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Carlyle Secured Lending, Inc. - Quarter Report: 2019 March (Form 10-Q)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period                      to                     
Commission File No. 000-54899

TCG BDC, INC.
(Exact name of Registrant as specified in its charter)

Maryland
 
80-0789789
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
520 Madison Avenue, 40th Floor, New York, NY 10022
 
(212) 813-4900
(Address of principal executive office) (Zip Code)
 
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
o
Non-accelerated filer
 
o 
  
Smaller reporting company
 
o
Emerging growth company
 
o 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, $0.01 par value
CGBD
NASDAQ Global Select Market
The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding at May 7, 2019 was 60,613,488.




TCG BDC, INC.
INDEX
 
 
 
 
Part I.
Financial Information
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II.
Other Information
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

2





TCG BDC, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollar amounts in thousands, except per share data)
 
March 31, 2019
 
December 31, 2018
ASSETS
(unaudited)
 
 
Investments, at fair value
 
 
 
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,965,496 and $1,799,751, respectively)
$
1,899,537

 
$
1,731,319

Investments—non-controlled/affiliated, at fair value (amortized cost of $14,081 and $13,839, respectively)
21,081

 
18,543

Investments—controlled/affiliated, at fair value (amortized cost of $241,801 and $230,001, respectively)
234,591

 
222,295

Total investments, at fair value (amortized cost of $2,221,378 and $2,043,591, respectively)
2,155,209

 
1,972,157

Cash and cash equivalents
40,071

 
87,186

Receivable for investment sold

 
8,060

Deferred financing costs
4,069

 
3,950

Interest receivable from non-controlled/non-affiliated investments
7,658

 
5,853

Interest receivable from non-controlled/affiliated investments
8

 
3

Interest and dividend receivable from controlled/affiliated investments
7,256

 
7,405

Prepaid expenses and other assets
8

 
129

Total assets
$
2,214,279

 
$
2,084,743

LIABILITIES
 
 
 
Secured borrowings (Note 6)
$
660,959

 
$
514,635

Notes payable, net of unamortized debt issuance costs of $3,095 and $3,157, respectively (Note 7)
446,105

 
446,043

Payable for investments purchased

 
1,870

Due to Investment Adviser
169

 
236

Interest and credit facility fees payable (Notes 6 and 7)
7,994

 
7,500

Dividend payable (Note 9)
22,681

 
35,497

Base management and incentive fees payable (Note 4)
13,531

 
13,834

Administrative service fees payable (Note 4)
139

 
94

Other accrued expenses and liabilities
2,514

 
1,816

Total liabilities
1,154,092

 
1,021,525

Commitments and contingencies (Notes 8 and 11)
 
 
 
NET ASSETS
 
 
 
Common stock, $0.01 par value; 200,000,000 shares authorized; 61,272,069 shares and 62,230,251 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
613

 
622

Paid-in capital in excess of par value
1,160,258

 
1,174,334

Offering costs
(1,633
)
 
(1,633
)
Total distributable earnings (loss)
(99,051
)
 
(110,105
)
Total net assets
$
1,060,187

 
$
1,063,218

NET ASSETS PER SHARE
$
17.30

 
$
17.09


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

3



TCG BDC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Investment income:
 
 
 
From non-controlled/non-affiliated investments:
 
 
 
Interest income
$
45,242

 
$
39,328

Other income
2,028

 
895

Total investment income from non-controlled/non-affiliated investments
47,270

 
40,223

From non-controlled/affiliated investments:
 
 
 
Interest income
379

 
379

Total investment income from non-controlled/affiliated investments
379

 
379

From controlled/affiliated investments:
 
 
 
Interest income
3,538

 
2,631

Dividend income
4,000

 
4,250

Total investment income from controlled/affiliated investments
7,538

 
6,881

Total investment income
55,187

 
47,483

Expenses:
 
 
 
Base management fees (Note 4)
7,685

 
7,222

Incentive fees (Note 4)
5,846

 
5,330

Professional fees
745

 
762

Administrative service fees (Note 4)
216

 
186

Interest expense (Notes 6 and 7)
11,991

 
7,815

Credit facility fees (Note 6)
568

 
525

Directors’ fees and expenses
93

 
98

Other general and administrative
421

 
405

Total expenses
27,565

 
22,343

Net investment income (loss) before taxes
27,622

 
25,140

Excise tax expense
60

 
10

Net investment income (loss)
27,562

 
25,130

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:
 
 
 
Net realized gain (loss) from:
 
 
 
Non-controlled/non-affiliated investments
899

 
(129
)
Net change in unrealized appreciation (depreciation):
 
 
 
Non-controlled/non-affiliated investments
2,473

 
(6,044
)
Non-controlled/affiliated investments
2,296

 
1,432

Controlled/affiliated investments
496

 
700

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
6,164

 
(4,041
)
Net increase (decrease) in net assets resulting from operations
$
33,726

 
$
21,089

Basic and diluted earnings per common share (Note 9)
$
0.55

 
$
0.34

Weighted-average shares of common stock outstanding—Basic and Diluted (Note 9)
61,772,774

 
62,504,465


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

4



TCG BDC, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollar amounts in thousands)
(unaudited)
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Increase (decrease) in net assets resulting from operations:
 
 
 
Net investment income (loss)
$
27,562

 
$
25,130

Net realized gain (loss) on investments
899

 
(129
)
Net change in unrealized appreciation (depreciation) on investments
5,265

 
(3,912
)
Net increase (decrease) in net assets resulting from operations
33,726

 
21,089

Capital transactions:
 
 
 
Common stock issued, net of offering and underwriting costs

 
(15
)
Reinvestment of dividends

 
6,629

Repurchase of common stock
(14,085
)
 

Dividends declared (Note 12)
(22,672
)
 
(23,150
)
Net increase (decrease) in net assets resulting from capital share transactions
(36,757
)
 
(16,536
)
Net increase (decrease) in net assets
(3,031
)
 
4,553

Net assets at beginning of period
1,063,218

 
1,127,304

Net assets at end of period
$
1,060,187

 
$
1,131,857


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

5



TCG BDC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(unaudited)
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Cash flows from operating activities:
 
 
 
Net increase (decrease) in net assets resulting from operations
$
33,726

 
$
21,089

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
Amortization of deferred financing costs
298

 
252

Net accretion of discount on investments
(2,161
)
 
(2,390
)
Paid-in-kind interest
(1,052
)
 
(213
)
Net realized (gain) loss on investments
(899
)
 
129

Net change in unrealized (appreciation) depreciation on investments
(5,265
)
 
3,912

Cost of investments purchased and change in payable for investments purchased
(247,039
)
 
(111,938
)
Proceeds from sales and repayments of investments and change in receivable for investments sold
79,554

 
164,119

Changes in operating assets:
 
 
 
Interest receivable
(1,361
)
 
(486
)
Dividend receivable
(300
)
 
(1,410
)
Prepaid expenses and other assets
121

 
(159
)
Changes in operating liabilities:
 
 
 
Due to Investment Adviser
(67
)
 
35

Interest and credit facility fees payable
494

 
160

Base management and incentive fees payable
(303
)
 
(546
)
Administrative service fees payable
45

 
30

Other accrued expenses and liabilities
698

 
(101
)
Net cash provided by (used in) operating activities
(143,511
)
 
72,483

Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock, net of offering and underwriting costs

 
(15
)
Repurchase of common stock
(14,085
)
 

Borrowings on SPV Credit Facility and Credit Facility
253,950

 
253,050

Repayments of SPV Credit Facility and Credit Facility
(107,626
)
 
(288,078
)
Debt issuance costs paid
(355
)
 
(17
)
Dividends paid in cash
(35,488
)
 
(23,852
)
Net cash provided by (used in) financing activities
96,396

 
(58,912
)
Net increase (decrease) in cash and cash equivalents
(47,115
)
 
13,571

Cash and cash equivalents, beginning of period
87,186

 
32,039

Cash and cash equivalents, end of period
$
40,071

 
$
45,610

Supplemental disclosures:
 
 
 
Interest paid during the period
$
11,515

 
$
7,682

Taxes, including excise tax, paid during the period
$
225

 
$
105

Dividends declared during the period
$
22,672

 
$
23,150

Reinvestment of dividends
$

 
$
6,629


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

6

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of of Net Assets
 
 
First Lien Debt (76.51%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advanced Instruments, LLC
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.73%
 
11/1/2016
 
10/31/2022
 
$
19,916

 
$
19,679

 
$
19,779

 
1.87
 %
 
Aero Operating, LLC (Dejana Industries, Inc.)
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 7.25%
 
9.74%
 
1/5/2018
 
12/29/2022
 
3,560

 
3,527

 
3,545

 
0.32

 
Alpha Packaging Holdings, Inc.
 
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
6.85%
 
6/26/2015
 
5/12/2020
 
2,858

 
2,857

 
2,855

 
0.27

 
Alpine SG, LLC
 
^*
 
(2) (3)
 
High Tech Industries
 
L + 5.50%
 
8.24%
 
2/2/2018
 
11/16/2022
 
13,801

 
13,677

 
13,741

 
1.30

 
American Physician Partners, LLC
 
^+
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.50%
 
9.10%
 
1/7/2019
 
12/21/2021
 
35,376

 
34,798

 
35,388

 
3.33

 
AMS Group HoldCo, LLC
 
^+*
 
(2) (3) (13)
 
Transportation: Cargo
 
L + 6.00%
 
8.60%
 
9/29/2017
 
9/29/2023
 
32,567

 
31,977

 
30,821

 
2.91

 
Analogic Corporation
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.00%
 
8.50%
 
6/22/2018
 
6/22/2024
 
35,160

 
34,474

 
34,586

 
3.26

 
Anchor Hocking, LLC
 
^
 
(2) (3)
 
Durable Consumer Goods
 
L + 8.25%
 
10.99%
 
1/25/2019
 
1/25/2024
 
11,575

 
11,209

 
11,199

 
1.06

 
Apptio, Inc.
 
^
 
(2) (3) (13)
 
Software
 
L + 7.25%
 
9.74%
 
1/10/2019
 
1/10/2025
 
28,402

 
27,804

 
28,332

 
2.67

 
Avenu Holdings, LLC
 
+*
 
(2) (3)
 
Sovereign & Public Finance
 
L + 5.25%
 
7.85%
 
9/28/2018
 
9/28/2024
 
38,959

 
38,321

 
38,199

 
3.60

 
Brooks Equipment Company, LLC
 
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.63%
 
6/26/2015
 
8/29/2020
 
2,502

 
2,494

 
2,499

 
0.24

 
Capstone Logistics Acquisition, Inc.
 
+*
 
(2) (3)
 
Transportation: Cargo
 
L + 4.50%
 
7.00%
 
6/26/2015
 
10/7/2021
 
14,306

 
14,238

 
14,295

 
1.35

 
Captive Resources Midco, LLC
 
^*
 
(2) (3) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.75%
 
8.25%
 
6/30/2015
 
12/18/2021
 
29,182

 
28,968

 
29,108

 
2.75

 
Central Security Group, Inc.
 
+*
 
(2) (3)
 
Consumer Services
 
L + 5.63%
 
8.13%
 
6/26/2015
 
10/6/2021
 
23,424

 
23,276

 
23,075

 
2.18

 
Chemical Computing Group ULC (Canada)
 
^*
 
(2) (3) (7) (13)
 
Software
 
L + 5.50%
 
8.00%
 
8/30/2018
 
8/30/2023
 
15,755

 
15,604

 
15,619

 
1.47

 
CIP Revolution Holdings, LLC
 
^+*
 
(2) (3) (13)
 
Media: Advertising, Printing & Publishing
 
L + 6.00%
 
8.61%
 
8/19/2016
 
8/19/2021
 
20,530

 
20,407

 
20,228

 
1.91

 
CircusTrix Holdings, LLC
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 5.50%
 
8.00%
 
2/2/2018
 
12/16/2021
 
9,190

 
9,125

 
9,037

 
0.85

 
Comar Holding Company, LLC
 
^*
 
(2) (3) (13)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.74%
 
6/18/2018
 
6/18/2024
 
27,137

 
26,527

 
26,647

 
2.51

 
Continuum Managed Services Holdco, LLC
 
^+*
 
(2) (3) (13)
 
High Tech Industries
 
L + 6.00%
 
8.50%
 
6/20/2017
 
6/8/2023
 
28,171

 
27,571

 
27,992

 
2.64

 
Dade Paper & Bag, LLC
 
^+*
 
(2) (3)
 
Forest Products & Paper
 
L + 7.50%
 
10.00%
 
6/9/2017
 
6/10/2024
 
49,125

 
48,363

 
48,771

 
4.60

 
Datto, Inc.
 
^+*
 
(2) (3) (13)
 
High Tech Industries
 
L + 8.00%
 
10.49%
 
12/7/2017
 
12/7/2022
 
35,622

 
35,199

 
36,349

 
3.43

 
Dent Wizard International Corporation
 
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.50%
 
4/28/2015
 
4/7/2020
 
884

 
882

 
881

 
0.08

 
Derm Growth Partners III, LLC (Dermatology Associates)
 
^
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 6.25%
 
8.85%
 
5/31/2016
 
5/31/2022
 
52,567

 
52,204

 
48,519

 
4.58

 
DermaRite Industries, LLC
 
^*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 7.00%
 
9.60%
 
3/3/2017
 
3/3/2022
 
21,803

 
21,584

 
21,654

 
2.04

 
Dimensional Dental Management, LLC
 
^
 
(2) (3) (11)
 
Healthcare & Pharmaceuticals
 
L + 6.75%
 
9.22%
 
2/12/2016
 
2/12/2021
 
33,674

 
33,301

 
28,213

 
2.66

 
Direct Travel, Inc.
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 6.50%
 
9.12%
 
10/14/2016
 
12/1/2021
 
35,287

 
34,899

 
35,162

 
3.32

 
DTI Holdco, Inc.
 
*
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.49%
 
12/18/2018
 
9/30/2023
 
1,990

 
1,868

 
1,860

 
0.18


7

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of of Net Assets
 
 
First Lien Debt (76.51%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EIP Merger Sub, LLC (Evolve IP)
 
^+*
 
(2) (3) (11)
 
Telecommunications
 
L + 5.75%
 
8.25%
 
6/7/2016
 
6/7/2022
 
$
36,093

 
$
35,465

 
$
34,834

 
3.29
 %
 
Emergency Communications Network, LLC
 
^+*
 
(2) (3)
 
Telecommunications
 
L + 6.25%
 
8.75%
 
6/1/2017
 
6/1/2023
 
24,561

 
24,394

 
24,160

 
2.28

 
Ensono, LP
 
*
 
(2) (3)
 
Telecommunications
 
L + 5.25%
 
7.75%
 
4/30/2018
 
6/27/2025
 
8,602

 
8,517

 
8,505

 
0.80

 
Frontline Technologies Holdings, LLC
 
^
 
(2) (3) (13)
 
Software
 
L + 6.50%
 
9.10%
 
9/18/2017
 
9/18/2023
 
40,420

 
40,093

 
40,401

 
3.81

 
FWR Holding Corporation
 
^+*
 
(2) (3) (13)
 
Beverage, Food & Tobacco
 
L + 5.50%
 
8.00%
 
8/21/2017
 
8/21/2023
 
46,190

 
45,379

 
46,051

 
4.34

 
Green Energy Partners/Stonewall, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 5.50%
 
8.10%
 
6/26/2015
 
11/13/2021
 
19,700

 
19,459

 
19,256

 
1.82

 
GRO Sub Holdco, LLC (Grand Rapids)
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.00%
 
8.60%
 
2/28/2018
 
2/22/2024
 
6,653

 
6,473

 
6,242

 
0.59

 
Hummel Station, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 6.00%
 
8.50%
 
2/3/2016
 
10/27/2022
 
14,753

 
14,095

 
13,924

 
1.31

 
Hydrofarm, LLC
 
^
 
(2) (3)
 
Wholesale
 
L+10.00% (30% cash/70% PIK)
 
12.49%
 
5/15/2017
 
5/12/2022
 
20,111

 
19,801

 
13,565

 
1.28

 
iCIMS, Inc.
 
^
 
(2) (3) (13)
 
Software
 
L + 6.50%
 
8.99%
 
9/12/2018
 
9/12/2024
 
20,025

 
19,630

 
19,798

 
1.87

 
Indra Holdings Corp. (Totes Isotoner)
 
^
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 4.25%
 
6.83%
 
4/29/2014
 
5/1/2021
 
18,965

 
17,640

 
9,760

 
0.92

 
Innovative Business Services, LLC
 
^*
 
(2) (3) (13)
 
High Tech Industries
 
L + 5.50%
 
8.30%
 
4/5/2018
 
4/5/2023
 
16,266

 
15,775

 
15,917

 
1.50

 
Legacy.com, Inc.
 
^
 
(2) (3) (11)
 
High Tech Industries
 
L + 6.00%
 
8.55%
 
3/20/2017
 
3/20/2023
 
17,000

 
16,706

 
16,330

 
1.54

 
Mailgun Technologies, Inc.
 
^
 
(2) (3) (13)
 
High Tech Industries
 
L + 6.00%
 
8.61%
 
3/26/2019
 
3/26/2025
 
11,526

 
11,273

 
11,268

 
1.06

 
Maravai Intermediate Holdings, LLC
 
^*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.75%
 
8/2/2018
 
8/2/2025
 
19,900

 
19,723

 
19,737

 
1.86

 
Metrogistics, LLC
 
+*
 
(2) (3)
 
Transportation: Cargo
 
L + 6.50%
 
9.10%
 
12/13/2016
 
9/30/2022
 
17,402

 
17,247

 
17,326

 
1.63

 
Moxie Liberty, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 6.50%
 
9.10%
 
10/16/2017
 
8/21/2020
 
9,848

 
9,260

 
8,773

 
0.83

 
National Carwash Solutions, Inc.
 
^+
 
(2) (3) (13)
 
Automotive
 
L + 6.00%
 
8.49%
 
8/7/2018
 
4/28/2023
 
8,393

 
8,218

 
8,292

 
0.78

 
National Technical Systems, Inc.
 
^+*
 
(2) (3) (13)
 
Aerospace & Defense
 
L + 6.25%
 
8.74%
 
6/26/2015
 
6/12/2021
 
28,169

 
27,939

 
28,105

 
2.65

 
NES Global Talent Finance US, LLC (United Kingdom)
 
+*
 
(2) (3) (7)
 
Energy: Oil & Gas
 
L + 5.50%
 
8.24%
 
5/9/2018
 
5/11/2023
 
9,967

 
9,816

 
9,773

 
0.92

 
Nexus Technologies, LLC
 
*
 
(2) (3)
 
High Tech Industries
 
L + 5.50%
 
8.10%
 
12/11/2018
 
12/5/2023
 
6,219

 
6,162

 
6,083

 
0.57

 
NMI AcquisitionCo, Inc.
 
^+*
 
(2) (3) (13)
 
High Tech Industries
 
L + 6.75%
 
9.25%
 
9/6/2017
 
9/6/2022
 
51,296

 
50,562

 
49,646

 
4.68

 
North American Dental Management, LLC
 
^
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.81%
 
10/26/2018
 
7/7/2023
 
3,335

 
3,241

 
3,246

 
0.31

 
Northland Telecommunications Corporation
 
^*
 
(2) (3) (13)
 
Media: Broadcast & Subscription
 
L + 5.75%
 
8.24%
 
10/1/2018
 
10/1/2025
 
21,584

 
21,254

 
21,284

 
2.01

 
Plano Molding Company, LLC
 
^
 
(2) (3)
 
Hotel, Gaming & Leisure
 
L + 7.50%
 
9.99%
 
5/1/2015
 
5/12/2021
 
14,865

 
14,702

 
13,912

 
1.31


8

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of  Net Assets
 
 
First Lien Debt (76.51%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PPC Flexible Packaging, LLC
 
^+*
 
(2) (3) (13)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.75%
 
11/23/2018
 
11/23/2024
 
$
13,767

 
$
13,549

 
$
13,437

 
1.27
 %
 
PPT Management Holdings, LLC
 
^
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L+1.00%, 6.50% PIK
 
9.99%
 
12/15/2016
 
12/16/2022
 
27,041

 
26,909

 
21,957

 
2.07

 
PricewaterhouseCoopers Public Sector LLP
 
^
 
(2) (3) (13)
 
Aerospace & Defense
 
L + 2.75%
 
5.24%
 
5/1/2018
 
5/1/2023
 

 
(128
)
 
(104
)
 
(0.01
)
 
Prime Risk Partners, Inc.
 
^
 
(2) (3) (11) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.38%
 
8.11%
 
8/15/2017
 
8/13/2023
 
27,719

 
27,195

 
27,217

 
2.57

 
Prime Risk Partners, Inc.
 
^
 
(2) (3) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.38%
 
7.98%
 
8/15/2017
 
8/13/2023
 
2,186

 
2,089

 
2,151

 
0.20

 
Product Quest Manufacturing, LLC
 
^
 
(2) (3) (9)
 
Containers, Packaging & Glass
 
L + 6.75%
 
10.00%
 
9/21/2017
 
3/31/2019
 
2,794

 
2,794

 
2,794

 
0.26

 
Product Quest Manufacturing, LLC
 
^
 
(2) (3) (9) (11)
 
Containers, Packaging & Glass
 
L + 5.75%
 
5.75%
 
9/9/2015
 
9/9/2020
 
33,000

 
32,270

 

 

 
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC)
 
+*
 
(2) (3)
 
Wholesale
 
L + 4.50%
 
7.00%
 
12/1/2017
 
1/28/2020
 
14,712

 
14,421

 
14,712

 
1.39

 
PSI Services, LLC
 
^
 
(2) (3)
 
Business Services
 
L + 5.00%
 
7.51%
 
9/19/2018
 
1/20/2023
 
4,527

 
4,472

 
4,458

 
0.42

 
QW Holding Corporation (Quala)
 
^+*
 
(2) (3) (13)
 
Environmental Industries
 
L + 5.75%
 
8.42%
 
8/31/2016
 
8/31/2022
 
39,060

 
38,443

 
38,646

 
3.65

 
Redwood Services Group, LLC
 
^*
 
(2) (3)
 
High Tech Industries
 
L + 6.00%
 
8.63%
 
11/13/2018
 
6/6/2023
 
6,028

 
5,983

 
6,004

 
0.57

 
Sapphire Convention, Inc. (Smart City)
 
^+*
 
(2) (3) (13)
 
Telecommunications
 
L + 5.25%
 
7.93%
 
11/20/2018
 
11/20/2025
 
28,793

 
28,159

 
28,270

 
2.67

 
Smile Doctors, LLC
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.75%
 
8.36%
 
10/6/2017
 
10/6/2022
 
19,034

 
18,925

 
18,715

 
1.76

 
SolAero Technologies Corp.
 
^
 
(2) (3) (9)
 
Telecommunications
 
L + 5.25%
 
7.74%
 
5/24/2016
 
12/10/2020
 
24,362

 
23,787

 
14,688

 
1.39

 
SolAero Technologies Corp.
 
^
 
(2) (3)
 
Telecommunications
 
L+7.25%, 4.00% PIK
 
10.25%
 
9/6/2018
 
4/12/2019
 
5,494

 
5,476

 
5,494

 
0.52

 
Sovos Brands Intermediate, Inc.
 
^
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.50%
 
11/16/2018
 
11/20/2025
 
20,050

 
19,858

 
19,799

 
1.87

 
SPay, Inc.
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 5.75%
 
8.26%
 
6/15/2018
 
6/15/2024
 
19,966

 
19,418

 
18,338

 
1.73

 
Superior Health Linens, LLC
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 7.50%
 
10.00%
 
9/30/2016
 
9/30/2021
 
22,137

 
21,941

 
21,861

 
2.06

 
Surgical Information Systems, LLC
 
^+*
 
(2) (3) (11)
 
High Tech Industries
 
L + 4.85%
 
7.34%
 
4/24/2017
 
4/24/2023
 
26,168

 
25,976

 
25,754

 
2.43

 
T2 Systems Canada, Inc.
 
+
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
5/24/2017
 
9/28/2022
 
3,959

 
3,893

 
3,949

 
0.37

 
T2 Systems, Inc.
 
^+*
 
(2) (3) (13)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
9/28/2016
 
9/28/2022
 
32,251

 
31,711

 
32,169

 
3.03

 
Tank Holding Corp.
 
^
 
(2) (3) (13)
 
Capital Equipment
 
L + 4.00%
 
6.49%
 
3/26/2019
 
3/26/2024
 

 

 

 

 
The Hilb Group, LLC
 
^
 
(2) (3) (11) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 6.00%
 
8.53%
 
6/24/2015
 
6/24/2021
 
50,949

 
50,459

 
50,093

 
4.72

 
The Topps Company, Inc.
 
+*
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 6.00%
 
8.60%
 
6/26/2015
 
10/2/2020
 
22,065

 
21,905

 
22,065

 
2.08


9

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of of Net Assets
 
 
First Lien Debt (76.51%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transform SR Holdings, LLC
 
^
 
(2) (3) (11)
 
Retail
 
L + 7.25%
 
9.74%
 
2/11/2019
 
2/11/2024
 
$
19,050

 
$
18,863

 
$
18,860

 
1.78
 %
 
Trump Card, LLC
 
^+*
 
(2) (3) (13)
 
Transportation: Cargo
 
L + 5.00%
 
7.61%
 
6/26/2018
 
4/21/2022
 
7,955

 
7,910

 
7,864

 
0.74

 
TSB Purchaser, Inc. (Teaching Strategies, LLC)
 
^+*
 
(2) (3) (13)
 
Media: Advertising, Printing & Publishing
 
L + 6.00%
 
8.60%
 
5/14/2018
 
5/14/2024
 
27,958

 
27,306

 
27,525

 
2.60

 
Tweddle Group, Inc.
 
^
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.50%
 
6.99%
 
9/17/2018
 
9/17/2023
 
2,080

 
2,052

 
2,069

 
0.20

 
U.S. Acute Care Solutions, LLC
 
+
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 5.00%
 
7.60%
 
2/21/2019
 
5/15/2021
 
4,298

 
4,241

 
4,293

 
0.40

 
USLS Acquisition, Inc.
 
^*
 
(2) (3) (13)
 
Business Services
 
L + 5.75%
 
8.35%
 
11/30/2018
 
11/30/2024
 
19,128

 
18,696

 
18,623

 
1.76

 
VRC Companies, LLC
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 6.50%
 
9.01%
 
3/31/2017
 
3/31/2023
 
56,995

 
56,282

 
56,564

 
5.34

 
Watchfire Enterprises, Inc.
 
*
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.85%
 
6/9/2017
 
10/2/2020
 
1,248

 
1,242

 
1,248

 
0.12

 
Westfall Technik, Inc.
 
^
 
(2) (3) (13)
 
Chemicals, Plastics & Rubber
 
L + 5.00%
 
7.60%
 
9/13/2018
 
9/13/2024
 
19,936

 
19,479

 
19,376

 
1.83

 
Zemax Software Holdings, LLC
 
^*
 
(2) (3) (13)
 
Software
 
L + 5.75%
 
8.35%
 
6/25/2018
 
6/25/2024
 
10,223

 
10,091

 
10,132

 
0.96

 
Zenith Merger Sub, Inc.
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 5.50%
 
8.10%
 
12/13/2017
 
12/13/2023
 
15,583

 
15,347

 
15,417

 
1.45

 
First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,718,671

 
$
1,648,980

 
155.54
 %
 
Second Lien Debt (10.63%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
Access CIG, LLC
 
^
 
(2) (3)
 
Business Services
 
L + 7.75%
 
10.24%
 
2/14/2018
 
2/27/2026
 
$
2,700

 
$
2,678

 
$
2,653

 
0.25
 %
 
Aimbridge Acquisition Co., Inc.
 
^
 
(2) (3)
 
Hotel, Gaming & Leisure
 
L + 7.50%
 
9.99%
 
2/1/2019
 
2/1/2027
 
7,727

 
7,594

 
7,631

 
0.72

 
AmeriLife Group, LLC
 
^*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 8.75%
 
11.25%
 
7/9/2015
 
1/10/2023
 
22,000

 
21,722

 
21,945

 
2.07

 
AQA Acquisition Holding, Inc.
 
^
 
(2) (3)
 
High Tech Industries
 
L + 8.00%
 
10.49%
 
10/1/2018
 
5/24/2024
 
40,000

 
39,636

 
39,892

 
3.77

 
Argon Medical Devices Holdings, Inc.
 
^*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 8.00%
 
10.50%
 
11/2/2017
 
1/23/2026
 
9,497

 
9,439

 
9,458

 
0.89

 
Brave Parent Holdings, Inc.
 
^*
 
(2) (3)
 
Software
 
L + 7.50%
 
10.00%
 
10/3/2018
 
4/19/2026
 
19,062

 
18,626

 
18,495

 
1.74

 
Drew Marine Group Inc.
 
^+*
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 7.00%
 
9.50%
 
11/19/2013
 
5/19/2021
 
12,500

 
12,488

 
12,423

 
1.17

 
Outcomes Group Holdings, Inc.
 
^*
 
(2) (3)
 
Business Services
 
L + 7.50%
 
10.00%
 
10/23/2018
 
10/26/2026
 
4,500

 
4,500

 
4,484

 
0.42

 
Pharmalogic Holdings Corp.
 
^
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 8.00%
 
10.50%
 
6/7/2018
 
12/11/2023
 
563

 
560

 
563

 
0.05

 
Project Accelerate Parent, LLC
 
^*
 
(2) (3)
 
Software
 
L + 8.50%
 
10.99%
 
1/2/2018
 
1/2/2026
 
22,500

 
21,996

 
22,214

 
2.10

 
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC)
 
^
 
(2) (3)
 
Wholesale
 
L + 8.50%
 
11.00%
 
1/24/2014
 
7/28/2020
 
3,000

 
2,973

 
3,000

 
0.28

 
Reladyne, Inc.
 
^+*
 
(2) (3) (13)
 
Wholesale
 
L + 9.50%
 
12.10%
 
4/19/2018
 
1/21/2023
 
12,242

 
12,048

 
12,234

 
1.15

 
Santa Cruz Holdco, Inc.
 
^
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 8.25%
 
10.85%
 
12/15/2017
 
12/13/2024
 
17,137

 
16,988

 
17,059

 
1.61

 
Tank Holding Corp.
 
^
 
(2) (3)
 
Capital Equipment
 
L + 8.25%
 
10.74%
 
3/26/2019
 
3/26/2027
 
37,380

 
36,634

 
36,633

 
3.46

 
Ultimate Baked Goods MIDCO, LLC (Rise Baking)
 
^
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 8.00%
 
10.50%
 
8/9/2018
 
8/9/2026
 
8,333

 
8,179

 
8,227

 
0.78


10

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of of Net Assets
 
 
Second Lien Debt (10.63%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Watchfire Enterprises, Inc.
 
^
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 8.00%
 
10.60%
 
10/2/2013
 
10/2/2021
 
$
7,000

 
$
6,953

 
$
6,990

 
0.66
 %
 
Zywave, Inc.
 
^
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.49%
 
11/18/2016
 
11/17/2023
 
4,950

 
4,894

 
4,950

 
0.47

 
Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
227,908

 
$
228,851

 
21.59
 %
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Type
 
Acquisition Date
 
Shares/ Units
 
Cost
 
Fair Value (5)
 
% of of Net Assets
Equity Investments (1.00%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANLG Holdings, LLC
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
Common stock
 
6/22/2018
 
879,689

 
$
880

 
$
880

 
0.08
%
Avenu Holdings, LLC
 
^
 
(6)
 
Sovereign & Public Finance
 
Common stock
 
9/28/2018
 
172,413

 
172

 
165

 
0.02

CIP Revolution Holdings, LLC
 
^
 
(6)
 
Media: Advertising, Printing & Publishing
 
Common stock
 
8/19/2016
 
31,825

 
318

 
264

 
0.03

Dade Paper & Bag, LLC
 
^
 
(6)
 
Forest Products & Paper
 
Common stock
 
6/9/2017
 
1,500,000

 
1,500

 
2,903

 
0.27

DecoPac, Inc.
 
^
 
(6)
 
Non-durable Consumer Goods
 
Common stock
 
9/29/2017
 
1,500,000

 
1,500

 
1,784

 
0.17

Derm Growth Partners III, LLC (Dermatology Associates)
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
Common stock
 
5/31/2016
 
1,000,000

 
1,000

 
138

 
0.01

GRO Sub Holdco, LLC (Grand Rapids)
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
Common stock
 
3/29/2018
 
500,000

 
500

 
220

 
0.02

Legacy.com, Inc.
 
^
 
(6)
 
High Tech Industries
 
Common stock
 
3/20/2017
 
1,500,000

 
1,500

 
941

 
0.09

Mailgun Technologies, Inc.
 
^
 
(6)
 
High Tech Industries
 
Common stock
 
3/26/2019
 
423,729

 
424

 
424

 
0.04

North Haven Goldfinch Topco, LLC
 
^
 
(6)
 
Containers, Packaging & Glass
 
Common stock
 
6/18/2018
 
2,314,815

 
2,315

 
2,362

 
0.22

Power Stop Intermediate Holdings, LLC
 
^
 
(6)
 
Automotive
 
Common stock
 
5/29/2015
 
7,150

 

 
34

 

PPC Flexible Packaging, LLC
 
^
 
(6)
 
Containers, Packaging & Glass
 
Common stock
 
2/1/2019
 
965

 
965

 
965

 
0.09

Rough Country, LLC
 
^
 
(6)
 
Durable Consumer Goods
 
Common stock
 
5/25/2017
 
754,775

 
755

 
1,040

 
0.10

SiteLock Group Holdings, LLC
 
^
 
(6)
 
High Tech Industries
 
Common stock
 
4/5/2018
 
446,429

 
446

 
552

 
0.06

T2 Systems Parent Corporation
 
^
 
(6)
 
Transportation: Consumer
 
Common stock
 
9/28/2016
 
555,556

 
556

 
571

 
0.06

Tailwind HMT Holdings Corp.
 
^
 
(6)
 
Energy: Oil & Gas
 
Common stock
 
11/17/2017
 
20,000

 
2,000

 
2,673

 
0.25

Tank Holding Corp.
 
^
 
(6)
 
Capital Equipment
 
Common stock
 
3/26/2019
 
850

 
850

 
850

 
0.08

THG Acquisition, LLC (The Hilb Group, LLC)
 
^
 
(6)
 
Banking, Finance, Insurance & Real Estate
 
Common stock
 
6/24/2015
 
1,500,000

 
1,500

 
2,805

 
0.26

Tweddle Holdings, Inc.
 
^
 
(6)
 
Media: Advertising, Printing & Publishing
 
Common stock
 
9/17/2018
 
17,208

 

 

 

USLS Acquisition, Inc.
 
^
 
(6)
 
Business Services
 
Common stock
 
11/30/2018
 
640,569

 
641

 
641

 
0.06

Zenith American Holding, Inc.
 
^
 
(6)
 
Business Services
 
Preferred stock
 
12/13/2017
 
782,384

 
782

 
1,181

 
0.11

Zenith American Holding, Inc.
 
^
 
(6)
 
Business Services
 
Common stock
 
12/13/2017
 
782,384

 

 

 

Zillow Topco LP
 
^
 
(6)
 
Software
 
Common stock
 
6/25/2018
 
312,500

 
313

 
313

 
0.03

Equity Investments Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
18,917

 
$
21,706

 
2.05
%
Total investments—non-controlled/non-affiliated
 
 
 
 
 
 
 
$
1,965,496

 
$
1,899,537

 
179.18
%

11

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

Investments—non-controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value 
(5)
 
% of 
Net Assets
First Lien Debt (0.67%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TwentyEighty, Inc. - Revolver
 
^
 
(2) (3) (12) (13)
 
Business Services
 
L + 8.00%
 
10.60%
 
1/31/2017
 
3/21/2020
 
$

 
$
(3
)
 
$

 
%
TwentyEighty, Inc. - (Term A Loans)
 
^
 
(2) (3) (12)
 
Business Services
 
L + 8.00%
 
10.60%
 
1/31/2017
 
3/21/2020
 
268

 
267

 
268

 
0.03

TwentyEighty, Inc. - (Term B Loans)
 
^
 
(12)
 
Business Services
 
N/A
 
 8.00% (4.00%
cash, 4.00% PIK)
 
1/31/2017
 
3/21/2020
 
7,064

 
6,950

 
6,923

 
0.65

TwentyEighty, Inc. - (Term C Loans)
 
^
 
(12)
 
Business Services
 
N/A
 
9.00% (0.25%
cash, 8.75% PIK)
 
1/31/2017
 
3/21/2020
 
7,276

 
6,867

 
7,130

 
0.67

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14,081

 
$
14,321

 
1.35
%
Investments—non-controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Acquisition Date
 
Shares/ Units
 
Cost
 
Fair
Value 
(5)
 
% of Net Assets
Equity Investments (0.31%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TwentyEighty Investors LLC
 
^
 
(6) (12)
 
Business Services
 
1/31/2017
 
69.786

 
$

 
$
6,760

 
0.64
%
Equity Investments Total
 
 
 
 
 
 
 
 
 
 
 
$

 
$
6,760

 
0.64
%
Total investments—non-controlled/affiliated
 
 
 
 
 
 
 
$
14,081

 
$
21,081

 
1.99
%
Investments—controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity
Date
 
Par Amount/ LLC Interest
 
Cost
 
Fair Value (5)
 
% of 
Net Assets
Investment Fund (10.88%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Middle Market Credit Fund, LLC, Mezzanine Loan
 
^
 
(2) (7) (8) (10)
 
Investment Fund
 
L+9.00%
 
11.77%
 
6/30/2016
 
3/22/2020
 
$
123,800

 
$
123,800

 
$
123,800

 
11.68
%
Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest
 
^
 
(7) (10)
 
Investment Fund
 
N/A
 
0.001%
 
2/29/2016
 
3/1/2021
 
118,001

 
118,001

 
110,791

 
10.44
%
Investment Fund Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
241,801

 
$
234,591

 
22.12
%
Total investments—controlled/affiliated
 
 
 
 
 
 
 
 
 
 
 
 
 
$
241,801

 
$
234,591

 
22.12
%
Total investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
2,221,378

 
$
2,155,209

 
203.29
%

12

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

^ Denotes that all or a portion of the assets are owned by TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”). The Company has entered into a senior secured revolving credit facility (as amended, the “Credit Facility”). The lenders of the Credit Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the TCG BDC SPV LLC (the “SPV”) or Carlyle Direct Lending CLO 2015-1R LLC (formerly known as Carlyle GMS Finance MM CLO 2015-1 LLC) (the “2015-1 Issuer”).
+ Denotes that all or a portion of the assets are owned by the Company’s wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility” and, together with the Credit Facility, the “Facilities”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or the 2015-1 Issuer.
* Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, the 2015-1 Issuer, and secure the notes issued in connection with a term debt securitization completed by the Company on June 26, 2015 (see Note 7, Notes Payable). Accordingly, such assets are not available to the creditors of the Company or the SPV.
(1)
Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of March 31, 2019, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of March 31, 2019, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of March 31, 2019. As of March 31, 2019, the reference rates for our variable rate loans were the 30-day LIBOR at 2.49%, the 90-day LIBOR at 2.60% and the 180-day LIBOR at 2.66%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.
(4)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(5)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments, equity investments and the investment fund was determined using significant unobservable inputs.
(6)
Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of March 31, 2019, the aggregate fair value of these securities is $28,466, or 2.68% of the Company’s net assets.
(7)
The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
(8)
Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company/investment fund.
(9)
Loan was on non-accrual status as of March 31, 2019.
(10)Under the Investment Company Act, the Company is deemed to be an “affiliated person” of and “control” this investment fund because the Company owns more than 25% of the investment fund’s outstanding voting securities and/or has the power to exercise control over management or policies of such investment fund. See Note 5, Middle Market Credit Fund, LLC, for more details. Transactions related to investments in controlled affiliates for the three month period ended March 31, 2019, were as follows:
Investments—controlled/affiliated
Fair Value as of December 31, 2018
 
Additions/ Purchases
 
Reductions/ Sales/ Paydowns
 
Net Realized Gain (Loss)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Fair Value as of March 31, 2019
 
Dividend and Interest Income
Middle Market Credit Fund, LLC, Mezzanine Loan
$
112,000

 
$
30,500

 
$
(18,700
)
 
$

 
$

 
$
123,800

 
$
3,538

Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest 
110,295

 

 

 

 
496

 
110,791

 
4,000

Total investments—controlled/affiliated
$
222,295

 
$
30,500

 
$
(18,700
)
 
$

 
$
496

 
$
234,591

 
$
7,538

(11)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.53%), EIP Merger Sub, LLC (Evolve IP) (3.75%), Legacy.com Inc. (4.01%), Prime Risk Partners, Inc. (2.89%), Product Quest Manufacturing, LLC (3.54%), Surgical Information Systems, LLC (1.13%), Transform SR Holdings, LLC (nil) and The Hilb Group, LLC (3.39%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

13

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

(12)
Under the Investment Company Act, the Company is deemed an “affiliated person” of this portfolio company because the Company owns 5% or more of the portfolio company’s outstanding voting securities. Transactions related to investments in non-controlled affiliates for the three month period ended March 31, 2019, were as follows:
Investments—non-controlled/affiliated
Fair Value as of December 31, 2018
 
Purchases/ Paid-in-kind interest
 
Sales/ Paydowns
 
Net Accretion of Discount
 
Net Realized Gain (Loss)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Fair value as of March 31,
2019
 
Interest Income
TwentyEighty, Inc. - Revolver
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$

TwentyEighty, Inc. - (Term A Loans)
316

 

 
(48
)
 

 

 

 
268

 
11

TwentyEighty, Inc. - (Term B Loans)
6,855

 
69

 

 
27

 

 
(28
)
 
6,923

 
139

TwentyEighty, Inc. - (Term C Loans)
6,981

 
152

 

 
40

 

 
(43
)
 
7,130

 
160

TwentyEighty Investors LLC (Equity)
4,391

 

 

 

 

 
2,369

 
6,760

 

Total investments—non-controlled/affiliated
$
18,543

 
$
221

 
$
(48
)
 
$
67

 
$

 
$
2,298

 
$
21,081

 
$
310


(13)
As of March 31, 2019, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
Investments—non-controlled/non-affiliated
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
 
 
 
 
Advanced Instruments, LLC
Revolver
 
0.50%
 
$
1,167

 
$
(8
)
Aero Operating LLC (Dejana Industries, Inc.)
Revolver
 
1.00
 
181

 
(1
)
American Physician Partners, LLC
Delayed Draw
 
1.00
 
4,200

 
1

American Physician Partners, LLC
Revolver
 
0.50
 
1,875

 
1

AMS Group HoldCo, LLC
Delayed Draw
 
1.00
 
4,009

 
(57
)
AMS Group HoldCo, LLC
Revolver
 
0.50
 
810

 
(41
)
Analogic Corporation
Revolver
 
0.50
 
3,365

 
(50
)
Apptio, Inc.
Revolver
 
0.50
 
2,367

 
(5
)
Captive Resources Midco, LLC
Delayed Draw
 
1.25
 
3,571

 
(8
)
Captive Resources Midco, LLC
Revolver
 
0.50
 
2,143

 
(4
)
Chemical Computing Group ULC
Revolver
 
0.50
 
903

 
(7
)
CIP Revolution Holdings, LLC
Revolver
 
0.50
 
532

 
(8
)
CircusTrix Holdings, LLC
Delayed Draw
 
1.00
 
1,115

 
(16
)
Comar Holding Company, LLC
Delayed Draw
 
1.00
 
5,136

 
(73
)
Comar Holding Company, LLC
Revolver
 
0.50
 
2,011

 
(29
)
Continuum Managed Services HoldCo, LLC
Revolver
 
0.50
 
2,500

 
(15
)
Datto, Inc.
Revolver
 
0.50
 
726

 
15

DermaRite Industries LLC
Revolver
 
0.50
 
1,800

 
(11
)
Direct Travel, Inc.
Delayed Draw
 
1.00
 
1,786

 
(6
)
Frontline Technologies Holdings, LLC
Delayed Draw
 
1.00
 
5,991

 
(2
)
FWR Holding Corporation
Delayed Draw
 
1.00
 
203

 
(1
)

14

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

Investments—non-controlled/non-affiliated
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
FWR Holding Corporation
Revolver
 
0.50%
 
$
3,333

 
$
(9
)
GRO Sub Holdco, LLC (Grand Rapids)
Delayed Draw
 
1.00
 
7,000

 
(83
)
GRO Sub Holdco, LLC (Grand Rapids)
Revolver
 
0.50
 
1,071

 
(13
)
iCIMS, Inc.
Revolver
 
0.50
 
1,252

 
(13
)
Innovative Business Services, LLC
Delayed Draw
 
1.00
 
3,886

 
(61
)
Innovative Business Services, LLC
Revolver
 
0.50
 
2,232

 
(35
)
Mailgun Technologies, Inc.
Revolver
 
0.50
 
1,342

 
(27
)
National Carwash Solutions, Inc.
Delayed Draw
 
1.00
 
1,494

 
(14
)
National Carwash Solutions, Inc.
Revolver
 
0.50
 
391

 
(4
)
National Technical Systems, Inc.
Revolver
 
0.50
 
2,500

 
(5
)
NMI AcquisitionCo, Inc.
Revolver
 
0.50
 
435

 
(14
)
North American Dental Management, LLC
Delayed Draw
 
1.00
 
1,715

 
(30
)
Northland Telecommunications Corporation
Revolver
 
0.50
 
1,702

 
(22
)
Pharmalogic Holdings Corp.
Delayed Draw
 
1.00
 
236

 

PPC Flexible Packaging, LLC
Revolver
 
0.50
 
1,884

 
(40
)
PricewaterhouseCoopers Public Sector LLP
Revolver
 
0.50
 
6,250

 
(104
)
Prime Risk Partners, Inc.
Delayed Draw
 
0.50
 
190

 
(3
)
Prime Risk Partners, Inc.
Delayed Draw
 
0.50
 
2,364

 
(39
)
QW Holding Corporation (Quala)
Delayed Draw
 
1.00
 
5,419

 
(50
)
Reladyne, Inc.
Delayed Draw
 
1.00
 
897

 
(1
)
Sapphire Convention, Inc.
Revolver
 
0.50
 
4,528

 
(71
)
Smile Doctors, LLC
Delayed Draw
 
1.00
 
4,560

 
(59
)
Smile Doctors, LLC
Revolver
 
0.50
 
964

 
(13
)
SPay, Inc.
Delayed Draw
 
1.00
 
9,545

 
(170
)
SPay, Inc.
Revolver
 
0.50
 
1,227

 
(84
)
Superior Health Linens, LLC
Revolver
 
0.50
 
700

 
(9
)
T2 Systems, Inc.
Revolver
 
0.50
 
1,760

 
(4
)
Tank Holding Corp. (1L)
Revolver
 
0.50
 
47

 

The Hilb Group, LLC
Delayed Draw
 
1.00
 
9,765

 
(138
)
Trump Card, LLC
Revolver
 
0.50
 
606

 
(6
)
TSB Purchaser, Inc. (Teaching Strategies, LLC)
Revolver
 
0.50
 
1,891

 
(27
)
TwentyEighty, Inc. (f/k/a Miller Heiman, Inc.)
Revolver
 
0.50
 
607

 

USLS Acquisition, Inc.
Delayed Draw
 
1.00
 
3,168

 
(69
)
USLS Acquisition, Inc.
Revolver
 
0.50
 
946

 
(21
)
VRC Companies, LLC
Delayed Draw
 
1.00
 
374

 
(3
)

15

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

Investments—non-controlled/non-affiliated
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
VRC Companies, LLC
Revolver
 
0.50%
 
$
918

 
$
(7
)
Westfall Technik, Inc.
Delayed Draw
 
1.00
 
5,022

 
(100
)
Westfall Technik, Inc.
Revolver
 
0.50
 
3,017

 
(60
)
Zemax Software Holdings, LLC
Revolver
 
0.50
 
1,284

 
(10
)
Zenith Merger Sub, Inc.
Delayed Draw
 
1.00
 
4,252

 
(31
)
Zenith Merger Sub, Inc.
Revolver
 
0.50
 
3,180

 
(23
)
Total unfunded commitments
 
 
 
 
$
150,345

 
$
(1,797
)
 
As of March 31, 2019, investments at fair value consisted of the following:
Type
 
Amortized Cost
 
Fair Value
 
% of Fair Value
First Lien Debt (excluding First Lien/Last Out)
 
$
1,492,517

 
$
1,462,000

 
67.84
%
First Lien/Last Out Unitranche
 
240,235

 
201,301

 
9.34

Second Lien Debt
 
227,908

 
228,851

 
10.62

Equity Investments
 
18,917

 
28,466

 
1.32

Investment Fund
 
241,801

 
234,591

 
10.88

Total
 
$
2,221,378

 
$
2,155,209

 
100.00
%
The rate type of debt investments at fair value as of  March 31, 2019 was as follows:
Rate Type
 
Amortized Cost
 
Fair Value
 
% of Fair Value of First and Second Lien Debt
Floating Rate
 
$
1,946,843

 
$
1,878,099

 
99.26
%
Fixed Rate
 
13,817

 
14,053

 
0.74

Total
 
$
1,960,660

 
$
1,892,152

 
100.00
%


16

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

The industry composition of investments at fair value as of March 31, 2019 was as follows:
Industry
Amortized Cost
 
Fair Value
 
% of Fair Value
Aerospace & Defense
$
27,811

 
$
28,001

 
1.30
%
Automotive
9,100

 
9,207

 
0.43

Banking, Finance, Insurance & Real Estate
131,933

 
133,319

 
6.18

Beverage, Food & Tobacco
73,416

 
74,077

 
3.44

Business Services
142,947

 
150,508

 
6.98

Capital Equipment
37,484

 
37,483

 
1.74

Chemicals, Plastics & Rubber
31,967

 
31,799

 
1.47

Construction & Building
2,494

 
2,499

 
0.12

Consumer Services
23,276

 
23,075

 
1.07

Containers, Packaging & Glass
81,277

 
49,060

 
2.28

Durable Consumer Goods
11,964

 
12,239

 
0.57

Energy: Electricity
42,814

 
41,953

 
1.95

Energy: Oil & Gas
11,816

 
12,446

 
0.58

Environmental Industries
38,443

 
38,646

 
1.79

Forest Products & Paper
49,863

 
51,674

 
2.40

Healthcare & Pharmaceuticals
287,931

 
273,588

 
12.69

High Tech Industries
257,652

 
257,703

 
11.96

Hotel, Gaming & Leisure
85,738

 
84,080

 
3.90

Investment Fund
241,801

 
234,591

 
10.88

Media: Broadcast & Subscription
21,254

 
21,284

 
0.99

Media: Advertising, Printing & Publishing
58,278

 
58,324

 
2.71

Non-durable Consumer Goods
58,033

 
50,668

 
2.35

Retail
18,863

 
18,860

 
0.87

Software
154,157

 
155,304

 
7.21

Sovereign & Public Finance
38,493

 
38,364

 
1.78

Telecommunications
125,798

 
115,951

 
5.38

Transportation: Cargo
71,372

 
70,306

 
3.26

Transportation: Consumer
36,160

 
36,689

 
1.70

Wholesale
49,243

 
43,511

 
2.02

Total
$
2,221,378

 
$
2,155,209

 
100.00
%

17

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of March 31, 2019
(dollar amounts in thousands)
(unaudited)

The geographical composition of investments at fair value as of March 31, 2019 was as follows:
Geography
Amortized Cost
 
Fair Value
 
% of Fair Value
Canada
$
15,604

 
$
15,619

 
0.73
%
United Kingdom
9,816

 
9,773

 
0.45

United States
2,195,958

 
2,129,817

 
98.82

Total
$
2,221,378

 
$
2,155,209

 
100.00
%
The accompanying notes are an integral part of these consolidated financial statements.

18

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2018
(dollar amounts in thousands)

 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of Net Assets
 
 
First Lien Debt (77.62%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advanced Instruments, LLC
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.63%
 
11/1/2016
 
10/31/2022
 
$
19,967

 
$
19,716

 
$
19,804

 
1.86
 %
 
Aero Operating, LLC (Dejana Industries, Inc.)
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 7.25%
 
9.60%
 
1/5/2018
 
12/29/2022
 
3,556

 
3,520

 
3,512

 
0.33

 
Alpha Packaging Holdings, Inc.
 
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
7.05%
 
6/26/2015
 
5/12/2020
 
2,866

 
2,865

 
2,858

 
0.27

 
Alpine SG, LLC
 
^*
 
(2) (3)
 
High Tech Industries
 
L + 6.00%
 
8.52%
 
2/2/2018
 
11/16/2022
 
9,695

 
9,607

 
9,659

 
0.91

 
AMS Group HoldCo, LLC
 
^+*
 
(2) (3) (13)
 
Transportation: Cargo
 
L + 6.00%
 
8.80%
 
9/29/2017
 
9/29/2023
 
32,612

 
31,996

 
31,721

 
2.98

 
Analogic Corporation
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.00%
 
8.52%
 
6/22/2018
 
6/22/2024
 
35,249

 
34,536

 
34,414

 
3.23

 
Avenu Holdings, LLC
 
+*
 
(2) (3)
 
Sovereign & Public Finance
 
L + 5.25%
 
8.05%
 
9/28/2018
 
9/28/2024
 
39,057

 
38,396

 
38,354

 
3.60

 
Brooks Equipment Company, LLC
 
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.71%
 
6/26/2015
 
8/29/2020
 
2,502

 
2,492

 
2,496

 
0.23

 
Capstone Logistics Acquisition, Inc.
 
+*
 
(2) (3)
 
Transportation: Cargo
 
L + 4.50%
 
7.02%
 
6/26/2015
 
10/7/2021
 
14,306

 
14,234

 
14,262

 
1.34

 
Captive Resources Midco, LLC
 
^+*
 
(2) (3) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.75%
 
8.27%
 
6/30/2015
 
12/18/2021
 
29,441

 
29,212

 
29,139

 
2.74

 
Central Security Group, Inc.
 
+*
 
(2) (3)
 
Consumer Services
 
L + 5.63%
 
8.15%
 
6/26/2015
 
10/6/2021
 
30,349

 
30,142

 
29,742

 
2.80

 
Chemical Computing Group ULC (Canada)
 
^*
 
(2) (3) (7) (13)
 
Software
 
L + 5.50%
 
8.02%
 
8/30/2018
 
8/30/2023
 
15,794

 
15,636

 
15,617

 
1.47

 
CIP Revolution Holdings, LLC
 
^+*
 
(2) (3) (13)
 
Media: Advertising, Printing & Publishing
 
L + 6.00%
 
8.80%
 
8/19/2016
 
8/19/2021
 
20,592

 
20,463

 
20,358

 
1.91

 
CircusTrix Holdings, LLC
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 5.50%
 
8.02%
 
2/2/2018
 
12/16/2021
 
9,212

 
9,001

 
8,972

 
0.84

 
Comar Holding Company, LLC
 
^*
 
(2) (3) (13)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.77%
 
6/18/2018
 
6/18/2024
 
27,086

 
26,452

 
26,505

 
2.49

 
Continuum Managed Services Holdco, LLC
 
^+*
 
(2) (3) (13)
 
High Tech Industries
 
L + 6.25%
 
8.53%
 
6/20/2017
 
6/8/2023
 
28,243

 
27,621

 
27,711

 
2.60

 
Dade Paper & Bag, LLC
 
^+*
 
(2) (3)
 
Forest Products & Paper
 
L + 7.50%
 
10.02%
 
6/9/2017
 
6/10/2024
 
49,250

 
48,464

 
47,798

 
4.49

 
Datto, Inc.
 
^*
 
(2) (3) (13)
 
High Tech Industries
 
L + 8.00%
 
10.46%
 
12/7/2017
 
12/7/2022
 
35,622

 
35,178

 
35,280

 
3.31

 
Dent Wizard International Corporation
 
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.51%
 
4/28/2015
 
4/7/2020
 
886

 
885

 
881

 
0.08

 
Derm Growth Partners III, LLC (Dermatology Associates)
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.25%
 
9.05%
 
5/31/2016
 
5/31/2022
 
51,599

 
51,203

 
50,946

 
4.78

 
DermaRite Industries, LLC
 
^*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 7.00%
 
9.52%
 
3/3/2017
 
3/3/2022
 
22,328

 
22,097

 
21,399

 
2.01

 
Dimensional Dental Management, LLC
 
^
 
(2) (3) (11)
 
Healthcare & Pharmaceuticals
 
L + 6.75%
 
9.28%
 
2/12/2016
 
2/12/2021
 
33,674

 
33,276

 
28,172

 
2.65

 
Direct Travel, Inc.
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 6.50%
 
9.30%
 
10/14/2016
 
12/1/2021
 
35,292

 
34,878

 
34,975

 
3.28

 
DTI Holdco, Inc.
 
^*
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.28%
 
12/18/2018
 
9/30/2023
 
1,995

 
1,870

 
1,860

 
0.17


19

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of Net Assets
First Lien Debt (77.62%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EIP Merger Sub, LLC (Evolve IP)
 
^+*
 
(2) (3) (11)
 
Telecommunications
 
L + 5.75%
 
8.27%
 
6/7/2016
 
6/7/2022
 
$
36,093

 
$
35,433

 
$
35,169

 
3.30
 %
Emergency Communications Network, LLC
 
^+*
 
(2) (3)
 
Telecommunications
 
L + 6.25%
 
8.75%
 
6/1/2017
 
6/1/2023
 
24,625

 
24,452

 
24,133

 
2.27

Ensono, LP
 
*
 
(2) (3)
 
Telecommunications
 
L + 5.25%
 
7.77%
 
4/30/2018
 
6/27/2025
 
8,623

 
8,618

 
8,450

 
0.79

Frontline Technologies Holdings, LLC
 
^
 
(2) (3) (13)
 
Software
 
L + 6.50%
 
9.02%
 
9/18/2017
 
9/18/2023
 
38,804

 
38,456

 
38,450

 
3.61

FWR Holding Corporation
 
^+*
 
(2) (3) (13)
 
Beverage, Food & Tobacco
 
L + 5.75%
 
8.26%
 
8/21/2017
 
8/21/2023
 
46,755

 
45,782

 
46,393

 
4.36

Green Energy Partners/Stonewall, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 5.50%
 
8.30%
 
6/26/2015
 
11/13/2021
 
19,750

 
19,494

 
19,536

 
1.83

GRO Sub Holdco, LLC (Grand Rapids)
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 6.00%
 
8.80%
 
2/28/2018
 
2/22/2024
 
6,661

 
6,466

 
6,209

 
0.58

Hummel Station, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 6.00%
 
8.52%
 
2/3/2016
 
10/27/2022
 
14,790

 
14,164

 
14,422

 
1.35

Hydrofarm, LLC
 
^
 
(2) (3)
 
Wholesale
 
L+10.00% (30% cash/70% PIK)
 
12.50%
 
5/15/2017
 
5/12/2022
 
20,306

 
19,958

 
13,989

 
1.31

iCIMS, Inc.
 
^
 
(2) (3) (13)
 
Software
 
L + 6.50%
 
8.94%
 
9/12/2018
 
9/12/2024
 
20,025

 
19,616

 
19,297

 
1.81

Indra Holdings Corp. (Totes Isotoner)
 
^
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 4.25%
 
6.77%
 
4/29/2014
 
5/1/2021
 
18,965

 
17,561

 
9,483

 
0.89

Innovative Business Services, LLC
 
^*
 
(2) (3) (13)
 
High Tech Industries
 
L + 5.50%
 
7.91%
 
4/5/2018
 
4/5/2023
 
16,307

 
15,789

 
15,948

 
1.50

Legacy.com, Inc.
 
^
 
(2) (3) (11)
 
High Tech Industries
 
L + 6.00%
 
8.79%
 
3/20/2017
 
3/20/2023
 
17,000

 
16,696

 
16,827

 
1.58

Maravai Intermediate Holdings, LLC
 
^*
 
(2)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.81%
 
8/2/2018
 
8/2/2025
 
19,950

 
19,766

 
19,719

 
1.85

Metrogistics, LLC
 
+*
 
(2) (3)
 
Transportation: Cargo
 
L + 6.50%
 
9.00%
 
12/13/2016
 
9/30/2022
 
17,517

 
17,349

 
17,424

 
1.65

Moxie Liberty, LLC
 
+*
 
(2) (3)
 
Energy: Electricity
 
L + 6.50%
 
9.30%
 
10/16/2017
 
8/21/2020
 
9,873

 
9,208

 
8,964

 
0.84

National Carwash Solutions, Inc.
 
^+
 
(2) (3) (13)
 
Automotive
 
L + 6.00%
 
8.35%
 
8/7/2018
 
4/28/2023
 
5,843

 
5,662

 
5,688

 
0.53

National Technical Systems, Inc.
 
^+*
 
(2) (3) (13)
 
Aerospace & Defense
 
L + 6.25%
 
8.87%
 
6/26/2015
 
6/12/2021
 
28,237

 
27,990

 
28,160

 
2.64

NES Global Talent Finance US, LLC (United Kingdom)
 
+*
 
(2) (3) (8)
 
Energy: Oil & Gas
 
L + 5.50%
 
8.03%
 
5/9/2018
 
5/11/2023
 
9,992

 
9,833

 
9,695

 
0.91

Nexus Technologies, LLC
 
^
 
(2) (3)
 
High Tech Industries
 
L + 5.50%
 
8.30%
 
12/11/2018
 
12/5/2023
 
6,234

 
6,177

 
6,158

 
0.58

NMI AcquisitionCo, Inc.
 
^+*
 
(2) (3) (13)
 
High Tech Industries
 
L + 6.75%
 
9.27%
 
9/6/2017
 
9/6/2022
 
51,424

 
50,646

 
49,501

 
4.65

North American Dental Management, LLC
 
^
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
8.04%
 
10/26/2018
 
7/7/2023
 
2,060

 
1,962

 
1,973

 
0.19

Northland Telecommunications Corporation
 
^*
 
(2) (3) (13)
 
Media: Broadcast & Subscription
 
L + 5.75%
 
8.10%
 
10/1/2018
 
10/1/2025
 
21,638

 
21,297

 
21,311

 
2.00


20

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of Net Assets
First Lien Debt (77.62%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment Alliance International, Inc.
 
^
 
(2) (3) (11)
 
Business Services
 
L + 6.05%
 
8.13%
 
9/15/2017
 
9/15/2021
 
$
23,723

 
$
23,324

 
$
23,588

 
2.22
 %
Plano Molding Company, LLC
 
^
 
(2) (3)
 
Hotel, Gaming & Leisure
 
L + 7.50%
 
9.98%
 
5/1/2015
 
5/12/2021
 
14,902

 
14,726

 
13,729

 
1.29

PPC Flexible Packaging, LLC
 
^+
 
(2) (3) (13)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.77%
 
11/23/2018
 
11/23/2024
 
11,962

 
11,761

 
11,839

 
1.11

PPT Management Holdings, LLC
 
^
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L+7.50% (100% PIK)
 
9.85%
 
12/15/2016
 
12/16/2022
 
26,820

 
26,675

 
22,194

 
2.08

PricewaterhouseCoopers Public Sector LLP
 
^
 
(2) (3) (13)
 
Aerospace & Defense
 
L + 2.75%
 
5.25%
 
5/1/2018
 
5/1/2023
 

 
(131
)
 
(160
)
 
(0.02
)
Prime Risk Partners, Inc.
 
^
 
(2) (3) (11) (13)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.00%
 
7.80%
 
8/15/2017
 
8/13/2023
 
24,389

 
23,906

 
23,466

 
2.20

Prime Risk Partners, Inc.
 
^
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 5.00%
 
7.44%
 
8/15/2017
 
8/13/2023
 
1,925

 
1,887

 
1,871

 
0.18

Product Quest Manufacturing, LLC
 
^
 
(2) (3) (13)
 
Containers, Packaging & Glass
 
L + 6.75%
 
10.00%
 
9/21/2017
 
3/31/2019
 
4,051

 
4,051

 
4,051

 
0.38

Product Quest Manufacturing, LLC
 
^
 
(2) (3) (9) (11)
 
Containers, Packaging & Glass
 
L + 5.75%
 
8.09%
 
9/9/2015
 
9/9/2020
 
33,000

 
32,270

 

 

Prowler Acquisition Corp. (Pipeline Supply and Service, LLC)
 
+*
 
(2) (3)
 
Wholesale
 
L + 4.50%
 
7.30%
 
12/1/2017
 
1/28/2020
 
14,752

 
14,396

 
14,663

 
1.38

PSI Services, LLC
 
^
 
(2) (3)
 
Business Services
 
L + 5.00%
 
7.52%
 
9/19/2018
 
1/20/2023
 
4,546

 
4,487

 
4,445

 
0.42

QW Holding Corporation (Quala)
 
^+*
 
(2) (3)
 
Environmental Industries
 
L + 6.75%
 
9.22%
 
8/31/2016
 
8/31/2022
 
36,179

 
35,604

 
35,835

 
3.37

Redwood Services Group, LLC
 
*
 
(2) (3)
 
High Tech Industries
 
L + 6.00%
 
8.71%
 
11/13/2018
 
6/6/2023
 
5,323

 
5,277

 
5,242

 
0.49

Sapphire Convention, Inc. (Smart City)
 
^*
 
(2) (3) (13)
 
Telecommunications
 
L + 5.25%
 
7.89%
 
11/20/2018
 
11/20/2025
 
28,866

 
28,207

 
28,264

 
2.65

Smile Doctors, LLC
 
^+*
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 5.75%
 
8.55%
 
10/6/2017
 
10/6/2022
 
18,155

 
18,037

 
17,782

 
1.67

SolAero Technologies Corp.
 
^
 
(2) (3) (9)
 
Telecommunications
 
L + 5.25%
 
7.75%
 
5/24/2016
 
12/10/2020
 
24,362

 
23,787

 
14,327

 
1.35

SolAero Technologies Corp.
 
^
 
(2) (3)
 
Telecommunications
 
L+ 7.25%, 4.00% PIK
 
10.25%
 
9/6/2018
 
3/31/2019
 
3,641

 
3,623

 
3,641

 
0.34

Sovos Brands Intermediate, Inc.
 
^
 
(2)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.64%
 
11/16/2018
 
11/20/2025
 
20,100

 
19,903

 
19,782

 
1.86

SPay, Inc.
 
^+*
 
(2) (3) (13)
 
Hotel, Gaming & Leisure
 
L + 5.75%
 
8.22%
 
6/15/2018
 
6/15/2024
 
19,909

 
19,347

 
19,009

 
1.79

Superior Health Linens, LLC
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 7.00%
 
9.52%
 
9/30/2016
 
9/30/2021
 
21,100

 
20,891

 
20,840

 
1.96

Surgical Information Systems, LLC
 
^+*
 
(2) (3) (11)
 
High Tech Industries
 
L + 4.85%
 
7.37%
 
4/24/2017
 
4/24/2023
 
27,708

 
27,497

 
27,171

 
2.55

T2 Systems Canada, Inc.
 
*
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
5/24/2017
 
9/28/2022
 
3,969

 
3,899

 
3,946

 
0.37

T2 Systems, Inc.
 
^+*
 
(2) (3) (13)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
9/28/2016
 
9/28/2022
 
32,331

 
31,756

 
32,133

 
3.02

The Hilb Group, LLC
 
^
 
(2) (3) (11)
 
Banking, Finance, Insurance & Real Estate
 
L + 6.00%
 
8.80%
 
6/24/2015
 
6/24/2021
 
49,451

 
48,861

 
48,456

 
4.55

The Topps Company, Inc.
 
+*
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 6.00%
 
8.80%
 
6/26/2015
 
10/2/2020
 
22,127

 
21,951

 
22,127

 
2.08


21

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (4)
 
Fair Value (5)
 
% of Net Assets
First Lien Debt (77.62%) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trump Card, LLC
 
^+*
 
(2) (3) (13)
 
Transportation: Cargo
 
L + 5.00%
 
7.80%
 
6/26/2018
 
4/21/2022
 
$
8,157

 
$
8,107

 
$
8,036

 
0.75
 %
TSB Purchaser, Inc. (Teaching Strategies, LLC)
 
^+*
 
(2) (3) (13)
 
Media: Advertising, Printing & Publishing
 
L + 6.00%
 
8.80%
 
5/14/2018
 
5/14/2024
 
28,028

 
27,352

 
27,462

 
2.58

Tweddle Group, Inc.
 
^
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.50%
 
6.97%
 
9/17/2018
 
9/17/2023
 
2,400

 
2,366

 
2,386

 
0.22

USLS Acquisition, Inc.
 
^
 
(2) (3) (13)
 
Business Services
 
L + 5.75%
 
8.46%
 
11/30/2018
 
11/30/2024
 
17,730

 
17,282

 
17,178

 
1.61

VRC Companies, LLC
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 6.50%
 
9.02%
 
3/31/2017
 
3/31/2023
 
54,181

 
53,345

 
53,410

 
5.03

Watchfire Enterprises, Inc.
 
*
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.00%
 
6.80%
 
6/9/2017
 
10/2/2020
 
1,248

 
1,241

 
1,248

 
0.12

Westfall Technik, Inc.
 
^
 
(2) (3) (13)
 
Chemicals, Plastics & Rubber
 
L + 5.00%
 
7.79%
 
9/13/2018
 
9/13/2024
 
10,585

 
10,218

 
9,902

 
0.93

Zemax Software Holdings, LLC
 
^*
 
(2) (3) (13)
 
Software
 
L + 5.75%
 
8.55%
 
6/25/2018
 
6/25/2024
 
10,248

 
10,111

 
10,144

 
0.95

Zenith Merger Sub, Inc.
 
^+*
 
(2) (3) (13)
 
Business Services
 
L + 5.50%
 
8.30%
 
12/13/2017
 
12/13/2023
 
10,881

 
10,732

 
10,778

 
1.01

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,602,861

 
$
1,532,119

 
143.88
 %
Second Lien Debt (9.07%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Access CIG, LLC
 
^
 
(2)
 
Business Services
 
L + 7.75%
 
10.46%
 
2/14/2018
 
2/27/2026
 
$
2,701

 
$
2,678

 
$
2,650

 
0.25
 %
AmeriLife Group, LLC
 
^*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 8.75%
 
11.27%
 
7/9/2015
 
1/10/2023
 
22,000

 
21,712

 
21,910

 
2.06

AQA Acquisition Holding, Inc.
 
^
 
(2) (3)
 
High Tech Industries
 
L + 8.00%
 
10.40%
 
10/1/2018
 
5/24/2024
 
40,000

 
39,623

 
39,336

 
3.69

Argon Medical Devices Holdings, Inc.
 
^*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 8.00%
 
10.52%
 
11/2/2017
 
1/23/2026
 
7,500

 
7,468

 
7,446

 
0.70

Brave Parent Holdings, Inc.
 
^*
 
(2) (3)
 
Software
 
L + 7.50%
 
10.02%
 
10/3/2018
 
4/19/2026
 
19,062

 
18,616

 
18,301

 
1.72

Drew Marine Group Inc.
 
^+*
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 7.00%
 
9.52%
 
11/19/2013
 
5/19/2021
 
12,500

 
12,487

 
12,396

 
1.16

Outcomes Group Holdings, Inc.
 
^*
 
(2)
 
Business Services
 
L + 7.50%
 
10.28%
 
10/23/2018
 
10/26/2026
 
4,500

 
4,500

 
4,447

 
0.42

Pharmalogic Holdings Corp.
 
^
 
(2) (3) (13)
 
Healthcare & Pharmaceuticals
 
L + 8.00%
 
10.52%
 
6/7/2018
 
12/11/2023
 
563

 
560

 
563

 
0.05

Project Accelerate Parent, LLC
 
^*
 
(2) (3)
 
Software
 
L + 8.50%
 
10.89%
 
1/2/2018
 
1/2/2026
 
22,500

 
21,986

 
22,109

 
2.08

Prowler Acquisition Corp. (Pipeline Supply and Service, LLC)
 
^
 
(2) (3)
 
Wholesale
 
L + 8.50%
 
11.30%
 
1/24/2014
 
7/28/2020
 
3,000

 
2,972

 
2,939

 
0.28

Reladyne, Inc.
 
^+*
 
(2) (3)
 
Wholesale
 
L + 9.50%
 
12.30%
 
4/19/2018
 
1/21/2023
 
10,000

 
9,830

 
9,915

 
0.93

Santa Cruz Holdco, Inc.
 
^
 
(2) (3)
 
Non-durable Consumer Goods
 
L + 8.25%
 
10.69%
 
12/15/2017
 
12/13/2024
 
17,138

 
16,984

 
16,903

 
1.59

Ultimate Baked Goods MIDCO, LLC (Rise Baking)
 
^
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 8.00%
 
10.52%
 
8/9/2018
 
8/9/2026
 
8,333

 
8,176

 
8,108

 
0.76

Watchfire Enterprises, Inc.
 
^
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 8.00%
 
10.80%
 
10/2/2013
 
10/2/2021
 
7,000

 
6,950

 
6,996

 
0.66

Zywave, Inc.
 
^
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.65%
 
11/18/2016
 
11/17/2023
 
4,950

 
4,892

 
4,939

 
0.46

Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
179,434

 
$
178,958

 
16.81
 %
 
Investments—non-controlled/non-affiliated (1)
 
 
 
Footnotes
 
Industry
 
Acquisition Date
 
Shares/ Units
 
Cost
 
Fair Value (5)
 
Percentage of Net Assets
Equity Investments (1.03%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANLG Holdings, LLC
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
6/22/2018
 
879,689

 
$
880

 
$
880

 
0.08
%
Avenu Holdings, LLC
 
^
 
(6)
 
Sovereign & Public Finance
 
9/28/2018
 
172,413

 
172

 
172

 
0.02

CIP Revolution Holdings, LLC
 
^
 
(6)
 
Media: Advertising, Printing & Publishing
 
8/19/2016
 
31,825

 
318

 
262

 
0.03

Dade Paper & Bag, LLC
 
^
 
(6)
 
Forest Products & Paper
 
6/9/2017
 
1,500,000

 
1,500

 
1,639

 
0.15

DecoPac, Inc.
 
^
 
(6)
 
Non-durable Consumer Goods
 
9/29/2017
 
1,500,000

 
1,500

 
1,434

 
0.13

Derm Growth Partners III, LLC (Dermatology Associates)
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
5/31/2016
 
1,000,000

 
1,000

 
1,415

 
0.13

GRO Sub Holdco, LLC (Grand Rapids)
 
^
 
(6)
 
Healthcare & Pharmaceuticals
 
3/29/2018
 
500,000

 
500

 
219

 
0.02

Legacy.com, Inc.
 
^
 
(6)
 
High Tech Industries
 
3/20/2017
 
1,500,000

 
1,500

 
1,227

 
0.12

North Haven Goldfinch Topco, LLC
 
^
 
(6)
 
Containers, Packaging & Glass
 
6/18/2018
 
2,314,815

 
2,315

 
2,103

 
0.20

Power Stop Intermediate Holdings, LLC
 
^
 
(6)
 
Automotive
 
5/29/2015
 
7,150

 

 
34

 

Rough Country, LLC
 
^
 
(6)
 
Durable Consumer Goods
 
5/25/2017
 
754,775

 
755

 
988

 
0.09

SiteLock Group Holdings, LLC
 
^
 
(6)
 
High Tech Industries
 
4/5/2018
 
446,429

 
446

 
446

 
0.04

T2 Systems Parent Corporation
 
^
 
(6)
 
Transportation: Consumer
 
9/28/2016
 
555,556

 
555

 
483

 
0.05

Tailwind HMT Holdings Corp.
 
^
 
(6)
 
Energy: Oil & Gas
 
11/17/2017
 
20,000

 
2,000

 
2,373

 
0.22

THG Acquisition, LLC (The Hilb Group, LLC)
 
^
 
(6)
 
Banking, Finance, Insurance & Real Estate
 
6/24/2015
 
1,500,000

 
1,500

 
3,100

 
0.29

Tweddle Holdings, Inc.
 
^
 
(6)
 
Media: Advertising, Printing & Publishing
 
9/17/2018
 
17,208

 

 

 

USLS Acquisition, Inc.
 
^
 
(6)
 
Business Services
 
11/30/2018
 
640,569

 
640

 
641

 
0.06

Zenith American Holding, Inc.
 
^
 
(6)
 
Business Services
 
12/13/2017
 
1,561,644

 
1,562

 
2,513

 
0.24

Zillow Topco LP
 
^
 
(6)
 
Software
 
6/25/2018
 
312,500

 
313

 
313

 
0.03

Equity Investments Total
 
 
 
 
 
 
 
 
 
 
 
$
17,456

 
$
20,242

 
1.90
%
Total investments—non-controlled/non-affiliated
 
 
 
 
 
$
1,799,751

 
$
1,731,319

 
162.59
%
Investments—non-controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Acquisition Date
 
Maturity Date
 
Par/
Principal Amount
 
Amortized Cost (4)
 
Fair Value
(5)
 
% of 
Net Assets
First Lien Debt (0.72%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TwentyEighty, Inc. - Revolver
 
^
 
(2) (3) (12) (13)
 
Business Services
 
L + 8.00%
 
10.90%
 
1/31/2017
 
3/21/2020
 
$

 
$
(3
)
 
$

 
%
TwentyEighty, Inc. - (Term A Loans)
 
^
 
(2) (3) (12)
 
Business Services
 
L + 8.00%
 
11.06%
 
1/31/2017
 
3/21/2020
 
316

 
315

 
316

 
0.03

TwentyEighty, Inc. - (Term B Loans)
 
^
 
(12)
 
Business Services
 
N/A
 
 8.00% (4.00%
cash, 4.00% PIK)
 
1/31/2017
 
3/21/2020
 
6,995

 
6,853

 
6,855

 
0.64

TwentyEighty, Inc. - (Term C Loans)
 
^
 
(12)
 
Business Services
 
N/A
 
9.00% (0.25%
cash, 8.75% PIK)
 
1/31/2017
 
3/21/2020
 
7,123

 
6,674

 
6,981

 
0.66

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
13,839

 
$
14,152

 
1.33
%

22

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

 

23

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

Investments—non-controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Acquisition Date
 
Shares/ Units
 
Cost
 
Fair Value (5)
 
% of Net Assets
Equity Investments (0.22%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TwentyEighty Investors LLC
 
^
 
(6) (12)
 
Business Services
 
1/31/2017
 
69,786

 
$

 
$
4,391

 
0.41
%
Equity Investments Total
 
 
 
 
 
 
 
 
 
 
 
$

 
$
4,391

 
0.41
%
Total investments—non-controlled/affiliated
 
 
 
 
 
$
13,839

 
$
18,543

 
1.74
%
Investments—controlled/affiliated
 
 
 
Footnotes
 
Industry
 
Reference Rate & Spread(2)
 
Interest Rate(2)
 
Acquisition Date
 
Maturity Date
 
Par Amount/ LLC Interest
 
Cost
 
Fair Value(5)
 
% of Net Assets
Investment Fund (11.34%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Middle Market Credit Fund, LLC, Mezzanine Loan
 
^
 
(2) (7) (8) (10)
 
Investment Fund
 
L+9.00%
 
11.47%
 
6/30/2016
 
3/22/2019
 
$
112,000

 
$
112,000

 
$
112,000

 
10.53
%
Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest
 
^
 
(7) (10)
 
Investment Fund
 
N/A
 
0.001%
 
2/29/2016
 
3/1/2021
 
118,001

 
118,001

 
110,295

 
10.37

Investment Fund Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
230,001

 
$
222,295

 
20.90
%
Total investments—controlled/affiliated
 
 
 
 
 
 
 
 
 
 
 
 
 
$
230,001

 
$
222,295

 
20.90
%
Total investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
2,043,591

 
$
1,972,157

 
185.23
%

^ Denotes that all or a portion of the assets are owned by the Company. The Company has entered into the Credit Facility. The lenders of the Credit Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the SPV or the 2015-1 Issuer.
+ Denotes that all or a portion of the assets are owned by the SPV. The SPV has entered into the SPV Credit Facility. The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or the 2015-1 Issuer.
* Denotes that all or a portion of the assets are owned by the 2015-1 Issuer and secure the notes issued in connection with a term debt securitization completed by the Company on June 26, 2015 (see Note 7, Notes Payable). Accordingly, such assets are not available to the creditors of the Company or the SPV.

(1)
Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of

24

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

December 31, 2018, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2018. As of December 31, 2018, the reference rates for our variable rate loans were the 30-day LIBOR at 2.50%, the 90-day LIBOR at 2.81% and the 180-day LIBOR at 2.88%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.
(4)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(5)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments, equity investments and the investment fund was determined using significant unobservable inputs.
(6)
Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of December 31, 2018, the aggregate fair value of these securities is $24,633, or 2.32% of the Company’s net assets.
(7)
The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
(8)
Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company/investment fund.
(9)
Loan was on non-accrual status as of December 31, 2018.
(10)
Under the Investment Company Act, the Company is deemed to be an “affiliated person” of and “control” this investment fund because the Company owns more than 25% of the investment fund’s outstanding voting securities and/or has the power to exercise control over management or policies of such investment fund. See Note 5, Middle Market Credit Fund, LLC, for more details. Transactions related to investments in controlled affiliates for the year ended December 31, 2018 were as follows:
Investments—controlled/affiliated
Fair Value as of December 31, 2017
 
Additions/ Purchases
 
Reductions/ Sales/ Paydowns
 
Net Realized Gain (Loss)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Fair Value as of December 31, 2018
 
Dividend and Interest Income
Middle Market Credit Fund, LLC, Mezzanine Loan
$
85,750

 
$
120,150

 
$
(93,900
)
 
$

 
$

 
$
112,000

 
$
13,240

Middle Market Credit Fund, LLC, Subordinated Loan and Member’s Interest 
86,766

 
31,500

 

 

 
(7,971
)
 
110,295

 
15,250

Total investments—controlled/affiliated
$
172,516

 
$
151,650

 
$
(93,900
)
 
$

 
$
(7,971
)
 
$
222,295

 
$
28,490


(11)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.51%), EIP Merger Sub, LLC (Evolve IP) (3.75%), Legacy.com Inc. (4.00%), Payment Alliance International Inc. (3.06%), Prime Risk Partners, Inc. (2.88%), Product Quest Manufacturing, LLC (3.54%), Surgical Information Systems, LLC (0.89%) and The Hilb Group, LLC (3.33%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

25

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

(12)
Under the Investment Company Act, the Company is deemed an “affiliated person” of this portfolio company because the Company owns 5% or more of the portfolio company’s outstanding voting securities. Transactions related to investments in non-controlled affiliates for the year ended December 31, 2018 were as follows:
Investments—non-controlled/affiliated
Fair Value as of December 31, 2017
 
Purchases/ Paid-in-kind interest
 
Sales/ Paydowns
 
Net Accretion of Discount
 
Net Realized Gain (Loss)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Fair value as of December 31, 2018
 
Interest Income
TwentyEighty, Inc. - Revolver
$
(20
)
 
$

 
$

 
$
3

 
$

 
$
17

 
$

 
$
3

TwentyEighty, Inc. - (Term A Loans)
3,760

 

 
(3,574
)
 
18

 

 
112

 
316

 
264

TwentyEighty, Inc. - (Term B Loans)
6,360

 
240

 

 
119

 

 
136

 
6,855

 
654

TwentyEighty, Inc. - (Term C Loans)
5,331

 
602

 

 
158

 

 
890

 
6,981

 
759

TwentyEighty Investors LLC (Equity)

 

 

 

 

 
4,391

 
4,391

 

Total investments—non-controlled/affiliated
$
15,431

 
$
842

 
$
(3,574
)
 
$
298

 
$

 
$
5,546

 
$
18,543

 
$
1,680


(13)
As of December 31, 2018, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
Investments—non-controlled/affiliated
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Advanced Instruments, LLC
Revolver
 
0.50%
 
$
1,167

 
$
(9
)
Aero Operating LLC (Dejana Industries, Inc.)
Revolver
 
1.00
 
202

 
(2
)
AMS Group HoldCo, LLC
Delayed Draw
 
1.00
 
4,009

 
(95
)
AMS Group HoldCo, LLC
Revolver
 
0.50
 
810

 
(19
)
Analogic Corporation
Revolver
 
0.50
 
3,365

 
(73
)
Captive Resources Midco, LLC
Delayed Draw
 
1.25
 
3,572

 
(31
)
Captive Resources Midco, LLC
Revolver
 
0.50
 
2,143

 
(18
)
Chemical Computing Group ULC
Revolver
 
0.50
 
903

 
(10
)
CIP Revolution Holdings, LLC
Revolver
 
0.50
 
532

 
(6
)
CircusTrix Holdings, LLC
Delayed Draw
 
1.00
 
1,115

 
(26
)
Comar Holding Company, LLC
Delayed Draw
 
1.00
 
5,136

 
(87
)
Comar Holding Company, LLC
Revolver
 
0.50
 
2,129

 
(36
)
Continuum Managed Services HoldCo, LLC
Revolver
 
0.50
 
2,500

 
(43
)
Datto, Inc.
Revolver
 
0.50
 
726

 
(7
)
DermaRite Industries LLC
Revolver
 
0.50
 
1,324

 
(52
)
Derm Growth Partners III, LLC (Dermatology Associates)
Revolver
 
0.50
 
968

 
(12
)
Direct Travel, Inc.
Delayed Draw
 
1.00
 
1,872

 
(16
)
FWR Holding Corporation
Revolver
 
0.50
 
2,778

 
(20
)
Frontline Technologies Holdings, LLC
Delayed Draw
 
1.00
 
7,705

 
(59
)
GRO Sub Holdco, LLC (Grand Rapids)
Delayed Draw
 
1.00
 
7,000

 
(85
)
GRO Sub Holdco, LLC (Grand Rapids)
Revolver
 
0.50
 
1,071

 
(13
)
iCIMS, Inc.
Revolver
 
0.50
 
1,252

 
(43
)

26

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

Investments—non-controlled/affiliated
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
Innovative Business Services, LLC
Delayed Draw
 
1.00%
 
$
3,886

 
$
(62
)
Innovative Business Services, LLC
Revolver
 
0.50
 
2,232

 
(36
)
National Carwash Solutions, Inc.
Delayed Draw
 
1.00
 
3,817

 
(57
)
National Carwash Solutions, Inc.
Revolver
 
0.50
 
632

 
(9
)
National Technical Systems, Inc.
Revolver
 
0.50
 
2,500

 
(6
)
NMI AcquisitionCo, Inc.
Revolver
 
0.50
 
435

 
(16
)
North American Dental Management, LLC
Delayed Draw
 
1.00
 
3,002

 
(52
)
Northland Telecommunications Corporation
Revolver
 
0.50
 
1,702

 
(24
)
Pharmalogic Holdings Corp.
Delayed Draw
 
1.00
 
237

 

PPC Flexible Packaging, LLC
Revolver
 
0.50
 
1,737

 
(16
)
Prime Risk Partners, Inc.
Delayed Draw
 
0.50
 
457

 
(10
)
Prime Risk Partners, Inc.
Delayed Draw
 
0.50
 
5,694

 
(175
)
Product Quest Manufacturing, LLC
Revolver
 
0.50
 
1,906

 

PricewaterhouseCoopers Public Sector LLP
Revolver
 
0.50
 
6,250

 
(160
)
SPay, Inc.
Delayed Draw
 
1.00
 
10,227

 
(197
)
SPay, Inc.
Revolver
 
0.50
 
546

 
(19
)
Sapphire Convention, Inc.
Revolver
 
0.50
 
4,528

 
(81
)
Smile Doctors, LLC
Delayed Draw
 
1.00
 
6,394

 
(97
)
Smile Doctors, LLC
Revolver
 
0.50
 
51

 
(1
)
Superior Health Linens, LLC
Revolver
 
0.50
 
1,867

 
(21
)
T2 Systems, Inc.
Revolver
 
0.50
 
1,760

 
(10
)
TSB Purchaser, Inc. (Teaching Strategies, LLC)
Revolver
 
0.50
 
1,891

 
(36
)
The Hilb Group, LLC
Delayed Draw
 
1.00
 
11,262

 
(185
)
Trump Card, LLC
Revolver
 
0.50
 
635

 
(9
)
TwentyEighty, Inc. (f/k/a Miller Heiman, Inc.)
Revolver
 
0.50
 
607

 

USLS Acquisition, Inc.
Delayed Draw
 
1.00
 
4,137

 
(98
)
USLS Acquisition, Inc.
Revolver
 
0.50
 
1,418

 
(34
)
VRC Companies, LLC
Delayed Draw
 
1.00
 
2,481

 
(33
)
VRC Companies, LLC
Revolver
 
0.50
 
1,227

 
(16
)
Westfall Technik, Inc.
Delayed Draw
 
1.00
 
15,259

 
(372
)
Westfall Technik, Inc.
Revolver
 
0.50
 
2,155

 
(53
)
Zemax Software Holdings, LLC
Revolver
 
0.50
 
1,284

 
(12
)
Zenith Merger Sub, Inc.
Revolver
 
0.50
 
2,622

 
(20
)
Total unfunded commitments
 
 
 
 
$
157,117

 
$
(2,679
)


27

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

As of December 31, 2018, investments at fair value consisted of the following:
Type
 
Amortized Cost
 
Fair Value
 
% of Fair Value
First Lien Debt (excluding First Lien/Last Out)
 
$
1,375,437

 
$
1,343,422

 
68.12
%
First Lien/Last Out Unitranche
 
241,263

 
202,849

 
10.29

Second Lien Debt
 
179,434

 
178,958

 
9.07

Equity Investments
 
17,456

 
24,633

 
1.25

Investment Fund
 
230,001

 
222,295

 
11.27

Total
 
$
2,043,591

 
$
1,972,157

 
100.00
%
The rate type of debt investments at fair value as of December 31, 2018 was as follows:
Rate Type
 
Amortized Cost
 
Fair Value
 
% of Fair Value of First and Second Lien Debt
Floating Rate
 
$
1,782,607

 
$
1,711,393

 
99.20
%
Fixed Rate
 
13,527

 
13,836

 
0.80

Total
 
$
1,796,134

 
$
1,725,229

 
100.00
%

























28

TCG BDC, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2018
(dollar amounts in thousands)

The industry composition of investments at fair value as of December 31, 2018 was as follows:
Industry
Amortized Cost
 
Fair Value
 
% of Fair Value
Aerospace & Defense
$
27,859

 
$
28,000

 
1.42
%
Automotive
6,547

 
6,603

 
0.33

Banking, Finance, Insurance & Real Estate
127,078

 
127,942

 
6.49

Beverage, Food & Tobacco
73,861

 
74,283

 
3.77

Business Services
156,800

 
162,545

 
8.24

Chemicals, Plastics & Rubber
22,705

 
22,298

 
1.13

Construction & Building
2,492

 
2,496

 
0.13

Consumer Services
30,142

 
29,742

 
1.51

Containers, Packaging & Glass
79,714

 
47,356

 
2.40

Durable Consumer Goods
755

 
988

 
0.05

Energy: Electricity
42,866

 
42,922

 
2.18

Energy: Oil & Gas
11,833

 
12,068

 
0.61

Environmental Industries
35,604

 
35,835

 
1.82

Forest Products & Paper
49,964

 
49,437

 
2.51

Healthcare & Pharmaceuticals
244,142

 
233,135

 
11.82

High Tech Industries
242,819

 
241,305

 
12.24

Hotel, Gaming & Leisure
77,952

 
76,685

 
3.89

Investment Fund
230,001

 
222,295

 
11.27

Media: Broadcast & Subscription
21,297

 
21,311

 
1.08

Media: Advertising, Printing & Publishing
58,690

 
58,712

 
2.98

Non-durable Consumer Goods
57,996

 
49,947

 
2.53

Software
124,734

 
124,231

 
6.30

Sovereign & Public Finance
38,568

 
38,526

 
1.95

Telecommunications
124,120

 
113,984

 
5.78

Transportation: Cargo
71,686

 
71,443

 
3.62

Transportation: Consumer
36,210

 
36,562

 
1.85

Wholesale
47,156

 
41,506

 
2.10

Total
$
2,043,591

 
$
1,972,157

 
100.00
%

The geographical composition of investments at fair value as of December 31, 2018 was as follows:
Geography
Amortized Cost
 
Fair Value
 
% of Fair Value
Canada
$
15,636

 
$
15,617

 
0.79
%
United Kingdom
9,833

 
9,695

 
0.49

United States
2,018,122

 
1,946,845

 
98.72

Total
$
2,043,591

 
$
1,972,157

 
100.00
%

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

29




TCG BDC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As of March 31, 2019
(dollar amounts in thousands, except per share data)
1. ORGANIZATION
TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) is a Maryland corporation formed on February 8, 2012, and structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle Global Credit Investment Management L.L.C. (“CGCIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group L.P. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).
The Company’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which the Company defines as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company seeks to achieve its investment objective primarily through direct originations of secured debt, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of its assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities). The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. Depending on market conditions, the Company expects that between 70% and 80% of the value of its assets will be invested in Middle Market Senior Loans. The Company expects that the composition of its portfolio will change over time given the Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.
The Company invests primarily in loans to middle market companies whose debt, if rated, is rated below investment grade, and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as “junk”). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal.
On May 2, 2013, the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations. Effective March 15, 2017, the Company changed its name from “Carlyle GMS Finance, Inc.” to “TCG BDC, Inc.” On June 19, 2017, the Company closed its initial public offering (“IPO”), issuing 9,454,200 shares of its common stock (including shares issued pursuant to the exercise of the underwriters’ over-allotment option on July 5, 2017) at a public offering price of $18.50 per share. Net of underwriting costs, the Company received cash proceeds of $169,488. Shares of common stock of TCG BDC began trading on the NASDAQ Global Select Market under the symbol “CGBD” on June 14, 2017.
Until December 31, 2017, the Company was an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012. As of June 30, 2017, the market value of the common stock held by non-affiliates exceeded $700,000. Accordingly, the Company ceased to be an emerging growth company as of December 31, 2017.
The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C. (the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C. (“CIM”), a subsidiary of The Carlyle Group L.P. “Carlyle” refers to The Carlyle Group L.P. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global investment firm publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.
TCG BDC SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on January 3, 2013. The SPV invests in first and second lien senior secured loans. The SPV is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 3, 2013. Effective March 15, 2017, the SPV changed its name from “Carlyle GMS Finance SPV LLC” to “TCG BDC SPV LLC”.

30



On June 9, 2017, pursuant to the Agreement and Plan of Merger, dated May 3, 2017 (the “Agreement”), by and between the Company and NF Investment Corp. (“NFIC”), NFIC merged with and into the Company (the “NFIC Acquisition”), with the Company as the surviving entity. The NFIC Acquisition was accounted for as an asset acquisition. NFIC SPV LLC (the “NFIC SPV” and, together with the SPV, the “SPVs”) is a Delaware limited liability company that was formed on June 18, 2013. Upon the consummation of the NFIC Acquisition, the NFIC SPV became a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the closing date of the NFIC Acquisition, June 9, 2017.
On June 26, 2015, the Company completed a $400,000 term debt securitization (the “2015-1 Debt Securitization”). The notes offered in the 2015-1 Debt Securitization (the “2015-1 Notes”) were issued by Carlyle Direct Lending CLO 2015-1R LLC (formerly known as Carlyle GMS Finance MM CLO 2015-1 LLC) (the “2015-1 Issuer”), a wholly owned and consolidated subsidiary of the Company. On August 30, 2018, the 2015-1 Issuer refinanced the 2015-1 Debt Securitization (the “2015-1 Debt Securitization Refinancing”) by redeeming in full the 2015-1 Notes and issuing new notes (the “2015-1R Notes”). The 2015-1R Notes are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. Refer to Note 7 for details. The 2015-1 Issuer is consolidated in these consolidated financial statements commencing from the date of its formation, May 8, 2015.
On February 29, 2016, the Company and Credit Partners USA LLC (“Credit Partners”) entered into an amended and restated limited liability company agreement, which was subsequently amended on June 24, 2016 (as amended, the “Limited Liability Company Agreement”) to co-manage Middle Market Credit Fund, LLC (“Credit Fund”). Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Refer to Note 5, Middle Market Credit Fund, LLC, for details.
As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).
To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“US GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC 946”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the SPVs and the 2015-1 Issuer. All significant intercompany balances and transactions have been eliminated. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.
The interim financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with US GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim periods presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018. The results of operations for the three month period ended March 31, 2019 are not necessarily indicative of the operating results to be expected for the full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

31



liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on base management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 for further information about fair value measurements.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.
Revenue Recognition
Interest from Investments and Realized Gain/Loss on Investments
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.
The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. As of March 31, 2019 and December 31, 2018, the fair value of the loans in the portfolio with PIK provisions was $55,069 and $53,660, respectively. For the three month periods ended March 31, 2019 and 2018, the Company earned $1,150 and $213, respectively, in PIK income included in interest income in the accompanying Consolidated Statements of Operations.
Dividend Income
Dividend income from the investment fund is recorded on the record date for the investment fund to the extent that such amounts are payable by the investment fund and are expected to be collected.
Other Income
Other income may include income such as consent, waiver, amendment, unused, syndication, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three month periods ended March 31, 2019 and 2018, the Company earned $2,028 and $895, respectively, in other income, primarily from amendment and arranger fees.


32



Non-Accrual Income
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2019 and December 31, 2018, the fair value of the loans in the portfolio on non-accrual status was $17,482 and $14,327, respectively. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2019 and December 31, 2018.
SPV Credit Facility, Credit Facility, 2015-1R Notes Related Costs, Expenses and Deferred Financing Costs (See Note 6, Borrowings, and Note 7, Notes Payable)
Interest expense and unused commitment fees on the SPV Credit Facility and Credit Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.
The SPV Credit Facility and Credit Facility are recorded at carrying value, which approximates fair value.
Deferred financing costs include capitalized expenses related to the closing or amendments of the SPV Credit Facility and Credit Facility. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.
Debt issuance costs include capitalized expenses including structuring and arrangement fees related to the offering of the 2015-1R Notes. Amortization of debt issuance costs for the notes is computed on the effective yield method over the term of the notes. The unamortized balance of such costs is presented as a direct deduction to the carrying amount of the notes in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in interest expense in the accompanying Consolidated Statements of Operations.
The notes are recorded at carrying value, which approximates fair value.
Offering Costs
Offering costs consist primarily of fees and expenses incurred in connection with the offering of shares, including legal, underwriting, printing and other costs, as well as costs associated with the preparation and filing of applicable registration statements. Offering costs are charged against equity when incurred. During the three month periods ended March 31, 2019 and 2018, $0 and $30, respectively, of the offering costs were incurred, 50% of which were paid by the Investment Adviser.
Income Taxes
For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding

33



year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. The SPVs and the 2015-1 Issuer are disregarded entities for tax purposes and are consolidated with the tax return of the Company. All penalties and interest associated with income taxes, if any, are included in income tax expense. For the three month periods ended March 31, 2019 and 2018, the Company incurred $60 and $10, respectively, in excise tax expense.
Dividends and Distributions to Common Stockholders
To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

Prior to July 5, 2017, the Company had an “opt in” dividend reinvestment plan. Effective on July 5, 2017, the Company converted the “opt in” dividend reinvestment plan to an “opt out” dividend reinvestment plan that provides for reinvestment of dividends and other distributions on behalf of the stockholders, other than those stockholders who have “opted out” of the plan. As a result of adopting the plan, if the Board of Directors authorizes, and the Company declares, a cash dividend or distribution, the stockholders who have not elected to “opt out” of the dividend reinvestment plan will have their cash dividends or distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash. Each registered stockholder may elect to have such stockholder’s dividends and distributions distributed in cash rather than participate in the plan. For any registered stockholder that does not so elect, distributions on such stockholder’s shares will be reinvested by State Street Bank and Trust Company, the Company’s plan administrator, in additional shares. The number of shares to be issued to the stockholder will be determined based on the total dollar amount of the cash distribution payable, net of applicable withholding taxes. The Company intends to use primarily newly issued shares to implement the plan so long as the market value per share is equal to or greater than the net asset value per share on the relevant valuation date. If the market value per share is less than the net asset value per share on the relevant valuation date, the plan administrator would implement the plan through the purchase of common stock on behalf of participants in the open market, unless the Company instructs the plan administrator otherwise.
Functional Currency
The functional currency of the Company is the U.S. Dollar and all transactions were in U.S. Dollars.
Recent Accounting Standards Updates
    
The FASB issued Accounting Standards Update (“ASU”) ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement in August 2018which modifies disclosure requirements pertaining to fair value measurement of Level 3 securities for public companies. Under the new standard, reporting entities can remove the disclosures no longer required and amend the disclosures immediately with retrospective application. The effective date for the additional disclosures for all public and nonpublic companies is for fiscal years, and interim periods within those years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures immediately and delay adoption of the additional disclosures until their effective date. The Company has elected to early adopt ASU 2018-13 in 2018. No significant changes were made to the Company’s fair value disclosures in the notes to the consolidated financial statements in order to comply with ASU 2018-13.

In September 2018, related to the Disclosure Update and Simplification release (“the DUS Release”), the FASB issued Compliance and Disclosure Interpretation 105.09 guidance (“CDI 105.09”) on compliance with the new requirement to present changes in shareholders’ equity in interim financial statements within Form 10-Q filings. The DUS Release requires disclosure of changes in shareholders’ equity within a registrant’s Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. CDI 105.09 notes that the SEC would not object if a registrant first discloses the changes in shareholders’ equity in its Form 10-Q for the quarter that begins after November 5, 2018. The Company has adopted the new requirement starting with the quarter that began on January 1, 2019, which did not have a material impact on the Company’s financial statements.

34



3. FAIR VALUE MEASUREMENTS
The Company applies fair value accounting in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.
Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment other than Credit Fund is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.
All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:
 
the nature and realizable value of any collateral;
call features, put features and other relevant terms of debt;
the portfolio company’s leverage and ability to make payments;
the portfolio company’s public or private credit rating;
the portfolio company’s actual and expected earnings and discounted cash flow;
prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;
the markets in which the portfolio company does business and recent economic and/or market events; and
comparisons to comparable transactions and publicly traded securities.
Investment performance data utilized are the most recently available financial statements and compliance certificate received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of March 31, 2019 and December 31, 2018.

35



US GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:
 
Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. Financial instruments in in this category generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally 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 in this category generally include investments in privately-held entities, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month periods ended March 31, 2019 and 2018, there were no transfers between levels.
The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
First Lien Debt
$

 
$

 
$
1,663,301

 
$
1,663,301

Second Lien Debt

 

 
228,851

 
228,851

Equity Investments

 

 
28,466

 
28,466

Investment Fund
 
 
 
 
 
 


Mezzanine Loan

 

 
123,800

 
123,800

Subordinated Loan and Member's Interest

 

 
110,791

 
110,791

Total
$

 
$

 
$
2,155,209

 
$
2,155,209

 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
First Lien Debt
$

 
$

 
$
1,546,271

 
$
1,546,271

Second Lien Debt

 

 
178,958

 
178,958

Equity Investments

 

 
24,633

 
24,633

Investment Fund
 
 
 
 
 
 
 
Mezzanine Loan

 

 
112,000

 
112,000

Subordinated Loan and Member's Interest

 

 
110,295

 
110,295

Total
$

 
$

 
$
1,972,157

 
$
1,972,157



36



The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:
 
Financial Assets
For the three month period ended March 31, 2019
 
First Lien Debt
 
Second Lien Debt
 
Equity Investments
 
Investment Fund - Mezzanine Loan
 
Investment Fund - Subordinated Loan and Member's Interest
 
Total
Balance, beginning of period
$
1,546,271

 
$
178,958

 
$
24,633

 
$
112,000

 
$
110,295

 
$
1,972,157

Purchases
165,076

 
48,405

 
2,240

 
30,500

 

 
246,221

Sales
(6,815
)
 

 
(1,738
)
 


 

 
(8,553
)
Paydowns
(44,241
)
 

 

 
(18,700
)
 

 
(62,941
)
Accretion of discount
2,092

 
69

 

 

 

 
2,161

Net realized gains (losses)
(60
)
 

 
959

 

 

 
899

Net change in unrealized appreciation (depreciation)
978

 
1,419

 
2,372

 

 
496

 
5,265

Balance, end of period
$
1,663,301

 
$
228,851

 
$
28,466

 
$
123,800

 
$
110,791

 
$
2,155,209

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2019 included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations
$
1,242

 
$
1,419

 
$
2,648

 
$

 
$
496

 
$
5,805

 
Financial Assets
For the three month period ended March 31, 2018
 
First Lien
Debt
 
Second Lien Debt
 
Equity Investments
 
Investment Fund - Mezzanine Loan
 
Total
Balance, beginning of period
$
1,531,276

 
$
246,233

 
$
17,506

 
$
85,750

 
$
1,880,765

Purchases
66,257

 
24,994

 
500

 
21,850

 
113,601

Sales
(20,960
)
 
(3,960
)
 

 

 
(24,920
)
Paydowns
(97,110
)
 
(49,992
)
 

 

 
(147,102
)
Accretion of discount
1,527

 
863

 

 

 
2,390

Net realized gains (losses)
(131
)
 
2

 

 

 
(129
)
Net change in unrealized appreciation (depreciation)
(4,985
)
 
(433
)
 
806

 

 
(4,612
)
Balance, end of period
$
1,475,874

 
$
217,707

 
$
18,812

 
$
107,600

 
$
1,819,993

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2018 included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations
$
(4,796
)
 
$
673

 
$
806

 
$

 
$
(3,317
)
The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:
Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These

37



factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.
Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.
Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in Credit Fund’s mezzanine loan are valued using collateral analysis with the expected recovery rate of principal and interest. Investments in Credit Fund’s subordinated loan and member’s interest are valued using discounted cash flow analysis with the expected discount rate, default rate and recovery rate of principal and interest.
The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of March 31, 2019 and December 31, 2018:
 
Fair Value as of March 31, 2019
 
Valuation Techniques
 
Significant Unobservable Inputs
 
Range
 
 
 
Low
 
High
 
Weighted Average
Investments in First Lien Debt
$
1,559,387

 
Discounted Cash Flow
 
Discount Rate
 
5.99
%
 
27.75
%
 
10.16
%
 
83,732

 
Consensus Pricing
 
Indicative Quotes
 
89.08

 
102.00

 
98.20

 
20,182

 
Income Approach
 
Discount Rate
 
12.23
%
 
12.23
%
 
12.23
%
 
 
 
Market Approach
 
Comparable Multiple
 
7.50x

 
7.50x

 
7.50x

Total First Lien Debt
1,663,301

 
 
 
 
 
 
 
 
 
 
Investments in Second Lien Debt
226,198

 
Discounted Cash Flow
 
Discount Rate
 
8.90
%
 
12.36
%
 
10.96
%
 
2,653

 
Consensus Pricing
 
Indicative Quotes
 
98.25

 
98.25

 
98.25

Total Second Lien Debt
228,851

 
 
 
 
 
 
 
 
 
 
Investments in Equity
28,466

 
Income Approach
 
Discount Rate
 
8.08
%
 
12.73
%
 
10.73
%
 
 
 
Market Approach
 
Comparable Multiple
 
7.03x

 
16.50x

 
9.69x

Total Equity Investments
28,466

 
 
 
 
 
 
 
 
 
 
Investments in Investment Fund
 
 
 
 
 
 
 
 
 
 
 
Mezzanine Loan
123,800

 
Collateral Analysis
 
Recovery Rate
 
100.00
%
 
100.00
%
 
100.00
%
Subordinated Loan and Member's Interest
110,791

 
Discounted Cash Flow
 
Discount Rate
 
10.00
%
 
10.00
%
 
10.00
%
 
 
 
Discounted Cash Flow
 
Default Rate
 
2.00
%
 
2.00
%
 
2.00
%
 
 
 
Discounted Cash Flow
 
Recovery Rate
 
75.00
%
 
75.00
%
 
75.00
%
Total Investments in Investment Fund
234,591

 
 
 
 
 
 
 
 
 
 
Total Level 3 Investments
$
2,155,209

 
 
 
 
 
 
 
 
 
 

38



 
Fair Value as of December 31, 2018
 
Valuation Techniques
 
Significant Unobservable Inputs
 
Range
 
 
 
Low
 
High
 
Weighted Average
Investments in First Lien Debt
$
1,457,170

 
Discounted Cash Flow
 
Discount Rate
 
6.45
%
 
26.48
%
 
10.49
%
 
74,774

 
Consensus Pricing
 
Indicative Quotes
 
50.00

 
100.00

 
92.04

 
14,327

 
Income Approach
 
Discount Rate
 
15.12
%
 
15.12
%
 
15.12
%
 
 
 
Market Approach
 
Comparable Multiple
 
6.76x

 
6.76x

 
6.76x

Total First Lien Debt
1,546,271

 
 
 
 
 
 
 
 
 
 
Investments in Second Lien Debt
176,307

 
Discounted Cash Flow
 
Discount Rate
 
9.34
%
 
13.22
%
 
11.31
%
 
2,651

 
Consensus Pricing
 
Indicative Quotes
 
98.17

 
98.17

 
98.17

Total Second Lien Debt
178,958

 
 
 
 
 
 
 
 
 
 
Investments in Equity
24,633

 
Income Approach
 
Discount Rate
 
8.51
%
 
12.84
%
 
10.49
%
 
 
 
Market Approach
 
Comparable Multiple
 
7.22x

 
14.70x

 
9.74x

Total Equity Investments
24,633

 
 
 
 
 
 
 
 
 
 
Investment in Investment Fund
 
 
 
 
 
 
 
 
 
 
 
Mezzanine Loan
112,000

 
Collateral Analysis
 
Recovery Rate
 
100.00
%
 
100.00
%
 
100.00
%
Subordinated Loan and Member's Interest
110,295

 
Discounted Cash Flow
 
Discount Rate
 
10.00
%
 
10.00
%
 
10.00
%
 
 
 
Discounted Cash Flow
 
Default Rate
 
2.00
%
 
2.00
%
 
2.00
%
 
 
 
Discounted Cash Flow
 
Recovery Rate
 
75.00
%
 
75.00
%
 
75.00
%
Total Investments in Investment Fund
222,295

 
 
 
 
 
 
 
 
 
 
Total Level 3 Investments
$
1,972,157

 
 
 
 
 
 
 
 
 
 
The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation may result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples would result in a significantly lower fair value measurement.
The significant unobservable input used in the fair value measurement of the Company’s investment in the mezzanine loan of Credit Fund is the recovery rate of principal and interest. A significant decrease in the recovery rate would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in the subordinated loan and member’s interest of Credit Fund are the discount rate, default rate and recovery rate. Significant increases in the discount rate or default rate would result in a significantly lower fair value measurement. A significant decrease in the recovery rate would result in a significantly lower fair value measurement.
Financial instruments disclosed but not carried at fair value
The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
December 31, 2018
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Secured borrowings
$
660,959

 
$
660,959

 
$
514,635

 
$
514,635

Total
$
660,959

 
$
660,959

 
$
514,635

 
$
514,635

The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

39



The following table represents the carrying values (before debt issuance costs) and fair values of the Company’s 2015-1R Notes disclosed but not carried at fair value as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
December 31, 2018
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Aaa/AAA Class A-1-1-R Notes
$
234,800

 
$
230,691

 
$
234,800

 
$
229,632

Aaa/AAA Class A-1-2-R Notes
50,000

 
49,400

 
50,000

 
49,442

Aaa/AAA Class A-1-3-R Notes
25,000

 
25,122

 
25,000

 
24,990

AA Class A-2-R Notes
66,000

 
66,000

 
66,000

 
66,000

A Class B Notes
46,400

 
45,020

 
46,400

 
44,242

BBB- Class C Notes
27,000

 
25,650

 
27,000

 
24,809

Total
$
449,200

 
$
441,883

 
$
449,200

 
$
439,115

The fair value determination of the Company’s notes payable was based on the market quotation(s) received from broker/dealer(s). These fair value measurements were based on significant inputs not observable and thus represent Level 3 measurements as defined in the accounting guidance for fair value measurement.
The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.
4. RELATED PARTY TRANSACTIONS
Investment Advisory Agreement
On April 3, 2013, the Company’s Board of Directors, including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”), approved an investment advisory agreement (the “Original Investment Advisory Agreement”) between the Company and the Investment Adviser in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, Section 15(c) of the Investment Company Act.
The Original Investment Advisory Agreement was amended on September 15, 2017 (as amended, the “First Amended and Restated Investment Advisory Agreement”) after the approval of the Company’s Board of Directors, including a majority of the Independent Directors, at an in-person meeting of the Board of Directors held on May 30, 2017 and the approval of the Company’s stockholders at a special meeting of stockholders held on September 15, 2017. On August 6, 2018, the First Amended and Restated Investment Advisory Agreement was further amended (as amended, the “Investment Advisory Agreement”) after the approval of the Company’s Board of Directors, including a majority of the Independent Directors, at an in-person meeting of the Board of Directors held on August 6, 2018.
Effective September 15, 2017, the base management fee has been calculated and payable quarterly in arrears at an annual rate of 1.50% of the average value of the gross assets at the end of the two most recently completed fiscal quarters; provided, however, effective July 1, 2018, the base management fee has been calculated at an annual rate of 1.00% of the average value of the gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (A) 200% and (B) the average value of the Company’s net asset value at the end of the two most recently completed calendar quarters. The base management fee will be appropriately adjusted for any share issuances or repurchases during such fiscal quarter and the base management fees for any partial month or quarter will be pro-rated. The Company’s gross assets exclude any cash and cash equivalents and include assets acquired through the incurrence of debt from the use of leverage.
The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter. The second part is determined and payable in arrears based on capital gains as of the end of each calendar year.
Effective September 15, 2017, pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, has been compared to a “hurdle rate” of 1.50% per quarter (6% annualized) or a “catch-up rate” of 1.82% per quarter (7.28% annualized), as applicable.
Pursuant to the Investment Advisory Agreement, the Company pays its Investment Adviser an incentive fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:
 

40



no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which its pre-incentive fee net investment income does not exceed the hurdle rate of 1.50%;
100% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.82% in any calendar quarter (7.28% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.82%) as the “catch-up.” The “catch-up” is meant to provide the Investment Adviser with approximately 17.5% of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.82% in any calendar quarter; and
17.5% of the amount of pre-incentive fee net investment income, if any, that exceeds 1.82% in any calendar quarter (7.28% annualized) will be payable to the Investment Adviser. This reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of all pre-incentive fee investment income thereafter is allocated to the Investment Adviser.
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 17.5% of realized capital gains, if any, on a cumulative basis from inception through the date of determination, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees, provided that, the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation.

For the three month periods ended March 31, 2019 and 2018, base management fees were $7,685 and $7,222, respectively, incentive fees related to pre-incentive fee net investment income were $5,846 and $5,330, respectively, and there were no incentive fees related to realized capital gains. For the three month periods ended March 31, 2019 and 2018, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) from inception through March 31, 2019 and 2018, respectively. The accrual for any capital gains incentive fee under US GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.
As of March 31, 2019 and December 31, 2018, $13,531 and $13,834, respectively, was included in base management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
On April 3, 2013, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.
Administration Agreement
On February 22, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the administration agreement, dated April 3, 2013, between the Company and the Administrator (the “Administration Agreement”). Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Treasurer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company’s Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.
Unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party.

41



For the three month periods ended March 31, 2019 and 2018, the Company incurred $216 and $186, respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of March 31, 2019 and December 31, 2018, $139 and $94, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
Sub-Administration Agreements
On February 22, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the sub-administration agreement, dated April 3, 2013, between the Administrator and Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel.
On February 22, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the sub-administration agreement, dated April 3, 2013, between the Administrator and State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreement, the “Sub-Administration Agreements”). Unless terminated earlier, the State Street Sub-Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by the vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The State Street Sub-Administration Agreement may be terminated upon at least 60 days’ written notice and without penalty by the vote of a majority of the outstanding securities of the Company, or by the vote of the Board of Directors or by either party to the State Street Sub-Administration Agreement.
For the three month periods ended March 31, 2019 and 2018, fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $189 and $192, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of March 31, 2019 and December 31, 2018, $572 and $383, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.
License Agreement
The Company has entered into a royalty free license agreement with CIM, which wholly owns our Adviser and is a wholly owned subsidiary of Carlyle, pursuant to which CIM has granted the Company a non-exclusive, revocable and non-transferable license to use the name and mark “Carlyle.”
Board of Directors
The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. The Board of Directors has established an Audit Committee, a Nominating and Governance Committee and a Compensation Committee, the members of each of which consist entirely of the Company’s Independent Directors. The Board of Directors may establish additional committees in the future. For the three month periods ended March 31, 2019 and 2018, the Company incurred $93 and $98 respectively, in fees and expenses associated with its Independent Directors’ services on the Company’s Board of Directors and its committees. As of March 31, 2019 and December 31, 2018, no fees or expenses associated with its Independent Directors were payable.
Transactions with Credit Fund
For the three month periods ended March 31, 2019 and 2018, the Company sold 0 and 1 investment, respectively, to Credit Fund for proceeds of $0 and $14,925, respectively, and realized no gains. See Note 5, Middle Market Credit Fund, LLC, for further information about Credit Fund.
5. MIDDLE MARKET CREDIT FUND, LLC
Overview
On February 29, 2016, the Company and Credit Partners entered into the Limited Liability Company Agreement to co-manage Credit Fund, a Delaware limited liability company that is not consolidated in the Company’s consolidated financial statements. Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. Establishing a quorum

42



for Credit Fund’s board of managers requires at least four members to be present at a meeting, including at least two of the Company’s representatives and two of Credit Partners’ representatives. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company. By virtue of its membership interest, the Company and Credit Partners each indirectly bear an allocable share of all expenses and other obligations of Credit Fund.
Together with Credit Partners, the Company co-invests through Credit Fund. Investment opportunities for Credit Fund are sourced primarily by the Company and its affiliates. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Fund’s investment committee consisting of an equal number of representatives of the Company and Credit Partners. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company Act). Middle Market Credit Fund SPV, LLC (the “Credit Fund Sub”), MMCF CLO 2017-1 LLC (the “2017-1 Issuer”) and MMCF Warehouse, LLC (the "Credit Fund Warehouse"), each a Delaware limited liability company, were formed on April 5, 2016 and October 6, 2017 and November 26, 2018, respectively. Credit Fund Sub, the 2017-1 Issuer and the Credit Fund Warehouse are wholly owned subsidiaries of Credit Fund and are consolidated in Credit Fund’s consolidated financial statements commencing from the date of their respective formations. Credit Fund Sub, the 2017-1 Issuer and the Credit Fund Warehouse primarily invest in first lien loans of middle market companies. Credit Fund and its wholly owned subsidiaries follow the same Internal Risk Rating System as the Company.
Credit Fund, the Company and Credit Partners entered into an administration agreement with Carlyle Global Credit Administration L.L.C., the administrative agent of Credit Fund (in such capacity, the “Administrative Agent”), pursuant to which the Administrative Agent is delegated certain administrative and non-discretionary functions, is authorized to enter into sub-administration agreements at the expense of Credit Fund with the approval of the board of managers of Credit Fund, and is reimbursed by Credit Fund for its costs and expenses and Credit Fund’s allocable portion of overhead incurred by the Administrative Agent in performing its obligations thereunder.
Selected Financial Data
Since inception of Credit Fund and through March 31, 2019 and December 31, 2018, the Company and Credit Partners each made capital contributions of $1 and $1 in members’ equity, respectively, and $118,000 and $118,000 in subordinated loans, respectively, to Credit Fund. As of March 31, 2019 and December 31, 2018, Credit Fund had borrowings of $123,800 and $112,000, respectively, in mezzanine loans under a revolving credit facility with the Company (the “Credit Fund Facility”). As of March 31, 2019 and December 31, 2018, Credit Fund had total subordinated loans and members’ equity outstanding of $217,496 and $208,568, respectively. As of March 31, 2019 and December 31, 2018, the Company’s ownership interest in such subordinated loans and members’ equity was $110,791 and $110,295, respectively, and in such mezzanine loans was $123,800 and $112,000, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund held cash and cash equivalents totaling $33,737 and $55,699, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund had total investments at fair value of $1,258,295 and $1,173,508, respectively, which was comprised of first lien senior secured loans, second lien senior secured loans and an equity investment to 64 and 60 portfolio companies, respectively. As of March 31, 2019 and December 31, 2018, 1 loan in Credit Fund’s portfolio was on non-accrual status with fair value of $21,151 and $25,400, respectively. As of March 31, 2019 and December 31, 2018, 98.3% and 99.9%, respectively, of investments in the portfolio were floating rate debt investments, which primarily are subject to interest rate floors. As of March 31, 2019 and December 31, 2018, 1.7% and 0.1%, respectively, of debt investments in the portfolio were fixed rate debt investments. As of March 31, 2019 and December 31, 2018, 1 loan in Credit Fund’s portfolio contained PIK provisions. The portfolio companies in Credit Fund are U.S. middle market companies in industries similar to those in which the Company may invest directly. Additionally, as of March 31, 2019 and December 31, 2018, Credit Fund had commitments to fund various undrawn revolving and delayed draw senior secured loans to its portfolio companies totaling $105,101 and $91,446, respectively.

43



Below is a summary of Credit Fund’s portfolio, followed by a listing of the loans in Credit Fund’s portfolio as of March 31, 2019 and December 31, 2018:
 
As of
March 31, 2019
 
As of
December 31, 2018
Senior secured loans (1)
$
1,270,122

 
$
1,207,913

Weighted average yields of senior secured loans based on amortized cost (2)
7.17
%
 
7.16
%
Weighted average yields of senior secured loans based on fair value (2)
7.22
%
 
7.32
%
Number of portfolio companies in Credit Fund
64

 
60

Average amount per portfolio company (1)
$
19,846

 
$
20,132

(1)
At par/principal amount.
(2)
Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2019 and December 31, 2018. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

44



Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Achilles Acquisition, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.00%
 
6.50%
 
10/11/2025
 
$
18,000

 
$
17,908

 
$
17,824

Acrisure, LLC
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.88%
 
11/22/2023
 
20,833

 
20,792

 
20,674

Acrisure, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.38%
 
11/22/2023
 
11,910

 
11,899

 
11,727

Advanced Instruments, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.73%
 
10/31/2022
 
11,761

 
11,670

 
11,676

Ahead, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.88%
 
6/29/2023
 
15,659

 
15,584

 
15,508

Alpha Packaging Holdings, Inc.
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
6.85%
 
5/12/2020
 
16,815

 
16,790

 
16,796

AM Conservation Holding Corporation
+*
 
(2) (3)
 
Energy: Electricity
 
L + 4.50%
 
7.10%
 
10/31/2022
 
38,213

 
37,993

 
38,056

Aptean, Inc.
+\
 
(2) (3)
 
Software
 
L + 4.25%
 
6.74%
 
4/23/2026
 
12,500

 
12,441

 
12,438

AQA Acquisition Holding, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.85%
 
5/24/2023
 
19,100

 
19,044

 
19,061

Avalign Technologies, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.50%
 
7.00%
 
12/22/2025
 
12,968

 
12,845

 
12,827

Big Ass Fans, LLC
+*\
 
(2) (3)
 
Capital Equipment
 
L + 3.75%
 
6.35%
 
5/21/2024
 
14,016

 
13,938

 
13,990

Borchers, Inc.
^+*
 
(2) (3) (8)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.10%
 
11/1/2024
 
15,550

 
15,496

 
15,515

Brooks Equipment Company, LLC
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.63%
 
8/29/2020
 
5,948

 
5,941

 
5,942

Clearent Newco, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.00%
 
6.56%
 
3/20/2024
 
26,239

 
25,870

 
25,991

Datto, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.25%
 
6.74%
 
4/2/2026
 
12,500

 
12,441

 
12,438

DecoPac, Inc.
^+*
 
(2) (3) (8)
 
Non-durable Consumer Goods
 
L + 4.25%
 
6.85%
 
9/29/2024
 
12,664

 
12,543

 
12,596

Dent Wizard International Corporation
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.50%
 
4/7/2020
 
24,194

 
24,132

 
24,105

DTI Holdco, Inc.
+*\
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.49%
 
9/30/2023
 
19,032

 
18,897

 
17,795

EIP Merger Sub, LLC (Evolve IP)
+*
 
(2) (3) (4)
 
Telecommunications
 
L + 5.75%
 
8.25%
 
6/7/2022
 
22,282

 
21,872

 
21,601

EIP Merger Sub, LLC (Evolve IP)
*
 
(2) (3) (7)
 
Telecommunications
 
L + 5.75%
 
8.25%
 
6/7/2022
 
1,500

 
1,470

 
1,448

Eliassen Group, LLC
+
 
(2) (3)
 
Business Services
 
L + 4.50%
 
7.00%
 
11/5/2024
 
6,242

 
6,219

 
6,236

Exactech, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.25%
 
2/14/2025
 
12,870

 
12,822

 
12,775

Executive Consulting Group, LLC, Inc.
^+
 
(2) (3) (8)
 
Business Services
 
L + 4.25%
 
6.85%
 
6/20/2024
 
15,279

 
15,135

 
15,115

Golden West Packaging Group LLC
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.75%
 
6/20/2023
 
30,099

 
29,904

 
29,774

HMT Holding Inc.
^+*
 
(2) (3) (8)
 
Energy: Oil & Gas
 
L + 4.50%
 
7.00%
 
11/17/2023
 
33,404

 
32,846

 
33,123

J.S. Held, LLC
+*
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.10%
 
9/25/2024
 
20,262

 
20,117

 
20,068

Jensen Hughes, Inc.
^+*
 
(2) (3) (8)
 
Utilities: Electric
 
L + 4.50%
 
7.10%
 
3/22/2024
 
29,354

 
29,149

 
28,932

Kestra Financial, Inc.
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.88%
 
6/24/2022
 
21,697

 
21,510

 
21,697

MAG DS Corp.
^+
 
(2) (3) (8)
 
Aerospace & Defense
 
L + 4.75%
 
7.25%
 
6/6/2025
 
25,844

 
25,587

 
25,717


45



Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
Maravai Intermediate Holdings, LLC
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.75%
 
8/2/2025
 
$
29,850

 
$
29,574

 
$
29,605

Marco Technologies, LLC
^+
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
7.07%
 
10/30/2023
 
7,498

 
7,451

 
7,425

Mold-Rite Plastics, LLC
+
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 4.25%
 
6.85%
 
12/14/2021
 
14,813

 
14,759

 
14,758

MSHC, Inc.
^+*
 
(2) (3) (8)
 
Construction & Building
 
L + 4.25%
 
6.85%
 
7/31/2023
 
31,163

 
31,057

 
30,957

Newport Group Holdings II, Inc.
+\
 
(2)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.36%
 
9/13/2025
 
23,895

 
23,655

 
23,757

North American Dental Management, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.81%
 
7/7/2023
 
37,091

 
36,451

 
36,395

North Haven CA Holdings, Inc.
^+*
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.10%
 
10/2/2023
 
35,052

 
34,717

 
34,653

Odyssey Logistics & Technology Corporation
+*\
 
(2) (3)
 
Transportation: Cargo
 
L + 4.00%
 
6.50%
 
10/12/2024
 
39,650

 
39,472

 
39,372

Output Services Group
^+\
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.75%
 
3/27/2024
 
17,356

 
17,297

 
16,827

PAI Holdco, Inc.
+*
 
(2) (3)
 
Automotive
 
L + 4.25%
 
6.77%
 
1/5/2025
 
19,673

 
19,588

 
19,625

Park Place Technologies, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.00%
 
6.50%
 
3/29/2025
 
15,882

 
15,819

 
15,724

Pasternack Enterprises, Inc.
+
 
(2) (3)
 
Capital Equipment
 
L + 4.00%
 
6.50%
 
7/2/2025
 
20,026

 
20,026

 
19,848

Pharmalogic Holdings Corp.
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.50%
 
6/11/2023
 
6,999

 
6,979

 
6,939

Ping Identity Corporation
+\
 
(2) (3)
 
High Tech Industries
 
L + 3.75%
 
6.25%
 
1/25/2025
 
4,963

 
4,952

 
4,933

Premier Senior Marketing, LLC
*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
11/30/2025
 
4,953

 
4,931

 
4,908

Premise Health Holding Corp.
^+\
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.35%
 
7/10/2025
 
13,828

 
13,769

 
13,721

Propel Insurance Agency, LLC
^+
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.85%
 
6/1/2024
 
20,323

 
19,792

 
19,901

PSI Services, LLC
^+*
 
(2) (3) (8)
 
Business Services
 
L + 5.00%
 
7.51%
 
1/20/2023
 
30,069

 
29,639

 
29,599

Q Holding Company
+*
 
(2) (3)
 
Automotive
 
L + 5.00%
 
7.50%
 
12/18/2021
 
17,055

 
17,016

 
16,998

QW Holding Corporation (Quala)
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.75%
 
8.42%
 
8/31/2022
 
10,500

 
10,260

 
10,337

Radiology Partners, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.75%
 
7.42%
 
7/9/2025
 
24,937

 
24,814

 
24,937

RevSpring, Inc.
+*\
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.75%
 
10/11/2025
 
24,938

 
24,851

 
24,653

Situs Group Holdings Corporation
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.00%
 
2/26/2023
 
8,915

 
8,907

 
8,863

Surgical Information Systems, LLC
+*
 
(2) (3) (7)
 
High Tech Industries
 
L + 4.85%
 
7.34%
 
4/24/2023
 
26,168

 
25,973

 
25,754

Systems Maintenance Services Holding, Inc.
+*
 
(2) (3)
 
High Tech Industries
 
L + 5.00%
 
7.50%
 
10/28/2023
 
23,949

 
23,839

 
19,054

T2 Systems Canada, Inc.
+
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
9/28/2022
 
2,639

 
2,594

 
2,633

T2 Systems, Inc.
^+*
 
(2) (3) (8)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
9/28/2022
 
15,737

 
15,463

 
15,696

The Original Cakerie, Co. (Canada)
+*
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.58%
 
7/20/2022
 
8,996

 
8,950

 
8,945

The Original Cakerie, Ltd. (Canada)
^+
 
(2) (3) (8)
 
Beverage, Food & Tobacco
 
L + 4.50%
 
7.08%
 
7/20/2022
 
6,674

 
6,637

 
6,630


46



Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
ThoughtWorks, Inc.
+*\
 
(2) (3)
 
Business Services
 
L + 4.00%
 
6.50%
 
10/12/2024
 
$
11,914

 
$
11,880

 
$
11,823

U.S. Acute Care Solutions, LLC
+*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 5.00%
 
7.60%
 
5/15/2021
 
31,624

 
31,472

 
31,582

U.S. TelePacific Holdings Corp.
+*\
 
(2) (3)
 
Telecommunications
 
L + 5.00%
 
7.60%
 
5/2/2023
 
26,660

 
26,468

 
25,794

Upstream Intermediate, LLC
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.50%
 
1/3/2024
 
18,164

 
18,092

 
18,041

Valet Waste Holdings, Inc.
+\
 
(2) (3)
 
Construction & Building
 
L + 4.00%
 
6.50%
 
9/28/2025
 
11,940

 
11,918

 
11,885

Valicor Environmental Services, LLC
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 4.50%
 
6.99%
 
6/1/2023
 
34,658

 
34,182

 
34,298

WIRB - Copernicus Group, Inc.
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.75%
 
8/15/2022
 
17,150

 
17,061

 
17,012

WRE Holding Corp.
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.00%
 
7.49%
 
1/3/2023
 
7,479

 
7,407

 
7,263

Zywave, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 5.00%
 
7.50%
 
11/17/2022
 
18,006

 
17,878

 
18,003

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,238,445

 
$
1,230,593

Second Lien Debt (1.76% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DBI Holding, LLC
^
 
(2) (3) (9)
 
Transportation: Cargo
 
8.00% (100% PIK)
 
8.00%
 
2/1/2026
 
$
21,150

 
$
20,697

 
$
21,151

Zywave, Inc.
*
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.49%
 
11/17/2023
 
1,050

 
1,039

 
1,050

Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
21,736

 
$
22,201

Investments (1)
 
 
Footnotes
 
Industry
 
Type
 
Shares/Units
 
Cost
 
Fair Value (6)
Equity Investments (0.44% of fair value)
 
 
 
 
 
 
 
 
 
 
DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
Preferred stock
 
13,996

 
$
5,365

 
$
5,501

DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
Common stock
 
2,961

 
$

 
$

Equity Investments Total
 
 
 
 
 
 
 
 
 
$
5,365

 
$
5,501

Total Investments
 
 
 
 
 
 
 
 
 
 
$
1,265,546

 
$
1,258,295


^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into the Credit Fund Facility. The lenders of the Credit Fund Facility have a first lien security interest in substantially all of the assets of Credit Fund. Accordingly, such assets are not available to creditors of Credit Fund Sub, the 2017-1 Issuer or the Credit Fund Warehouse.
+ Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund, the 2017-1 Issuer or the Credit Fund Warehouse.
* Denotes that all or a portion of the assets are owned by the 2017-1 Issuer and secure the notes issued in connection with a $399,900 term debt securitization completed by Credit Fund on December 19, 2017 (the “2017-1 Debt Securitization”). Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the Credit Fund Warehouse.
\ Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse. Credit Fund Warehouse has entered into a revolving credit facility (the “Credit Fund Warehouse Facility”). The lenders of the Credit Fund Warehouse Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse. Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the 2017-1 Issuer.
(1)
Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of March 31, 2019, the geographical composition of investments as a percentage of fair value was 1.45% in Canada and 98.55% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of March 31, 2019. As of March 31, 2019, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 2.49%, the 90-day LIBOR at 2.60% and the 180-day LIBOR at 2.66%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.
(4)
Credit Fund Sub receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.20% on EIP Merger Sub, LLC (Evolve IP). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments.

47



(5)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(6)
Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements.
(7)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, Credit Fund Sub and the 2017-1 Issuer is entitled to receive additional interest as a result of an agreement among lenders as follows: EIP Merger Sub, LLC (Evolve IP) (3.75%) and Surgical Information Systems, LLC (1.13%). Pursuant to the agreement among lenders in respect of these loans, these investments represent a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.
(8)
As of March 31, 2019, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
First Lien Debt – unfunded delayed draw and revolving term loans commitments
 
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
Advanced Instruments, LLC
 
Revolver
 
0.50%
 
$
1,333

 
$
(9
)
Ahead, LLC
 
Revolver
 
0.50
 
4,688

 
(35
)
AQA Acquisition Holding, Inc.
 
Revolver
 
0.50
 
2,459

 
(4
)
Borchers, Inc.
 
Revolver
 
0.50
 
1,935

 
(4
)
Clearent Newco, LLC
 
Delayed Draw
 
1.00
 
2,428

 
(20
)
Clearent Newco, LLC
 
Revolver
 
0.50
 
1,120

 
(9
)
DecoPac, Inc.
 
Revolver
 
0.50
 
2,143

 
(10
)
Executive Consulting Group, LLC, Inc.
 
Revolver
 
0.50
 
2,368

 
(22
)
HMT Holding Inc.
 
Revolver
 
0.50
 
6,173

 
(44
)
J.S. Held, LLC
 
Delayed Draw
 
1.00
 
2

 

Jensen Hughes, Inc.
 
Revolver
 
0.50
 
1,455

 
(16
)
Jensen Hughes, Inc.
 
Delayed Draw
 
1.00
 
6,842

 
(77
)
MAG DS Corp.
 
Revolver
 
0.50
 
5,000

 
(20
)
Marco Technologies, LLC
 
Delayed Draw
 
1.00
 
7,500

 
(37
)
MSHC, Inc.
 
Delayed Draw
 
1.00
 
9,268

 
(47
)
North American Dental Management, LLC
 
Revolver
 
0.50
 
2,505

 
(44
)
North Haven CA Holdings, Inc. (CoAdvantage)
 
Revolver
 
0.50
 
6,114

 
(59
)
Output Services Group
 
Delayed Draw
 
4.25
 
2,518

 
(67
)
Pharmalogic Holdings Corp.
 
Delayed Draw
 
1.00
 
2,947

 
(18
)
Premise Health Holding Corp.
 
Delayed Draw
 
1.00
 
1,103

 
(8
)
Propel Insurance Agency, LLC
 
Delayed Draw
 
0.50
 
7,143

 
(101
)
Propel Insurance Agency, LLC
 
Revolver
 
0.50
 
2,381

 
(34
)
PSI Services LLC
 
Revolver
 
0.50
 
528

 
(8
)
QW Holding Corporation (Quala)
 
Delayed Draw
 
1.00
 
1,453

 
(14
)
QW Holding Corporation (Quala)
 
Revolver
 
0.50
 
5,498

 
(51
)
T2 Systems, Inc.
 
Revolver
 
0.50
 
1,173

 
(3
)
The Original Cakerie, Ltd. (Canada)
 
Revolver
 
0.50
 
1,399

 
(8
)
Upstream Intermediate, LLC
 
Revolver
 
0.50
 
1,606

 
(10
)
Valicor Environmental Services, LLC
 
Revolver
 
0.50
 
3,515

 
(33
)
WIRB - Copernicus Group, Inc.
 
Delayed Draw
 
1.00
 
6,480

 
(36
)
WIRB - Copernicus Group, Inc.
 
Revolver
 
0.50
 
1,000

 
(6
)
WRE Holding Corp.
 
Delayed Draw
 
0.89
 
2,069

 
(45
)
WRE Holding Corp.
 
Revolver
 
0.50
 
355

 
(8
)
Zywave, Inc.
 
Revolver
 
0.50
 
600

 

Total unfunded commitments
 
 
 
 
 
$
105,101

 
$
(907
)
(9)
Loan was on non-accrual status as of March 31, 2019.


48



Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Achilles Acquisition, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.00%
 
6.56%
 
10/11/2025
 
$
18,000

 
$
17,906

 
$
17,716

Acrisure, LLC
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.77%
 
11/22/2023
 
20,886

 
20,843

 
19,981

Acrisure, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.27%
 
11/22/2023
 
11,940

 
11,928

 
11,333

Advanced Instruments, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.63%
 
10/31/2022
 
11,791

 
11,695

 
11,690

Ahead, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.87%
 
6/29/2023
 
20,059

 
19,959

 
19,856

Alpha Packaging Holdings, Inc.
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
7.05%
 
5/12/2020
 
16,860

 
16,830

 
16,813

AM Conservation Holding Corporation
+*
 
(2) (3)
 
Energy: Electricity
 
L + 4.50%
 
7.30%
 
10/31/2022
 
38,310

 
38,079

 
38,027

AQA Acquisition Holding, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
7.05%
 
5/24/2023
 
19,148

 
19,111

 
18,978

Avalign Technologies, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.50%
 
7.00%
 
12/22/2025
 
13,000

 
12,874

 
12,848

Big Ass Fans, LLC
+*\
 
(2) (3)
 
Capital Equipment
 
L + 3.75%
 
6.55%
 
5/21/2024
 
14,052

 
13,973

 
13,840

Borchers, Inc.
^+*
 
(2) (3) (8)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.30%
 
11/1/2024
 
15,589

 
15,533

 
15,545

Brooks Equipment Company, LLC
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.71%
 
8/29/2020
 
5,948

 
5,940

 
5,935

Clearent Newco, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.00%
 
6.52%
 
3/20/2024
 
23,093

 
22,702

 
22,819

DBI Holding, LLC
+*
 
(2) (3) (9)
 
Transportation: Cargo
 
L + 5.25%
 
7.76%
 
8/1/2021
 
34,494

 
34,276

 
25,400

DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
15% (100% PIK)
 
7.76%
 
2/1/2020
 
1,119

 
1,119

 
1,119

DecoPac, Inc.
^+*
 
(2) (3) (8)
 
Non-durable Consumer Goods
 
L + 4.25%
 
7.05%
 
9/29/2024
 
12,696

 
12,571

 
12,619

Dent Wizard International Corporation
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.51%
 
4/7/2020
 
24,256

 
24,183

 
24,110

DTI Holdco, Inc.
+*\
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.28%
 
9/30/2023
 
19,081

 
18,941

 
17,793

EIP Merger Sub, LLC (Evolve IP)
+*
 
(2) (3) (4)
 
Telecommunications
 
L + 5.75%
 
8.27%
 
6/7/2022
 
22,358

 
21,923

 
21,788

EIP Merger Sub, LLC (Evolve IP)
*
 
(2) (3) (7)
 
Telecommunications
 
L + 5.75%
 
8.27%
 
6/7/2022
 
1,500

 
1,469

 
1,462

Eliassen Group, LLC
+
 
(2) (3)
 
Business Services
 
L + 4.50%
 
7.00%
 
11/5/2024
 
6,250

 
6,226

 
6,202

Exactech, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.27%
 
2/14/2025
 
12,903

 
12,849

 
12,741

Executive Consulting Group, LLC, Inc.
^+
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.30%
 
6/20/2024
 
15,318

 
15,168

 
15,132

Golden West Packaging Group LLC
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.77%
 
6/20/2023
 
30,180

 
29,978

 
29,760

HMT Holding Inc.
^+*
 
(2) (3) (8)
 
Energy: Oil & Gas
 
L + 4.50%
 
7.02%
 
11/17/2023
 
33,490

 
32,902

 
33,172

J.S. Held, LLC
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.30%
 
9/25/2024
 
20,309

 
20,137

 
19,998

Jensen Hughes, Inc.
^+*
 
(2) (3) (8)
 
Utilities: Electric
 
L + 4.50%
 
7.30%
 
3/22/2024
 
27,978

 
27,896

 
27,382

Kestra Financial, Inc.
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.76%
 
6/24/2022
 
21,744

 
21,547

 
21,690

MAG DS Corp.
^+
 
(2) (3) (8)
 
Aerospace & Defense
 
L + 4.75%
 
7.27%
 
6/6/2025
 
22,885

 
22,679

 
22,665

Maravai Intermediate Holdings, LLC
+\
 
(2)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.81%
 
8/2/2025
 
29,925

 
29,640

 
29,578


49



Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mold-Rite Plastics, LLC
+
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.30%
 
12/14/2021
 
$
14,850

 
$
14,793

 
$
14,762

MSHC, Inc.
^+*
 
(2) (3) (8)
 
Construction & Building
 
L + 4.25%
 
6.89%
 
7/31/2023
 
23,579

 
23,514

 
23,088

Newport Group Holdings II, Inc.
+\
 
(2)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.54%
 
9/13/2025
 
17,790

 
17,666

 
17,564

North American Dental Management, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
8.04%
 
7/7/2023
 
37,781

 
37,329

 
37,093

North Haven CA Holdings, Inc.
^+*
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.02%
 
10/2/2023
 
35,139

 
34,789

 
34,401

Odyssey Logistics & Technology Corporation
+*\
 
(2) (3)
 
Transportation: Cargo
 
L + 4.00%
 
6.52%
 
10/12/2024
 
39,680

 
39,496

 
39,149

Output Services Group
^+\
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.77%
 
3/27/2024
 
17,400

 
17,338

 
16,663

PAI Holdco, Inc.
+*
 
(2) (3)
 
Automotive
 
L + 4.25%
 
7.05%
 
1/5/2025
 
19,727

 
19,637

 
19,459

Park Place Technologies, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.00%
 
6.52%
 
3/29/2025
 
15,922

 
15,856

 
15,639

Pasternack Enterprises, Inc.
+
 
(2) (3)
 
Capital Equipment
 
L + 4.00%
 
6.52%
 
7/2/2025
 
20,076

 
20,076

 
19,745

Pharmalogic Holdings Corp.
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.52%
 
6/11/2023
 
7,017

 
6,995

 
6,949

Ping Identity Corporation
+\
 
(2) (3)
 
High Tech Industries
 
L + 3.75%
 
6.27%
 
1/25/2025
 
4,975

 
4,956

 
4,915

Premier Senior Marketing, LLC
*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
11/30/2025
 
4,953

 
4,953

 
4,875

Premise Health Holding Corp.
^+\
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.55%
 
7/10/2025
 
13,862

 
13,805

 
13,717

Propel Insurance Agency, LLC
^+
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
6/1/2024
 
21,088

 
20,535

 
20,628

PSI Services, LLC
^+*
 
(2) (3) (8)
 
Business Services
 
L + 5.00%
 
7.52%
 
1/20/2023
 
29,919

 
29,469

 
29,239

Q Holding Company
+*
 
(2) (3)
 
Automotive
 
L + 5.00%
 
7.52%
 
12/18/2021
 
17,099

 
17,058

 
16,969

QW Holding Corporation (Quala)
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 6.75%
 
9.22%
 
8/31/2022
 
9,704

 
9,338

 
9,489

RevSpring, Inc.
+*\
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
7.05%
 
10/11/2025
 
20,000

 
19,953

 
19,680

Situs Group Holdings Corporation
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.02%
 
2/26/2023
 
8,915

 
8,892

 
8,887

Surgical Information Systems, LLC
+*
 
(2) (3) (7)
 
High Tech Industries
 
L + 4.85%
 
7.37%
 
4/24/2023
 
27,708

 
27,494

 
27,171

Systems Maintenance Services Holding, Inc.
+*
 
(2) (3)
 
High Tech Industries
 
L + 5.00%
 
7.52%
 
10/28/2023
 
24,010

 
23,907

 
17,842

T2 Systems Canada, Inc.
+
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
9/28/2022
 
2,646

 
2,598

 
2,630

T2 Systems, Inc.
^+*
 
(2) (3) (8)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
9/28/2022
 
15,775

 
15,484

 
15,677

The Original Cakerie, Co. (Canada)
+*
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.50%
 
7/20/2022
 
9,019

 
8,968

 
8,932

The Original Cakerie, Ltd. (Canada)
+
 
(2) (3) (8)
 
Beverage, Food & Tobacco
 
L + 4.50%
 
7.02%
 
7/20/2022
 
6,957

 
6,917

 
6,883

ThoughtWorks, Inc.
+*\
 
(2) (3)
 
Business Services
 
L + 4.00%
 
6.52%
 
10/12/2024
 
11,944

 
11,909

 
11,770

U.S. Acute Care Solutions, LLC
+*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 5.00%
 
7.52%
 
5/15/2021
 
31,705

 
31,540

 
31,395

U.S. TelePacific Holdings Corp.
+*\
 
(2) (3)
 
Telecommunications
 
L + 5.00%
 
7.80%
 
5/2/2023
 
26,660

 
26,459

 
24,768


50



Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upstream Intermediate, LLC
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.77%
 
1/3/2024
 
$
17,939

 
$
17,863

 
$
17,677

Valet Waste Holdings, Inc.
+\
 
(2) (3)
 
Construction & Building
 
L + 4.00%
 
6.52%
 
9/28/2025
 
11,970

 
11,947

 
11,902

Valicor Environmental Services, LLC
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 4.75%
 
7.27%
 
6/1/2023
 
33,410

 
32,914

 
32,995

WIRB - Copernicus Group, Inc.
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.77%
 
8/15/2022
 
17,194

 
17,098

 
16,931

WRE Holding Corp.
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.00%
 
7.52%
 
1/3/2023
 
7,238

 
7,162

 
6,993

Zywave, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 5.00%
 
7.52%
 
11/17/2022
 
18,050

 
17,914

 
17,991

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,197,499

 
$
1,172,460

Second Lien Debt (0.09% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Zywave, Inc.
*
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.65%
 
11/17/2023
 
$
1,050

 
$
1,038

 
$
1,048

Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,038

 
$
1,048

Total Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,198,537

 
$
1,173,508


^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into the Credit Fund Facility. The lenders of the Credit Fund Facility have a first lien security interest in substantially all of the assets of Credit Fund. Accordingly, such assets are not available to creditors of Credit Fund Sub, the 2017-1 Issuer or the Credit Fund Warehouse.
+ Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund, the 2017-1 Issuer or the Credit Fund Warehouse.
* Denotes that all or a portion of the assets are owned by the 2017-1 Issuer and secure the notes issued in connection with a $399,900 term debt securitization completed by Credit Fund on December 19, 2017 (the “2017-1 Debt Securitization”). Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the Credit Fund Warehouse.
\ Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse. Credit Fund Warehouse has entered into a revolving credit facility (the “Credit Fund Warehouse Facility”). The lenders of the Credit Fund Warehouse Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse. Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the 2017-1 Issuer.
(1)
Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2018, the geographical composition of investments as a percentage of fair value was 1.35% in Canada and 98.65% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2018. As of December 31, 2018, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 2.50%, the 90-day LIBOR at 2.81% and the 180-day LIBOR at 2.88%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.
(4)
Credit Fund Sub receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.20% on EIP Merger Sub, LLC (Evolve IP). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments.
(5)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(6)
Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements.
(7)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, Credit Fund is entitled to receive additional interest as a result of an agreement among lenders as follows: EIP Merger Sub, LLC (Evolve IP) (3.75%) and Surgical Information Systems, LLC (0.89%). Pursuant to the agreement among lenders in respect of these loans, these investments represent a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

51



(8)
As of December 31, 2018, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
First Lien Debt—unfunded delayed draw and revolving term loans commitments
 
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
Advanced Instruments, LLC
 
Revolver
 
0.50%
 
$
1,333

 
$
(10
)
Ahead, LLC
 
Revolver
 
0.50
 
4,688

 
(38
)
AQA Acquisition Holding, Inc.
 
Revolver
 
0.50
 
2,459

 
(19
)
Borchers, Inc.
 
Revolver
 
0.50
 
1,935

 
(5
)
Clearent Newco, LLC
 
Delayed Draw
 
1.00
 
4,988

 
(46
)
Clearent Newco, LLC
 
Revolver
 
0.50
 
1,760

 
(16
)
DecoPac, Inc.
 
Revolver
 
0.50
 
2,143

 
(11
)
Executive Consulting Group, LLC, Inc.
 
Revolver
 
0.50
 
2,368

 
(25
)
HMT Holding Inc.
 
Revolver
 
0.50
 
6,173

 
(49
)
Jensen Hughes, Inc.
 
Revolver
 
0.50
 
2,000

 
(39
)
Jensen Hughes, Inc.
 
Delayed Draw
 
1.00
 
337

 
(7
)
MAG DS Corp.
 
Revolver
 
0.50
 
2,022

 
(18
)
MSHC, Inc.
 
Delayed Draw
 
0.32
 
9,852

 
(145
)
North American Dental Management, LLC
 
Revolver
 
0.50
 
2,000

 
(35
)
North Haven CA Holdings, Inc. (CoAdvantage)
 
Revolver
 
0.50
 
6,114

 
(109
)
Output Services Group
 
Delayed Draw
 
4.25
 
2,518

 
(93
)
Pharmalogic Holdings Corp.
 
Delayed Draw
 
1.00
 
2,947

 
(20
)
Premise Health Holding Corp.
 
Delayed Draw
 
1.00
 
1,103

 
(11
)
Propel Insurance Agency, LLC
 
Delayed Draw
 
0.50
 
7,143

 
(110
)
Propel Insurance Agency, LLC
 
Revolver
 
0.50
 
1,667

 
(26
)
PSI Services LLC
 
Revolver
 
0.50
 
754

 
(17
)
QW Holding Corporation (Quala)
 
Revolver
 
0.50
 
5,498

 
(52
)
T2 Systems, Inc.
 
Revolver
 
0.50
 
1,173

 
(7
)
The Original Cakerie, Ltd. (Canada)
 
Revolver
 
0.50
 
1,132

 
(10
)
Upstream Intermediate, LLC
 
Revolver
 
0.50
 
1,606

 
(22
)
Valicor Environmental Services, LLC
 
Revolver
 
0.50
 
4,971

 
(54
)
WIRB - Copernicus Group, Inc.
 
Delayed Draw
 
1.00
 
6,480

 
(69
)
WIRB - Copernicus Group, Inc.
 
Revolver
 
0.50
 
1,000

 
(11
)
WRE Holding Corp.
 
Delayed Draw
 
0.89
 
2,069

 
(51
)
WRE Holding Corp.
 
Revolver
 
0.50
 
613

 
(15
)
Zywave, Inc.
 
Revolver
 
0.50
 
600

 
(2
)
Total unfunded commitments
 
 
 
 
 
$
91,446

 
$
(1,142
)
(9)
Loan was on non-accrual status as of December 31, 2018.








52



Below is certain summarized consolidated financial information for Credit Fund as of March 31, 2019 and December 31, 2018, respectively. Credit Fund commenced operations in May 2016.
 
 
March 31, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
Selected Consolidated Balance Sheet Information
 
 
 
 
ASSETS
 
 
 
 
Investments, at fair value (amortized cost of $1,265,546 and $1,198,537, respectively)
 
$
1,258,295

 
$
1,173,508

Cash and other assets
 
41,074

 
62,547

Total assets
 
$
1,299,369

 
$
1,236,055

LIABILITIES AND MEMBERS’ EQUITY
 
 
 
 
Secured borrowings
 
$
624,667

 
$
572,178

Notes payable, net of unamortized debt issuance costs of $1,798 and $1,849, respectively
 
280,524

 
309,114

Mezzanine loans
 
123,800

 
112,000

Other liabilities
 
52,882

 
34,195

Subordinated loans and members’ equity
 
217,496

 
208,568

Liabilities and members’ equity
 
$
1,299,369

 
$
1,236,055

 
 
For the three month periods ended
 
 
March 31, 2019
 
March 31, 2018
 
 
(unaudited)
 
(unaudited)
Selected Consolidated Statement of Operations Information:
 
 
 
 
Total investment income
 
$
22,606

 
$
17,911

Expenses
 
 
 
 
Interest and credit facility expenses
 
14,730

 
10,656

Other expenses
 
441

 
389

Total expenses
 
15,171

 
11,045

Net investment income (loss)
 
7,435

 
6,866

Net realized gain (loss) on investments
 
(8,285
)
 

Net change in unrealized appreciation (depreciation) on investments
 
17,778

 
3,035

Net increase (decrease) resulting from operations
 
$
16,928

 
$
9,901

Debt
Credit Fund Facility
On June 24, 2016, Credit Fund entered into the Credit Fund Facility with the Company pursuant to which Credit Fund may from time to time request mezzanine loans from the Company, which was subsequently amended on June 5, 2017, October 2, 2017, November 3, 2017, June 22, 2018 and June 29, 2018. The maximum principal amount of the Credit Fund Facility is $175,000. The maturity date of the Credit Fund Facility is March 22, 2020. Amounts borrowed under the Credit Fund Facility bear interest at a rate of LIBOR plus 9.00%.
During the three month periods ended March 31, 2019 and 2018, there were mezzanine loan borrowings of $30,500 and $21,850, respectively, and repayments of $18,700 and $0, respectively, under the Credit Fund Facility. As of March 31, 2019 and December 31, 2018, there were $123,800 and $112,000 in mezzanine loans outstanding, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund was in compliance with all covenants and other requirements of the Credit Fund Facility.
Credit Fund Sub Facility
On June 24, 2016, Credit Fund Sub closed on the Credit Fund Sub Facility with lenders, which was subsequently amended on May 31, 2017, October 27, 2017 and August 24, 2018. The Credit Fund Sub Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $640,000. The facility is secured by a first lien security interest in

53



substantially all of the portfolio investments held by Credit Fund Sub. The maturity date of the Credit Fund Sub Facility is May 22, 2024. Amounts borrowed under the Credit Fund Sub Facility bear interest at a rate of LIBOR plus 2.25%.
During the three month periods ended March 31, 2019 and 2018, there were secured borrowings of $60,020 and $67,965, respectively, and repayments of $20,404 and $15,035, respectively, under the Credit Fund Sub Facility. As of March 31, 2019 and December 31, 2018, there was $510,750 and $471,134 in secured borrowings outstanding, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund Sub was in compliance with all covenants and other requirements of the Credit Fund Sub Facility.
2017-1 Notes
On December 19, 2017, Credit Fund completed the 2017-1 Debt Securitization. The notes offered in the 2017-1 Debt Securitization (the “2017-1 Notes”) were issued by the 2017-1 Issuer, a wholly owned and consolidated subsidiary of Credit Fund, and are secured by a diversified portfolio of the 2017-1 Issuer consisting primarily of first and second lien senior secured loans. The 2017-1 Debt Securitization was executed through a private placement of the 2017-1 Notes, consisting of $231,700 of Aaa/AAA Class A-1 Notes, which bear interest at the three-month LIBOR plus 1.17%; $48,300 of Aa2/AA Class A-2 Notes, which bear interest at the three-month LIBOR plus 1.50%; $15,000 of A2/A Class B-1 Notes, which bear interest at the three-month LIBOR plus 2.25%; $9,000 of A2/A Class B-2 Notes which bear interest at 4.30%; $22,900 of Baa2/BBB Class C Notes which bear interest at the three-month LIBOR plus 3.20%; and $25,100 of Ba2/BB Class D Notes which bear interest at the three-month LIBOR plus 6.38%. The 2017-1 Notes are scheduled to mature on January 15, 2028. Credit Fund received 100% of the preferred interests issued by the 2017-1 Issuer (the “2017-1 Issuer Preferred Interests”) on the closing date of the 2017-1 Debt Securitization in exchange for Credit Fund’s contribution to the 2017-1 Issuer of the initial closing date loan portfolio. The 2017-1 Issuer Preferred Interests do not bear interest and had a nominal value of $47,900 at closing.
As of March 31, 2019 and December 31, 2018, the 2017-1 Issuer was in compliance with all covenants and other requirements of the indenture.
Credit Fund Warehouse Facility
On November 26, 2018, Credit Fund closed on the Credit Fund Warehouse Facility with lenders. The Credit Fund Warehouse Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $150,000. The Credit Fund Warehouse Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Credit Fund Warehouse. The maturity date of the Credit Fund Warehouse Facility is November 26, 2019. Amounts borrowed under the Credit Fund Warehouse Facility bear interest at a rate of LIBOR plus 1.05%.
During the three month period ended March 31, 2019, there were secured borrowings of $12,873 under the Credit Fund Warehouse Facility. As of March 31, 2019, there was $113,917 in secured borrowings outstanding.
As of March 31, 2019, Credit Fund Warehouse was in compliance with all covenants and other requirements of the Credit Fund Warehouse Facility.
6. BORROWINGS
In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 150% after such borrowing. As of March 31, 2019 and December 31, 2018, asset coverage was 195.50% and 210.31%, respectively. During the three month periods ended March 31, 2019 and 2018, there were secured borrowings of $253,950 and $253,050, respectively, under the SPV Credit Facility and Credit Facility and repayments of $107,626 and $288,078, respectively, under the SPV Credit Facility and Credit Facility. As of March 31, 2019 and December 31, 2018, there were $660,959 and $514,635, respectively, in secured borrowings outstanding.
SPV Credit Facility
The SPV closed on May 24, 2013 on the SPV Credit Facility, which was subsequently amended on June 30, 2014, June 19, 2015, June 9, 2016, May 26, 2017 and August 9, 2018. The SPV Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $400,000 (the borrowing base as calculated pursuant to the terms of the SPV Credit Facility) and the amount of net cash proceeds and unpledged capital commitments the Company has received, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $750,000, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to

54



support such borrowings. The SPV Credit Facility has a revolving period through May 21, 2021 and a maturity date of May 23, 2023. Borrowings under the SPV Credit Facility bear interest initially at the applicable commercial paper rate (if the lender is a conduit lender) or LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.00% per year through May 21, 2021, with pre-determined future interest rate increases of 0.875%-1.75% following the end of the revolving period. The SPV is also required to pay an undrawn commitment fee of between 0.50% and 0.75% per year depending on the drawings under the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the SPV.
As part of the SPV Credit Facility, the SPV is subject to limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by the SPV including, but not limited to, restrictions on sector and geographic concentrations, loan size, payment frequency, tenor and minimum investment ratings (or estimated ratings). In addition, borrowed funds are intended to be used primarily to purchase first lien loan assets, and the SPV is limited in its ability to purchase certain other assets (including, but not limited to, second lien loans, covenant-lite loans, revolving and delayed draw loans and discount loans) and other assets are not permitted to be purchased (including, but not limited to paid-in-kind loans). The SPV Credit Facility has certain requirements relating to asset coverage, interest coverage, collateral quality and portfolio performance, including limitations on delinquencies and charge offs, certain violations of which could result in the immediate acceleration of the amounts due under the SPV Credit Facility. The SPV Credit Facility is also subject to a borrowing base that applies different advance rates to assets held by the SPV based generally on the fair market value of such assets. Under certain circumstances as set forth in the SPV Credit Facility, the Company could be obliged to repurchase loans from the SPV.
As of March 31, 2019 and December 31, 2018, the SPV was in compliance with all covenants and other requirements of the SPV Credit Facility.
Credit Facility
The Company closed on March 21, 2014 on the Credit Facility, which was subsequently amended on January 8, 2015, May 25, 2016, March 22, 2017 and September 25, 2018. The maximum principal amount of the Credit Facility is $513,000, subject to availability under the Credit Facility, which is based on certain advance rates multiplied by the value of the Company’s portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that the Company may incur in accordance with the terms of the Credit Facility. Proceeds of the Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Credit Facility may be increased to $620,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Credit Facility includes a $20,000 limit for swingline loans and a $5,000 limit for letters of credit. The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Amounts drawn under the Credit Facility, including amounts drawn in respect of letters of credit, bear interest at either LIBOR plus an applicable spread of 2.25%, or an “alternative base rate” (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of 1.25%. The Company may elect either the LIBOR or the “alternative base rate” at the time of drawdown, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company also pays a fee of 0.375% on undrawn amounts under the Credit Facility and, in respect of each undrawn letter of credit, a fee and interest rate equal to the then-applicable margin under the Credit Facility while the letter of credit is outstanding. The availability period under the Credit Facility will terminate on March 22, 2022 and the Credit Facility will mature on March 22, 2023. During the period from March 22, 2022 to March 22, 2023, the Company will be obligated to make mandatory prepayments under the Credit Facility out of the proceeds of certain asset sales, other recovery events and equity and debt issuances.
Subject to certain exceptions, the Credit Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Company. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.
As of March 31, 2019 and December 31, 2018, the Company was in compliance with all covenants and other requirements of the Credit Facility.
Summary of Facilities
The Facilities consisted of the following as of March 31, 2019 and December 31, 2018:

55



 
March 31, 2019
 
Total Facility
 
Borrowings Outstanding
 
Unused Portion (1)
 
Amount Available (2)
SPV Credit Facility
$
400,000

 
$
252,959

 
$
147,041

 
$
4,420

Credit Facility
513,000

 
408,000

 
105,000

 
105,000

Total
$
913,000

 
$
660,959

 
$
252,041

 
$
109,420

 
 
 
 
 
 
 
 
 
December 31, 2018
 
Total Facility
 
Borrowings Outstanding
 
Unused Portion (1)
 
Amount Available (2)
SPV Credit Facility
$
400,000

 
$
224,135

 
$
175,865

 
$
2,547

Credit Facility
413,000

 
290,500

 
122,500

 
122,500

Total
$
813,000

 
$
514,635

 
$
298,365

 
$
125,047

 
(1)
The unused portion is the amount upon which commitment fees are based.
(2)
Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.
As of March 31, 2019 and December 31, 2018, $3,183 and $2,978, respectively, of interest expense, $284 and $205, respectively, of unused commitment fees and $23 and $23, respectively, of other fees were included in interest and credit facility fees payable. For the three month periods ended March 31, 2019 and 2018 , the weighted average interest rates were 4.68% and 3.78%, respectively, and the average principal debt outstanding was $568,519 and $553,656, respectively. As of March 31, 2019 and December 31, 2018, the weighted average interest rates were 4.65% and 4.67%, respectively, based on floating LIBOR rates.
For the three month periods ended March 31, 2019 and 2018, the components of interest expense and credit facility fees were as follows:
 
For the three month periods ended
 
 
March 31, 2019
 
March 31, 2018
 
Interest expense
$
6,653

 
$
5,235

 
Facility unused commitment fee
303

 
288

 
Amortization of deferred financing costs
236

 
202

 
Other fees
29

 
35

 
Total interest expense and credit facility fees
$
7,221

 
$
5,760

 
Cash paid for interest expense
$
6,449

 
$
5,291

 
7. NOTES PAYABLE
On June 26, 2015, the Company completed the 2015-1 Debt Securitization. The 2015-1 Notes were issued by the 2015-1 Issuer, a wholly-owned and consolidated subsidiary of the Company. The 2015-1 Debt Securitization was executed through a private placement of the 2015-1 Notes, consisting of $160,000 of Aaa/AAA Class A-1A Notes; $40,000 of Aaa/AAA Class A-1B Notes; $27,000 of Aaa/AAA Class A-1C Notes; and $46,000 of Aa2 Class A-2 Notes. The 2015-1 Notes were issued at par and were scheduled to mature on July 15, 2027. The Company received 100% of the preferred interests issued by the 2015-1 Issuer (the “2015-1 Issuer Preferred Interests”) on the closing date of the 2015-1 Debt Securitization in exchange for the Company’s contribution to the 2015-1 Issuer of the initial closing date loan portfolio. The 2015-1 Issuer Preferred Interests do not bear interest and had a nominal value of $125,900 at closing. In connection with the contribution, the Company made customary representations, warranties and covenants to the 2015-1 Issuer in the purchase agreement. The Class A-1A, Class A-1B and Class A-1C and Class A-2 Notes are included in these consolidated financial statements. The 2015-1 Issuer Preferred Interests were eliminated in consolidation.
On the closing date of the 2015-1 Debt Securitization, the 2015-1 Issuer effected a one-time distribution to the Company of a substantial portion of the proceeds of the private placement of the 2015-1 Notes, net of expenses, which distribution was used to repay a portion of certain amounts outstanding under the SPV Credit Facility and the Credit Facility.

56



As part of the 2015-1 Debt Securitization, certain first and second lien senior secured loans were distributed by the SPV to the Company pursuant to a distribution and contribution agreement.

On August 30, 2018, the Company and the 2015-1 Issuer closed the 2015-1 Debt Securitization Refinancing. On the closing date of the 2015-1 Debt Securitization Refinancing, the 2015-1 Issuer, among other things, (a) refinanced the issued Class A-1A Notes by redeeming in full the Class A-1A Notes and issuing new AAA Class A-1-1-R Notes in an aggregate principal amount of $234,800 which bear interest at the three-month LIBOR plus 1.55%; (b) refinanced the issued Class A-1B Notes by redeeming in full the Class A-1B Notes and issuing new AAA Class A-1-2-R Notes in an aggregate principal amount of $50,000 which bear interest at the three-month LIBOR plus 1.48% for the first 24 months and the three-month LIBOR plus 1.78% thereafter; (c) refinanced the issued Class A-1C Notes by redeeming in full the Class A-1C Notes and issuing new AAA Class A-1-3-R Notes in an aggregate principal amount of $25,000 which bear interest at 4.56%; (d) refinanced the issued Class A-2 Notes by redeeming in full the Class A-2 Notes and issuing new Class A-2-R Notes in an aggregate principal amount of $66,000 which bear interest at the three-month LIBOR plus 2.20%; (e) issued new single-A Class B Notes and BBB- Class C Notes in aggregate principal amounts of $46,400 and $27,000, respectively, which bear interest at the three-month LIBOR plus 3.15% and the three-month LIBOR plus 4.00%, respectively; (f) reduced the 2015-1 Issuer Preferred Interests by approximately $21,375 from a nominal value of $125,900 to approximately $104,525 at close; and (g) extended the reinvestment period end date and maturity date applicable to the 2015-1 Issuer to October 15, 2023 and October 15, 2031, respectively. Following the 2015-1 Debt Securitization Refinancing, the Company retained the 2015-1 Issuer Preferred Interests. The 2015-1R Notes in the 2015-1 Debt Securitization Refinancing were issued by the 2015-1 Issuer and are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans.
On the closing date of the 2015-1 Debt Securitization Refinancing, the 2015-1 Issuer effected a one-time distribution to the Company of a substantial portion of the proceeds of the private placement of the 2015-1R Notes, net of expenses, which distribution was used to repay a portion of certain amounts outstanding under the SPV Credit Facility and the Credit Facility. As part of the 2015-1 Debt Securitization Refinancing, certain first and second lien senior secured loans were distributed by the SPV to the Company pursuant to a distribution and contribution agreement. The Company contributed the loans that comprised the initial closing date loan portfolio (including the loans distributed to the Company from the SPV) to the 2015-1 Issuer pursuant to a contribution agreement. Future loan transfers from the Company to the 2015-1 Issuer will be made pursuant to a sale agreement and are subject to the approval of the Company’s Board of Directors. Assets of the 2015-1 Issuer are not available to the creditors of the SPV or the Company. In connection with the issuance and sale of the 2015-1R Notes, the Company made customary representations, warranties and covenants in the purchase agreement.
During the reinvestment period, pursuant to the indenture governing the 2015-1R Notes, all principal collections received on the underlying collateral may be used by the 2015-1 Issuer to purchase new collateral under the direction of Investment Adviser in its capacity as collateral manager of the 2015-1 Issuer and in accordance with the Company’s investment strategy.
The Investment Adviser serves as collateral manager to the 2015-1 Issuer under a collateral management agreement (the “Collateral Management Agreement”). Pursuant to the Collateral Management Agreement, the 2015-1 Issuer pays management fees (comprised of base management fees, subordinated management fees and incentive management fees) to the Investment Adviser for rendering collateral management services. As per the Collateral Management Agreement, for the period the Company retains all of the 2015-1 Issuer Preferred Interests, the Investment Adviser does not earn management fees for providing such collateral management services. The Company currently retains all of the 2015-1 Issuer Preferred Interests, thus the Investment Adviser did not earn any management fees from the 2015-1 Issuer for the three month periods ended March 31, 2019 and 2018. Any such waived fees may not be recaptured by the Investment Adviser.
Pursuant to an undertaking by the Company in connection with the 2015-1 Debt Securitization Refinancing, the Company has agreed to hold on an ongoing basis the 2015-1 Issuer Preferred Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate outstanding amount of all collateral obligations by the 2015-1 Issuer for so long as any securities of the 2015-1 Issuer remain outstanding. As of March 31, 2019, the Company was in compliance with its undertaking.
The 2015-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2015-1 Issuer.
As of March 31, 2019, there were 62 first lien and second lien senior secured loans with a total fair value of approximately $550,089 and cash of $15,236 securing the 2015-1R Notes. The pool of loans in the securitization must meet

57



certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2015-1R Notes.
For the three month periods ended March 31, 2019 and 2018, the weighted average interest rate, the effective annualized weighted average interest rates, which include amortization of debt issuance costs on the 2015-1R Notes and 2015-1 Notes, were 4.75% and 3.78%, respectively, based on floating LIBOR rates. As of March 31, 2019 and December 31, 2018 the weighted average interest rates were 4.75% and 4.42% respectively, based on floating LIBOR rates.
For the three month periods ended March 31, 2019 and 2018, the components of interest expense on the 2015-1R and 2015-1 Notes were as follows:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Interest expense
$
5,276

 
$
2,530

Amortization of deferred financing costs
62

 
50

Total interest expense and credit facility fees
$
5,338

 
$
2,580

Cash paid for interest expense
$
5,066

 
$
2,391

8. COMMITMENTS AND CONTINGENCIES
A summary of significant contractual payment obligations was as follows as of March 31, 2019 and December 31, 2018:
 
 
SPV Credit Facility and Credit Facility
 
2015-1R Notes
Payment Due by Period
 
March 31, 2019
 
December 31, 2018
 
March 31, 2019
 
December 31, 2018
Less than 1 Year
 
$

 
$

 
$

 
$

1-3 Years
 

 

 

 

3-5 Years
 
660,959

 
514,635

 

 

More than 5 Years
 

 

 
449,200

 
449,200

Total
 
$
660,959

 
$
514,635

 
$
449,200

 
$
449,200

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of March 31, 2019 and December 31, 2018 for any such exposure.
The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:
 
Par Value as of
 
March 31, 2019
 
December 31, 2018
Unfunded delayed draw commitments
$
85,898

 
$
97,261

Unfunded revolving term loan commitments
64,447

 
59,856

Total unfunded commitments
$
150,345

 
$
157,117

9. NET ASSETS
The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.
On November 5, 2018, the Company’s Board of Directors approved a $100,000 stock repurchase program (the “Company Stock Repurchase Program”). The Company Stock Repurchase Program is expected to be in effect until the earlier of November 5, 2019 and the date the approved dollar amount has been used to repurchase shares. Since the inception of the Company Stock Repurchase Program through March 31, 2019, the Company has repurchased 1,296,590 shares of the Company's common stock at an average cost of $14.62 per share, or $18,952 in the aggregate, resulting in accretion to net assets per share of $0.06.

58



During the three month period ended March 31, 2019, the Company repurchased and extinguished 958,182 shares for $14,085. The following table summarizes capital activity during the three month period ended March 31, 2019:
 
 
 
Common Stock
 
Capital in Excess of Par Value
 
Offering Costs
 
Accumulated Net Investment Income (Loss)
 
Accumulated Net Realized Gain (Loss) on Investments
 
Accumulated Net Unrealized Appreciation (Depreciation) on Investments
 
Total Net Assets
 
 
Shares
 
Amount
 
Balance, beginning of period
 
62,230,251

 
$
622

 
$
1,174,334

 
$
(1,633
)
 
$
5,901

 
$
(44,572
)
 
$
(71,434
)
 
$
1,063,218

Repurchase of common stock
 
(958,182
)
 
(9
)
 
(14,076
)
 

 

 

 

 
(14,085
)
Net investment income (loss)
 

 

 

 

 
27,562

 

 

 
27,562

Net realized gain (loss) on investments
 

 

 

 

 

 
899

 

 
899

Net change in unrealized appreciation (depreciation) on investments
 

 

 

 

 

 

 
5,265

 
5,265

Dividends declared
 

 

 

 

 
(22,672
)
 

 

 
(22,672
)
Balance, end of period
 
61,272,069

 
$
613

 
$
1,160,258

 
$
(1,633
)
 
$
10,791

 
$
(43,673
)
 
$
(66,169
)
 
$
1,060,187

During the three month period ended March 31, 2018, the Company issued 361,056 shares for $6,629 through the reinvestment of dividends. The following table summarizes capital activity during the three month period ended March 31, 2018:
 
 
 
Common Stock
 
Capital in Excess of Par Value
 
Offering Costs
 
Accumulated Net Investment Income (Loss)
 
Accumulated Net Realized Gain (Loss) on Investments
 
Accumulated Net Unrealized Appreciation (Depreciation) on Investments
 
Total Net Assets
 
 
Shares
 
Amount
 
Balance, beginning of period
 
62,207,603

 
$
622

 
$
1,172,807

 
$
(1,618
)
 
$
2,522

 
$
(43,548
)
 
$
(3,481
)
 
$
1,127,304

Reinvestment of dividends
 
361,056

 
4

 
6,625

 

 

 

 

 
6,629

Offering costs
 

 

 

 
(15
)
 

 

 

 
(15
)
Net investment income (loss)
 

 

 

 

 
25,130

 

 

 
25,130

Net realized gain (loss) on investments
 

 

 

 

 

 
(129
)
 

 
(129
)
Net change in unrealized appreciation (depreciation) on investments
 

 

 

 

 

 

 
(3,912
)
 
(3,912
)
Dividends declared
 

 

 

 

 
(23,150
)
 

 

 
(23,150
)
Balance, end of period
 
62,568,659

 
$
626

 
$
1,179,432

 
$
(1,633
)
 
$
4,502

 
$
(43,677
)
 
$
(7,393
)
 
$
1,131,857

The following table summarizes total shares issued and proceeds received related to capital activity during the three month period ended March 31, 2018:
 
 
Shares Issued
 
Proceeds Received
January 17, 2018*
 
361,056

 
$
6,629

Total
 
361,056

 
$
6,629

* Represents shares issued upon the reinvestment of dividends


59



The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the period.
Basic and diluted earnings per common share were as follows:
 
 
For the three month periods ended
 
 
March 31, 2019
 
March 31, 2018
Net increase (decrease) in net assets resulting from operations
 
$
33,726

 
$
21,089

Weighted-average common shares outstanding
 
61,772,774

 
62,504,465

Basic and diluted earnings per common share
 
$
0.55

 
$
0.34

The following table summarizes the Company’s dividends declared during the two most recent fiscal years and the current fiscal year to-date:
Date Declared
 
Record Date
 
Payment Date
 
Per Share Amount
 
March 20, 2017
 
March 20, 2017
 
April 24, 2017
 
$
0.41

 
June 20, 2017
 
June 30, 2017
 
July 18, 2017
 
$
0.37

 
August 7, 2017
 
September 29, 2017
 
October 18, 2017
 
$
0.37

 
November 7, 2017
 
December 29, 2017
 
January 17, 2018
 
$
0.37

 
December 13, 2017
 
December 29, 2017
 
January 17, 2018
 
$
0.12

(1) 
February 26, 2018
 
March 29, 2018
 
April 17, 2018
 
$
0.37

 
May 2, 2018
 
June 29, 2018
 
July 17, 2018
 
$
0.37

 
August 6, 2018
 
September 28, 2018
 
October 17, 2018
 
$
0.37

 
November 5, 2018
 
December 28, 2018
 
January 17, 2019
 
$
0.37

 
December 12, 2018
 
December 28, 2018
 
January 17, 2019
 
$
0.20

(1) 
February 22, 2019
 
March 29, 2019
 
April 17, 2019
 
$
0.37

 
(1) 
Represents a special dividend.

60



10. CONSOLIDATED FINANCIAL HIGHLIGHTS
The following is a schedule of consolidated financial highlights for the three month periods ended March 31, 2019 and 2018: 
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Per Share Data:
 
 
 
Net asset value per share, beginning of period
$
17.09

 
$
18.12

Net investment income (loss) (1)
0.45

 
0.40

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
0.09

 
(0.06
)
Net increase (decrease) in net assets resulting from operations
0.54

 
0.34

Dividends declared (2)
(0.37
)
 
(0.37
)
Accretion due to share repurchases
0.04

 

Net asset value per share, end of period
$
17.30

 
$
18.09

Market price per share, end of period
$
14.48

 
$
17.90

 
 
 
 
Number of shares outstanding, end of period
61,272,069

 
62,568,651

Total return based on net asset value (3)
3.39
%
 
1.88
 %
Total return based on market price (4)
19.76
%
 
(8.83
)%
Net assets, end of period
$
1,060,187

 
$
1,131,857

Ratio to average net assets (5):
 
 
 
Expenses before incentive fees
2.03
%
 
1.49
 %
Expenses after incentive fees
2.58
%
 
1.96
 %
Net investment income (loss)
2.58
%
 
2.20
 %
Interest expense and credit facility fees
1.18
%
 
0.73
 %
Ratios/Supplemental Data:
 
 
 
Asset coverage, end of period
195.50
%
 
241.33
 %
Portfolio turnover
3.45
%
 
6.17
 %
Weighted-average shares outstanding
61,772,774

 
62,504,465

(1)
Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period.
(2)
Dividends declared per share was calculated as the sum of dividends declared during the period divided by the number of shares outstanding at each respective quarter-end date (refer to Note 9, Net Assets).
(3)
Total return based on net asset value (not annualized) is based on the change in net asset value per share during the period plus the declared dividends, assuming reinvestment of dividends in accordance with the dividend reinvestment plan, divided by the beginning net asset value for the period.
(4)
Total return based on market value (not annualized) is calculated as the change in market value per share during the period plus the declared dividends, assuming reinvestment of dividends in accordance with the dividend reinvestment plan, divided by the beginning market price for the period.
(5)
These ratios to average net assets have not been annualized.
11. LITIGATION
The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its consolidated financial statements. As of March 31, 2019 and December 31, 2018, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.
In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these consolidated financial statements.

61



12. TAX
The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of March 31, 2019 and December 31, 2018.
In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. As of March 31, 2019 and December 31, 2018, the Company had filed tax returns and therefore is subject to examination.
The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate. The estimated tax character of dividends declared for three month periods ended March 31, 2019 and 2018 was as follows:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Ordinary income
$
22,672

 
$
23,150

Tax return of capital
$

 
$

13. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below.
Subsequent to March 31, 2019, the Company borrowed $85,500 under the Credit Facility and SPV Credit Facility to fund investment acquisitions. The Company also voluntarily repaid $52,160 under the Credit Facility and SPV Credit Facility.
On May 6, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.37 per share, which is payable on July 17, 2019 to stockholders of record as of June 28, 2019.
On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Investment Advisory Agreement with the Adviser for an additional one year term.

62



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(dollar amounts in thousands, except per share data, unless otherwise indicated)
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this Form 10-Q, and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q and the documents incorporated by reference herein involve a number of risks and uncertainties, including statements concerning:
our, or our portfolio companies’, future business, operations, operating results or prospects;
the return or impact of current and future investments;
the impact of any protracted decline in the liquidity of credit markets on our business;
the impact of fluctuations in interest rates on our business;
our future operating results;
the impact of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;
the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
our ability to recover unrealized losses;
market conditions and our ability to access alternative debt markets and additional debt and equity capital;
our contractual arrangements and relationships with third parties;
the general economy and its impact on the industries in which we invest;
uncertainty surrounding the financial stability of the United States, Europe and China;
the social, geopolitical, financial, trade and legal implications of Brexit;
the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;
competition with other entities and our affiliates for investment opportunities;
the speculative and illiquid nature of our investments;
the use of borrowed money to finance a portion of our investments;
our expected financings and investments;
the adequacy of our cash resources and working capital;
the timing, form and amount of any dividend distributions;
the timing of cash flows, if any, from the operations of our portfolio companies;
the ability to consummate acquisitions;
the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;
currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;
the ability of The Carlyle Group Employee Co., L.L.C. to attract and retain highly talented professionals that can provide services to our investment adviser and administrator;
our ability to maintain our status as a business development company; and

63



our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.
We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part II, Item 1A of and elsewhere in this Form 10-Q.
We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-Q, quarterly reports on Form 10-Q and current reports on Form 8-K.
OVERVIEW
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2018 and Part II, Item 1A of this Form 10-Q “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.
We are a Maryland corporation formed on February 8, 2012, and structured as an externally managed, non-diversified closed-end investment company. We have elected to be regulated as a BDC under the Investment Company Act. We have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.
Our investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which we define as companies with approximately $10 million to $100 million of EBITDA. We seek to achieve our investment objective primarily through direct originations of Middle Market Senior Loans, with the balance of our assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities). We generally make Middle Market Senior Loans to private U.S. middle market companies that are, in many cases, controlled by private equity firms. Depending on market conditions, we expect that between 70% and 80% of the value of our assets will be invested in Middle Market Senior Loans. We expect that the composition of our portfolio will change over time given our Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which we are operating.
On June 19, 2017, we closed our IPO, issuing 9,454,200 shares of our common stock (including shares issued pursuant to the exercise of the underwriters’ over-allotment option on July 5, 2017) at a public offering price of $18.50 per share. Net of underwriting costs, we received cash proceeds of $169,488. Shares of common stock of TCG BDC began trading on the NASDAQ Global Select Market under the symbol “CGBD” on June 14, 2017.
On June 9, 2017, we acquired NF Investment Corp. (“NFIC”), a BDC managed by our Investment Advisor (the “NFIC Acquisition”). As a result, we issued 434,233 shares of common stock to the NFIC stockholders and approximately $145,602 in cash, and acquired approximately $153,648 in net assets.
We are externally managed by our Investment Adviser, an investment adviser registered under the Advisers Act. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle.
In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates. We have operated our business as a BDC since we began our investment activities in May 2013.


64



KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.
Revenue
We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.
Expenses
Our primary operating expenses include the payment of: (i) investment advisory fees, including base management fees and incentive fees, to our Investment Adviser pursuant to the Investment Advisory Agreement between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under the Administration Agreement between us and our Administrator; and (iii) other operating expenses as detailed below:
administration fees payable under our Administration Agreement and Sub-Administration Agreements, including related expenses;
the costs of any offerings of our common stock and other securities, if any;
calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);
expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;
the base management fee and any incentive fee payable under our Investment Advisory Agreement;
certain costs and expenses relating to distributions paid on our shares;
debt service and other costs of borrowings or other financing arrangements;
the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;
amounts payable to third parties relating to, or associated with, making or holding investments;
the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;
transfer agent and custodial fees;
costs of hedging;
commissions and other compensation payable to brokers or dealers;
federal and state registration fees;
any U.S. federal, state and local taxes, including any excise taxes;
independent director fees and expenses;
costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

65



the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;
the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred prior to the filing of our election to be regulated as a BDC;
our fidelity bond;
directors and officers/errors and omissions liability insurance, and any other insurance premiums;
indemnification payments;
direct fees and expenses associated with independent audits, agency, consulting and legal costs; and
all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation.
We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.
PORTFOLIO AND INVESTMENT ACTIVITY
As of March 31, 2019, the fair value of our investments was approximately $2,155,209, comprised of 131 investments in 103 portfolio companies/investment fund across 29 industries with 59 sponsors. As of December 31, 2018, the fair value of our investments was approximately $1,972,157, comprised of 119 investments in 96 portfolio companies/investment fund across 27 industries with 57 sponsors.
Based on fair value as of March 31, 2019, our portfolio consisted of approximately 87.8% in secured debt (77.2% in first lien debt (including 9.3% in first lien/last out loans) and 10.6% in second lien debt), 10.9% in Credit Fund and 1.3% in equity investments. Based on fair value as of March 31, 2019, approximately 1% of our debt portfolio was invested in debt bearing a fixed interest rate and approximately 99% of our debt portfolio was invested in debt bearing a floating interest rate, which primarily are subject to interest rate floors.
Based on fair value as of December 31, 2018, our portfolio consisted of approximately 87.5% in secured debt (78.4% in first lien debt (including 10.3% in first lien/last out loans) and 9.1% in second lien debt), 11.3% in Credit Fund and 1.2% in equity investments. Based on fair value as of December 31, 2018, approximately 1% of our debt portfolio was invested in debt bearing a fixed interest rate and approximately 99% of our debt portfolio was invested in debt bearing a floating interest rate, which primarily are subject to interest rate floors.

66



Our investment activity for the three month periods ended March 31, 2019 and 2018 is presented below (information presented herein is at amortized cost unless otherwise indicated):
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Investments:
 
 
 
Total investments, beginning of period
$
2,043,591

 
$
1,971,012

New investments purchased
246,221

 
119,601

Net accretion of discount on investments
2,161

 
2,390

Net realized gain (loss) on investments
899

 
(129
)
Investments sold or repaid
(71,494
)
 
(172,022
)
Total Investments, end of period
$
2,221,378

 
$
1,920,852

Principal amount of investments funded:
 
 
 
First Lien Debt (excluding First Lien/Last Out)
$
143,749

 
$
65,783

First Lien/Last Out Unitranche
23,879

 
1,231

Second Lien Debt
49,344

 
25,582

Equity Investments
2,241

 
500

Investment Fund
30,500

 
27,850

Total
$
249,713

 
$
120,946

Principal amount of investments sold or repaid:
 
 
 
First Lien Debt (excluding First Lien/Last Out)
$
(25,902
)
 
$
(117,619
)
First Lien/Last Out Unitranche
(25,264
)
 
(394
)
Second Lien Debt

 
(53,990
)
Equity Investments

 

Investment Fund
(18,700
)
 

Total
$
(69,866
)
 
$
(172,003
)
Number of new funded investments
12

 
8

Average amount of new funded investments
$
20,518

 
$
14,950

Percentage of new funded debt investments at floating interest rates
100
%
 
100
%
Percentage of new funded debt investments at fixed interest rates
%
 
%
As of March 31, 2019 and December 31, 2018, investments consisted of the following:
 
March 31, 2019
 
December 31, 2018
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
First Lien Debt (excluding First Lien/Last Out)
$
1,492,517

 
$
1,462,000

 
$
1,375,437

 
$
1,343,422

First Lien/Last Out Unitranche
240,235

 
201,301

 
241,263

 
202,849

Second Lien Debt
227,908

 
228,851

 
179,434

 
178,958

Equity Investments
18,917

 
28,466

 
17,456

 
24,633

Investment Fund
241,801

 
234,591

 
230,001

 
222,295

Total
$
2,221,378

 
$
2,155,209

 
$
2,043,591

 
$
1,972,157











67



The weighted average yields (1) for our first and second lien debt, based on the amortized cost and fair value as of March 31, 2019 and December 31, 2018, were as follows:
 
March 31, 2019
 
December 31, 2018
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
First Lien Debt (excluding First Lien/Last Out)
9.12
%
 
9.31
%
 
9.16
%
 
9.38
%
First Lien/Last Out Unitranche
10.42
%
 
12.44
%
 
10.62
%
 
12.63
%
First Lien Debt Total
9.30
%
 
9.69
%
 
9.38
%
 
9.80
%
Second Lien Debt
11.07
%
 
11.02
%
 
11.04
%
 
11.07
%
First and Second Lien Debt Total
9.51
%
 
9.85
%
 
9.54
%
 
9.94
%
 
(1)
Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2019 and December 31, 2018. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.
Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our first and second lien debt investments as measured on an amortized cost basis decreased from 9.54% to 9.51% from December 31, 2018 to March 31, 2019. The decrease in weighted average yields was primarily due to a decrease in the effective LIBOR rate applicable to loans in the portfolio.
The following table summarizes the fair value of our performing and non-performing investments as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
December 31, 2018
 
Fair Value
 
Percentage
 
Fair Value
 
Percentage
Performing
$
2,137,727

 
99.19
%
 
$
1,957,830

 
99.27
%
Non-accrual (1)
17,482

 
0.81

 
14,327

 
0.73

Total
$
2,155,209

 
100.00
%
 
$
1,972,157

 
100.00
%
 
(1)
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest has been paid current and, in management’s judgment, likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. See Note 2 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the accounting policies.
See the Consolidated Schedules of Investments as of March 31, 2019 and December 31, 2018 in our consolidated financial statements in Part I, Item 1 of this Form 10-Q for more information on these investments, including a list of companies and type and amount of investments.
As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”:

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Internal Risk Ratings Definitions
Rating
  
Definition
1

  
Performing—Low Risk: Borrower is operating more than 10% ahead of the base case.
 
 
2

  
Performing—Stable Risk: Borrower is operating within 10% of the base case (above or below). This is the initial rating assigned to all new borrowers.
 
 
3

  
Performing—Management Notice: Borrower is operating more than 10% below the base case. A financial covenant default may have occurred, but there is a low risk of payment default.
 
 
4

  
Watch List: Borrower is operating more than 20% below the base case and there is a high risk of covenant default, or it may have already occurred. Payments are current although subject to greater uncertainty, and there is moderate to high risk of payment default.
 
 
5

  
Watch List—Possible Loss: Borrower is operating more than 30% below the base case. At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have occurred. Loss of principal is possible.
 
 
6

  
Watch List—Probable Loss: Borrower is operating more than 40% below the base case, and at the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Additionally, the prospects for improvement in the borrower’s situation are sufficiently negative that impairment of some or all principal is probable.
Our Investment Adviser’s risk rating model is based on evaluating portfolio company performance in comparison to the base case when considering certain credit metrics including, but not limited to, adjusted EBITDA and net senior leverage as well as specific events including, but not limited to, default and impairment.
Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. In connection with our quarterly valuation process, our Investment Adviser reviews our investment ratings on a regular basis. The following table summarizes the Internal Risk Ratings as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
December 31, 2018
 
Fair Value
 
% of Fair Value
 
Fair Value
 
% of Fair Value
(dollar amounts in millions)
 
 
 
 
 
 
 
Internal Risk Rating 1
$
70.8

 
3.74
%
 
$
71.0

 
4.12
%
Internal Risk Rating 2
1,381.7

 
73.02

 
1,302.9

 
75.52

Internal Risk Rating 3
212.5

 
11.23

 
208.4

 
12.08

Internal Risk Rating 4
189.2

 
10.00

 
105.1

 
6.09

Internal Risk Rating 5
23.3

 
1.23

 
23.5

 
1.36

Internal Risk Rating 6
14.7

 
0.78

 
14.3

 
0.83

Total
$
1,892.2

 
100.00
%
 
$
1,725.2

 
100.00
%

As of March 31, 2019 and December 31, 2018, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3. As of March 31, 2019 and December 31, 2018, 14 and 12 of our debt investments, with an aggregate fair value of $227.2 million and $142.9 million, respectively, were assigned an Internal Risk Rating of 4-6 (“Watch List”). As of March 31, 2019 and December 31, 2018, three and two first lien debt investments in the portfolio with a fair value of $17.5 million and $14.3 million, respectively, were on non-accrual status, which represented approximately 0.81% and 0.73%, respectively, of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2019 and December 31, 2018

During the three month period ended March 31, 2019, 4 investments with fair value of $114.0 million were downgraded to the Watch List due to changes in financial condition and performance of the respective portfolio companies and 2 investments with fair value of $28.4 million were upgraded and removed from the Watch List due to improved performance of the respective portfolio companies.

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CONSOLIDATED RESULTS OF OPERATIONS
For the three month periods ended March 31, 2019 and 2018
The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.
Investment Income
Investment income for the three month periods ended March 31, 2019 and 2018 was as follows: 
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Investment income:
 
 
 
First Lien Debt
$
41,574

 
$
33,455

Second Lien Debt
5,746

 
7,103

Equity Investments
247

 

Investment Fund
7,538

 
6,881

Cash
82

 
44

Total investment income
$
55,187

 
$
47,483

The increase in investment income for the three month period ended March 31, 2019 from the comparable period in 2018 was primarily driven by our increasing invested balance, an increase in LIBOR, and increased interest and dividend income from Credit Fund. As of March 31, 2019, the size of our portfolio increased to $2,221,378 from $1,920,852 as of March 31, 2018, at amortized cost, and total principal amount of investments outstanding increased to $2,253,682 from $1,950,235 as of March 31, 2018. As of March 31, 2019, the weighted average yield of our first and second lien debt investments increased to 9.51% from 9.24% as of March 31, 2018 on amortized cost, primarily due to the increase in LIBOR.
Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of March 31, 2019 and 2018, three and one first lien debt investments in the portfolio were on non-accrual with fair value of $17,482 and $14,955, respectively, which represents 0.81% and 0.78% of total investments at fair value, respectively. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2019 and 2018.
For the three month periods ended March 31, 2019 and 2018, the Company earned $2,028 and $895, respectively, in other income. The increase in other income for the three month period ended March 31, 2019 from the comparable period in 2018 was primarily driven by higher amendment fees and arranger fees.
Our total dividend and interest income from investments in Credit Fund totaled $7,538 and $6,881 for the three month periods ended March 31, 2019 and 2018, respectively. The increase was primarily driven by our increased invested balance in Credit Fund and an increase in LIBOR.
Net investment income (loss) for the three month periods ended March 31, 2019 and 2018 was as follows:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Total investment income
$
55,187

 
$
47,483

Net expenses (including excise tax expense)
(27,625
)
 
(22,353
)
Net investment income (loss)
$
27,562

 
$
25,130




70



Expenses
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Base management fees
$
7,685

 
$
7,222

Incentive fees
5,846

 
5,330

Professional fees
745

 
762

Administrative service fees
216

 
186

Interest expense
11,991

 
7,815

Credit facility fees
568

 
525

Directors’ fees and expenses
93

 
98

Other general and administrative
421

 
405

Excise tax expense
60

 
10

Net expenses
$
27,625

 
$
22,353


Interest expense and credit facility fees for the three month periods ended March 31, 2019 and 2018 were comprised of the following:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Interest expense
$
11,991

 
$
7,815

Facility unused commitment fee
303

 
288

Amortization of deferred financing costs
236

 
202

Other fees
29

 
35

Total interest expense and credit facility fees
$
12,559

 
$
8,340

Cash paid for interest expense
$
11,515

 
$
7,682

The increase in interest expense for the three month period ended March 31, 2019 compared to the comparable period in 2018 was driven by increased drawings under the Facilities related to increased deployment of capital for investments and an increase in LIBOR. For the three month period ended March 31, 2019, the average interest rate increased to 4.71% from 3.78% for the comparable period in 2018, and average principal debt outstanding increased to $1,017,719 from $826,656 for the comparable period in 2018.
The increase in base management fees and incentive fees related to pre-incentive fee net investment income for the three month period ended March 31, 2019 from the comparable period in 2018 were driven by our deployment of capital and increasing invested balance. For the three month periods ended March 31, 2019 and 2018, base management fees were $7,685 and $7,222, respectively, incentive fees related to pre-incentive fee net investment income were $5,846 and $5,330, respectively, and there were no incentive fees related to realized capital gains. The accrual for any capital gains incentive fee under accounting principles generally accepted in the United States (“US GAAP”) in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the incentive and base management fees. For the three month periods ended March 31, 2019 and 2018, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of March 31, 2019 and 2018, respectively.
Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.
Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments
During the three month periods ended March 31, 2019 and 2018, we had realized gains on 2 and 1 investments, respectively, totaling approximately $959 and $2, respectively, which were offset by realized losses on 1 and 3 investments,

71



respectively, totaling approximately $60 and $131, respectively. During the three month periods ended March 31, 2019 and 2018, we had a change in unrealized appreciation on 70 and 55 investments, respectively, totaling approximately $16,195 and $9,612, respectively, which was offset by a change in unrealized depreciation on 37 and 53 investments, respectively, totaling approximately $10,930 and $13,524, respectively.
Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three month periods ended March 31, 2019 and 2018 were as follows:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Net realized gain (loss) on investments
$
899

 
$
(129
)
Net change in unrealized appreciation (depreciation) on investments
5,265

 
(3,912
)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
$
6,164

 
$
(4,041
)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three month periods ended March 31, 2019 and 2018 were as follows:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Type
Net realized gain (loss)
 
Net change in unrealized appreciation (depreciation)
 
Net realized gain (loss)
 
Net change in unrealized appreciation (depreciation)
First Lien Debt
$
(60
)
 
$
978

 
$
(131
)
 
$
(4,985
)
Second Lien Debt

 
1,419

 
2

 
(433
)
Equity Investments
959

 
2,372

 

 
806

Investment Fund

 
496

 

 
700

Total
$
899

 
$
5,265

 
$
(129
)
 
$
(3,912
)
Net change in unrealized appreciation in our investments for the three month period ended March 31, 2019 compared to the comparable period in 2018 was primarily due to changes in various inputs utilized under our valuation methodology, including, but not limited to, market spreads, leverage multiples and borrower ratings, and the impact of exits.
MIDDLE MARKET CREDIT FUND, LLC
Overview
On February 29, 2016, the Company and Credit Partners entered into an amended and restated limited liability company agreement, which was subsequently amended on June 24, 2016 (as amended, the “Limited Liability Company Agreement”) to co-manage Credit Fund, a Delaware limited liability company that is not consolidated in the Company’s consolidated financial statements. Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. Establishing a quorum for Credit Fund’s board of managers requires at least four members to be present at a meeting, including at least two of the Company’s representatives and two of Credit Partners’ representatives. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company. By virtue of its membership interest, the Company and Credit Partners each indirectly bear an allocable share of all expenses and other obligations of Credit Fund.
Together with Credit Partners, the Company co-invests through Credit Fund. Investment opportunities for Credit Fund are sourced primarily by the Company and its affiliates. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Fund’s investment committee consisting of an equal number of representatives of the Company and Credit Partners. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company Act). Middle Market Credit Fund SPV, LLC (the “Credit Fund Sub”), MMCF CLO 2017-1 LLC (the “2017-1 Issuer”) and MMCF Warehouse, LLC (the "Credit Fund Warehouse"), each a Delaware limited liability company, were formed on April 5, 2016 and October 6, 2017 and November 26, 2018, respectively. Credit Fund Sub, the 2017-1 Issuer and the Credit Fund Warehouse are wholly owned subsidiaries of Credit Fund and are consolidated in Credit Fund’s consolidated financial statements commencing

72



from the date of their respective formations. Credit Fund Sub, the 2017-1 Issuer and the Credit Fund Warehouse primarily invest in first lien loans of middle market companies. Credit Fund and its wholly owned subsidiaries follow the same Internal Risk Rating System as the Company.
Credit Fund, the Company and Credit Partners entered into an administration agreement with Carlyle Global Credit Administration L.L.C., the administrative agent of Credit Fund (in such capacity, the “Administrative Agent”), pursuant to which the Administrative Agent is delegated certain administrative and non-discretionary functions, is authorized to enter into sub-administration agreements at the expense of Credit Fund with the approval of the board of managers of Credit Fund, and is reimbursed by Credit Fund for its costs and expenses and Credit Fund’s allocable portion of overhead incurred by the Administrative Agent in performing its obligations thereunder.
Selected Financial Data
Since inception of Credit Fund and through March 31, 2019 and December 31, 2018, the Company and Credit Partners each made capital contributions of $1 and $1 in members’ equity, respectively, and $118,000 and $118,000 in subordinated loans, respectively, to Credit Fund. As of March 31, 2019 and December 31, 2018, Credit Fund had borrowings of $123,800 and $112,000, respectively, in mezzanine loans under a revolving credit facility with the Company (the “Credit Fund Facility”). As of March 31, 2019 and December 31, 2018, Credit Fund had total subordinated loans and members’ equity outstanding of $217,496 and $208,568, respectively. As of March 31, 2019 and December 31, 2018, the Company’s ownership interest in such subordinated loans and members’ equity was $110,791 and $110,295, respectively, and in such mezzanine loans was $123,800 and $112,000, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund held cash and cash equivalents totaling $33,737 and $55,699, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund had total investments at fair value of $1,258,295 and $1,173,508, respectively, which was comprised of first lien senior secured loans, second lien senior secured loans and an equity investment to 64 and 60 portfolio companies, respectively. As of March 31, 2019 and December 31, 2018, 1 loan in Credit Fund’s portfolio was on non-accrual status with fair value of $21,151 and $25,400, respectively. As of March 31, 2019 and December 31, 2018, 98.3% and 99.9%, respectively, of investments in the portfolio were floating rate debt investments, which primarily are subject to interest rate floors. As of March 31, 2019 and December 31, 2018, 1.7% and 0.1%, respectively, of investments in the portfolio were fixed rate debt investments. As of March 31, 2019 and December 31, 2018, 1 loan in Credit Fund’s portfolio contained PIK provisions. The portfolio companies in Credit Fund are U.S. middle market companies in industries similar to those in which the Company may invest directly. Additionally, as of March 31, 2019 and December 31, 2018, Credit Fund had commitments to fund various undrawn revolving and delayed draw senior secured loans to its portfolio companies totaling $105,101 and $91,446, respectively.
Below is a summary of Credit Fund’s portfolio, followed by a listing of the loans in Credit Fund’s portfolio as of March 31, 2019 and December 31, 2018:
 
As of March 31, 2019
 
As of December 31, 2018
Senior secured loans (1)
$
1,270,122

 
$
1,207,913

Weighted average yields of senior secured loans based on amortized cost (2)
7.17
%
 
7.16
%
Weighted average yields of senior secured loans based on fair value (2)
7.22
%
 
7.32
%
Number of portfolio companies in Credit Fund
64

 
60

Average amount per portfolio company (1)
$
19,846

 
$
20,132

(1)
At par/principal amount.
(2)
Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2019 and December 31, 2018. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

73



Credit Fund’s Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Achilles Acquisition, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.00%
 
6.50%
 
10/11/2025
 
$
18,000

 
$
17,908

 
$
17,824

Acrisure, LLC
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.88%
 
11/22/2023
 
20,833

 
20,792

 
20,674

Acrisure, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.38%
 
11/22/2023
 
11,910

 
11,899

 
11,727

Advanced Instruments, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.73%
 
10/31/2022
 
11,761

 
11,670

 
11,676

Ahead, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.88%
 
6/29/2023
 
15,659

 
15,584

 
15,508

Alpha Packaging Holdings, Inc.
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
6.85%
 
5/12/2020
 
16,815

 
16,790

 
16,796

AM Conservation Holding Corporation
+*
 
(2) (3)
 
Energy: Electricity
 
L + 4.50%
 
7.10%
 
10/31/2022
 
38,213

 
37,993

 
38,056

Aptean, Inc.
+\
 
(2) (3)
 
Software
 
L + 4.25%
 
6.74%
 
4/23/2026
 
12,500

 
12,441

 
12,438

AQA Acquisition Holding, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.85%
 
5/24/2023
 
19,100

 
19,044

 
19,061

Avalign Technologies, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.50%
 
7.00%
 
12/22/2025
 
12,968

 
12,845

 
12,827

Big Ass Fans, LLC
+*\
 
(2) (3)
 
Capital Equipment
 
L + 3.75%
 
6.35%
 
5/21/2024
 
14,016

 
13,938

 
13,990

Borchers, Inc.
^+*
 
(2) (3) (8)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.10%
 
11/1/2024
 
15,550

 
15,496

 
15,515

Brooks Equipment Company, LLC
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.63%
 
8/29/2020
 
5,948

 
5,941

 
5,942

Clearent Newco, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.00%
 
6.56%
 
3/20/2024
 
26,239

 
25,870

 
25,991

Datto, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.25%
 
6.74%
 
4/2/2026
 
12,500

 
12,441

 
12,438

DecoPac, Inc.
^+*
 
(2) (3) (8)
 
Non-durable Consumer Goods
 
L + 4.25%
 
6.85%
 
9/29/2024
 
12,664

 
12,543

 
12,596

Dent Wizard International Corporation
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.50%
 
4/7/2020
 
24,194

 
24,132

 
24,105

DTI Holdco, Inc.
+*\
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.49%
 
9/30/2023
 
19,032

 
18,897

 
17,795

EIP Merger Sub, LLC (Evolve IP)
+*
 
(2) (3) (4)
 
Telecommunications
 
L + 5.75%
 
8.25%
 
6/7/2022
 
22,282

 
21,872

 
21,601

EIP Merger Sub, LLC (Evolve IP)
*
 
(2) (3) (7)
 
Telecommunications
 
L + 5.75%
 
8.25%
 
6/7/2022
 
1,500

 
1,470

 
1,448

Eliassen Group, LLC
+
 
(2) (3)
 
Business Services
 
L + 4.50%
 
7.00%
 
11/5/2024
 
6,242

 
6,219

 
6,236

Exactech, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.25%
 
2/14/2025
 
12,870

 
12,822

 
12,775

Executive Consulting Group, LLC, Inc.
^+
 
(2) (3) (8)
 
Business Services
 
L + 4.25%
 
6.85%
 
6/20/2024
 
15,279

 
15,135

 
15,115

Golden West Packaging Group LLC
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.75%
 
6/20/2023
 
30,099

 
29,904

 
29,774

HMT Holding Inc.
^+*
 
(2) (3) (8)
 
Energy: Oil & Gas
 
L + 4.50%
 
7.00%
 
11/17/2023
 
33,404

 
32,846

 
33,123

J.S. Held, LLC
+*
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.10%
 
9/25/2024
 
20,262

 
20,117

 
20,068

Jensen Hughes, Inc.
^+*
 
(2) (3) (8)
 
Utilities: Electric
 
L + 4.50%
 
7.10%
 
3/22/2024
 
29,354

 
29,149

 
28,932

Kestra Financial, Inc.
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.88%
 
6/24/2022
 
21,697

 
21,510

 
21,697

MAG DS Corp.
^+
 
(2) (3) (8)
 
Aerospace & Defense
 
L + 4.75%
 
7.25%
 
6/6/2025
 
25,844

 
25,587

 
25,717


74



Credit Fund’s Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
Maravai Intermediate Holdings, LLC
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.75%
 
8/2/2025
 
$
29,850

 
$
29,574

 
$
29,605

Marco Technologies, LLC
^+
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
7.07%
 
10/30/2023
 
7,498

 
7,451

 
7,425

Mold-Rite Plastics, LLC
+
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 4.25%
 
6.85%
 
12/14/2021
 
14,813

 
14,759

 
14,758

MSHC, Inc.
^+*
 
(2) (3) (8)
 
Construction & Building
 
L + 4.25%
 
6.85%
 
7/31/2023
 
31,163

 
31,057

 
30,957

Newport Group Holdings II, Inc.
+\
 
(2)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.36%
 
9/13/2025
 
23,895

 
23,655

 
23,757

North American Dental Management, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.81%
 
7/7/2023
 
37,091

 
36,451

 
36,395

North Haven CA Holdings, Inc.
^+*
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.10%
 
10/2/2023
 
35,052

 
34,717

 
34,653

Odyssey Logistics & Technology Corporation
+*\
 
(2) (3)
 
Transportation: Cargo
 
L + 4.00%
 
6.50%
 
10/12/2024
 
39,650

 
39,472

 
39,372

Output Services Group
^+\
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.75%
 
3/27/2024
 
17,356

 
17,297

 
16,827

PAI Holdco, Inc.
+*
 
(2) (3)
 
Automotive
 
L + 4.25%
 
6.77%
 
1/5/2025
 
19,673

 
19,588

 
19,625

Park Place Technologies, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.00%
 
6.50%
 
3/29/2025
 
15,882

 
15,819

 
15,724

Pasternack Enterprises, Inc.
+
 
(2) (3)
 
Capital Equipment
 
L + 4.00%
 
6.50%
 
7/2/2025
 
20,026

 
20,026

 
19,848

Pharmalogic Holdings Corp.
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.50%
 
6/11/2023
 
6,999

 
6,979

 
6,939

Ping Identity Corporation
+\
 
(2) (3)
 
High Tech Industries
 
L + 3.75%
 
6.25%
 
1/25/2025
 
4,963

 
4,952

 
4,933

Premier Senior Marketing, LLC
*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
11/30/2025
 
4,953

 
4,931

 
4,908

Premise Health Holding Corp.
^+\
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.35%
 
7/10/2025
 
13,828

 
13,769

 
13,721

Propel Insurance Agency, LLC
^+
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.85%
 
6/1/2024
 
20,323

 
19,792

 
19,901

PSI Services, LLC
^+*
 
(2) (3) (8)
 
Business Services
 
L + 5.00%
 
7.51%
 
1/20/2023
 
30,069

 
29,639

 
29,599

Q Holding Company
+*
 
(2) (3)
 
Automotive
 
L + 5.00%
 
7.50%
 
12/18/2021
 
17,055

 
17,016

 
16,998

QW Holding Corporation (Quala)
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.75%
 
8.42%
 
8/31/2022
 
10,500

 
10,260

 
10,337

Radiology Partners, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.75%
 
7.42%
 
7/9/2025
 
24,937

 
24,814

 
24,937

RevSpring, Inc.
+*\
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.75%
 
10/11/2025
 
24,938

 
24,851

 
24,653

Situs Group Holdings Corporation
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.00%
 
2/26/2023
 
8,915

 
8,907

 
8,863

Surgical Information Systems, LLC
+*
 
(2) (3) (7)
 
High Tech Industries
 
L + 4.85%
 
7.34%
 
4/24/2023
 
26,168

 
25,973

 
25,754

Systems Maintenance Services Holding, Inc.
+*
 
(2) (3)
 
High Tech Industries
 
L + 5.00%
 
7.50%
 
10/28/2023
 
23,949

 
23,839

 
19,054

T2 Systems Canada, Inc.
+
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
9/28/2022
 
2,639

 
2,594

 
2,633

T2 Systems, Inc.
^+*
 
(2) (3) (8)
 
Transportation: Consumer
 
L + 6.75%
 
9.35%
 
9/28/2022
 
15,737

 
15,463

 
15,696


75



Credit Fund’s Consolidated Schedule of Investments as of March 31, 2019
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
 Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (97.80% of fair value) (continued)
 
 
 
 
 
 
 
 
 
 
 
 
The Original Cakerie, Co. (Canada)
+*
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.58%
 
7/20/2022
 
$
8,996

 
$
8,950

 
$
8,945

The Original Cakerie, Ltd. (Canada)
^+
 
(2) (3) (8)
 
Beverage, Food & Tobacco
 
L + 4.50%
 
7.08%
 
7/20/2022
 
6,674

 
6,637

 
6,630

ThoughtWorks, Inc.
+*\
 
(2) (3)
 
Business Services
 
L + 4.00%
 
6.50%
 
10/12/2024
 
11,914

 
11,880

 
11,823

U.S. Acute Care Solutions, LLC
+*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 5.00%
 
7.60%
 
5/15/2021
 
31,624

 
31,472

 
31,582

U.S. TelePacific Holdings Corp.
+*\
 
(2) (3)
 
Telecommunications
 
L + 5.00%
 
7.60%
 
5/2/2023
 
26,660

 
26,468

 
25,794

Upstream Intermediate, LLC
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.50%
 
1/3/2024
 
18,164

 
18,092

 
18,041

Valet Waste Holdings, Inc.
+\
 
(2) (3)
 
Construction & Building
 
L + 4.00%
 
6.50%
 
9/28/2025
 
11,940

 
11,918

 
11,885

Valicor Environmental Services, LLC
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 4.50%
 
6.99%
 
6/1/2023
 
34,658

 
34,182

 
34,298

WIRB - Copernicus Group, Inc.
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.75%
 
8/15/2022
 
17,150

 
17,061

 
17,012

WRE Holding Corp.
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.00%
 
7.49%
 
1/3/2023
 
7,479

 
7,407

 
7,263

Zywave, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 5.00%
 
7.50%
 
11/17/2022
 
18,006

 
17,878

 
18,003

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
$
1,238,445

 
$
1,230,593

Second Lien Debt (1.76% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DBI Holding, LLC
^*
 
(2) (3) (9)
 
Transportation: Cargo
 
8.00% (100% PIK)
 
8.00%
 
2/1/2026
 
$
21,150

 
$
20,697

 
$
21,151

Zywave, Inc.
*
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.49%
 
11/17/2023
 
1,050

 
1,039

 
1,050

Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
$
21,736

 
$
22,201

Investments (1)
 
 
Footnotes
 
Industry
 
Type
 
Shares/Units
 
Cost
 
Fair Value (6)
Equity Investments (0.44% of fair value)
 
 
 
 
 
 
 
 
 
 
DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
Preferred stock
 
13,996

 
$
5,365

 
$
5,501

DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
Common stock
 
2,961

 

 

Equity Investments Total
 
 
 
 
 
 
 
$
5,365

 
$
5,501

Total Investments
 
 
 
 
 
 
 
 
 
 
$
1,265,546

 
$
1,258,295


^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into the Credit Fund Facility. The lenders of the Credit Fund Facility have a first lien security interest in substantially all of the assets of Credit Fund. Accordingly, such assets are not available to creditors of Credit Fund Sub, the 2017-1 Issuer or the Credit Fund Warehouse.
+ Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund, the 2017-1 Issuer or the Credit Fund Warehouse.
* Denotes that all or a portion of the assets are owned by the 2017-1 Issuer and secure the notes issued in connection with a $399,900 term debt securitization completed by Credit Fund on December 19, 2017 (the “2017-1 Debt Securitization”). Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the Credit Fund Warehouse.
\ Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse. Credit Fund Warehouse has entered into a revolving credit facility (the “Credit Fund Warehouse Facility”). The lenders of the Credit Fund Warehouse Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse. Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the 2017-1 Issuer.
(1)
Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of March 31, 2019, the geographical composition of investments as a percentage of fair value was 1.45% in Canada and 98.55% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of March 31, 2019. As of March 31, 2019, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 2.49%, the 90-day LIBOR at 2.60% and the 180-day LIBOR at 2.66%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.

76



(4)
Credit Fund Sub receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.20% on EIP Merger Sub, LLC (Evolve IP). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments.
(5)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(6)
Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
(7)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, Credit Fund is entitled to receive additional interest as a result of an agreement among lenders as follows: EIP Merger Sub, LLC (Evolve IP) (3.75%) and Surgical Information Systems, LLC (1.13%). Pursuant to the agreement among lenders in respect of these loans, these investments represent a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.
(8)
As of March 31, 2019, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
First Lien Debt—unfunded delayed draw and revolving term loans commitments
 
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
Advanced Instruments, LLC
 
Revolver
 
0.50%
 
$
1,333

 
$
(9
)
Ahead, LLC
 
Revolver
 
0.50
 
4,688

 
(35
)
AQA Acquisition Holding, Inc.
 
Revolver
 
0.50
 
2,459

 
(4
)
Borchers, Inc.
 
Revolver
 
0.50
 
1,935

 
(4
)
Clearent Newco, LLC
 
Delayed Draw
 
1.00
 
2,428

 
(20
)
Clearent Newco, LLC
 
Revolver
 
0.50
 
1,120

 
(9
)
DecoPac, Inc.
 
Revolver
 
0.50
 
2,143

 
(10
)
Executive Consulting Group, LLC, Inc.
 
Revolver
 
0.50
 
2,368

 
(22
)
HMT Holding Inc.
 
Revolver
 
0.50
 
6,173

 
(44
)
J.S. Held, LLC
 
Delayed Draw
 
1.00
 
2

 

Jensen Hughes, Inc.
 
Revolver
 
0.50
 
1,455

 
(16
)
Jensen Hughes, Inc.
 
Delayed Draw
 
1.00
 
6,842

 
(77
)
MAG DS Corp.
 
Revolver
 
0.50
 
5,000

 
(20
)
Marco Technologies, LLC
 
Delayed Draw
 
1.00
 
7,500

 
(37
)
MSHC, Inc.
 
Delayed Draw
 
1.00
 
9,268

 
(47
)
North American Dental Management, LLC
 
Revolver
 
0.50
 
2,505

 
(44
)
North Haven CA Holdings, Inc. (CoAdvantage)
 
Revolver
 
0.50
 
6,114

 
(59
)
Output Services Group
 
Delayed Draw
 
4.25
 
2,518

 
(67
)
Pharmalogic Holdings Corp.
 
Delayed Draw
 
1.00
 
2,947

 
(18
)
Premise Health Holding Corp.
 
Delayed Draw
 
1.00
 
1,103

 
(8
)
Propel Insurance Agency, LLC
 
Delayed Draw
 
0.50
 
7,143

 
(101
)
Propel Insurance Agency, LLC
 
Revolver
 
0.50
 
2,381

 
(34
)
PSI Services LLC
 
Revolver
 
0.50
 
528

 
(8
)
QW Holding Corporation (Quala)
 
Delayed Draw
 
1.00
 
1,453

 
(14
)
QW Holding Corporation (Quala)
 
Revolver
 
0.50
 
5,498

 
(51
)
T2 Systems, Inc.
 
Revolver
 
0.50
 
1,173

 
(3
)
The Original Cakerie, Ltd. (Canada)
 
Revolver
 
0.50
 
1,399

 
(8
)
Upstream Intermediate, LLC
 
Revolver
 
0.50
 
1,606

 
(10
)
Valicor Environmental Services, LLC
 
Revolver
 
0.50
 
3,515

 
(33
)
WIRB - Copernicus Group, Inc.
 
Delayed Draw
 
1.00
 
6,480

 
(36
)
WIRB - Copernicus Group, Inc.
 
Revolver
 
0.50
 
1,000

 
(6
)
WRE Holding Corp.
 
Delayed Draw
 
0.89
 
2,069

 
(45
)
WRE Holding Corp.
 
Revolver
 
0.50
 
355

 
(8
)
Zywave, Inc.
 
Revolver
 
0.50
 
600

 

Total unfunded commitments
 
 
 
 
 
$
105,101

 
$
(907
)
(9)
Loan was on non-accrual status as of March 31, 2019.

77



Credit Fund’s Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Achilles Acquisition, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.00%
 
6.56%
 
10/11/2025
 
$
18,000

 
$
17,906

 
$
17,716

Acrisure, LLC
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.77%
 
11/22/2023
 
20,886

 
20,843

 
19,981

Acrisure, LLC
+\
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.27%
 
11/22/2023
 
11,940

 
11,928

 
11,333

Advanced Instruments, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
7.63%
 
10/31/2022
 
11,791

 
11,695

 
11,690

Ahead, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
6.87%
 
6/29/2023
 
20,059

 
19,959

 
19,856

Alpha Packaging Holdings, Inc.
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 4.25%
 
7.05%
 
5/12/2020
 
16,860

 
16,830

 
16,813

AM Conservation Holding Corporation
+*
 
(2) (3)
 
Energy: Electricity
 
L + 4.50%
 
7.30%
 
10/31/2022
 
38,310

 
38,079

 
38,027

AQA Acquisition Holding, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.25%
 
7.05%
 
5/24/2023
 
19,148

 
19,111

 
18,978

Avalign Technologies, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 4.50%
 
7.00%
 
12/22/2025
 
13,000

 
12,874

 
12,848

Big Ass Fans, LLC
+*\
 
(2) (3)
 
Capital Equipment
 
L + 3.75%
 
6.55%
 
5/21/2024
 
14,052

 
13,973

 
13,840

Borchers, Inc.
^+*
 
(2) (3) (8)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.30%
 
11/1/2024
 
15,589

 
15,533

 
15,545

Brooks Equipment Company, LLC
+*
 
(2) (3)
 
Construction & Building
 
L + 5.00%
 
7.71%
 
8/29/2020
 
5,948

 
5,940

 
5,935

Clearent Newco, LLC
^+
 
(2) (3) (8)
 
High Tech Industries
 
L + 4.00%
 
6.52%
 
3/20/2024
 
23,093

 
22,702

 
22,819

DBI Holding, LLC
+*
 
(2) (3) (9)
 
Transportation: Cargo
 
L + 5.25%
 
7.76%
 
8/1/2021
 
34,494

 
34,276

 
25,400

DBI Holding, LLC
^
 
 
 
Transportation: Cargo
 
15% (100% PIK)
 
7.76%
 
2/1/2020
 
1,119

 
1,119

 
1,119

DecoPac, Inc.
^+*
 
(2) (3) (8)
 
Non-durable Consumer Goods
 
L + 4.25%
 
7.05%
 
9/29/2024
 
12,696

 
12,571

 
12,619

Dent Wizard International Corporation
+
 
(2) (3)
 
Automotive
 
L + 4.00%
 
6.51%
 
4/7/2020
 
24,256

 
24,183

 
24,110

DTI Holdco, Inc.
+*\
 
(2) (3)
 
High Tech Industries
 
L + 4.75%
 
7.28%
 
9/30/2023
 
19,081

 
18,941

 
17,793

EIP Merger Sub, LLC (Evolve IP)
+*
 
(2) (3) (4)
 
Telecommunications
 
L + 5.75%
 
8.27%
 
6/7/2022
 
22,358

 
21,923

 
21,788

EIP Merger Sub, LLC (Evolve IP)
*
 
(2) (3) (7)
 
Telecommunications
 
L + 5.75%
 
8.27%
 
6/7/2022
 
1,500

 
1,469

 
1,462

Eliassen Group, LLC
+
 
(2) (3)
 
Business Services
 
L + 4.50%
 
7.00%
 
11/5/2024
 
6,250

 
6,226

 
6,202

Exactech, Inc.
+\
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.27%
 
2/14/2025
 
12,903

 
12,849

 
12,741

Executive Consulting Group, LLC, Inc.
^+
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.30%
 
6/20/2024
 
15,318

 
15,168

 
15,132

Golden West Packaging Group LLC
+*
 
(2) (3)
 
Containers, Packaging & Glass
 
L + 5.25%
 
7.77%
 
6/20/2023
 
30,180

 
29,978

 
29,760

HMT Holding Inc.
^+*
 
(2) (3) (8)
 
Energy: Oil & Gas
 
L + 4.50%
 
7.02%
 
11/17/2023
 
33,490

 
32,902

 
33,172

J.S. Held, LLC
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.30%
 
9/25/2024
 
20,309

 
20,137

 
19,998

Jensen Hughes, Inc.
^+*
 
(2) (3) (8)
 
Utilities: Electric
 
L + 4.50%
 
7.30%
 
3/22/2024
 
27,978

 
27,896

 
27,382

Kestra Financial, Inc.
+*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.76%
 
6/24/2022
 
21,744

 
21,547

 
21,690

MAG DS Corp.
^+
 
(2) (3) (8)
 
Aerospace & Defense
 
L + 4.75%
 
7.27%
 
6/6/2025
 
22,885

 
22,679

 
22,665

Maravai Intermediate Holdings, LLC
+\
 
(2)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.81%
 
8/2/2025
 
29,925

 
29,640

 
29,578


78



Credit Fund’s Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mold-Rite Plastics, LLC
+
 
(2) (3)
 
Chemicals, Plastics & Rubber
 
L + 4.50%
 
7.30%
 
12/14/2021
 
$
14,850

 
$
14,793

 
$
14,762

MSHC, Inc.
^+*
 
(2) (3) (8)
 
Construction & Building
 
L + 4.25%
 
6.89%
 
7/31/2023
 
23,579

 
23,514

 
23,088

Newport Group Holdings II, Inc.
+\
 
(2)
 
Banking, Finance, Insurance & Real Estate
 
L + 3.75%
 
6.54%
 
9/13/2025
 
17,790

 
17,666

 
17,564

North American Dental Management, LLC
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 5.25%
 
8.04%
 
7/7/2023
 
37,781

 
37,329

 
37,093

North Haven CA Holdings, Inc.
^+*
 
(2) (3) (8)
 
Business Services
 
L + 4.50%
 
7.02%
 
10/2/2023
 
35,139

 
34,789

 
34,401

Odyssey Logistics & Technology Corporation
+*\
 
(2) (3)
 
Transportation: Cargo
 
L + 4.00%
 
6.52%
 
10/12/2024
 
39,680

 
39,496

 
39,149

Output Services Group
^+\
 
(2) (3) (8)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
6.77%
 
3/27/2024
 
17,400

 
17,338

 
16,663

PAI Holdco, Inc.
+*
 
(2) (3)
 
Automotive
 
L + 4.25%
 
7.05%
 
1/5/2025
 
19,727

 
19,637

 
19,459

Park Place Technologies, Inc.
+\
 
(2) (3)
 
High Tech Industries
 
L + 4.00%
 
6.52%
 
3/29/2025
 
15,922

 
15,856

 
15,639

Pasternack Enterprises, Inc.
+
 
(2) (3)
 
Capital Equipment
 
L + 4.00%
 
6.52%
 
7/2/2025
 
20,076

 
20,076

 
19,745

Pharmalogic Holdings Corp.
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.00%
 
6.52%
 
6/11/2023
 
7,017

 
6,995

 
6,949

Ping Identity Corporation
+\
 
(2) (3)
 
High Tech Industries
 
L + 3.75%
 
6.27%
 
1/25/2025
 
4,975

 
4,956

 
4,915

Premier Senior Marketing, LLC
*
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
11/30/2025
 
4,953

 
4,953

 
4,875

Premise Health Holding Corp.
^+\
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 3.75%
 
6.55%
 
7/10/2025
 
13,862

 
13,805

 
13,717

Propel Insurance Agency, LLC
^+
 
(2) (3) (8)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.25%
 
6.75%
 
6/1/2024
 
21,088

 
20,535

 
20,628

PSI Services, LLC
^+*
 
(2) (3) (8)
 
Business Services
 
L + 5.00%
 
7.52%
 
1/20/2023
 
29,919

 
29,469

 
29,239

Q Holding Company
+*
 
(2) (3)
 
Automotive
 
L + 5.00%
 
7.52%
 
12/18/2021
 
17,099

 
17,058

 
16,969

QW Holding Corporation (Quala)
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 6.75%
 
9.22%
 
8/31/2022
 
9,704

 
9,338

 
9,489

RevSpring, Inc.
+*\
 
(2) (3)
 
Media: Advertising, Printing & Publishing
 
L + 4.25%
 
7.05%
 
10/11/2025
 
20,000

 
19,953

 
19,680

Situs Group Holdings Corporation
+
 
(2) (3)
 
Banking, Finance, Insurance & Real Estate
 
L + 4.50%
 
7.02%
 
2/26/2023
 
8,915

 
8,892

 
8,887

Surgical Information Systems, LLC
+*
 
(2) (3) (7)
 
High Tech Industries
 
L + 4.85%
 
7.37%
 
4/24/2023
 
27,708

 
27,494

 
27,171

Systems Maintenance Services Holding, Inc.
+*
 
(2) (3)
 
High Tech Industries
 
L + 5.00%
 
7.52%
 
10/28/2023
 
24,010

 
23,907

 
17,842

T2 Systems Canada, Inc.
+
 
(2) (3)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
9/28/2022
 
2,646

 
2,598

 
2,630

T2 Systems, Inc.
^+*
 
(2) (3) (8)
 
Transportation: Consumer
 
L + 6.75%
 
9.34%
 
9/28/2022
 
15,775

 
15,484

 
15,677

The Original Cakerie, Co. (Canada)
+*
 
(2) (3)
 
Beverage, Food & Tobacco
 
L + 5.00%
 
7.50%
 
7/20/2022
 
9,019

 
8,968

 
8,932

The Original Cakerie, Ltd. (Canada)
+
 
(2) (3) (8)
 
Beverage, Food & Tobacco
 
L + 4.50%
 
7.02%
 
7/20/2022
 
6,957

 
6,917

 
6,883

ThoughtWorks, Inc.
+*\
 
(2) (3)
 
Business Services
 
L + 4.00%
 
6.52%
 
10/12/2024
 
11,944

 
11,909

 
11,770

U.S. Acute Care Solutions, LLC
+*
 
(2) (3)
 
Healthcare & Pharmaceuticals
 
L + 5.00%
 
7.52%
 
5/15/2021
 
31,705

 
31,540

 
31,395


79



Credit Fund’s Consolidated Schedule of Investments as of December 31, 2018
Investments (1)
 
 
Footnotes
 
Industry
 
Reference Rate & Spread (2)
 
Interest Rate (2)
 
Maturity Date
 
Par/ Principal Amount
 
Amortized Cost (5)
 
Fair Value (6)
First Lien Debt (99.91% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. TelePacific Holdings Corp.
+*\
 
(2) (3)
 
Telecommunications
 
L + 5.00%
 
7.80%
 
5/2/2023
 
$
26,660

 
$
26,459

 
$
24,768

Upstream Intermediate, LLC
^+
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.77%
 
1/3/2024
 
17,939

 
17,863

 
17,677

Valet Waste Holdings, Inc.
+\
 
(2) (3)
 
Construction & Building
 
L + 4.00%
 
6.52%
 
9/28/2025
 
11,970

 
11,947

 
11,902

Valicor Environmental Services, LLC
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 4.75%
 
7.27%
 
6/1/2023
 
33,410

 
32,914

 
32,995

WIRB - Copernicus Group, Inc.
^+*
 
(2) (3) (8)
 
Healthcare & Pharmaceuticals
 
L + 4.25%
 
6.77%
 
8/15/2022
 
17,194

 
17,098

 
16,931

WRE Holding Corp.
^+*
 
(2) (3) (8)
 
Environmental Industries
 
L + 5.00%
 
7.52%
 
1/3/2023
 
7,238

 
7,162

 
6,993

Zywave, Inc.
^+*
 
(2) (3) (8)
 
High Tech Industries
 
L + 5.00%
 
7.52%
 
11/17/2022
 
18,050

 
17,914

 
17,991

First Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,197,499

 
$
1,172,460

Second Lien Debt (0.09% of fair value)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Zywave, Inc.
*
 
(2) (3)
 
High Tech Industries
 
L + 9.00%
 
11.65%
 
11/17/2023
 
$
1,050

 
$
1,038

 
$
1,048

Second Lien Debt Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,038

 
$
1,048

Total Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,198,537

 
$
1,173,508


^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into the Credit Fund Facility. The lenders of the Credit Fund Facility have a first lien security interest in substantially all of the assets of Credit Fund. Accordingly, such assets are not available to creditors of Credit Fund Sub, the 2017-1 Issuer or the Credit Fund Warehouse.
+ Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund, the 2017-1 Issuer or the Credit Fund Warehouse.
* Denotes that all or a portion of the assets are owned by the 2017-1 Issuer and secure the notes issued in connection with a $399,900 term debt securitization completed by Credit Fund on December 19, 2017 (the “2017-1 Debt Securitization”). Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the Credit Fund Warehouse.
\ Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse. Credit Fund Warehouse has entered into a revolving credit facility (the “Credit Fund Warehouse Facility”). The lenders of the Credit Fund Warehouse Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse. Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub or the 2017-1 Issuer.
(1)
Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2018, the geographical composition of investments as a percentage of fair value was 1.35% in Canada and 98.65% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2018. As of December 31, 2018, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 2.50%, the 90-day LIBOR at 2.81% and 180-day LIBOR at 2.88%.
(3)
Loan includes interest rate floor feature, which is generally 1.00%.
(4)
Credit Fund Sub receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.20% on EIP Merger Sub, LLC (Evolve IP). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments.
(5)
Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.
(6)
Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
(7)
In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, Credit Fund is entitled to receive additional interest as a result of an agreement among lenders as follows: EIP Merger Sub, LLC (Evolve IP) (3.75%) and Surgical Information Systems, LLC (0.89%). Pursuant to the agreement among lenders in respect of these loans, these investments represent a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

80



(8)
As of December 31, 2018, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans:
First Lien Debt—unfunded delayed draw and revolving term loans commitments
 
Type
 
Unused Fee
 
Par/ Principal Amount
 
Fair Value
Advanced Instruments, LLC
 
Revolver
 
0.50%
 
$
1,333

 
$
(10
)
Ahead, LLC
 
Revolver
 
0.50
 
4,688

 
(38
)
AQA Acquisition Holding, Inc.
 
Revolver
 
0.50
 
2,459

 
(19
)
Borchers, Inc.
 
Revolver
 
0.50
 
1,935

 
(5
)
Clearent Newco, LLC
 
Delayed Draw
 
1.00
 
4,988

 
(46
)
Clearent Newco, LLC
 
Revolver
 
0.50
 
1,760

 
(16
)
DecoPac, Inc.
 
Revolver
 
0.50
 
2,143

 
(11
)
Executive Consulting Group, LLC, Inc.
 
Revolver
 
0.50
 
2,368

 
(25
)
HMT Holding Inc.
 
Revolver
 
0.50
 
6,173

 
(49
)
Jensen Hughes, Inc.
 
Revolver
 
0.50
 
2,000

 
(39
)
Jensen Hughes, Inc.
 
Delayed Draw
 
1.00
 
337

 
(7
)
MAG DS Corp.
 
Revolver
 
0.50
 
2,022

 
(18
)
MSHC, Inc.
 
Delayed Draw
 
0.32
 
9,852

 
(145
)
North American Dental Management, LLC
 
Revolver
 
0.50
 
2,000

 
(35
)
North Haven CA Holdings, Inc. (CoAdvantage)
 
Revolver
 
0.50
 
6,114

 
(109
)
Output Services Group
 
Delayed Draw
 
4.25
 
2,518

 
(93
)
Pharmalogic Holdings Corp.
 
Delayed Draw
 
1.00
 
2,947

 
(20
)
Premise Health Holding Corp.
 
Delayed Draw
 
1.00
 
1,103

 
(11
)
Propel Insurance Agency, LLC
 
Delayed Draw
 
0.50
 
7,143

 
(110
)
Propel Insurance Agency, LLC
 
Revolver
 
0.50
 
1,667

 
(26
)
PSI Services LLC
 
Revolver
 
0.50
 
754

 
(17
)
QW Holding Corporation (Quala)
 
Revolver
 
0.50
 
5,498

 
(52
)
T2 Systems, Inc.
 
Revolver
 
0.50
 
1,173

 
(7
)
The Original Cakerie, Ltd. (Canada)
 
Revolver
 
0.50
 
1,132

 
(10
)
Upstream Intermediate, LLC
 
Revolver
 
0.50
 
1,606

 
(22
)
Valicor Environmental Services, LLC
 
Revolver
 
0.50
 
4,971

 
(54
)
WIRB - Copernicus Group, Inc.
 
Delayed Draw
 
1.00
 
6,480

 
(69
)
WIRB - Copernicus Group, Inc.
 
Revolver
 
0.50
 
1,000

 
(11
)
WRE Holding Corp.
 
Delayed Draw
 
0.89
 
2,069

 
(51
)
WRE Holding Corp.
 
Revolver
 
0.50
 
613

 
(15
)
Zywave, Inc.
 
Revolver
 
0.50
 
600

 
(2
)
Total unfunded commitments
 
 
 
 
 
$
91,446

 
$
(1,142
)
(9)
Loan was on non-accrual status as of December 31, 2018.

81



Below is certain summarized consolidated financial information for Credit Fund as of March 31, 2019 and December 31, 2018, respectively. Credit Fund commenced operations in May 2016.
 
 
March 31, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
Selected Consolidated Balance Sheet Information
 
 
 
 
ASSETS
 
 
 
 
Investments, at fair value (amortized cost of $1,265,546 and $1,198,537, respectively)
 
$
1,258,295

 
$
1,173,508

Cash and other assets
 
41,074

 
62,547

Total assets
 
$
1,299,369

 
$
1,236,055

LIABILITIES AND MEMBERS’ EQUITY
 
 
 
 
Secured borrowings
 
$
624,667

 
$
572,178

Notes payable, net of unamortized debt issuance costs of $1,798 and $1,849, respectively
 
280,524

 
309,114

Mezzanine loans
 
123,800

 
112,000

Other liabilities
 
52,882

 
34,195

Subordinated loans and members’ equity
 
217,496

 
208,568

Liabilities and members’ equity
 
$
1,299,369

 
$
1,236,055

 
 
For the three month periods ended
 
 
March 31, 2019
 
March 31, 2018
 
 
(unaudited)
 
(unaudited)
Selected Consolidated Statement of Operations Information:
 
 
 
 
Total investment income
 
$
22,606

 
$
17,911

Expenses
 
 
 
 
Interest and credit facility expenses
 
14,730

 
10,656

Other expenses
 
441

 
389

Total expenses
 
15,171

 
11,045

Net investment income (loss)
 
7,435

 
6,866

Net realized gain (loss) on investments
 
(8,285
)
 

Net change in unrealized appreciation (depreciation) on investments
 
17,778

 
3,035

Net increase (decrease) resulting from operations
 
$
16,928

 
$
9,901

Debt
Credit Fund Facility
On June 24, 2016, Credit Fund entered into the Credit Fund Facility with the Company pursuant to which Credit Fund may from time to time request mezzanine loans from the Company, which was subsequently amended on June 5, 2017, October 2, 2017, November 3, 2017, June 22, 2018 and June 29, 2018. The maximum principal amount of the Credit Fund Facility is $175,000. The maturity date of the Credit Fund Facility is March 22, 2020. Amounts borrowed under the Credit Fund Facility bear interest at a rate of LIBOR plus 9.00%.
During the three month periods ended March 31, 2019 and 2018, there were mezzanine loan borrowings of $30,500 and $21,850, respectively, and repayments of $18,700 and $0, respectively, under the Credit Fund Facility. As of March 31, 2019 and December 31, 2018, there were $123,800 and $112,000 in mezzanine loans outstanding, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund was in compliance with all covenants and other requirements of the Credit Fund Facility.
Credit Fund Sub Facility
On June 24, 2016, Credit Fund Sub closed on the Credit Fund Sub Facility with lenders, which was subsequently amended on May 31, 2017, October 27, 2017 and August 24, 2018. The Credit Fund Sub Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $640,000. The facility is secured by a first lien security interest in substantially all of the portfolio investments held by Credit Fund Sub. The maturity date of the Credit Fund Sub Facility is May 22, 2024. Amounts borrowed under the Credit Fund Sub Facility bear interest at a rate of LIBOR plus 2.25%.

82



During the three month periods ended March 31, 2019 and 2018, there were secured borrowings of $60,020 and $67,965, respectively, and repayments of $20,404 and $15,035, respectively, under the Credit Fund Sub Facility. As of March 31, 2019 and December 31, 2018, there was $510,750 and $471,134 in secured borrowings outstanding, respectively.
As of March 31, 2019 and December 31, 2018, Credit Fund Sub was in compliance with all covenants and other requirements of the Credit Fund Sub Facility.
2017-1 Notes
On December 19, 2017, Credit Fund completed the 2017-1 Debt Securitization. The notes offered in the 2017-1 Debt Securitization (the “2017-1 Notes”) were issued by the 2017-1 Issuer, a wholly owned and consolidated subsidiary of Credit Fund, and are secured by a diversified portfolio of the 2017-1 Issuer consisting primarily of first and second lien senior secured loans. The 2017-1 Debt Securitization was executed through a private placement of the 2017-1 Notes, consisting of $231,700 of Aaa/AAA Class A-1 Notes, which bear interest at the three-month LIBOR plus 1.17%; $48,300 of Aa2/AA Class A-2 Notes, which bear interest at the three-month LIBOR plus 1.50%; $15,000 of A2/A Class B-1 Notes, which bear interest at the three-month LIBOR plus 2.25%; $9,000 of A2/A Class B-2 Notes which bear interest at 4.30%; $22,900 of Baa2/BBB Class C Notes which bear interest at the three-month LIBOR plus 3.20%; and $25,100 of Ba2/BB Class D Notes which bear interest at the three-month LIBOR plus 6.38%. The 2017-1 Notes are scheduled to mature on January 15, 2028. Credit Fund received 100% of the preferred interests issued by the 2017-1 Issuer (the “2017-1 Issuer Preferred Interests”) on the closing date of the 2017-1 Debt Securitization in exchange for Credit Fund’s contribution to the 2017-1 Issuer of the initial closing date loan portfolio. The 2017-1 Issuer Preferred Interests do not bear interest and had a nominal value of $47,900 at closing.
As of March 31, 2019 and December 31, 2018, the 2017-1 Issuer was in compliance with all covenants and other requirements of the indenture.
Credit Fund Warehouse Facility
On November 26, 2018, Credit Fund closed on the Credit Fund Warehouse Facility with lenders. The Credit Fund Warehouse Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $150,000. The Credit Fund Warehouse Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Credit Fund Warehouse. The maturity date of the Credit Fund Warehouse Facility is November 26, 2019. Amounts borrowed under the Credit Fund Warehouse Facility bear interest at a rate of LIBOR plus 1.05%.
During the three month period ended March 31, 2019, there were secured borrowings of $12,873 under the Credit Fund Warehouse Facility. As of March 31, 2019, there was $113,917 in secured borrowings outstanding.
As of March 31, 2019, Credit Fund Warehouse was in compliance with all covenants and other requirements of the Credit Fund Warehouse Facility.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We generate cash from the net proceeds of offerings of our common stock and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Facilities, as well as through securitization of a portion of our existing investments.
The SPV closed on May 24, 2013 on the SPV Credit Facility, which was subsequently amended on June 30, 2014, June 19, 2015, June 9, 2016, May 26, 2017 and August 9, 2018. The SPV Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $400,000 (the borrowing base as calculated pursuant to the terms of the SPV Credit Facility) and the amount of net cash proceeds and unpledged capital commitments the Company has received, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $750,000, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to support such borrowings. The SPV Credit Facility imposes financial and operating covenants on us and the SPV that restrict our and its business activities. Continued compliance with these covenants will depend on many factors, some of which are beyond our control.
We closed on March 21, 2014 on the Credit Facility, which was subsequently amended on January 8, 2015, May 25, 2016, March 22, 2017 and September 25, 2018. The maximum principal amount of the Credit Facility is $513,000, subject to availability under the Credit Facility, which is based on certain advance rates multiplied by the value of the Company’s

83



portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that the Company may incur in accordance with the terms of the Credit Facility. Proceeds of the Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Credit Facility may be increased, subject to certain conditions, to $620,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Credit Facility includes a $20,000 limit for swingline loans and a $5,000 limit for letters of credit. Subject to certain exceptions, the Credit Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Company. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.
Although we believe that we and the SPV will remain in compliance, there are no assurances that we or the SPV will continue to comply with the covenants in the Credit Facility and SPV Credit Facility, as applicable. Failure to comply with these covenants could result in a default under the Credit Facility and/or the SPV Credit Facility that, if we or the SPV were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the Credit Facility and/or the SPV Credit Facility, and thereby have a material adverse impact on our business, financial condition and results of operations.
For more information on the SPV Credit Facility and the Credit Facility, see Note 6 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders and for other general corporate purposes.
On June 26, 2015, we completed the 2015-1 Debt Securitization. The 2015-1 Notes were issued by Carlyle Direct Lending CLO 2015-1R LLC (formerly known as Carlyle GMS Finance MM CLO 2015-1 LLC) (the “2015-1 Issuer”), a wholly owned and consolidated subsidiary of us. On August 30, 2018, the 2015-1 Issuer refinanced the 2015-1 Debt Securitization (the “2015-1 Debt Securitization Refinancing”) by redeeming in full the 2015-1 Notes and issuing new notes (the “2015-1R Notes”). The 2015-1R Notes are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. On the closing date of the 2015-1 Debt Securitization Refinancing, the 2015-1 Issuer, among other things, (a) refinanced the issued Class A-1A Notes by redeeming in full the Class A-1A Notes and issuing new AAA Class A-1-1-R Notes in an aggregate principal amount of $234,800 which bear interest at the three-month LIBOR plus 1.55%; (b) refinanced the issued Class A-1B Notes by redeeming in full the Class A-1B Notes and issuing new AAA Class A-1-2-R Notes in an aggregate principal amount of $50,000 which bear interest at the three-month LIBOR plus 1.48% for the first 24 months and the three-month LIBOR plus 1.78% thereafter; (c) refinanced the issued Class A-1C Notes by redeeming in full the Class A-1C Notes and issuing new AAA Class A-1-3-R Notes in an aggregate principal amount of $25,000 which bear interest at 4.56%; (d) refinanced the issued Class A-2 Notes by redeeming in full the Class A-2 Notes and issuing new Class A-2-R Notes in an aggregate principal amount of $66,000 which bear interest at the three-month LIBOR plus 2.20%; (e) issued new single-A Class B Notes and BBB- Class C Notes in aggregate principal amounts of $46,400 and $27,000, respectively, which bear interest at the three-month LIBOR plus 3.15% and the three-month LIBOR plus 4.00%, respectively; (f) reduced the 2015-1 Issuer Preferred Interests by approximately $21,375 from a nominal value of $125,900 to approximately $104,525 at close; and (g) extended the reinvestment period end date and maturity date applicable to the 2015-1 Issuer to October 15, 2023 and October 15, 2031, respectively. In connection with the contribution, we have made customary representations, warranties and covenants to the 2015-1 Issuer. The Class A-1-1-R, Class A-1-2-R, Class A-1-3-R, Class A-2-R, Class B and Class C Notes are included in the consolidated financial statements included in Part I, Item 1 of this Form 10-Q. The 2015-1 Issuer Preferred Interests were eliminated in consolidation. For more information on the 2015-1R Notes, see Note 7 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
As of March 31, 2019 and December 31, 2018, we had $40,071 and $87,186, respectively, in cash and cash equivalents. The Facilities consisted of the following as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
Total 
Facility
 
Borrowings Outstanding
 
Unused 
Portion (1)
 
Amount Available (2)
SPV Credit Facility
$
400,000

 
$
252,959

 
$
147,041

 
$
4,420

Credit Facility
513,000

 
408,000

 
105,000

 
105,000

Total
$
913,000

 
$
660,959

 
$
252,041

 
$
109,420


84



 
December 31, 2018
 
Total 
Facility
 
Borrowings Outstanding
 
Unused 
Portion (1)
 
Amount Available (2)
SPV Credit Facility
$
400,000

 
$
224,135

 
$
175,865

 
$
2,547

Credit Facility
413,000

 
290,500

 
122,500

 
122,500

Total
$
813,000

 
$
514,635

 
$
298,365

 
$
125,047

(1)
The unused portion is the amount upon which commitment fees are based.
(2)
Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

The following were the carrying values (before debt issuance costs) and fair values of the Company’s 2015-1R Notes as of March 31, 2019 and December 31, 2018:
 
March 31, 2019
 
December 31, 2018
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Aaa/AAA Class A-1-1-R Notes
$
234,800

 
$
230,691

 
$
234,800

 
$
229,632

Aaa/AAA Class A-1-2-R Notes
50,000

 
49,400

 
50,000

 
49,442

Aaa/AAA Class A-1-3-R Notes
25,000

 
25,122

 
25,000

 
24,990

AA Class A-2-R Notes
66,000

 
66,000

 
66,000

 
66,000

A Class B Notes
46,400

 
45,020

 
46,400

 
44,242

BBB- Class C Notes
27,000

 
25,650

 
27,000

 
24,809

Total
$
449,200

 
$
441,883


$
449,200

 
$
439,115


As of March 31, 2019 and December 31, 2018, we had a combined $1,110,159 and $963,835, respectively, of outstanding consolidated indebtedness under our Facilities and notes. Our annualized interest cost as of March 31, 2019 and December 31, 2018, was 4.69% and 4.55%, excluding fees (such as fees on undrawn amounts and amortization of upfront fees).
Equity Activity
Shares issued and outstanding as of March 31, 2019 and December 31, 2018 were 61,272,069 and 62,230,251, respectively.
The following table summarizes activity in the number of shares of our common stock outstanding during the three month periods ended March 31, 2019 and 2018:
 
For the three month periods ended
 
March 31, 2019
 
March 31, 2018
Shares outstanding, beginning of period
62,230,251

 
62,207,603

Reinvestment of dividends

 
361,056

Repurchase of common stock
(958,182
)
 

Shares outstanding, end of period
61,272,069

 
62,568,659

Contractual Obligations
A summary of our significant contractual payment obligations was as follows as of March 31, 2019 and December 31, 2018:

85



 
 
SPV Credit Facility and Credit Facility
 
2015-1R Notes
Payment Due by Period
 
March 31, 2019
 
December 31, 2018
 
March 31, 2019
 
December 31, 2018
Less than 1 Year
 
$

 
$

 
$

 
$

1-3 Years
 

 

 

 

3-5 Years
 
660,959

 
514,635

 

 

More than 5 Years
 

 

 
449,200

 
449,200

Total
 
$
660,959

 
$
514,635

 
$
449,200

 
$
449,200

As of March 31, 2019 and December 31, 2018, $252,959 and $224,135, respectively, of secured borrowings were outstanding under the SPV Credit Facility, $408,000 and $290,500, respectively, were outstanding under the Credit Facility. As of March 31, 2019 and December 31, 2018, $449,200 and $449,200 of 2015-1R Notes, respectively, were outstanding. For the three month periods ended March 31, 2019 and 2018, we incurred $11,991 and $7,815, respectively, of interest expense and $303 and $288, respectively, of unused commitment fees.
OFF BALANCE SHEET ARRANGEMENTS
In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of March 31, 2019 and December 31, 2018 in Part I, Item 1 of this Form 10-Q for any such exposure.
We have in the past and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.
We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:
 
Principal Amount as of
 
March 31, 2019
 
December 31, 2018
Unfunded delayed draw commitments
$
85,898

 
$
97,261

Unfunded revolving term loan commitments
64,447

 
59,856

Total unfunded commitments
$
150,345

 
$
157,117

Pursuant to an undertaking by us in connection with the 2015-1 Debt Securitization, we agreed to hold on an ongoing basis the 2015-1 Issuer Preferred Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate outstanding amount of all collateral obligations by the 2015-1 Issuer for so long as any securities of the 2015-1 Issuer remains outstanding. As of March 31, 2019 and December 31, 2018, we were in compliance with this undertaking.
DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS
Prior to July 5, 2017, we had an “opt in” dividend reinvestment plan. Effective on July 5, 2017, we converted our “opt in” dividend reinvestment plan to an “opt out” dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, other than those stockholders who have “opted out” of the plan. As a result of adopting the plan, if our Board of Directors authorizes, and we declare, a cash dividend or distribution, our stockholders who have not elected to “opt out” of our dividend reinvestment plan will have their cash dividends or distributions automatically reinvested in additional shares of our common stock, rather than receiving cash. Each registered stockholder may elect to have such stockholder’s dividends and distributions distributed in cash rather than participate in the plan. For any registered stockholder that does not so elect, distributions on such stockholder’s shares will be reinvested by State Street Bank and Trust Company, our plan administrator, in additional shares. The number of shares to be issued to the stockholder will be determined based on the total dollar amount of the cash distribution payable, net of applicable withholding taxes. We intend to use primarily newly issued shares to implement the plan so long as the market value per share is equal to or greater than the net asset value per share on the relevant valuation date. If the market value per share is less than the net asset value per share on the relevant valuation date, the plan administrator would implement the plan through the purchase of common stock on behalf of participants in the open market, unless we instruct the plan administrator otherwise.

86



The following table summarizes the Company’s dividends declared during the two most recent fiscal years and the current fiscal year to date:
Date Declared
 
Record Date
 
Payment Date
 
Per Share Amount
 
2017
 
 
 
 
 
 
 
March 20, 2017
 
March 20, 2017
 
April 24, 2017
 
$
0.41

 
June 20, 2017
 
June 30, 2017
 
July 18, 2017
 
$
0.37

 
August 7, 2017
 
September 29, 2017
 
October 18, 2017
 
$
0.37

 
November 7, 2017
 
December 29, 2017
 
January 17, 2018
 
$
0.37

 
December 13, 2017
 
December 29, 2017
 
January 17, 2018
 
$
0.12

(1) 
Total
 
 
 
 
 
$
1.64

 
2018
 
 
 
 
 
 
 
February 26, 2018
 
March 29, 2018
 
April 17, 2018
 
$
0.37

 
May 2, 2018
 
June 29, 2018
 
July 17, 2018
 
$
0.37

 
August 6, 2018
 
September 28, 2018
 
October 17, 2018
 
$
0.37

 
November 5, 2018
 
December 28, 2018
 
January 17, 2019
 
$
0.37

 
December 12, 2018
 
December 28, 2018
 
January 17, 2019
 
$
0.20

(1) 
Total
 
 
 
 
 
$
1.68

 
2019
 
 
 
 
 
 
 
February 22, 2019
 
March 29, 2019
 
April 17, 2019
 
$
0.37

 
May 6, 2019
 
June 28, 2019
 
July 17, 2019
 
$
0.37

 
Total
 
 
 
 
 
$
0.74

 
(1)
Represents a special dividend.
ASSET COVERAGE
In accordance with the Investment Company Act, a BDC is only allowed to borrow amounts such that its “asset coverage,” as defined in the Investment Company Act, satisfies the minimum asset coverage ratio specified in the Investment Company Act after such borrowing. “Asset coverage” generally refers to a company’s total assets, less all liabilities and indebtedness not represented by “senior securities,” as defined in the Investment Company Act, divided by total senior securities representing indebtedness and, if applicable, preferred stock. “Senior securities” for this purpose includes borrowings from banks or other lenders, debt securities and preferred stock.
Prior to March 23, 2018, BDCs were required to maintain a minimum asset coverage ratio of 200%. On March 23, 2018, an amendment to Section 61(a) of the Investment Company Act was signed into law to permit BDCs to reduce the minimum asset coverage ratio from 200% to 150%, so long as certain approval and disclosure requirements are satisfied. Under the 200% minimum asset coverage ratio, BDCs are permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity, and under the 150% minimum asset coverage ratio, BDCs are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a) of the Investment Company Act, as amended, permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1 to 1 to a maximum of 2 to 1.
On April 9, 2018 and June 6, 2018, the Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the Investment Company Act), and the stockholders of the Company, respectively, approved the application to the Company of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the Investment Company Act. As a result, the minimum asset coverage ratio applicable to the Company was reduced from 200% to 150%, effective as of June 7, 2018, the first day after the Company’s 2018 Annual Meeting.
As of March 31, 2019 and December 31, 2018, the Company had total senior securities of $1,110,159 and $963,835, respectively, consisting of secured borrowings under the Facilities and the Notes Payable, and had asset coverage ratios of 195.50% and 210.31%, respectively. For a discussion of the principal risk factors associated with these senior securities, see Part II, Item 1A of this Form 10‑Q.
CRITICAL ACCOUNTING POLICIES

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The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in connection with our consolidated financial statements in Part I, Item 1 of this Form 10-Q and in Part II, Item 8 of the Company’s annual report on Form 10-K for the year ended December 31, 2018.
Fair Value Measurements
The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.
Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment other than Credit Fund is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.
All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:
the nature and realizable value of any collateral;
call features, put features and other relevant terms of debt;
the portfolio company’s leverage and ability to make payments;
the portfolio company’s public or private credit rating;
the portfolio company’s actual and expected earnings and discounted cash flow;
prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;
the markets in which the portfolio company does business and recent economic and/or market events; and
comparisons to comparable transactions and publicly traded securities.
Investment performance data utilized are the most recently available financial statements and compliance certificate received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

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Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of March 31, 2019 and December 31, 2018.
US GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:
 
Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. Financial instruments in this category generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally 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 included in this category generally include investments in privately-held entities, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.
The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:
Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

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Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.
Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in Credit Fund’s mezzanine loan are valued using collateral analysis with expected recovery rate of principal and interest. Investments in Credit Fund’s subordinated loan and member’s interest are valued using discounted cash flow analysis with expected discount rates, default rates and recovery rates of principal and interest.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation may result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in the mezzanine loan of Credit Fund are recovery rates of principal and interest. Significant decreases in recovery rates would result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company’s investments in the subordinated loan and member’s interest of Credit Fund are discount rates, default rates and recovery rates. Significant increases in discount rates or default rates would result in a significantly lower fair value measurement. Significant decreases in recovery rates would result in a significantly lower fair value measurement.
The carrying values of the secured borrowings and notes payable approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement. The fair value determination of the Company’s notes payable was based on the market quotation(s) received from broker/dealer(s). These fair value measurements were based on significant inputs not observable and thus represent Level 3 measurements as defined in the accounting guidance for fair value measurement.
The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.
See Note 3 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on fair value measurements.
Use of Estimates
The preparation of consolidated financial statements in Part I, Item 1 of this Form 10-Q in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on base management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements in Part I, Item 1 of this Form 10-Q. Actual results could differ from these estimates and such differences could be material.

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Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition
Interest from Investments and Realized Gain/Loss on Investments
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.
The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations included in Part I, Item 1 of this Form 10-Q.
Dividend Income
Dividend income from the investment fund is recorded on the record date for the investment fund to the extent that such amounts are payable by the investment fund and are expected to be collected.
Other Income
Other income may include income such as consent, waiver, amendment, unused, syndication, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the Consolidated Statements of Assets and Liabilities included in Part I, Item 1 of this Form 10-Q.
Non-Accrual Income
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Income Taxes
For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next

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tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.
The SPVs and the 2015-1 Issuer are disregarded entities for tax purposes and are consolidated with the tax return of the Company.
Dividends and Distributions to Common Stockholders
To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.
Interest Rate Risk
As of March 31, 2019, on a fair value basis, approximately 1% of our debt investments bear interest at a fixed rate and approximately 99% of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, our Facilities are also subject to floating interest rates and are currently paid based on floating LIBOR rates.
Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.
The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. Interest income is calculated as revenue from interest generated from our settled portfolio of debt investments held as of March 31, 2019 and December 31, 2018, excluding our investment in Credit Fund. These hypothetical calculations are based on a model of the settled debt investments in our portfolio, excluding our investment in Credit Fund, held as of March 31, 2019 and December 31, 2018, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings and notes payable as of March 31, 2019 and December 31, 2018 and based on the terms of our Facilities and notes payable. Interest expense on our Facilities and notes payable is calculated using the stated interest rate as of March 31, 2019 and December 31, 2018, adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.
We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.
Based on our Consolidated Statements of Assets and Liabilities as of March 31, 2019 and December 31, 2018, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments), excluding our investment in Credit Fund, and outstanding secured borrowings and notes payable assuming no changes in our investment and borrowing structure:
 
As of March 31, 2019
 
As of December 31, 2018
Basis Point Change
Interest Income
 
Interest Expense
 
Net Investment Income
 
Interest Income
 
Interest Expense
 
Net Investment Income
Up 300 basis points
$
56,730

 
$
(32,555
)
 
$
24,175

 
$
52,554

 
$
(28,165
)
 
$
24,389

Up 200 basis points
$
38,826

 
$
(21,703
)
 
$
17,123

 
$
35,036

 
$
(18,777
)
 
$
16,259

Up 100 basis points
$
19,513

 
$
(10,852
)
 
$
8,661

 
$
17,518

 
$
(9,388
)
 
$
8,130

Down 100 basis points
$
(19,169
)
 
$
10,852

 
$
(8,317
)
 
$
(17,477
)
 
$
9,388

 
$
(8,089
)
Down 200 basis points
$
(30,613
)
 
$
21,703

 
$
(8,910
)
 
$
(28,103
)
 
$
18,777

 
$
(9,326
)
Down 300 basis points
$
(31,595
)
 
$
28,331

 
$
(3,264
)
 
$
(28,741
)
 
$
22,953

 
$
(5,788
)

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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the three month period ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The Company may become party to certain lawsuits in the ordinary course of business. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 11 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2018. For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 26, 2019, which is accessible on the SEC’s website at sec.gov.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information regarding purchases of our common stock made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the first quarter of 2019.
Period
 
Total Number of Shares Purchased(1)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)
 
Maximum (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2019 through January 31, 2019
 
307,549

 
$
14.37

 
307,549

 
$
90,335

February 1, 2019 through February 28, 2019
 
272,806

 
14.99

 
272,806

 
86,245

March 1, 2019 through March 31, 2019
 
402,642

 
14.89

 
402,642

 
80,248

Total
 
982,997

 
 
 
982,997

 
 
(1)
On trade date basis.
(2)
Shares purchased by the Company pursuant to the Company's Stock Repurchase Program, which was entered into on November 5, 2018. Pursuant to the program, the Company is authorized to repurchase up to $100 million in the aggregate of its outstanding common stock in the open market and/or through privately negotiated transactions at prices not to exceed the Company’s net asset value per share as reported in its most recent financial statements, in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act. The timing, manner, price and amount of any repurchases will be determined by the Company, in its discretion, based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal and regulatory requirements and other factors, and may include purchases pursuant to Rule 10b5-1 of the Exchange Act. The program is expected to be in effect until the earlier of November 5, 2019 and the date the approved dollar amount has been used to repurchase shares. The program does not require the Company to repurchase any specific number of shares and there can be no assurance as to the amount of shares repurchased under the program. The program may be suspended, extended, modified or discontinued by the Company at any time, subject to applicable law. Pursuant to the authorization described above, the Company adopted the Company 10b5-1 Plan. The Company 10b5-1 Plan provides that purchases will be conducted on the open market in accordance with Rule 10b5-1 and 10b-18 under the Exchange Act and will otherwise be subject to applicable law, which may prohibit purchases under certain circumstances. The amount of purchases made under the Company 10b5-1 Plan or otherwise and how much will be purchased at any time is uncertain, dependent on prevailing market prices and trading volumes, all of which we cannot predict.
Item 3. Defaults Upon Senior Securities.
Not applicable.

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Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
  
 
 
 
  
 
 
 
  
 
 
 
  
* Filed herewith

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

 
TCG BDC, INC.
 
 
 
Dated: May 7, 2019
By
  
/s/ Thomas M. Hennigan
 
 
  
Thomas M. Hennigan
Chief Financial Officer
(principal financial officer)

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