for at least 20 trading days (whether
or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during
the five business day period after any five consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the
product of the last reported sale price of the Companys common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after October 1, 2021, until the close of business
on the scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the occurrence or nonoccurrence of any of the foregoing circumstances.
35
The Convertible Notes are accounted for in accordance with ASC Topic 470-20,
Debt with
Conversion and Other Options
. Upon conversion of any of the Convertible Notes, the Company intends to pay the outstanding principal amount in cash and, to the extent that the conversion value exceeds the principal amount, has the option to pay
the excess amount in cash or shares of the Companys common stock (or a combination of cash and shares), subject to the requirements of the respective indenture. The Company has determined that the embedded conversion options in the Convertible
Notes are not required to be separately accounted for as derivatives under ASC Topic 815,
Derivatives and Hedging.
At the time of issuance the values of the debt and equity components of the Convertible Notes were approximately 99.4% and
0.6%, respectively.
The OID equal to the equity component of the Convertible Notes was recorded in paid-in capital in excess of
par in the accompanying Consolidated Statements of Assets and Liabilities. The Company records interest expense comprised of both stated interest and amortization of the OID. At the time of issuance, the equity component of the Convertible
Notes was $743. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the values at the time of issuance and accounted for as debt issuance costs
and equity issuance costs, respectively.
As of September 30, 2017 and December 31, 2016, the components of the carrying value
of the Convertible Notes were as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Principal amount of debt
|
|
$
|
115,000
|
|
|
$
|
115,000
|
|
OID, net of accretion
|
|
|
622
|
|
|
|
714
|
|
Unamortized debt issuance costs
|
|
|
3,323
|
|
|
|
3,884
|
|
Carrying value
|
|
$
|
111,055
|
|
|
$
|
110,402
|
|
Stated interest rate
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
Effective interest rate (stated interest rate plus accretion of OID)
|
|
|
4.61
|
%
|
|
|
4.60
|
%
|
For the three and nine months ended September 30, 2017 and 2016, the components of interest and other
debt expenses related to the Convertible Notes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30, 2017
|
|
|
Three Months
Ended
September 30, 2016
|
|
|
Nine Months
Ended
September 30, 2017
|
|
|
Nine Months
Ended
September 30, 2016
|
|
Borrowing interest expense
|
|
$
|
1,294
|
|
|
|
N/A
|
|
|
$
|
3,881
|
|
|
|
N/A
|
|
Accretion of OID
|
|
|
31
|
|
|
|
N/A
|
|
|
|
92
|
|
|
|
N/A
|
|
Amortization of debt issuance costs
|
|
|
189
|
|
|
|
N/A
|
|
|
|
562
|
|
|
|
N/A
|
|
Total
|
|
$
|
1,514
|
|
|
|
N/A
|
|
|
$
|
4,535
|
|
|
|
N/A
|
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
Commitments
The Company may enter into commitments to fund investments. As of September 30, 2017, the Company believed that it had adequate financial
resources to satisfy its unfunded commitments. The Company had the following unfunded commitments by investment types as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Commitment
Expiration
Date
(1)
|
|
|
Unfunded
Commitment
(2)
|
|
|
Fair
Value
(3)
|
|
|
Commitment
Expiration
Date
(1)
|
|
|
Unfunded
Commitment
(2)
|
|
|
Fair
Value
(3)
|
|
1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuum Managed Services LLC
|
|
|
06/08/2019
|
|
|
$
|
1,800
|
|
|
$
|
(49
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Legacy Buyer Corp.
|
|
|
10/24/2019
|
|
|
|
2,500
|
|
|
|
(50
|
)
|
|
|
10/24/2019
|
|
|
|
800
|
|
|
|
(28
|
)
|
Elemica, Inc.
|
|
|
07/07/2021
|
|
|
|
6,000
|
|
|
|
(105
|
)
|
|
|
07/07/2021
|
|
|
|
6,000
|
|
|
|
(135
|
)
|
Netvoyage Corporation
|
|
|
03/24/2022
|
|
|
|
654
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuum Managed Services LLC
|
|
|
06/08/2022
|
|
|
|
2,220
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Xactly Corporation
|
|
|
07/29/2022
|
|
|
|
1,697
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 1st Lien/Senior Secured Debt
|
|
|
|
|
|
|
14,871
|
|
|
|
(310
|
)
|
|
|
|
|
|
|
6,800
|
|
|
|
(163
|
)
|
Total
|
|
|
|
|
|
$
|
14,871
|
|
|
$
|
(310
|
)
|
|
|
|
|
|
$
|
6,800
|
|
|
$
|
(163
|
)
|
(1)
|
|
Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and
certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.
|
(2)
|
|
Net of capitalized fees, expenses and OID.
|
(3)
|
|
A negative fair value was reflected as investments, at fair value in the Consolidated Statements of Assets and
Liabilities. The negative fair value is the result of the capitalized discount on the loan.
|
36
Contingencies
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure to the
Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such
indemnifications.
Equity Issuances
On May 24, 2017, the Company completed a follow-on offering under its shelf registration statement, issuing 3,250,000 shares of its common
stock at a public offering price of $22.50 per share. Net of offering and underwriting costs, the Company received cash proceeds of $69,648.
On May 26, 2017, the Company sold an additional 487,500 shares of its common stock pursuant to the underwriters exercise of the
option to purchase additional shares the Company granted in connection with the aforementioned offering. Net of underwriting costs, the Company received additional cash proceeds of $10,640.
There were no sales of our common stock during the nine months ended September 30, 2016.
Distributions
The following table
reflects the distributions declared on shares of the Companys common stock during the nine months ended September 30, 2017:
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount Per Share
|
February 22, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
|
$0.45
|
May 1, 2017
|
|
June 30, 2017
|
|
July 17, 2017
|
|
$0.45
|
August 1, 2017
|
|
September 29, 2017
|
|
October 16, 2017
|
|
$0.45
|
The following table reflects the distributions declared on shares of the Companys common stock during
the nine months ended September 30, 2016:
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount Per Share
|
February 25, 2016
|
|
March 31, 2016
|
|
April 15, 2016
|
|
$0.45
|
May 3, 2016
|
|
June 30, 2016
|
|
July 15, 2016
|
|
$0.45
|
August 2, 2016
|
|
September 30, 2016
|
|
October 17, 2016
|
|
$0.45
|
Dividend Reinvestment Plan
Concurrent with the IPO, the Company adopted a dividend reinvestment plan that provides for reinvestment of all cash distributions declared by
the Board of Directors, unless a stockholder elects to opt out of the plan. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not opted out of the dividend reinvestment plan
will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution.
The following table summarizes shares distributed pursuant to the dividend reinvestment plan during the nine months ended September 30,
2017 to stockholders who had not opted out of the dividend reinvestment plan:
37
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Shares
|
November 1, 2016
|
|
December 31, 2016
|
|
January 17, 2017
|
|
11,124
|
February 22, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
|
11,202
|
May 1, 2017
|
|
June 30, 2017
|
|
July 17, 2017
|
|
18,417
|
The following table summarizes shares distributed pursuant to the dividend reinvestment plan during the nine
months ended September 30, 2016 to stockholders who had not opted out of the dividend reinvestment plan:
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Shares
|
November 3, 2015
|
|
December 31, 2015
|
|
January 28, 2016
|
|
8,206
|
February 25, 2016
|
|
March 31, 2016
|
|
April 15, 2016
|
|
5,555
|
May 3, 2016
|
|
June 30, 2016
|
|
July 15, 2016
|
|
8,937
|
The following information sets forth the computation of basic and
diluted earnings per share for the three and nine months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Numerator for basic and diluted earnings per share - increase in net assets resulting from
operations
|
|
$
|
18,112
|
|
|
$
|
22,663
|
|
|
$
|
37,262
|
|
|
$
|
35,064
|
|
Denominator for basic and diluted earnings per share - weighted average shares outstanding
|
|
|
40,106,702
|
|
|
|
36,320,014
|
|
|
|
38,130,304
|
|
|
|
36,312,852
|
|
Basic and diluted earnings per share
|
|
$
|
0.45
|
|
|
$
|
0.62
|
|
|
$
|
0.98
|
|
|
$
|
0.97
|
|
For the purpose of calculating diluted earnings per common share, the average closing price of the
Companys common stock for the three and nine months ended September 30, 2017 was less than the conversion price for the Convertible Notes outstanding as of September 30, 2017. Therefore, for the three and nine months ended
September 30, 2017, diluted earnings per share equals basic earnings per share because the underlying shares for the intrinsic value of the embedded options in the Convertible Notes were not dilutive. For the three and nine months ended
September 30, 2016, diluted earnings per share equals basic earnings per share because there were no common stock equivalents outstanding.
38
Below is the schedule of financial highlights of the Company for the nine months
ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
Ended
September 30, 2017
|
|
For the Nine Months
Ended
September 30, 2016
|
Per Share Data:
(1)
|
|
|
|
|
|
|
|
|
NAV, beginning of period
|
|
$
|
18.31
|
|
|
$
|
18.97
|
|
Net investment income (loss)
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
Net realized and unrealized gains (losses)
|
|
$
|
(0.65
|
)
|
|
$
|
(0.64
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
|
0.95
|
|
|
|
0.96
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock, net of underwriting and offering costs
|
|
|
0.32
|
|
|
|
|
|
Distributions declared from net investment income
(2)
|
|
|
(1.35
|
)
|
|
|
(1.35
|
)
|
|
|
|
|
|
|
|
|
|
Total increase (decrease) in net assets
|
|
|
(0.08
|
)
|
|
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
NAV, end of period
|
|
$
|
18.23
|
|
|
$
|
18.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$
|
22.82
|
|
|
$
|
21.77
|
|
Shares outstanding, end of period
|
|
|
40,109,905
|
|
|
|
36,321,374
|
|
Weighted average shares outstanding
|
|
|
38,130,304
|
|
|
|
36,312,852
|
|
Total return based on NAV
(3)
|
|
|
5.74%
|
|
|
|
4.89%
|
|
Total return based on market value
(4)
|
|
|
3.04%
|
|
|
|
22.70%
|
|
|
|
|
Ratio/Supplemental Data (all amounts in thousands except ratios):
|
|
|
|
|
|
|
|
|
Net assets, end of period
|
|
$
|
731,159
|
|
|
$
|
674,970
|
|
Ratio of net expenses to average net assets
(
5)
|
|
|
7.98%
|
|
|
|
7.17%
|
|
Ratio of expenses (without incentive fees and interest and other debt expenses) to average
net assets
(
5)
|
|
|
3.40%
|
|
|
|
3.44%
|
|
Ratio of interest and other debt expenses to average net assets
(
6)
|
|
|
2.74%
|
|
|
|
1.96%
|
|
Ratio of incentive fees to average net assets
(6)
|
|
|
1.84%
|
|
|
|
1.77%
|
|
Ratio of total expenses to average net assets
(
5)
|
|
|
7.98%
|
|
|
|
7.17%
|
|
Ratio of net investment income to average net assets
(5)(7)
|
|
|
11.69%
|
|
|
|
11.45%
|
|
Average debt outstanding
|
|
$
|
464,395
|
|
|
$
|
460,469
|
|
Average debt per share
(8)
|
|
$
|
12.18
|
|
|
$
|
12.68
|
|
Portfolio turnover
|
|
|
41%
|
|
|
|
13%
|
|
(1)
|
|
The per share data was derived by using the weighted average shares outstanding during the applicable period.
|
(2)
|
|
The per share data for distributions declared reflects the actual amount of distributions declared per share
for the applicable period.
|
(3)
|
|
Total return based on NAV is calculated as the change in NAV per share during the respective periods, assuming
dividends and distributions, if any, are reinvested in accordance with the Companys dividend reinvestment plan.
|
(4)
|
|
Total return based on market value is calculated as the change in market value per share during the respective
periods, assuming dividends and distributions, if any, are reinvested in accordance with the Companys dividend reinvestment plan.
|
(5)
|
|
Annualized except for certain operating expenses.
|
(7)
|
|
Annualized except for certain components of other income.
|
(8)
|
|
Average debt per share is calculated as average debt outstanding divided by the weighted average shares
outstanding during the applicable period.
|
39
Subsequent events after the Consolidated Statements of Assets and
Liabilities date have been evaluated through the date the unaudited consolidated financial statements were issued. Other than the items discussed below, the Company has concluded that there is no impact requiring adjustment or disclosure in the
consolidated financial statements.
On October 31, 2017, the Board of Directors declared a quarterly distribution of $0.45 per share
payable on January 16, 2018 to holders of record as of December 29, 2017.
On November 1, 2017, the Company and Cal Regents, as
members of the Senior Credit Fund, entered into an amendment to the amended and restated limited liability company agreement of the Senior Credit Fund to extend the investment period for the Senior Credit Fund from November 1, 2017 to January 2,
2018.
40