Franklin BSP Lending Corp - Quarter Report: 2020 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2020
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 814-00821
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
(Exact Name of Registrant as Specified in its Charter)
Maryland | 27-2614444 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
9 West 57th Street, 49th Floor, Suite 4920 New York, New York | 10019 | |
(Address of Principal Executive Office) | (Zip Code) | |
(212) 588-6770
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer x | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The number of shares of the registrant's common stock, $0.001 par value, outstanding as of August 11, 2020 was 199,986,553.
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2020
TABLE OF CONTENTS
Page | |
PART I - FINANCIAL INFORMATION | |
PART II - OTHER INFORMATION | |
PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollars in thousands except share and per share data)
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments, at fair value: | |||||||
Control Investments, at fair value (amortized cost of $304,434 and $358,570, respectively) | $ | 315,499 | $ | 406,517 | |||
Affiliate Investments, at fair value (amortized cost of $181,066 and $175,470, respectively) | 109,444 | 129,526 | |||||
Non-affiliate Investments, at fair value (amortized cost of $1,966,683 and $2,105,602, respectively) | 1,792,596 | 2,010,141 | |||||
Investments, at fair value (amortized cost of $2,452,183 and $2,639,642, respectively) | 2,217,539 | 2,546,184 | |||||
Cash and cash equivalents | 181,826 | 46,470 | |||||
Interest and dividends receivable | 13,748 | 17,047 | |||||
Receivable for unsettled trades | 20,629 | 27,895 | |||||
Prepaid expenses and other assets | 3,691 | 2,934 | |||||
Total assets | $ | 2,437,433 | $ | 2,640,530 | |||
LIABILITIES | |||||||
Debt (net of deferred financing costs of $9,420 and $11,288, respectively) | $ | 1,056,013 | $ | 1,083,754 | |||
Stockholder distributions payable | 14,990 | 10,503 | |||||
Management fees payable | 19,322 | 10,098 | |||||
Incentive fee on income payable | — | 6,513 | |||||
Accounts payable and accrued expenses | 13,977 | 14,765 | |||||
Payable for unsettled trades | 19,731 | 40,347 | |||||
Interest and debt fees payable | 8,879 | 11,425 | |||||
Directors' fees payable | 84 | 54 | |||||
Unrealized depreciation on forward currency exchange contracts | 465 | 388 | |||||
Total liabilities | 1,133,461 | 1,177,847 | |||||
Commitments and contingencies (Note 7) | |||||||
NET ASSETS | |||||||
Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding | — | — | |||||
Common stock, $.001 par value, 450,000,000 shares authorized; 227,873,207 issued and 199,994,685 outstanding at June 30, 2020, and 215,850,546 issued and 190,207,517 outstanding at December 31, 2019 | 200 | 190 | |||||
Additional paid in capital | 1,901,954 | 1,847,312 | |||||
Total distributable loss | (598,182 | ) | (384,819 | ) | |||
Total net assets | 1,303,972 | 1,462,683 | |||||
Total liabilities and net assets | $ | 2,437,433 | $ | 2,640,530 | |||
Net asset value per share | $ | 6.52 | $ | 7.69 | |||
The accompanying notes are an integral part of these consolidated financial statements.
1
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share and per share data)
(Unaudited)
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Investment income: | |||||||||||||||
From control investments | |||||||||||||||
Interest income | $ | 5,173 | $ | 4,831 | $ | 11,221 | $ | 9,905 | |||||||
Dividend income | 3,154 | 5,057 | 6,572 | 7,320 | |||||||||||
Fee and other income | 6 | — | 9 | — | |||||||||||
Total investment income from control investments | 8,333 | 9,888 | 17,802 | 17,225 | |||||||||||
From affiliate investments | |||||||||||||||
Interest income | (152 | ) | 2,645 | 796 | 6,903 | ||||||||||
Dividend income | 672 | 382 | 1,081 | 1,264 | |||||||||||
Fee and other income | (2 | ) | 3 | (2 | ) | 6 | |||||||||
Total investment income from affiliate investments | 518 | 3,030 | 1,875 | 8,173 | |||||||||||
From non-affiliate investments | |||||||||||||||
Interest income | 35,030 | 48,292 | 76,205 | 93,974 | |||||||||||
Dividend income | — | — | 40 | 1,756 | |||||||||||
Fee and other income | 1,125 | 557 | 2,191 | 1,579 | |||||||||||
Total investment income from non-affiliate investments | 36,155 | 48,849 | 78,436 | 97,309 | |||||||||||
Interest from cash and cash equivalents | 75 | 285 | 249 | 446 | |||||||||||
Total investment income | 45,081 | 62,052 | 98,362 | 123,153 | |||||||||||
Operating expenses: | |||||||||||||||
Management fees | 9,445 | 10,037 | 19,322 | 19,470 | |||||||||||
Incentive fee on income | — | 6,773 | — | 13,564 | |||||||||||
Interest and debt fees | 12,297 | 14,116 | 26,077 | 27,374 | |||||||||||
Professional fees | 1,190 | 1,428 | 2,601 | 3,135 | |||||||||||
Other general and administrative | 994 | 1,673 | 2,606 | 3,527 | |||||||||||
Administrative services | 252 | 197 | 560 | 393 | |||||||||||
Directors' fees | 250 | 228 | 511 | 462 | |||||||||||
Total expenses | 24,428 | 34,452 | 51,677 | 67,925 | |||||||||||
Income tax expense, including excise tax | 220 | 501 | 694 | 963 | |||||||||||
Net investment gain attributable to non-controlling interests | — | 7 | — | 9 | |||||||||||
Net investment income | 20,433 | 27,092 | 45,991 | 54,256 | |||||||||||
Realized and unrealized gain (loss): | |||||||||||||||
Net realized gain (loss) | |||||||||||||||
Control investments | 128 | — | (372 | ) | (94 | ) | |||||||||
Affiliate investments | 413 | 549 | 602 | 555 | |||||||||||
Non-affiliate investments | (56,964 | ) | 2,022 | (70,306 | ) | (523 | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share and per share data)
(Unaudited)
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net realized gain (loss) on foreign currency transactions | 1,105 | (48 | ) | 773 | 674 | ||||||||||
Total net realized gain (loss) | (55,318 | ) | 2,523 | (69,303 | ) | 612 | |||||||||
Net change in unrealized appreciation (depreciation) on investments | |||||||||||||||
Control investments | (19,277 | ) | 17,083 | (36,882 | ) | 28,749 | |||||||||
Affiliate investments | 2,961 | (705 | ) | (25,678 | ) | 8,767 | |||||||||
Non-affiliate investments | 82,827 | (10,865 | ) | (78,626 | ) | 1,385 | |||||||||
Net change in deferred taxes | 1,034 | (4 | ) | 1,748 | (486 | ) | |||||||||
Total net change in unrealized appreciation (depreciation) on investments, net of change in deferred taxes | 67,545 | 5,509 | (139,438 | ) | 38,415 | ||||||||||
Net change in unrealized depreciation attributable to non-controlling interests | — | (1,725 | ) | — | (3,017 | ) | |||||||||
Net change in unrealized depreciation from forward currency exchange contracts | (1,768 | ) | (235 | ) | (77 | ) | (1,270 | ) | |||||||
Net realized and unrealized gain (loss) | 10,459 | 6,072 | (208,818 | ) | 34,740 | ||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 30,892 | $ | 33,164 | $ | (162,827 | ) | $ | 88,996 | ||||||
Per share information - basic and diluted | |||||||||||||||
Net investment income | $ | 0.10 | $ | 0.14 | $ | 0.24 | $ | 0.29 | |||||||
Net increase (decrease) in net assets resulting from operations | $ | 0.16 | $ | 0.17 | $ | (0.84 | ) | $ | 0.47 | ||||||
Weighted average shares outstanding | 199,084,903 | 189,907,442 | 194,595,661 | 189,928,762 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollars in thousands except share and per share data)
(Unaudited)
For the six months ended June 30, | |||||||
2020 | 2019 | ||||||
Operations: | |||||||
Net investment income | $ | 45,991 | $ | 54,256 | |||
Net realized loss from investments | (70,076 | ) | (62 | ) | |||
Net realized gain on foreign currency transactions | 773 | 674 | |||||
Net change in unrealized appreciation (depreciation) on investments | (141,186 | ) | 38,901 | ||||
Net change in deferred taxes | 1,748 | (486 | ) | ||||
Net change in unrealized depreciation attributable to non-controlling interests | — | (3,017 | ) | ||||
Net change in unrealized depreciation from forward currency exchange contracts | (77 | ) | (1,270 | ) | |||
Net increase (decrease) in net assets resulting from operations | (162,827 | ) | 88,996 | ||||
Stockholder distributions: | |||||||
Distributions | (50,536 | ) | (61,220 | ) | |||
Net decrease in net assets from stockholder distributions | (50,536 | ) | (61,220 | ) | |||
Capital share transactions: | |||||||
Issuance of common stock, net of issuance costs | 59,000 | — | |||||
Reinvestment of stockholder distributions | 12,932 | 17,938 | |||||
Repurchases of common stock | (17,280 | ) | (18,582 | ) | |||
Net increase (decrease) in net assets from capital share transactions | 54,652 | (644 | ) | ||||
Total increase (decrease) in net assets, before non-controlling interest | (158,711 | ) | 27,132 | ||||
Increase in non-controlling interest | — | 3,026 | |||||
Total increase (decrease) in net assets | (158,711 | ) | 30,158 | ||||
Net assets at beginning of period | 1,462,683 | 1,492,719 | |||||
Net assets at end of period | $ | 1,303,972 | $ | 1,522,877 | |||
Net asset value per common share attributable to Business Development Corporation of America | $ | 6.52 | $ | 7.97 | |||
Common shares outstanding at end of period | 199,994,685 | 190,292,223 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
4
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the six months ended June 30, | |||||||
2020 | 2019 | ||||||
Operating activities: | |||||||
Net increase (decrease) in net assets resulting from operations | $ | (162,827 | ) | $ | 88,996 | ||
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by (used in) operating activities: | |||||||
Payment-in-kind interest income | (3,271 | ) | (2,306 | ) | |||
Net accretion of discount on investments | (3,331 | ) | (4,802 | ) | |||
Amortization of deferred financing costs | 1,868 | 1,748 | |||||
Amortization of discount on unsecured notes | 391 | 271 | |||||
Sales and repayments of investments | 487,267 | 374,240 | |||||
Purchases of investments | (363,282 | ) | (522,133 | ) | |||
Net realized loss from investments | 70,076 | 62 | |||||
Net realized gain on foreign currency transactions | (773 | ) | (674 | ) | |||
Net change in unrealized (appreciation) depreciation on investments | 141,186 | (38,901 | ) | ||||
Net change in unrealized depreciation from forward currency exchange contracts | 77 | 1,270 | |||||
(Increase) decrease in operating assets: | |||||||
Interest and dividends receivable | 3,299 | (2,461 | ) | ||||
Receivable for unsettled trades | 7,266 | 4,379 | |||||
Prepaid expenses and other assets | (757 | ) | 1,347 | ||||
Increase (decrease) in operating liabilities: | |||||||
Management fees payable | 9,224 | 326 | |||||
Incentive fee on income payable | (6,513 | ) | 1,083 | ||||
Accounts payable and accrued expenses | (788 | ) | 1,263 | ||||
Payable for unsettled trades | (20,616 | ) | 34,575 | ||||
Interest and debt fees payable | (2,546 | ) | 3,530 | ||||
Directors' fees payable | 30 | (27 | ) | ||||
Net cash provided by (used in) operating activities | 155,980 | (58,214 | ) | ||||
Financing activities: | |||||||
Proceeds from issuance of shares of common stock, net | 59,000 | — | |||||
Repurchases of common stock | (17,280 | ) | (18,571 | ) | |||
Proceeds from debt | 197,000 | 197,000 | |||||
Payments on debt | (227,000 | ) | — | ||||
Payments of financing costs | — | (2,531 | ) | ||||
Stockholder distributions | (33,117 | ) | (43,623 | ) | |||
Increase in non-controlling interest | — | 3,026 | |||||
Net cash provided by (used in) financing activities | (21,397 | ) | 135,301 | ||||
Net increase in cash and cash equivalents | 134,583 | 77,087 | |||||
Effect of foreign currency exchange rates | 773 | 674 | |||||
Cash and cash equivalents, beginning of period | 46,470 | 96,692 | |||||
Cash and cash equivalents, end of period | $ | 181,826 | $ | 174,453 | |||
Supplemental information: | |||||||
Interest paid during the period | $ | 26,278 | $ | 21,719 | |||
Taxes, including excise tax, paid during the period | $ | 55 | $ | 53 | |||
Distributions reinvested | $ | 12,932 | $ | 17,938 | |||
The accompanying notes are an integral part of these consolidated financial statements.
5
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Senior Secured First Lien Debt - 120.8% (b) | |||||||||||||||||||
1236904 BC, Ltd. (c) (i) | Software/Services | L+5.50% (5.68%), 2/26/2027 | $ | 18,923 | $ | 18,189 | $ | 17,239 | 1.3 | % | |||||||||
Abaco Systems Holding Corp. (c) (i) | Industrials | L+6.00% (7.31%), 12/7/2021 | 23,094 | 22,959 | 23,094 | 1.8 | % | ||||||||||||
ABC Financial Intermediate, LLC (c) (j) | Technology | L+4.25% (5.29%), 1/2/2025 | 14,528 | 14,481 | 12,422 | 1.0 | % | ||||||||||||
Abercrombie & Fitch, Co. (a) | Consumer | 8.75%, 7/15/2025 | 3,182 | 3,182 | 3,138 | 0.2 | % | ||||||||||||
Accentcare, Inc. (c) (j) | Healthcare | L+5.00% (5.18%), 6/22/2026 | 13,405 | 13,289 | 12,775 | 1.0 | % | ||||||||||||
Acrisure, LLC (i) (j) | Financials | L+3.50% (3.68%), 2/16/2027 | 24,773 | 24,755 | 23,348 | 1.8 | % | ||||||||||||
AHP Health Partners, Inc. (i) | Healthcare | L+4.50% (5.50%), 6/30/2025 | 10,514 | 10,447 | 10,093 | 0.8 | % | ||||||||||||
Alchemy US Holdco 1, LLC (c) (i) (j) | Industrials | L+5.50% (5.69%), 10/10/2025 | 6,377 | 6,113 | 5,900 | 0.5 | % | ||||||||||||
Aldevron, LLC (i) | Healthcare | L+4.25% (5.25%), 10/13/2026 | 9,347 | 9,262 | 9,195 | 0.7 | % | ||||||||||||
Alvogen Pharma US, Inc. (c) (j) | Healthcare | L+5.25% (6.32%), 12/29/2023 | 12,818 | 12,774 | 11,953 | 0.9 | % | ||||||||||||
AM General, LLC (c) (i) | Industrials | L+7.25% (8.32%), 12/28/2021 | 1,533 | 1,533 | 1,533 | 0.1 | % | ||||||||||||
AMI Entertainment Network, LLC (c) | Media/Entertainment | P+5.00% (8.25%), 7/21/2022 | 1,234 | 1,234 | 1,190 | 0.1 | % | ||||||||||||
AMI Entertainment Network, LLC (c) (i) | Media/Entertainment | L+6.00% (7.00%), 7/21/2022 | 12,755 | 12,650 | 12,296 | 0.9 | % | ||||||||||||
AMI Entertainment Network, LLC (c) (i) | Media/Entertainment | L+6.00% (7.00%), 7/21/2022 | 3,667 | 3,628 | 3,535 | 0.3 | % | ||||||||||||
AP Gaming I, LLC (j) | Gaming/Lodging | L+3.50% (4.50%), 2/15/2024 | 7,583 | 7,578 | 6,599 | 0.5 | % | ||||||||||||
AP NMT Acquisition B.V. (a) (j) | Media/Entertainment | L+5.75% (7.20%), 8/13/2021 | 3,797 | 3,801 | 3,797 | 0.3 | % | ||||||||||||
Aq Carver Buyer, Inc. (c) (i) | Business Services | L+5.00% (6.00%), 9/23/2025 | 9,344 | 8,676 | 9,111 | 0.7 | % | ||||||||||||
AqGen Ascensus, Inc. (c) (j) | Business Services | L+4.00% (5.07%), 12/5/2022 | 9,344 | 9,337 | 9,344 | 0.7 | % | ||||||||||||
AqGen Ascensus, Inc. (c) (j) | Business Services | L+4.25% (5.25%), 12/5/2022 | 7,940 | 7,893 | 7,940 | 0.6 | % | ||||||||||||
Arch Global Precision, LLC (c) (i) | Industrials | L+4.75% (5.82%), 4/1/2026 | 10,309 | 10,236 | 10,309 | 0.8 | % | ||||||||||||
Athenahealth, Inc. (j) | Healthcare | L+4.50% (4.82%), 2/11/2026 | 12,728 | 12,582 | 12,304 | 0.9 | % | ||||||||||||
Avaya Holdings Corp. (a) (j) | Technology | L+4.25% (4.43%), 12/16/2024 | 20,145 | 20,021 | 18,544 | 1.4 | % | ||||||||||||
Aveanna Healthcare, LLC (j) | Healthcare | L+5.50% (6.50%), 3/18/2024 | 5,991 | 5,803 | 5,305 | 0.4 | % | ||||||||||||
Aveanna Healthcare, LLC (j) | Healthcare | L+4.25% (5.25%), 3/18/2024 | 780 | 747 | 688 | 0.1 | % | ||||||||||||
Axiom Global, Inc. (c) (i) | Business Services | L+4.75% (4.93%), 10/1/2026 | 11,436 | 11,339 | 10,875 | 0.8 | % | ||||||||||||
BBB Industries, LLC (j) | Transportation | L+4.50% (5.58%), 8/1/2025 | 13,054 | 12,972 | 11,129 | 0.9 | % | ||||||||||||
BCP Raptor, LLC (j) | Energy | L+4.25% (5.25%), 6/24/2024 | 13,819 | 13,733 | 9,881 | 0.8 | % | ||||||||||||
BCP Renaissance, LLC (j) | Energy | L+3.50% (4.50%), 10/31/2024 | 3,402 | 3,392 | 2,834 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Black Mountain Sand, LLC (c) (t) | Energy | L+9.00% (10.50%), 11/30/2021 | $ | 13,050 | $ | 12,960 | $ | 11,745 | 0.9 | % | |||||||||
Black Mountain Sand, LLC (c) (t) | Energy | L+9.00% (10.50%), 11/30/2021 | 11,255 | 11,184 | 10,129 | 0.8 | % | ||||||||||||
BMC Software Finance, Inc. (j) | Technology | L+4.25% (4.43%), 10/2/2025 | 17,647 | 17,513 | 16,654 | 1.3 | % | ||||||||||||
Bomgar Corp. (j) | Technology | L+4.00% (4.18%), 4/18/2025 | 1,952 | 1,946 | 1,879 | 0.1 | % | ||||||||||||
Boston Market Corp. (c) (l) (t) | Food & Beverage | 5.00%, 4/1/2022 | 2,375 | — | — | — | % | ||||||||||||
California Resources Corp. (j) | Energy | L+4.75% (5.75%), 12/30/2022 | 10,670 | 10,562 | 3,828 | 0.3 | % | ||||||||||||
CareCentrix, Inc. (i) (j) | Healthcare | L+4.50% (4.81%), 4/3/2025 | 19,833 | 19,735 | 17,286 | 1.3 | % | ||||||||||||
CCW, LLC (c) (i) (t) | Food & Beverage | L+8.00% (9.00%), 3/22/2021 | 26,725 | 26,608 | 17,104 | 1.3 | % | ||||||||||||
CCW, LLC (c) (t) | Food & Beverage | L+8.00% (9.00%), 3/22/2021 | 1,500 | 1,500 | 960 | 0.1 | % | ||||||||||||
CDHA Holdings, LLC (c) (i) (l) | Healthcare | L+6.75% (7.75%), 8/24/2023 | 15,531 | 15,384 | 14,863 | 1.1 | % | ||||||||||||
CDHA Holdings, LLC (c) (l) | Healthcare | L+6.75% (7.75%), 8/24/2023 | 551 | 545 | 527 | 0.0 | % | ||||||||||||
CDHA Holdings, LLC (c) (l) | Healthcare | L+6.75% (7.75%), 8/24/2023 | 1,265 | 1,265 | 1,209 | 0.1 | % | ||||||||||||
CDS Canada 4, LP (a) | Media/Entertainment | L+4.00% (5.00%), 6/3/2021 | 348 | 369 | 348 | 0.0 | % | ||||||||||||
CDS U.S. Intermediate Holdings, Inc. (a) (c) (i) (j) (t) | Media/Entertainment | L+5.50% (6.50%), 7/8/2022 | 3,980 | 3,912 | 2,189 | 0.2 | % | ||||||||||||
Chloe Ox Parent, LLC (c) (i) | Healthcare | L+4.50% (5.50%), 12/23/2024 | 11,419 | 11,344 | 10,654 | 0.8 | % | ||||||||||||
Clarion Events, Ltd. (a) (c) (j) | Business Services | L+5.00% (6.00%), 9/30/2024 | 10,341 | 10,198 | 8,583 | 0.7 | % | ||||||||||||
Clover Technologies Group, LLC (c) (j) | Industrials | L+7.50% (8.94%), 2/3/2024 | 1,479 | 1,479 | 1,285 | 0.1 | % | ||||||||||||
CLP Health Services, Inc. (c) (i) | Healthcare | L+5.00% (6.07%), 12/31/2026 | 10,060 | 9,880 | 9,919 | 0.8 | % | ||||||||||||
Cold Spring Brewing, Co. (c) (i) | Food & Beverage | L+4.75% (5.75%), 12/19/2025 | 8,774 | 8,693 | 8,694 | 0.7 | % | ||||||||||||
Community Care Health Network, LLC (c) (j) | Healthcare | L+4.75% (4.93%), 2/17/2025 | 7,177 | 7,018 | 6,346 | 0.5 | % | ||||||||||||
Connect Finco SARL (a) (j) | Telecom | L+4.50% (5.50%), 12/11/2026 | 1,983 | 1,909 | 1,861 | 0.1 | % | ||||||||||||
Conservice Midco, LLC (c) (j) | Business Services | L+4.25% (4.56%), 5/13/2027 | 2,567 | 2,441 | 2,439 | 0.2 | % | ||||||||||||
CONSOL Energy, Inc. (c) (j) | Industrials | L+4.50% (4.68%), 9/27/2024 | 4,099 | 4,083 | 3,033 | 0.2 | % | ||||||||||||
Conterra Ultra Broadband, LLC (c) (j) | Telecom | L+4.50% (4.68%), 4/30/2026 | 4,984 | 4,963 | 4,984 | 0.4 | % | ||||||||||||
Corfin Industries, LLC (c) (i) | Industrials | L+6.00% (7.00%), 2/5/2026 | 12,266 | 12,037 | 12,037 | 0.9 | % | ||||||||||||
Crown Subsea Communications Holding, Inc. (c) (j) | Industrials | L+6.00% (6.17%), 11/3/2025 | 1,908 | 1,894 | 1,908 | 0.1 | % | ||||||||||||
CRS-SPV, Inc. (c) (o) | Industrials | L+4.50% (5.50%), 3/8/2021 | 62 | 62 | 62 | 0.0 | % | ||||||||||||
Dunn Paper, Inc. (c) (j) | Paper & Packaging | L+4.75% (5.75%), 8/26/2022 | 581 | 539 | 535 | 0.0 | % | ||||||||||||
Dynasty Acquisition Co., Inc. (i) (j) | Industrials | L+3.50% (3.81%), 4/6/2026 | 2,964 | 2,854 | 2,523 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Dynasty Acquisition Co., Inc. (i) (j) | Industrials | L+3.50% (3.81%), 4/6/2026 | $ | 5,513 | $ | 5,308 | $ | 4,693 | 0.4 | % | |||||||||
Florida Food Products, LLC (c) | Food & Beverage | L+6.75% (7.06%), 9/6/2023 | 1,647 | 1,647 | 1,647 | 0.1 | % | ||||||||||||
Florida Food Products, LLC (c) (i) | Food & Beverage | L+6.75% (7.75%), 9/6/2025 | 22,002 | 21,595 | 22,002 | 1.7 | % | ||||||||||||
Foresight Energy Operating, LLC (c) (p) | Industrials | L+8.00% (9.00%), 6/30/2027 | 1,333 | 1,333 | 1,333 | 0.1 | % | ||||||||||||
Foresight Energy Operating, LLC (c) (l) (p) (u) | Industrials | L+8.00% (9.50%), 6/30/2027 | 666 | 967 | 967 | 0.1 | % | ||||||||||||
Gold Standard Baking, Inc. (c) (l) | Food & Beverage | L+6.50% (7.50%), 7/25/2022 | 3,108 | 2,483 | 1,243 | 0.1 | % | ||||||||||||
Green Energy Partners/Stonewall, LLC (j) | Utilities | L+5.50% (6.50%), 11/15/2021 | 1,317 | 1,316 | 1,135 | 0.1 | % | ||||||||||||
Green Energy Partners/Stonewall, LLC (j) | Utilities | L+5.50% (6.50%), 11/15/2021 | 995 | 994 | 857 | 0.1 | % | ||||||||||||
HC2 Holdings, Inc. | Industrials | 11.50%, 12/1/2021 | 7,864 | 7,814 | 7,496 | 0.6 | % | ||||||||||||
HireRight, Inc. (i) | Business Services | L+3.75% (3.93%), 7/11/2025 | 2,900 | 2,880 | 2,590 | 0.2 | % | ||||||||||||
ICR Operations, LLC (c) | Business Services | L+5.00% (6.00%), 3/26/2024 | 2,753 | 2,752 | 2,753 | 0.2 | % | ||||||||||||
ICR Operations, LLC (c) (i) | Business Services | L+5.00% (6.00%), 3/26/2025 | 17,233 | 16,993 | 17,233 | 1.3 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) | Industrials | L+5.75% (6.75%), 7/31/2024 | 46 | 46 | 46 | 0.0 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) | Industrials | L+5.75% (6.75%), 7/31/2023 | 1,887 | 1,887 | 1,887 | 0.1 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) (i) | Industrials | L+5.75% (6.75%), 7/31/2023 | 28,403 | 28,118 | 28,403 | 2.2 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) (i) | Industrials | L+5.75% (6.75%), 7/31/2024 | 833 | 819 | 833 | 0.1 | % | ||||||||||||
IDERA, Inc. (c) (j) | Technology | L+4.00% (5.08%), 6/28/2024 | 2,084 | 2,079 | 1,980 | 0.2 | % | ||||||||||||
Integral Ad Science, Inc. (c) (l) | Software/Services | L+7.25% (8.25%), 7/19/2024 | 15,399 | 15,192 | 15,399 | 1.2 | % | ||||||||||||
Integrated Efficiency Solutions, Inc. (c) (l) | Industrials | L+9.00% (11.00%), 6/30/2022 | 3,751 | 3,751 | 3,151 | 0.2 | % | ||||||||||||
Integrated Global Services, Inc. (c) | Industrials | L+6.00% (7.00%), 2/4/2026 | 2,028 | 2,028 | 1,992 | 0.2 | % | ||||||||||||
Integrated Global Services, Inc. (c) (i) | Industrials | L+6.00% (7.00%), 2/4/2026 | 12,137 | 11,910 | 11,922 | 0.9 | % | ||||||||||||
Intelsat Jackson Holdings, SA (a) | Telecom | 8.63%, 1/2/2024 | 2,367 | 2,376 | 2,362 | 0.2 | % | ||||||||||||
Internap Corp. (c) (p) | Business Services | L+10.00% (11.00%), 5/8/2023 | 1,995 | 1,870 | 1,863 | 0.1 | % | ||||||||||||
Internap Corp. (c) (i) (l) (p) | Business Services | L+6.50% (7.50%), 5/8/2025 | 5,837 | 5,837 | 5,837 | 0.4 | % | ||||||||||||
International Cruise & Excursions, Inc. (c) (i) | Business Services | L+5.25% (6.32%), 6/6/2025 | 4,976 | 4,937 | 4,180 | 0.3 | % | ||||||||||||
IPC Corp. (c) (j) | Software/Services | L+4.50% (5.50%), 8/6/2021 | 3,784 | 3,765 | 3,121 | 0.2 | % | ||||||||||||
Iri Holdings, Inc. (c) (j) | Business Services | L+4.25% (4.61%), 12/1/2025 | 4,925 | 4,887 | 4,802 | 0.4 | % | ||||||||||||
K2 Intelligence Holdings, Inc. (c) (i) | Business Services | L+4.75% (5.75%), 9/23/2024 | 11,521 | 11,326 | 11,331 | 0.9 | % | ||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (l) (o) | Transportation | L+8.00% (13.00%), 12/22/2028 | 50,549 | 50,549 | 50,549 | 3.9 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
8
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Kaman Distribution Corp. (c) (i) | Industrials | L+5.00% (5.31%), 8/26/2026 | $ | 21,390 | $ | 19,689 | $ | 19,893 | 1.5 | % | |||||||||
KidKraft, Inc. (c) (t) | Consumer | L+6.00% (7.44%), 8/15/2022 | 1,006 | 50 | 50 | 0.0 | % | ||||||||||||
KMTEX, LLC (c) (g) (l) (o) | Chemicals | P+2.00% (5.25%), 6/16/2025 | 669 | 669 | 669 | 0.1 | % | ||||||||||||
KMTEX, LLC (c) (l) (o) | Chemicals | P+2.00% (5.25%), 6/16/2025 | 3,121 | 3,121 | 3,121 | 0.2 | % | ||||||||||||
Lakeland Tours, LLC (c) (i) (j) | Education | L+4.25% (5.25%), 12/16/2024 | 13,100 | 12,103 | 9,611 | 0.7 | % | ||||||||||||
Lakeview Health Holdings, Inc. (c) (l) (t) | Healthcare | 9.75%, 12/15/2021 | 135 | 124 | 47 | 0.0 | % | ||||||||||||
Lakeview Health Holdings, Inc. (c) (l) (t) | Healthcare | 9.75%, 12/15/2021 | 3,940 | 2,671 | 1,379 | 0.1 | % | ||||||||||||
LightSquared, LP (l) | Telecom | L+11.75% (12.75%), 12/7/2020 | 4,775 | 4,775 | 4,211 | 0.3 | % | ||||||||||||
Lionbridge Technologies, Inc. (c) (i) | Business Services | L+6.25% (7.25%), 12/20/2025 | 10,292 | 10,198 | 10,292 | 0.8 | % | ||||||||||||
MCS Acquisition Corp. (c) | Business Services | L+4.75% (5.75%), 5/20/2024 | 13,973 | 13,939 | 5,450 | 0.4 | % | ||||||||||||
MED Parentco, LP (j) | Healthcare | L+4.25% (4.61%), 8/31/2026 | 1,003 | 1,003 | 905 | 0.1 | % | ||||||||||||
MED Parentco, LP (j) | Healthcare | L+4.25% (4.61%), 8/31/2026 | 5,717 | 5,666 | 5,159 | 0.4 | % | ||||||||||||
Medallion Midland Acquisition, LP (j) | Energy | L+3.25% (4.25%), 10/30/2024 | 3,670 | 3,664 | 3,274 | 0.3 | % | ||||||||||||
Medical Depot Holdings, Inc. (c) (i) (l) | Healthcare | L+7.50% (8.50%), 1/3/2023 | 19,041 | 18,314 | 12,243 | 0.9 | % | ||||||||||||
MGTF Radio Company, LLC (c) (o) | Media/Entertainment | L+6.00% (7.00%), 4/1/2024 | 55,896 | 55,774 | 43,990 | 3.4 | % | ||||||||||||
Midwest Can Company, LLC (c) | Paper & Packaging | L+5.75% (6.75%), 3/2/2026 | 617 | 617 | 606 | 0.0 | % | ||||||||||||
Midwest Can Company, LLC (c) (i) | Paper & Packaging | L+5.75% (6.75%), 3/2/2026 | 17,595 | 17,263 | 17,263 | 1.3 | % | ||||||||||||
Mileage Plus Holdings, LLC (a) | Transportation | 6.50%, 6/20/2027 | 1,461 | 1,437 | 1,461 | 0.1 | % | ||||||||||||
Mileage Plus Holdings, LLC | Transportation | L+5.25% (6.25%), 6/25/2027 | 967 | 948 | 959 | 0.1 | % | ||||||||||||
Miller Environmental Group, Inc. (c) | Business Services | L+6.50% (7.50%), 3/15/2024 | 265 | 265 | 265 | 0.0 | % | ||||||||||||
Miller Environmental Group, Inc. (c) (i) | Business Services | L+6.50% (7.50%), 3/15/2024 | 10,536 | 10,351 | 10,536 | 0.8 | % | ||||||||||||
Miller Environmental Group, Inc. (c) (i) | Business Services | L+6.50% (7.50%), 3/15/2024 | 11,521 | 11,351 | 11,521 | 0.9 | % | ||||||||||||
Mintz Group, LLC (c) | Business Services | L+5.00% (6.00%), 3/18/2026 | 105 | 105 | 104 | 0.0 | % | ||||||||||||
Mintz Group, LLC (c) (i) | Business Services | L+5.00% (6.00%), 3/18/2026 | 4,735 | 4,690 | 4,690 | 0.4 | % | ||||||||||||
MLN US Holdco, LLC (a) (j) | Technology | L+4.50% (4.68%), 11/28/2025 | 1,362 | 1,355 | 1,107 | 0.1 | % | ||||||||||||
Monitronics International, Inc. | Business Services | L+6.50% (7.75%), 3/29/2024 | 7,537 | 7,550 | 5,709 | 0.4 | % | ||||||||||||
Montreign Operating Company, LLC (c) | Gaming/Lodging | L+2.25% (2.43%), 3/22/2021 | 7,896 | 7,845 | 7,896 | 0.6 | % | ||||||||||||
Mood Media Corp. (c) (i) (t) | Media/Entertainment | L+7.25% (8.25%), 6/28/2022 | 13,234 | 13,040 | 11,348 | 0.9 | % | ||||||||||||
Mood Media Corp. (c) (t) | Media/Entertainment | L+7.25% (8.25%), 6/28/2022 | 707 | 692 | 607 | 0.0 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
9
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Murray Energy Holdings, Co. (c) | Industrials | L+11.00% (13.00%), 7/31/2020 | $ | 2,185 | $ | 2,180 | $ | 1,529 | 0.1 | % | |||||||||
Murray Energy Holdings, Co. (c) (j) (t) | Industrials | L+7.25% (8.70%), 10/17/2022 | 12,184 | 9,716 | 207 | 0.0 | % | ||||||||||||
Muth Mirror Systems, LLC (c) | Technology | L+5.25% (6.25%), 4/23/2025 | 650 | 650 | 578 | 0.0 | % | ||||||||||||
Muth Mirror Systems, LLC (c) (i) | Technology | L+5.25% (7.08%), 4/23/2025 | 15,618 | 15,368 | 13,978 | 1.1 | % | ||||||||||||
National Technical Systems, Inc. (c) (i) | Business Services | L+6.00% (7.43%), 6/14/2021 | 17,282 | 17,251 | 16,590 | 1.3 | % | ||||||||||||
Navitas Midstream Midland Basin, LLC (j) | Energy | L+4.50% (5.50%), 12/13/2024 | 21,674 | 18,722 | 19,371 | 1.5 | % | ||||||||||||
New Amsterdam Software Bidco, LLC (c) (i) | Technology | L+5.00% (6.00%), 5/1/2026 | 6,103 | 6,001 | 6,103 | 0.5 | % | ||||||||||||
New Star Metals, Inc. (c) (i) | Industrials | L+6.00% (7.50%), 6/29/2023 | 21,982 | 21,600 | 20,773 | 1.6 | % | ||||||||||||
NexSteppe, Inc. (c) (l) (o) (t) | Chemicals | 12.00%, 9/30/2020 | 15,846 | 10,203 | — | — | % | ||||||||||||
NexSteppe, Inc. (c) (l) (o) (t) | Chemicals | 12.00%, 9/30/2020 | 2,410 | 1,750 | — | — | % | ||||||||||||
NFE Atlantic Holdings, LLC (a) (c) | Utilities | L+6.25% (7.75%), 1/10/2023 | 10,764 | 10,531 | 10,495 | 0.8 | % | ||||||||||||
NN, Inc. (j) | Industrials | L+5.75% (6.50%), 10/19/2022 | 9,740 | 9,196 | 8,717 | 0.7 | % | ||||||||||||
NN, Inc. (j) | Industrials | L+5.75% (5.93%), 10/19/2022 | 10,861 | 10,430 | 9,721 | 0.7 | % | ||||||||||||
Norvax, LLC (c) | Business Services | L+6.50% (7.50%), 9/12/2025 | 11,432 | 11,174 | 10,936 | 0.8 | % | ||||||||||||
NTM Acquisition Corp. (c) (i) | Media/Entertainment | L+6.25% (7.25%), 6/7/2022 | 22,595 | 22,487 | 20,618 | 1.6 | % | ||||||||||||
Olaplex, Inc. (c) | Consumer | L+6.50% (7.50%), 1/8/2025 | 1,908 | 1,908 | 1,873 | 0.1 | % | ||||||||||||
Olaplex, Inc. (c) (i) | Consumer | L+6.50% (7.50%), 1/8/2026 | 17,450 | 17,129 | 17,129 | 1.3 | % | ||||||||||||
ORG GC Holdings, LLC (c) (i) (t) | Business Services | L+6.75% (7.75%), 7/31/2022 | 21,624 | 21,457 | 20,564 | 1.6 | % | ||||||||||||
PeopLease Holdings, LLC (c) (i) | Business Services | L+9.62% (10.62%), 2/26/2021 | 20,000 | 19,973 | 19,500 | 1.5 | % | ||||||||||||
Perstorp Holding Ab (a) (j) | Chemicals | L+4.75% (5.82%), 2/27/2026 | 8,913 | 8,809 | 7,687 | 0.6 | % | ||||||||||||
PGX Holdings, Inc. (c) (j) (l) (t) | Consumer | L+9.50% (10.50%), 9/29/2023 | 11,392 | 10,922 | 6,550 | 0.5 | % | ||||||||||||
Planet Equity Group, LLC (c) | Business Services | L+5.25% (6.25%), 11/18/2024 | 1,163 | 1,163 | 1,111 | 0.1 | % | ||||||||||||
Planet Equity Group, LLC (c) (i) | Business Services | L+5.25% (6.25%), 11/18/2025 | 14,866 | 14,666 | 14,287 | 1.1 | % | ||||||||||||
PlayPower, Inc. (c) (i) | Industrials | L+5.50% (5.81%), 5/8/2026 | 25,868 | 25,542 | 24,574 | 1.9 | % | ||||||||||||
Premier Dental Services, Inc. (c) (i) (j) | Healthcare | L+5.25% (6.25%), 6/30/2023 | 32,188 | 32,053 | 29,903 | 2.3 | % | ||||||||||||
Premier Global Services, Inc. (c) (j) | Telecom | L+6.50% (7.50%), 6/8/2023 | 6,491 | 6,341 | 4,219 | 0.3 | % | ||||||||||||
PSKW, LLC (c) (i) | Healthcare | L+6.25% (7.25%), 3/9/2026 | 29,925 | 29,216 | 29,177 | 2.2 | % | ||||||||||||
PT Network, LLC (c) (i) (l) | Healthcare | L+7.50% (8.73%), 11/30/2023 | 16,909 | 16,842 | 14,475 | 1.1 | % | ||||||||||||
Questex, Inc. (c) | Media/Entertainment | L+5.00% (6.00%), 9/9/2024 | 1,292 | 1,292 | 1,213 | 0.1 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
10
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Questex, Inc. (c) (i) | Media/Entertainment | L+5.00% (6.00%), 9/9/2024 | $ | 15,908 | $ | 15,686 | $ | 14,937 | 1.1 | % | |||||||||
Red River Technology, LLC (c) (i) | Business Services | L+5.00% (6.00%), 8/30/2024 | 23,550 | 23,255 | 23,550 | 1.8 | % | ||||||||||||
Reddy Ice Corp. (c) | Food & Beverage | L+5.50% (6.70%), 7/1/2025 | 1,278 | 1,260 | 1,239 | 0.1 | % | ||||||||||||
Reddy Ice Corp. (c) | Food & Beverage | L+5.50% (6.50%), 7/1/2024 | 687 | 687 | 667 | 0.1 | % | ||||||||||||
Reddy Ice Corp. (c) (i) | Food & Beverage | L+5.50% (6.70%), 7/1/2025 | 19,442 | 18,956 | 18,907 | 1.4 | % | ||||||||||||
Regionalcare Hospital Partners Holdings, Inc. (j) | Healthcare | L+3.75% (3.93%), 11/14/2025 | 21,025 | 20,767 | 19,614 | 1.5 | % | ||||||||||||
REP TEC Intermediate Holdings, Inc. (c) (i) | Software/Services | L+6.50% (7.50%), 6/19/2025 | 7,015 | 6,806 | 6,805 | 0.5 | % | ||||||||||||
Resco Products, Inc. (c) | Industrials | L+6.25% (6.43%), 9/5/2020 | 10,000 | 10,000 | 9,200 | 0.7 | % | ||||||||||||
Safety Products/JHC Acquisition Corp. (c) (j) | Industrials | L+4.50% (5.57%), 6/28/2026 | 17,628 | 17,488 | 16,147 | 1.2 | % | ||||||||||||
Safety Products/JHC Acquisition Corp. (c) (j) | Industrials | L+4.50% (5.57%), 6/28/2026 | 953 | 953 | 873 | 0.1 | % | ||||||||||||
Schenectady International Group, Inc. (j) | Chemicals | L+4.75% (4.93%), 10/15/2025 | 21,618 | 21,232 | 20,321 | 1.6 | % | ||||||||||||
SCIH Salt Holdings, Inc. (i) | Industrials | L+4.50% (5.50%), 3/16/2027 | 24,975 | 24,733 | 24,309 | 1.9 | % | ||||||||||||
SFR Group, SA (a) (i) (j) | Telecom | L+4.00% (4.18%), 8/14/2026 | 12,902 | 12,805 | 12,372 | 0.9 | % | ||||||||||||
Shields Health Solutions Holdings, LLC (c) (i) | Healthcare | L+5.00% (5.18%), 8/19/2026 | 6,928 | 6,867 | 6,928 | 0.5 | % | ||||||||||||
SitusAMC Holdings Corp. (c) | Financials | L+4.75% (5.75%), 6/30/2025 | 752 | 741 | 742 | 0.1 | % | ||||||||||||
SitusAMC Holdings Corp. (c) (i) | Financials | L+4.75% (5.75%), 6/30/2025 | 8,444 | 8,337 | 8,333 | 0.6 | % | ||||||||||||
Skillsoft Corp. | Technology | L+7.50% (8.50%), 9/17/2020 | 850 | 805 | 850 | 0.1 | % | ||||||||||||
Skillsoft Corp. (j) (t) | Technology | P+5.75% (9.00%), 4/28/2021 | 14,153 | 13,665 | 8,608 | 0.7 | % | ||||||||||||
Sotera Health Holdings, LLC (j) | Healthcare | L+4.50% (5.50%), 12/11/2026 | 2,500 | 2,402 | 2,437 | 0.2 | % | ||||||||||||
Squan Holding Corp. (c) (l) | Telecom | L+8.00% (9.00%), 9/30/2020 | 16,010 | 15,845 | 15,689 | 1.2 | % | ||||||||||||
SSH Group Holdings, Inc. (j) | Education | L+4.25% (4.56%), 7/30/2025 | 10,681 | 10,653 | 9,880 | 0.8 | % | ||||||||||||
Subsea Global Solutions, LLC (c) (i) | Business Services | L+7.00% (8.00%), 3/29/2023 | 4,744 | 4,668 | 4,649 | 0.4 | % | ||||||||||||
Subsea Global Solutions, LLC (c) (i) | Business Services | L+7.00% (8.00%), 3/29/2023 | 8,284 | 8,194 | 8,127 | 0.6 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | L+6.00% (10.00%), 9/30/2021 | 32,134 | 21,646 | 4,820 | 0.4 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | L+6.00% (10.00%), 9/30/2021 | 5,704 | 3,833 | 856 | 0.1 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | 10.00%, 9/30/2021 | 3,150 | 2,986 | 3,150 | 0.2 | % | ||||||||||||
The Dun & Bradstreet Corp. (j) | Business Services | L+4.00% (4.18%), 2/6/2026 | 9,975 | 9,814 | 9,701 | 0.7 | % | ||||||||||||
Tillamook Country Smoker, LLC (c) | Food & Beverage | L+5.75% (7.19%), 5/19/2022 | 2,157 | 2,157 | 2,124 | 0.2 | % | ||||||||||||
Tillamook Country Smoker, LLC (c) (i) | Food & Beverage | L+5.75% (6.75%), 5/19/2022 | 9,988 | 9,931 | 9,838 | 0.8 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
11
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Tivity Health, Inc. (a) (j) | Healthcare | L+4.25% (4.43%), 3/8/2024 | $ | 1,591 | $ | 1,579 | $ | 1,427 | 0.1 | % | |||||||||
Tivity Health, Inc. (a) (j) | Healthcare | L+5.25% (5.43%), 3/6/2026 | 4,333 | 4,245 | 3,881 | 0.3 | % | ||||||||||||
Trademark Global, LLC (c) (l) | Consumer | L+8.00% (9.00%), 10/31/2022 | 1,923 | 1,916 | 1,788 | 0.1 | % | ||||||||||||
Traverse Midstream Partners, LLC (j) | Energy | L+4.00% (5.00%), 9/27/2024 | 16,140 | 15,806 | 13,376 | 1.0 | % | ||||||||||||
Trilogy International Partners, LLC (a) | Telecom | 8.88%, 5/1/2022 | 14,875 | 14,844 | 13,271 | 1.0 | % | ||||||||||||
United States Steel Corp. (a) | Industrials | 12.00%, 6/1/2025 | 990 | 938 | 1,015 | 0.1 | % | ||||||||||||
University of St. Augustine Acquisition Corp. (c) (i) | Education | L+4.25% (5.25%), 2/2/2026 | 23,883 | 23,406 | 23,883 | 1.8 | % | ||||||||||||
Vantage Mobility International, LLC (c) (l) (p) (t) | Transportation | L+6.00% (7.00%), 6/30/2023 | 198 | 196 | 169 | 0.0 | % | ||||||||||||
Veritext Corp. (c) (i) | Business Services | L+3.50% (3.68%), 8/1/2025 | 4,950 | 4,950 | 4,727 | 0.4 | % | ||||||||||||
Verscend Holding Corp. (j) | Healthcare | L+4.50% (4.68%), 8/27/2025 | 774 | 761 | 746 | 0.1 | % | ||||||||||||
Vertex Aerospace Services Corp. (c) (i) | Industrials | L+4.50% (4.68%), 6/30/2025 | 8,682 | 8,650 | 8,681 | 0.7 | % | ||||||||||||
Von Drehle Corp. (c) (i) | Paper & Packaging | L+5.75% (6.75%), 3/6/2023 | 12,894 | 12,785 | 12,894 | 1.0 | % | ||||||||||||
Vyaire Medical, Inc. (j) | Healthcare | L+4.75% (6.20%), 4/16/2025 | 7,952 | 7,733 | 6,571 | 0.5 | % | ||||||||||||
WaterBridge Midstream Operating, LLC (j) | Energy | L+5.75% (6.75%), 6/22/2026 | 13,839 | 13,587 | 11,261 | 0.9 | % | ||||||||||||
WMK, LLC (c) | Business Services | L+5.75% (6.75%), 9/5/2025 | 2,597 | 2,588 | 2,535 | 0.2 | % | ||||||||||||
WMK, LLC (c) | Business Services | L+5.75% (6.75%), 9/5/2025 | 358 | 354 | 355 | 0.0 | % | ||||||||||||
WMK, LLC (c) | Business Services | L+5.75% (7.06%), 9/5/2024 | 1,745 | 1,745 | 1,686 | 0.1 | % | ||||||||||||
WMK, LLC (c) (i) | Business Services | L+5.75% (7.06%), 9/5/2025 | 19,206 | 18,922 | 18,572 | 1.4 | % | ||||||||||||
YummyEarth, Inc. (c) | Food & Beverage | L+7.00% (8.00%), 8/1/2025 | 2,626 | 2,625 | 2,626 | 0.2 | % | ||||||||||||
Sub Total Senior Secured First Lien Debt | $ | 1,741,585 | $ | 1,574,943 | 120.8 | % | |||||||||||||
Senior Secured Second Lien Debt - 16.7% (b) | |||||||||||||||||||
Accentcare, Inc. (c) (i) | Healthcare | L+8.75% (8.93%), 6/21/2027 | $ | 17,795 | $ | 17,407 | $ | 16,710 | 1.3 | % | |||||||||
Anchor Glass Container Corp. (c) | Paper & Packaging | L+7.75% (9.14%), 12/6/2024 | 20,000 | 19,845 | 7,000 | 0.5 | % | ||||||||||||
Astro AB Merger Sub, Inc. (a) (c) (i) | Financials | L+7.50% (8.50%), 4/28/2023 | 7,758 | 7,758 | 7,719 | 0.6 | % | ||||||||||||
Avatar Purchaser, Inc. (c) (j) | Software/Services | L+7.50% (8.64%), 11/17/2025 | 11,716 | 11,480 | 11,165 | 0.8 | % | ||||||||||||
Aveanna Healthcare, LLC (c) | Healthcare | L+8.00% (9.00%), 3/17/2025 | 15,000 | 14,866 | 12,045 | 0.9 | % | ||||||||||||
Baker Hill Acquisition, LLC (c) | Financials | L+11.00% (12.44%), 3/22/2021 | 3,017 | 1,508 | 1,584 | 0.1 | % | ||||||||||||
Baker Hill Acquisition, LLC (c) | Financials | L+11.00% (12.44%), 3/22/2021 | 447 | 429 | 447 | 0.0 | % | ||||||||||||
BrandMuscle Holdings, Inc. (c) | Business Services | L+8.50% (9.93%), 6/1/2022 | 24,500 | 24,354 | 23,091 | 1.8 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
12
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Carlisle FoodService Products, Inc. (c) (i) | Consumer | L+7.75% (8.75%), 3/20/2026 | $ | 10,719 | $ | 10,566 | $ | 10,280 | 0.8 | % | |||||||||
CDS U.S. Intermediate Holdings, Inc. (a) (c) (t) | Media/Entertainment | L+8.25% (9.25%), 7/10/2023 | 9,177 | 8,961 | 918 | 0.1 | % | ||||||||||||
Dentalcorp Perfect Smile, ULC (a) (c) | Healthcare | L+7.50% (8.50%), 6/8/2026 | 10,139 | 10,062 | 10,098 | 0.8 | % | ||||||||||||
Dimora Brands, Inc. (c) | Consumer | L+8.50% (9.50%), 8/25/2025 | 4,464 | 4,463 | 4,464 | 0.3 | % | ||||||||||||
Edelman Financial Services, LLC (a) (j) | Financials | L+6.75% (6.93%), 7/20/2026 | 8,852 | 8,836 | 8,039 | 0.6 | % | ||||||||||||
Hyland Software, Inc. (i) | Technology | L+7.00% (7.75%), 7/7/2025 | 6,904 | 6,928 | 6,789 | 0.5 | % | ||||||||||||
ICP Industrial, Inc. (c) | Chemicals | L+8.25% (8.64%), 5/3/2024 | 5,588 | 5,587 | 4,848 | 0.4 | % | ||||||||||||
MLN US Holdco, LLC (a) (c) (i) | Technology | L+8.75% (8.93%), 11/30/2026 | 3,000 | 2,952 | 1,992 | 0.2 | % | ||||||||||||
Northstar Financial Services Group, LLC (c) | Financials | L+7.50% (8.25%), 5/25/2026 | 2,666 | 2,656 | 2,666 | 0.2 | % | ||||||||||||
PetVet Care Centers, LLC (c) | Healthcare | L+6.25% (6.43%), 2/13/2026 | 3,539 | 3,526 | 3,323 | 0.2 | % | ||||||||||||
PI US Holdco III, Ltd. (a) (c) | Financials | L+7.25% (8.32%), 12/22/2025 | 7,865 | 7,805 | 7,314 | 0.6 | % | ||||||||||||
ProAmpac, LLC (c) | Paper & Packaging | L+8.50% (9.50%), 11/18/2024 | 3,352 | 3,351 | 2,950 | 0.2 | % | ||||||||||||
Project Boost Purchaser, LLC (c) | Business Services | L+8.00% (8.18%), 5/31/2027 | 1,848 | 1,848 | 1,791 | 0.1 | % | ||||||||||||
QuickBase, Inc. (c) | Technology | L+8.00% (8.18%), 4/2/2027 | 7,484 | 7,358 | 7,353 | 0.6 | % | ||||||||||||
Recess Holdings, Inc. (c) (i) | Industrials | L+7.75% (8.75%), 9/29/2025 | 16,134 | 15,950 | 14,843 | 1.1 | % | ||||||||||||
Renaissance Holding Corp. (c) | Software/Services | L+7.00% (7.76%), 5/29/2026 | 8,456 | 8,330 | 7,864 | 0.6 | % | ||||||||||||
River Cree Enterprises, LP (a) (c) (m) | Gaming/Lodging | 10.00%, 5/17/2025 | CAD | 21,275 | 16,439 | 12,537 | 1.0 | % | |||||||||||
SSH Group Holdings, Inc. (c) (i) | Education | L+8.25% (8.56%), 7/30/2026 | 10,122 | 10,045 | 9,717 | 0.7 | % | ||||||||||||
St. Croix Hospice Acquisition Corp. (c) | Healthcare | L+8.75% (9.75%), 3/29/2024 | 2,056 | 1,991 | 2,056 | 0.2 | % | ||||||||||||
TIBCO Software, Inc. | Technology | L+7.25% (7.43%), 3/3/2028 | 13,020 | 12,957 | 12,475 | 1.0 | % | ||||||||||||
Travelpro Products, Inc. (a) (c) (l) | Consumer | 13.00%, 11/1/2022 | 2,417 | 2,417 | 2,097 | 0.2 | % | ||||||||||||
Travelpro Products, Inc. (a) (c) (l) (m) | Consumer | 13.00%, 11/21/2022 | CAD | 2,800 | 2,150 | 1,779 | 0.1 | % | |||||||||||
Vantage Mobility International, LLC (c) (l) (p) (t) | Transportation | L+6.00% (7.00%), 6/30/2023 | 3,010 | 2,743 | 2,559 | 0.2 | % | ||||||||||||
Sub Total Senior Secured Second Lien Debt | $ | 255,568 | $ | 218,513 | 16.7 | % | |||||||||||||
Subordinated Debt - 9.2% (b) | |||||||||||||||||||
Captek Softgel International, Inc. (c) (l) (t) | Health/Fitness | 11.50%, 1/30/2023 | $ | 7,126 | $ | 7,071 | $ | 5,345 | 0.4 | % | |||||||||
Del Real, LLC (c) (l) (t) | Food & Beverage | 14.50%, 4/1/2023 | 3,273 | 3,131 | 2,762 | 0.2 | % | ||||||||||||
DoorDash, Inc. (c) (l) | Technology | 10.00%, 3/1/2025 | 23,171 | 22,858 | 22,849 | 1.7 | % | ||||||||||||
Gdb Debt Recovery Authority Of Commonwealth Puerto Rico (a) (l) | Financials | 7.50%, 8/20/2040 | 13,175 | 9,815 | 8,618 | 0.7 | % | ||||||||||||
HemaSource, Inc. (c) (x) | Healthcare | 11.00%, 1/1/2024 | 2,235 | 2,162 | 2,123 | 0.2 | % | ||||||||||||
HTC Borrower, LLC (c) (l) | Consumer | 13.00%, 9/1/2020 | 5,492 | 5,471 | 5,492 | 0.4 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
13
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Park Ave RE Holdings, LLC (c) (l) (o) (w) | Financials | 13.00%, 12/31/2021 | $ | 37,237 | $ | 37,237 | $ | 37,237 | 2.9 | % | |||||||||
PCX Aerostructures, LLC (c) (l) (p) | Industrials | 6.00%, 8/9/2021 | 7,995 | 6,182 | 9,579 | 0.7 | % | ||||||||||||
Siena Capital Finance, LLC (c) (o) | Financials | 12.50%, 5/15/2024 | 25,500 | 25,492 | 25,500 | 2.0 | % | ||||||||||||
Sub Total Subordinated Debt | $ | 119,419 | $ | 119,505 | 9.2 | % | |||||||||||||
Collateralized Securities - 7.3% (b) | |||||||||||||||||||
Collateralized Securities - Debt Investment | |||||||||||||||||||
Anchorage Credit Opportunities CLO, LLC 19-1A D (a) (c) | Diversified Investment Vehicles | L+5.10% (6.51%), 1/20/2032 | $ | 3,000 | $ | 2,888 | $ | 2,785 | 0.2 | % | |||||||||
Avery Point CLO, Ltd. 15-6A E1 (a) (c) | Diversified Investment Vehicles | L+5.50% (6.04%), 8/6/2027 | 3,500 | 3,179 | 2,612 | 0.2 | % | ||||||||||||
Babson CLO, Ltd. 19-4A E (a) (c) | Diversified Investment Vehicles | L+7.39% (9.00%), 1/15/2033 | 1,500 | 1,399 | 1,375 | 0.1 | % | ||||||||||||
Catamaran CLO, Ltd. 16-1A D (a) (c) | Diversified Investment Vehicles | L+6.65% (7.79%), 1/18/2029 | 7,250 | 7,065 | 6,097 | 0.5 | % | ||||||||||||
Crown Point CLO, Ltd. 2019-8A E (a) (c) | Diversified Investment Vehicles | L+7.10% (8.24%), 10/20/2032 | 4,000 | 3,803 | 3,666 | 0.3 | % | ||||||||||||
Dryden Senior Loan Fund 17-49A E (a) (c) | Diversified Investment Vehicles | L+6.30% (7.44%), 7/18/2030 | 3,000 | 2,895 | 2,435 | 0.2 | % | ||||||||||||
Dryden Senior Loan Fund 2014-36A ER2 (a) (c) | Diversified Investment Vehicles | L+6.88% (8.10%), 4/15/2029 | 2,000 | 1,950 | 1,682 | 0.1 | % | ||||||||||||
Eaton Vance CDO, Ltd. 15-1A FR (a) (c) | Diversified Investment Vehicles | L+7.97% (9.11%), 1/20/2030 | 2,000 | 1,809 | 1,391 | 0.1 | % | ||||||||||||
Greywolf CLO, Ltd. 20-3RA ER (a) (c) | Diversified Investment Vehicles | L+8.74% (9.84%), 4/15/2033 | 1,000 | 932 | 693 | 0.1 | % | ||||||||||||
ICG US CLO, Ltd. 15-2RA D (a) (c) | Diversified Investment Vehicles | L+6.99% (8.39%), 1/17/2033 | 1,500 | 1,427 | 1,038 | 0.1 | % | ||||||||||||
Jamestown CLO, Ltd. 2020-15A E (a) (c) | Diversified Investment Vehicles | L+7.00% (7.77%), 4/15/2033 | 2,000 | 1,902 | 1,825 | 0.1 | % | ||||||||||||
KKR Financial CLO, Ltd. 27A E (a) (c) | Diversified Investment Vehicles | L+6.90% (8.12%), 10/15/2032 | 1,250 | 1,191 | 1,074 | 0.1 | % | ||||||||||||
LCM, Ltd. Partnership 16A ER2 (a) (c) | Diversified Investment Vehicles | L+6.38% (7.60%), 10/15/2031 | 2,500 | 2,315 | 2,066 | 0.2 | % | ||||||||||||
Madison Park Funding, Ltd. 16-21A DR (a) (c) | Diversified Investment Vehicles | L+7.56% (8.78%), 10/15/2032 | 2,000 | 1,886 | 1,660 | 0.1 | % | ||||||||||||
Madison Park Funding, Ltd. 19-35A E (a) (c) | Diversified Investment Vehicles | L+6.75% (7.89%), 4/20/2031 | 2,000 | 1,947 | 1,827 | 0.1 | % | ||||||||||||
Medalist Partners Corporate Finance CLO, Ltd. 20-1A D (a) (c) | Diversified Investment Vehicles | L+7.49% (9.12%), 4/17/2033 | 3,000 | 2,854 | 2,310 | 0.2 | % | ||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A FR (a) (c) (p) (t) | Diversified Investment Vehicles | L+11.00% (11.99%), 4/25/2031 | 4,750 | 4,554 | 3,445 | 0.3 | % | ||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F (a) (c) (p) (t) | Diversified Investment Vehicles | L+7.50% (8.64%), 1/20/2027 | 10,728 | 9,626 | 5,050 | 0.4 | % | ||||||||||||
OCP CLO, Ltd. 14-5A DR (a) (c) | Diversified Investment Vehicles | L+5.70% (6.69%), 4/26/2031 | 2,200 | 2,066 | 1,815 | 0.1 | % | ||||||||||||
OCP CLO, Ltd. 2019-17A E (a) (c) | Diversified Investment Vehicles | L+6.66% (7.80%), 7/20/2032 | 3,000 | 2,917 | 2,792 | 0.2 | % | ||||||||||||
Pikes Peak CLO 19-3A E (a) (c) | Diversified Investment Vehicles | L+6.86% (7.85%), 4/25/2030 | 3,000 | 2,857 | 2,759 | 0.2 | % | ||||||||||||
Sound Point CLO, Ltd. 17-1A E (a) (c) | Diversified Investment Vehicles | L+5.96% (7.00%), 1/23/2029 | 4,000 | 3,774 | 2,947 | 0.2 | % | ||||||||||||
Sound Point CLO, Ltd. 18-3A D (a) (c) | Diversified Investment Vehicles | L+5.79% (6.78%), 10/26/2031 | 1,000 | 913 | 771 | 0.1 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
14
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Sound Point CLO, Ltd. 19-3A E (a) (c) | Diversified Investment Vehicles | L+7.31% (8.30%), 10/25/2032 | $ | 3,000 | $ | 2,915 | $ | 2,668 | 0.2 | % | |||||||||
Sound Point CLO, Ltd. 2015-3A ER (a) (c) | Diversified Investment Vehicles | L+5.25% (6.39%), 1/20/2028 | 2,000 | 1,889 | 1,511 | 0.1 | % | ||||||||||||
Symphony CLO, Ltd. 2012-9A ER2 (a) (c) | Diversified Investment Vehicles | L+6.95% (8.13%), 7/16/2032 | 3,000 | 2,945 | 2,167 | 0.2 | % | ||||||||||||
TCW CLO 2019-1 AMR, Ltd. 19-1A F (a) (c) | Diversified Investment Vehicles | L+8.67% (9.06%), 2/15/2029 | 2,500 | 2,402 | 2,038 | 0.1 | % | ||||||||||||
Tralee CLO, Ltd. 13-1A DR (a) (c) | Diversified Investment Vehicles | L+4.18% (5.32%), 7/20/2029 | 2,500 | 2,294 | 2,117 | 0.2 | % | ||||||||||||
Wellfleet CLO, Ltd. 20-1A D (a) (c) | Diversified Investment Vehicles | L+7.24% (8.01%), 4/15/2033 | 3,000 | 2,912 | 2,729 | 0.2 | % | ||||||||||||
Whitehorse, Ltd. 2014-1A E (a) (c) (p) (t) | Diversified Investment Vehicles | L+4.55% (5.24%), 5/1/2026 | 8,000 | 7,728 | 3,794 | 0.3 | % | ||||||||||||
Zais CLO 13, Ltd. 19-13A D1 (a) (c) | Diversified Investment Vehicles | L+4.52% (5.74%), 7/15/2032 | 3,000 | 2,860 | 2,363 | 0.2 | % | ||||||||||||
Collateralized Securities - Equity Investment (n) | |||||||||||||||||||
CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 1/16/2026 | $ | 3,243 | $ | 98 | $ | — | — | % | |||||||||
CVP Cascade CLO, Ltd. 2014-2A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 7/18/2026 | 3,755 | 452 | — | — | % | ||||||||||||
Figueroa CLO, Ltd. 2014-1A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 1/15/2027 | 2,986 | 312 | — | — | % | ||||||||||||
MidOcean Credit CLO 2013-2A INC (a) (c) (p) (v) | Diversified Investment Vehicles | 0.00%, 1/29/2030 | 37,600 | 15,829 | 5,047 | 0.4 | % | ||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 10.35%, 4/25/2031 | 31,603 | 19,121 | 16,163 | 1.2 | % | ||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 0.00%, 1/20/2027 | 31,575 | 6,285 | — | — | % | ||||||||||||
OFSI Fund, Ltd. 2014-6A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 3/20/2025 | 1,970 | 263 | — | — | % | ||||||||||||
Whitehorse, Ltd. 2014-1A Side Letter (a) (c) (p) | Diversified Investment Vehicles | 0.00%, 5/1/2026 | 1,886 | 134 | — | — | % | ||||||||||||
Whitehorse, Ltd. 2014-1A SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 0.00%, 5/1/2026 | 36,000 | 6,965 | — | — | % | ||||||||||||
Sub Total Collateralized Securities | $ | 141,553 | $ | 94,712 | 7.3 | % | |||||||||||||
Equity/Other - 16.1% (b) (d) | |||||||||||||||||||
Aden & Anais Holdings, Inc. (c) (e) (x) | Retail | 4,470 | $ | — | $ | — | — | % | |||||||||||
Answers Corp. (c) (p) | Media/Entertainment | 908,911 | 11,362 | 727 | 0.1 | % | |||||||||||||
Baker Hill Acquisition, LLC (c) (e) | Financials | 22,653 | — | — | — | % | |||||||||||||
Capstone Nutrition Development, LLC (c) (e) (p) (u) | Consumer | 47,883 | 4,598 | 4,309 | 0.3 | % | |||||||||||||
Captek Softgel International, Inc. (c) (e) (x) | Health/Fitness | 8,498 | 942 | — | — | % | |||||||||||||
Clover Technologies Group, LLC (c) (e) (j) | Industrials | 2,753 | 275 | 275 | 0.0 | % | |||||||||||||
Clover Technologies Group, LLC (c) (e) (j) | Industrials | 180,274 | 1,153 | 8 | 0.0 | % | |||||||||||||
CRD Holdings, LLC (c) (o) (u) | Energy | 9.00% | 52,285,603 | 22,069 | 21,082 | 1.6 | % | ||||||||||||
CRS-SPV, Inc. (c) (e) (o) | Industrials | 246 | 2,219 | 1,614 | 0.1 | % | |||||||||||||
Danish CRJ, Ltd. (a) (c) (e) (p) (r) | Transportation | 5,002 | — | — | — | % | |||||||||||||
Data Source Holdings, LLC (c) (e) | Business Services | 10,617 | 140 | 203 | 0.0 | % | |||||||||||||
Del Real, LLC (c) (e) (u) | Food & Beverage | 670,510 | 382 | — | — | % | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
15
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Dyno Acquiror, Inc. (c) (e) | Consumer | 134,102 | $ | 58 | $ | 80 | 0.0 | % | |||||||||||
First Eagle Greenway Fund II, LLC (a) (p) | Diversified Investment Vehicles | 5,374 | 5,374 | 1,797 | 0.1 | % | |||||||||||||
Foresight Energy Operating, LLC (c) (e) (p) (u) | Industrials | 84,298 | 1,105 | 1,105 | 0.1 | % | |||||||||||||
HemaSource, Inc. (c) (e) (x) | Healthcare | 223,503 | 168 | 168 | 0.0 | % | |||||||||||||
ICP Industrial, Inc. (c) (e) | Chemicals | 288 | 279 | 322 | 0.0 | % | |||||||||||||
Integrated Efficiency Solutions, Inc. (c) (e) | Industrials | 53,215 | 56 | — | — | % | |||||||||||||
Integrated Efficiency Solutions, Inc. (c) (e) | Industrials | 2,975 | 3 | — | — | % | |||||||||||||
Internap Corp (c) (e) (p) | Business Services | 1,293,189 | 543 | 543 | 0.0 | % | |||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o) | Transportation | 1 | — | 51,952 | 4.0 | % | |||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o) | Transportation | 3,250,000 | 2,795 | 3,250 | 0.3 | % | |||||||||||||
Kahala US OpCo, LLC (a) (c) (e) (k) (o) | Transportation | 13.00% | 4,413,472 | — | — | — | % | ||||||||||||
KidKraft, Inc. (c) (e) (u) | Consumer | 2,682,257 | — | — | — | % | |||||||||||||
KMTEX, LLC (c) (e) (o) (u) | Chemicals | 4,162,000 | 2,793 | 2,793 | 0.2 | % | |||||||||||||
KMTEX, LLC (c) (e) (o) (u) | Chemicals | 442,000 | — | — | — | % | |||||||||||||
Lakeview Health Holdings, Inc. (c) (e) | Healthcare | 447 | — | — | — | % | |||||||||||||
MGTF Holdco, LLC (c) (e) (o) (u) | Media/Entertainment | 330,000 | — | — | — | % | |||||||||||||
Mood Media Corp. (c) (e) | Media/Entertainment | 121,021 | 27 | — | — | % | |||||||||||||
Motor Vehicle Software Corp. (c) (x) | Business Services | 223,503 | 318 | 201 | 0.0 | % | |||||||||||||
New Constellis Holdings Inc. (c) (e) | Business Services | 2,316 | 67 | 67 | 0.0 | % | |||||||||||||
NexSteppe, Inc. (c) (e) (o) | Chemicals | 237,239,694 | 737 | — | — | % | |||||||||||||
NMFC Senior Loan Program I, LLC (a) (o) | Diversified Investment Vehicles | 50,000 | 50,000 | 38,655 | 3.0 | % | |||||||||||||
Nomacorc, LLC (c) (e) (u) | Industrials | 356,816 | 56 | 79 | 0.0 | % | |||||||||||||
Park Ave RE Holdings, LLC (c) (e) (o) (w) | Financials | 719 | 2,415 | 5,278 | 0.4 | % | |||||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 27,250 | — | — | — | % | |||||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 1,356 | — | — | — | % | |||||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 315 | — | — | — | % | |||||||||||||
PennantPark Credit Opportunities Fund II, LP (a) (p) | Diversified Investment Vehicles | 8,739 | 8,739 | 8,732 | 0.7 | % | |||||||||||||
PT Network, LLC (c) (e) (u) | Healthcare | 3 | — | — | — | % | |||||||||||||
RMP Group, Inc. (c) (u) | Financials | 223 | 164 | 232 | 0.0 | % | |||||||||||||
Schweiger Dermatology Group, LLC (c) (e) (u) | Healthcare | 265,024 | — | — | — | % | |||||||||||||
Siena Capital Finance, LLC (c) (o) | Financials | 35,839,400 | 36,549 | 29,747 | 2.3 | % | |||||||||||||
Smile Brands, Inc. (c) (e) | Healthcare | 712 | 815 | 798 | 0.1 | % | |||||||||||||
Squan Holding Corp. (c) (e) | Telecom | 180,835 | — | — | — | % | |||||||||||||
Squan Holding Corp. (c) (e) | Telecom | 8,962 | — | 4,500 | 0.3 | % | |||||||||||||
St. Croix Hospice Acquisition Corp. (c) (e) | Healthcare | 112 | — | 31 | 0.0 | % | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
16
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020 (Unaudited) | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
St. Croix Hospice Acquisition Corp. (c) (e) | Healthcare | 112 | $ | 64 | $ | 139 | 0.0 | % | |||||||||||
SYNACOR, Inc. (e) (s) | Technology | 59,785 | — | 68 | 0.0 | % | |||||||||||||
Tap Rock Resources, LLC (c) (e) (g) (p) (u) | Energy | 18,356,442 | 15,376 | 16,337 | 1.3 | % | |||||||||||||
Tax Advisors Group, LLC (c) (u) | Financials | 86 | 609 | 755 | 0.1 | % | |||||||||||||
Tax Defense Network, LLC (c) (e) (p) | Consumer | 147,099 | 425 | — | — | % | |||||||||||||
Tax Defense Network, LLC (c) (e) (p) | Consumer | 633,382 | — | — | — | % | |||||||||||||
Team Waste, LLC (c) (p) (u) | Industrials | 128,483 | 2,569 | 2,570 | 0.2 | % | |||||||||||||
Tennenbaum Waterman Fund, LP (a) (p) | Diversified Investment Vehicles | 10,000 | 10,000 | 8,692 | 0.7 | % | |||||||||||||
Travelpro Products, Inc. (a) (c) (e) | Consumer | 447,007 | 506 | 172 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 4,206 | 31 | 15 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 3,155 | — | — | — | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 99,236 | — | — | — | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 39,769 | 132 | 21 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 223 | 35 | 9 | 0.0 | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 10,000 | 10 | — | — | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 490 | 490 | 94 | 0.0 | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 139 | 139 | 278 | 0.0 | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 1,468,221 | — | — | — | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 391,131 | — | — | — | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 3,280,908 | 3,140 | — | — | % | |||||||||||||
Women's Marketing, Inc. (c) (e) | Media/Entertainment | 3,643 | — | — | — | % | |||||||||||||
World Business Lenders, LLC (c) (e) | Financials | 922,669 | 3,750 | 2,168 | 0.2 | % | |||||||||||||
WPNT, LLC (c) (e) (o) (u) | Media/Entertainment | 330,000 | — | — | — | % | |||||||||||||
WSO Holdings, LP (c) (e) | Food & Beverage | 698 | 279 | — | — | % | |||||||||||||
Wythe Will Tzetzo, LLC (c) (e) (u) | Food & Beverage | 22,312 | 302 | — | — | % | |||||||||||||
YummyEarth, Inc. (c) (e) | Food & Beverage | 223 | — | — | — | % | |||||||||||||
Sub Total Equity/Other | $ | 194,058 | $ | 209,866 | 16.1 | % | |||||||||||||
TOTAL INVESTMENTS - 170.1% (b) | $ | 2,452,183 | $ | 2,217,539 | 170.1 | % | |||||||||||||
Forward foreign currency contracts:
Counterparty | Contract to Deliver | In Exchange For | Maturity Date | Unrealized Depreciation | ||||||||
Goldman Sachs International | CAD 21,807 | $ | 15,564 | 8/7/2020 | $ | (465 | ) | |||||
_____________
(a) | All of the Company's investments, except the investments noted by this footnote, are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. Qualifying assets represent 82.9% of the Company's total assets. The significant majority of all investments held are deemed to be illiquid. |
(b) | Percentages are based on net assets as of June 30, 2020. |
The accompanying notes are an integral part of these consolidated financial statements.
17
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
(c) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements). |
(d) | All amounts are in thousands except share amounts. |
(e) | Non-income producing at June 30, 2020. |
(f) | The Company has various unfunded commitments to portfolio companies. Please refer to Note 7 - Commitments and Contingencies for details of these unfunded commitments. |
(g) | The commitment related to this investment is discretionary. |
(h) | The Company's investment is held through the consolidated subsidiary, Kahala Aviation Holdings, LLC, which owns 100% of the equity of the operating company, Kahala Ireland OpCo Designated Activity Company. |
(i) | The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities. |
(j) | The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities. |
(k) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC. |
The accompanying notes are an integral part of these consolidated financial statements.
18
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
(l) | For the three months ended June 30, 2020, the following investments paid or have the option to pay all or a portion of interest and dividends via payment-in-kind (“PIK”): |
June 30, 2020 (Unaudited) | |||||||||||||||
Portfolio Company | Investment Type | Cash | PIK | All-in Rate | PIK earned for the three months ended June 30, 2020 | ||||||||||
Boston Market Corp. | Senior Secured First Lien Debt | — | % | 5.00 | % | 5.00 | % | $ | — | ||||||
CDHA Holdings, LLC | Senior Secured First Lien Debt | 6.75 | % | 1.00 | % | 7.75 | % | — | |||||||
CDHA Holdings, LLC | Senior Secured First Lien Debt | 6.75 | % | 1.00 | % | 7.75 | % | 1 | |||||||
CDHA Holdings, LLC | Senior Secured First Lien Debt | 6.75 | % | 1.00 | % | 7.75 | % | 10 | |||||||
Foresight Energy Operating, LLC | Senior Secured First Lien Debt | — | % | 9.50 | % | 9.50 | % | — | |||||||
Gold Standard Baking, Inc. | Senior Secured First Lien Debt | 5.50 | % | 2.00 | % | 7.50 | % | 16 | |||||||
Integral Ad Science, Inc. | Senior Secured First Lien Debt | 7.00 | % | 1.25 | % | 8.25 | % | 49 | |||||||
Integrated Efficiency Solutions, Inc. | Senior Secured First Lien Debt | 8.00 | % | 3.00 | % | 11.00 | % | — | |||||||
Internap Corp. | Senior Secured First Lien Debt | 4.00 | % | 3.50 | % | 7.50 | % | 18 | |||||||
Kahala Ireland OpCo Designated Activity Company | Senior Secured First Lien Debt | 13.00 | % | — | % | 13.00 | % | — | |||||||
KMTEX, LLC | Senior Secured First Lien Debt | 5.25 | % | — | % | 5.25 | % | — | |||||||
KMTEX, LLC | Senior Secured First Lien Debt | 5.25 | % | — | % | 5.25 | % | — | |||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien Debt | — | % | 9.75 | % | 9.75 | % | — | |||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien Debt | — | % | 9.75 | % | 9.75 | % | — | |||||||
LightSquared, LP | Senior Secured First Lien Debt | — | % | 12.75 | % | 12.75 | % | 175 | |||||||
Medical Depot Holdings, Inc. | Senior Secured First Lien Debt | 6.50 | % | 2.00 | % | 8.50 | % | 96 | |||||||
NexSteppe, Inc. | Senior Secured First Lien Debt | — | % | 12.00 | % | 12.00 | % | — | |||||||
NexSteppe, Inc. | Senior Secured First Lien Debt | — | % | 12.00 | % | 12.00 | % | — | |||||||
PGX Holdings, Inc. | Senior Secured First Lien Debt | 6.25 | % | 4.25 | % | 10.50 | % | — | |||||||
PT Network, LLC | Senior Secured First Lien Debt | 6.73 | % | 2.00 | % | 8.73 | % | 85 | |||||||
Squan Holding Corp. | Senior Secured First Lien Debt | 8.00 | % | 1.00 | % | 9.00 | % | 41 | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | — | % | 10.00 | % | 10.00 | % | — | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | — | % | 10.00 | % | 10.00 | % | — | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | — | % | 10.00 | % | 10.00 | % | — | |||||||
Trademark Global, LLC | Senior Secured First Lien Debt | 7.00 | % | 2.00 | % | 9.00 | % | 3 | |||||||
Vantage Mobility International, LLC | Senior Secured First Lien Debt | — | % | 7.00 | % | 7.00 | % | — | |||||||
Travelpro Products, Inc. | Senior Secured Second Lien Debt | 11.00 | % | 2.00 | % | 13.00 | % | — | |||||||
Travelpro Products, Inc. | Senior Secured Second Lien Debt | 11.00 | % | 2.00 | % | 13.00 | % | — | |||||||
Vantage Mobility International, LLC | Senior Secured Second Lien Debt | — | % | 7.00 | % | 7.00 | % | — | |||||||
Vital Proteins, LLC | Senior Secured Second Lien Debt | 7.50 | % | 4.50 | % | 12.00 | % | 130 | |||||||
Captek Softgel International, Inc. | Subordinated Debt | 10.00 | % | 1.50 | % | 11.50 | % | — | |||||||
Del Real, LLC | Subordinated Debt | 11.75 | % | 2.75 | % | 14.50 | % | 123 | |||||||
DoorDash, Inc. | Subordinated Debt | — | % | 10.00 | % | 10.00 | % | 646 | |||||||
Dyno Acquiror, Inc. | Subordinated Debt | 10.50 | % | 1.50 | % | 12.00 | % | 1 | |||||||
Gdb Debt Recovery Authority Of Commonwealth Puerto Rico | Subordinated Debt | 7.50 | % | — | % | 7.50 | % | — | |||||||
HTC Borrower, LLC | Subordinated Debt | 10.00 | % | 3.00 | % | 13.00 | % | 41 | |||||||
Park Ave RE Holdings, LLC | Subordinated Debt | 13.00 | % | — | % | 13.00 | % | — | |||||||
PCX Aerostructures, LLC | Subordinated Debt | 6.00 | % | — | % | 6.00 | % | — | |||||||
Total | $ | 1,435 | |||||||||||||
(m) | The principal amount (par amount) is denominated in Canadian Dollars or CAD. |
(n) | For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (v) for a further description of an equity investment in a Collateralized Security. |
The accompanying notes are an integral part of these consolidated financial statements.
19
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
(o) | The provisions of the 1940 Act classify investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be "non-controlled" when the Company owns 25% or less of the portfolio company's voting securities and "controlled" when the Company owns more than 25% of the portfolio company's voting securities. The Company classifies this investment as "controlled". |
(p) | The provisions of the 1940 Act classify investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as "non-affiliated" when the Company owns less than 5% of a portfolio company's voting securities and "affiliated" when the Company owns 5% or more of a portfolio company's voting securities. The Company classifies this investment as "affiliated". |
(q) | Unless otherwise indicated, all investments in the consolidated schedule of investments are non-affiliated, non-controlled investments. |
(r) | The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD. |
(s) | The investment is not a restricted security. All other securities are restricted securities. |
(t) | The investment is on non-accrual status as of June 30, 2020. |
(u) | Investments are held in the taxable wholly-owned, consolidated subsidiary, 54th Street Equity Holdings, Inc. |
(v) | The Collateralized Securities - subordinated notes are treated as equity investments and are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized. |
(w) | The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC. |
(x) | The investment is held through BSP TCAP Acquisition Holdings LP which, as further outlined in Note 1, is an affiliated acquisition entity utilized for the Triangle Transaction. Due to certain restrictions, such as limits on the number of partners allowable within the equity structures of the newly acquired investments, these investments are still held within the acquisition entity as of June 30, 2020. |
(y) | The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, monthly, quarterly, or semiannually. For each, the Company has provided the spread over LIBOR or Prime and the current interest rate in effect at June 30, 2020. Certain investments are subject to a LIBOR or Prime interest rate floor. For fixed rate loans, a spread above a reference rate is not applicable. |
The accompanying notes are an integral part of these consolidated financial statements.
20
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
June 30, 2020
(Unaudited)
The following table shows the portfolio composition by industry grouping based on fair value at June 30, 2020:
At June 30, 2020 | ||||||
Investments at Fair Value | Percentage of Total Portfolio | |||||
Business Services | $ | 330,234 | 14.9 | % | ||
Healthcare | 305,545 | 13.8 | % | |||
Industrials | 300,119 | 13.5 | % | |||
Financials | 170,099 | 7.7 | % | |||
Diversified Investment Vehicles | 152,588 | 6.9 | % | |||
Technology | 134,229 | 6.0 | % | |||
Energy | 123,118 | 5.5 | % | |||
Transportation | 122,028 | 5.5 | % | |||
Media/Entertainment | 117,713 | 5.3 | % | |||
Food & Beverage | 89,813 | 4.0 | % | |||
Consumer | 68,027 | 3.1 | % | |||
Telecom | 63,469 | 2.9 | % | |||
Software/Services | 61,593 | 2.8 | % | |||
Education | 53,091 | 2.4 | % | |||
Paper & Packaging | 41,248 | 1.9 | % | |||
Chemicals | 39,761 | 1.8 | % | |||
Gaming/Lodging | 27,032 | 1.2 | % | |||
Utilities | 12,487 | 0.6 | % | |||
Health/Fitness | 5,345 | 0.2 | % | |||
Retail | — | — | % | |||
Total | $ | 2,217,539 | 100.0 | % | ||
The accompanying notes are an integral part of these consolidated financial statements.
21
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Senior Secured First Lien Debt - 120.6% (b) | |||||||||||||||||||
Abaco Systems Holding Corp. (c) (i) | Industrials | L+6.00% (8.01%), 12/7/2021 | $ | 23,215 | $ | 23,032 | $ | 23,215 | 1.6 | % | |||||||||
ABC Financial Intermediate, LLC (j) | Technology | L+4.25% (5.99%), 1/2/2025 | 14,603 | 14,550 | 14,493 | 1.0 | % | ||||||||||||
Accentcare, Inc. (c) (j) | Healthcare | L+5.00% (6.95%), 6/22/2026 | 13,472 | 13,347 | 13,346 | 0.9 | % | ||||||||||||
Acrisure, LLC (i) (j) | Financials | L+4.25% (6.19%), 11/22/2023 | 20,263 | 20,255 | 20,288 | 1.4 | % | ||||||||||||
AHP Health Partners, Inc. (i) | Healthcare | L+4.50% (6.30%), 6/30/2025 | 19,886 | 19,739 | 20,016 | 1.4 | % | ||||||||||||
Aldevron, LLC (i) | Healthcare | L+4.25% (6.19%), 10/13/2026 | 11,370 | 11,260 | 11,484 | 0.8 | % | ||||||||||||
Aleris International, Inc. (j) | Industrials | L+4.75% (6.55%), 2/27/2023 | 21,095 | 20,987 | 21,085 | 1.4 | % | ||||||||||||
Allied Universal Security Services, LLC (j) | Business Services | L+4.25% (6.05%), 7/10/2026 | 6,066 | 6,010 | 6,097 | 0.4 | % | ||||||||||||
Allied Universal Security Services, LLC (j) | Business Services | L+4.25% (6.05%), 7/10/2026 | 601 | 601 | 604 | 0.0 | % | ||||||||||||
Alvogen Pharma US, Inc. (j) | Healthcare | L+4.75% (6.55%), 12/31/2023 | 12,818 | 12,767 | 10,871 | 0.7 | % | ||||||||||||
AM General, LLC (c) (i) | Industrials | L+7.25% (9.31%), 12/28/2021 | 1,626 | 1,626 | 1,626 | 0.1 | % | ||||||||||||
American Greetings Corp. (j) | Consumer | L+4.50% (6.30%), 4/5/2024 | 1,723 | 1,698 | 1,690 | 0.1 | % | ||||||||||||
AMI Entertainment Network, LLC (c) (i) | Media/Entertainment | L+6.00% (7.94%), 7/21/2022 | 3,667 | 3,618 | 3,618 | 0.3 | % | ||||||||||||
AMI Entertainment Network, LLC (c) (i) | Media/Entertainment | L+6.00% (7.94%), 7/21/2022 | 12,983 | 12,851 | 12,809 | 0.9 | % | ||||||||||||
AP Gaming I, LLC (a) (j) | Gaming/Lodging | L+3.50% (5.30%), 2/15/2024 | 7,621 | 7,616 | 7,640 | 0.5 | % | ||||||||||||
AP NMT Acquisition B.V. (a) (j) | Media/Entertainment | L+5.75% (7.84%), 8/13/2021 | 5,831 | 5,839 | 5,842 | 0.4 | % | ||||||||||||
Aq Carver Buyer, Inc. (c) (i) | Business Services | L+5.00% (6.94%), 9/23/2025 | 9,391 | 8,656 | 9,298 | 0.6 | % | ||||||||||||
AqGen Ascensus, Inc. (j) | Business Services | L+4.00% (5.94%), 12/5/2022 | 9,392 | 9,383 | 9,398 | 0.6 | % | ||||||||||||
AqGen Ascensus, Inc. (j) | Business Services | L+4.25% (6.05%), 12/5/2022 | 7,980 | 7,923 | 8,020 | 0.6 | % | ||||||||||||
Arch Global Precision, LLC (c) (i) | Industrials | L+4.75% (6.55%), 4/1/2026 | 8,660 | 8,591 | 8,626 | 0.6 | % | ||||||||||||
Athenahealth, Inc. (j) | Healthcare | L+4.50% (6.40%), 2/11/2026 | 12,792 | 12,632 | 12,840 | 0.9 | % | ||||||||||||
Avaya Holdings Corp. (a) (j) | Technology | L+4.25% (5.99%), 12/16/2024 | 20,906 | 20,763 | 20,477 | 1.4 | % | ||||||||||||
Aveanna Healthcare, LLC (c) (j) | Healthcare | L+5.50% (7.30%), 3/18/2024 | 6,021 | 5,807 | 5,648 | 0.4 | % | ||||||||||||
Aveanna Healthcare, LLC (c) (j) | Healthcare | L+4.25% (6.05%), 3/18/2024 | 784 | 746 | 721 | 0.0 | % | ||||||||||||
Axiom Global, Inc. (c) (i) | Business Services | L+4.75% (6.85%), 10/1/2026 | 10,974 | 10,868 | 10,869 | 0.7 | % | ||||||||||||
BBB Industries, LLC (j) | Transportation | L+4.50% (6.30%), 8/1/2025 | 11,142 | 11,100 | 10,826 | 0.7 | % | ||||||||||||
BCP Raptor, LLC (j) | Energy | L+4.25% (6.05%), 6/24/2024 | 19,033 | 18,903 | 17,511 | 1.2 | % | ||||||||||||
BCP Renaissance, LLC (j) | Energy | L+3.50% (5.44%), 10/31/2024 | 3,420 | 3,408 | 3,022 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
22
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Black Mountain Sand, LLC (c) | Energy | L+9.00% (10.91%), 11/30/2021 | $ | 13,050 | $ | 12,946 | $ | 12,854 | 0.9 | % | |||||||||
Black Mountain Sand, LLC (c) | Energy | L+9.00% (11.10%), 11/30/2021 | 12,606 | 12,516 | 12,417 | 0.9 | % | ||||||||||||
BMC Software Finance, Inc. (j) | Technology | L+4.25% (6.05%), 10/2/2025 | 22,013 | 21,831 | 21,741 | 1.5 | % | ||||||||||||
Bomgar Corp. (j) | Technology | L+4.00% (5.93%), 4/18/2025 | 1,962 | 1,955 | 1,911 | 0.1 | % | ||||||||||||
BrightSpring Health Holdings Corp. (j) | Healthcare | L+4.50% (6.21%), 3/5/2026 | 4,975 | 4,939 | 4,997 | 0.3 | % | ||||||||||||
California Resources Corp. (a) (j) | Energy | L+4.75% (6.55%), 12/30/2022 | 12,259 | 12,110 | 10,926 | 0.7 | % | ||||||||||||
CareCentrix, Inc. (i) (j) | Healthcare | L+4.50% (6.44%), 4/3/2025 | 19,856 | 19,783 | 19,807 | 1.4 | % | ||||||||||||
CCW, LLC (c) | Food & Beverage | L+7.00% (8.81%), 3/22/2021 | 1,300 | 1,300 | 1,235 | 0.1 | % | ||||||||||||
CCW, LLC (c) (i) | Food & Beverage | L+7.00% (8.81%), 3/22/2021 | 26,725 | 26,608 | 25,389 | 1.7 | % | ||||||||||||
CDHA Holdings, LLC (c) | Healthcare | L+6.00% (7.95%), 8/24/2023 | 430 | 430 | 430 | 0.0 | % | ||||||||||||
CDHA Holdings, LLC (c) | Healthcare | L+6.00% (7.95%), 8/24/2023 | 553 | 546 | 553 | 0.0 | % | ||||||||||||
CDHA Holdings, LLC (c) (i) | Healthcare | L+6.00% (7.95%), 8/24/2023 | 15,601 | 15,430 | 15,601 | 1.1 | % | ||||||||||||
CDS U.S. Intermediate Holdings, Inc. (a) (i) (j) | Media/Entertainment | L+3.75% (5.69%), 7/8/2022 | 3,980 | 3,905 | 3,775 | 0.3 | % | ||||||||||||
Chloe Ox Parent, LLC (i) | Healthcare | L+4.50% (6.44%), 12/23/2024 | 11,478 | 11,394 | 11,406 | 0.8 | % | ||||||||||||
Clarion Events, Ltd. (a) (j) | Business Services | L+5.00% (6.91%), 9/30/2024 | 10,393 | 10,233 | 10,172 | 0.7 | % | ||||||||||||
Clover Technologies Group, LLC (c) (j) | Industrials | L+6.50% (8.30%), 5/8/2020 | 8,603 | 8,598 | 2,882 | 0.2 | % | ||||||||||||
CLP Health Services, Inc. (i) | Healthcare | L+5.00% (6.80%), 12/31/2026 | 9,480 | 9,338 | 9,409 | 0.6 | % | ||||||||||||
Cold Spring Brewing, Co. (c) (i) | Food & Beverage | L+4.75% (6.55%), 12/19/2025 | 9,888 | 9,789 | 9,789 | 0.7 | % | ||||||||||||
Community Care Health Network, LLC (j) | Healthcare | L+4.75% (6.55%), 2/17/2025 | 5,076 | 5,062 | 4,999 | 0.3 | % | ||||||||||||
CONSOL Energy, Inc. (a) (c) (j) | Industrials | L+4.50% (6.30%), 9/27/2024 | 4,120 | 4,102 | 3,794 | 0.3 | % | ||||||||||||
Conterra Ultra Broadband, LLC (c) (j) | Telecom | L+4.50% (6.30%), 4/30/2026 | 5,009 | 4,987 | 5,009 | 0.3 | % | ||||||||||||
Corfin Industries, LLC (c) (i) | Industrials | L+5.50% (7.43%), 2/15/2024 | 8,486 | 8,369 | 8,486 | 0.6 | % | ||||||||||||
Crown Subsea Communications Holding, Inc. (c) (j) | Industrials | L+6.00% (7.69%), 11/3/2025 | 3,328 | 3,300 | 3,328 | 0.2 | % | ||||||||||||
CRS-SPV, Inc. (c) (o) | Industrials | L+4.50% (6.30%), 3/8/2020 | 62 | 62 | 62 | 0.0 | % | ||||||||||||
Digicel Group, Ltd. (a) | Telecom | 8.75%, 5/25/2024 | 10,607 | 10,556 | 10,342 | 0.7 | % | ||||||||||||
Dynasty Acquisition Co., Inc. (j) | Industrials | L+4.00% (5.94%), 4/6/2026 | 3,871 | 3,857 | 3,895 | 0.3 | % | ||||||||||||
Dynasty Acquisition Co., Inc. (j) | Industrials | L+4.00% (5.94%), 4/6/2026 | 2,081 | 2,074 | 2,094 | 0.1 | % | ||||||||||||
Eagle Rx, LLC (c) (i) | Healthcare | L+4.75% (6.44%), 12/31/2021 | 26,438 | 26,435 | 26,438 | 1.8 | % | ||||||||||||
Envision Healthcare Corp. (j) | Healthcare | L+3.75% (5.55%), 10/10/2025 | 3,970 | 3,806 | 3,376 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
23
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Florida Food Products, LLC (c) | Food & Beverage | L+6.75% (8.55%), 9/6/2023 | $ | 1,416 | $ | 1,416 | $ | 1,399 | 0.1 | % | |||||||||
Florida Food Products, LLC (c) (i) | Food & Beverage | L+6.75% (8.55%), 9/6/2025 | 22,114 | 21,666 | 21,849 | 1.5 | % | ||||||||||||
Foresight Energy, LLC (c) (j) | Industrials | L+5.75% (7.66%), 3/28/2022 | 5,919 | 5,888 | 2,721 | 0.2 | % | ||||||||||||
Frontier Communications Corp. | Telecom | 8.00%, 4/1/2027 | 15,332 | 15,341 | 16,054 | 1.1 | % | ||||||||||||
Frontier Communications Corp. (j) | Telecom | L+3.75% (5.55%), 6/17/2024 | 9,819 | 9,643 | 9,853 | 0.7 | % | ||||||||||||
Gold Standard Baking, Inc. (c) (l) | Food & Beverage | L+6.50% (8.50%), 7/25/2022 | 3,049 | 2,273 | 1,220 | 0.1 | % | ||||||||||||
Green Energy Partners/Stonewall, LLC (c) (j) | Energy | L+5.50% (7.44%), 11/15/2021 | 1,000 | 998 | 922 | 0.1 | % | ||||||||||||
Green Energy Partners/Stonewall, LLC (j) | Energy | L+5.50% (7.44%), 11/15/2021 | 1,324 | 1,322 | 1,221 | 0.1 | % | ||||||||||||
HC2 Holdings, Inc. (c) | Industrials | 11.50%, 12/1/2021 | 10,796 | 10,706 | 10,353 | 0.7 | % | ||||||||||||
HireRight, Inc. (i) | Business Services | L+3.75% (5.55%), 7/11/2025 | 2,955 | 2,933 | 2,927 | 0.2 | % | ||||||||||||
ICR Operations, LLC (c) | Business Services | L+5.00% (6.94%), 3/26/2024 | 98 | 96 | 98 | 0.0 | % | ||||||||||||
ICR Operations, LLC (c) (i) | Business Services | L+5.00% (6.94%), 3/26/2025 | 17,321 | 17,055 | 17,321 | 1.2 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) | Industrials | L+5.75% (7.68%), 7/31/2024 | 46 | 46 | 45 | 0.0 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) | Industrials | L+5.75% (7.54%), 7/31/2023 | 161 | 161 | 158 | 0.0 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) (i) | Industrials | L+5.75% (7.70%), 7/31/2024 | 837 | 822 | 822 | 0.1 | % | ||||||||||||
Ideal Tridon Holdings, Inc. (c) (i) | Industrials | L+5.75% (7.68%), 7/31/2023 | 28,549 | 28,216 | 28,036 | 1.9 | % | ||||||||||||
IDERA, Inc. (j) | Technology | L+4.50% (6.30%), 6/28/2024 | 2,095 | 2,089 | 2,099 | 0.1 | % | ||||||||||||
Integral Ad Science, Inc. (c) (l) | Software/Services | L+7.25% (9.05%), 7/19/2024 | 15,302 | 15,070 | 15,302 | 1.1 | % | ||||||||||||
Integrated Efficiency Solutions, Inc. (c) | Industrials | L+10.25% (12.19%), 6/30/2022 | 3,658 | 3,658 | 3,344 | 0.2 | % | ||||||||||||
Intelsat Jackson Holdings, SA (a) (j) | Telecom | L+4.50% (6.43%), 1/2/2024 | 10,000 | 10,178 | 10,070 | 0.7 | % | ||||||||||||
Internap Corp. (c) (i) (l) | Business Services | L+7.00% (8.79%), 4/6/2022 | 11,789 | 11,779 | 7,533 | 0.5 | % | ||||||||||||
International Cruise & Excursions, Inc. (c) (i) | Business Services | L+5.25% (7.05%), 6/6/2025 | 5,001 | 4,958 | 5,002 | 0.3 | % | ||||||||||||
IPC Corp. (c) (j) | Software/Services | L+4.50% (6.43%), 8/6/2021 | 3,784 | 3,757 | 3,126 | 0.2 | % | ||||||||||||
Iri Holdings, Inc. (c) (j) | Business Services | L+4.50% (6.30%), 12/1/2025 | 4,950 | 4,908 | 4,826 | 0.3 | % | ||||||||||||
K2 Intelligence Holdings, Inc. (c) (i) | Business Services | L+4.75% (6.69%), 9/23/2024 | 11,667 | 11,446 | 11,445 | 0.8 | % | ||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (l) (o) | Transportation | L+8.00% (13.00%), 12/22/2028 | 105,549 | 105,549 | 105,549 | 7.2 | % | ||||||||||||
Kaman Distribution Corp. (c) (i) | Industrials | L+5.00% (6.94%), 8/26/2026 | 21,498 | 19,650 | 20,853 | 1.4 | % | ||||||||||||
Kissner Milling Co., Ltd. (a) | Industrials | 8.38%, 12/1/2022 | 11,294 | 11,514 | 11,802 | 0.8 | % | ||||||||||||
Lakeland Tours, LLC (i) (j) | Education | L+4.25% (6.15%), 12/16/2024 | 10,210 | 10,148 | 10,171 | 0.7 | % | ||||||||||||
Lakeview Health Holdings, Inc. (c) (l) (t) | Healthcare | 9.75%, 12/15/2021 | 129 | 124 | 54 | 0.0 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
24
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Lakeview Health Holdings, Inc. (c) (l) (t) | Healthcare | 9.75%, 12/15/2021 | $ | 3,756 | $ | 2,671 | $ | 1,582 | 0.1 | % | |||||||||
LightSquared, LP (l) | Telecom | L+8.75% (10.85%), 12/7/2020 | 12,376 | 11,812 | 7,921 | 0.5 | % | ||||||||||||
Lionbridge Technologies, Inc. (c) (i) | Business Services | L+6.25% (8.04%), 12/20/2025 | 10,344 | 10,241 | 10,241 | 0.7 | % | ||||||||||||
MCS Acquisition Corp. (c) | Business Services | L+4.75% (6.64%), 5/20/2024 | 14,009 | 13,971 | 6,024 | 0.4 | % | ||||||||||||
MED Parentco, LP (j) | Healthcare | L+4.25% (6.05%), 8/31/2026 | 306 | 306 | 305 | 0.0 | % | ||||||||||||
MED Parentco, LP (j) | Healthcare | L+4.25% (6.05%), 8/31/2026 | 5,745 | 5,690 | 5,736 | 0.4 | % | ||||||||||||
Medallion Midland Acquisition, LP (j) | Energy | L+3.25% (5.05%), 10/30/2024 | 4,361 | 4,353 | 4,306 | 0.3 | % | ||||||||||||
Medical Depot Holdings, Inc. (c) (i) (l) | Healthcare | L+7.50% (9.44%), 1/3/2023 | 18,850 | 17,981 | 14,175 | 1.0 | % | ||||||||||||
MGTF Radio Company, LLC (c) (o) | Media/Entertainment | L+6.00% (7.80%), 4/1/2024 | 57,974 | 57,831 | 54,171 | 3.7 | % | ||||||||||||
Micross Solutions, LLC (c) | Software/Services | L+5.00% (6.72%), 8/7/2023 | 3,065 | 2,955 | 3,065 | 0.2 | % | ||||||||||||
Midwest Can Company, LLC (c) (i) | Paper & Packaging | L+5.00% (6.81%), 4/11/2024 | 4,622 | 4,589 | 4,622 | 0.3 | % | ||||||||||||
Miller Environmental Group, Inc. (c) (i) | Business Services | P+5.50% (10.25%), 3/15/2024 | 10,589 | 10,378 | 10,377 | 0.7 | % | ||||||||||||
Miller Environmental Group, Inc. (c) (i) | Business Services | L+6.50% (8.63%), 3/15/2024 | 11,579 | 11,385 | 11,371 | 0.8 | % | ||||||||||||
MLN US Holdco, LLC (a) (j) | Technology | L+4.50% (6.19%), 11/28/2025 | 10,675 | 10,645 | 10,061 | 0.7 | % | ||||||||||||
Monitronics International, Inc. (c) | Business Services | L+6.50% (8.30%), 3/29/2024 | 7,575 | 7,589 | 6,541 | 0.5 | % | ||||||||||||
Montreign Operating Company, LLC (c) | Gaming/Lodging | L+8.25% (10.16%), 1/24/2023 | 26,681 | 26,425 | 23,559 | 1.6 | % | ||||||||||||
Mood Media Corp. (c) | Media/Entertainment | L+7.25% (9.19%), 6/28/2022 | 704 | 691 | 662 | 0.0 | % | ||||||||||||
Mood Media Corp. (c) (i) | Media/Entertainment | L+7.25% (9.19%), 6/28/2022 | 13,168 | 13,025 | 12,378 | 0.9 | % | ||||||||||||
Murray Energy Holdings, Co. (c) | Industrials | L+11.00% (13.00%), 7/31/2020 | 1,671 | 1,631 | 1,667 | 0.1 | % | ||||||||||||
Murray Energy Holdings, Co. (j) (t) | Industrials | L+7.25% (9.19%), 10/17/2022 | 9,184 | 9,071 | 1,870 | 0.1 | % | ||||||||||||
Muth Mirror Systems, LLC (c) (i) | Technology | L+5.25% (7.39%), 4/23/2025 | 15,778 | 15,498 | 15,509 | 1.1 | % | ||||||||||||
National Technical Systems, Inc. (c) (i) | Business Services | L+6.25% (7.94%), 6/14/2021 | 17,469 | 17,422 | 16,770 | 1.1 | % | ||||||||||||
Navitas Midstream Midland Basin, LLC (c) (j) | Energy | L+4.50% (6.30%), 12/13/2024 | 13,326 | 13,305 | 12,977 | 0.9 | % | ||||||||||||
New Amsterdam Software Bidco, LLC (c) (i) | Technology | L+5.00% (6.80%), 5/1/2026 | 6,134 | 6,023 | 6,023 | 0.4 | % | ||||||||||||
New Star Metals, Inc. (c) (i) | Industrials | L+6.00% (7.95%), 6/29/2023 | 22,692 | 22,284 | 22,692 | 1.6 | % | ||||||||||||
NexSteppe, Inc. (c) (l) (o) (t) | Chemicals | 12.00%, 3/31/2020 | 15,285 | 10,453 | — | — | % | ||||||||||||
NexSteppe, Inc. (c) (l) (o) (t) | Chemicals | 12.00%, 3/31/2020 | 2,269 | 1,750 | — | — | % | ||||||||||||
NN, Inc. (a) (j) | Industrials | L+5.25% (7.05%), 10/19/2022 | 9,889 | 9,394 | 9,691 | 0.7 | % | ||||||||||||
Norvax, LLC (c) | Business Services | L+6.50% (8.41%), 9/12/2025 | 11,489 | 11,212 | 11,214 | 0.8 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
25
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
NTM Acquisition Corp. (c) (i) | Media/Entertainment | L+6.25% (8.05%), 6/7/2022 | $ | 22,999 | $ | 22,861 | $ | 22,999 | 1.6 | % | |||||||||
Office Depot, Inc. (a) (j) | Retail | L+5.25% (7.04%), 11/8/2022 | 4,947 | 4,889 | 4,984 | 0.3 | % | ||||||||||||
ORG Chemical Holdings, LLC (c) (g) (l) | Chemicals | L+7.75% (9.70%), 6/30/2022 | 3,420 | 3,420 | 3,420 | 0.2 | % | ||||||||||||
ORG Chemical Holdings, LLC (c) (i) (l) | Chemicals | L+7.75% (9.70%), 6/30/2022 | 3,730 | 3,695 | 3,730 | 0.3 | % | ||||||||||||
ORG GC Holdings, LLC (c) (i) | Business Services | L+6.75% (8.70%), 7/31/2022 | 21,624 | 21,457 | 20,932 | 1.4 | % | ||||||||||||
PeopLease Holdings, LLC (c) (i) | Business Services | L+9.62% (11.57%), 2/26/2021 | 20,000 | 19,953 | 19,800 | 1.4 | % | ||||||||||||
PGX Holdings, Inc. (c) (j) | Consumer | L+5.25% (7.05%), 9/29/2020 | 11,820 | 11,807 | 8,416 | 0.6 | % | ||||||||||||
Planet Equity Group, LLC (c) (i) | Business Services | L+5.25% (7.18%), 11/18/2025 | 14,941 | 14,721 | 14,717 | 1.0 | % | ||||||||||||
PlayPower, Inc. (c) (i) | Industrials | L+5.50% (7.46%), 5/8/2026 | 26,385 | 26,025 | 26,385 | 1.8 | % | ||||||||||||
Premier Dental Services, Inc. (i) (j) | Healthcare | L+5.25% (7.05%), 6/30/2023 | 32,354 | 32,196 | 32,313 | 2.2 | % | ||||||||||||
Premier Global Services, Inc. (c) (j) | Telecom | L+6.50% (8.40%), 6/8/2023 | 8,578 | 8,382 | 5,284 | 0.4 | % | ||||||||||||
PSKW, LLC (c) | Healthcare | L+7.68% (9.63%), 11/26/2021 | 17,750 | 17,637 | 17,750 | 1.2 | % | ||||||||||||
PSKW, LLC (c) | Healthcare | L+7.68% (9.63%), 11/25/2021 | 1,972 | 1,954 | 1,972 | 0.1 | % | ||||||||||||
PSKW, LLC (c) | Healthcare | L+7.68% (9.63%), 11/25/2021 | 1,930 | 1,919 | 1,930 | 0.1 | % | ||||||||||||
PSKW, LLC (c) (i) | Healthcare | L+4.25% (6.19%), 11/26/2021 | 1,162 | 1,159 | 1,162 | 0.1 | % | ||||||||||||
PT Network, LLC (c) (i) (l) | Healthcare | L+7.50% (9.44%), 11/30/2023 | 16,780 | 16,702 | 15,052 | 1.0 | % | ||||||||||||
Questex, Inc. (c) | Media/Entertainment | L+5.00% (6.91%), 9/9/2024 | 689 | 689 | 689 | 0.0 | % | ||||||||||||
Questex, Inc. (c) (i) | Media/Entertainment | L+5.00% (6.89%), 9/9/2024 | 15,989 | 15,739 | 15,989 | 1.1 | % | ||||||||||||
Red River Technology, LLC (c) (i) | Business Services | L+5.00% (6.94%), 8/30/2024 | 23,669 | 23,340 | 23,337 | 1.6 | % | ||||||||||||
Reddy Ice Corp. (c) (i) | Food & Beverage | L+5.50% (7.60%), 7/1/2025 | 19,540 | 19,003 | 19,003 | 1.3 | % | ||||||||||||
Regionalcare Hospital Partners Holdings, Inc. (j) | Healthcare | L+4.50% (6.30%), 11/14/2025 | 19,850 | 19,521 | 19,994 | 1.4 | % | ||||||||||||
Resco Products, Inc. (c) | Industrials | L+6.25% (8.05%), 3/7/2020 | 10,000 | 10,000 | 9,200 | 0.6 | % | ||||||||||||
Safety Products/JHC Acquisition Corp. (c) (j) | Industrials | L+4.50% (6.30%), 6/28/2026 | 958 | 958 | 937 | 0.1 | % | ||||||||||||
Safety Products/JHC Acquisition Corp. (c) (j) | Industrials | L+4.50% (6.30%), 6/28/2026 | 17,717 | 17,564 | 17,341 | 1.2 | % | ||||||||||||
Schenectady International Group, Inc. (j) | Chemicals | L+4.75% (6.79%), 10/15/2025 | 19,593 | 19,164 | 19,446 | 1.3 | % | ||||||||||||
SFR Group, SA (a) (i) | Telecom | L+3.69% (5.43%), 2/2/2026 | 14,962 | 14,926 | 14,962 | 1.0 | % | ||||||||||||
SFR Group, SA (a) (i) (j) | Telecom | L+4.00% (5.74%), 8/14/2026 | 12,967 | 12,862 | 12,978 | 0.9 | % | ||||||||||||
Shields Health Solutions Holdings, LLC (c) (i) | Healthcare | L+5.00% (6.80%), 8/19/2026 | 6,963 | 6,896 | 6,897 | 0.5 | % | ||||||||||||
SitusAMC Holdings Corp. (c) (i) | Financials | L+4.75% (6.55%), 6/30/2025 | 8,486 | 8,369 | 8,371 | 0.6 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
26
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Skillsoft Corp. (j) | Technology | L+4.75% (6.95%), 4/28/2021 | $ | 15,001 | $ | 14,378 | $ | 11,469 | 0.8 | % | |||||||||
Squan Holding Corp. (c) (l) | Telecom | L+7.00% (8.95%), 6/30/2020 | 16,276 | 16,123 | 13,835 | 1.0 | % | ||||||||||||
SSH Group Holdings, Inc. (j) | Education | L+4.25% (6.19%), 7/30/2025 | 10,736 | 10,704 | 10,776 | 0.7 | % | ||||||||||||
Subsea Global Solutions, LLC (c) | Business Services | L+7.00% (9.06%), 3/29/2023 | 388 | 388 | 381 | 0.0 | % | ||||||||||||
Subsea Global Solutions, LLC (c) (i) | Business Services | L+7.00% (9.00%), 3/29/2023 | 2,392 | 2,302 | 2,344 | 0.2 | % | ||||||||||||
Subsea Global Solutions, LLC (c) (i) | Business Services | L+7.00% (9.00%), 3/29/2023 | 8,327 | 8,219 | 8,168 | 0.6 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | L+6.00% (10.00%), 4/30/2020 | 5,257 | 3,833 | 1,262 | 0.1 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | L+6.00% (10.00%), 4/30/2020 | 29,616 | 21,646 | 7,108 | 0.5 | % | ||||||||||||
Tax Defense Network, LLC (c) (l) (p) (t) | Consumer | L+10.00% (10.00%), 4/30/2020 | 2,357 | 2,357 | 2,357 | 0.2 | % | ||||||||||||
The Dun & Bradstreet Corp. (j) | Business Services | L+5.00% (6.79%), 2/6/2026 | 10,000 | 9,825 | 10,079 | 0.7 | % | ||||||||||||
TIBCO Software, Inc. (j) | Technology | L+4.00% (5.71%), 6/30/2026 | 4,988 | 4,988 | 5,005 | 0.3 | % | ||||||||||||
Tillamook Country Smoker, LLC (c) | Food & Beverage | L+5.75% (7.85%), 5/19/2022 | 1,078 | 1,078 | 1,054 | 0.1 | % | ||||||||||||
Tillamook Country Smoker, LLC (c) (i) | Food & Beverage | L+5.75% (7.65%), 5/19/2022 | 10,090 | 10,018 | 9,858 | 0.7 | % | ||||||||||||
Tivity Health, Inc. (a) (j) | Healthcare | L+5.25% (7.05%), 3/6/2026 | 4,396 | 4,299 | 4,396 | 0.3 | % | ||||||||||||
Tivity Health, Inc. (a) (j) | Healthcare | L+4.25% (6.05%), 3/8/2024 | 1,641 | 1,627 | 1,641 | 0.1 | % | ||||||||||||
Trademark Global, LLC (c) | Consumer | L+6.00% (7.80%), 4/28/2023 | 2,067 | 2,067 | 2,067 | 0.1 | % | ||||||||||||
Traverse Midstream Partners, LLC (j) | Energy | L+4.00% (5.80%), 9/27/2024 | 16,222 | 15,847 | 14,568 | 1.0 | % | ||||||||||||
Trilogy International Partners, LLC (a) | Telecom | 8.88%, 5/1/2022 | 14,875 | 14,837 | 13,983 | 1.0 | % | ||||||||||||
University of St. Augustine Acquisition Corp. (c) (i) | Education | L+4.25% (6.05%), 2/2/2026 | 24,004 | 23,482 | 23,524 | 1.6 | % | ||||||||||||
Veritext Corp. (i) | Business Services | L+3.75% (5.69%), 8/1/2025 | 4,975 | 4,975 | 4,955 | 0.3 | % | ||||||||||||
Vertex Aerospace Services Corp. (i) | Industrials | L+4.50% (6.30%), 6/30/2025 | 8,726 | 8,692 | 8,753 | 0.6 | % | ||||||||||||
Von Drehle Corp. (c) (i) (l) | Paper & Packaging | L+11.50% (13.44%), 3/6/2023 | 26,856 | 26,595 | 25,164 | 1.7 | % | ||||||||||||
Vyaire Medical, Inc. (c) (j) | Healthcare | L+4.75% (6.84%), 4/16/2025 | 8,850 | 8,580 | 7,611 | 0.5 | % | ||||||||||||
WaterBridge Midstream Operating, LLC (j) | Energy | L+5.75% (7.83%), 6/22/2026 | 11,834 | 11,572 | 11,613 | 0.8 | % | ||||||||||||
WMK, LLC (c) | Business Services | L+5.75% (7.49%), 9/5/2025 | 1,910 | 1,903 | 1,910 | 0.1 | % | ||||||||||||
WMK, LLC (c) | Business Services | L+5.75% (7.44%), 9/5/2024 | 1,134 | 1,134 | 1,134 | 0.1 | % | ||||||||||||
WMK, LLC (c) (i) | Business Services | L+5.75% (7.49%), 9/5/2025 | 20,180 | 19,853 | 20,180 | 1.4 | % | ||||||||||||
Xplornet Communications, Inc. (a) (i) (j) | Telecom | L+4.00% (5.94%), 9/9/2021 | 15,679 | 15,645 | 15,699 | 1.1 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
27
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
YummyEarth, Inc. (c) | Food & Beverage | L+7.00% (8.91%), 8/1/2025 | $ | 2,626 | $ | 2,625 | $ | 2,626 | 0.2 | % | |||||||||
Sub Total Senior Secured First Lien Debt | $ | 1,862,228 | $ | 1,764,292 | 120.6 | % | |||||||||||||
Senior Secured Second Lien Debt - 21.0% (b) | |||||||||||||||||||
Accentcare, Inc. (c) (i) | Healthcare | L+8.75% (10.70%), 6/21/2027 | $ | 17,795 | $ | 17,380 | $ | 17,366 | 1.2 | % | |||||||||
Anchor Glass Container Corp. (c) | Paper & Packaging | L+7.75% (9.46%), 12/6/2024 | 20,000 | 19,845 | 10,400 | 0.7 | % | ||||||||||||
Astro AB Merger Sub, Inc. (a) (i) | Financials | L+7.50% (9.43%), 4/28/2023 | 7,758 | 7,758 | 7,719 | 0.5 | % | ||||||||||||
Asurion Corp. (i) (j) | Business Services | L+6.50% (8.30%), 8/4/2025 | 18,734 | 18,866 | 18,949 | 1.3 | % | ||||||||||||
Avatar Purchaser, Inc. (c) (j) | Software/Services | L+7.50% (9.49%), 11/17/2025 | 11,716 | 11,458 | 11,716 | 0.8 | % | ||||||||||||
Aveanna Healthcare, LLC (c) | Healthcare | L+8.00% (9.80%), 3/17/2025 | 15,000 | 14,852 | 13,650 | 0.9 | % | ||||||||||||
Baker Hill Acquisition, LLC (c) | Financials | L+11.00% (13.09%), 3/22/2021 | 3,017 | 1,508 | 1,584 | 0.1 | % | ||||||||||||
Baker Hill Acquisition, LLC (c) | Financials | L+11.00% (13.09%), 3/22/2021 | 447 | 416 | 447 | 0.0 | % | ||||||||||||
Boston Market Corp. (c) | Food & Beverage | L+4.50% (6.51%), 1/9/2021 | 3,691 | 3,691 | 3,691 | 0.3 | % | ||||||||||||
Boston Market Corp. (c) | Food & Beverage | L+8.25% (10.19%), 1/18/2021 | 26,259 | 24,260 | 8,534 | 0.6 | % | ||||||||||||
Boston Market Corp. (c) | Food & Beverage | L+4.50% (6.59%), 1/9/2021 | 923 | 923 | 923 | 0.1 | % | ||||||||||||
BrandMuscle Holdings, Inc. (c) | Business Services | L+8.50% (10.60%), 6/1/2022 | 24,500 | 24,317 | 24,500 | 1.7 | % | ||||||||||||
Carlisle FoodService Products, Inc. (c) (i) | Consumer | L+7.75% (9.55%), 3/20/2026 | 10,719 | 10,552 | 10,719 | 0.7 | % | ||||||||||||
CDS U.S. Intermediate Holdings, Inc. (a) (c) | Media/Entertainment | L+8.25% (10.19%), 7/10/2023 | 9,177 | 8,946 | 7,846 | 0.5 | % | ||||||||||||
Constellis Holdings, LLC (c) (t) | Business Services | L+9.00% (10.93%), 4/21/2025 | 1,117 | 1,117 | 56 | 0.0 | % | ||||||||||||
Dentalcorp Perfect Smile, ULC (a) (c) | Healthcare | L+7.50% (9.30%), 6/8/2026 | 10,139 | 10,056 | 10,139 | 0.7 | % | ||||||||||||
Dimora Brands, Inc. (c) | Consumer | L+8.50% (10.30%), 8/25/2025 | 4,464 | 4,463 | 4,464 | 0.3 | % | ||||||||||||
Edelman Financial Services, LLC (a) (j) | Financials | L+6.75% (8.54%), 7/20/2026 | 6,764 | 6,736 | 6,730 | 0.5 | % | ||||||||||||
Hyland Software, Inc. (c) (i) | Technology | L+7.00% (8.80%), 7/7/2025 | 6,904 | 6,930 | 6,904 | 0.5 | % | ||||||||||||
ICP Industrial, Inc. (c) | Chemicals | L+8.25% (10.04%), 5/3/2024 | 5,588 | 5,587 | 5,588 | 0.4 | % | ||||||||||||
KidKraft, Inc. (c) (l) | Consumer | 12.00%, 3/31/2022 | 6,373 | 6,316 | 5,149 | 0.4 | % | ||||||||||||
MLN US Holdco, LLC (a) (c) (i) | Technology | L+8.75% (10.44%), 11/30/2026 | 3,000 | 2,948 | 2,452 | 0.2 | % | ||||||||||||
Northstar Financial Services Group, LLC (c) | Financials | L+7.50% (9.30%), 5/25/2026 | 2,666 | 2,656 | 2,666 | 0.2 | % | ||||||||||||
PetVet Care Centers, LLC (c) | Healthcare | L+6.25% (8.05%), 2/13/2026 | 3,539 | 3,525 | 3,539 | 0.2 | % | ||||||||||||
PI US Holdco III, Ltd. (a) (c) | Financials | L+7.25% (9.05%), 12/22/2025 | 6,696 | 6,645 | 6,562 | 0.5 | % | ||||||||||||
ProAmpac, LLC (c) | Paper & Packaging | L+8.50% (10.40%), 11/18/2024 | 3,352 | 3,351 | 3,352 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
28
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Project Boost Purchaser, LLC | Business Services | L+8.00% (9.80%), 5/31/2027 | $ | 1,848 | $ | 1,848 | $ | 1,848 | 0.1 | % | |||||||||
QuickBase, Inc. (c) | Technology | L+8.00% (9.71%), 4/2/2027 | 7,484 | 7,348 | 7,349 | 0.5 | % | ||||||||||||
Recess Holdings, Inc. (c) (i) | Industrials | L+7.75% (9.55%), 9/29/2025 | 15,008 | 14,841 | 15,008 | 1.0 | % | ||||||||||||
Renaissance Holding Corp. (c) | Software/Services | L+7.00% (8.80%), 5/29/2026 | 8,456 | 8,320 | 8,123 | 0.6 | % | ||||||||||||
River Cree Enterprises, LP (a) (c) (m) | Gaming/Lodging | 10.00%, 5/17/2025 | CAD | 21,275 | 16,427 | 16,378 | 1.1 | % | |||||||||||
SCA Pharmaceuticals, LLC (c) | Healthcare | L+9.00% (10.94%), 12/16/2020 | 2,235 | 2,194 | 2,056 | 0.1 | % | ||||||||||||
SSH Group Holdings, Inc. (c) (i) | Education | L+8.25% (10.19%), 7/30/2026 | 10,122 | 10,039 | 10,122 | 0.7 | % | ||||||||||||
St. Croix Hospice Acquisition Corp. (c) | Healthcare | L+8.75% (10.55%), 3/29/2024 | 2,056 | 1,983 | 2,056 | 0.1 | % | ||||||||||||
TierPoint, LLC (c) | Business Services | L+7.25% (9.05%), 5/5/2025 | 5,334 | 5,298 | 5,014 | 0.3 | % | ||||||||||||
Travelpro Products, Inc. (a) (c) (l) | Consumer | 13.00%, 11/1/2022 | 2,405 | 2,404 | 2,405 | 0.2 | % | ||||||||||||
Travelpro Products, Inc. (a) (c) (l) (m) | Consumer | 13.00%, 11/21/2022 | CAD | 2,786 | 2,137 | 2,145 | 0.1 | % | |||||||||||
US Salt, LLC (c) (i) | Industrials | L+8.63% (10.42%), 1/18/2027 | 26,968 | 26,197 | 26,968 | 1.9 | % | ||||||||||||
Vantage Mobility International, LLC (c) (l) (p) (t) | Transportation | L+6.00% (7.80%), 6/30/2023 | 2,883 | 2,743 | 2,883 | 0.2 | % | ||||||||||||
Vital Proteins, LLC (c) (l) | Consumer | 12.00%, 5/16/2022 | 8,628 | 8,485 | 8,478 | 0.6 | % | ||||||||||||
Sub Total Senior Secured Second Lien Debt | $ | 335,366 | $ | 306,478 | 21.0 | % | |||||||||||||
Subordinated Debt - 7.4% (b) | |||||||||||||||||||
AHP Health Partners, Inc. | Healthcare | 9.75%, 7/15/2026 | $ | 6,589 | $ | 6,511 | $ | 7,257 | 0.5 | % | |||||||||
Captek Softgel International, Inc. (c) (l) (t) | Health/Fitness | 11.50%, 1/30/2023 | 7,099 | 7,071 | 5,324 | 0.4 | % | ||||||||||||
Community Intervention Services, Inc. (c) (l) (t) | Healthcare | 13.00%, 1/29/2021 | 6,074 | — | — | — | % | ||||||||||||
Del Real, LLC (c) | Food & Beverage | 11.00%, 4/1/2023 | 3,129 | 2,998 | 2,641 | 0.2 | % | ||||||||||||
Dyno Acquiror, Inc. (c) (l) | Consumer | 12.00%, 8/1/2020 | 1,074 | 1,074 | 1,074 | 0.1 | % | ||||||||||||
HemaSource, Inc. (c) (x) | Healthcare | 11.00%, 1/1/2024 | 2,235 | 2,152 | 2,156 | 0.1 | % | ||||||||||||
HTC Borrower, LLC (c) (l) | Consumer | 13.00%, 9/1/2020 | 5,410 | 5,326 | 5,410 | 0.4 | % | ||||||||||||
Iridium Communications, Inc. | Telecom | 10.25%, 4/15/2023 | 3,536 | 3,536 | 3,794 | 0.3 | % | ||||||||||||
Park Ave RE Holdings, LLC (c) (l) (o) (w) | Financials | 13.00%, 12/31/2021 | 37,237 | 37,237 | 37,237 | 2.5 | % | ||||||||||||
PCX Aerostructures, LLC (c) (l) (p) | Industrials | 6.00%, 8/9/2021 | 7,878 | 6,065 | 5,908 | 0.4 | % | ||||||||||||
RMP Group, Inc. (c) (l) | Financials | 11.50%, 9/1/2022 | 2,299 | 2,240 | 2,300 | 0.2 | % | ||||||||||||
Siena Capital Finance, LLC (c) (o) | Financials | 12.50%, 8/16/2021 | 22,500 | 22,492 | 22,500 | 1.5 | % | ||||||||||||
Xplornet Communications, Inc. (a) (c) | Telecom | 9.63%, 6/1/2022 | 12,304 | 12,304 | 12,550 | 0.8 | % | ||||||||||||
Sub Total Subordinated Debt | $ | 109,006 | $ | 108,151 | 7.4 | % | |||||||||||||
Collateralized Securities - 7.4% (b) | |||||||||||||||||||
Collateralized Securities - Debt Investment | |||||||||||||||||||
Anchorage Credit Opportunities CLO, LLC 19-1A D (a) (c) | Diversified Investment Vehicles | L+5.10% (7.01%), 1/20/2032 | $ | 3,000 | $ | 2,885 | $ | 2,885 | 0.2 | % | |||||||||
Avery Point CLO, Ltd. 15-6A E1 (a) (c) | Diversified Investment Vehicles | L+5.50% (7.39%), 8/6/2027 | 3,500 | 3,156 | 3,156 | 0.2 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
29
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Babson CLO, Ltd. 19-4A E (a) (c) | Diversified Investment Vehicles | L+7.39% (9.29%), 1/15/2033 | $ | 1,500 | $ | 1,395 | $ | 1,395 | 0.1 | % | |||||||||
Crown Point CLO, Ltd. 2019-8A E (a) (c) | Diversified Investment Vehicles | L+7.10% (9.12%), 10/20/2032 | 6,000 | 5,708 | 5,853 | 0.4 | % | ||||||||||||
Dryden Senior Loan Fund 17-49A E (a) (c) | Diversified Investment Vehicles | L+6.30% (8.30%), 7/18/2030 | 3,000 | 2,890 | 2,890 | 0.2 | % | ||||||||||||
Dryden Senior Loan Fund 2014-36A ER2 (a) (c) | Diversified Investment Vehicles | L+6.88% (8.87%), 4/15/2029 | 2,000 | 1,947 | 1,975 | 0.1 | % | ||||||||||||
KKR Financial CLO, Ltd. 27A E (a) (c) | Diversified Investment Vehicles | L+6.90% (8.82%), 10/15/2032 | 1,250 | 1,189 | 1,211 | 0.1 | % | ||||||||||||
LCM, Ltd. Partnership 16A ER2 (a) (c) | Diversified Investment Vehicles | L+6.38% (8.38%), 10/15/2031 | 2,500 | 2,307 | 2,307 | 0.2 | % | ||||||||||||
Madison Park Funding, Ltd. 16-21A DR (a) (c) | Diversified Investment Vehicles | L+7.56% (9.39%), 10/15/2032 | 2,000 | 1,881 | 1,881 | 0.1 | % | ||||||||||||
Madison Park Funding, Ltd. 19-35A E (a) (c) | Diversified Investment Vehicles | L+6.75% (8.72%), 4/20/2031 | 2,000 | 1,945 | 1,945 | 0.1 | % | ||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A FR (a) (c) (p) | Diversified Investment Vehicles | L+11.00% (12.94%), 4/25/2031 | 4,750 | 4,550 | 4,612 | 0.3 | % | ||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F (a) (c) (p) | Diversified Investment Vehicles | L+7.50% (9.47%), 1/20/2027 | 10,728 | 9,586 | 9,209 | 0.6 | % | ||||||||||||
OCP CLO, Ltd. 14-5A DR (a) (c) | Diversified Investment Vehicles | L+5.70% (7.64%), 4/26/2031 | 2,200 | 2,060 | 2,060 | 0.1 | % | ||||||||||||
OCP CLO, Ltd. 2019-17A E (a) (c) | Diversified Investment Vehicles | L+6.66% (8.79%), 7/20/2032 | 3,000 | 2,913 | 2,946 | 0.2 | % | ||||||||||||
Pikes Peak CLO 19-3A E (a) (c) | Diversified Investment Vehicles | L+6.86% (8.80%), 4/25/2030 | 3,000 | 2,849 | 2,849 | 0.2 | % | ||||||||||||
Sound Point CLO, Ltd. 19-3A E (a) (c) | Diversified Investment Vehicles | L+7.31% (9.41%), 10/25/2032 | 3,000 | 2,912 | 2,972 | 0.2 | % | ||||||||||||
Sound Point CLO, Ltd. 2015-3A ER (a) (c) | Diversified Investment Vehicles | L+5.25% (7.22%), 1/20/2028 | 2,000 | 1,881 | 1,915 | 0.1 | % | ||||||||||||
Symphony CLO, Ltd. 2012-9A ER2 (a) (c) | Diversified Investment Vehicles | L+6.95% (8.95%), 7/16/2032 | 3,000 | 2,942 | 2,972 | 0.2 | % | ||||||||||||
TCW CLO 2019-1 AMR, Ltd. 19-1A F (a) (c) | Diversified Investment Vehicles | L+8.67% (10.58%), 2/15/2029 | 2,500 | 2,396 | 2,396 | 0.2 | % | ||||||||||||
Vibrant CLO, Ltd. 2016-4A DR (a) (c) | Diversified Investment Vehicles | L+4.33% (6.30%), 7/20/2032 | 3,000 | 2,913 | 2,947 | 0.2 | % | ||||||||||||
Whitehorse, Ltd. 2014-1A E (a) (c) (p) | Diversified Investment Vehicles | L+4.55% (6.46%), 5/1/2026 | 8,000 | 7,717 | 7,054 | 0.5 | % | ||||||||||||
Zais CLO 13, Ltd. 19-13A D1 (a) (c) | Diversified Investment Vehicles | L+4.52% (6.60%), 7/15/2032 | 3,000 | 2,854 | 2,908 | 0.2 | % | ||||||||||||
Collateralized Securities - Equity Investment (n) | |||||||||||||||||||
CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 1/16/2026 | $ | 3,243 | $ | 106 | $ | 24 | 0.0 | % | |||||||||
CVP Cascade CLO, Ltd. 2014-2A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 7/18/2026 | 3,755 | 463 | 38 | 0.0 | % | ||||||||||||
Figueroa CLO, Ltd. 2014-1A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 1/15/2027 | 2,986 | 597 | 67 | 0.0 | % | ||||||||||||
MidOcean Credit CLO 2013-2A INC (a) (c) (p) (v) | Diversified Investment Vehicles | 0.76%, 1/29/2025 | 37,600 | 16,815 | 11,835 | 0.8 | % | ||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 16.56%, 7/25/2025 | 31,603 | 19,353 | 19,697 | 1.4 | % | ||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 21.81%, 1/20/2027 | 31,575 | 7,298 | 6,607 | 0.5 | % | ||||||||||||
OFSI Fund, Ltd. 2014-6A Side Letter (a) (c) | Diversified Investment Vehicles | 0.00%, 3/20/2025 | 1,970 | 263 | — | — | % | ||||||||||||
Whitehorse, Ltd. 2014-1A Side Letter (a) (c) (p) | Diversified Investment Vehicles | 10.44%, 5/1/2026 | 1,886 | 134 | 35 | 0.0 | % | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
30
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Whitehorse, Ltd. 2014-1A SUB (a) (c) (p) (v) | Diversified Investment Vehicles | 0.00%, 5/1/2026 | $ | 36,000 | $ | 6,965 | $ | 286 | 0.0 | % | |||||||||
Sub Total Collateralized Securities | $ | 122,870 | $ | 108,927 | 7.4 | % | |||||||||||||
Equity/Other - 17.7% (b) (d) | |||||||||||||||||||
Aden & Anais Holdings, Inc. (c) (e) (x) | Retail | 4,470 | $ | — | $ | — | — | % | |||||||||||
Answers Corp. (c) (p) | Media/Entertainment | 908,911 | 11,361 | 727 | 0.0 | % | |||||||||||||
Avaya Holdings Corp. (a) (e) (s) | Technology | 187,660 | 2,979 | 2,533 | 0.2 | % | |||||||||||||
Baker Hill Acquisition, LLC (c) (e) | Financials | 22,653 | — | — | — | % | |||||||||||||
Boston Market Corp. (c) (e) (u) | Food & Beverage | 160,327 | — | — | — | % | |||||||||||||
Capstone Nutrition Development, LLC (c) (e) (p) (u) | Consumer | 47,883 | 4,788 | 4,788 | 0.3 | % | |||||||||||||
Captek Softgel International, Inc. (c) (e) (x) | Health/Fitness | 8,498 | 942 | — | — | % | |||||||||||||
CRD Holdings, LLC (a) (c) (o) (u) | Energy | 9.00% | 52,285,603 | 28,066 | 28,943 | 2.0 | % | ||||||||||||
CRS-SPV, Inc. (c) (e) (o) | Industrials | 246 | 2,219 | 2,221 | 0.2 | % | |||||||||||||
Danish CRJ, Ltd. (a) (c) (e) (p) (r) | Transportation | 5,002 | — | — | — | % | |||||||||||||
Data Source Holdings, LLC (c) (e) | Business Services | 10,617 | 140 | 93 | 0.0 | % | |||||||||||||
Del Real, LLC (c) (e) (u) | Food & Beverage | 670,510 | 382 | — | — | % | |||||||||||||
Dyno Acquiror, Inc. (c) (e) | Consumer | 134,102 | 58 | 80 | 0.0 | % | |||||||||||||
HemaSource, Inc. (c) (e) (x) | Healthcare | 223,503 | 168 | 101 | 0.0 | % | |||||||||||||
ICP Industrial, Inc. (c) (e) | Chemicals | 288 | 279 | 380 | 0.0 | % | |||||||||||||
Integrated Efficiency Solutions, Inc. (c) (e) | Industrials | 53,215 | 56 | — | — | % | |||||||||||||
Integrated Efficiency Solutions, Inc. (c) (e) | Industrials | 2,975 | 3 | — | — | % | |||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o) | Transportation | 1 | — | 57,226 | 3.9 | % | |||||||||||||
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o) | Transportation | 3,250,000 | 2,795 | 3,250 | 0.2 | % | |||||||||||||
Kahala US OpCo, LLC (a) (c) (e) (k) (o) | Transportation | 13.00% | 4,413,472 | — | — | — | % | ||||||||||||
K-Square Restaurant Partners, LP (c) (e) (x) | Food & Beverage | 447 | 175 | — | — | % | |||||||||||||
Lakeview Health Holdings, Inc. (c) (e) | Healthcare | 447 | — | — | — | % | |||||||||||||
MGTF Holdco, LLC (c) (e) (o) (u) | Media/Entertainment | 330,000 | — | — | — | % | |||||||||||||
MIC Holding, LLC (c) (e) | Consumer | 30,000 | 3,750 | 3,822 | 0.3 | % | |||||||||||||
MIC Holding, LLC (c) (e) | Consumer | 1,470 | 3,687 | 4,520 | 0.3 | % | |||||||||||||
Micross Solutions, LLC (c) (e) | Software/Services | 442,430 | 223 | 1,040 | 0.1 | % | |||||||||||||
Mood Media Corp. (c) (e) | Media/Entertainment | 121,021 | 27 | — | — | % | |||||||||||||
Motor Vehicle Software Corp. (c) (e) (x) | Business Services | 223,503 | 318 | 268 | 0.0 | % | |||||||||||||
NexSteppe, Inc. (c) (e) (o) | Chemicals | 237,239,694 | 737 | — | — | % | |||||||||||||
NMFC Senior Loan Program I, LLC (a) (o) | Diversified Investment Vehicles | 50,000 | 50,000 | 47,310 | 3.2 | % | |||||||||||||
Nomacorc, LLC (c) (e) (u) | Industrials | 356,816 | 56 | 143 | 0.0 | % | |||||||||||||
Park Ave RE Holdings, LLC (c) (e) (o) (w) | Financials | 719 | 2,842 | 11,133 | 0.8 | % | |||||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 27,250 | — | — | — | % | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
31
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 315 | $ | — | $ | — | — | % | |||||||||||
PCX Aerostructures, LLC (c) (e) (p) | Industrials | 1,356 | — | — | — | % | |||||||||||||
PennantPark Credit Opportunities Fund II, LP (a) (p) | Diversified Investment Vehicles | 8,739 | 8,739 | 8,707 | 0.6 | % | |||||||||||||
PT Network, LLC (c) (e) (u) | Healthcare | 3 | — | — | — | % | |||||||||||||
RMP Group, Inc. (c) (e) (u) | Financials | 223 | 164 | 274 | 0.0 | % | |||||||||||||
RockYou, Inc. (c) (e) | Media/Entertainment | 15,105 | — | — | — | % | |||||||||||||
Schweiger Dermatology Group, LLC (c) (e) (u) | Healthcare | 265,024 | — | — | — | % | |||||||||||||
Siena Capital Finance, LLC (c) (o) | Financials | 35,839,400 | 36,537 | 36,915 | 2.5 | % | |||||||||||||
Smile Brands, Inc. (c) (e) | Healthcare | 712 | 815 | 1,101 | 0.1 | % | |||||||||||||
Squan Holding Corp. (c) (e) | Telecom | 180,835 | — | — | — | % | |||||||||||||
Squan Holding Corp. (c) (e) | Telecom | 8,962 | — | — | — | % | |||||||||||||
St. Croix Hospice Acquisition Corp. (c) (e) | Healthcare | 112 | — | 31 | 0.0 | % | |||||||||||||
St. Croix Hospice Acquisition Corp. (c) (e) | Healthcare | 112 | 64 | 134 | 0.0 | % | |||||||||||||
SYNACOR, Inc. (e) (s) | Technology | 59,785 | — | 91 | 0.0 | % | |||||||||||||
Tap Rock Resources, LLC (c) (e) (g) (p) (u) | Energy | 20,672,210 | 20,672 | 20,879 | 1.4 | % | |||||||||||||
Tax Advisors Group, LLC (c) (e) (u) | Financials | 86 | 609 | 755 | 0.1 | % | |||||||||||||
Tax Defense Network, LLC (c) (e) (p) | Consumer | 633,382 | — | — | — | % | |||||||||||||
Tax Defense Network, LLC (c) (e) (p) | Consumer | 147,099 | 425 | — | — | % | |||||||||||||
Team Waste, LLC (c) (e) (p) (u) | Industrials | 111,752 | 2,235 | 2,235 | 0.2 | % | |||||||||||||
Tennenbaum Waterman Fund, LP (a) (p) | Diversified Investment Vehicles | 10,000 | 10,000 | 9,841 | 0.7 | % | |||||||||||||
THL Credit Greenway Fund II, LLC (a) (p) | Diversified Investment Vehicles | 5,048 | 5,048 | 2,554 | 0.2 | % | |||||||||||||
Travelpro Products, Inc. (a) (c) (e) | Consumer | 447,007 | 506 | 581 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 39,769 | 132 | 21 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 99,236 | — | — | — | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 3,155 | — | — | — | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 223 | 35 | 9 | 0.0 | % | |||||||||||||
United Biologics, LLC (c) (e) (u) | Healthcare | 4,206 | 31 | 15 | 0.0 | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 10,000 | 10 | — | — | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 490 | 490 | 640 | 0.0 | % | |||||||||||||
USASF Holdco, LLC (c) (e) (u) | Financials | 139 | 139 | 278 | 0.0 | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 1,468,221 | — | — | — | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 391,131 | — | — | — | % | |||||||||||||
Vantage Mobility International, LLC (c) (e) (p) | Transportation | 3,139,625 | 3,140 | 942 | 0.1 | % | |||||||||||||
Women's Marketing, Inc. (c) (e) | Media/Entertainment | 3,643 | — | — | — | % | |||||||||||||
World Business Lenders, LLC (c) (e) | Financials | 922,669 | 3,750 | 3,755 | 0.3 | % | |||||||||||||
WPNT, LLC (c) (e) (o) (u) | Media/Entertainment | 330,000 | — | — | — | % | |||||||||||||
WSO Holdings, LP (c) (e) | Food & Beverage | 698 | 279 | — | — | % | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
32
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019 | |||||||||||||||||||
Portfolio Company (f) (q) | Industry | Investment Coupon Rate / Maturity (y) | Principal / Number of Shares | Amortized Cost | Fair Value | % of Net Assets (b) | |||||||||||||
Wythe Will Tzetzo, LLC (c) (e) (u) | Food & Beverage | 22,312 | $ | 301 | $ | — | — | % | |||||||||||
YummyEarth, Inc. (c) (e) | Food & Beverage | 223 | — | — | — | % | |||||||||||||
Sub Total Equity/Other | $ | 210,172 | $ | 258,336 | 17.7 | % | |||||||||||||
TOTAL INVESTMENTS - 174.1% (b) | $ | 2,639,642 | $ | 2,546,184 | 174.1 | % | |||||||||||||
Forward foreign currency contracts:
Counterparty | Contract to Deliver | In Exchange For | Maturity Date | Unrealized Depreciation | ||||||||
Goldman Sachs International | CAD 21,807 | $ | 16,359 | 1/10/2020 | $ | (388 | ) | |||||
_________
(a) | All of the Company's investments, except the investments noted by this footnote, are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. Qualifying assets represent 75.9% of the Company's total assets. The significant majority of all investments held are deemed to be illiquid. |
(b) | Percentages are based on net assets as of December 31, 2019. |
(c) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements). |
(d) | All amounts are in thousands except share amounts. |
(e) | Non-income producing at December 31, 2019. |
(f) | The Company has various unfunded commitments to portfolio companies. Please refer to Note 7 - Commitments and Contingencies for details of these unfunded commitments. |
(g) | The commitment related to this investment is discretionary. |
(h) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala LuxCo S.A.R.L, which own 100% of the equity of the operating company, Kahala Ireland OpCo Designated Activity Company. |
(i) | The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities. |
(j) | The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities. |
(k) | The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC. |
The accompanying notes are an integral part of these consolidated financial statements.
33
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
(l) | For the year ended December 31, 2019, the following investments paid or have the option to pay all or a portion of interest and dividends via payment-in-kind (“PIK”): |
December 31, 2019 | |||||||||||||||
Portfolio Company | Investment Type | Cash | PIK | All-in Rate | PIK earned for the year ended December 31, 2019 | ||||||||||
Gold Standard Baking, Inc. | Senior Secured First Lien Debt | 6.50 | % | 2.00 | % | 8.50 | % | $ | 81 | ||||||
Integral Ad Science, Inc. | Senior Secured First Lien Debt | 7.80 | % | 1.25 | % | 9.05 | % | 182 | |||||||
Internap Corp. | Senior Secured First Lien Debt | 8.04 | % | 0.75 | % | 8.79 | % | 56 | |||||||
Kahala Ireland OpCo Designated Activity Company | Senior Secured First Lien Debt | 13.00 | % | — | % | 13.00 | % | — | |||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien Debt | — | % | 9.75 | % | 9.75 | % | — | |||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien Debt | — | % | 9.75 | % | 9.75 | % | — | |||||||
LightSquared, LP | Senior Secured First Lien Debt | — | % | 10.85 | % | 10.85 | % | 1,478 | |||||||
Medical Depot Holdings, Inc. | Senior Secured First Lien Debt | 7.44 | % | 2.00 | % | 9.44 | % | 93 | |||||||
NexSteppe, Inc. | Senior Secured First Lien Debt | — | % | 12.00 | % | 12.00 | % | — | |||||||
NexSteppe, Inc. | Senior Secured First Lien Debt | — | % | 12.00 | % | 12.00 | % | — | |||||||
ORG Chemical Holdings, LLC | Senior Secured First Lien Debt | 9.70 | % | — | % | 9.70 | % | 14 | |||||||
ORG Chemical Holdings, LLC | Senior Secured First Lien Debt | 9.70 | % | — | % | 9.70 | % | 269 | |||||||
PT Network, LLC | Senior Secured First Lien Debt | 7.44 | % | 2.00 | % | 9.44 | % | 101 | |||||||
Squan Holding Corp. | Senior Secured First Lien Debt | 7.95 | % | 1.00 | % | 8.95 | % | 169 | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | — | % | 10.00 | % | 10.00 | % | — | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | 4.47 | % | 5.53 | % | 10.00 | % | — | |||||||
Tax Defense Network, LLC | Senior Secured First Lien Debt | 4.47 | % | 5.53 | % | 10.00 | % | — | |||||||
TwentyEighty, Inc. | Senior Secured First Lien Debt | 4.00 | % | 4.00 | % | 8.00 | % | 201 | |||||||
TwentyEighty, Inc. | Senior Secured First Lien Debt | 0.25 | % | 8.75 | % | 9.00 | % | 426 | |||||||
Von Drehle Corp. | Senior Secured First Lien Debt | 9.44 | % | 4.00 | % | 13.44 | % | 1,068 | |||||||
KidKraft, Inc. | Senior Secured Second Lien Debt | 11.00 | % | 1.00 | % | 12.00 | % | 63 | |||||||
Travelpro Products, Inc. | Senior Secured Second Lien Debt | 11.00 | % | 2.00 | % | 13.00 | % | 48 | |||||||
Travelpro Products, Inc. | Senior Secured Second Lien Debt | 11.00 | % | 2.00 | % | 13.00 | % | 42 | |||||||
Vantage Mobility International, LLC | Senior Secured Second Lien Debt | — | % | 7.80 | % | 7.80 | % | — | |||||||
Vital Proteins, LLC | Senior Secured Second Lien Debt | 7.50 | % | 4.50 | % | 12.00 | % | 168 | |||||||
Captek Softgel International, Inc. | Subordinated Debt | 10.00 | % | 1.50 | % | 11.50 | % | 80 | |||||||
Community Intervention Services, Inc. | Subordinated Debt | — | % | 13.00 | % | 13.00 | % | — | |||||||
Dyno Acquiror, Inc. | Subordinated Debt | 10.50 | % | 1.50 | % | 12.00 | % | 16 | |||||||
HTC Borrower, LLC | Subordinated Debt | 10.00 | % | 3.00 | % | 13.00 | % | 169 | |||||||
Park Ave RE Holdings, LLC | Subordinated Debt | 13.00 | % | — | % | 13.00 | % | — | |||||||
PCX Aerostructures, LLC | Subordinated Debt | — | % | 6.00 | % | 6.00 | % | 462 | |||||||
RMP Group, Inc. | Subordinated Debt | 10.50 | % | 1.00 | % | 11.50 | % | 23 | |||||||
Total | $ | 5,209 | |||||||||||||
(m) | The principal amount (par amount) is denominated in Canadian Dollars or CAD. |
(n) | For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (v) for a further description of an equity investment in a Collateralized Security. |
(o) | The provisions of the 1940 Act classify investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be "non-controlled" when the Company owns 25% or less of the portfolio company's voting securities and "controlled" when the Company owns more than 25% of the portfolio company's voting securities. The Company classifies this investment as "controlled". |
(p) | The provisions of the 1940 Act classify investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as "non-affiliated" when the Company owns less than 5% of a portfolio company's voting securities and "affiliated" when the Company owns 5% or more of a portfolio company's voting securities. The Company classifies this investment as "affiliated". |
The accompanying notes are an integral part of these consolidated financial statements.
34
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
(q) | Unless otherwise indicated, all investments in the consolidated schedule of investments are non-affiliated, non-controlled investments. |
(r) | The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD. |
(s) | The investment is not a restricted security. All other securities are restricted securities. |
(t) | The investment is on non-accrual status as of December 31, 2019. |
(u) | Investments are held in the taxable wholly-owned, consolidated subsidiary, 54th Street Equity Holdings, Inc. |
(v) | The Collateralized Securities - subordinated notes are treated as equity investments and are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized. |
(w) | The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC. |
(x) | The investment is held through BSP TCAP Acquisition Holdings LP which, as further outlined in Note 1, is an affiliated acquisition entity utilized for the Triangle Transaction. Due to certain restrictions, such as limits on the number of partners allowable within the equity structures of the newly acquired investments, these investments are still held within the acquisition entity as of December 31, 2019. |
(y) | The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, monthly, quarterly, or semiannually. For each, the Company has provided the spread over LIBOR or Prime and the current interest rate in effect at December 31, 2019. Certain investments are subject to a LIBOR or Prime interest rate floor. For fixed rate loans, a spread above a reference rate is not applicable. |
The accompanying notes are an integral part of these consolidated financial statements.
35
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)
December 31, 2019
The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2019:
At December 31, 2019 | ||||||
Investments at Fair Value | Percentage of Total Portfolio | |||||
Healthcare | $ | 364,143 | 14.3 | % | ||
Business Services | 354,813 | 13.9 | % | |||
Industrials | 308,246 | 12.1 | % | |||
Transportation | 180,676 | 7.1 | % | |||
Diversified Investment Vehicles | 177,339 | 7.0 | % | |||
Financials | 170,154 | 6.7 | % | |||
Telecom | 152,334 | 6.0 | % | |||
Energy | 152,159 | 6.0 | % | |||
Media/Entertainment | 141,505 | 5.5 | % | |||
Technology | 128,117 | 5.0 | % | |||
Food & Beverage | 109,211 | 4.3 | % | |||
Consumer | 76,535 | 3.0 | % | |||
Education | 54,593 | 2.1 | % | |||
Gaming/Lodging | 47,577 | 1.9 | % | |||
Paper & Packaging | 43,538 | 1.7 | % | |||
Software/Services | 42,372 | 1.7 | % | |||
Chemicals | 32,564 | 1.3 | % | |||
Health/Fitness | 5,324 | 0.2 | % | |||
Retail | 4,984 | 0.2 | % | |||
Total | $ | 2,546,184 | 100.0 | % | ||
The accompanying notes are an integral part of these consolidated financial statements.
36
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Note 1 — Organization and Basis of Presentation
Business Development Corporation of America (the “Company” or "BDCA") is an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, the Company has elected to be treated for tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment activities are managed by BDCA Adviser, LLC (the “Adviser”), a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by the Company’s Board of Directors ("Board"), a majority of whom are independent of the Adviser and its affiliates. As a BDC, the Company is required to comply with certain regulatory requirements.
The Company’s investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. The Company invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The Company defines middle market companies as those with annual revenues up to $1 billion. The Company also purchases interests in loans through secondary market transactions. First and second lien secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower, which may include inventory, receivables, plant, property, and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. The Company may invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities” or "CLOs"). CLOs are entities that are formed to manage a portfolio of senior secured loans made to companies whose debt is typically rated below investment grade or, in limited circumstances, unrated. The senior secured loans within these Collateralized Securities meet specified credit and diversity criteria and are subject to concentration limitations in order to create a diverse investment portfolio. In most cases, companies to whom the Company provides customized financing solutions will be privately held at the time the Company invests in them.
On February 1, 2019, Franklin Resources, Inc. (“FRI”) and Templeton International, Inc. (collectively with FRI, “Franklin Templeton”) acquired BSP, including BSP’s 100% ownership interest in the Adviser (the “FT Transaction”).
During the six months ended June 30, 2020, the Company invested approximately $363.3 million in portfolio companies to contribute to the support of their business objectives of which some were contractually obligated. See Note 7 - Commitments and Contingencies. As of June 30, 2020, the Company held investments in loans it made to investee companies with aggregate principal amounts of $2,183.9 million. The details of such investments have been disclosed on the consolidated schedule of investments as well as in Note 3 - Fair Value of Financial Instruments. In addition to providing loans to investee companies, from time to time the Company may assist investee companies in securing financing from other sources by introducing such investee companies to sponsors or other lending institutions.
While the structure of the Company’s investments is likely to vary, the Company may invest in senior secured debt, senior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, preferred equity, common equity, warrants, CLOs, and other instruments, many of which generate current yields. If the Adviser deems appropriate, the Company may invest in more liquid senior secured and second lien debt securities, some of which may be traded. The Company will make such investments to the extent allowed by the 1940 Act and consistent with its continued qualification as a RIC for federal income tax purposes.
On January 25, 2011, the Company commenced its initial public offering (the “IPO”) on a “reasonable best efforts basis” of up to 150.0 million shares of common stock, $0.001 par value per share, and subsequently amended the offering to issue up to an additional 101.1 million shares of its common stock (the “Offering”). The Company closed the Offering to new investments on April 30, 2015. As of June 30, 2020, the Company had issued 227.9 million shares of common stock for gross proceeds of $2.3 billion including the shares purchased by affiliates and shares issued under the Company's distribution reinvestment plan (“DRIP”). As of June 30, 2020, the Company had repurchased a cumulative 27.9 million shares of common stock through its share repurchase program for payments of $239.5 million.
The Company intends to co-invest, subject to the conditions included in the exemptive order the Company received from the Securities and Exchange Commission ("SEC"), with certain of its affiliates. The Company believes that such co-investments may afford it additional investment opportunities and an ability to achieve greater diversification.
As a BDC, the Company is generally required to invest at least 70% of its total assets primarily in securities of private and certain U.S. public companies (other than certain financial institutions), cash, cash equivalents and U.S. Government securities, and other high-quality debt investments that mature in one year or less.
37
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The Company is permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally currently allows it to incur leverage for up to one half of its total assets). The Company has used, and expects to continue to use, its credit facilities and other borrowings, along with proceeds from the rotation of its portfolio and proceeds from private securities offerings to finance its investment objectives.
Although the Small Business Credit Availability Act of 2018 (the “SBCAA”) amended the 1940 Act to permit BDCs to incur increased leverage if certain conditions are met, the Company does not presently intend to avail itself of the increased leverage limits permitted by the SBCAA. If the Company were to avail itself of the increased leverage permitted by the SBCAA, this would effectively allow the Company to double its leverage, which would increase leverage risk and expenses.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements reflect all adjustments, both normal and recurring which, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition for the periods presented. The Company is an investment company and follows accounting and reporting guidance in Accounting Standards Codification ("ASC") Topic 946 - Financial Services - Investment Companies ("ASC 946").
We have also formed and expect to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”). The Company consolidates the following subsidiaries for accounting purposes: BDCA Funding I, LLC (“Funding I”), BDCA-CB Funding, LLC (“CB Funding”), BDCA Helvetica Funding, Ltd. (“Helvetica Funding”), 54th Street Equity Holdings, Inc. and the Consolidated Holding Companies. All significant intercompany balances and transactions have been eliminated in consolidation.
Prior to September 30, 2019, in conjunction with the consolidation of subsidiaries, the Company had recognized non-controlling interests attributable to third party ownership in the following Consolidated Holding Companies: Kahala Aviation Holdings, LLC, Kahala Aviation US, Inc., and Kahala LuxCo S.A.R.L. On September 30, 2019, the Company entered an agreement to purchase the third party ownership of Kahala Aviation Holdings LLC, which in turn owns 100% of the equity of Kahala Aviation US, Inc. and Kahala LuxCo S.A.R.L. As a result of this agreement, the company owns 100% of the equity of Kahala Aviation Holdings LLC, Kahala Aviation US, Inc, and Kahala LuxCo S.A.R.L, and therefore no longer recognizes a non-controlling interest in these Consolidated Holding Companies. Effective in the current period, the Kahala LuxCo S.A.R.L. entity was liquidated. See Note 9 - Common Stock for detail of the activity attributable to non-controlling interests.
Interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by U.S. GAAP for annual consolidated financial statements. U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ materially. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2020.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions 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. Actual results could differ from those estimates.
Consolidation
As provided under ASC 946, the Company will generally not consolidate its investment in a company other than a substantially or wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company's substantially wholly-owned subsidiaries in its consolidated financial statements.
38
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Valuation of Portfolio Investments
Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis, the Company performs an analysis of each investment to determine fair value as follows:
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined to be readily available, the Company uses the quote obtained.
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:
• | Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by the Company's Board of Directors or as noted below, with respect to investments in an investment fund; |
• | The independent valuation firm(s) conduct independent appraisals and make an independent assessment of the value of each investment; and |
• | The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable). |
For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of the Company's measurement date. However, there can be no assurance that the Company will be able to sell such investment at a price equal to its net asset value per share and the Company may ultimately sell such investment at a discount to its net asset value per share.
The Company’s investments in funds that offer periodic liquidity have redemption frequencies which range from monthly to quarterly and redemption notice periods which range from 30 to 90 days. Investments in private equity typically do not offer liquidity and instead, capital is returned through periodic distributions.
Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its Board of Directors, as described herein. 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. Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.
39
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Investment Classification
The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control” is defined as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. In addition, any person “who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. Typically, any person who does not so own more than 25% of the voting securities of any company shall be presumed not to control such company.” Consistent with the 1940 Act, “Affiliated Investments” are defined as those investments in companies in which the Company owns 5% or more of the voting securities. Consistent with the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments in a money market deposit account. Cash and cash equivalents are carried at cost which approximates fair value.
Offering Costs
The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators, and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.
Pursuant to the Investment Advisory Agreement, the Company and the Adviser have agreed that the Company will not be liable for organization and offering costs, including transfer agent fees, in excess of 1.5% of the aggregate gross proceeds from the Company’s on-going offering. Should the Company resume continually offering its shares, any offering costs incurred will be capitalized and amortized as an expense on a straight-line basis over a 12-month period. For the periods ended June 30, 2020 and 2019, the Company did not incur any offering costs.
Deferred Financing Costs
Financing costs incurred in connection with the Company’s unsecured notes and revolving credit facilities with Wells Fargo and Citi are capitalized and amortized into expense using the straight-line method, which approximates the effective yield method over the life of the respective facility. See Note 5 - Borrowings for details on the credit facilities and unsecured notes.
Distributions
The Company’s Board of Directors authorizes and declares cash distributions payable on a quarterly basis to stockholders of record on each record date. The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions. The Company calculates each stockholder’s specific distribution amount for the quarter using record and declaration dates and accrues distributions on the date the Company accepts a subscription for shares of the Company’s common stock. The distributions are payable by the fifth day following each record date. From time to time, the Company may also pay interim distributions, including capital gains distributions, at the discretion of the Company’s Board of Directors. The Company’s distributions may exceed earnings, especially during the period before it has substantially invested the proceeds from the offering. As a result, a portion of the distributions made by the Company may represent a return of capital for U.S. federal income tax purposes. A return of capital is a return of each stockholder’s investment rather than earnings or gains derived from the Company’s investment activities.
The Company may fund cash distributions to stockholders from any sources of funds available to the Company, including advances from the Adviser that are subject to reimbursement, as well as offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets. The Company has not established limits on the amount of funds it may use from available sources to make distributions. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.
Revenue Recognition
Interest Income
Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.
40
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The Company has a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in the Company's case, preferred shares or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40-35, Beneficial Interests in Securitized Financial Assets ("ASC 325-40-35"). The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly. In accordance with ASC 325-40, investments in CLOs are periodically assessed for other-than-temporary impairment ("OTTI"). When the Company determines that a CLO has OTTI, the amortized cost basis of the CLO is written down as of the date of the determination based on events and information evaluated and that write-down is recognized as a realized loss.
Fee Income
Fee income, such as structuring fees, origination, closing, amendment fees, commitment, termination, and other upfront fees are generally non-recurring and are recognized as income when earned, either upon receipt or amortized into income. Upon the re-payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.
Payment-in-Kind Interest/Dividends
The Company holds debt and equity investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.
Non-accrual Income
Investments may be placed on non-accrual status when principal or interest payments are past due and/or when there is reasonable doubt that principal or interest will be collected. Accrued interest which may include un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.
Net Realized Gain or Loss and Net Change in Unrealized Appreciation or Depreciation
Gain or loss on the sale of investments is calculated using the specific identification method. The Company measures realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when a gain or loss is realized.
Income Taxes
The Company has elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. Generally, a RIC is not subject to federal income taxes in respect of each taxable year if it distributes dividends for federal income tax purposes to stockholders of an amount generally equal to at least 90% of ‘‘investment company taxable income,’’ as defined in the Code, and determined without regard to any deduction for dividends paid. Distributions declared prior to the filing of the previous year's tax return and paid up to twelve months after the previous tax year can be carried back to the prior tax year in determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its ability to be subject to be taxed as a RIC each year. The Company may be subject to federal excise tax imposed at a rate of 4% on certain undistributed amounts. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.
Recent Accounting Pronouncements
Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. The Company adopted ASU 2020-04 for the period ended June 30, 2020 and there was no impact to the accompanying financial statements and related disclosures.
41
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Note 3 — Fair Value of Financial Instruments
The Company’s fair value measurements are classified into a fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurement, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:
• | Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. |
• | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. |
• | Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. |
The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.
For investments for which Level 1 inputs, such as quoted prices, were not available at June 30, 2020 and December 31, 2019, the investments were valued at fair value as determined in good faith using the valuation policy approved by the Board of Directors using Level 2 and Level 3 inputs. The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value. Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio at June 30, 2020 and December 31, 2019 may differ materially from values that would have been used had a ready market for the securities existed.
In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the Board of Directors. Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis the Company performs an analysis of each investment to determine fair value as described below.
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, the Company uses the quote obtained.
42
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, as of the Company's measurement date.
For investments in Collateralized Securities, the Adviser models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate cash flows from the assets, and distribute the cash flows to the liability structure based on the contractual priority of payments. The cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Adviser considers broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.
As part of the Company's quarterly valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company. The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).
Determination of fair values involves subjective judgments and estimates. Accordingly, the notes to the consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on the consolidated financial statements.
For discussion of the fair value measurement of the Company's borrowings, refer to Note 5 - Borrowings.
For discussion of the fair value measurement of the Company's foreign currency contracts, refer to Note 6 - Derivatives.
The following table presents fair value measurements of investments, by major class, as of June 30, 2020, according to the fair value hierarchy:
Fair Value Measurements | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Measured at Net Asset Value (1) | Total | |||||||||||||||
Senior Secured First Lien Debt | $ | — | $ | 408,288 | $ | 1,166,655 | $ | — | $ | 1,574,943 | |||||||||
Senior Secured Second Lien Debt | — | 27,303 | 191,210 | — | 218,513 | ||||||||||||||
Subordinated Debt | — | 8,618 | 110,887 | — | 119,505 | ||||||||||||||
Collateralized Securities | — | — | 94,712 | — | 94,712 | ||||||||||||||
Equity/Other | 68 | — | 151,922 | 57,876 | 209,866 | ||||||||||||||
Total | $ | 68 | $ | 444,209 | $ | 1,715,386 | $ | 57,876 | $ | 2,217,539 | |||||||||
______________
(1) In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient election have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.
43
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table presents fair value measurements of investments, by major class, as of December 31, 2019, according to the fair value hierarchy:
Fair Value Measurements | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Measured at Net Asset Value (1) | Total | |||||||||||||||
Senior Secured First Lien Debt | $ | — | $ | 642,755 | $ | 1,121,537 | $ | — | $ | 1,764,292 | |||||||||
Senior Secured Second Lien Debt | — | 35,246 | 271,232 | — | 306,478 | ||||||||||||||
Subordinated Debt | — | 11,051 | 97,100 | — | 108,151 | ||||||||||||||
Collateralized Securities | — | — | 108,927 | — | 108,927 | ||||||||||||||
Equity/Other | 2,624 | — | 187,300 | 68,412 | 258,336 | ||||||||||||||
Total | $ | 2,624 | $ | 689,052 | $ | 1,786,096 | $ | 68,412 | $ | 2,546,184 | |||||||||
______________
(1) In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient election have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended June 30, 2020:
Senior Secured First Lien Debt | Senior Secured Second Lien Debt | Subordinated Debt | Collateralized Securities | Equity/Other | Total | ||||||||||||||||||
Balance as of December 31, 2019 | $ | 1,121,537 | $ | 271,232 | $ | 97,100 | $ | 108,927 | $ | 187,300 | $ | 1,786,096 | |||||||||||
Net change in unrealized appreciation (depreciation) on investments | (38,262 | ) | (6,699 | ) | 3,141 | (32,901 | ) | (21,916 | ) | (96,637 | ) | ||||||||||||
Purchases and other adjustments to cost | 175,630 | 5,474 | 26,270 | 26,045 | 5,649 | 239,068 | |||||||||||||||||
Sales and repayments | (202,048 | ) | (50,387 | ) | (14,420 | ) | (7,535 | ) | (20,753 | ) | (295,143 | ) | |||||||||||
Net realized gain (loss) | (24,026 | ) | (31,073 | ) | (1,204 | ) | 176 | 1,642 | (54,485 | ) | |||||||||||||
Transfers in | 178,598 | 9,567 | — | — | — | 188,165 | |||||||||||||||||
Transfers out | (44,774 | ) | (6,904 | ) | — | — | — | (51,678 | ) | ||||||||||||||
Balance as of June 30, 2020 | $ | 1,166,655 | $ | 191,210 | $ | 110,887 | $ | 94,712 | $ | 151,922 | $ | 1,715,386 | |||||||||||
Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period: | $ | (53,509 | ) | $ | (24,311 | ) | $ | 3,447 | $ | (32,863 | ) | $ | (24,867 | ) | $ | (132,103 | ) | ||||||
Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the period.
For the six months ended June 30, 2020, transfers from Level 2 to Level 3 were due to current assessments of investment liquidity and a decrease in the number of observable market inputs. For the six months ended June 30, 2020, transfers from Level 3 to Level 2 were due to an increase in the number of observable market inputs.
44
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2019:
Senior Secured First Lien Debt | Senior Secured Second Lien Debt | Subordinated Debt | Collateralized Securities | Equity/Other | Total | ||||||||||||||||||
Balance as of December 31, 2018 | $ | 1,039,223 | $ | 252,651 | $ | 92,595 | $ | 127,212 | $ | 117,107 | $ | 1,628,788 | |||||||||||
Net change in unrealized appreciation (depreciation) on investments | 11,310 | (13,032 | ) | 2,896 | 13,773 | 29,402 | 44,349 | ||||||||||||||||
Purchases and other adjustments to cost | 399,096 | 95,904 | 25,976 | 54,094 | 76,674 | 651,744 | |||||||||||||||||
Sales and repayments | (287,445 | ) | (73,393 | ) | (35,326 | ) | (60,418 | ) | (48,014 | ) | (504,596 | ) | |||||||||||
Net realized gain (loss) | (45,639 | ) | 464 | (607 | ) | (25,734 | ) | 12,131 | (59,385 | ) | |||||||||||||
Transfers in | 55,783 | 16,396 | 11,566 | — | — | 83,745 | |||||||||||||||||
Transfers out | (50,791 | ) | (7,758 | ) | — | — | — | (58,549 | ) | ||||||||||||||
Balance as of December 31, 2019 | $ | 1,121,537 | $ | 271,232 | $ | 97,100 | $ | 108,927 | $ | 187,300 | $ | 1,786,096 | |||||||||||
Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period: | $ | (29,473 | ) | $ | (12,908 | ) | $ | (1,595 | ) | $ | (7,891 | ) | $ | 29,109 | $ | (22,758 | ) | ||||||
Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the period.
For the year ended December 31, 2019, transfers from Level 2 to Level 3 were due to a decrease in the number of observable market inputs. For the year ended December 31, 2019, transfers from Level 3 to Level 2 were due to an increase in the number of observable market inputs.
The composition of the Company’s investments as of June 30, 2020, at amortized cost and fair value, were as follows:
Investments at Amortized Cost | Investments at Fair Value | Fair Value Percentage of Total Portfolio | ||||||||
Senior Secured First Lien Debt | $ | 1,741,585 | $ | 1,574,943 | 71.0 | % | ||||
Senior Secured Second Lien Debt | 255,568 | 218,513 | 9.8 | |||||||
Subordinated Debt | 119,419 | 119,505 | 5.4 | |||||||
Collateralized Securities | 141,553 | 94,712 | 4.3 | |||||||
Equity/Other | 194,058 | 209,866 | 9.5 | |||||||
Total | $ | 2,452,183 | $ | 2,217,539 | 100.0 | % | ||||
The composition of the Company’s investments as of December 31, 2019, at amortized cost and fair value, were as follows:
Investments at Amortized Cost | Investments at Fair Value | Fair Value Percentage of Total Portfolio | ||||||||
Senior Secured First Lien Debt | $ | 1,862,228 | $ | 1,764,292 | 69.3 | % | ||||
Senior Secured Second Lien Debt | 335,366 | 306,478 | 12.0 | |||||||
Subordinated Debt | 109,006 | 108,151 | 4.2 | |||||||
Collateralized Securities | 122,870 | 108,927 | 4.3 | |||||||
Equity/Other | 210,172 | 258,336 | 10.2 | |||||||
Total | $ | 2,639,642 | $ | 2,546,184 | 100.0 | % | ||||
45
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Significant Unobservable Inputs
The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of June 30, 2020. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
Range | ||||||||||||||
Asset Category | Fair Value | Primary Valuation Technique | Unobservable Inputs | Minimum | Maximum | Weighted Average (a) | ||||||||
Senior Secured First Lien Debt | $ | 940,575 | Discounted Cash Flow | Market Yield | 3.86% | 30.75% | 8.86% | |||||||
Senior Secured First Lien Debt | $ | 69,570 | Yield Analysis | Market Yield | 6.69% | 24.28% | 10.71% | |||||||
Senior Secured First Lien Debt | $ | 58,374 | Waterfall Analysis | EBITDA Multiple | 0.34x | 7.89x | 3.43x | |||||||
Senior Secured First Lien Debt (b) | $ | 50,549 | Waterfall Analysis | Discount Rate | 17.50% | 17.50% | 17.50% | |||||||
Senior Secured First Lien Debt | $ | 23,610 | Recovery Analysis | EBITDA Multiple | 1.23x | 7.14x | 6.71x | |||||||
Senior Secured First Lien Debt (c) | $ | 21,089 | N/A | N/A | N/A | N/A | N/A | |||||||
Senior Secured First Lien Debt | $ | 2,888 | Waterfall Analysis | Revenue Multiple | 0.39x | 0.84x | 0.62x | |||||||
Senior Secured Second Lien Debt | $ | 137,417 | Discounted Cash Flow | Market Yield | 8.30% | 22.25% | 11.79% | |||||||
Senior Secured Second Lien Debt | $ | 41,285 | Yield Analysis | Market Yield | 8.06% | 21.15% | 13.90% | |||||||
Senior Secured Second Lien Debt | $ | 7,918 | Waterfall Analysis | EBITDA Multiple | 5.47x | 6.25x | 6.16x | |||||||
Senior Secured Second Lien Debt | $ | 4,590 | Waterfall Analysis | Revenue Multiple | 0.39x | 1.56x | 0.91x | |||||||
Subordinated Debt (b) | $ | 37,237 | Discounted Cash Flow | Discount Rate | 10.75% | 10.75% | 10.75% | |||||||
Subordinated Debt (b) | $ | 25,500 | Waterfall Analysis | Tangible Net Asset Value Multiple | 1.40x | 1.40x | 1.40x | |||||||
Subordinated Debt (b) | $ | 22,849 | Discounted Cash Flow | Market Yield | 0.13x | 0.13x | 0.13x | |||||||
Subordinated Debt | $ | 10,377 | Yield Analysis | Market Yield | 13.13% | 23.82% | 16.36% | |||||||
Subordinated Debt (b) | $ | 9,579 | Waterfall Analysis | EBITDA Multiple | 3.58x | 3.58x | 3.58x | |||||||
Subordinated Debt (b) | $ | 5,345 | Waterfall Analysis | Revenue Multiple | 0.70x | 0.70x | 0.70x | |||||||
Collateralized Securities | $ | 94,712 | Discounted Cash Flow | Discount Rate | 6.40% | 44.50% | 15.52% | |||||||
Equity/Other | $ | 71,539 | Waterfall Analysis | Discount Rate | 17.50% | 20.00% | 18.07% | |||||||
Equity/Other | $ | 30,119 | Waterfall Analysis | Tangible Net Asset Value Multiple | 1.30x | 1.40x | 1.40x | |||||||
Equity/Other | $ | 21,082 | Discounted Cash Flow | Market Yield | 15.45% | 18.56% | 16.72% | |||||||
Equity/Other | $ | 15,058 | Waterfall Analysis | EBITDA Multiple | 1.63x | 10.65x | 7.57x | |||||||
46
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Equity/Other (b) | $ | 5,278 | Discounted Cash Flow | Discount Rate | 10.75% | 10.75% | 10.75% | |||||||
Equity/Other | $ | 3,342 | Waterfall Analysis | Revenue Multiple | 0.10x | 2.33x | 1.82x | |||||||
Equity/Other (c) | $ | 3,336 | N/A | N/A | N/A | N/A | N/A | |||||||
Equity/Other (b) | $ | 2,168 | Waterfall Analysis | TBV Multiple | 2.55x | 2.55x | 2.55x | |||||||
Total | $ | 1,715,386 | ||||||||||||
______________
(a) | Weighted averages are calculated based on fair value of investments. |
(b) | This asset category contains one investment. |
(c) | This instrument(s) was held at cost. |
There were no significant changes in valuation approach or technique as of June 30, 2020.
Level 3 Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities where the fair value is based on unobservable inputs.
The income and market approaches were used in the determination of fair value of certain Level 3 assets as of June 30, 2020 and December 31, 2019. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates is risk of default, rating of the investment, call provisions and comparable company investments. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.
Valuations of loans, corporate debt, and other debt obligations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analysis, which incorporate comparisons to other debt instruments for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis. The Company also considers the use of EBITDA multiples, revenue multiples, tangible net asset value multiples, TBV multiples, and other relevant multiples on its debt and equity investments to determine any credit gains or losses in certain instances. Increases or decreases in either of these inputs in isolation may result in a significantly lower or higher fair value measurement of the respective subject instrument.
The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2019. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
Range | ||||||||||||||
Asset Category | Fair Value | Primary Valuation Technique | Unobservable Inputs | Minimum | Maximum | Weighted Average (a) | ||||||||
Senior Secured First Lien Debt | $ | 858,510 | Discounted Cash Flow | Market Yield | 6.50% | 57.85% | 10.00% | |||||||
Senior Secured First Lien Debt | $ | 119,724 | Waterfall Analysis | Discount Rate | 13.00% | 19.39% | 13.76% | |||||||
Senior Secured First Lien Debt (c) | $ | 51,492 | N/A | N/A | N/A | N/A | N/A | |||||||
Senior Secured First Lien Debt | $ | 48,582 | Yield Analysis | Market Yield | 6.15% | 15.65% | 10.72% | |||||||
Senior Secured First Lien Debt | $ | 40,373 | Waterfall Analysis | EBITDA Multiple | 3.00x | 5.50x | 3.86x | |||||||
47
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Senior Secured First Lien Debt | $ | 2,856 | Waterfall Analysis | Revenue Multiple | 0.42x | 0.92x | 0.71x | |||||||
Senior Secured Second Lien Debt | $ | 201,399 | Discounted Cash Flow | Market Yield | 6.17% | 28.00% | 11.40% | |||||||
Senior Secured Second Lien Debt | $ | 46,566 | Yield Analysis | Market Yield | 10.43% | 19.73% | 11.38% | |||||||
Senior Secured Second Lien Debt | $ | 18,353 | Waterfall Analysis | EBITDA Multiple | 4.85x | 7.86x | 5.16x | |||||||
Senior Secured Second Lien Debt | $ | 4,914 | Waterfall Analysis | Revenue Multiple | 0.48x | 1.59x | 0.94x | |||||||
Subordinated Debt (b) | $ | 37,237 | Discounted Cash Flow | Discount Rate | 8.50% | 8.50% | 8.50% | |||||||
Subordinated Debt (b) | $ | 22,500 | Waterfall Analysis | Tangible Net Asset Value Multiple | 1.70x | 1.70x | 1.70x | |||||||
Subordinated Debt | $ | 13,581 | Yield Analysis | Market Yield | 12.18% | 19.59% | 14.45% | |||||||
Subordinated Debt (b) | $ | 12,550 | Discounted Cash Flow | Market Yield | 9.00% | 9.00% | 9.00% | |||||||
Subordinated Debt | $ | 11,232 | Waterfall Analysis | EBITDA Multiple | 5.69x | 7.94x | 6.76x | |||||||
Collateralized Securities | $ | 85,163 | Discounted Cash Flow | Discount Rate | 4.60% | 22.50% | 12.51% | |||||||
Collateralized Securities (c) | $ | 23,764 | N/A | N/A | N/A | N/A | N/A | |||||||
Equity/Other | $ | 81,355 | Waterfall Analysis | Discount Rate | 12.50% | 13.00% | 12.87% | |||||||
Equity/Other | $ | 37,833 | Waterfall Analysis | Tangible Net Asset Value Multiple | 1.70x | 1.94x | 1.71x | |||||||
Equity/Other | $ | 28,943 | Discounted Cash Flow | Market Yield | 6.66% | 13.75% | 10.11% | |||||||
Equity/Other | $ | 20,332 | Waterfall Analysis | EBITDA Multiple | 3.30x | 12.06x | 7.62x | |||||||
Equity/Other (b) | $ | 11,133 | Discounted Cash Flow | Discount Rate | 8.50% | 8.50% | 8.50% | |||||||
Equity/Other | $ | 3,949 | Waterfall Analysis | Revenue Multiple | 0.16x | 2.50x | 1.56x | |||||||
Equity/Other (b) | $ | 3,755 | Waterfall Analysis | TBV Multiple | 4.30x | 4.30x | 4.30x | |||||||
Total | $ | 1,786,096 | ||||||||||||
______________
(a) | Weighted averages are calculated based on fair value of investments. |
(b) | This asset category contains one investment. |
(c) | This instrument(s) was held at cost. |
There were no significant changes in valuation approach or technique as of December 31, 2019.
Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.
48
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
As of June 30, 2020, the Company had nineteen portfolio companies, which represented 28 investments, on non-accrual status with a total amortized cost of $212.9 million and fair value of $124.4 million which represented 8.7% and 5.6% of the investment portfolio's total amortized cost and fair value, respectively. As of December 31, 2019, the Company had eight portfolio companies, which represented twelve investments, on non-accrual status with a total amortized cost of $62.8 million and fair value of $22.5 million, which represented 2.4%, and 0.9% of the investment portfolio's total amortized cost and fair value, respectively. Refer to Note 2 - Summary of Significant Accounting Policies - for additional details regarding the Company’s non-accrual policy.
Note 4 — Related Party Transactions and Arrangements
Investment Advisory Agreement
Pursuant to the Investment Advisory Agreement and for the investment advisory and management services provided thereunder, the Company pays the Adviser a base management fee and an incentive fee.
Prior to February 1, 2019, the Adviser provided investment advisory and management services under the investment advisory and management services agreement, effective November 1, 2016 (the “Prior Investment Advisory Agreement”), and most recently re-approved by the Board in August 2018. The terms of the Prior Investment Advisory Agreement were materially identical to the Investment Advisory Agreement. The Prior Investment Advisory Agreement automatically terminated on February 1, 2019 upon the indirect change of control of the Adviser on the consummation of Franklin Templeton's acquisition of BSP. The Investment Advisory Agreement was approved by the Board, including a majority of independent directors, on October 22, 2018, and by stockholders at a special meeting held on January 11, 2019 and took effect February 1, 2019.
Base Management Fee
The base management fee is calculated at an annual rate of 1.5% of the Company’s average gross assets. The Company's gross assets increase or decrease with any appreciation or depreciation associated with a derivative contract. Average gross assets is calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears and is appropriately pro-rated for any partial month or quarter. All or any part of the base management fee not taken as to any quarter may be deferred without interest and may be taken in such other quarter as the Adviser will determine within three years.
As of June 30, 2020 and December 31, 2019, $19.3 million and $10.1 million was payable to the Adviser for base management fees, respectively.
For the three and six months ended June 30, 2020, the Company incurred $9.4 million and $19.3 million, respectively, in base management fees under the Investment Advisory Agreement. For the three and six months ended June 30, 2019, the Company incurred $10.0 million and $19.5 million, respectively, in base management fees under the Investment Advisory Agreement.
Incentive Fees
The incentive fee consists of two parts. The first part is referred to as the incentive fee on income and it is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income, and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence, and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains or losses, or unrealized capital appreciation or depreciation. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on the value of the Company's net assets at the end of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature (as described below). The calculation of the incentive fee on income for each quarter is as follows:
49
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
• | No incentive fee on income will be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.75% or 7.00% annualized (the “Preferred Return”) on net assets; |
• | 100% of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the preferred return but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) will be payable to the Adviser. This portion of the Company’s incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 2.1875% (8.75% annualized) in any calendar quarter; and |
• | For any quarter in which the Company's Pre-Incentive Fee Net Investment Income exceeds 2.1875% (8.75% annualized), the incentive fee on income will be equal to 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved. |
As of June 30, 2020 and December 31, 2019, $0.0 million and $6.5 million was payable to the Adviser for the incentive fee on income, respectively.
For both the three and six months ended June 30, 2020, the Company did not incur incentive fees on income under the Investment Advisory Agreement. For the three and six months ended June 30, 2019, the Company incurred $6.8 million and $13.6 million, respectively, in incentive fees on income under the Investment Advisory Agreement.
The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” is an incentive fee on capital gains earned on liquidated investments from the portfolio during operations prior to the Company’s liquidation and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier). This fee equals 20% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For the three and six months ended June 30, 2020 and 2019, the Company did not incur incentive fees on capital gains during operations under the Investment Advisory Agreement.
Administration Agreement
In connection with the Administration Agreement, BSP provides the Company with office facilities and administrative services. As of June 30, 2020 and December 31, 2019, $0.9 million and $0.6 million was payable to BSP under the Administration Agreement, respectively.
For the three and six months ended June 30, 2020, the Company incurred $0.2 million and $0.8 million, respectively, in administrative service fees under the Administration Agreement. For the three and six months ended June 30, 2019, the Company incurred $0.6 million and $1.2 million, respectively, in administrative service fees under the Administration Agreement.
Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC. The SEC staff has granted the Company exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with its investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and the Company's stockholders and do not involve overreaching in respect of the Company or the Company's stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objective and strategies.
Private Placement in connection with FT Transaction
On February 1, 2019, Franklin Templeton acquired BSP, including BSP’s 100% ownership interest in our Adviser. In connection with the FT Transaction, on November 1, 2018, the Company issued approximately 6.1 million and 4.9 million shares of the Company's common stock to FRI and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
50
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Offering Costs
The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators, and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company. The Company incurred no offering costs for the three and six months ended June 30, 2020.
Other Affiliated Parties
The Adviser is the investment adviser of BDCA. The Adviser is an affiliate of BSP, an SEC registered investment adviser. The Adviser and BSP are under common control. Prior to the consummation of the FT Transaction on February 1, 2019, the Adviser was affiliated and under common control with Providence Equity Capital Markets L.L.C. (“PECM”), an SEC registered investment adviser on the BSP platform. The Adviser was affiliated and under common control with Providence Equity Partners L.L.C. (“PEP”), an SEC registered investment adviser. PEP is a global private equity investment adviser and maintained an information barrier between itself and the Adviser, BSP and PECM. The Adviser was affiliated and under common control with Merganser Capital Management, LLC (“Merganser”), an SEC registered investment adviser. BSP, the Adviser, PECM, Merganser and PEP’s respective Form ADV’s are publicly available for review on the SEC Investment Adviser Public Disclosure website.
Note 5 — Borrowings
Wells Fargo Credit Facility
On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank, and collateral custodian (as amended from time to time, the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility was last amended on July 7, 2020 (the "Wells Fargo Amendment") and provides for borrowings in an aggregate principal amount of up to $575.0 million on a committed basis (reduced from $600.0 million by the Wells Fargo Amendment). The Wells Fargo Credit Facility has a maturity date of May 9, 2023.
The Wells Fargo Credit Facility is priced at the one-month maturity LIBOR, with no LIBOR floor, plus a spread of 2.75% per annum (prior to the Wells Fargo Amendment, the spread ranged between 1.65% and 2.50% per annum). Interest is payable quarterly in arrears. Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%, except for the period from March 15, 2019 through June 15, 2019, where the non-usage fee per annum was 0.50% on any principal amount unused.
Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs.
The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate the rights, obligations, power, and authority of the Company, in its capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants, and other events with respect to the Company that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.
In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.
51
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Citi Credit Facility
On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into a credit facility (as amended from time to time, the “Citi Credit Facility”) with Citibank, N.A. ("Citi") as administrative agent and U.S. Bank as collateral agent, account bank, and collateral custodian. The Citi Credit Facility provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. The Citi Credit Facility's reinvestment period ends on May 31, 2021 and matures on May 31, 2022. On June 22, 2020, the Company, through CB Funding, entered into an amendment (the “Citi Amendment”) to the Citi Credit Facility. The Citi Amendment, among other things, makes certain changes to the Citi Credit Facility in connection with the upcoming LIBOR discontinuation. In connection with the Citi Credit Facility, CB Funding has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Citi may declare the outstanding advances and all other obligations under the Citi Credit Facility immediately due and payable. During the continuation of an event of default, CB Funding must pay interest at a default rate.
The Citi Credit Facility contains customary default provisions for facilities of this type pursuant to which Citi may terminate the rights, obligations, power, and authority of the Company, in its capacity as servicer of the portfolio assets under the Citi Credit Facility, including, but not limited to, non-performance of Citi Credit Facility obligations, insolvency, defaults of certain financial covenants, and other events with respect to the Company that may be adverse to Citi and the secured parties under the Citi Credit Facility.
The Citi Credit Facility is priced at three-month LIBOR plus a spread of 1.60% per annum through and including the last day of the investment period and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. The non-usage fee per annum is 0.50%. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.
2020 Notes
On August 26, 2015, the Company entered into a Purchase Agreement with certain initial purchasers, relating to the Company’s sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due 2020 (the “2020 Notes”) to the initial purchasers in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the initial purchasers. The Purchase Agreement includes customary representations, warranties, and covenants by the Company. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the initial purchasers against certain liabilities under the Securities Act. The 2020 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The net proceeds from the sale of the 2020 Notes was approximately $97.9 million, after deducting initial purchasers' discounts and commissions of approximately $1.6 million payable by the Company and estimated offering expenses of approximately $0.5 million payable by the Company. The Company used the net proceeds to make investments in accordance with the Company’s investment objectives and for general corporate purposes.
The 2020 Notes were issued pursuant to an Indenture, dated as of August 31, 2015 (the “2015 Indenture”), between the Company and U.S. Bank National Association, trustee (the “Trustee”). The 2020 Notes will mature on September 1, 2020 and may be redeemed in whole or in part at the Company’s option at any time, or from time to time, at the redemption prices set forth in the 2015 Indenture. The 2020 Notes bear interest at a rate of 6.00% per year payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2016. The 2020 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2020 Notes. The 2020 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles or similar facilities, including credit facilities held by the Company’s wholly owned, special purpose financing subsidiaries.
The 2015 Indenture contains certain covenants, including covenants requiring the Company to: (i) comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the 2020 Notes, whether or not the Company is subject to such provisions; (ii) provide financial information to the
52
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
holders of the 2020 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended; and (iii) maintain total unencumbered assets, as defined in the 2015 Indenture, of at least 175% of the aggregate principal amount of all of the Company and the Company’s consolidated subsidiaries’ outstanding unsecured debt determined on a consolidated basis in accordance with U.S. GAAP. These covenants are subject to important limitations and exceptions that are described in the 2015 Indenture.
On August 14, 2020, the Company redeemed all outstanding 2020 Notes.
2022 Notes
On December 14, 2017, the Company entered into a Purchase Agreement (the “2022 Notes Purchase Agreement”) with Sandler O'Neill & Partners, L.P. (the "Initial Purchaser") relating to the Company's sale of $150.0 million aggregate principal amount of its 4.75% fixed rate notes due 2022 (the “2022 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501(a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2022 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2022 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2022 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2022 Notes was approximately $147.0 million, after deducting an offering price discount of approximately $0.8 million, as well as Initial Purchaser’s discounts and commissions of approximately $1.7 million and offering expenses of approximately $0.6 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes.
The 2022 Notes were issued pursuant to the Indenture dated as of December 19, 2017 (the “2017 Indenture”), between the Company and the Trustee, and a Supplemental Indenture, dated as of December 19, 2017 (the “Supplemental Indenture”), between the Company and the Trustee. The 2022 Notes will mature on December 30, 2022, unless repurchased or redeemed in accordance with their terms prior to such date. The 2022 Notes bear interest at a rate of 4.75% per year payable semi-annually on June 30 and December 30 of each year, commencing on June 30, 2018. The 2022 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2022 Notes. The 2022 Notes will rank equally in right of payment with all of the Company's existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company's subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company's wholly owned, special purpose financing subsidiaries.
The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2022 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture.
In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2022 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
53
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
2023 Notes
On May 11, 2018, the Company entered into a Purchase Agreement (the “2023 Notes Purchase Agreement”) with the Initial Purchaser relating to the Company’s sale of $60.0 million aggregate principal amount of its 5.375% fixed rate notes due 2023 (the “2023 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501 (a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2023 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2023 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2023 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2023 Notes were approximately $58.7 million, after deducting an offering price discount of approximately $0.3 million, as well as Initial Purchaser’s discounts and commissions of approximately $0.6 million and estimated offering expenses of approximately $0.4 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes. The 2023 Notes were issued pursuant to the 2017 Indenture between the Company and The Trustee, and a Second Supplemental Indenture, dated as of May 16, 2018, between the Company and the Trustee. The 2023 Notes will mature on May 30, 2023, unless repurchased or redeemed in accordance with their terms prior to such date. The 2023 Notes bear interest at a rate of 5.375% per year payable semi-annually on May 30 and November 30 of each year, commencing on November 30, 2018. The 2023 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2023 Notes. The 2023 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company’s wholly owned, special purpose financing subsidiaries. The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2023 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture. In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2023 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2023 Notes at a repurchase price equal to 100% of the principal amount of the 2023 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
54
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
2024 Notes
On December 3, 2019, the Company entered into a Purchase Agreement (the “2024 Notes Purchase Agreement”) with the Initial Purchaser relating to the Company’s sale of $100.0 million aggregate principal amount of its 4.85% fixed rate notes due 2024 (the “2024 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501 (a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2024 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2024 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2024 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2024 Notes were approximately $98.4 million, after deducting the Initial Purchaser’s discounts and commissions of approximately $1.2 million and estimated offering expenses of approximately $0.4 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes. The 2024 Notes were issued pursuant to the 2017 Indenture between the Company and The Trustee, and a Third Supplemental Indenture, dated as of December 5, 2019, between the Company and the Trustee. The 2024 Notes will mature on December 15, 2024, unless repurchased or redeemed in accordance with their terms prior to such date. The 2024 Notes bear interest at a rate of 4.85% per year payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2020. The 2024 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2024 Notes. The 2024 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company’s wholly owned, special purpose financing subsidiaries. The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2024 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture. In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2024 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2024 Notes at a repurchase price equal to 100% of the principal amount of the 2024 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
The weighted average annualized interest cost for all borrowings for the six months ended June 30, 2020 and 2019 was 3.83% and 4.80%, respectively. The average daily debt outstanding for the six months ended June 30, 2020 and 2019 was $1.2 billion and $1.0 billion, respectively. The maximum debt outstanding for the six months ended June 30, 2020 and 2019 was $1.3 billion and $1.1 billion, respectively.
The following table represents borrowings as of June 30, 2020:
Maturity Date | Total Aggregate Borrowing Capacity | Total Principal Outstanding | Less Deferred Financing Costs | Amount per Consolidated Statements of Assets and Liabilities | ||||||||||||||
Wells Fargo Credit Facility | 5/9/2023 | $ | 600,000 | $ | 531,652 | $ | (5,739 | ) | $ | 525,913 | ||||||||
Citi Credit Facility | 5/31/2022 | 400,000 | 125,500 | (1,804 | ) | 123,696 | ||||||||||||
2024 Notes | 12/15/2024 | 100,000 | 98,937 | (166 | ) | 98,771 | ||||||||||||
2023 Notes | 5/30/2023 | 60,000 | 59,810 | (550 | ) | 59,260 | ||||||||||||
2022 Notes | 12/30/2022 | 150,000 | 149,588 | (1,140 | ) | 148,448 | ||||||||||||
2020 Notes | 9/1/2020 | 100,000 | 99,946 | (21 | ) | 99,925 | ||||||||||||
Totals | $ | 1,410,000 | $ | 1,065,433 | $ | (9,420 | ) | $ | 1,056,013 | |||||||||
55
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table represents borrowings as of December 31, 2019:
Maturity Date | Total Aggregate Borrowing Capacity | Total Principal Outstanding | Less Deferred Financing Costs | Amount per Consolidated Statements of Assets and Liabilities | ||||||||||||||
Wells Fargo Credit Facility | 5/9/2023 | $ | 600,000 | $ | 436,652 | $ | (6,738 | ) | $ | 429,914 | ||||||||
Citi Credit Facility | 5/31/2022 | 400,000 | 250,500 | (2,271 | ) | 248,229 | ||||||||||||
2024 Notes | 12/15/2024 | 100,000 | 98,818 | (184 | ) | 98,634 | ||||||||||||
2023 Notes | 5/30/2023 | 60,000 | 59,778 | (644 | ) | 59,134 | ||||||||||||
2022 Notes | 12/30/2022 | 150,000 | 149,505 | (1,367 | ) | 148,138 | ||||||||||||
2020 Notes | 9/1/2020 | 100,000 | 99,789 | (84 | ) | 99,705 | ||||||||||||
Totals | $ | 1,410,000 | $ | 1,095,042 | $ | (11,288 | ) | $ | 1,083,754 | |||||||||
The following table represents interest and debt fees for the three and six months ended June 30, 2020:
Three months ended June 30, 2020 | Six months ended June 30, 2020 | ||||||||||||||||||||||||||||||
Interest Rate | Non-Usage Rate | Interest Expense | Deferred Financing Costs (3) | Other Fees (4) | Interest Rate | Non-Usage Rate | Interest Expense | Deferred Financing Costs (3) | Other Fees (4) | ||||||||||||||||||||||
Wells Fargo Credit Facility | (1) | (2) | $ | 3,457 | $ | 499 | $ | 86 | (1) | (2) | $ | 7,932 | $ | 999 | $ | 268 | |||||||||||||||
Citi Credit Facility | L+1.60% | 0.50% | 2,142 | 233 | 153 | L+1.60% | 0.50% | 4,699 | 466 | 292 | |||||||||||||||||||||
2024 Notes | 4.85% | n/a | 1,272 | 10 | 13 | 4.85% | n/a | 2,544 | 19 | 26 | |||||||||||||||||||||
2023 Notes | 5.38% | n/a | 822 | 47 | — | 5.38% | n/a | 1,645 | 94 | — | |||||||||||||||||||||
2022 Notes | 4.75% | n/a | 1,822 | 113 | 9 | 4.75% | n/a | 3,645 | 227 | 9 | |||||||||||||||||||||
2020 Notes | 6.00% | n/a | 1,579 | 32 | 8 | 6.00% | n/a | 3,141 | 63 | 8 | |||||||||||||||||||||
Totals | $ | 11,094 | $ | 934 | $ | 269 | $ | 23,606 | $ | 1,868 | $ | 603 | |||||||||||||||||||
______________
(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned.
(2) The non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
(3) Amortization of deferred financing costs.
(4) Includes non-usage fees and custody fees.
56
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table represents interest and debt fees for the three and six months ended June 30, 2019:
Three months ended June 30, 2019 | Six months ended June 30, 2019 | ||||||||||||||||||||||||||||||
Interest Rate | Non-Usage Rate | Interest Expense | Deferred Financing Costs (3) | Other Fees (4) | Interest Rate | Non-Usage Rate | Interest Expense | Deferred Financing Costs (3) | Other Fees (4) | ||||||||||||||||||||||
Wells Fargo Credit Facility | (1) | (2) | $ | 5,341 | $ | 499 | $ | 194 | (1) | (2) | $ | 9,485 | $ | 967 | $ | 738 | |||||||||||||||
Citi Credit Facility | L+1.60% | 0.50% | 3,327 | 201 | 132 | L+1.60% | 0.50% | 6,679 | 399 | 268 | |||||||||||||||||||||
2023 Notes | 5.38% | n/a | 822 | 47 | — | 5.38% | n/a | 1,644 | 94 | — | |||||||||||||||||||||
2022 Notes | 4.75% | n/a | 1,822 | 114 | 5 | 4.75% | n/a | 3,644 | 226 | 5 | |||||||||||||||||||||
2020 Notes | 6.00% | n/a | 1,579 | 31 | 2 | 6.00% | n/a | 3,157 | 62 | 6 | |||||||||||||||||||||
Totals | $ | 12,891 | $ | 892 | $ | 333 | $ | 24,609 | $ | 1,748 | $ | 1,017 | |||||||||||||||||||
_____________
(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned.
(2) The non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%, except for the period from March 15, 2019 through June 15, 2019, where the non-usage fee per annum was 0.50% on any principal amount unused.
(3) Amortization of deferred financing costs.
(4) Includes non-usage fees, custody fees, and trustee fees.
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate fair value. The fair value of short-term financial instruments such as cash and cash equivalents, due to affiliates, and accounts payable approximate their carrying value on the accompanying consolidated statements of assets and liabilities due to their short-term nature. The fair value of the Company's 2020 Notes, 2022 Notes, 2023 Notes, and 2024 Notes are derived from market indications provided by Bloomberg Finance L.P. at June 30, 2020 and December 31, 2019.
At June 30, 2020, the carrying amount of the Company's secured borrowings approximated their fair value. The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company's borrowings is estimated based upon market interest rates for the Company's own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of June 30, 2020 and December 31, 2019, the Company's borrowings would be deemed to be Level 3, as defined in Note 3 - Fair Value of Financial Instruments.
The fair values of the Company’s remaining financial instruments that are not reported at fair value on the accompanying consolidated statements of assets and liabilities are reported below:
Level | Carrying Amount at June 30, 2020 | Fair Value at June 30, 2020 | |||||||
Wells Fargo Credit Facility | 3 | $ | 531,652 | $ | 531,652 | ||||
Citi Credit Facility | 3 | 125,500 | 125,500 | ||||||
2024 Notes | 3 | 98,937 | 86,145 | ||||||
2023 Notes | 3 | 59,810 | 54,932 | ||||||
2022 Notes | 3 | 149,588 | 139,028 | ||||||
2020 Notes | 3 | 99,946 | 100,172 | ||||||
$ | 1,065,433 | $ | 1,037,429 | ||||||
57
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Level | Carrying Amount at December 31, 2019 | Fair Value at December 31, 2019 | |||||||
Wells Fargo Credit Facility | 3 | $ | 436,652 | $ | 436,652 | ||||
Citi Credit Facility | 3 | 250,500 | 250,500 | ||||||
2024 Notes | 3 | 98,818 | 99,722 | ||||||
2023 Notes | 3 | 59,778 | 60,721 | ||||||
2022 Notes | 3 | 149,505 | 151,937 | ||||||
2020 Notes | 3 | 99,789 | 101,389 | ||||||
$ | 1,095,042 | $ | 1,100,921 | ||||||
Note 6 — Derivatives
Foreign Currency
The Company may enter into forward foreign currency contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies or to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company's investments denominated in foreign currencies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date (usually the security transaction settlement date) at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled. The Company's forward foreign currency contracts generally have terms of approximately three months. The volume of open contracts at the end of each reporting period is reflective of the typical volume of transactions during each calendar quarter. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit this risk by dealing with creditworthy counterparties.
At June 30, 2020 and December 31, 2019, the forward foreign currency contracts were classified within Level 2 of the fair value hierarchy. The foreign currency forward contract held as of June 30, 2020, was subject to ISDA Master Agreements or similar agreements. The foreign currency forward contract held as of December 31, 2019, was subject to ISDA Master Agreements or similar agreements.
The Company is operated by a person who has claimed an exclusion from the definition of the "commodity pool operator" under the Commodity Exchange Act, and, therefore, who is not subject to registration or regulation as a pool operator under such Act.
Note 7 — Commitments and Contingencies
Commitments
In the ordinary course of business, the Company may enter into future funding commitments. As of June 30, 2020, the Company had unfunded commitments on delayed draw term loans of $16.3 million (including $13.5 million of non-discretionary commitments and $2.8 million of discretionary commitments), unfunded commitments on revolver term loans of $28.1 million, and unfunded equity capital discretionary commitments of $11.1 million. As of December 31, 2019, the Company had unfunded commitments on delayed draw term loans of $24.9 million (including $21.8 million of non-discretionary commitments and $3.1 million of discretionary commitments), unfunded commitments on revolver term loans of $28.0 million, and unfunded equity capital discretionary commitments of $21.4 million. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments.
58
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
As of June 30, 2020, the Company's unfunded commitments consisted of the following:
June 30, 2020 | ||||||||||||
Portfolio Company Name | Investment Type | Commitment Type | Total Commitment | Remaining Commitment | ||||||||
Arch Global Precision, LLC | Senior Secured First Lien | Delayed draw term loan | $ | 2,520 | $ | 2,520 | ||||||
Arch Global Precision, LLC | Senior Secured First Lien | Revolver term loan | 1,008 | 1,008 | ||||||||
CRS-SPV, Inc. | Senior Secured First Lien | Revolver term loan | 224 | 162 | ||||||||
Ideal Tridon Holdings, Inc. | Senior Secured First Lien | Delayed draw term loan | 80 | 34 | ||||||||
Ideal Tridon Holdings, Inc. | Senior Secured First Lien | Revolver term loan | 2,810 | 923 | ||||||||
Integral Ad Science, Inc. | Senior Secured First Lien | Revolver term loan | 1,085 | 1,085 | ||||||||
KMTEX, LLC (1) | Senior Secured First Lien | Delayed draw term loan | 803 | 134 | ||||||||
KMTEX, LLC (1) | Senior Secured First Lien | Delayed draw term loan | 2,678 | 2,678 | ||||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien | Revolver term loan | 321 | 186 | ||||||||
MED Parentco, LP | Senior Secured First Lien | Delayed draw term loan | 1,432 | 429 | ||||||||
Midwest Can Company, LLC | Senior Secured First Lien | Revolver term loan | 1,543 | 926 | ||||||||
Miller Environmental Group, Inc. | Senior Secured First Lien | Delayed draw term loan | 1,131 | 1,131 | ||||||||
Miller Environmental Group, Inc. | Senior Secured First Lien | Revolver term loan | 1,324 | 1,059 | ||||||||
Mintz Group, LLC | Senior Secured First Lien | Delayed draw term loan | 1,344 | 1,344 | ||||||||
Mintz Group, LLC | Senior Secured First Lien | Revolver term loan | 630 | 525 | ||||||||
Muth Mirror Systems, LLC | Senior Secured First Lien | Revolver term loan | 1,299 | 649 | ||||||||
New Amsterdam Software Bidco, LLC | Senior Secured First Lien | Delayed draw term loan | 1,790 | 1,790 | ||||||||
Norvax, LLC | Senior Secured First Lien | Revolver term loan | 1,152 | 1,152 | ||||||||
Pike Corp. | Senior Secured First Lien | Revolver term loan | 6,115 | 6,115 | ||||||||
Planet Equity Group, LLC | Senior Secured First Lien | Revolver term loan | 2,325 | 1,162 | ||||||||
PT Network, LLC | Senior Secured First Lien | Revolver term loan | 1,316 | 1,316 | ||||||||
Questex, Inc. | Senior Secured First Lien | Revolver term loan | 2,584 | 1,292 | ||||||||
Reddy Ice Corp. | Senior Secured First Lien | Delayed draw term loan | 2,512 | 1,234 | ||||||||
Reddy Ice Corp. | Senior Secured First Lien | Revolver term loan | 1,762 | 1,075 | ||||||||
REP TEC Intermediate Holdings, Inc. | Senior Secured First Lien | Delayed draw term loan | 2,223 | 2,223 | ||||||||
REP TEC Intermediate Holdings, Inc. | Senior Secured First Lien | Revolver term loan | 741 | 741 | ||||||||
Safety Products/JHC Acquisition Corp. | Senior Secured First Lien | Delayed draw term loan | 2,167 | 1,214 | ||||||||
SCIH Salt Holdings, Inc. | Senior Secured First Lien | Revolver term loan | 3,746 | 3,746 | ||||||||
Subsea Global Solutions, LLC | Senior Secured First Lien | Revolver term loan | 963 | 963 | ||||||||
Tap Rock Resources, LLC (1) | Equity/Other | Equity | 29,470 | 11,114 | ||||||||
Tillamook Country Smoker, LLC | Senior Secured First Lien | Revolver term loan | 2,696 | 539 | ||||||||
University of St. Augustine Acquisition Corp. | Senior Secured First Lien | Revolver term loan | 2,615 | 2,615 | ||||||||
WMK, LLC | Senior Secured First Lien | Delayed draw term loan | 1,920 | 1,562 | ||||||||
WMK, LLC | Senior Secured First Lien | Revolver term loan | 2,618 | 873 | ||||||||
Total | $ | 88,947 | $ | 55,519 | ||||||||
_____________
(1) The commitment related to this investment is discretionary.
59
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
As of December 31, 2019, the Company's unfunded commitments consisted of the following:
December 31, 2019 | ||||||||||||
Portfolio Company Name | Investment Type | Commitment Type | Total Commitment | Remaining Commitment | ||||||||
AMI Entertainment Network, LLC | Senior Secured First Lien Debt | Revolver term loan | $ | 1,234 | $ | 1,234 | ||||||
Arch Global Precision, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 1,071 | 1,071 | ||||||||
Arch Global Precision, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,008 | 1,008 | ||||||||
CCW, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,500 | 200 | ||||||||
CDHA Holdings, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 7,580 | 7,027 | ||||||||
CDHA Holdings, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,264 | 834 | ||||||||
Corfin Industries, LLC | Senior Secured First Lien Debt | Revolver term loan | 956 | 956 | ||||||||
CRS-SPV, Inc. | Senior Secured First Lien Debt | Revolver term loan | 224 | 162 | ||||||||
Florida Food Products, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,647 | 231 | ||||||||
ICR Operations, LLC | Senior Secured First Lien Debt | Revolver term loan | 2,753 | 2,655 | ||||||||
Ideal Tridon Holdings, Inc. | Senior Secured First Lien Debt | Delayed draw term loan | 80 | 34 | ||||||||
Ideal Tridon Holdings, Inc. | Senior Secured First Lien Debt | Revolver term loan | 2,810 | 2,649 | ||||||||
Integral Ad Science, Inc. | Senior Secured First Lien Debt | Revolver term loan | 1,085 | 1,085 | ||||||||
Lakeview Health Holdings, Inc. | Senior Secured First Lien Debt | Revolver term loan | 315 | 186 | ||||||||
MED Parentco, LP | Senior Secured First Lien Debt | Delayed draw term loan | 1,437 | 1,131 | ||||||||
Midwest Can Company, LLC | Senior Secured First Lien Debt | Revolver term loan | 547 | 547 | ||||||||
Miller Environmental Group, Inc. | Senior Secured First Lien Debt | Delayed draw term loan | 1,131 | 1,131 | ||||||||
Miller Environmental Group, Inc. | Senior Secured First Lien Debt | Revolver term loan | 1,324 | 1,324 | ||||||||
Muth Mirror Systems, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,299 | 1,299 | ||||||||
New Amsterdam Software Bidco, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 1,790 | 1,790 | ||||||||
Norvax, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,152 | 1,152 | ||||||||
ORG Chemical Holdings, LLC (1) | Senior Secured First Lien Debt | Delayed draw term loan | 6,503 | 3,083 | ||||||||
Planet Equity Group, LLC | Senior Secured First Lien Debt | Revolver term loan | 2,325 | 2,325 | ||||||||
PT Network, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,316 | 1,316 | ||||||||
Questex, Inc. | Senior Secured First Lien Debt | Revolver term loan | 2,584 | 1,895 | ||||||||
Reddy Ice Corp. | Senior Secured First Lien Debt | Delayed draw term loan | 2,518 | 2,518 | ||||||||
Reddy Ice Corp. | Senior Secured First Lien Debt | Revolver term loan | 1,762 | 1,762 | ||||||||
Safety Products/JHC Acquisition Corp. | Senior Secured First Lien Debt | Delayed draw term loan | 2,171 | 1,214 | ||||||||
SitusAMC Holdings Corp. | Senior Secured First Lien Debt | Delayed draw term loan | 752 | 752 | ||||||||
Subsea Global Solutions, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 4,744 | 2,352 | ||||||||
Subsea Global Solutions, LLC | Senior Secured First Lien Debt | Revolver term loan | 963 | 575 | ||||||||
Tap Rock Resources, LLC (1) | Equity/Other | Equity | 42,100 | 21,428 | ||||||||
Tillamook Country Smoker, LLC | Senior Secured First Lien Debt | Revolver term loan | 1,618 | 539 | ||||||||
University of St. Augustine Acquisition Corp. | Senior Secured First Lien Debt | Revolver term loan | 2,615 | 2,615 | ||||||||
Vantage Mobility International, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 196 | 196 | ||||||||
WMK, LLC | Senior Secured First Lien Debt | Delayed draw term loan | 4,528 | 2,618 | ||||||||
WMK, LLC | Senior Secured First Lien Debt | Revolver term loan | 2,618 | 1,484 | ||||||||
Total | $ | 111,520 | $ | 74,378 | ||||||||
_____________
(1) The commitment related to this investment is discretionary.
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims, and regulatory matters. The Company has no knowledge of material legal or regulatory proceedings pending or known to be contemplated against the Company at this time.
60
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Indemnifications
In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.
Note 8 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Adviser and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations.
As a result of these relationships, the Company is dependent upon the Adviser and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.
Note 9 — Common Stock
On August 25, 2011, the Company had raised sufficient funds to break escrow on its IPO. On July 1, 2014, the Company's registration statement on Form N-2 (File No.333-193241) for its Follow-on was declared effective by the SEC. Simultaneously with the effectiveness of the registration statement of the Follow-on, the Company's IPO terminated. Through June 30, 2020, the Company issued 227.9 million shares of common stock for gross proceeds of $2.3 billion, including the shares purchased by an affiliate of BSP and shares issued under the Company's DRIP. Following the time the Company's updated registration statement was declared effective on June 30, 2015, the Company issued shares for subscription agreements that had been accepted through that date. The Company suspended the DRIP from March 29, 2020 through June 26, 2020. While the DRIP was suspended, participants and all other holders of the Company's common stock received distributions paid by the Company in cash. From inception of the Company's DRIP plan to June 30, 2020, the Company had repurchased 27.9 million shares of common stock through its share repurchase program for payments of $239.5 million. As of December 31, 2019, the Company had repurchased 25.6 million shares of common stock for payments of $222.2 million. Amounts include additional shares tendered for death and disability as permitted.
On March 31, 2020, the Company issued in a private placement an aggregate amount of 9,532,062 newly issued shares of its common stock at a price of $5.77 per share for aggregate cash proceeds of $55.0 million. On April 30, 2020, the Company issued in a private placement an aggregate amount of 693,240 newly issued shares of its common stock at a price of $5.77 per share for aggregate cash proceeds of $4.0 million.
The following table reflects the common stock activity for the six months ended June 30, 2020:
Shares | Value | ||||||
Shares Sold | 10,225,302 | $ | 59,000 | ||||
Shares Issued through DRIP | 1,791,638 | 12,932 | |||||
Share Repurchases | (2,229,772 | ) | (17,280 | ) | |||
9,787,168 | $ | 54,652 | |||||
The following table reflects the common stock activity for the year ended December 31, 2019:
Shares | Value | ||||||
Shares Sold | — | $ | — | ||||
Shares Issued through DRIP | 4,373,786 | 34,905 | |||||
Share Repurchases | (4,490,328 | ) | (36,286 | ) | |||
(116,542 | ) | $ | (1,381 | ) | |||
61
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table reflects the stockholders' equity activity for the six months ended June 30, 2020:
Common stock - shares | Common stock - par | Additional paid in capital | Total distributable earnings (loss) | Total Stockholders' Equity | ||||||||||||||
Balance as of December 31, 2019 | 190,207,517 | $ | 190 | $ | 1,847,312 | $ | (384,819 | ) | $ | 1,462,683 | ||||||||
Net investment income | — | — | — | 25,558 | 25,558 | |||||||||||||
Net realized loss from investment transactions | — | — | — | (13,985 | ) | (13,985 | ) | |||||||||||
Net change in unrealized depreciation on investments and foreign exchange currency contracts, net of change in deferred taxes | — | — | — | (205,292 | ) | (205,292 | ) | |||||||||||
Issuance of common stock, net of issuance costs | 9,532,062 | 10 | 54,990 | — | 55,000 | |||||||||||||
Repurchases | (2,134,416 | ) | (2 | ) | (16,539 | ) | — | (16,541 | ) | |||||||||
Distributions to stockholders | — | — | — | (30,727 | ) | (30,727 | ) | |||||||||||
Reinvested dividends | 1,046,828 | 1 | 8,112 | — | 8,113 | |||||||||||||
Balance as of March 31, 2020 | 198,651,991 | $ | 199 | $ | 1,893,875 | $ | (609,265 | ) | $ | 1,284,809 | ||||||||
Net investment income | — | — | — | 20,433 | 20,433 | |||||||||||||
Net realized loss from investment transactions | — | — | — | (55,318 | ) | (55,318 | ) | |||||||||||
Net change in unrealized appreciation on investments and foreign exchange currency contracts, net of change in deferred taxes | — | — | — | 65,777 | 65,777 | |||||||||||||
Issuance of common stock, net of issuance costs | 693,240 | — | 4,000 | — | 4,000 | |||||||||||||
Repurchases | (95,356 | ) | — | (739 | ) | — | (739 | ) | ||||||||||
Distributions to stockholders | — | — | — | (19,809 | ) | (19,809 | ) | |||||||||||
Reinvested dividends | 744,810 | 1 | 4,818 | — | 4,819 | |||||||||||||
Balance as of June 30, 2020 | 199,994,685 | $ | 200 | $ | 1,901,954 | $ | (598,182 | ) | $ | 1,303,972 | ||||||||
62
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
The following table reflects the stockholders' equity activity for the six months ended June 30, 2019:
Common stock - shares | Common stock - par | Additional paid in capital | Total distributable earnings (loss) | Net assets attributable to non-controlling interest | Total Stockholders' Equity | |||||||||||||||||
Balance as of December 31, 2018 | 190,324,059 | $ | 190 | $ | 1,811,970 | $ | (323,127 | ) | $ | 3,686 | $ | 1,492,719 | ||||||||||
Net investment income | — | — | — | 27,164 | 2 | 27,166 | ||||||||||||||||
Net realized loss from investment transactions | — | — | — | (1,911 | ) | — | (1,911 | ) | ||||||||||||||
Net change in unrealized appreciation on investments and foreign exchange currency contracts, net of change in deferred taxes | — | — | — | 30,579 | 1,292 | 31,871 | ||||||||||||||||
Repurchases | (2,241,001 | ) | (2 | ) | (18,374 | ) | — | — | (18,376 | ) | ||||||||||||
Distributions to stockholders | — | — | — | (30,441 | ) | — | (30,441 | ) | ||||||||||||||
Reinvested dividends | 1,087,268 | 1 | 8,915 | — | — | 8,916 | ||||||||||||||||
Balance as of March 31, 2019 | 189,170,326 | $ | 189 | $ | 1,802,511 | $ | (297,736 | ) | $ | 4,980 | $ | 1,509,944 | ||||||||||
Net investment income | — | — | — | 27,092 | 7 | 27,099 | ||||||||||||||||
Net realized gain from investment transactions | — | — | — | 2,523 | — | 2,523 | ||||||||||||||||
Net change in unrealized appreciation on investments and foreign exchange currency contracts, net of change in deferred taxes | — | — | — | 3,549 | 1,725 | 5,274 | ||||||||||||||||
Repurchases | (25,215 | ) | — | (206 | ) | — | — | (206 | ) | |||||||||||||
Distributions to stockholders | — | — | — | (30,779 | ) | — | (30,779 | ) | ||||||||||||||
Reinvested dividends | 1,147,112 | 1 | 9,021 | — | — | 9,022 | ||||||||||||||||
Balance as of June 30, 2019 | 190,292,223 | $ | 190 | $ | 1,811,326 | $ | (295,351 | ) | $ | 6,712 | $ | 1,522,877 | ||||||||||
Note 10 — Share Repurchase Program
The Company intends to conduct annual tender offers pursuant to its share repurchase program (“SRP”). The Company’s Board of Directors considers the following factors in making its determination regarding whether to cause the Company to offer to repurchase shares and under what terms:
•the effect of such repurchases on the Company's qualification as a RIC (including the consequences of any necessary asset sales);
•the liquidity of the Company's assets (including fees and costs associated with disposing of assets);
•the Company's investment plans and working capital requirements;
•the relative economies of scale with respect to the Company's size;
•the Company's history in repurchasing shares or portions thereof;
•the condition of the securities markets.
63
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
On June 26, 2020, the Company's Board of Directors amended the Company's SRP. The Company intends to conduct tender offers on an annual basis, instead of on a semi-annual basis as was done previously. The Company intends to continue to limit the number of shares to be repurchased in any calendar year to the lesser of (i) 10% of the weighted average number of shares outstanding in the prior calendar year or (ii) the number of shares of common stock the Company is able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during the relevant redemption period. In addition, in the event of a stockholder’s death or disability, the Company may, in its sole discretion, accept up to the full amount tendered by such stockholder of the current net asset value per share. Any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that the Company may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock the Company is able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period. The Company's eight most recent tender offers were oversubscribed.
Offer Date | Repurchase Date | Shares Tendered | Shares Repurchased | Repurchase Price Per Share | Aggregate Consideration for Repurchased Shares (in thousands) | |||||||||||
June 18, 2019 | July 23, 2019 | 31,263,410 | 2,199,337 | $ | 7.96 | $ | 17,506.70 | |||||||||
December 17, 2019 | January 27, 2020 | 37,389,681 | 2,115,276 | $ | 7.75 | $ | 16,698.90 | |||||||||
Share amounts in the table above represent amounts filed in the tender offer.
Note 11 — Earnings Per Share
Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company had no potentially dilutive securities for the periods ended June 30, 2020 and 2019.
The following information sets forth the computation of the weighted average basic and diluted net increase in net assets per share resulting from operations for the three and six months ended June 30, 2020 and 2019.
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Basic and diluted | |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 30,892 | $ | 33,164 | $ | (162,827 | ) | $ | 88,996 | ||||||
Weighted average common shares outstanding | 199,084,903 | 189,907,442 | 194,595,661 | 189,928,762 | |||||||||||
Net increase (decrease) in net assets resulting from operations per share | $ | 0.16 | $ | 0.17 | $ | (0.84 | ) | $ | 0.47 | ||||||
Note 12 — Distributions
For the period from January 1, 2019 to March 29, 2020, the Company’s Board of Directors had authorized, and had declared, cash distributions payable on a monthly basis to stockholders of record at a distribution rate of $0.00178082 per day, which is equivalent to approximately $0.65 annually, per share of common stock, except for 2020 where the daily distribution rate was $0.00177596 per day to accurately reflect 2020 being a leap year. Effective April 21, 2020, the Board of Directors of the Company approved a transition in the timing of its distributions to holders of the Company's common stock from a monthly to a quarterly basis. On June 26, 2020, the Board declared a regular quarterly cash dividend of $0.10 per share of the Company's common stock, payable on July 6, 2020 to stockholders of record as of June 30, 2020.
The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions. The Company calculates each stockholder’s specific distribution amount for the quarter using record and declaration dates. The distributions are payable by the fifth day following each record date.
As of June 30, 2020 and December 31, 2019, the Company had accrued $15.0 million and $10.5 million, respectively, in stockholder distributions that were unpaid.
64
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Note 13 — Income Tax Information and Distributions to Stockholders
The Company has elected to be treated for federal income tax purposes as a RIC under the Code. Generally, a RIC is exempt from federal income taxes if it meets certain quarterly asset diversification requirements, annual income tests, and distributes to stockholders its ‘‘investment company taxable income,’’ as defined in the Code, each taxable year. Distributions declared prior to the filing of the previous year's tax return and paid up to one year after the previous tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its RIC status each year. The Company may also be subject to federal excise taxes of 4%.
A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses). If the Company's expenses in a given taxable year exceed gross taxable income (e.g., as the result of large amounts of equity-based compensation), it would incur a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to the RIC’s stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such net capital losses, and use them to offset capital gains indefinitely. Due to these limits on the deductibility of expenses and net capital losses, the Company may for tax purposes have aggregate taxable income for several taxable years that it is required to distribute and that is taxable to stockholders even if such taxable income is greater than the aggregate net income the Company actually earned during those taxable years. Such required distributions may be made from the Company cash assets or by liquidation of investments, if necessary. The Company may realize gains or losses from such liquidations. In the event the Company realizes net capital gains from such transactions, the Company may make a larger capital gain distribution than it would have made in the absence of such transactions.
Depending on the level of taxable income earned in a tax year, for excise tax purposes the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and incur a 4% U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.
The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes (“ASC Topic 740”), nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company's 2019 tax year and 2018, 2017, and 2016 federal tax returns remain subject to examination by the Internal Revenue Service.
As of June 30, 2020, the Company had a deferred tax asset of $1.8 million and a deferred tax liability of $(1.4) million. Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $1.8 million. As of December 31, 2019, the Company had a deferred tax asset of $1.5 million and a deferred tax liability of $(3.1) million. Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $1.5 million.
The deferred tax asset valuation allowance has been determined pursuant to the provisions of ASC Topic 740, including the Company's estimation of future taxable income, if necessary, and is adequate to reduce the total deferred tax asset to an amount that will more likely than not be realized.
65
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Note 14 — Financial Highlights
The following is a schedule of financial highlights for the six months ended June 30, 2020 and 2019:
For the six months ended June 30, | |||||||
2020 | 2019 | ||||||
Per share data: | |||||||
Net asset value, beginning of period | $ | 7.69 | $ | 7.82 | |||
Results of operations (1) | |||||||
Net investment income | 0.24 | 0.29 | |||||
Net realized and unrealized loss, net of change in deferred taxes | (1.08 | ) | 0.20 | ||||
Net change in unrealized depreciation attributable to non-controlling interests | — | (0.01 | ) | ||||
Net unrealized depreciation from forward currency exchange contracts | — | (0.01 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (0.84 | ) | 0.47 | ||||
Stockholder distributions (2) | |||||||
Distributions from net investment income | (0.26 | ) | (0.32 | ) | |||
Net decrease in net assets resulting from stockholder distributions | (0.26 | ) | (0.32 | ) | |||
Capital share transactions | |||||||
Issuance of common stock (8) | (0.04 | ) | — | ||||
Net decrease in net assets resulting from capital share transactions | (0.04 | ) | — | ||||
Other (9) | (0.03 | ) | — | ||||
Net asset value, end of period | $ | 6.52 | $ | 7.97 | |||
Shares outstanding at end of period | 199,994,685 | 190,292,223 | |||||
Total return (4) | (12.10 | )% | 6.00 | % | |||
Ratio/Supplemental data: | |||||||
Total net assets, end of period | 1,303,972 | 1,522,877 | |||||
Ratio of net investment income to average net assets (3)(6) | 6.85 | % | 8.17 | % | |||
Ratio of total expenses to average net assets (3)(6)(7) | 7.80 | % | 8.29 | % | |||
Portfolio turnover rate (5) | 15.26 | % | 15.39 | % | |||
______________
(1) | The per share data was derived by using the weighted average shares outstanding during the period. |
(2) | The per share data for distributions reflects the actual amount of distributions declared per share during the period. |
(3) | Ratios are annualized, except for incentive fees. |
(4) | Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. |
(5) | Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested assets at fair value. Portfolio turnover rate is not annualized. |
(6) | There were no offering costs during the period. |
(7) | Ratio of total expenses to average net assets is calculated using total operating expenses, including income tax expense over average net assets. |
(8) | The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock. |
(9) | Represents the impact of calculating certain per share amounts based on weighted average shares outstanding during the period and certain per share amounts based on shares outstanding as of period end. |
66
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Note 15 – Schedules of Investments and Advances to Affiliates
The following table presents the Schedule of Investments and Advances to Affiliates as of June 30, 2020:
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2019 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at June 30, 2020 | |||||||||||||||||||||||
Control Investments | ||||||||||||||||||||||||||||||||
Capstone Nutrition (fka Integrity Nutraceuticals) - L+12.50% (15.08%), 9/25/2020 (2)(5)(6)(7) | Senior Secured First Lien Debt | Consumer | $ | — | $ | — | $ | 504 | $ | — | $ | (504 | ) | $ | — | $ | — | |||||||||||||||
CRD Holdings, LLC - 9.00% (2) (7) | Equity/Other | Energy | 1,428 | 28,943 | — | (5,996 | ) | — | (1,865 | ) | 21,082 | |||||||||||||||||||||
CRS-SPV, Inc. (2) (7) (8) | Equity/Other | Industrials | — | 2,221 | — | — | — | (607 | ) | 1,614 | ||||||||||||||||||||||
CRS-SPV, Inc. - L+4.50% (5.50%), 3/8/2021 (2) (7) | Senior Secured First Lien Debt | Industrials | 2 | 62 | — | — | — | — | 62 | |||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company - L+8.00% (13.00%), 12/22/2028 (2) (3) (6) (7) | Senior Secured First Lien Debt | Transportation | 5,075 | 105,549 | — | (55,000 | ) | — | — | 50,549 | ||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8) | Equity/Other | Transportation | — | 57,226 | — | — | — | (5,274 | ) | 51,952 | ||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8) | Equity/Other | Transportation | — | 3,250 | — | — | — | — | 3,250 | |||||||||||||||||||||||
Kahala US OpCo, LLC - 13.00% (2) (3) (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
KMTEX, LLC - P+2.00% (5.25%), 6/16/2025 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | 1 | — | 669 | — | — | — | 669 | |||||||||||||||||||||||
KMTEX, LLC - P+2.00% (5.25%), 6/16/2025 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | 4 | — | 3,121 | — | — | — | 3,121 | |||||||||||||||||||||||
KMTEX, LLC (2) (7) (8) | Equity/Other | Chemicals | — | — | — | — | — | — | — | |||||||||||||||||||||||
KMTEX, LLC (2) (7) (8) | Equity/Other | Chemicals | — | — | 2,793 | — | — | — | 2,793 | |||||||||||||||||||||||
MGTF Holdco, LLC (2) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
MGTF Radio Company, LLC - L+6.00% (7.00%), 4/1/2024 (2) (7) | Senior Secured First Lien Debt | Media/Entertainment | 2,108 | 54,171 | 16 | (2,078 | ) | 5 | (8,124 | ) | 43,990 | |||||||||||||||||||||
NexSteppe, Inc. (2) (7) (8) | Equity/Other | Chemicals | — | — | — | — | — | — | — | |||||||||||||||||||||||
NexSteppe, Inc. - 12.00%, 9/30/2020 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | — | — | — | — | — | — | — | |||||||||||||||||||||||
NexSteppe, Inc. - 12.00%, 9/30/2020 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | — | — | — | (378 | ) | 127 | 251 | — | ||||||||||||||||||||||
NMFC Senior Loan Program I, LLC (2) | Equity/Other | Diversified Investment Vehicles | 2,688 | 47,310 | — | — | — | (8,655 | ) | 38,655 | ||||||||||||||||||||||
Park Ave RE Holdings, LLC - 13.00%, 12/31/2021 (2) (6) (7) | Subordinated Debt | Financials | 2,447 | 37,237 | — | — | — | — | 37,237 | |||||||||||||||||||||||
Park Ave RE Holdings, LLC (2) (7) (8) | Equity/Other | Financials | — | 11,133 | — | (427 | ) | — | (5,428 | ) | 5,278 | |||||||||||||||||||||
Siena Capital Finance, LLC - 12.50%, 5/15/2024 (2) (7) | Subordinated Debt | Financials | 1,593 | 22,500 | 3,000 | — | — | — | 25,500 | |||||||||||||||||||||||
Siena Capital Finance, LLC (2) (7) | Equity/Other | Financials | 2,456 | 36,915 | 12 | — | — | (7,180 | ) | 29,747 | ||||||||||||||||||||||
WPNT, LLC (2) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
Total Control Investments | $ | 17,802 | $ | 406,517 | $ | 10,115 | $ | (63,879 | ) | $ | (372 | ) | $ | (36,882 | ) | $ | 315,499 | |||||||||||||||
67
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2019 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at June 30, 2020 | |||||||||||||||||||||||
Affiliate Investments | ||||||||||||||||||||||||||||||||
Answers Corp. (7) | Equity/Other | Media/Entertainment | $ | — | $ | 727 | $ | — | $ | — | $ | — | $ | — | $ | 727 | ||||||||||||||||
Capstone Nutrition Development, LLC (7) (8) | Equity/Other | Consumer | — | 4,788 | — | (191 | ) | — | (288 | ) | 4,309 | |||||||||||||||||||||
Danish CRJ, Ltd. (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
First Eagle Greenway Fund II, LLC | Equity/Other | Diversified Investment Vehicles | 18 | 2,554 | 326 | — | — | (1,083 | ) | 1,797 | ||||||||||||||||||||||
Foresight Energy Operating, LLC - L+8.00% (9.00%), 6/30/2027 (7) | Senior Secured First Lien Debt | Industrials | — | — | 1,333 | — | — | — | 1,333 | |||||||||||||||||||||||
Foresight Energy Operating, LLC - L+8.00% (9.50%), 6/30/2027 (6) (7) | Senior Secured First Lien Debt | Industrials | — | — | 967 | — | — | — | 967 | |||||||||||||||||||||||
Foresight Energy Operating, LLC (7) (8) | Equity/Other | Industrials | — | — | 1,105 | — | — | — | 1,105 | |||||||||||||||||||||||
Internap Corp. - L+10.00% (11.00%), 5/8/2023 (7) | Senior Secured First Lien Debt | Business Services | 47 | — | 2,547 | (724 | ) | 47 | (7 | ) | 1,863 | |||||||||||||||||||||
Internap Corp. - L+6.50% (7.50%), 5/8/2025 (6) (7) | Senior Secured First Lien Debt | Business Services | 66 | — | 5,837 | — | — | — | 5,837 | |||||||||||||||||||||||
Internap Corp (7) (8) | Equity/Other | Business Services | — | — | 543 | — | — | — | 543 | |||||||||||||||||||||||
MidOcean Credit CLO 2013-2A INC - 0.00%, 1/29/2030 (7) | Collateralized Securities | Diversified Investment Vehicles | (22 | ) | 11,835 | — | (986 | ) | — | (5,802 | ) | 5,047 | ||||||||||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A SUB - 10.35%, 4/25/2031 (7) | Collateralized Securities | Diversified Investment Vehicles | 445 | 19,697 | — | (232 | ) | — | (3,302 | ) | 16,163 | |||||||||||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A FR - L+11.00% (11.99%), 4/25/2031 (7) | Collateralized Securities | Diversified Investment Vehicles | 49 | 4,612 | 4 | — | — | (1,171 | ) | 3,445 | ||||||||||||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F - L+7.50% (8.64%), 1/20/2027 (7) | Collateralized Securities | Diversified Investment Vehicles | 97 | 9,209 | 40 | — | — | (4,199 | ) | 5,050 | ||||||||||||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB - 0.00%, 1/20/2027 (7) | Collateralized Securities | Diversified Investment Vehicles | (318 | ) | 6,607 | — | (1,012 | ) | — | (5,595 | ) | — | ||||||||||||||||||||
PCX Aerostructures, LLC - 6.00%, 8/9/2021 (6) (7) | Subordinated Debt | Industrials | 238 | 5,908 | 118 | — | — | 3,553 | 9,579 | |||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PennantPark Credit Opportunities Fund II, LP | Equity/Other | Diversified Investment Vehicles | 336 | 8,707 | — | — | — | 25 | 8,732 | |||||||||||||||||||||||
Tap Rock Resources, LLC (7) (8) | Equity/Other | Energy | — | 20,879 | 3,886 | (9,368 | ) | 186 | 754 | 16,337 | ||||||||||||||||||||||
Tax Defense Network, LLC - L+6.00% (10.00%), 9/30/2021 (6) (7) | Senior Secured First Lien Debt | Consumer | — | 1,262 | — | — | — | (406 | ) | 856 | ||||||||||||||||||||||
Tax Defense Network, LLC - L+6.00% (10.00%), 9/30/2021 (6) (7) | Senior Secured First Lien Debt | Consumer | — | 7,108 | — | — | — | (2,288 | ) | 4,820 | ||||||||||||||||||||||
Tax Defense Network, LLC - 10.00%, 9/30/2021 (6) (7) | Senior Secured First Lien Debt | Consumer | — | 2,357 | 629 | — | — | 164 | 3,150 | |||||||||||||||||||||||
68
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2019 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at June 30, 2020 | |||||||||||||||||||||||
Tax Defense Network, LLC (7) (8) | Equity/Other | Consumer | — | — | — | — | — | — | — | |||||||||||||||||||||||
Tax Defense Network, LLC (7) (8) | Equity/Other | Consumer | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Team Waste, LLC (7) | Equity/Other | Industrials | 84 | 2,235 | 335 | — | — | — | 2,570 | |||||||||||||||||||||||
Tennenbaum Waterman Fund, LP | Equity/Other | Diversified Investment Vehicles | 643 | 9,841 | — | — | — | (1,149 | ) | 8,692 | ||||||||||||||||||||||
TwentyEighty, Inc. (5) (7) (8) | Equity/Other | Business Services | — | — | — | (369 | ) | 369 | — | — | ||||||||||||||||||||||
Vantage Mobility International, LLC - L+6.00% (7.00%), 6/30/2023 (6) (7) | Senior Secured First Lien Debt | Transportation | — | — | 196 | — | — | (27 | ) | 169 | ||||||||||||||||||||||
Vantage Mobility International, LLC - L+6.00% (7.00%), 6/30/2023 (6) (7) | Senior Secured Second Lien Debt | Transportation | — | 2,883 | — | — | — | (324 | ) | 2,559 | ||||||||||||||||||||||
Vantage Mobility International, LLC - L+7.75% (10.26%), 9/1/2021 (5) (7) | Subordinated Debt | Transportation | 12 | — | — | — | — | — | — | |||||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | 942 | — | — | — | (942 | ) | — | ||||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
Whitehorse, Ltd. 2014-1A SUB - 0.00%, 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | — | 286 | — | — | — | (286 | ) | — | ||||||||||||||||||||||
Whitehorse, Ltd. 2014-1A Side Letter - 0.00%, 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | (2 | ) | 35 | — | — | — | (35 | ) | — | |||||||||||||||||||||
Whitehorse, Ltd. 2014-1A E - L+4.55% (5.24%), 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 182 | 7,054 | 10 | — | — | (3,270 | ) | 3,794 | ||||||||||||||||||||||
Total Affiliate Investments | $ | 1,875 | $ | 129,526 | $ | 17,876 | $ | (12,882 | ) | $ | 602 | $ | (25,678 | ) | $ | 109,444 | ||||||||||||||||
Total Control & Affiliate Investments | $ | 19,677 | $ | 536,043 | $ | 27,991 | $ | (76,761 | ) | $ | 230 | $ | (62,560 | ) | $ | 424,943 | ||||||||||||||||
______________________________________________________
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company out of this category into a different category.
(1) | The principal amount and ownership detail are shown in the consolidated schedules of investments. |
(2) | This investment was not deemed significant under Regulation S-X as of June 30, 2020. |
(3) | For the year ended December 31, 2019, the Company had determined that it must include audited financial statements of Kahala Ireland Opco Designated Activity Company because it was a controlled investment and was required to do so under SEC Rule 3-09. The audited financial statements were attached as Exhibit 99.1 in the Company's 2019 Form 10-K. |
(4) | Gross of net change in deferred taxes in the amount of $1.7 million. |
(5) | Investment no longer held as of June 30, 2020. |
(6) | Investment paid or has the option to pay all or a portion of interest and dividends via payment-in-kind. |
69
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
(7) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements). |
(8) | Investment is non-income producing at June 30, 2020. |
Dividends and interest for the six months ended June 30, 2020 attributable to Controlled and Affiliated investments no longer held as of June 30, 2020 were $12.5 thousand.
Realized loss for the six months ended June 30, 2020 attributable to Controlled and Affiliated investments no longer held as of June 30, 2020 was $0.1 million.
Change in unrealized gain (loss) for the six months ended June 30, 2020 attributable to Controlled and Affiliated investments no longer held as of June 30, 2020 was $0.0 million.
The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2019:
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2018 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at December 31, 2019 | |||||||||||||||||||||||
Control Investments | ||||||||||||||||||||||||||||||||
California Resources Development JV, LLC (2) (5) (7) | Equity/Other | Energy | $ | 887 | $ | 28,973 | $ | — | $ | (28,402 | ) | $ | — | $ | (571 | ) | $ | — | ||||||||||||||
Capstone Nutrition Common Stock (fka Integrity Nutraceuticals, Inc.) (2) (5) (7) (8) | Equity/Other | Consumer | — | — | — | (159 | ) | (1,471 | ) | 1,630 | — | |||||||||||||||||||||
Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/25/2020 (2) (5) (6) (7) | Senior Secured First Lien Debt | Consumer | — | 3,219 | 1,804 | (5,471 | ) | 838 | (390 | ) | — | |||||||||||||||||||||
Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/19/2020 (2) (5) (6) (7) | Senior Secured First Lien Debt | Consumer | (12 | ) | 3,459 | — | (1,612 | ) | (14,794 | ) | 12,947 | — | ||||||||||||||||||||
Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/25/2020 (2) (5) (6) (7) | Senior Secured First Lien Debt | Consumer | — | 7,692 | — | (3,282 | ) | (30,365 | ) | 25,955 | — | |||||||||||||||||||||
Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals, Inc.) (2) (5) (7) (8) | Equity/Other | Consumer | — | — | — | — | — | — | — | |||||||||||||||||||||||
CRD Holdings, LLC - 9.00% (2) (7) | Equity/Other | Energy | 3,341 | — | 41,560 | (13,494 | ) | — | 877 | 28,943 | ||||||||||||||||||||||
CRS-SPV, Inc. (2) (7) (8) | Equity/Other | Industrials | 26 | 2,221 | — | — | — | — | 2,221 | |||||||||||||||||||||||
CRS-SPV, Inc. - L+4.50% (6.30%), 3/8/2020 (2) (7) | Senior Secured First Lien Debt | Industrials | 2 | — | 67 | (5 | ) | — | — | 62 | ||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company - L+8.00% (13.00%), 12/22/2028 (2) (3) (6) (7) | Senior Secured First Lien Debt | Transportation | 11,695 | 111,549 | 38,000 | (44,000 | ) | — | — | 105,549 | ||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8) | Equity/Other | Transportation | — | 20,329 | — | — | — | 36,897 | 57,226 | |||||||||||||||||||||||
Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8) | Equity/Other | Transportation | — | 3,250 | — | (36 | ) | — | 36 | 3,250 | ||||||||||||||||||||||
Kahala US OpCo, LLC - 13.00% (2) (3) (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
MGTF Holdco, LLC (2) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
MGTF Radio Company, LLC - L+6.00% (7.80%), 4/1/2024 (2) (7) | Senior Secured First Lien Debt | Media/Entertainment | 3,754 | — | 62,291 | (4,472 | ) | 12 | (3,660 | ) | 54,171 | |||||||||||||||||||||
70
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2018 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at December 31, 2019 | |||||||||||||||||||||||
MGTF Radio Company, LLC - P+3.50% (9.00%), 3/29/2020 (2) (5) (7) | Senior Secured First Lien Debt | Media/Entertainment | (9 | ) | — | 37,577 | (37,977 | ) | 21 | 379 | — | |||||||||||||||||||||
MGTF Radio Company, LLC - 16.00%, 3/30/2020 (2) (5) (7) | Subordinated Debt | Media/Entertainment | 188 | — | 20,082 | (24,309 | ) | — | 4,227 | — | ||||||||||||||||||||||
NexSteppe, Inc. (2) (7) (8) | Equity/Other | Chemicals | — | — | — | — | — | — | — | |||||||||||||||||||||||
NexSteppe, Inc. - 12.00% 3/31/2020 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
NexSteppe, Inc. - 12.00% 3/31/2020 (2) (6) (7) | Senior Secured First Lien Debt | Chemicals | — | — | — | — | — | — | — | |||||||||||||||||||||||
NMFC Senior Loan Program I, LLC (2) | Equity/Other | Diversified Investment Vehicles | 5,864 | 50,573 | — | — | — | (3,263 | ) | 47,310 | ||||||||||||||||||||||
Park Ave RE Holdings, LLC - 13.00% 12/31/2021 (2) (6) (7) | Subordinated Debt | Financials | 4,858 | 37,192 | 1,750 | (1,705 | ) | — | — | 37,237 | ||||||||||||||||||||||
Park Ave RE Holdings, LLC (2) (7) (8) | Equity/Other | Financials | — | 15,578 | 2,500 | (4,246 | ) | 4,486 | (7,185 | ) | 11,133 | |||||||||||||||||||||
Park Ave RE Holdings, LLC (2) (5) (7) (8) | Equity/Other | Financials | — | 23,645 | — | (23,645 | ) | — | — | — | ||||||||||||||||||||||
Siena Capital Finance, LLC - 12.50% 8/16/2021 (2) (7) | Subordinated Debt | Financials | 2,346 | — | 22,492 | — | — | 8 | 22,500 | |||||||||||||||||||||||
Siena Capital Finance, LLC (2) (7) | Equity/Other | Financials | 4,732 | — | 36,631 | — | (94 | ) | 378 | 36,915 | ||||||||||||||||||||||
WPNT, LLC (2) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
Total Control Investments | $ | 37,672 | $ | 307,680 | $ | 264,754 | $ | (192,815 | ) | $ | (41,367 | ) | $ | 68,265 | $ | 406,517 | ||||||||||||||||
Affiliate Investments | ||||||||||||||||||||||||||||||||
Answers Corp. (7) | Equity/Other | Media/Entertainment | $ | 818 | $ | 1,909 | $ | — | $ | — | $ | — | $ | (1,182 | ) | $ | 727 | |||||||||||||||
B&M CLO, Ltd. 2014-1A SUB - 0.00%, 4/16/2026 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | 46 | 6,029 | — | (5,839 | ) | (4,685 | ) | 4,495 | — | |||||||||||||||||||||
Capstone Nutrition Development, LLC (7) (8) | Equity/Other | Consumer | — | — | 4,788 | — | — | — | 4,788 | |||||||||||||||||||||||
CVP Cascade CLO, Ltd. 2013-CLO1 SUB - 0.00%, 1/16/2026 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | 221 | 1,166 | — | (539 | ) | (435 | ) | (192 | ) | — | ||||||||||||||||||||
CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter - 0.00%, 1/16/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 12 | 68 | — | (405 | ) | — | 337 | — | ||||||||||||||||||||||
CVP Cascade CLO, Ltd. 2014-2A Side Letter - 0.00%, 7/18/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 43 | 274 | — | (550 | ) | — | 276 | — | ||||||||||||||||||||||
Danish CRJ, Ltd. (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
Figueroa CLO, Ltd. 2014-1A FR - L+10.00% (12.30%), 1/15/2027 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | 857 | 7,508 | — | (5,730 | ) | (2,270 | ) | 492 | — | |||||||||||||||||||||
Figueroa CLO, Ltd. 2014-1A SUB - 0.00%, 1/15/2027 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | 324 | 7,468 | — | (6,289 | ) | (5,280 | ) | 4,101 | — | |||||||||||||||||||||
Figueroa CLO, Ltd. 2014-1A Side Letter - 0.00%, 1/15/2027 (7) | Collateralized Securities | Diversified Investment Vehicles | 37 | 483 | — | (550 | ) | — | 67 | — | ||||||||||||||||||||||
Frank Entertainment Group, LLC - 6.00% 12/31/2019 (5) (7) | Senior Secured First Lien Debt | Media/Entertainment | — | 1,441 | — | (347 | ) | (1,489 | ) | 395 | — | |||||||||||||||||||||
Frank Entertainment Group, LLC - L+9.00% (11.03%), 12/31/2019 (5) (6) (7) | Senior Secured First Lien Debt | Media/Entertainment | — | — | 867 | — | (867 | ) | — | — | ||||||||||||||||||||||
71
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2018 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at December 31, 2019 | |||||||||||||||||||||||
Frank Entertainment Group, LLC - 12.00% 12/31/2019 (5) (6) (7) | Senior Secured Second Lien Debt | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
Frank Entertainment Group, LLC (5) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
Frank Entertainment Group, LLC (5) (7) (8) | Equity/Other | Media/Entertainment | — | — | — | — | — | — | — | |||||||||||||||||||||||
Frank Entertainment Group, LLC (5) (7) (8) | Equity/Other | Media/Entertainment | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Frontstreet Facility Solutions, Inc. - 13.00%, 3/1/2021 (5) (7) | Subordinated Debt | Telcom | 26 | 189 | — | (123 | ) | (104 | ) | 38 | — | |||||||||||||||||||||
Frontstreet Facility Solutions, Inc. (5) (7) (8) | Equity/Other | Telcom | — | — | — | (128 | ) | 128 | — | — | ||||||||||||||||||||||
MidOcean Credit CLO 2013-2A INC - 0.76%, 1/29/2025 (7) | Collateralized Securities | Diversified Investment Vehicles | 432 | 16,534 | — | (3,630 | ) | — | (1,069 | ) | 11,835 | |||||||||||||||||||||
MidOcean Credit CLO III, LLC - 13.99%, 7/21/2026 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | 431 | 14,651 | — | (17,458 | ) | 544 | 2,263 | — | ||||||||||||||||||||||
MidOcean Credit CLO 2015-4A INC - 0.00%, 4/15/2027 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | — | 8,595 | — | (6,795 | ) | (5,310 | ) | 3,510 | — | |||||||||||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A SUB - 16.56%, 7/25/2025 (7) | Collateralized Securities | Diversified Investment Vehicles | 3,546 | 24,788 | — | (447 | ) | — | (4,644 | ) | 19,697 | |||||||||||||||||||||
NewStar Arlington Senior Loan Program, LLC 14-1A FR - L+11.00% (12.94%), 4/25/2031 (7) | Collateralized Securities | Diversified Investment Vehicles | 664 | 4,425 | 18 | — | — | 169 | 4,612 | |||||||||||||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F - L+7.50% (9.47%), 1/20/2027 (7) | Collateralized Securities | Diversified Investment Vehicles | 1,244 | 8,580 | 162 | — | — | 467 | 9,209 | |||||||||||||||||||||||
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB - 21.81%, 1/20/2027 (7) | Collateralized Securities | Diversified Investment Vehicles | 1,639 | 11,895 | — | (3,032 | ) | — | (2,256 | ) | 6,607 | |||||||||||||||||||||
OFSI Fund, Ltd. 2014-6A SUB - 0.00%, 3/20/2025 (5) (7) | Collateralized Securities | Diversified Investment Vehicles | — | 3,008 | — | (1,535 | ) | (8,468 | ) | 6,995 | — | |||||||||||||||||||||
OFSI Fund, Ltd. 2014-6A Side Letter - 0.00%, 3/20/2025 (7) | Collateralized Securities | Diversified Investment Vehicles | — | 199 | — | (238 | ) | — | 39 | — | ||||||||||||||||||||||
PCX Aerostructures, LLC - 6.00%, 8/9/2021 (6) (7) | Subordinated Debt | Industrials | 464 | — | 6,023 | — | — | (115 | ) | 5,908 | ||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PCX Aerostructures, LLC (7) (8) | Equity/Other | Industrials | — | — | — | — | — | — | — | |||||||||||||||||||||||
PennantPark Credit Opportunities Fund II, LP | Equity/Other | Diversified Investment Vehicles | 647 | 8,705 | 304 | — | — | (302 | ) | 8,707 | ||||||||||||||||||||||
Tap Rock Resources, LLC (7) (8) | Equity/Other | Energy | — | — | 20,672 | — | — | 207 | 20,879 | |||||||||||||||||||||||
Tax Defense Network, LLC - L+6.00% (10.00%), 4/30/2020 (6) (7) | Senior Secured First Lien Debt | Consumer | (4 | ) | 1,195 | — | (111 | ) | — | 178 | 1,262 | |||||||||||||||||||||
Tax Defense Network, LLC - L+6.00% (10.00%), 4/30/2020 (6) (7) | Senior Secured First Lien Debt | Consumer | (30 | ) | 6,732 | — | (631 | ) | 3 | 1,004 | 7,108 | |||||||||||||||||||||
72
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Portfolio Company (1) | Type of Asset | Industry | Amount of dividends and interest included in income | Beginning Fair Value at December 31, 2018 | Gross additions* | Gross reductions** | Realized Gain/(Loss) | Change in Unrealized Gain (Loss) (4) | Fair Value at December 31, 2019 | |||||||||||||||||||||||
Tax Defense Network, LLC - L+10.00% (10.00%), 4/30/2020 (6) (7) | Senior Secured First Lien Debt | Consumer | — | — | 2,357 | — | — | — | 2,357 | |||||||||||||||||||||||
Tax Defense Network, LLC (7) (8) | Equity/Other | Consumer | — | — | — | — | — | — | — | |||||||||||||||||||||||
Tax Defense Network, LLC (7) (8) | Equity/Other | Consumer | — | — | — | — | — | — | — | |||||||||||||||||||||||
Team Waste, LLC (7) (8) | Equity/Other | Industrials | — | 2,235 | — | — | — | — | 2,235 | |||||||||||||||||||||||
Tennenbaum Waterman Fund, LP | Equity/Other | Diversified Investment Vehicles | $ | 1,381 | $ | 10,137 | $ | — | $ | — | $ | — | $ | (296 | ) | $ | 9,841 | |||||||||||||||
THL Credit Greenway Fund II, LLC | Equity/Other | Diversified Investment Vehicles | 1,636 | 7,435 | — | (3,290 | ) | — | (1,591 | ) | 2,554 | |||||||||||||||||||||
TwentyEighty, Inc. (5) (7) (8) | Equity/Other | Business Services | — | — | — | (6,465 | ) | 6,465 | — | — | ||||||||||||||||||||||
TwentyEighty, Inc. - L+8.00% (10.33%), 3/31/2020 (5) (6) (7) | Senior Secured First Lien Debt | Business Services | 40 | 300 | 13 | (304 | ) | 17 | (26 | ) | — | |||||||||||||||||||||
TwentyEighty, Inc. - 8.00%, 3/31/2020 (5) (6) (7) | Senior Secured First Lien Debt | Business Services | 1,013 | 6,422 | 813 | (6,754 | ) | 481 | (962 | ) | — | |||||||||||||||||||||
TwentyEighty, Inc. - 9.00%, 3/31/2020 (5) (6) (7) | Senior Secured First Lien Debt | Business Services | 992 | 6,158 | 981 | (6,709 | ) | 438 | (868 | ) | — | |||||||||||||||||||||
Vantage Mobility International, LLC - L+6.00% (7.80%), 6/30/2023 (6) (7) | Senior Secured Second Lien Debt | Transportation | — | — | 2,742 | — | — | 141 | 2,883 | |||||||||||||||||||||||
Vantage Mobility International, LLC - L+6.00% (8.44%), 6/30/2023 (5) | Senior Secured First Lien Debt | Transportation | — | — | 2,351 | (2,351 | ) | — | — | — | ||||||||||||||||||||||
Vantage Mobility International, LLC - L+7.75% (10.26%), 9/1/2021 (5) (7) | Subordinated Debt | Transportation | 480 | — | 5,842 | (5,490 | ) | (509 | ) | 157 | — | |||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | — | 3,140 | — | — | (2,198 | ) | 942 | ||||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
Vantage Mobility International, LLC (7) (8) | Equity/Other | Transportation | — | — | — | — | — | — | — | |||||||||||||||||||||||
Whitehorse, Ltd. 2014-1A SUB - 0.00%, 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 18 | 3,975 | — | (1,895 | ) | — | (1,794 | ) | 286 | |||||||||||||||||||||
Whitehorse, Ltd. 2014-1A Side Letter - 10.44%, 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 8 | 297 | — | (342 | ) | — | 80 | 35 | ||||||||||||||||||||||
Whitehorse, Ltd. 2014-1A E - L+4.55% (6.46%), 5/1/2026 (7) | Collateralized Securities | Diversified Investment Vehicles | 297 | — | 7,314 | — | — | (260 | ) | 7,054 | ||||||||||||||||||||||
World Business Lenders, LLC (7) (8) | Equity/Other | Financials | — | 3,759 | — | (3,755 | ) | — | (4 | ) | — | |||||||||||||||||||||
Total Affiliate Investments | $ | 17,282 | $ | 176,560 | $ | 58,387 | $ | (91,732 | ) | $ | (21,341 | ) | $ | 7,652 | $ | 129,526 | ||||||||||||||||
Total Control & Affiliate Investments | $ | 54,954 | $ | 484,240 | $ | 323,141 | $ | (284,547 | ) | $ | (62,708 | ) | $ | 75,917 | $ | 536,043 | ||||||||||||||||
_____________________________________________________
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company into this category from a different category.
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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company out of this category into a different category.
(1) | The principal amount and ownership detail are shown in the consolidated schedules of investments. |
(2) | This investment was not deemed significant under Regulation S-X as of December 31, 2019. |
(3) | For the year ended December 31, 2019, the Company had determined that it must include audited financial statements of Kahala Ireland Opco Designated Activity Company because it was a controlled investment and was required to do so under SEC Rule 3-09. The audited financial statements were attached as Exhibit 99.1 in the Company's 2019 Form 10-K. |
(4) | Gross of net change in deferred taxes in the amount of $1.0 million. |
(5) | Investment no longer held as of December 31, 2019. |
(6) | Investment paid or has the option to pay all or a portion of interest and dividends via payment-in-kind. |
(7) | The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements). |
(8) | Investment is non-income producing at December 31, 2019. |
Dividends and interest for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 were $5.5 million.
Realized loss for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 was $67.1 million.
Change in unrealized gain for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 was $64.6 million.
Note 16 – Subsequent Events
The Company has evaluated subsequent events through the filing of this Form 10-Q and has determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the consolidated financial statements except for the following:
MassMutual Credit Facility
On July 7, 2020, the Company and a wholly-owned, special purpose financing subsidiary of the Company, BDCA Asset Financing, LLC (“BDCA Asset Financing”), entered into a loan and servicing agreement (the “MassMutual Credit Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”) as facility servicer and a lender and U.S. Bank National Association as collateral custodian, collateral administrator and administrative agent. The MassMutual Credit Facility provides for borrowings of up to $150 million on a committed basis.
BDCA Asset Financing’s obligations under the MassMutual Credit Facility are secured by a first priority security interest in substantially all of the assets of BDCA Asset Financing, including its portfolio of investments and the Company’s equity interest in BDCA Asset Financing. The obligations of BDCA Asset Financing under the MassMutual Credit Facility are non-recourse to the Company.
The MassMutual Credit Facility provides for borrowings through December 31, 2021 and matures on December 31, 2025.
The MassMutual Credit Facility is priced at three-month maturity LIBOR, with a LIBOR floor of 0.75%, plus a spread of 5.0%. Interest is payable quarterly in arrears. BDCA Asset Financing will be subject to a non-usage fee of 0.50% to the extent the aggregate principal amount available under the MassMutual Credit Facility has not been borrowed. BDCA Asset Financing paid a structuring fee and incurred other customary costs and expenses in connection with the MassMutual Credit Facility.
In connection with the MassMutual Credit Facility, the Company and BDCA Asset Financing have made certain representations and warranties and are required to comply with various covenants and other customary requirements. The MassMutual Credit Facility contains customary default provisions pursuant to which MassMutual may terminate the Company in its capacity as portfolio asset servicer of the portfolio assets under the MassMutual Credit Facility. Upon the occurrence of an event of default, MassMutual may declare the outstanding advances and all other obligations under the MassMutual Credit Facility immediately due and payable.
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BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the period ended June 30, 2020
(Unaudited)
Amendment to Wells Fargo Credit Facility
On July 7, 2020, the Company amended the Wells Fargo Credit Facility. For more information, see the description of Wells Fargo Credit Facility in “Note 5 - Borrowings”.
Redemption of 2020 Notes
On August 14, 2020, the Company redeemed all outstanding 2020 Notes. For more information, see the description of the 2020 Notes in “Note 5 - Borrowings”.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Business Development Corporation of America (the "Company," "BDCA," "we," or "our") and the notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q. We are externally managed by our adviser, BDCA Adviser, LLC (the “Adviser”).
Forward Looking Statements
The forward-looking statements contained in this Quarterly Report on Form 10-Q may include statements as to:
• | our future operating results; |
• | the impact of the COVID-19 pandemic on our business and our portfolio companies, including our and their ability to access capital and liquidity; |
• | changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including the effect of the current COVID-19 pandemic; |
• | the impact that the discontinuation of LIBOR and the transition to new reference rates could have on the value of our LIBOR-indexed portfolio investments and the cost of borrowing under our credit facilities; |
• | the impact of the investments that we expect to make; |
• | the ability of our portfolio companies to achieve their objectives; |
• | our contractual arrangements and relationships with third parties; |
• | our expected financings and investments; |
• | the adequacy of our cash resources and working capital; |
• | the timing of cash flows, if any, from the operations of our portfolio companies; |
• | our repurchase of shares; |
• | actual and potential conflicts of interest with our Adviser and its affiliates; |
• | the dependence of our future success on the general economy and its effect on the industries in which we invest; |
• | the ability to qualify and maintain our qualifications as a regulated investment company (“RIC”) and a business development company (“BDC”); |
• | the timing, form, and amount of any distributions; |
• | the impact of fluctuations in interest rates on our business; |
• | the valuation of any investments in portfolio companies, particularly those having no liquid trading market; |
• | the impact of changes to generally accepted accounting principles, and the impact to BDCA; and |
• | the impact of changes to tax legislation and, generally, our tax position. |
In addition, words such as "anticipate," "believe," "expect," and "intend" indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K. Other factors that could cause actual results to differ materially include:
• | changes in the economy; |
• | risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and |
• | future changes in laws or regulations and conditions in our operating areas. |
You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligations to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
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Overview
We are an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, we have elected to be treated for tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our investment activities are managed by the Adviser, a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by our Board of Directors, a majority of whom are independent of the Adviser and its affiliates. As a BDC, we are required to comply with certain regulatory requirements.
Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We invest primarily in senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans, and equity of predominantly private U.S. middle-market companies. We define middle market companies as those with annual revenues of less than $1 billion, although we may invest in larger or smaller companies. We may also purchase interests in loans or corporate bonds through secondary market transactions. We expect that each investment generally will range between approximately 0.5% and 3.0% of our total assets. As of June 30, 2020, 80.8% of our portfolio was invested in senior secured loans.
Senior secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in priority of payments and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property, and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities” or “CLO's”).
Financial and Operating Highlights
(Dollars in millions, except per share amounts) | ||||
At June 30, 2020: | ||||
Investment Portfolio | $ | 2,217.5 | ||
Net assets | 1,304.0 | |||
Debt (net of deferred financing costs) | 1,056.0 | |||
Net asset value per share | 6.52 | |||
Portfolio Activity for the Six Months Ended June 30, 2020: | ||||
Cost of investments purchased during period, including PIK | 366.6 | |||
Sales, repayments, and other exits during the period | 487.3 | |||
Number of portfolio companies at end of period | 232 | |||
Operating results for the Six Months Ended June 30, 2020: | ||||
Net investment income per share | 0.24 | |||
Distributions declared per share | 0.26 | |||
Net decrease in net assets resulting from operations per share | (0.84 | ) | ||
Net investment income | 46.0 | |||
Net realized and unrealized loss, net of change in deferred taxes | (208.8 | ) | ||
Net decrease in net assets resulting from operations | (162.8 | ) | ||
Portfolio and Investment Activity
During the six months ended June 30, 2020, we made $363.3 million of investments in new and existing portfolio companies and had $487.3 million in aggregate amount of sales and repayments, resulting in net sales and repayments of $124.0 million for the period. The total portfolio of debt investments at fair value consisted of 91.5% bearing variable interest rates and 8.5% bearing fixed interest rates.
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Our portfolio composition, based on fair value at June 30, 2020 was as follows:
June 30, 2020 | |||||
Percentage of Total Portfolio | Weighted Average Current Yield for Total Portfolio (1) | ||||
Senior Secured First Lien Debt | 71.0 | % | 7.1 | % | |
Senior Secured Second Lien Debt | 9.8 | 11.1 | |||
Subordinated Debt | 5.4 | 11.4 | |||
Collateralized Securities (2) | 4.3 | 8.1 | |||
Equity/Other (3) | 9.5 | 7.4 | |||
Total | 100.0 | % | 7.8 | % | |
______________
(1) Includes the effect of the amortization or accretion of loan premiums or discounts.
(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with Accounting Standards Codification ("ASC") Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).
(3) Weighted average current yield for Equity/Other may be based on actual or annualized income, where applicable.
During the year ended December 31, 2019, we made $997.0 million of investments in new and existing portfolio companies and had $786.8 million in aggregate amount of sales and repayments, resulting in net investments of $210.2 million for the period. The total portfolio of debt investments at fair value consisted of 90.5% bearing variable interest rates and 9.5% bearing fixed interest rates.
Our portfolio composition, based on fair value at December 31, 2019 was as follows:
______________
December 31, 2019 | |||||
Percentage of Total Portfolio | Weighted Average Current Yield for Total Portfolio (1) | ||||
Senior Secured First Lien Debt | 69.3 | % | 8.5 | % | |
Senior Secured Second Lien Debt | 12.0 | 12.3 | |||
Subordinated Debt | 4.2 | 11.3 | |||
Collateralized Securities (2) | 4.3 | 10.1 | |||
Equity/Other (3) | 10.2 | 6.3 | |||
Total | 100.0 | % | 8.9 | % | |
(1) Includes the effect of the amortization or accretion of loan premiums or discounts.
(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).
(3) Weighted average current yield for Equity/Other may be based on actual or annualized income, where applicable.
Portfolio Asset Quality
Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors.
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Loan Rating | Summary Description | |
1 | Debt investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since the time of investment are favorable. | |
2 | Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. All investments are initially rated a “2”. | |
3 | Performing debt investment requiring closer monitoring. Trends and risk factors show some deterioration. | |
4 | Underperforming debt investment. Some loss of interest or dividend expected, but still expecting a positive return on investment. Trends and risk factors are negative. | |
5 | Underperforming debt investment with expected loss of interest and some principal. | |
The weighted average risk rating of our investments based on fair value was 2.58 and 2.37 as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020, we had nineteen portfolio companies, which represented 28 investments, on non-accrual status with a total amortized cost of $212.9 million and fair value of $124.4 million which represented 8.7% and 5.6% of the investment portfolio's total amortized cost and fair value, respectively. As of December 31, 2019, we had eight portfolio companies, which represented twelve portfolio investments, on non-accrual status with a total amortized cost of $62.8 million and fair value of $22.5 million, which represented 2.4%, and 0.9% of the investment portfolio's total amortized cost and fair value, respectively. Refer to Note 2 - Summary of Significant Accounting Policies - in our consolidated financial statements included in this report for additional details regarding our non-accrual policy.
RESULTS OF OPERATIONS
Operating results for the three and six months ended June 30, 2020 and 2019 were as follows (dollars in thousands):
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Total investment income | $ | 45,081 | $ | 62,052 | $ | 98,362 | $ | 123,153 | |||||||
Total expenses | 24,428 | 34,452 | 51,677 | 67,925 | |||||||||||
Income tax expense, including excise tax | 220 | 501 | 694 | 963 | |||||||||||
Net investment gain attributable to non-controlling interests | — | 7 | — | 9 | |||||||||||
Net investment income | $ | 20,433 | $ | 27,092 | $ | 45,991 | $ | 54,256 | |||||||
Investment Income
For the three and six months ended June 30, 2020, total investment income was $45.1 million and $98.4 million, respectively, and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 7.8%. Included within total investment income was $1.1 million and $2.2 million, respectively, of fee income for the three and six months ended June 30, 2020. Fee income consists primarily of prepayment and amendment fees. For the three and six months ended June 30, 2019, total investment income was $62.1 million and $123.2 million, respectively and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 9.7%. Included within total investment income was $0.6 million and $1.6 million, respectively, of fee income for the three and six months ended June 30, 2019. Fee income consists primarily of prepayment and amendment fees.
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Operating Expenses
The composition of our operating expenses for the three and six months ended June 30, 2020 and 2019 was as follows (dollars in thousands):
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Management fees | $ | 9,445 | $ | 10,037 | $ | 19,322 | $ | 19,470 | |||||||
Incentive fee on income | — | 6,773 | — | 13,564 | |||||||||||
Interest and debt fees | 12,297 | 14,116 | 26,077 | 27,374 | |||||||||||
Professional fees | 1,190 | 1,428 | 2,601 | 3,135 | |||||||||||
Other general and administrative | 994 | 1,673 | 2,606 | 3,527 | |||||||||||
Administrative services | 252 | 197 | 560 | 393 | |||||||||||
Directors' fees | 250 | 228 | 511 | 462 | |||||||||||
Total operating expenses | $ | 24,428 | $ | 34,452 | $ | 51,677 | $ | 67,925 | |||||||
For the three and six months ended June 30, 2020, we incurred management fees of $9.4 million and $19.3 million, respectively. For both the three and six months ended June 30, 2020, we did not incur incentive fees on income. For the three and six months ended June 30, 2019, we incurred management fees of $10.0 million and $19.5 million, respectively. For the three and six months ended June 30, 2019, we incurred incentive fees on income of $6.8 million and $13.6 million, respectively.
For the three and six months ended June 30, 2020, we incurred interest and debt fees of $12.3 million and $26.1 million, respectively. For the three and six months ended June 30, 2019, we incurred interest and debt fees of $14.1 million and $27.4 million, respectively. Interest and debt fees are comprised of interest expense, non-usage fees, trustee fees, amortization of deferred financing costs, and amortization of discount if applicable related to the Wells Fargo Credit Facility, Citi Credit Facility, 2024 Notes, 2023 Notes, 2022 Notes, and 2020 Notes, each as defined herein in the section entitled "Borrowings". The decrease in interest and debt fees for the three and six months ended June 30, 2020 as compared to the same periods in 2019 is primarily the result of a decrease in average interest costs.
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Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments, foreign currency transactions, and forward currency exchange contracts
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and foreign currency transactions, net of change in deferred taxes for the three and six months ended June 30, 2020 and 2019 were as follows (dollars in thousands):
For the three months ended June 30, | For the six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net realized gain (loss) | |||||||||||||||
Control investments | $ | 128 | $ | — | $ | (372 | ) | $ | (94 | ) | |||||
Affiliate investments | 413 | 549 | 602 | 555 | |||||||||||
Non-affiliate investments | (56,964 | ) | 2,022 | (70,306 | ) | (523 | ) | ||||||||
Net realized gain (loss) on foreign currency transactions | 1,105 | (48 | ) | 773 | 674 | ||||||||||
Total net realized gain (loss) | (55,318 | ) | 2,523 | (69,303 | ) | 612 | |||||||||
Net change in unrealized appreciation (depreciation) on investments | |||||||||||||||
Control investments | (19,277 | ) | 17,083 | (36,882 | ) | 28,749 | |||||||||
Affiliate investments | 2,961 | (705 | ) | (25,678 | ) | 8,767 | |||||||||
Non-affiliate investments | 82,827 | (10,865 | ) | (78,626 | ) | 1,385 | |||||||||
Net change in deferred taxes | 1,034 | (4 | ) | 1,748 | (486 | ) | |||||||||
Total net change in unrealized appreciation (depreciation) on investments, net of change in deferred taxes | 67,545 | 5,509 | (139,438 | ) | 38,415 | ||||||||||
Net change in unrealized depreciation attributable to non-controlling interests | — | (1,725 | ) | — | (3,017 | ) | |||||||||
Net change in unrealized depreciation from forward currency exchange contracts | (1,768 | ) | (235 | ) | (77 | ) | (1,270 | ) | |||||||
Net realized and unrealized gain (loss) | $ | 10,459 | $ | 6,072 | $ | (208,818 | ) | $ | 34,740 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions, net of change in deferred taxes, resulted in a net gain (loss) of $10.5 million and $(208.8) million, respectively, for the three and six months ended June 30, 2020 compared to net gain of $6.1 million and $34.7 million for the same periods in 2019. We look at net realized gain (loss) and change in unrealized appreciation (depreciation) together, as movement in unrealized appreciation or depreciation can be the result of realizations.
The net realized and unrealized gain for the three months ended June 30, 2020 was primarily driven by unrealized gains on Senior Secured Investments, partially offset by realized losses on Senior Secured Investment sales. The net realized and unrealized loss for the six months ended June 30, 2020 was primarily driven by realized losses on Senior Secured Investment sales as well as unrealized losses on Senior Secured Investments, Collateralized Securities, and Equity investments.
Changes in Net Assets from Operations
During the six months ended June 30, 2020, our operating results were impacted by the uncertainty surrounding the COVID-19 pandemic, which had a negative impact on the global economy and impacted the fair value and performance of our investment portfolio. For the three and six months ended June 30, 2020, we recorded a net increase (decrease) in net assets resulting from operations of $30.9 million and $(162.8) million, respectively, versus a net increase in net assets resulting from operations of $33.2 million and $89.0 million, respectively, for the three and six months ended June 30, 2019. The decrease in net assets resulting from operations for the three months ended June 30, 2020, as compared to the prior period, is driven by a decrease in net investment income partially offset by an increase in realized and unrealized gain on our investments. The decrease for the six months ended June 30, 2020, as compared to the prior period, is primarily driven by an increase in realized and unrealized loss on our investments. Based on the weighted average shares of common stock outstanding for the periods ended June 30, 2020 and 2019, our per share net increase (decrease) in net assets resulting from operations was $0.16 and $(0.84), respectively, for the three and six months ended June 30, 2020, versus a net increase in net assets resulting from operations of $0.17 and $0.47, respectively, for the three and six months ended June 30, 2019.
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Cash Flows
For the six months ended June 30, 2020, net cash provided by operating activities was $156.0 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions, and sales of portfolio investments. The increase in cash flows provided by operating activities for the six months ended June 30, 2020 was primarily a result of sales and repayments of investments of $487.3 million and net change in unrealized depreciation on investments of $141.2 million, offset by purchases of investments of $363.3 million.
Net cash used in financing activities of $21.4 million during the six months ended June 30, 2020 primarily related to payments on debt of $227.0 million, which was partially offset by proceeds from debt of $197.0 million.
For the six months ended June 30, 2019, net cash used in operating activities was $58.2 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions, and sales of portfolio investments. The decrease in cash flows used in operating activities for the six months ended June 30, 2019 was primarily a result of purchases of investments of $522.1 million, offset by sales and repayments of investments of $374.2 million.
Net cash provided by financing activities of $135.3 million during the six months ended June 30, 2019 primarily related to proceeds from debt of $197.0 million, which was partially offset by net repurchases of common stock of $18.6 million and payments of stockholder distributions of $43.6 million.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has resulted in governments around the world implementing a broad suite of measures to help control the spread of the virus, including quarantines, travel restrictions and business curtailments and others. The emergence of COVID-19 has created economic and financial disruptions that during the quarter adversely affected, and may continue to affect, our business, financial condition, liquidity and certain of our portfolio companies’ results of operations and liquidity. The extent to which the COVID-19 pandemic will continue to affect our business, financial condition, liquidity and certain of our portfolio companies’ results of operations and liquidity will depend on future developments, which are highly uncertain and cannot be predicted.
Given the unprecedented nature of the COVID-19 exigency and the fiscal and monetary response designed to mitigate strain to businesses and the economy, the operating environment of certain of our portfolio companies is evolving rapidly. We have been in frequent communication with management, as well as the private equity sponsors, of our portfolio companies in order to understand the impact of the COVID-19 pandemic on their particular businesses and assess their ability to meet their obligations. As a result of the business disruptions affecting certain of our portfolio companies, we may be required to reduce the future amount of distributions to our stockholders. We continue to closely monitor our investment portfolio in order to be positioned to respond appropriately.
Recent Developments
On July 7, 2020, the Company and BDCA Asset Financing entered into the MassMutual Credit Facility. For more information, see the description of the MassMutual Credit Facility in “Liquidity and Capital Resources - Borrowings”.
On July 7, 2020, the Company amended the Wells Fargo Credit Facility. For more information, see the description of Wells Fargo Credit Facility in “Liquidity and Capital Resources - Borrowings”.
On August 14, 2020, the Company redeemed all outstanding 2020 Notes. For more information, see the description of the 2020 Notes in “Liquidity and Capital Resources - Borrowings”.
Liquidity and Capital Resources
We generate cash flows from fees, interest, and dividends earned from our investments, as well as proceeds from sales of our investments and, previously, from the net proceeds of our Offering. As of June 30, 2020, we had issued 227.9 million shares of our common stock for gross proceeds of $2.3 billion, including the shares purchased by affiliates and shares issued pursuant to the DRIP. As of June 30, 2020, we had $410.0 million of senior unsecured notes outstanding. We suspended the DRIP from March 29, 2020 through June 26, 2020. While the DRIP was suspended, participants and all other holders of our common stock received distributions paid in cash. On March 31, 2020, we issued in a private placement an aggregate amount of 9,532,062 newly issued shares of our common stock at a price of $5.77 per share for aggregate cash proceeds of $55.0 million and on April 30, 2020, we issued in a private placement an aggregate amount of 693,240 newly issued shares of our common stock for aggregate cash proceeds of $4.0 million.
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Our principal demands for funds in both the short-term and long-term are for portfolio investments, for the payment of operating expenses, distributions to our investors, repurchases under our share repurchase program, and for the payment of principal and interest on our outstanding indebtedness. We may also from time to time enter into other agreements with third parties whereby third parties will contribute to specific investment opportunities. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings, proceeds from the sale of investments, and undistributed funds from operations. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets, and borrowing restrictions that may be imposed by lenders.
We intend to conduct annual tender offers pursuant to our share repurchase program. Our Board of Directors will consider the following factors, among others, in making its determination regarding whether to cause us to offer to repurchase shares and under what terms:
• | the effect of such repurchases on our qualification as a RIC (including the consequences of any necessary asset sales); |
• | the liquidity of our assets (including fees and costs associated with disposing of assets); |
• | our investment plans and working capital requirements; |
• | the relative economies of scale with respect to our size; |
• | our history in repurchasing shares or portions thereof; and |
• | the condition of the securities markets. |
We intend to conduct tender offers on an annual basis. We intend to continue to limit the number of shares to be repurchased in any calendar year to the lesser of (i) 10% of the weighted average number of shares outstanding in the prior calendar year or (ii) the number of shares of common stock the Company is able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during the relevant redemption period. In addition, in the event of a stockholder’s death or disability, any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that we may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock we are able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period.
Distributions
For the period from January 1, 2019 to March 29, 2020, the Company’s Board of Directors had authorized, and had declared, cash distributions payable on a monthly basis to stockholders of record at a distribution rate of $0.00178082 per day, which is equivalent to approximately $0.65 annually, per share of common stock, except for 2020 where the daily distribution rate was $0.00177596 per day to accurately reflect 2020 being a leap year. Effective April 21, 2020, the Board of Directors of the Company approved a transition in the timing of its distributions to holders of the Company's common stock from a monthly to a quarterly basis. On June 26, 2020, the Board declared a regular quarterly cash dividend of $0.10 per share of the Company's common stock, payable on July 6, 2020 to stockholders of record as of June 30, 2020.
The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions. The Company calculates each stockholder’s specific distribution amount for the quarter using record and declaration dates. The distributions are payable by the fifth day following each record date.
The table below shows the components of the distributions we have declared and/or paid during the six months ended June 30, 2020 and 2019 (dollars in thousands).
For the six months ended June 30, | |||||||
2020 | 2019 | ||||||
Distributions declared | $ | 50,536 | $ | 61,220 | |||
Distributions paid | $ | 46,049 | $ | 61,561 | |||
Portion of distributions paid in cash | $ | 33,117 | $ | 43,623 | |||
Portion of distributions paid in DRIP shares | $ | 12,932 | $ | 17,938 | |||
As of June 30, 2020, we had $15.0 million of distributions accrued and unpaid. As of December 31, 2019, we had $10.5 million of distributions accrued and unpaid.
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We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets. We have not established limits on the amount of funds we may use from available sources to make distributions. We may have distributions which could be characterized as a return of capital for tax purposes. During the six months ended June 30, 2020 and 2019, no portion of our distributions was characterized as return of capital for tax purposes. The specific tax characteristics of our distributions made in respect of our anticipated fiscal year ending December 31, 2020 will be reported to stockholders shortly after the end of the calendar year 2020 as well as in our periodic reports with the SEC. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gain. Moreover, you should understand that any such distributions were not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or our Adviser continues to make such reimbursements. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at all.
The following table sets forth the distributions declared during the six months ended June 30, 2020 and 2019 (dollars in thousands):
For the six months ended June 30, | |||||||
2020 | 2019 | ||||||
Distributions | $ | 50,536 | $ | 61,220 | |||
Total distributions | $ | 50,536 | $ | 61,220 | |||
Taxation as a RIC
We have elected to be treated as a RIC under Subchapter M of the Code commencing with our tax year ended December 31, 2011 and intend to maintain our qualification as a RIC thereafter. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any income that we distribute as dividends for U.S. federal income tax purposes to our stockholders. To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each tax year, an amount equal to at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss and determined without regard to any deduction for dividends paid, or the annual distribution requirement. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to state, local, and foreign taxes.
Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal income tax. If we fail to qualify as a RIC for any reason and become subject to corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.
Related Party Transactions and Agreements
Private Placement in connection with FT Transaction
On February 1, 2019, Franklin Templeton acquired BSP, including BSP's 100% ownership interest in our Advisor (the "FT Transaction"). In connection with the FT Transaction, on November 1, 2018, we issued approximately 6.1 million and 4.9 million shares of our common stock to Franklin Resources, Inc. and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act. As a result of this issuance, the Company received aggregate cash proceeds of $90.0 million.
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Investment Advisory Agreement
We entered into an Investment Advisory Agreement as of February 1, 2019, which was approved by the Board of Directors for a two year term, under which the Adviser, subject to the overall supervision of our Board of Directors manages the day-to-day operations of, and provides investment advisory services to us. The Adviser and its affiliates also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours. The Adviser and its affiliates serve as investment adviser or sub-adviser to private funds and registered open-end funds, and serves as an investment adviser to a public real estate investment trust. The Adviser’s policies are designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities. In addition, any affiliated fund currently formed or formed in the future and managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.
Prior to February 1, 2019, our Adviser provided investment advisory and management services under the Prior Investment Advisory Agreement, effective November 1, 2016, and most recently re-approved by the Board in August 2018. The terms of the Prior Investment Advisory Agreement were materially identical to the Investment Advisory Agreement. The Prior Investment Advisory Agreement automatically terminated upon the indirect change of control of the Adviser on the consummation of the FT Transaction.
Administration Agreement
On November 1, 2016, we entered into the Administration Agreement with BSP, pursuant to which BSP provides us with office facilities and administrative services. The Administration Agreement may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. For the three and six months ended June 30, 2020, the Company incurred $0.2 million and $0.8 million, respectively, in administrative service fees under the Administration Agreement. For the three and six months ended June 30, 2019, the Company incurred $0.6 million and $1.2 million, respectively, in administrative service fees under the Administration Agreement.
Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. The SEC staff has granted us exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
Borrowings
We are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, equals at least 200% after such borrowing, with certain limited exceptions. We are continually exploring additional forms of alternative debt financing which could include new or expanded credit facilities or the issuance of debt securities. We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital. We currently have credit facilities with Wells Fargo and Citi and have sold $410.0 million in aggregate principal of unsecured notes.
Wells Fargo Credit Facility
On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank, and collateral custodian (as amended from time to time, the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility was last amended on July 7, 2020 (the "Wells Fargo Amendment") and provides for borrowings in an aggregate principal amount of up to $575.0 million (reduced from $600.0 million by the Wells Fargo Amendment) on a committed basis subject to compliance with a borrowing base. The Wells Fargo Credit Facility has a maturity date of May 9, 2023.
The Wells Fargo Credit Facility is priced at the one-month maturity LIBOR, with no LIBOR floor, plus a spread of 2.75% per annum (prior to the Wells Fargo Amendment, the spread ranged between 1.65% and 2.50% per annum). Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum is currently 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
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In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.
Citi Credit Facility
On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into a credit facility as amended from time to time, (the “Citi Credit Facility”) with Citibank, N.A. ("Citi") as administrative agent and U.S. Bank as collateral agent, account bank, and collateral custodian. The Citi Credit Facility provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. The Citi Credit Facility's reinvestment period ends on May 31, 2021 and matures on May 31, 2022. On June 22, 2020, the Company, through CB Funding, entered into an amendment (the “Citi Amendment”) to the Citi Credit Facility. The Citi Amendment, among other things, makes certain changes to the Citi Credit Facility in connection with the upcoming LIBOR discontinuation. In connection with the Citi Credit Facility, CB Funding has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Citi may declare the outstanding advances and all other obligations under the Citi Credit Facility immediately due and payable. During the continuation of an event of default, CB Funding must pay interest at a default rate.
The Citi Credit Facility contains customary default provisions for facilities of this type pursuant to which Citi may terminate the rights, obligations, power, and authority of the Company, in its capacity as servicer of the portfolio assets under the Citi Credit Facility, including, but not limited to, non-performance of Citi Credit Facility obligations, insolvency, defaults of certain financial covenants, and other events with respect to the Company that may be adverse to Citi and the secured parties under the Citi Credit Facility.
The Citi Credit Facility is priced at three month LIBOR plus a spread of 1.60% per annum through and including the last day of the investment period and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. The non-usage fee per annum is 0.50%. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.
MassMutual Credit Facility
On July 7, 2020, the Company and a wholly-owned, special purpose financing subsidiary of the Company, BDCA Asset Financing, LLC (“BDCA Asset Financing”), entered into a loan and servicing agreement (the “MassMutual Credit Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”) as facility servicer and a lender and U.S. Bank National Association as collateral custodian, collateral administrator and administrative agent. The MassMutual Credit Facility provides for borrowings of up to $150 million on a committed basis.
BDCA Asset Financing’s obligations under the MassMutual Credit Facility are secured by a first priority security interest in substantially all of the assets of BDCA Asset Financing, including its portfolio of investments and the Company’s equity interest in BDCA Asset Financing. The obligations of BDCA Asset Financing under the MassMutual Credit Facility are non-recourse to the Company.
The MassMutual Credit Facility provides for borrowings through December 31, 2021 and matures on December 31, 2025. The MassMutual Credit Facility is priced at three-month maturity LIBOR, with a LIBOR floor of 0.75%, plus a spread of 5.0%. Interest is payable quarterly in arrears. BDCA Asset Financing will be subject to a non-usage fee of 0.50% to the extent the aggregate principal amount available under the MassMutual Credit Facility has not been borrowed. BDCA Asset Financing paid a structuring fee and incurred other customary costs and expenses in connection with the MassMutual Credit Facility.
In connection with the MassMutual Credit Facility, the Company and BDCA Asset Financing have made certain representations and warranties and are required to comply with various covenants and other customary requirements. The MassMutual Credit Facility contains customary default provisions pursuant to which MassMutual may terminate the Company in its capacity as portfolio asset servicer of the portfolio assets under the MassMutual Credit Facility. Upon the occurrence of an event of default, MassMutual may declare the outstanding advances and all other obligations under the MassMutual Credit Facility immediately due and payable.
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2020 Notes
On August 26, 2015, the Company entered into a Purchase Agreement relating to the Company’s sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due September 1, 2020 (the “2020 Notes”). The 2020 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2020 Notes were approximately $97.9 million. The 2020 Notes bear interest at a rate of 6.00% per year payable semi-annually.
On August 14, 2020, the Company redeemed all outstanding 2020 Notes.
2022 Notes
On December 14, 2017, the Company entered into a Purchase Agreement relating to the Company's sale of $150.0 million aggregate principal amount of its 4.75% fixed rate notes due December 30, 2022 (the “2022 Notes”). The 2022 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2022 Notes were approximately $147.0 million. The 2022 Notes bear interest at a rate of 4.75% per year payable semi-annually.
2023 Notes
On May 11, 2018, the Company entered into a Purchase Agreement relating to the Company's sale of $60.0 million aggregate principal amount of its 5.375% fixed rate notes due May 30, 2023 (the “2023 Notes”). The 2023 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2023 Notes were approximately $58.7 million. The 2023 Notes bear interest at a rate of 5.375% per year payable semi-annually.
2024 Notes
On December 3, 2019, the Company entered into a Purchase Agreement relating to the Company's sale of $100.0 million aggregate principal amount of its 4.85% fixed rate notes due December 15, 2024 (the “2024 Notes”). The 2024 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2024 Notes were approximately $98.4 million. The 2024 Notes bear interest at a rate of 4.85% per year payable semi-annually.
See Note 5 to our consolidated financial statements contained in this Quarterly Report on Form 10-Q for a more detailed discussion of our borrowings.
Contractual Obligations
The following table shows our payment obligations for repayment of debt and other contractual obligations as of June 30, 2020 (dollars in thousands):
Payment Due by Period | |||||||||||||||||||
Total | Less than 1 year | 1 - 3 years | 3- 5 years | More than 5 years | |||||||||||||||
Wells Fargo Credit Facility (1) | $ | 531,652 | $ | — | $ | 531,652 | $ | — | $ | — | |||||||||
Citi Credit Facility (2) | 125,500 | — | 125,500 | — | — | ||||||||||||||
2024 Notes (3) | 98,937 | — | — | 98,937 | — | ||||||||||||||
2023 Notes (4) | 59,810 | — | 59,810 | — | — | ||||||||||||||
2022 Notes (5) | 149,588 | — | 149,588 | — | — | ||||||||||||||
2020 Notes (6) | 99,946 | 99,946 | — | — | — | ||||||||||||||
Total contractual obligations | $ | 1,065,433 | $ | 99,946 | $ | 866,550 | $ | 98,937 | $ | — | |||||||||
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(1) | As of June 30, 2020, we had $68.3 million of unused borrowing capacity under the Wells Fargo Credit Facility, subject to borrowing base limits. |
(2) | As of June 30, 2020, we had $274.5 million of unused borrowing capacity under the Citi Credit Facility, subject to borrowing base limits. |
(3) | As of June 30, 2020, we had no unused borrowing capacity under the 2024 Notes. |
(4) | As of June 30, 2020, we had no unused borrowing capacity under the 2023 Notes. |
(5) | As of June 30, 2020, we had no unused borrowing capacity under the 2022 Notes. |
(6) | As of June 30, 2020, we had no unused borrowing capacity under the 2020 Notes. |
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Commitments
In the ordinary course of business, we may enter into future funding commitments. As of June 30, 2020, the Company had unfunded commitments on delayed draw term loans of $16.3 million (including $13.5 million of non-discretionary commitments and $2.8 million of discretionary commitments), unfunded commitments on revolver term loans of $28.1 million, and unfunded equity capital discretionary commitments of $11.1 million. As of December 31, 2019, the Company had unfunded commitments on delayed draw term loans of $24.9 million (including $21.8 million of non-discretionary commitments and $3.1 million of discretionary commitments), unfunded commitments on revolver term loans of $28.0 million, and unfunded equity capital discretionary commitments of $21.4 million. Please refer to Note 7 - Commitments and Contingencies for further detail of these unfunded commitments. We maintain sufficient cash on hand and available borrowing capacity to fund such unfunded commitments.
Significant Accounting Estimates and Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions 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. Actual results could differ from those estimates.
While our significant accounting policies are more fully described in Note 2 - Summary of Significant Accounting Policies appearing elsewhere in this report, we believe the following accounting policies require the most significant judgment in the preparation of our consolidated financial statements.
Valuation of Portfolio Investments
Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis we perform an analysis of each investment to determine fair value as follows:
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, we use the quote obtained.
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of our measurement date.
For investments in Collateralized Securities, both the assets and liabilities of each Collateralized Securities' capital structure are modeled. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets and distribute the cash flows to the liability structure based on the contractual priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.
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As part of our quarterly valuation process the Adviser may be assisted by one or more independent valuation firms engaged by us. The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).
With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:
• | Each portfolio company or investment will be valued by the Adviser, potentially with assistance from one or more independent valuation firms engaged by our Board of Directors; |
• | The independent valuation firm(s), if involved, will conduct independent appraisals and make an independent assessment of the value of each investment; and |
• | The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser, independent valuation firm (to the extent applicable) and the audit committee of the Board of Directors. |
Because there is not a readily available market value for most of the investments in its portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our Board of Directors, as described herein. 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. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
Revenue Recognition
Interest Income
Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.
The Company has a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in the Company's case, preferred shares, or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40-35, Beneficial Interests in Securitized Financial Assets ("ASC 325-40-35"). The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly. In accordance with ASC 325-40, investments in CLOs are periodically assessed for other-than-temporary impairment ("OTTI"). When the Company determines that a CLO has OTTI, the amortized cost basis of the CLO is written down as of the date of the determination based on events and information evaluated and that write-down is recognized as a realized loss.
Fee Income
Fee income, such as structuring fees, origination, closing, amendment fees, commitment, and other upfront fees are generally non-recurring and are recognized as revenue when earned, either upfront or amortized into income. Upon the payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.
Payment-in-Kind Interest/Dividends
We hold debt and equity investments in our portfolio that contain PIK interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.
Non-accrual Income
Investments are placed on non-accrual status when principal or interest/dividend payments are past due and/or when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.
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Net Realized Gain or Loss and Net Change in Unrealized Appreciation or Depreciation
Gain or loss on the sale of investments is calculated using the specific identification method. We measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when a gain or loss is realized.
See Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements for a description of other accounting policies and recently issued accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements, subject to the requirements of the 1940 Act, in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this report, we did not engage in interest rate hedging activities. We would not hold or issue these derivative contracts for trading or speculative purposes.
As of June 30, 2020, our debt included variable-rate debt, bearing a weighted average interest rate of LIBOR plus 2.10% and fixed rate debt, bearing a weighted average interest rate of 5.17% with a total carrying value (net of deferred financing costs) of $1,056.0 million. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase or decrease by 100 or 200 basis points assuming that our current consolidated statement of assets and liabilities was to remain constant and no actions were taken to alter our existing interest rate sensitivity. Interest rate floors, if applicable, are not reflected in the sensitivity analysis below.
Change in Interest Rates | Estimated Percentage Change in Interest Income net of Interest Expense | ||
(-) 200 Basis Points | (19.68 | )% | |
(-) 100 Basis Points | (9.84 | )% | |
Base Interest Rate | — | % | |
(+) 100 Basis Points | 9.84 | % | |
(+) 200 Basis Points | 19.68 | % | |
Because we may borrow money to make investments, our net investment income may be dependent on the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of increasing interest rates, our cost of funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
Capital Markets Risk
The prices of securities we hold may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the publicly-traded securities held by us.
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed, and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Change in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of June 30, 2020, we were not defendants in any material pending legal proceeding, and no such material proceedings are known to be contemplated. However, from time to time, we may be party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under the contracts with our portfolio companies. Third parties may also seek to impose liability on us in connection with the activities of our portfolio companies.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in Part I., “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which could materially affect our business, financial condition, and/or operating results. The risks described below and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks to us and certain of our portfolio companies.
Social, political, economic and other conditions and events may occur that create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which the Company and its investments are exposed. For example, in December 2019, a novel strain of coronavirus (also known as “COVID-19”) emerged in China and has since spread rapidly to other countries, including the United States. The global impact of the outbreak is rapidly evolving, and many countries have reacted by instituting quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and other public venues. With respect to the U.S. credit markets (in particular for middle market loans), this outbreak has resulted in, and may continue to result in, the following (among other things): (i) government imposition of various forms of shelter in place orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practical aspects of their operations, as well as in furloughs or lay-offs of employees, and, while these effects are hoped to be temporary, some effects could be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit; (iii) volatility and disruption of these markets including greater volatility in pricing and spreads; and (iv) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which may not necessarily adequately address the problems facing the loan market and middle market businesses.
This outbreak is having, and any future outbreaks could have, an adverse impact on the markets and the economy in general, which could have an impact on, among other things, the ability of lenders to originate loans, the volume and type of loans originated, and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could reduce the amount and quality of loans available for investment by us and returns to us, among other things. As of the date of this quarterly report on Form 10-Q, it is impossible to determine the scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have on us and certain of our portfolio companies. Further, even after the pandemic subsides, the U.S. and other major economies may experience a recession.
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Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact us, certain of our portfolio companies and our investments, these types of events are impacting and may continue to impact us and such portfolio companies. The effects of a public health emergency may impact (i) the value and performance of us and certain of our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all (iii) our ability to repay debt obligations, on a timely basis or at all, (iv) our ability to comply with certain regulatory requirements, such as asset coverage requirements, and/or covenants under our credit facilities and indentures, (v) our ability to continue to pay distributions or to make them at current levels or (vi) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in losses to us. We may also be harmed if the operations and effectiveness of any of our portfolio companies (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted.
The capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations.
The U.S. capital markets have experienced significant volatility and disruption following the global outbreak of COVID-19 that began in December 2019, as evidenced by the volatility in global stock markets as a result of, among other things, uncertainty surrounding the COVID-19 pandemic and the fluctuating price of commodities such as oil. Despite actions of the U.S. federal government and foreign governments, these events have contributed to worsening general economic conditions that are negatively impacting the broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole. These conditions could continue for a prolonged period of time or worsen in the future.
Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not show the complete impact of the COVID-19 pandemic and the resulting measures taken in response thereto.
Disruptions in the capital markets caused by the COVID-19 pandemic have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity could harm our business, financial condition, results of operations and cash flows. Unfavorable economic conditions may also increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a negative impact on our and certain of our portfolio companies’ operating results and the fair values of our debt and equity investments.
Because we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us.
As of June 30, 2020, we had approximately $1.1 billion of debt financing. The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Because we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our common stock. If the value of our assets increases, leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distribution payments. Leverage is generally considered a speculative investment technique.
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Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $2.7 billion in total assets, (ii) a weighted average cost of funds of 3.83%, (iii) $1.4 billion in debt outstanding (i.e., assumes that the $410.0 million principal amount of 2020 Notes, 2022 Notes, 2023 Notes, and 2024 Notes sold and the full $1.0 billion available to us under the revolving credit facilities we have with Wells Fargo and Citi is outstanding), and (iv) $1.3 billion in stockholders’ equity. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds by the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.
Assumed Return on Our Portfolio (net of expenses) | (10)% | (5)% | —% | 5% | 10% | |||||
Corresponding return to stockholders (1) | (25.18)% | (14.66)% | (4.14)% | 6.38% | 16.90% | |||||
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(1) In order for us to cover our hypothetical annual interest payments on indebtedness, we would need to achieve annual returns on our June 30, 2020 total assets of at least 1.97%.
As of June 30, 2020, the Wells Fargo Facility provided for borrowings in an aggregate principal amount of up to $600.0 million on a committed basis, due May 9, 2023; the Citi Credit Facility provided for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, due May 31, 2022; the 2020 Notes provided borrowings in an aggregate principal amount of $100.0 million, due September 1, 2020; the 2022 Notes provided borrowings in an aggregate principal amount of $150.0 million, due December 30, 2022; the 2023 Notes provided borrowings in an aggregate principal amount of $60.0 million, due May 30, 2023; and the 2024 Notes provided borrowings in an aggregate principal amount of $100.0 million, due December 15, 2024. See Item 7 in the Annual Report filed on Form 10-K for more information about these financing arrangements.
The discontinuation of LIBOR and the transition to any new reference rates may affect the value of our LIBOR-indexed portfolio investments and may increase the cost of borrowing under our credit facilities, which in each case could affect our results of operations or financial condition.
On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”) announced that LIBOR would be phased out of use after the 2021 calendar year, and the FCA has determined not to compel participant banks to submit LIBOR information after 2021. In response to the expected discontinuation of LIBOR, the Federal Reserve Board and the Federal Reserve Bank of New York formed the Alternative Reference Rates Committee (“ARRC”), a U.S. working group of private-sector representatives and financial regulators, to recommend an alternative reference rate to U.S. dollar LIBOR. Similarly, financial regulators in the UK, the European Union, Japan, and Switzerland formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies. The ARRC has recommended the Secured Overnight Financing Rate (“SOFR”) together with a spread adjustment, as appropriate in the particular market, as its preferred alternative reference rate for U.S. dollar LIBOR. SOFR represents the average interest rate to borrow cash overnight collateralized by U.S. Treasury securities, is based on U.S. Treasury-backed repurchase transactions, and published daily by the Federal Reserve Bank.
At this time, it is not possible to predict with complete certainty how the discontinuation of LIBOR will affect financial instruments that utilize LIBOR, whether SOFR or any other alternative reference rates will attain general acceptance in the financial markets, or the pace at which any such transition away from LIBOR and to any other reference rate may occur. The process of phasing out LIBOR or any further changes or reforms to the determination or supervision of LIBOR or alternative reference rates, may result in a sudden or prolonged increase or decrease in reported LIBOR or alternative reference rates, which could have an adverse impact on the market for or value of any securities, loans, derivatives, and other financial obligations or extensions of credit indexed to LIBOR or such alternative reference rate that may be held by or due to us or on our overall financial condition or results of operations.
As of the date of this filing, our Wells Fargo Facility, Citi Credit Facility and MassMutual Facility each have provisions which contemplate the transition away from LIBOR. Under the MassMutual Facility, if BDCA Asset Financing, MassMutual or a majority of lenders determine, for a variety of enumerated reasons, that LIBOR cannot or may not be used, the Administrative Agent thereunder and BDCA Asset Financing will determine an alternative benchmark. Within five days of providing the amendment to all lenders, the amendment will take effect. If no alternative rate exists, the MassMutual Credit Facility will default to the higher of the Prime Rate and the Federal Funds Effective Rate plus 0.50%. The Wells Fargo Credit Facility, also provides a mechanism to notify the Administrative Agent that LIBOR is unavailable, defaulting to the Prime Rate or the Federal Funds Effective Rate plus 1.50%. Similarly, the Citi Credit Facility provides a mechanism to notify the Administrative Agent that LIBOR is unavailable, defaulting to the Prime Rate or the Federal Funds Effective Rate plus 1.50%. We may have to make amendments to all three credit facilities.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
On April 30, 2020, the Company issued in a private placement an aggregate amount of 693,240 newly issued shares of its common stock to an investor that met the criteria of an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act at a price of $5.77 per share for aggregate cash proceeds of $4.0 million.
The private placement was exempt from registration under Section 4(a)(2) of the Securities Act and Regulation D thereunder. The Company relied, in part, upon representations of the purchaser in the purchase agreement that it was an accredited investor as defined in Regulation D under the Securities Act.
Issuer Purchases of Equity Securities
Repurchases of our common stock pursuant to our tender offer are as follows:
Period | Total Number of Shares Purchased | Average Price per Share | Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | |||||||||
April 1, 2020 through April 30, 2020 | — | $ | — | — | — | ||||||||
May 1, 2020 through May 31, 2020 | — | — | — | — | |||||||||
June 1, 2020 through June 30, 2020 | — | — | — | — | |||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the six months ended June 30, 2020 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No. | Description |
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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.
Signature | Title | Date | ||
/s/ Richard J. Byrne Richard J. Byrne | Chief Executive Officer, President, and Chairman of the Board of Directors (Principal Executive Officer) | August 14, 2020 | ||
/s/ Nina Kang Baryski Nina Kang Baryski | Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | August 14, 2020 | ||
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