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TriplePoint Venture Growth BDC Corp. - Quarter Report: 2017 September (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

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

COMMISSION FILE NUMBER:  814-01044

 

TriplePoint Venture Growth BDC Corp.

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

 

46-3082016

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

TriplePoint Venture Growth BDC Corp.

2755 Sand Hill Road, Suite 150, Menlo Park, California 94025

(Address of principal executive office)

(650) 854-2090

(Registrant’s telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes      No  

 

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

(Do not check if a small reporting company) 

 

 

Smaller reporting company

Emerging growth company

 

 

 

 

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

 

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

As of November 6, 2017, the registrant had 17,711,184 shares of common stock, $0.01 par value per share, outstanding.

 

 

1


TriplePoint Venture Growth BDC Corp.

TABLE OF CONTENTS

 

 

 

 

PAGE

PART I. FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

Condensed Consolidated Statements of Assets and Liabilities as of September 30, 2017 and December 31, 2016

 

3

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and September 30, 2016

 

4

 

Condensed Consolidated Statements of Changes in Net Assets for the Nine Months Ended September 30, 2017 and September 30, 2016

 

5

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and September 30, 2016

 

6

 

Condensed Consolidated Schedules of Investments as of September 30, 2017 and December 31, 2016

 

7

 

Notes to Condensed Consolidated Financial Statements as of September 30, 2017

 

16

Item 2.

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

 

34

 

Forward-Looking Statements

 

34

 

Overview

 

35

 

Portfolio Composition, Investment Activity and Asset Quality

 

36

 

Results of Operations

 

42

 

Critical Accounting Policies

 

47

 

Liquidity and Capital Resources

 

47

 

Recent Developments

 

51

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

52

Item 4.

Controls and Procedures

 

53

 

 

 

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

54

Item 1A.

Risk Factors

 

54

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

54

Item 3.

Defaults Upon Senior Securities

 

54

Item 4.

Mine Safety Disclosures

 

54

Item 5.

Other Information

 

54

Item 6.

Exhibits

 

55

SIGNATURES

 

56

 

 

2


PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements

TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except per share data)

 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value (amortized cost of $309,219 and $370,116, respectively)

 

$

311,136

 

 

$

374,311

 

Short-term investments at fair value (cost of $94,962 and $39,990, respectively)

 

 

94,962

 

 

 

39,990

 

Cash

 

 

5,145

 

 

 

7,776

 

Restricted cash

 

 

3,327

 

 

 

7,702

 

Deferred credit facility costs

 

 

1,155

 

 

 

1,774

 

Prepaid expenses and other assets

 

 

1,880

 

 

 

2,669

 

Total assets

 

$

417,605

 

 

$

434,222

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving Credit Facility

 

$

25,500

 

 

$

115,000

 

2020 Notes, net

 

 

 

 

 

53,288

 

2022 Notes, net

 

 

72,302

 

 

 

 

Payable for U.S. Treasury bill assets

 

 

94,962

 

 

 

39,990

 

Base management fee payable

 

 

1,567

 

 

 

1,449

 

Income incentive fee payable

 

 

1,066

 

 

 

1,208

 

Accrued capital gains incentive fee

 

 

 

 

 

 

Payable to directors and officers

 

 

60

 

 

 

63

 

Other accrued expenses and liabilities

 

 

7,389

 

 

 

7,361

 

Total liabilities

 

$

202,846

 

 

$

218,359

 

Commitments and Contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share (50,000 shares authorized; no shares issued and outstanding, respectively)

 

$

 

 

$

 

Common stock, par value $0.01 per share (450,000 shares authorized; 16,043 and 15,981 shares issued and outstanding, respectively)

 

 

160

 

 

 

160

 

Paid-in capital in excess of par value

 

 

232,317

 

 

 

231,518

 

Undistributed net investment income

 

 

4,862

 

 

 

1,025

 

Accumulated net realized losses

 

 

(24,498

)

 

 

(21,035

)

Accumulated net unrealized gains on investments

 

 

1,918

 

 

 

4,195

 

Total net assets

 

$

214,759

 

 

$

215,863

 

Total liabilities and net assets

 

$

417,605

 

 

$

434,222

 

 

 

 

 

 

 

 

 

 

Net asset value per share

 

$

13.39

 

 

$

13.51

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from investments

 

$

10,310

 

 

$

11,207

 

 

$

39,061

 

 

$

31,214

 

Other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expirations / terminations of unfunded commitments

 

 

 

 

 

1,133

 

 

 

418

 

 

 

1,558

 

Other fees

 

 

109

 

 

 

162

 

 

 

926

 

 

 

214

 

Total investment and other income

 

 

10,419

 

 

 

12,502

 

 

 

40,405

 

 

 

32,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base management fee

 

 

1,567

 

 

 

1,376

 

 

 

4,805

 

 

 

4,076

 

Income incentive fee

 

 

1,066

 

 

 

1,568

 

 

 

4,520

 

 

 

1,568

 

Capital gains incentive fee

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and amortization of fees

 

 

2,306

 

 

 

2,036

 

 

 

6,861

 

 

 

5,733

 

Administration agreement expenses

 

 

346

 

 

 

395

 

 

 

1,058

 

 

 

1,190

 

General and administrative expenses

 

 

767

 

 

 

632

 

 

 

2,044

 

 

 

2,238

 

Total operating expenses

 

 

6,052

 

 

 

6,007

 

 

 

19,288

 

 

 

14,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

4,367

 

 

 

6,495

 

 

 

21,117

 

 

 

18,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains (losses) on investments

 

 

1,044

 

 

 

1,081

 

 

 

(2,351

)

 

 

(20,906

)

Net change in unrealized (losses) gains on investments

 

 

(620

)

 

 

3,859

 

 

 

(2,277

)

 

 

6,906

 

Net realized loss on extinguishment of debt

 

 

(1,112

)

 

 

 

 

 

(1,112

)

 

 

 

Net realized and unrealized (losses) gains

 

 

(688

)

 

 

4,940

 

 

 

(5,740

)

 

 

(14,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

3,679

 

 

$

11,435

 

 

$

15,377

 

 

$

4,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net investment income per share

 

$

0.27

 

 

$

0.40

 

 

$

1.32

 

 

$

1.12

 

Basic and diluted net increase in net assets per share

 

$

0.23

 

 

$

0.71

 

 

$

0.96

 

 

$

0.26

 

Basic and diluted weighted average shares of common stock outstanding

 

 

16,023

 

 

 

16,091

 

 

 

16,001

 

 

 

16,227

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

(in thousands)

 

 

 

Shares of Common Stock

 

 

Total Net Assets

 

Balance as of January 1, 2016

 

 

16,302

 

 

$

231,646

 

Net increase in net assets resulting from operations

 

 

 

 

 

4,181

 

Distributions declared

 

 

 

 

 

(17,475

)

Common stock issuance, net

 

 

142

 

 

 

1,416

 

Acquisition of common stock under repurchase plan

 

 

(486

)

 

 

(5,376

)

Balance as of September 30, 2016

 

 

15,958

 

 

 

214,392

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2017

 

 

15,981

 

 

 

215,863

 

Net increase in net assets resulting from operations

 

 

 

 

 

15,377

 

Distributions declared

 

 

 

 

 

(17,280

)

Common stock issuance, net

 

 

62

 

 

 

799

 

Balance as of September 30, 2017

 

 

16,043

 

 

$

214,759

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

15,377

 

 

$

4,181

 

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

 

 

 

 

 

 

 

 

Fundings and purchases of investments

 

 

(153,127

)

 

 

(93,805

)

(Purchase) sale of short-term investments, net

 

 

(54,972

)

 

 

(9,839

)

Principal payments and proceeds from investments

 

 

213,801

 

 

 

46,773

 

Payment-in-kind interest on investments

 

 

(1,501

)

 

 

(1,284

)

Net change in unrealized losses (gains) on investments

 

 

2,277

 

 

 

(6,906

)

Realized losses

 

 

3,463

 

 

 

20,906

 

Amortization and accretion of premiums and discounts, net

 

 

(1,551

)

 

 

(1,596

)

Accretion of end-of-term payments, net of prepayments

 

 

914

 

 

 

(3,225

)

Amortization of debt fees and issuance costs

 

 

961

 

 

 

940

 

Change in restricted cash

 

 

4,375

 

 

 

(237

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Payable for U.S. Treasury bill assets

 

 

54,972

 

 

 

9,839

 

Prepaid expenses and other assets

 

 

791

 

 

 

(340

)

Base management fee payable

 

 

118

 

 

 

1

 

Income incentive fee payable

 

 

(142

)

 

 

115

 

Payable to directors and officers

 

 

(3

)

 

 

(12

)

Other accrued expenses and liabilities

 

 

29

 

 

 

50

 

Net cash provided by (used in) operating activities

 

 

85,782

 

 

 

(34,439

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

(Repayments) borrowings under revolving credit facility, net

 

 

(89,500

)

 

 

39,000

 

Repurchase of common stock

 

 

 

 

 

(5,376

)

Distributions paid, net

 

 

(16,481

)

 

 

(16,059

)

Deferred credit facility costs

 

 

 

 

 

(1,080

)

Repayment of 2020 Notes

 

 

(54,625

)

 

 

 

Net proceeds from issuance of 2022 Notes

 

 

72,193

 

 

 

 

Net cash (used in) provided by financing activities

 

 

(88,413

)

 

 

16,485

 

Net change in cash

 

 

(2,631

)

 

 

(17,954

)

Cash at beginning of period

 

 

7,776

 

 

 

32,451

 

Cash at end of period

 

$

5,145

 

 

$

14,497

 

Supplemental Disclosure of Non-Cash Financing Activities:

 

 

 

 

 

 

 

 

Distributions reinvested

 

$

799

 

 

$

1,416

 

Accrued 2022 Notes issuance costs

 

$

211

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

5,757

 

 

$

4,615

 

 

See accompanying notes to condensed consolidated financial statements. 

 

6


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

(unaudited)

(dollars in thousands)

As of September 30, 2017

 

Venture Growth Stage Company

 

Industry

 

Type of Investment

 

Outstanding Principal

 

 

Cost

 

 

Fair Value

 

 

Maturity Date

Debt Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biofuels / Biomass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harvest Power, Inc.

 

Biofuels / Biomass

 

Growth Capital Loan (13.00% interest rate, 9.00% EOT payment)

 

$

13,250

 

 

$

14,374

 

 

$

13,811

 

 

5/31/2018

Total Biofuels / Biomass  - 6.43%*

 

 

 

 

 

 

13,250

 

 

 

14,374

 

 

 

13,811

 

 

 

Building Materials/Construction Machinery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

View, Inc.

 

Building Materials/Construction Machinery

 

Equipment Loan (Prime + 8.00% interest rate, 14.00% EOT payment)

 

 

13,276

 

 

 

12,737

 

 

 

12,742

 

 

6/30/2021

 

 

Building Materials/Construction Machinery

 

Equipment Loan (Prime + 8.00% interest rate, 14.00% EOT payment)

 

 

6,356

 

 

 

6,086

 

 

 

6,087

 

 

6/30/2021

 

 

Building Materials/Construction Machinery

 

Equipment Loan (Prime + 8.00% interest rate, 14.00% EOT payment)

 

 

8,568

 

 

 

8,177

 

 

 

8,180

 

 

7/31/2021

 

 

Building Materials/Construction Machinery

 

Equipment Loan (Prime + 8.00% interest rate, 14.00% EOT payment)

 

 

1,935

 

 

 

1,832

 

 

 

1,831

 

 

9/30/2021

 

 

Building Materials/Construction Machinery

 

Convertible Note (10.10% PIK interest rate, 14.00% EOT Payment)

 

 

1,031

 

 

 

1,043

 

 

 

1,138

 

 

1/25/2020

Total Building Materials/Construction Machinery  - 13.96%*

 

 

 

 

31,166

 

 

 

29,875

 

 

 

29,978

 

 

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FinancialForce.com, Inc.

 

Business Applications Software

 

Growth Capital Loan (Prime + 7.50% interest rate, 4.00% EOT payment)

 

 

15,000

 

 

 

14,559

 

 

 

14,739

 

 

12/31/2020

 

 

Business Applications Software

 

Growth Capital Loan (Prime + 7.50% interest rate, 4.00% EOT payment)

 

 

15,000

 

 

 

14,392

 

 

 

14,569

 

 

6/30/2021

 

 

Business Applications Software

 

Growth Capital Loan (Prime + 7.50% interest rate, 4.00% EOT payment)

 

 

15,000

 

 

 

14,291

 

 

 

14,284

 

 

9/30/2021

 

 

 

 

 

 

 

45,000

 

 

 

43,242

 

 

 

43,592

 

 

 

MapR Technologies, Inc.

 

Business Applications Software

 

Equipment Loan (8.00% interest rate,10.00% EOT payment)

 

 

1,594

 

 

 

1,811

 

 

 

1,817

 

 

9/30/2018

 

 

Business Applications Software

 

Equipment Lease  (8.25% interest rate, 10.00% EOT payment) (1)

 

 

105

 

 

 

105

 

 

 

106

 

 

1/31/2019

 

 

Business Applications Software

 

Equipment Lease  (8.25% interest rate, 10.00% EOT payment) (1)

 

 

1,322

 

 

 

1,322

 

 

 

1,331

 

 

6/30/2019

 

 

Business Applications Software

 

Equipment Loan (6.50% interest rate,10.00% EOT payment)

 

 

617

 

 

 

644

 

 

 

646

 

 

6/30/2019

 

 

Business Applications Software

 

Equipment Lease  (8.50% interest rate, 10.00% EOT payment) (1)

 

 

140

 

 

 

140

 

 

 

141

 

 

12/31/2019

 

 

Business Applications Software

 

Equipment Loan (6.75% interest rate,10.00% EOT payment)

 

 

275

 

 

 

279

 

 

 

279

 

 

10/31/2019

 

 

Business Applications Software

 

Equipment Lease  (8.75% interest rate, 10.00% EOT payment) (1)

 

 

409

 

 

 

409

 

 

 

410

 

 

4/30/2020

 

 

Business Applications Software

 

Equipment Loan (7.00% interest rate,10.00% EOT payment)

 

 

139

 

 

 

138

 

 

 

138

 

 

1/31/2020

 

 

Business Applications Software

 

Equipment Lease  (9.00% interest rate, 10.00% EOT payment) (1)

 

 

503

 

 

 

504

 

 

 

504

 

 

7/31/2020

 

 

 

 

 

 

 

5,104

 

 

 

5,352

 

 

 

5,372

 

 

 

Total Business Applications Software  - 22.80%*

 

 

 

 

50,104

 

 

 

48,594

 

 

 

48,964

 

 

 

Database Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SimpliVity Corporation

 

Database Software

 

Equipment Lease (6.75% interest rate, 10.00% EOT payment) (1)

 

 

1,974

 

 

 

1,974

 

 

 

2,148

 

 

12/31/2018

 

 

Database Software

 

Equipment Lease (6.75% interest rate, 7.50% EOT payment) (1)

 

 

1,125

 

 

 

1,125

 

 

 

1,188

 

 

6/30/2018

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

920

 

 

 

920

 

 

 

997

 

 

12/31/2018

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

643

 

 

 

643

 

 

 

706

 

 

2/28/2019

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

40

 

 

 

40

 

 

 

44

 

 

3/31/2019

 

 

Database Software

 

Equipment Lease (9.00% interest rate, 10.00% EOT payment) (1)

 

 

3,669

 

 

 

3,669

 

 

 

4,122

 

 

9/30/2018

Total Database Software  - 4.29%*

 

 

 

 

 

 

8,371

 

 

 

8,371

 

 

 

9,205

 

 

 

E-Commerce - Clothing and Accessories

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outfittery GMBH (1) (2) (3)

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (12.25% interest rate, 9.00% EOT payment)

 

 

7,127

 

 

 

6,719

 

 

 

6,676

 

 

8/31/2021

 

 

 

 

 

 

 

7,127

 

 

 

6,719

 

 

 

6,676

 

 

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 7.00% interest rate, 6.25% EOT payment)

 

 

10,000

 

 

 

10,346

 

 

 

10,619

 

 

11/30/2018

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 6.25% EOT payment)

 

 

6,000

 

 

 

6,099

 

 

 

6,285

 

 

6/30/2019

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 6.25% EOT payment)

 

 

2,000

 

 

 

2,013

 

 

 

2,085

 

 

10/31/2019

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 4.50% EOT payment)

 

 

4,000

 

 

 

3,989

 

 

 

4,086

 

 

11/30/2019

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.50% interest rate, 5.25% EOT payment)

 

 

5,500

 

 

 

5,165

 

 

 

5,435

 

 

6/30/2021

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.50% interest rate, 5.25% EOT payment)

 

 

4,500

 

 

 

4,188

 

 

 

4,187

 

 

9/30/2021

 

 

 

 

 

 

 

32,000

 

 

 

31,800

 

 

 

32,697

 

 

 

Total E-Commerce - Clothing and Accessories  - 18.33%*

 

 

 

 

39,127

 

 

 

38,519

 

 

 

39,373

 

 

 

Entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mind Candy Limited (1) (3)

 

Entertainment

 

Growth Capital Loan (11.00% PIK, 3.00% Cash,9.50% EOT payment)

 

 

9,163

 

 

 

10,051

 

 

 

7,608

 

 

1/31/2019

Total Entertainment  - 3.54%*

 

 

 

 

 

 

9,163

 

 

 

10,051

 

 

 

7,608

 

 

 

Financial Institution and Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlueVine Capital, Inc.

 

Financial Institution and Services

 

Growth Capital Loan (8.75% interest rate, 3.05% EOT payment)

 

 

10,000

 

 

 

9,839

 

 

 

9,837

 

 

3/31/2019

 

 

 

 

 

 

 

10,000

 

 

 

9,839

 

 

 

9,837

 

 

 

KnCMiner AB (1) (3) (8) (11)

 

Financial Institution and Services

 

Growth Capital Loan (9.00% interest rate, 6.00% EOT payment)

 

 

3,544

 

 

 

3,595

 

 

 

3,335

 

 

6/30/2018

 

 

Financial Institution and Services

 

Growth Capital Loan (9.25% interest rate, 6.00% EOT payment)

 

 

1,695

 

 

 

1,692

 

 

 

1,596

 

 

6/30/2018

 

 

 

 

 

 

 

5,239

 

 

 

5,287

 

 

 

4,931

 

 

 

WorldRemit Limited (1) (3)

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

5,218

 

 

 

5,256

 

 

12/31/2018

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

5,092

 

 

 

5,172

 

 

6/30/2019

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

5,085

 

 

 

5,172

 

 

6/30/2019

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

4,989

 

 

 

5,106

 

 

11/30/2019

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 3.75% interest rate, 4.00% EOT payment)

 

 

5,000

 

 

 

5,012

 

 

 

5,017

 

 

3/31/2018

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 4.00% EOT payment)

 

 

5,000

 

 

 

4,871

 

 

 

4,869

 

 

7/31/2020

 

 

 

 

 

 

 

30,000

 

 

 

30,267

 

 

 

30,592

 

 

 

Total Financial Institution and Services  - 21.12%*

 

 

 

 

45,239

 

 

 

45,393

 

 

 

45,360

 

 

 

Food & Beverage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Bottle Coffee, Inc.

 

Food & Beverage

 

Growth Capital Loan (Prime + 1.50% interest rate, 0.25% EOT payment)

 

 

5,000

 

 

 

5,001

 

 

 

5,013

 

 

10/31/2017

 

 

Food & Beverage

 

Growth Capital Loan (Prime + 1.50% interest rate)

 

 

5,000

 

 

 

4,944

 

 

 

5,000

 

 

12/31/2017

Total Food & Beverage  - 4.66%*

 

 

 

 

 

 

10,000

 

 

 

9,945

 

 

 

10,013

 

 

 

Food & Drug

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PillPack, Inc.

 

Food & Drug

 

Growth Capital Loan (Prime + 5.75% interest rate, 9.00% EOT payment)

 

 

5,000

 

 

 

4,918

 

 

 

4,916

 

 

8/31/2020

Total Food & Drug  - 2.29%*

 

 

 

 

 

 

5,000

 

 

 

4,918

 

 

 

4,916

 

 

 

Network Systems Management Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Virtual Instruments Corporation

 

Network Systems Management Software

 

Growth Capital Loan (10.00% interest rate)

 

 

5,000

 

 

 

5,000

 

 

 

4,993

 

 

4/4/2020

 

 

Network Systems Management Software

 

Growth Capital Loan (5.00% PIK interest rate)

 

 

21,941

 

 

 

21,941

 

 

 

20,853

 

 

4/4/2021

 

 

Network Systems Management Software

 

Growth Capital Loan (5.00% PIK interest rate)

 

 

5,264

 

 

 

5,264

 

 

 

4,917

 

 

4/4/2021

Total Network Systems Management Software  - 14.32%*

 

 

 

 

32,205

 

 

 

32,205

 

 

 

30,763

 

 

 

Restaurant / Food Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Munchery, Inc.

 

Restaurant / Food Service

 

Growth Capital Loan (Prime + 8.25% interest rate, 8.75% EOT payment)

 

 

2,589

 

 

 

2,664

 

 

 

2,636

 

 

6/30/2019

Total Restaurant / Food Service  - 1.23%*

 

 

 

 

 

 

2,589

 

 

 

2,664

 

 

 

2,636

 

 

 

Security Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ring, Inc.

 

Security Products

 

Growth Capital Loan (Prime + 2.75% interest rate, 3.50% EOT payment)

 

 

20,000

 

 

 

19,838

 

 

 

19,832

 

 

8/31/2018

Total Security Products  - 9.23%*

 

 

 

 

 

 

20,000

 

 

 

19,838

 

 

 

19,832

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

7


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
(unaudited)

(dollars in thousands)

As of September 30, 2017

 

Venture Growth Stage Company

 

Industry

 

Type of Investment

 

Outstanding Principal

 

 

Cost

 

 

Fair Value

 

 

Maturity Date

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Security Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forgerock, Inc.

 

Security Services

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

$

8,214

 

 

$

8,572

 

 

$

8,678

 

 

9/30/2019

 

 

Security Services

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

 

4,854

 

 

 

4,943

 

 

 

5,009

 

 

2/29/2020

Total Security Services  - 6.37%*

 

 

 

 

 

 

13,068

 

 

 

13,515

 

 

 

13,687

 

 

 

Wireless Communications Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cambridge Broadband Network Limited (1) (3)

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.75% interest rate)

 

 

6,045

 

 

 

6,585

 

 

 

6,592

 

 

12/31/2017

Eero, Inc.

 

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 8.25% interest rate)

 

 

10,000

 

 

 

9,892

 

 

 

9,945

 

 

11/30/2019

Total Wireless Communications Equipment  - 7.70%*

 

 

 

 

16,045

 

 

 

16,477

 

 

 

16,537

 

 

 

Total Debt Investments  - 136.28%*

 

 

 

 

 

$

295,327

 

 

$

294,739

 

 

$

292,683

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

8


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
(unaudited)

(dollars in thousands)

As of September 30, 2017

 

Venture Growth Stage Company

 

Industry

 

Type of Warrant

 

Shares

 

 

Cost

 

 

Fair Value

 

Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising / Marketing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

InMobi Pte Ltd. (1) (2) (3)

 

Advertising / Marketing

 

Ordinary Shares

 

 

48,500

 

 

$

35

 

 

$

103

 

Total Advertising / Marketing  - 0.05%*

 

 

 

 

 

 

48,500

 

 

 

35

 

 

 

103

 

Biofuels / Biomass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harvest Power, Inc.

 

Biofuels / Biomass

 

Common Stock

 

 

350

 

 

 

77

 

 

 

 

Total Biofuels / Biomass - 0.00%*

 

 

 

 

 

 

350

 

 

 

77

 

 

 

 

Building Materials/Construction Machinery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

View, Inc.

 

Building Materials/Construction Machinery

 

Preferred Stock

 

 

2,222,222

 

 

 

500

 

 

 

500

 

Total Building Materials/Construction Machinery  - 0.23%*

 

 

 

 

 

 

2,222,222

 

 

 

500

 

 

 

500

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FinancialForce.com, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

547,440

 

 

 

1,540

 

 

 

1,655

 

Lattice Engines, Inc. (2)

 

Business Applications Software

 

Preferred Stock

 

 

396,652

 

 

 

48

 

 

 

95

 

MapR Technologies, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

256,388

 

 

 

42

 

 

 

46

 

Medallia, Inc. (2)

 

Business Applications Software

 

Preferred Stock

 

 

55,814

 

 

 

11

 

 

 

76

 

Total Business Applications Software  - 0.87%*

 

 

 

 

 

 

1,256,294

 

 

 

1,641

 

 

 

1,872

 

Business to Business Marketplace

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Optoro, Inc. (2)

 

Business to Business Marketplace

 

Preferred Stock

 

 

10,346

 

 

 

40

 

 

 

7

 

Total Business to Business Marketplace  - 0.00%*

 

 

 

 

 

 

10,346

 

 

 

40

 

 

 

7

 

Conferencing Equipment / Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuze, Inc. (fka Thinking Phone Networks, Inc.) (2)

 

Conferencing Equipment / Services

 

Preferred Stock

 

 

323,381

 

 

 

670

 

 

 

639

 

Total Conferencing Equipment / Services  - 0.30%*

 

 

 

 

 

 

323,381

 

 

 

670

 

 

 

639

 

E-Commerce - Clothing and Accessories

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JackThreads, Inc. (2)

 

E-Commerce - Clothing and Accessories

 

Common Stock

 

 

283,401

 

 

 

88

 

 

 

 

Outfittery GMBH (1) (2) (3) (10)

 

E-Commerce - Clothing and Accessories

 

Cash Exit Fee

 

 

 

 

 

404

 

 

 

401

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Preferred Stock

 

 

88,037

 

 

 

213

 

 

 

828

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Common Stock

 

 

116,047

 

 

 

793

 

 

 

1,617

 

Stance, Inc. (2)

 

E-Commerce - Clothing and Accessories

 

Preferred Stock

 

 

75,000

 

 

 

41

 

 

 

41

 

Total E-Commerce - Clothing and Accessories  - 1.34%*

 

 

 

 

 

 

562,485

 

 

 

1,539

 

 

 

2,887

 

E-Commerce - Personal Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birchbox, Inc. (2)

 

E-Commerce - Personal Goods

 

Preferred Stock

 

 

60,052

 

 

 

690

 

 

 

1,271

 

Total E-Commerce - Personal Goods  - 0.59%*

 

 

 

 

 

 

60,052

 

 

 

690

 

 

 

1,271

 

Educational/Training Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Varsity Tutors LLC (2) (10)

 

Educational/Training Software

 

Preferred Stock

 

 

240,590

 

 

 

65

 

 

 

65

 

Total Educational/Training Software  - 0.03%*

 

 

 

 

 

 

240,590

 

 

 

65

 

 

 

65

 

Entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mind Candy, Inc. (1) (3)

 

Entertainment

 

Preferred Stock

 

 

287,187

 

 

 

751

 

 

 

 

Total Entertainment  - 0.00%*

 

 

 

 

 

 

287,187

 

 

 

751

 

 

 

 

Financial Institution and Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlueVine Capital, Inc.

 

Financial Institution and Services

 

Preferred Stock

 

 

180,865

 

 

 

241

 

 

 

241

 

WorldRemit Limited (1) (3)

 

Financial Institution and Services

 

Preferred Stock

 

 

128,288

 

 

 

382

 

 

 

409

 

Total Financial Institution and Services  - 0.30%*

 

 

 

 

 

 

309,153

 

 

 

623

 

 

 

650

 

Food & Beverage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Bottle Coffee, Inc.

 

Food & Beverage

 

Preferred Stock

 

 

9,004

 

 

 

80

 

 

 

122

 

Total Food & Beverage  - 0.06%*

 

 

 

 

 

 

9,004

 

 

 

80

 

 

 

122

 

Food & Drug

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PillPack, Inc.

 

Food & Drug

 

Common Stock

 

 

28,297

 

 

 

55

 

 

 

55

 

Total Food & Drug  - 0.03%*

 

 

 

 

 

 

28,297

 

 

 

55

 

 

 

55

 

General Media and Content

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TechMediaNetwork, Inc. (2)

 

General Media and Content

 

Preferred Stock

 

 

72,234

 

 

 

31

 

 

 

28

 

Thrillist Media Group, Inc. (2)

 

General Media and Content

 

Common Stock

 

 

774,352

 

 

 

624

 

 

 

1,378

 

Total General Media and Content  - 0.65%*

 

 

 

 

 

 

846,586

 

 

 

655

 

 

 

1,406

 

Medical Software and Information Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AirStrip Technologies, Inc. (2)

 

Medical Software and Information Services

 

Preferred Stock

 

 

31,063

 

 

 

112

 

 

 

74

 

Total Medical Software and Information Services  - 0.03%*

 

 

 

 

 

 

31,063

 

 

 

112

 

 

 

74

 

Multimedia / Streaming Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shazam Entertainment Limited (1) (2) (3)

 

Multimedia / Streaming Software

 

Ordinary Shares

 

 

2,669,479

 

 

 

134

 

 

 

139

 

Total Multimedia / Streaming Software  - 0.06%*

 

 

 

 

 

 

2,669,479

 

 

 

134

 

 

 

139

 

Restaurant / Food Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Munchery, Inc.

 

Restaurant / Food Service

 

Preferred Stock

 

 

21,537

 

 

 

45

 

 

 

 

Total Restaurant / Food Service  - 0.00%*

 

 

 

 

 

 

21,537

 

 

 

45

 

 

 

0

 

Security Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ring, Inc.

 

Security Products

 

Preferred Stock

 

 

31,192

 

 

 

57

 

 

 

57

 

Total Security Products  - 0.03%*

 

 

 

 

 

 

31,192

 

 

 

57

 

 

 

57

 

Security Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CrowdStrike, Inc. (2)

 

Security Services

 

Preferred Shares

 

 

99,344

 

 

 

72

 

 

 

92

 

Forgerock, Inc.

 

Security Services

 

Preferred Stock

 

 

195,992

 

 

 

155

 

 

 

459

 

Total Security Services  - 0.26%*

 

 

 

 

 

 

295,336

 

 

 

227

 

 

 

551

 

Shopping Facilitators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farfetch UK Limited (1) (2) (3)

 

Shopping Facilitators

 

Preferred Stock

 

 

37,998

 

 

 

170

 

 

 

250

 

Total Shopping Facilitators  - 0.12%*

 

 

 

 

 

 

37,998

 

 

 

170

 

 

 

250

 

Travel and Leisure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inspirato, LLC (2)

 

Travel and Leisure

 

Preferred Units

 

 

1,994

 

 

 

36

 

 

 

9

 

Total Travel and Leisure  - 0.00%*

 

 

 

 

 

 

1,994

 

 

 

36

 

 

 

9

 

Wireless Communications Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cambridge Broadband Network Limited (1) (3)

 

Wireless Communications Equipment

 

Preferred Shares

 

 

33,000

 

 

 

95

 

 

 

4

 

Eero, Inc.

 

Wireless Communications Equipment

 

Preferred Stock

 

 

35,446

 

 

 

80

 

 

 

80

 

Total Wireless Communications Equipment  - 0.04%*

 

 

 

 

 

 

68,446

 

 

 

175

 

 

 

84

 

Total Warrants  - 5.00%*

 

 

 

 

 

 

 

 

 

$

8,377

 

 

$

10,741

 

 

See accompanying notes to condensed consolidated financial statements.

 

9


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
(unaudited)

(dollars in thousands)

As of September 30, 2017

 

Venture Growth Stage Company

 

Industry

 

Type of Equity

 

Shares

 

 

Cost

 

 

Fair Value

 

Equity Investments (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MapR Technologies, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

39,018

 

 

$

161

 

 

$

161

 

Total Business Applications Software  - 0.07%*

 

 

 

 

 

 

39,018

 

 

 

161

 

 

 

161

 

Communications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pluribus Networks, Inc.

 

Communications Software

 

Preferred Stock

 

 

722,073

 

 

 

2,000

 

 

 

2,000

 

Total Communications Software  - 0.93%*

 

 

 

 

 

 

722,073

 

 

 

2,000

 

 

 

2,000

 

Database Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutanix, Inc. (7)

 

Database Software

 

Common Stock

 

 

113,731

 

 

 

705

 

 

 

2,546

 

Total Database Software  - 1.19%*

 

 

 

 

 

 

113,731

 

 

 

705

 

 

 

2,546

 

E-Commerce - Personal Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Preferred Stock

 

 

2,839

 

 

 

250

 

 

 

319

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Convertible Note (8.00% interest rate)

 

 

 

45

 

 

 

125

 

Total E-Commerce - Personal Goods  - 0.21%*

 

 

 

 

 

 

2,839

 

 

 

295

 

 

 

444

 

Financial Institution and Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolut Ltd. (1) (3)

 

Financial Institution and Services

 

Preferred Stock

 

 

4,325

 

 

 

49

 

 

 

49

 

 

 

Financial Institution and Services

 

Ordinary Shares

 

 

21,595

 

 

 

243

 

 

 

243

 

Total Financial Institution and Services  - 0.14%*

 

 

 

 

 

 

25,920

 

 

 

292

 

 

 

292

 

Household & Office Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casper Sleep Inc.

 

Household & Office Goods

 

Preferred Stock

 

 

8,000

 

 

 

250

 

 

 

250

 

Casper Sleep Inc.

 

Household & Office Goods

 

Common Stock

 

 

26,669

 

 

 

750

 

 

 

750

 

Total Household & Office Goods  - 0.47%*

 

 

 

 

 

 

34,669

 

 

 

1,000

 

 

 

1,000

 

Network Systems Management Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cohesity Inc.

 

Network Systems Management Software

 

Preferred Stock

 

 

60,342

 

 

 

400

 

 

 

400

 

Total Network Systems Management Software  - 0.19%*

 

 

 

 

 

 

60,342

 

 

 

400

 

 

 

400

 

Software Development Tools

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MongoDB, Inc.

 

Software Development Tools

 

Common Stock

 

 

74,742

 

 

 

1,000

 

 

 

622

 

Total Software Development Tools  - 0.29%*

 

 

 

 

 

 

74,742

 

 

 

1,000

 

 

 

622

 

Travel and Leisure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inspirato, LLC (1) (4)

 

Travel and Leisure

 

Preferred Units

 

 

1,948

 

 

 

250

 

 

 

247

 

Total Travel and Leisure  - 0.12%*

 

 

 

 

 

 

1,948

 

 

 

250

 

 

 

247

 

Total Equity Investments  - 3.59%*

 

 

 

 

 

 

 

 

 

$

6,103

 

 

$

7,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments in Portfolio Companies  - 144.88%*

 

 

 

 

 

 

 

 

 

$

309,219

 

 

$

311,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term Investments (2)

 

 

 

 

 

 

 

 

 

Cost

 

 

Fair Value

 

U.S. Treasury Bills

 

$95,000 Face Value, Maturity Date 10/19/2017, Yield to Maturity 0.91%

 

 

 

 

 

$

94,962

 

 

$

94,962

 

Total Short-Term Investments  - 44.22%*

 

 

 

 

 

 

 

 

 

$

94,962

 

 

$

94,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments  - 189.09%*

 

 

 

 

 

 

 

 

 

$

404,181

 

 

$

406,098

 

 

See accompanying notes to condensed consolidated financial statements.

 

10


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands)

As of December 31, 2016

 

Venture Growth Stage Company

 

Industry

 

Type of Investment

 

Outstanding Principal

 

 

Cost

 

 

Fair Value

 

 

Maturity

Date

Debt Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biofuels / Biomass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harvest Power, Inc.

 

Biofuels / Biomass

 

Growth Capital Loan (13.00% interest rate, 9.00% EOT payment)

 

$

15,000

 

 

$

16,121

 

 

$

16,065

 

 

11/30/2017

Total Biofuels / Biomass  - 7.44%*

 

 

 

 

 

 

15,000

 

 

 

16,121

 

 

 

16,065

 

 

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birst, Inc.

 

Business Applications Software

 

Growth Capital Loan (Prime + 6.90% interest rate, 2.00% EOT payment)

 

 

10,000

 

 

 

10,086

 

 

 

10,109

 

 

11/30/2017

 

 

Business Applications Software

 

Growth Capital Loan (Prime + 6.90% interest rate, 2.00% EOT payment)

 

 

15,000

 

 

 

14,908

 

 

 

14,990

 

 

3/31/2019

 

 

Business Applications Software

 

Growth Capital Loan (Prime + 6.90% interest rate, 2.00% EOT payment)

 

 

2,000

 

 

 

1,983

 

 

 

1,995

 

 

6/30/2019

 

 

 

 

 

 

 

27,000

 

 

 

26,977

 

 

 

27,094

 

 

 

FinancialForce.com, Inc.

 

Business Applications Software

 

Growth Capital Loan (Prime + 7.50% interest rate, 4.00% EOT payment)

 

 

15,000

 

 

 

14,308

 

 

 

14,396

 

 

12/31/2020

MapR Technologies, Inc.

 

Business Applications Software

 

Equipment Loan (8.00% interest rate,10.00% EOT payment)

 

 

2,708

 

 

 

2,810

 

 

 

2,853

 

 

9/30/2018

 

 

Business Applications Software

 

Equipment Lease (8.25% interest rate, 10.00% EOT payment) (1)

 

 

145

 

 

 

145

 

 

 

146

 

 

1/31/2019

 

 

Business Applications Software

 

Equipment Lease (8.25% interest rate, 10.00% EOT payment) (1)

 

 

1,434

 

 

 

1,434

 

 

 

1,441

 

 

6/30/2019

 

 

Business Applications Software

 

Equipment Loan (6.50% interest rate,10.00% EOT payment)

 

 

860

 

 

 

845

 

 

 

845

 

 

6/30/2019

 

 

Business Applications Software

 

Equipment Lease (8.50% interest rate, 10.00% EOT payment) (1)

 

 

135

 

 

 

135

 

 

 

135

 

 

12/31/2019

 

 

 

 

 

 

 

5,282

 

 

 

5,369

 

 

 

5,420

 

 

 

Total Business Applications Software  - 21.73%

 

 

 

 

47,282

 

 

 

46,654

 

 

 

46,910

 

 

 

Conferencing Equipment / Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuze, Inc. (fka Thinking Phone Networks, Inc.)

Conferencing Equipment / Services

 

Growth Capital Loan (11.25% interest rate, 2.85% EOT payment)

 

 

30,000

 

 

 

29,453

 

 

 

30,096

 

 

9/30/2019

 

 

Conferencing Equipment / Services

 

Growth Capital Loan (11.50% interest rate, 2.85% EOT payment)

 

 

5,000

 

 

 

4,900

 

 

 

4,898

 

 

9/30/2019

 

 

Conferencing Equipment / Services

 

Growth Capital Loan (11.50% interest rate, 2.85% EOT payment)

 

 

5,000

 

 

 

4,899

 

 

 

4,897

 

 

9/30/2019

Total Conferencing Equipment / Services  - 18.48%

 

 

 

 

40,000

 

 

 

39,252

 

 

 

39,891

 

 

 

Database Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SimpliVity Corporation

 

Database Software

 

Growth Capital Loan (10.00% interest rate, 8.50% EOT payment)

 

 

7,000

 

 

 

7,241

 

 

 

7,631

 

 

6/30/2018

 

 

Database Software

 

Growth Capital Loan (10.00% interest rate, 8.50% EOT payment)

 

 

3,000

 

 

 

3,074

 

 

 

3,271

 

 

10/31/2018

 

 

Database Software

 

Growth Capital Loan (11.50% interest rate, 9.00% EOT payment)

 

 

7,000

 

 

 

7,175

 

 

 

7,684

 

 

10/31/2018

 

 

Database Software

 

Growth Capital Loan (11.50% interest rate, 9.00% EOT payment)

 

 

3,000

 

 

 

3,057

 

 

 

3,293

 

 

12/31/2018

 

 

Database Software

 

Growth Capital Loan (12.75% interest rate, 9.50% EOT payment)

 

 

10,000

 

 

 

10,158

 

 

 

11,047

 

 

1/31/2019

 

 

Database Software

 

Equipment Lease (6.75% interest rate, 10.00% EOT payment) (1)

 

 

2,808

 

 

 

2,808

 

 

 

3,176

 

 

12/31/2018

 

 

Database Software

 

Equipment Lease (6.75% interest rate, 7.50% EOT payment) (1)

 

 

1,939

 

 

 

1,939

 

 

 

2,133

 

 

6/30/2018

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

1,311

 

 

 

1,311

 

 

 

1,475

 

 

12/31/2018

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

885

 

 

 

885

 

 

 

1,010

 

 

2/28/2019

 

 

Database Software

 

Equipment Lease (7.00% interest rate, 10.00% EOT payment) (1)

 

 

54

 

 

 

54

 

 

 

61

 

 

3/31/2019

 

 

Database Software

 

Equipment Lease (9.00% interest rate, 10.00% EOT payment) (1)

 

 

4,556

 

 

 

4,554

 

 

 

5,677

 

 

9/30/2018

Total Database Software  - 21.52%*

 

 

 

 

 

 

41,553

 

 

 

42,256

 

 

 

46,458

 

 

 

E-Commerce - Clothing and Accessories

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ModCloth, Inc.

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (11.50% interest rate, 13.42% EOT payment)

 

 

684

 

 

 

809

 

 

 

789

 

 

6/30/2017

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (11.50% interest rate, 13.69% EOT payment)

 

 

1,475

 

 

 

1,725

 

 

 

1,688

 

 

6/30/2017

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (13.00% interest rate, 15.50% EOT payment)

 

 

2,000

 

 

 

2,232

 

 

 

2,255

 

 

8/31/2017

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (13.00% interest rate, 16.00% EOT payment)

 

 

5,000

 

 

 

5,545

 

 

 

5,606

 

 

11/30/2017

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (13.00% interest rate, 16.50% EOT payment)

 

 

5,000

 

 

 

5,504

 

 

 

5,574

 

 

2/28/2018

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (13.00% interest rate, 11.61% EOT payment)

 

 

4,114

 

 

 

4,548

 

 

 

4,571

 

 

6/30/2017

 

 

E-Commerce - Clothing and Accessories

 

Equipment Lease (7.50% interest rate, 15.00% EOT payment) (1)

 

 

36

 

 

 

36

 

 

 

37

 

 

3/31/2017

 

 

E-Commerce - Clothing and Accessories

 

Equipment Lease  (7.50% interest rate, 15.00% EOT payment) (1)

 

 

7

 

 

 

7

 

 

 

7

 

 

6/30/2017

 

 

E-Commerce - Clothing and Accessories

 

Equipment Lease (7.50% interest rate, 15.00% EOT payment) (1)

 

 

5

 

 

 

5

 

 

 

5

 

 

7/31/2017

 

 

 

 

 

 

 

18,321

 

 

 

20,411

 

 

 

20,532

 

 

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 7.00% interest rate, 6.25% EOT payment)

 

 

10,000

 

 

 

10,116

 

 

 

10,554

 

 

11/30/2018

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 6.25% EOT payment)

 

 

6,000

 

 

 

5,970

 

 

 

6,221

 

 

6/30/2019

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 6.25% EOT payment)

 

 

2,000

 

 

 

1,972

 

 

 

2,065

 

 

10/31/2019

 

 

E-Commerce - Clothing and Accessories

 

Growth Capital Loan (Prime + 6.25% interest rate, 4.50% EOT payment)

 

 

4,000

 

 

 

3,934

 

 

 

4,034

 

 

11/30/2019

 

 

 

 

 

 

 

22,000

 

 

 

21,992

 

 

 

22,874

 

 

 

Total E-Commerce - Clothing and Accessories  - 20.11%*

 

 

 

 

40,321

 

 

 

42,403

 

 

 

43,406

 

 

 

E-Commerce - Personal Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Growth Capital Loan (10.00% interest rate, 8.00% EOT payment)

 

 

5,000

 

 

 

5,104

 

 

 

5,095

 

 

2/28/2019

 

 

E-Commerce - Personal Goods

 

Growth Capital Loan (10.00% interest rate, 7.00% EOT payment)

 

 

5,000

 

 

 

5,111

 

 

 

5,057

 

 

2/28/2019

 

 

E-Commerce - Personal Goods

 

Growth Capital Loan (10.25% interest rate, 8.00% EOT payment)

 

 

10,000

 

 

 

10,082

 

 

 

10,096

 

 

7/31/2019

Total E-Commerce - Personal Goods  - 9.38%*

 

 

 

 

20,000

 

 

 

20,297

 

 

 

20,248

 

 

 

Entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mind Candy Limited (1) (3)

 

Entertainment

 

Growth Capital Loan (12.00% interest rate, 9.50% EOT payment)

 

 

9,000

 

 

 

9,781

 

 

 

7,430

 

 

6/30/2017

Total Entertainment  - 3.44%*

 

 

 

 

 

 

9,000

 

 

 

9,781

 

 

 

7,430

 

 

 

Financial Institution and Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KnCMiner AB (1) (3) (8)

 

Financial Institution and Services

 

Growth Capital Loan (9.00% interest rate, 6.00% EOT payment)

 

 

3,758

 

 

 

3,809

 

 

 

3,231

 

 

6/30/2018

 

 

Financial Institution and Services

 

Growth Capital Loan (9.25% interest rate, 6.00% EOT payment)

 

 

1,798

 

 

 

1,795

 

 

 

1,546

 

 

6/30/2018

 

 

 

 

 

 

 

5,556

 

 

 

5,604

 

 

 

4,777

 

 

 

WorldRemit Limited (1) (3)

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

5,075

 

 

 

5,088

 

 

12/31/2018

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

4,950

 

 

 

5,005

 

 

6/30/2019

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

4,941

 

 

 

5,005

 

 

6/30/2019

 

 

Financial Institution and Services

 

Growth Capital Loan (Prime + 8.75% interest rate, 10.00% EOT payment)

 

 

5,000

 

 

 

4,851

 

 

 

4,940

 

 

11/30/2019

 

 

 

 

 

 

 

20,000

 

 

 

19,817

 

 

 

20,038

 

 

 

Total Financial Institution and Services  - 11.50%*

 

 

 

 

25,556

 

 

 

25,421

 

 

 

24,815

 

 

 

Network Systems Management Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Virtual Instruments Corporation

 

Network Systems Management Software

 

Growth Capital Loan (10.00% interest rate)

 

 

5,000

 

 

 

5,000

 

 

 

4,994

 

 

4/4/2020

 

 

Network Systems Management Software

 

Growth Capital Loan (5.00% interest rate) (5)

 

 

21,155

 

 

 

21,155

 

 

 

18,662

 

 

4/4/2021

 

 

Network Systems Management Software

 

Growth Capital Loan (5.00% interest rate) (5)

 

 

5,076

 

 

 

5,076

 

 

 

4,291

 

 

4/4/2021

Total Network Systems Management Software  - 12.95%*

 

 

 

 

31,231

 

 

 

31,231

 

 

 

27,947

 

 

 

Restaurant / Food Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Munchery, Inc.

 

Restaurant / Food Service

 

Growth Capital Loan (Prime + 7.00% interest rate, 6.75% EOT payment)

 

 

3,000

 

 

 

2,972

 

 

 

3,003

 

 

6/30/2019

Total Restaurant / Food Service  - 1.39%*

 

 

 

 

 

 

3,000

 

 

 

2,972

 

 

 

3,003

 

 

 

Security Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CrowdStrike, Inc.

 

Security Services

 

Growth Capital Loan (Prime + 7.75% interest rate, 0.50% EOT payment)

 

 

20,000

 

 

 

18,715

 

 

 

18,715

 

 

12/31/2020

Forgerock, Inc.

 

Security Services

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

 

10,000

 

 

 

10,085

 

 

 

10,150

 

 

9/30/2019

 

 

Security Services

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

 

5,000

 

 

 

4,948

 

 

 

4,976

 

 

2/29/2020

 

 

 

 

 

 

 

15,000

 

 

 

15,033

 

 

 

15,126

 

 

 

Total Security Services  - 15.68%*

 

 

 

 

 

 

35,000

 

 

 

33,748

 

 

 

33,841

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

11


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)

As of December 31, 2016

 

Venture Growth Stage Company

 

Industry

 

Type of Investment

 

Outstanding Principal

 

 

Cost

 

 

Fair Value

 

 

Maturity

Date

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shopping Facilitators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farfetch UK Limited (1) (3)

 

Shopping Facilitators

 

Growth Capital Loan (Prime + 8.25% interest rate, 9.00% EOT payment)

 

$

10,000

 

 

$

9,975

 

 

$

10,410

 

 

3/31/2020

 

 

Shopping Facilitators

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

 

5,000

 

 

 

5,008

 

 

 

5,211

 

 

1/31/2020

 

 

Shopping Facilitators

 

Growth Capital Loan (Prime + 6.75% interest rate, 8.50% EOT payment)

 

 

5,000

 

 

 

4,842

 

 

 

5,034

 

 

6/30/2020

Total Shopping Facilitators  - 9.57%*

 

 

 

 

 

 

20,000

 

 

 

19,825

 

 

 

20,655

 

 

 

Wireless Communications Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cambridge Broadband Network Limited (1) (3)

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.75% interest rate)

 

 

6,045

 

 

 

6,271

 

 

 

6,271

 

 

12/31/2017

Xirrus, Inc.

 

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.25% interest rate, 12.04% EOT payment) (5)

1,378

 

 

 

1,719

 

 

 

1,684

 

 

12/31/2016 (9)

 

 

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.25% interest rate, 13.01% EOT payment) (5)

3,029

 

 

 

3,627

 

 

 

3,566

 

 

12/31/2016 (9)

 

 

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.25% interest rate, 13.75% EOT payment) (5)

3,547

 

 

 

4,135

 

 

 

4,106

 

 

3/31/2017

 

 

Wireless Communications Equipment

 

Growth Capital Loan (Prime + 10.25% interest rate, 15.82% EOT payment) (5)

9,982

 

 

 

10,794

 

 

 

11,224

 

 

12/31/2017

 

 

Wireless Communications Equipment

 

Growth Capital Loan (12.00% interest rate) (2) (5)

 

 

2,564

 

 

 

2,552

 

 

 

2,487

 

 

10/16/2017

 

 

 

 

 

 

 

20,500

 

 

 

22,827

 

 

 

23,067

 

 

 

Total Wireless Communications Equipment  - 13.59%*

 

 

 

 

26,545

 

 

 

29,098

 

 

 

29,338

 

 

 

Total Debt Investments  - 166.78%*

 

 

 

 

 

$

354,488

 

 

$

359,059

 

 

$

360,007

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

12


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)

As of December 31, 2016

 

Venture Growth Stage Company

 

Industry

 

Type of Warrant

 

Shares

 

 

Cost

 

 

Fair Value

 

Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising / Marketing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

InMobi Pte Ltd. (1) (2) (3)

 

Advertising / Marketing

 

Ordinary Shares

 

 

48,500

 

 

$

35

 

 

$

106

 

Total Advertising / Marketing  - 0.05%*

 

 

 

 

 

 

48,500

 

 

 

35

 

 

 

106

 

Biofuels / Biomass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harvest Power, Inc.

 

Biofuels / Biomass

 

Common Stock

 

 

350

 

 

 

77

 

 

 

 

Total Biofuels / Biomass  - 0.00%*

 

 

 

 

 

 

350

 

 

 

77

 

 

 

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birst, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

428,491

 

 

 

129

 

 

 

39

 

FinancialForce.com, Inc. (2)

 

Business Applications Software

 

Preferred Stock

 

 

195,170

 

 

 

508

 

 

 

508

 

Lattice Engines, Inc. (2)

 

Business Applications Software

 

Preferred Stock

 

 

396,652

 

 

 

48

 

 

 

95

 

MapR Technologies, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

256,388

 

 

 

42

 

 

 

92

 

Medallia, Inc. (2)

 

Business Applications Software

 

Preferred Stock

 

 

55,814

 

 

 

11

 

 

 

87

 

Total Business Applications Software  - 0.38%*

 

 

 

 

 

 

1,332,515

 

 

 

738

 

 

 

821

 

Business to Business Marketplace

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Optoro, Inc. (2)

 

Business to Business Marketplace

 

Preferred Stock

 

 

10,346

 

 

 

40

 

 

 

9

 

Total Business to Business Marketplace  - 0.00%*

 

 

 

 

 

 

10,346

 

 

 

40

 

 

 

9

 

Conferencing Equipment / Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuze, Inc. (fka Thinking Phone Networks, Inc.)

 

Conferencing Equipment / Services

 

Preferred Stock

 

 

323,471

 

 

 

670

 

 

 

633

 

Total Conferencing Equipment / Services  - 0.29%*

 

 

 

 

 

 

323,471

 

 

 

670

 

 

 

633

 

Database Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SimpliVity Corporation

 

Database Software

 

Preferred Stock

 

 

770,201

 

 

 

936

 

 

 

 

Total Database Software  - 0.00%*

 

 

 

 

 

 

770,201

 

 

 

936

 

 

 

 

E-Commerce - Clothing and Accessories

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JackThreads, Inc. (2)

 

E-Commerce - Clothing and Accessories

 

Common Stock

 

 

283,401

 

 

 

88

 

 

 

77

 

ModCloth, Inc.

 

E-Commerce - Clothing and Accessories

 

Preferred Stock

 

 

5,590,041

 

 

 

746

 

 

 

503

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Preferred Stock

 

 

88,037

 

 

 

213

 

 

 

828

 

Rent the Runway, Inc.

 

E-Commerce - Clothing and Accessories

 

Common Stock

 

 

82,891

 

 

 

331

 

 

 

1,155

 

Total E-Commerce - Clothing and Accessories  - 1.19%*

 

 

 

 

 

 

6,044,370

 

 

 

1,378

 

 

 

2,563

 

E-Commerce - Personal Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Preferred Stock

 

 

60,052

 

 

 

690

 

 

 

1,406

 

Total E-Commerce - Personal Goods  - 0.65%*

 

 

 

 

 

 

60,052

 

 

 

690

 

 

 

1,406

 

Entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mind Candy, Inc. (1) (3)

 

Entertainment

 

Preferred Stock

 

 

287,187

 

 

 

751

 

 

 

 

Total Entertainment  - 0.00%*

 

 

 

 

 

 

287,187

 

 

 

751

 

 

 

 

Financial Institution and Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WorldRemit Limited (1) (3)

 

Financial Institution and Services

 

Preferred Stock

 

 

96,216

 

 

 

279

 

 

 

307

 

Total Financial Institution and Services  - 0.14%*

 

 

 

 

 

 

96,216

 

 

 

279

 

 

 

307

 

General Media and Content

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TechMediaNetwork, Inc. (2)

 

General Media and Content

 

Preferred Stock

 

 

72,234

 

 

 

31

 

 

 

28

 

Thrillist Media Group, Inc. (2)

 

General Media and Content

 

Common Stock

 

 

774,352

 

 

 

624

 

 

 

1,394

 

Total General Media and Content  - 0.66%*

 

 

 

 

 

 

846,586

 

 

 

655

 

 

 

1,422

 

Medical Software and Information Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AirStrip Technologies, Inc. (2)

 

Medical Software and Information Services

 

Preferred Stock

 

 

31,063

 

 

 

112

 

 

 

74

 

Total Medical Software and Information Services  - 0.03%*

 

 

 

 

 

 

31,063

 

 

 

112

 

 

 

74

 

Multimedia / Streaming Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shazam Entertainment Limited (1) (2) (3)

 

Multimedia / Streaming Software

 

Ordinary Shares

 

 

2,669,479

 

 

 

134

 

 

 

166

 

Total Multimedia / Streaming Software  - 0.08%*

 

 

 

 

 

 

2,669,479

 

 

 

134

 

 

 

166

 

Restaurant / Food Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Chef Corporation (2)

 

Restaurant / Food Service

 

Preferred Stock

 

 

315,211

 

 

 

98

 

 

 

98

 

Munchery, Inc.

 

Restaurant / Food Service

 

Preferred Stock

 

 

222,640

 

 

 

45

 

 

 

45

 

Total Restaurant / Food Service  - 0.07%*

 

 

 

 

 

 

537,851

 

 

 

143

 

 

 

143

 

Security Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CrowdStrike, Inc.

 

Security Services

 

Preferred Shares

 

 

99,344

 

 

 

72

 

 

 

72

 

Forgerock, Inc.

 

Security Services

 

Preferred Stock

 

 

97,996

 

 

 

155

 

 

 

209

 

Total Security Services  - 0.13%*

 

 

 

 

 

 

197,340

 

 

 

227

 

 

 

281

 

Shopping Facilitators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farfetch UK Limited (1) (3)

 

Shopping Facilitators

 

Preferred Stock

 

 

37,998

 

 

 

170

 

 

 

183

 

Total Shopping Facilitators  - 0.08%*

 

 

 

 

 

 

37,998

 

 

 

170

 

 

 

183

 

Travel and Leisure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inspirato, LLC (2)

 

Travel and Leisure

 

Preferred Units

 

 

1,994

 

 

 

37

 

 

 

40

 

Total Travel and Leisure  - 0.02%*

 

 

 

 

 

 

1,994

 

 

 

37

 

 

 

40

 

Wireless Communications Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cambridge Broadband Network Limited (1) (3)

 

Wireless Communications Equipment

 

Preferred Shares

 

 

33,000

 

 

 

95

 

 

 

4

 

Eero, Inc. (2)

 

Wireless Communications Equipment

 

Preferred Stock

 

 

35,446

 

 

 

80

 

 

 

80

 

Xirrus, Inc.

 

Wireless Communications Equipment

 

Preferred Stock

 

 

6,446,763

 

 

 

787

 

 

 

 

Total Wireless Communications Equipment  - 0.04%*

 

 

 

 

 

 

6,515,209

 

 

 

962

 

 

 

84

 

Total Warrants  - 3.82%*

 

 

 

 

 

 

 

 

 

$

8,034

 

 

$

8,238

 

 

See accompanying notes to condensed consolidated financial statements.

 

13


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands)

As of December 31, 2016

 

Venture Growth Stage Company

 

Industry

 

Type of Warrant

 

Shares

 

 

Cost

 

 

Fair Value

 

Equity Investments (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Applications Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birst, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

42,801

 

 

$

250

 

 

$

184

 

MapR Technologies, Inc.

 

Business Applications Software

 

Preferred Stock

 

 

36,264

 

 

 

150

 

 

 

150

 

Total Business Applications Software  - 0.15%*

 

 

 

 

 

 

79,065

 

 

 

400

 

 

 

334

 

Database Software

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutanix, Inc. (7)

 

Database Software

 

Common Stock

 

 

173,731

 

 

 

1,078

 

 

 

4,430

 

Total Database Software  - 2.05%*

 

 

 

 

 

 

173,731

 

 

 

1,078

 

 

 

4,430

 

E-Commerce - Personal Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Preferred Stock

 

 

2,839

 

 

 

250

 

 

 

292

 

Birchbox, Inc.

 

E-Commerce - Personal Goods

 

Convertible Note (8.00% interest rate)

 

 

 

 

45

 

 

 

130

 

Total E-Commerce - Personal Goods  - 0.20%*

 

 

 

 

 

 

2,839

 

 

 

295

 

 

 

422

 

Software Development Tools

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inspirato, LLC (1) (4)

 

Travel and Leisure

 

Preferred Units

 

 

1,948

 

 

 

250

 

 

 

258

 

Total Software Development Tools  - 0.12%*

 

 

 

 

 

 

1,948

 

 

 

250

 

 

 

258

 

Software Development Tools

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MongoDB, Inc.

 

Software Development Tools

 

Common Stock

 

 

74,742

 

 

 

1,000

 

 

 

622

 

Total Software Development Tools  - 0.29%*

 

 

 

 

 

 

74,742

 

 

 

1,000

 

 

 

622

 

Total Equity Investments  - 2.81%*

 

 

 

 

 

 

 

 

 

$

3,023

 

 

$

6,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments in Portfolio Companies  - 173.40%*

 

 

 

 

 

 

 

 

 

$

370,116

 

 

$

374,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term Investments (2)

 

 

 

 

 

 

 

 

 

Cost

 

 

Fair Value

 

U.S. Treasury Bills

 

$40,000 Face Value Maturity Date 1/26/2017 Yield to Maturity 0.40%

 

 

 

 

 

$

39,990

 

 

$

39,990

 

Total Short-Term Investments  - 18.53%*

 

 

 

 

 

 

 

 

 

$

39,990

 

 

$

39,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments  - 191.93%*

 

 

 

 

 

 

 

 

 

$

410,106

 

 

$

414,301

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

14


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS

(unaudited)

As of September 30, 2017 and as of December 31, 2016

NOTES TO CONDENSED CONSOLIDATED SCHEDULES OF INVESTMENTS

Notes applicable to the investments presented in the foregoing tables:

No investment represents a 5% or greater interest in any outstanding class of voting security of the portfolio company.

Notes applicable to the debt investments presented in the foregoing tables:

Interest rate is the annual interest rate on the debt investment and does not include any original issue discount, end-of-term (“EOT”) payment, or any additional fees related to the investments, such as deferred interest, commitment fees or prepayment fees.

For each debt investment tied to the Prime Rate, “Prime”, the current rate is 4.25% as of September 30, 2017.

The EOT payments are contractual and fixed interest payments due in cash at the maturity date of the loan, including upon prepayment, and are a fixed percentage of the original principal balance of the loan unless otherwise noted. The EOT payment is amortized and recognized as non-cash income over the loan or lease prior to its payment.

Some of the terms noted in the foregoing tables are subject to change based on certain events such as prepayments.

Notes applicable to the equipment leases presented in the foregoing tables:

At the end of the term of certain equipment leases, the lessee has the option to purchase the underlying assets at fair market value in certain cases subject to a cap, return the equipment or continue to finance the assets. The fair market values of the financed assets have been estimated as a percentage of original cost for purposes of the EOT payment value.

Notes applicable to the warrants presented in the foregoing tables:

Warrants are associated with funded debt instruments as well as certain commitments to provide future funding.

Specific notes applicable to specific investments in the foregoing tables:

(1) Investment is a non-qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). As of September 30, 2017 and December 31, 2016, non-qualifying assets as a percentage of total assets were 16.6% and 17.4%, respectively.

(2) As of September 30, 2017 or December 31, 2016, these debt investments, warrants, equity investments and short-term investments were not pledged as collateral as part of the Company’s revolving credit facility.

(3) Entity is not domiciled in the United States and does not have its principal place of business in the United States.

(4) Investment is owned by TPVG Investment LLC, a wholly owned taxable subsidiary of the Company.

(5) Debt investment has a payment-in-kind (“PIK”) feature.

(6) Unused.

(7) Entity is publicly traded and listed on The Nasdaq Global Select Market (the “NASDAQ”).

(8) As of September 30, 2017, the Company’s debt investments in KnCMiner AB include risk and time discounted expected recoveries of cash from completed asset sales and equity in GoGreen Light AB, which acquired certain assets from KnCMiner AB.

(9) The maturity date was extended to March 31, 2017 during the first quarter of 2017.

(10) Investment is a cash success fee or a cash exit fee payable on the consummation of certain trigger events.

(11) Debt is non-performing.

* Value as a percentage of net assets

See accompanying notes to condensed consolidated financial statements.

 

15


TRIPLEPOINT VENTURE GROWTH BDC CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017
(unaudited)

 

Note 1. Organization

TriplePoint Venture Growth BDC Corp. (the “Company”), a Maryland corporation, was formed on June 28, 2013 and priced its initial public offering and commenced investment operations on March 5, 2014. The Company is structured as an externally-managed non-diversified, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, the Company expects to qualify annually as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company was formed to expand the venture growth stage business segment of TriplePoint Capital LLC’s (“TPC”) investment platform. TPC is widely recognized as a leading global financing provider devoted to serving venture capital-backed companies with creative, flexible and customized debt financing, equity capital and complementary services throughout their lifespan. The Company’s investment objective is to maximize total return to stockholders primarily in the form of current income and, to a lesser extent, capital appreciation by primarily lending to venture growth stage companies focused in technology, life sciences and other high growth industries backed by TPC’s select group of leading venture capital investors. The Company is externally managed by TPVG Advisers LLC (the “Adviser”) which is registered as an investment adviser under the 1940 Act and is a wholly owned subsidiary of TPC. The Adviser is responsible for sourcing, reviewing and structuring investment opportunities, underwriting and performing due diligence on investments and monitoring the investment portfolio on an ongoing basis. The Adviser was organized in August 2013 and, pursuant to an investment advisory agreement entered into between the Company and the Adviser, the Company pays the Adviser a base management fee and an incentive fee for its services. The Company has also entered into an administration agreement with TPVG Administrator LLC (the “Administrator”), a wholly owned subsidiary of the Adviser, for which it pays expenses for services provided.

The Company has two wholly owned subsidiaries: TPVG Variable Funding Company LLC (the “Financing Subsidiary”), a bankruptcy remote special purpose entity established for utilizing the Company’s revolving credit facility, and TPVG Investment LLC, an entity established for holding certain Company investments in order to benefit from the tax treatment of these investments and create a tax structure that is more advantageous with respect to the Company’s RIC status. These subsidiaries are consolidated in the financial statements of the Company.

Note 2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures required by GAAP for the annual reporting of consolidated financial statements are omitted.

The condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. In the opinion of management, all adjustments and reclassifications that are necessary for the fair representation of financial results as of and for the periods presented have been included and all intercompany account balances and transactions have been eliminated.

Certain items in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current period’s presentation. These reclassifications did not impact any prior amounts of reported total assets, total liabilities, net assets or results of operations.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2017.  

Foreign Currency Translation

The Company’s books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

 

Fair value of investment securities, other assets and liabilities—at the exchange rates prevailing at the end of the period; and

 

Purchases and sales of investment securities, income and expenses—at the exchange rates prevailing on the respective dates of such transactions, income or expenses.

 

16


Results of operations based on changes in foreign exchange rates are included as a component of “Net realized and unrealized gains (losses)” in the statement of operations, if any.

Note 3. Related Party Agreements and Transactions

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser. Subject to the overall supervision of the Company’s Board of Directors (the “Board”) and in accordance with the 1940 Act, the Adviser manages the day-to-day operations and provides investment advisory services to the Company pursuant to the Advisory Agreement. Under the terms of the Advisory Agreement, the Adviser:

 

determines the composition of the Company’s portfolio, the nature and timing of changes to the Company’s portfolio and the manner of implementing such changes;

 

identifies, evaluates and negotiates the structure of investments;

 

executes, closes, services and monitors investments;

 

determines the securities and other assets purchased, retained or sold;

 

performs due diligence on prospective investments; and

 

provides the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds.

As consideration for the investment advisory and management services provided, and pursuant to the Advisory Agreement, the Company has agreed to pay the Adviser a fee consisting of two components—a base management fee and an incentive fee. The cost of both the base management fee and incentive fee is ultimately borne by the Company’s stockholders.

The base management fee is calculated at an annual rate of 1.75% of the Company’s average adjusted gross assets, including assets purchased with borrowed funds. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of the Company’s gross assets at the end of its two most recently completed calendar quarters. Such amount is appropriately adjusted (based on the actual number of days elapsed relative to the total number of days in such calendar quarter) for any share issuance or repurchases during a calendar quarter. Base management fees for any partial month or quarter are appropriately pro-rated.

The incentive fee, which provides the Adviser with a share of the income it generates for the Company, consists of two components— net investment income and net capital gains—which are largely independent of each other, and may result in one or both components payable in a given period.

Under the investment income component, the Company pays the Adviser 20.0% of the amount by which the Company’s pre-incentive fee net investment income for the quarter exceeds a hurdle rate of 2.0% (8.0% annualized) of the Company’s net assets at the end of the immediately preceding calendar quarter, subject to a “catch-up” provision pursuant to which the Adviser receives all of such income in excess of 2.0% but less than 2.5%, subject to a total return requirement. The effect of the “catch-up” provision is that, subject to the total return provision discussed below, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, the Adviser receives 20.0% of the Company’s pre-incentive fee net investment income as if the 2.0% hurdle rate did not apply. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of the Company’s pre-incentive fee net investment income is payable except to the extent that 20.0% of the cumulative net increase in net assets resulting from operations since the effective date of the Company’s election to be regulated as a BDC exceeds the cumulative incentive fees accrued and/or paid since the effective date of the Company’s election to be regulated as a BDC. In other words, any investment income incentive fee that is payable in a calendar quarter is limited to the lesser of (i) 20.0% of the amount by which the Company’s pre-incentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the “catch-up” provision and (ii) (x) 20.0% of the cumulative net increase in net assets resulting from operations since the effective date of the Company’s election to be regulated as a BDC minus (y) the cumulative incentive fees accrued and/or paid since the effective date of the Company’s election to be regulated as a BDC. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of the Company’s pre-incentive fee net investment income, realized gains and losses and unrealized appreciation and depreciation since the effective date of the Company’s election to be regulated as a BDC. The Company elected to be regulated as a BDC under the 1940 Act on March 5, 2014.

 

17


Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where it incurs a loss, subject to the total return requirement described in the preceding paragraph. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly minimum hurdle rate, the Company may pay the applicable incentive fee even if it has incurred a loss in that quarter due to realized and unrealized losses, subject to the total return requirement. The Company’s net investment income used to calculate this component of the incentive fee is also included in the amount of the Company’s assets used to calculate the 1.75% base management fee. These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuance or repurchase during the current quarter.

Under the capital gains component of the incentive fee, the Company pays the Adviser at the end of each calendar year 20.0% of the Company’s aggregate cumulative realized capital gains from inception through the end of that year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized losses through the end of such year, less the aggregate amount of any previously paid capital gains incentive fees. For the foregoing purpose, the Company’s “aggregate cumulative realized capital gains” does not include any unrealized gains. It should be noted that the Company accrues an incentive fee for accounting purposes taking into account any unrealized gains in accordance with GAAP. The capital gains component of the incentive fee is not subject to any minimum return to stockholders. If such amount is negative, then no capital gains incentive fee is payable for such year. Additionally, if the Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee.

The base management fee accrued and payable, income incentive fee accrued and payable, and capital gains incentive fee accrued are included in the Company’s condensed consolidated financial statements and summarized in the table below. The Adviser has agreed to exclude U.S. Treasury bills acquired at the end of each applicable quarter in the calculation of gross assets for purposes of determining its base management fee. There were no net realized capital gains since the inception of the Company and, thus, no capital gains incentive fee was earned or is payable. The Company had cumulative realized and unrealized losses during the three and nine months ended September 30, 2017 and September 30, 2016, and, as a result, no capital gains incentive fees were recorded for the three and nine months ended September 30, 2017 and September 30, 2016.

 

Management and Incentive Fees

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Base management fee

 

$

1,567

 

 

$

1,376

 

 

$

4,805

 

 

$

4,076

 

Income incentive fee

 

$

1,066

 

 

$

1,568

 

 

$

4,520

 

 

$

1,568

 

Capital gains incentive fee

 

$

 

 

$

 

 

$

 

 

$

 

 

The table above presents the base management and incentive fees accrued during the period which are paid in the quarter after they are earned. During the three and nine months ended September 30, 2017, approximately $1.7 million and $4.7 million, respectively, of base management fees earned in prior periods were paid, and approximately $2.0 million and $4.7 million, respectively, of income incentive fees earned in prior periods were paid. During the three and nine months ended September 30, 2016, approximately $1.3 million and $4.1 million, respectively, of base management fees earned in prior periods were paid, and approximately $0.0 and $1.5 million, respectively, of income incentive fees earned in prior periods were paid.

Administration Agreement

Prior to the commencement of operations, the Board approved an administration agreement dated February 18, 2014 (the “Administration Agreement”). The Administration Agreement provides that the Administrator is responsible for furnishing the Company with office facilities and equipment and providing the Company with clerical, bookkeeping, recordkeeping services and other administrative services at such facilities. Under the Administration Agreement, the Administrator performs, or oversees, or arranges for, the performance of the Company’s required administrative services, which includes being responsible for the financial and other records which the Company is required to maintain and preparing reports to the Company’s stockholders and reports and other materials filed with the SEC and any other regulatory authority. In addition, the Administrator assists the Company in determining and publishing net asset value (“NAV”), overseeing the preparation and filing of the Company’s tax returns and printing and disseminating reports and other materials to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, the Administrator also provides managerial assistance on the Company’s behalf to those companies that have accepted the Company’s offer to provide such assistance.

Payments under the Administration Agreement are equal to the Company’s allocable portion (subject to the review of the Board) of the Administrator’s overhead resulting from its obligations under the Administration Agreement, including rent and the allocable portion of the cost of the chief compliance officer and chief financial officer and their respective staffs. In addition, if requested to provide significant managerial assistance to the Company’s portfolio companies, the Administrator is paid an additional amount based on the services provided, which shall not exceed the amount the Company receives from such companies for providing this assistance. 

 

18


For the three months ended September 30, 2017 and 2016, expenses paid or payable by the Company to the Administrator under the Administration Agreement were approximately $0.3 million and $0.4 million, respectively, of which approximately $62 thousand and $63 thousand, respectively, were paid or payable to third party service providers. For the nine months ended September 30, 2017 and 2016, expenses paid or payable by the Company to the Administrator under the Administration Agreement were approximately $1.1 million and $1.2 million, respectively, of which approximately $186 thousand and $184 thousand, respectively, were paid or payable to third party service providers.

Note 4. Investments

The Company measures the fair value of its investments in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or “ASC Topic 820”, issued by the Financial Accounting Standards Board, or “FASB”. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Valuation Committee of the Board is responsible for assisting the Board in valuing investments that are not publicly traded or for which current market values are not readily available. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to portfolio investments for which market quotations are not readily available, the Board, with the assistance of the Adviser and its senior investment team and independent valuation agents, is responsible for determining, in good faith, the fair value in accordance with the valuation policy approved by the Board. If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as appropriate, considering the reasonableness of the range indicated by those results. The Adviser considers a range of fair values based upon the valuation techniques utilized and selects a value within that range that most accurately represents fair value based on current market conditions as well as other factors the Adviser’s senior investment team considers relevant. The Board determines fair value of its investments on at least a quarterly basis or at such other times when the Board feels it would be appropriate to do so given the circumstances. A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances present at each valuation date. Due to the inherent uncertainty of determining fair value of portfolio investments that do not have a readily available market value, fair value of investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC Topic 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level of information used in the valuation. In accordance with ASC Topic 820, these inputs are summarized in the three levels listed below.

Level 1—Valuations are based on quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2—Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly and model-based valuation techniques for which all significant inputs are observable.

Level 3—Valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models incorporating significant unobservable inputs, such as discounted cash flow models and other similar valuations techniques. The valuation of Level 3 assets and liabilities generally requires significant management judgment due to the inability to observe inputs to valuation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the investment.

Under ASC 820, fair value measurement assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset, which may be a hypothetical market, excluding transaction costs. The principal market for any asset is the market with the greatest volume and level of activity for such asset in which the reporting entity would or could sell or transfer the asset. In determining the principal market for an asset or liability, it is assumed that the reporting entity has access to such market as of the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable and willing and able to transact.

 

19


With respect to investments for which market quotations are not readily available, the Board undertakes a multi-step valuation process each quarter, as described below:

 

The quarterly valuation process begins with each portfolio company or investment being initially valued by the Adviser’s professionals that are responsible for the portfolio investment;

 

Preliminary valuation conclusions are then documented and discussed with the Adviser’s senior investment team;

 

At least once annually, the valuation for each portfolio investment will be reviewed by an independent valuation firm. However, the Board does not intend to have de minimis investments of less than 1.0% of the Company’s gross assets (up to an aggregate of 10.0% of the Company’s gross assets) independently reviewed, given the expenses involved in connection therewith;

 

The Valuation Committee then reviews these preliminary valuations and makes fair value recommendations to the Board; and

 

The Board then discusses valuations and determines, in good faith, the fair value of each investment in the Company’s portfolio based on the input of the Adviser, the respective independent valuation firms and the Valuation Committee.

Debt Investments

The debt investments identified on the condensed consolidated schedules of investments are loans and equipment leases made to venture growth stage companies focused in technology, life sciences and other high growth industries which are backed by a select group of leading venture capital investors. These investments are considered Level 3 assets under ASC Topic 820 as there is no known or accessible market or market indices for these types of debt instruments and thus the Adviser’s senior management team must estimate the fair value of these investment securities based on models utilizing unobservable inputs.

To estimate the fair value of debt investments, the Company compares the cost basis of each debt investment, including any original issue discount, to the resulting fair value determined using a discounted cash flow model, unless another model is more appropriate based on the circumstances at the measurement date. The discounted cash flow approach entails analyzing the interest rate spreads for recently completed financing transactions which are similar in nature to these debt investments, in order to determine a comparable range of effective market interest rates. The range of interest rate spreads utilized is based on borrowers with similar credit profiles. All remaining expected cash flows of the investment are discounted using this range of interest rates to determine a range of fair values for the debt investment.

The valuation process includes, among other things, evaluating the underlying investment performance of the portfolio company’s current financial condition and ability to raise additional capital, as well as macro-economic events that may impact valuations. These events include, but are not limited to, current market yields and interest rate spreads of similar securities as of the measurement date. Changes in these unobservable inputs could result in significantly different fair value measurements.

Under certain circumstances, an alternative technique may be used to value certain debt investments that better reflect the fair value of the investment, such as the price paid or realized in a recently completed transaction or a binding offer received in an arm’s length transaction, or the use of multiple probability weighted cash flow model when the expected future cash flows contain elements of variability or estimates of proceeds that would be received in a liquidation scenario.

Warrant Investments

Warrant fair values are primarily determined using a Black Scholes option pricing model. Privately held warrants and equity-related securities are valued based on an analysis of various factors, includes, but not limited to, those listed below. Increases or decreases in any of the unobservable inputs described below could result in a material change in fair value:

 

Underlying enterprise value of the issuer based on available information, including any information regarding the most recent financing round of borrower. Valuation techniques to determine enterprise value include market multiple approaches, income approaches or the use of recent rounds of financing and the portfolio company’s capital structure. Valuation techniques are also utilized to allocate the enterprise fair value of a portfolio company to the specific class of common or preferred stock exercisable in the warrant. Such techniques take into account the rights and preferences of the portfolio company’s securities, expected exit scenarios, and volatility associated with such outcomes to allocate the fair value to the specific class of stock held in the portfolio. Such techniques included option pricing models, including back solve techniques, probability weighted expected return models and other techniques determined to be appropriate.

 

Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant price, is based on comparable publicly traded companies within indices similar in nature to the underlying company issuing the warrant.

 

20


 

The risk-free interest rates are derived from the U.S. Treasury yield curve. The risk-free interest rates are calculated based on a weighted average of the risk-free interest rates that correspond closest to the expected remaining life of the warrant.

 

Other adjustments, including a marketability discount on private company warrants, are estimated based on the Adviser’s judgment about the general industry environment.

 

Historical portfolio experience on cancellations and exercises of warrants are utilized as the basis for determining the estimated life of the warrants in each financial reporting period. Warrants may be exercised in the event of acquisitions, mergers or initial public offerings, and cancelled due to events such as bankruptcies, restructuring activities or additional financings. These events cause the expected remaining life assumption to be shorter than the contractual term of the warrants.

Under certain circumstances alternative techniques may be used to value certain warrants that more accurately reflect the warrants’ fair values, such as an expected settlement of a warrant in the near term, a model that incorporates a put feature associated with the warrant, or the price paid or realized in a recently completed transaction or binding offer received in an arm’s-length transaction. The fair value may be determined based on the expected proceeds to be received from such settlement or based on the net present value of the expected proceeds from the put option.

These valuation methodologies involve a significant degree of judgment. There is no single standard for determining the estimated fair value of investments which do not have an active observable market. Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time. The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a single estimate may then be determined.

Equity Investments

The fair value of an equity investment in a privately held company is initially the amount invested. The Company adjusts the fair value of equity investments in private companies upon the completion of a new third party round of equity financing subsequent to its investment. The Company may make adjustments to fair value, absent a new equity financing event, based upon positive or negative changes in a portfolio company’s financial or operational performance. The Company may also reference comparable transactions and/or secondary market transactions of comparable companies to estimate fair value. These valuation methodologies involve a significant degree of judgment.

The fair value of an equity investment in a publicly traded company is based upon the closing public share price on the date of measurement. These assets are recorded at fair value on a recurring basis. There is no single standard for determining the estimated fair value of investments which do not have an active public market. Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time. The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a single estimate may then be determined.

Investment Valuation

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of September 30, 2017 and as of December 31, 2016. The Company transfers investments in and out of Level 1, 2 and 3 as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the three months ended September 30, 2017, there were no transfers between Levels 1, 2, or 3.

 

Investment Type

 

As of September 30, 2017

 

(dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Debt investments

 

$

 

 

$

 

 

$

292,683

 

 

$

292,683

 

Warrants

 

 

 

 

 

 

 

 

10,741

 

 

 

10,741

 

Equity investments

 

 

2,546

 

 

 

 

 

 

5,166

 

 

 

7,712

 

Short-term investments

 

 

94,962

 

 

 

 

 

 

 

 

 

94,962

 

Total investments

 

$

97,508

 

 

$

 

 

$

308,590

 

 

$

406,098

 

 

 

21


Investment Type

 

As of December 31, 2016

 

(dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Debt investments

 

$

 

 

$

 

 

$

360,007

 

 

$

360,007

 

Warrants

 

 

 

 

 

 

 

 

8,238

 

 

 

8,238

 

Equity investments

 

 

 

 

 

4,430

 

 

 

1,636

 

 

 

6,066

 

Short-term investments

 

 

39,990

 

 

 

 

 

 

 

 

 

39,990

 

Total investments

 

$

39,990

 

 

$

4,430

 

 

$

369,881

 

 

$

414,301

 

 

The following tables present information about Level 3 investments measured at fair value for the three and nine months ended September 30, 2017 and 2016. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the net unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. 

 

Level 3

 

For the Three Months Ended September 30, 2017

 

Investment Activity (dollars in thousands)

 

Debt Investments

 

 

Warrants

 

 

Equity Investments

 

 

Total Investments

 

Fair value as of July 1, 2017

 

$

235,899

 

 

$

9,551

 

 

$

4,853

 

 

$

250,303

 

Funding and purchases of investments, at cost

 

 

79,996

 

 

 

1,538

 

 

 

304

 

 

 

81,838

 

Principal payments and sale proceeds received from investments

 

 

(24,886

)

 

 

 

 

 

 

 

 

(24,886

)

Amortization and accretion of premiums and discounts, net and end-of term payments

 

 

775

 

 

 

 

 

 

 

 

 

775

 

Realized gains (losses) on investments

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) included in earnings

 

 

288

 

 

 

(348

)

 

 

9

 

 

 

(51

)

Payment-in-kind coupon

 

 

611

 

 

 

 

 

 

 

 

 

611

 

Totals

 

$

292,683

 

 

$

10,741

 

 

$

5,166

 

 

$

308,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on Level 3 investments held as of September 30, 2017

 

$

406

 

 

$

(348

)

 

$

10

 

 

$

69

 

 

Level 3

 

For the Nine Months Ended September 30, 2017

 

Investment Activity (dollars in thousands)

 

Debt Investments

 

 

Warrants

 

 

Equity Investments

 

 

Total Investments

 

Fair value as of January 1, 2017

 

$

360,007

 

 

$

8,238

 

 

$

1,636

 

 

$

369,881

 

Funding and purchases of investments, at cost

 

 

146,485

 

 

 

2,939

 

 

 

3,703

 

 

 

153,127

 

Principal payments and sale proceeds received from investments

 

 

(212,320

)

 

 

 

 

 

(74

)

 

 

(212,394

)

Amortization and accretion of premiums and discounts, net and end-of term payments

 

 

637

 

 

 

 

 

 

 

 

 

637

 

Realized losses on investments

 

 

(622

)

 

 

(2,597

)

 

 

(176

)

 

 

(3,395

)

Net change in unrealized gains (losses) included in earnings

 

 

(3,005

)

 

 

2,161

 

 

 

77

 

 

 

(767

)

Payment-in-kind coupon

 

 

1,501

 

 

 

 

 

 

 

 

 

1,501

 

Totals

 

$

292,683

 

 

$

10,741

 

 

$

5,166

 

 

$

308,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on Level 3 investments held as of September 30, 2017

 

$

1,115

 

 

$

104

 

 

$

11

 

 

$

1,230

 

Level 3

 

For the Three Months Ended September 30, 2016

 

Investment Activity (dollars in thousands)

 

Debt Investments

 

 

Warrants

 

 

Equity Investments

 

 

Total Investments

 

Fair value as of July 1, 2016

 

$

286,816

 

 

$

8,763

 

 

$

3,820

 

 

$

299,399

 

Fundings of investments, at cost

 

 

14,659

 

 

 

334

 

 

 

196

 

 

 

15,189

 

Principal payments and sale proceeds received from investments

 

 

(11,650

)

 

 

(1,095

)

 

 

(790

)

 

 

(13,535

)

Amortization and accretion of premiums and discounts, net and end-of term payments

 

 

2,296

 

 

 

 

 

 

 

 

 

2,296

 

Gross transfers out of Level 3 (1)

 

 

 

 

 

(374

)

 

 

(1,809

)

 

 

(2,183

)

Realized gains on investments

 

 

65

 

 

 

726

 

 

 

290

 

 

 

1,081

 

Net change in unrealized gains (losses) included in earnings

 

 

63

 

 

 

(190

)

 

 

100

 

 

 

(27

)

Payment-in-kind coupon

 

 

316

 

 

 

 

 

 

 

 

 

316

 

Totals

 

$

292,565

 

 

$

8,164

 

 

$

1,807

 

 

$

302,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on Level 3 investments held as of September 30, 2016

 

$

64

 

 

$

(191

)

 

$

103

 

 

$

(24

)

 

 

22


Level 3

 

For the Nine Months Ended September 30, 2016

 

Investment Activity (dollars in thousands)

 

Debt Investments

 

 

Warrants

 

 

Equity Investments

 

 

Total Investments

 

Fair value as of January 1, 2016

 

$

259,585

 

 

$

8,067

 

 

$

3,639

 

 

$

271,291

 

Fundings of investments, at cost

 

 

91,932

 

 

 

1,677

 

 

 

196

 

 

 

93,805

 

Principal payments and sale proceeds received from investments

 

 

(46,890

)

 

 

(1,095

)

 

 

(790

)

 

 

(48,775

)

Amortization and accretion of premiums and discounts, net and end-of term payments

 

 

4,821

 

 

 

 

 

 

 

 

 

4,821

 

Gross transfers out of Level 3 (1)

 

 

 

 

 

(374

)

 

 

(1,809

)

 

 

(2,183

)

Realized gains (losses) on investments

 

 

(20,448

)

 

 

(595

)

 

 

290

 

 

 

(20,753

)

Net change in unrealized gains included in earnings

 

 

2,281

 

 

 

484

 

 

 

281

 

 

 

3,046

 

Payment-in-kind coupon

 

 

1,284

 

 

 

 

 

 

 

 

 

1,284

 

Totals

 

$

292,565

 

 

$

8,164

 

 

$

1,807

 

 

$

302,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on Level 3 investments held as of September 30, 2016

 

$

(1,750

)

 

$

(474

)

 

$

105

 

 

$

(2,119

)

Realized gains and losses are included as a component of net realized gains (losses) in the condensed consolidated statements of operations.

During the three months ended September 30, 2017, the Company recognized net realized gains from the sale of investments of $1.0 million, consisting entirely of realized gains from the sale of 60,000 shares of Nutanix, Inc., a publicly traded company. During the same period, the Company elected to exercise its option to redeem, in full, its 6.75% Notes due 2020 (the "2020 Notes") at par plus accrued and unpaid interest which resulted in a realized loss on debt extinguishment of approximately $1.1 million.  

During the nine months ended September 30, 2017, the Company recognized net realized losses from the sale of investments of approximately $2.4 million, consisting of gross realized gains of $1.0 million from the sale of equity in one portfolio company, offset by gross realized losses of $3.4 million, of which $2.8 million consisted of warrant and equity losses related to the acquisition of four portfolio companies and $0.6 million related to the reversal of accrued loan modification fees in connection with the pay-off of one portfolio company. During the same period, the Company recognized a realized loss on debt extinguishment of approximately $1.1 million in relation to the acceleration of unamortized fees on its 2020 Notes redemption.  

During the three months ended September 30, 2016, the Company had realized gains of approximately $1.1 million primarily due to warrant and equity gains related to the acquisition of two portfolio companies.

During the nine months ended September 30, 2016, there were net realized losses of approximately $20.9 million, which consisted of realized losses of $20.4 million from two portfolio companies, and net realized losses of $0.8 million on warrants from nine portfolio companies, which were offset by realized gains of $0.3 million on equity from one portfolio company.

Unrealized gains and losses are included in net change in unrealized gains (losses) on investments in the condensed consolidated statements of operations. 

The change in net unrealized gains (losses) for Level 3 investments in debt, equity and warrants are summarized in the tables above. In addition to the unrealized gains and losses for Level 3 investments, during the three and nine months ended September 30, 2017, there were changes in unrealized gains of approximately $12 thousand and $0, respectively, on U.S. Treasury bills. For the three and nine months ended September 30, 2016, there were changes in unrealized losses of approximately $3 thousand and unrealized losses of approximately $5 thousand, respectively, on U.S. Treasury bills.

For the three and nine months ended September 30, 2017, the Company recognized approximately $0.1 million and $1.3 million, respectively, in other income consisting of approximately $0 million and $0.4 million, respectively, from the termination or expiration of unfunded commitments and approximately $0.1 million and $0.9 million, respectively from amortization of certain fees paid by portfolio companies and other income.

For the three and nine months ended September 30, 2016, the Company recognized approximately $1.3 million and $1.8 million, respectively, in other income consisting of $1.1 million and $1.6 million, respectively, from the termination or expiration of unfunded commitments and approximately $0.2 million in each period, from amortization of certain fees paid by companies and other income.

The following tables provide a summary of quantitative information about the Level 3 fair value measurements of investments as of September 30, 2017 and December 31, 2016. In addition to the techniques and inputs noted in the tables below, the Company may also use other valuation techniques and methodologies when determining fair value measurements. The tables below are not intended to be all inclusive, but rather provide information on significant Level 3 inputs as they relate to the fair value measurements of investments.

 

 

23


Level 3 Investments

 

As of September 30, 2017

 

(dollars in thousands)

 

Fair Value

 

 

Valuation Technique

 

Unobservable Inputs

 

Range (Weighted Average)

 

Debt investments

 

$

287,752

 

 

Discounted Cash Flows

 

Discount Rate

 

2.50% - 34.35% (14.30%)

 

 

 

 

4,931

 

 

Discounted Expected Recovery

 

Expected Recovery Rate

 

94.00%

 

Warrants

 

 

7,756

 

 

Black Scholes Option Pricing Model

 

Revenue Multiples

 

0.90x – 8.00x (4.11x)

 

 

 

 

 

 

 

 

 

Volatility

 

27.80% - 75.00% (53.30%)

 

 

 

 

 

 

 

 

 

Term

 

0.25– 7.00 Years (3.19  Years)

 

 

 

 

 

 

 

 

 

Discount for Lack of Marketability

 

0.00% - 32.70% (14.30%)

 

 

 

 

 

 

 

 

 

Risk Free Rate

 

1.03% - 2.16% (1.63%)

 

 

 

 

2,584

 

 

Option-Pricing Method and Probability-Weighted Expected Return Method

 

Weighted Average Cost of Capital

 

25.00% – 30.00% (25.30%)

 

 

 

 

 

 

 

 

 

Term

 

1.25 – 1.25 Years (1.25 Years)

 

 

 

 

401

 

 

Discounted Expected Return

 

Discount Rate

 

17.25%

 

 

 

 

 

 

 

 

 

Term

 

3.50 Years

 

 

 

 

 

 

 

 

 

Probability of non-payment

 

25.00%

 

Equity investments

 

 

1,474

 

 

Black Scholes Option Pricing Model

 

Revenue Multiples

 

1.80x – 6.00x (3.88x)

 

 

 

 

 

 

 

 

 

Volatility

 

27.80% - 60.00% (41.50%)

 

 

 

 

 

 

 

 

 

Term

 

1.25– 2.50 Years (1.86  Years)

 

 

 

 

 

 

 

 

 

Discount for Lack of Marketability

 

0.00% - 23.70% (16.1%)

 

 

 

 

 

 

 

 

 

Risk Free Rate

 

1.39% - 1.55% (1.52%)

 

 

 

 

3,692

 

 

Last Equity Financing

 

Price per share

 

$2.77 - $31.25

 

Total investments

 

$

308,590

 

 

 

 

 

 

 

 

 

 

 

Level 3 Investments

 

As of December 31, 2016

(dollars in thousands)

 

Fair Value

 

 

Valuation Technique

 

Unobservable Inputs

 

Range (Weighted Average)

Debt investments

 

$

355,230

 

 

Discounted Cash Flows

 

Discount Rate

 

2.50% - 25.00% (14.32%)

 

 

 

4,777

 

 

Discounted Expected Recovery

 

N/A

 

N/A

Warrants

 

 

6,089

 

 

Black Scholes Option Pricing Model

 

Share Price and Equity Value

 

N/A

 

 

 

 

 

 

 

 

Revenue Multiples

 

0.34x – 8.00x (3.43x)

 

 

 

 

 

 

 

 

Volatility

 

40.00% - 70.00% (53.30%)

 

 

 

 

 

 

 

 

Term

 

1.00– 7.00 Years (2.98  Years)

 

 

 

 

 

 

 

 

Discount for Lack of Marketability

 

0.00% - 32.70% (14.10%)

 

 

 

2,149

 

 

Option-Pricing Method and Probability-Weighted Expected Return Method

 

Weighted Average Cost of Capital

 

25.00% – 30.00% (25.40%)

 

 

 

 

 

 

 

 

Term

 

1.25 – 2.25 Years (1.33 Years)

Equity investments

 

 

1,636

 

 

Black Scholes Option Pricing Model

 

Share Price and Equity Value

 

N/A

 

 

 

 

 

 

 

 

Revenue Multiples

 

1.50x – 6.00x (3.57x)

 

 

 

 

 

 

 

 

Volatility

 

45.00% - 60.00% (51.70%)

 

 

 

 

 

 

 

 

Term

 

1.00– 2.50 Years (1.55  Years)

 

 

 

 

 

 

 

 

Discount for Lack of Marketability

 

0.00% - 23.70% (12.90%)

Total investments

 

$

369,881

 

 

 

 

 

 

 

 

As of September 30, 2017 and December 31, 2016, the fair values for all of the Company’s debt investments, other than KnCMiner AB, were estimated using discounted cash flow models based on anticipated cash flows and a discount rate deemed most appropriate for each investment given the facts and circumstances specific to each portfolio company and market yields at the reporting date. The fair values for the Company’s debt investments in KnCMiner AB include risk and time discounted expected recoveries as well as preferred shares received from GoGreen Light AB, which acquired certain assets from KnCMiner AB. Such preferred shares entitle the Company to receive annual cash distributions based on a percentage of the net income of GoGreen Light AB.

As of September 30, 2017 and December 31, 2016, fair values for all but 3 warrant positions were estimated using an Option-Pricing Method that values individual equity classes based on their economic rights and preferences using the Black Scholes Option-Pricing Model. Two warrant positions were valued using a combination of the Option-Pricing Method and the Probability-Weighted Expected Return Method given the outlook for those portfolio companies. Certain investments within the portfolio contain fee conditions which may result in cash proceeds to the Company upon a qualifying liquidity event. These fees were valued using a discounted expected return method. As of September 30, 2017, all but 6 equity investments were valued using the market approach. The fair market value for 6 investments as of September 30, 2017 was derived based on the last equity financing round. As of December 31, 2016, all the equity investments were valued using the market approach.

 

The range of the various assumptions and weighted averages of these assumptions are summarized in the tables above.

As of September 30, 2017 and December 31, 2016, approximately $289.3 million and $363.0 million, respectively, of the Company’s assets were pledged for borrowings under its revolving credit facility.

Note 5. Credit Risk

Debt investments may be affected by business, financial market or legal uncertainties. Prices of investments may be volatile, and a variety of factors that are inherently difficult to predict, such as domestic, economic and political developments, may significantly affect the value of these investments. In addition, the value of these investments may fluctuate as the general level of interest rates fluctuate.

 

24


In many instances, the portfolio company’s ability to repay the debt investments is dependent on additional funding by its venture capital investors, a future sale or an initial public offering. The value of these investments may be detrimentally affected to the extent a borrower defaults on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted loan.

Note 6. Borrowings

Revolving Credit Facility

In February 2014, the Company, along with its Financing Subsidiary as borrower, entered into a credit agreement with Deutsche Bank AG, acting as administrative agent and a lender, and KeyBank National Association, Everbank Commercial Lender Finance, Inc., and AloStar Bank of Commerce, as other lenders, which provided the Company with a $150.0 million commitment, subject to borrowing base requirements (the “Revolving Credit Facility”). In August 2014, the Company amended the Revolving Credit Facility to increase the total commitments available thereunder to $200.0 million in aggregate.

Pursuant to an amendment to the Revolving Credit Facility, effective as of January 2016, borrowings under the Revolving Credit Facility bear interest at the sum of (i) a floating rate based on certain indices, including LIBOR and commercial paper rates, plus (ii) a margin of 3.0% during the revolving period and 4.5% during the amortization period. Borrowings under the Revolving Credit Facility are secured only by the assets of the Financing Subsidiary. The Company agreed to pay Deutsche Bank AG a syndication fee in 12 monthly installments, of approximately 1% of the committed facility amount. The Company also agreed to pay to Deutsche Bank AG a fee to act as administrative agent under the Revolving Credit Facility and to pay each lender (i) a commitment fee of 0.65% multiplied by such lender’s commitment on the effective date payable in 12 equal monthly installments and (ii) a fee of approximately 0.75% per annum for any unused borrowings under the Revolving Credit Facility on a monthly basis. The Revolving Credit Facility contains affirmative and restrictive covenants, including but not limited to an advance rate limitation of approximately 55% of the applicable net loan balance of assets held by the Financing Subsidiary, maintenance of minimum net worth at an agreed level, a ratio of total assets to total indebtedness of not less than approximately 2:1, a key man clause relating to the Company’s Chief Executive Officer, Mr. James P. Labe, and the Company’s President and Chief Investment Officer, Mr. Sajal K. Srivastava, and eligibility requirements, including but not limited to geographic and industry concentration limitations and certain loan grade classifications. Furthermore, events of default under the Revolving Credit Facility include, among other things, (i) a payment default; (ii) a change of control; (iii) bankruptcy; (iv) a covenant default; and, (v) the Company’s failure to maintain compliance with RIC provisions at all times. The revolving period of the Revolving Credit Facility ends on February 21, 2018 and the maturity date of the Revolving Credit Facility is February 21, 2019. As of September 30, 2017 and December 31, 2016, the Company was in compliance with all covenants under the Revolving Credit Facility.

At September 30, 2017 and December 31, 2016, the Company had outstanding borrowings under the Revolving Credit Facility of $25.5 million and $115.0 million, respectively, which is included in the Company’s condensed consolidated statements of assets and liabilities. The book value of the Revolving Credit Facility approximates fair value due to the relatively short maturity, cash repayments and market interest rates of the instrument. The fair value of the Revolving Credit Facility would be categorized as Level 3 of the fair value hierarchy if determined as of the reporting date.

Interest expense includes the interest cost charged on borrowings, the unused fee on the Revolving Credit Facility, third party administrative fees, and the amortization of deferred Revolving Credit Facility fees and expenses. These expenses are summarized in the table below. 

 

25


 

Interest Expense and Amortization of Fees

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revolving Credit Facility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost charged on borrowings

 

$

217

 

 

$

506

 

 

$

1,822

 

 

$

983

 

Unused fee

 

 

345

 

 

 

275

 

 

 

787

 

 

 

930

 

Amortization of costs and other fees

 

 

235

 

 

 

234

 

 

 

698

 

 

 

758

 

Revolving Credit Facility Total

 

$

797

 

 

$

1,015

 

 

$

3,307

 

 

$

2,671

 

2020 Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost

 

$

430

 

 

$

922

 

 

$

2,274

 

 

$

2,765

 

Amortization of costs and other fees

 

 

47

 

 

 

99

 

 

 

248

 

 

 

297

 

2020 Notes Total

 

$

477

 

 

$

1,021

 

 

$

2,522

 

 

$

3,062

 

2022 Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost

 

$

919

 

 

$

 

 

$

919

 

 

$

 

Amortization of costs and other fees

 

 

113

 

 

 

 

 

 

113

 

 

 

 

2022 Notes Total

 

$

1,032

 

 

$

 

 

$

1,032

 

 

$

 

Total interest expense and amortization of fees

 

$

2,306

 

 

$

2,036

 

 

$

6,861

 

 

$

5,733

 

During the three and nine months ended September 30, 2017, the Company had average outstanding borrowings under the Revolving Credit Facility of $20.1 million and $61.4 million, respectively, at a weighted average interest of 4.22% and 3.89%, respectively. During the three and nine months ended September 30, 2016, the Company had average outstanding borrowings under the Revolving Credit Facility of $56.7 million and $37.1 million, respectively, at a weighted average interest of 3.49% and 3.48%, respectively.

2020 Notes

On August 4, 2015, the Company completed a public offering of $50.0 million in aggregate principal amount of its 2020 Notes and received net proceeds of approximately $48.3 million after the payment of fees and offering costs. On September 2, 2015, the Company issued an additional $4.6 million in aggregate principal amount of its 2020 Notes and received net proceeds of approximately $4.5 million after the payment of fees and offering costs as a result of the underwriters’ partial exercise of their option to purchase additional 2020 Notes. The 2020 Notes are disclosed under “2020 Notes” in the condensed consolidated statements of assets and liabilities, net of unamortized issuance costs. The interest expense, including amortization of debt issuance costs are summarized in the table above. The interest on the 2020 Notes was payable quarterly on January 15, April 15, July 15 and October 15, beginning on October 15, 2015. Until August 15, 2017, the 2020 Notes were listed on the New York Stock Exchange (“NYSE”) under the symbol “TPVZ”. The 2020 Notes were issued in integral principal amount multiples ("units") of $25.  

On July 14, 2017, the Company elected to exercise its option to redeem, in full, the 2020 Notes and on August 13, 2017 (the “Redemption Date”). The 2020 Notes were redeemed at par plus accrued and unpaid interest which resulted in a realized loss on debt extinguishment of approximately $1.1 million.  As of the Redemption Date, the outstanding 2020 Notes had an aggregate principal amount of $54.6 million and accrued but unpaid interest of approximately $0.3 million. The 2020 Notes were delisted on the NYSE effective as of August 15, 2017.

At  December 31, 2016, the 2020 Notes had a market price of $25.50 per unit, resulting in an aggregate fair value of approximately $55.7 million. The 2020 Notes are recorded at amortized cost in the condensed consolidated statements of assets and liabilities. Amortized cost includes approximately $1.3 million at December 31, 2016, of deferred issuance cost which is amortized and expensed over the five year term of the 2020 Notes based on an effective yield method.

2022 Notes

On July 14, 2017, the Company completed a public offering of $65.0 million in aggregate principal amount of its 5.75% notes due 2022 (the “2022 Notes”) and received net proceeds of approximately $62.8 million after the payment of fees and offering costs. On July 24, 2017, as a result of the underwriters’ full exercise of their option to purchase additional 2022 Notes, the Company issued an additional $9.75 million in aggregate principal amount of the 2022 Notes and received net proceeds of approximately $9.5 million after the payment of fees and offering costs. The interest on the 2022 Notes is payable quarterly on January 15, April 15, July 15 and October 15, beginning October 15, 2017. The 2022 Notes are listed on the NYSE under the symbol “TPVY”.  The 2022 Notes were issued in integral principal amount multiples ("units") of $25. The Company used a portion of the net proceeds from the offering of the 2022 Notes to redeem all of the outstanding 2020 Notes.

 

26


At September 30, 2017, the 2022 Notes had a market price of $25.28 per unit, resulting in an aggregate fair value of approximately $75.6 million. The 2022 Notes are recorded at amortized cost in the condensed consolidated statements of assets and liabilities. Amortized cost includes approximately $2.5 million of deferred issuance cost at September 30, 2017, which is amortized and expensed over the five year term of the 2022 Notes based on an effective yield method.

The following tables provide additional information about the fair value hierarchy of the Company’s liabilities at September 30, 2017 and December 31, 2016.

 

Liability

 

As of September 30, 2017

 

(dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Revolving Credit Facility

 

$

 

 

$

 

 

$

25,500

 

 

$

25,500

 

2022 Notes, net *

 

 

 

 

 

73,139

 

 

 

 

 

 

73,139

 

Total

 

$

 

 

$

73,139

 

 

$

25,500

 

 

$

98,639

 

_______________

*

Net of approximately $2.5 million of deferred issuance cost

 

Liability

 

As of December 31, 2016

 

(dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Revolving Credit Facility

 

$

 

 

$

 

 

$

115,000

 

 

$

115,000

 

2020 Notes, net *

 

 

 

 

 

54,381

 

 

 

 

 

 

54,381

 

Total

 

$

 

 

$

54,381

 

 

$

115,000

 

 

$

169,381

 

_______________

*

Net of approximately $1.3 million of deferred issuance cost.

Other Payables

On September 29, 2017, the Company purchased $95.0 million in face value of U.S. Treasury bills for settlement on October 3, 2017. On December 30, 2016, the Company purchased $40.0 million of U.S. Treasury bills for settlement on January 4, 2017. The associated payable was included in the Company’s condensed consolidated statements of assets and liabilities as of September 30, 2017 and December 31, 2016.

Note 7. Commitments and Contingencies

Commitments

As of September 30, 2017 and December 31, 2016, the Company’s unfunded commitments totaled approximately $158.2 million to 11 portfolio companies and approximately $117.4 million to nine portfolio companies, respectively, of which $50.0 million and $60.0 million, respectively, was dependent upon the portfolio companies reaching certain milestones before the debt commitment becomes available to them. Of the approximately $158.2 million of unfunded commitments as of September 30, 2017, approximately $31.0 million will expire in 2017, $97.2 million will expire during 2018, and $30.0 million will expire during 2019, if not drawn prior to expiration.

The Company’s credit agreements contain customary lending provisions that allow it relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. The Company generally expects more than 75% of its gross unfunded commitments to eventually be drawn before the expiration of their corresponding availability periods.

 

27


The tables below provide the Company’s unfunded commitments by portfolio company as of September 30, 2017 and December 31, 2016.

 

 

 

As of September 30, 2017

 

Unfunded Commitments for Growth Capital Loans (unless otherwise noted)*

(dollars in thousands)

 

Principal Balance

 

 

Fair Value of Unfunded Commitment Liability

 

Blue Bottle Coffee, Inc.

 

$

20,000

 

 

$

40

 

BlueVine Capital, Inc.

 

 

10,000

 

 

 

170

 

Eero, Inc.

 

 

5,000

 

 

 

 

MapR Technologies, Inc. (Equipment Lease)

 

 

2,956

 

 

 

8

 

Outfittery GMBH

 

 

2,376

 

 

 

148

 

PillPack, Inc.

 

 

30,000

 

 

 

200

 

Rent the Runway, Inc.

 

 

18,000

 

 

 

329

 

Ring, Inc.

 

 

30,000

 

 

 

 

Stance, Inc.

 

 

15,000

 

 

 

166

 

Varsity Tutors LLC

 

 

15,000

 

 

 

159

 

View, Inc. (Equipment Loan)

 

 

9,865

 

 

 

197

 

Total

 

$

158,197

 

 

$

1,417

 

______________

*Does not include $27.4 million backlog of potential future commitments. Refer to the “Backlog of Potential Future Commitments” below. 

 

 

As of December 31, 2016

 

Unfunded Commitments for Growth Capital Loans (unless otherwise noted)*

(dollars in thousands)

 

Principal Balance

 

 

Fair Value of Unfunded Commitment Liability

 

CrowdStrike, Inc.

 

$

5,000

 

 

$

81

 

Eero, Inc.

 

 

15,000

 

 

 

130

 

Farfetch UK Limited

 

 

5,000

 

 

 

53

 

FinancialForce.com, Inc.

 

 

15,000

 

 

 

94

 

Green Chef Corporation

 

 

10,000

 

 

 

173

 

MapR Technologies, Inc. (Equipment Lease)

 

 

4,352

 

 

 

12

 

Optoro, Inc.

 

 

25,000

 

 

 

40

 

Rent the Runway, Inc.

 

 

28,000

 

 

 

511

 

WorldRemit Ltd.

 

 

10,000

 

 

 

124

 

Total

 

$

117,352

 

 

$

1,218

 

______________

*Does not include $40.0 million backlog of potential future commitments. Refer to the “Backlog of Potential Future Commitments” below. 

The tables above also provide the fair value of the Company’s unfunded commitment liability totaling approximately $1.4 million and $1.2 million as of September 30, 2017 and December 31, 2016, respectively. The fair value at the inception of the delay draw credit agreements is equal to the fees and warrants received to enter into these agreements, taking into account the remaining terms of the agreements and the counterparties’ credit profile. The unfunded commitment liability reflects the fair value of these future funding commitments and is included in “Other accrued expenses and liabilities” in the Company’s condensed consolidated statements of assets and liabilities.

These liabilities are considered Level 3 liabilities under ASC Topic 820 as there is no known or accessible market or market indices for these types of financial instruments. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. The below table provides additional details regarding the Company’s unfunded commitments activity during the three and nine months ended September 30, 2017 and 2016.

 

 

28


 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

Commitments Activity (dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Activity during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New commitments *

 

 

121,879

 

 

 

69,000

 

 

 

264,879

 

 

 

194,000

 

Fundings

 

 

(82,790

)

 

 

(15,000

)

 

 

(151,658

)

 

 

(93,805

)

Expirations / Terminations

 

 

 

 

 

(83,000

)

 

 

(85,000

)

 

 

(154,656

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unfunded commitments at beginning of period

 

$

146,484

 

 

$

164,500

 

 

$

117,352

 

**

$

189,961

 

Unfunded commitments at end of period **

 

$

158,197

 

 

$

115,500

 

 

$

158,197

 

 

$

115,500

 

Backlog of potential future commitments

 

$

27,376

 

 

$

20,000

 

 

$

67,374

 

 

$

20,000

 

______________

* Includes backlog of potential future commitments. Refer to the “Backlog of Potential Future Commitments” below. 

**Does not include backlog of potential future commitments. Refer to the “Backlog of Potential Future Commitments” below.

The following table provides additional information on the Company’s unfunded commitments regarding milestones, expirations, and types of loans.

 

Unfunded Commitments*

(dollars in thousands)

 

As of September 30, 2017

 

 

As of December 31, 2016

 

Dependent on milestones

 

$

50,000

 

 

$

60,000

 

Expiring during:

 

 

 

 

 

 

 

 

2017

 

 

30,956

 

 

 

102,352

 

2018

 

 

97,241

 

 

 

10,000

 

2019

 

 

30,000

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Growth capital loans

 

 

145,376

 

 

 

113,000

 

Equipment leases and loans

 

 

12,821

 

 

 

4,352

 

______________

*Does not include backlog of potential future commitments. Refer to the “Backlog of Potential Future Commitments” below. 

 

Backlog of Potential Future Commitments

 

The Company may enter into commitments with certain of its portfolio companies which permit an increase in the commitment amount in the future in the event that conditions to such increases are met.  If such conditions to increase the Company’s commitments are met, these amounts may become unfunded commitments if not drawn prior to expiration. As of September 30, 2017 and December 31, 2016, this backlog of potential future commitments totaled $27.4 million and $40.0 million, respectively.

 

29


Note 8. Financial Highlights

The financial highlights presented below are for the three and nine months ended September 30, 2017 and 2016.

 

Financial Highlights

 

For the Three Months Ended September 30, or as of September 30,

 

 

For the Nine Months Ended September 30, or as of September 30,

 

(dollars in thousands, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Per Share Data (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

13.52

 

 

$

13.05

 

 

$

13.51

 

 

$

14.21

 

Changes in net asset value due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

 

 

 

 

0.04

 

 

 

 

 

 

0.07

 

Dividend reinvestment plan

 

 

 

 

 

 

 

 

 

 

 

(0.03

)

Net investment income

 

 

0.27

 

 

 

0.40

 

 

 

1.32

 

 

 

1.12

 

Net realized gains (losses) on investments

 

 

0.07

 

 

 

0.07

 

 

 

(0.15

)

 

 

(1.29

)

Net change in unrealized gains (losses) on investments

 

 

(0.04

)

 

 

0.24

 

 

 

(0.14

)

 

 

0.44

 

Net realized loss on extinguishment of debt

 

 

(0.07

)

 

 

 

 

 

(0.07

)

 

 

 

Distributions

 

 

(0.36

)

 

 

(0.36

)

 

 

(1.08

)

 

 

(1.08

)

Net asset value at end of period

 

$

13.39

 

 

$

13.44

 

 

$

13.39

 

 

$

13.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income per share

 

$

0.27

 

 

$

0.40

 

 

$

1.32

 

 

$

1.12

 

Net increase (decrease) in net assets resulting from operations per share

 

$

0.23

 

 

$

0.71

 

 

$

0.96

 

 

$

0.26

 

Weighted average shares of common stock outstanding for period

 

 

16,023

 

 

 

16,091

 

 

 

16,001

 

 

 

16,227

 

Shares of common stock outstanding at end of period

 

 

16,043

 

 

 

15,958

 

 

 

16,043

 

 

 

15,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios / Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

216,533

 

 

$

211,807

 

 

$

215,863

 

 

$

231,646

 

Net asset value at end of period

 

$

214,759

 

 

$

214,392

 

 

$

214,759

 

 

$

214,392

 

Average net asset value

 

$

215,730

 

 

$

210,740

 

 

$

215,763

 

 

$

220,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return based on net asset value per share (2)

 

 

1.9

%

 

 

6.6

%

 

 

7.7

%

 

 

5.1

%

Net asset value per share at beginning of period

 

$

13.52

 

 

$

13.05

 

 

$

13.51

 

 

$

14.21

 

Distributions per share during period

 

$

0.36

 

 

$

0.36

 

 

$

1.08

 

 

$

1.08

 

Net asset value per share at end of period

 

$

13.39

 

 

$

13.44

 

 

$

13.39

 

 

$

13.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return based on stock price (3)

 

 

3.6

%

 

 

3.6

%

 

 

23.6

%

 

 

(1.5

)%

Stock price at beginning of period

 

$

13.31

 

 

$

10.59

 

 

$

11.78

 

 

$

11.96

 

Distributions per share during period

 

$

0.36

 

 

$

0.36

 

 

$

1.08

 

 

$

1.08

 

Stock price at end of period

 

$

13.40

 

 

$

10.60

 

 

$

13.40

 

 

$

10.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income to average net asset value (4)

 

 

8.0

%

 

 

12.3

%

 

 

13.1

%

 

 

11.0

%

Net increase (decrease) in net assets to average net asset value (4)

 

 

6.8

%

 

 

21.6

%

 

 

9.5

%

 

 

2.5

%

Ratio of expenses to average net asset value (4) (5)

 

 

11.1

%

 

 

11.3

%

 

 

12.0

%

 

 

9.0

%

 

(1)

All per share activity is calculated based on the weighted average shares outstanding for the relevant period, except net increase (decrease) in net assets from capital share transactions, which is based on the common shares outstanding as of the relevant balance sheet date.

(2)

Total return based on NAV is the change in ending NAV per share plus distributions per share paid during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning NAV per share.

(3)

Total return based on stock price is the change in the ending stock price of the Company’s common stock plus distributions paid during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning stock price of the Company’s common stock. The total return is for the period shown and is not annualized.

(4)

Percentage is presented on an annualized basis.

(5)

Additional financial ratios are provided below:  

 

Ratios

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(Percentages, on an annualized basis)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating expenses excluding incentive fees to average net asset value

 

 

9.2

%

 

 

8.4

%

 

 

9.2

%

 

 

8.0

%

Income component of incentive fees to average net asset value

 

 

2.0

%

 

 

3.0

%

 

 

2.8

%

 

 

1.0

%

Capital gains component of incentive fees to average net asset value

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

The weighted average portfolio yield on debt investments presented below is for the three and nine months ended September 30, 2017 and 2016.

 

 

30


Ratios

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(Percentages, on an annualized basis) (1)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Weighted average portfolio yield on debt investments

 

 

15.4

%

 

 

15.1

%

 

 

17.4

%

 

 

14.7

%

Coupon income

 

 

10.4

%

 

 

10.5

%

 

 

10.4

%

 

 

10.5

%

Accretion of discount

 

 

0.9

%

 

 

0.8

%

 

 

0.7

%

 

 

0.7

%

Accretion of end-of-term payments

 

 

2.2

%

 

 

2.4

%

 

 

1.9

%

 

 

2.6

%

Impact of prepayments during the period

 

 

1.9

%

 

 

1.4

%

 

 

4.4

%

 

 

0.9

%

_______________

(1)    Weighted average portfolio yields on debt investments for periods shown are the annualized rates of interest income recognized during the period divided by the average amortized cost of debt investments in the portfolio at the beginning of each month in the period.

Note 9. Net Increase in Net Assets per Share

The following information sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016.

 

Basic and Diluted Share Information

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net investment income

 

$

4,367

 

 

$

6,495

 

 

$

21,117

 

 

$

18,181

 

Net increase in net assets resulting from operations

 

$

3,679

 

 

$

11,435

 

 

$

15,377

 

 

$

4,181

 

Basic and diluted weighted average shares of common stock outstanding

 

 

16,023

 

 

 

16,091

 

 

 

16,001

 

 

 

16,227

 

Basic and diluted net investment income per share of common stock

 

$

0.27

 

 

$

0.40

 

 

$

1.32

 

 

$

1.12

 

Basic and diluted net increase in net assets resulting from operations per share of common stock

 

$

0.23

 

 

$

0.71

 

 

$

0.96

 

 

$

0.26

 

Note 10. Equity

Since inception through September 30, 2017, the Company has issued 16,494,683 shares of common stock through an initial public offering, a concurrent private placement offering and a follow-on offering. The Company received net proceeds from these offerings of approximately $237.5 million, net of the portion of the underwriting sales load and offering costs paid by the Company.

The Company has adopted a dividend reinvestment plan for its stockholders, which is an “opt out” dividend reinvestment plan. Under this plan, if the Company declares a cash distribution to stockholders, the amount of such distribution is automatically reinvested in additional shares of common stock unless a stockholder specifically “opts out” of the dividend reinvestment plan. If a stockholder opts out, that stockholder receives cash distributions.

Information on the proceeds raised along with any related underwriting sales load and associated offering expenses, and the price at which common stock was issued by the Company, during the nine months ended September 30, 2017 and year ended December 31, 2016 is provided in the following tables.

 

Issuance of Common Stock for the Nine Months Ended September 30, 2017 (dollars in thousands, except per share data)

 

Date

 

Number of Shares of Common Stock Issued

 

 

Gross Proceeds Raised

 

 

Underwriting Sales Load

 

 

Offering Expenses

 

 

Gross Offering Price

First quarter 2017 distribution reinvestment

 

4/17/2017

 

 

21

 

 

 

271

 

 

 

 

 

 

 

 

$13.21 per share

Second quarter 2017 distribution reinvestment

 

6/16/2017

 

 

17

 

 

 

214

 

 

 

 

 

 

 

 

$12.73 per share

Third quarter 2017 distribution reinvestment

 

9/15/2017

 

 

25

 

 

 

314

 

 

 

 

 

 

 

 

$12.43 per share

Total issuance

 

 

 

 

63

 

 

$

799

 

 

$

 

 

$

 

 

 

 

Issuance of Common Stock for the Year Ended December 31, 2016 (dollars in thousands, except per share data)

 

Date

 

Number of Shares of Common Stock Issued

 

 

Gross Proceeds Raised

 

 

Underwriting Sales Load

 

 

Offering Expenses

 

 

Gross Offering Price

First quarter 2016 distribution reinvestment

 

4/15/2016

 

 

46

 

 

 

452

 

 

 

 

 

 

 

 

$9.80 per share

Second quarter 2016 distribution reinvestment

 

6/16/2016

 

 

69

 

 

 

691

 

 

 

 

 

 

 

 

$10.03 per share

Third quarter 2016 distribution reinvestment

 

9/16/2016

 

 

27

 

 

 

273

 

 

 

 

 

 

 

 

$10.29 per share

Fourth quarter 2016 distribution reinvestment

 

12/16/2016

 

 

23

 

 

 

271

 

 

 

 

 

 

 

 

$11.68 per share

Total issuance

 

 

 

 

165

 

 

$

1,687

 

 

$

 

 

$

 

 

 

During the fourth quarter of 2015, the Board authorized the repurchase of up to $25 million of its common stock at prices below the Company’s NAV per share as reported in its most recent financial statements. This repurchase program expired on October 31, 2017. There was no repurchase of common stock during the nine months ended September 30, 2017. The Company repurchased 485,986 shares of common stock for approximately $5.4 million during the year ended December 31, 2016.

 

 

31


Shares Repurchased for the Year Ended December 31, 2016 (dollars in thousands, except per share data)

 

Date

 

Number of Shares Repurchased

 

 

Approximate Dollar Value of Shares Repurchased

 

 

Average Price per Share

Shares Repurchased

 

5/12/2016 to 6/16/2016

 

 

190

 

 

$

2,002

 

 

$ 10.52 per share

Shares Repurchased

 

8/11/2016 to 8/29/2016

 

 

296

 

 

$

3,374

 

 

$ 11.41 per share

Total Shares Repurchased

 

 

 

 

486

 

 

$

5,376

 

 

 

The Company had 16,043,322 and 15,980,768 shares of common stock outstanding as of September 30, 2017 and December 31, 2016, respectively.

Note 11. Distributions

The Company has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a RIC under the Code, beginning with the Company’s taxable year ended December 31, 2014. In order to maintain its ability to be subject to tax as a RIC, among other things, the Company is required to distribute at least 90% of its net ordinary income and net realized short-term capital gains in excess of its net realized long-term capital losses, if any, to its stockholders. Additionally, to avoid a nondeductible 4% U.S. federal excise tax on certain of the Company’s undistributed income, the Company must distribute during each calendar year an amount at least equal to the sum of: (a) 98% of the Company’s ordinary income (not taking into account any capital gains or losses) for such calendar year; (b) 98.2% of the amount by which the Company’s capital gains exceed the Company’s capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year (unless an election is made by the Company to use its taxable year); and (c) certain undistributed amounts from previous years on which the Company paid no U.S. federal income tax.

For the tax years ended December 31, 2014 and 2015, the Company was subject to a 4% U.S. federal excise tax and the Company may be subject to this tax in future years. In such cases, the Company is liable for the tax only on the amount by which the Company does not meet the foregoing distribution requirement. The character of income and gains that the Company distributes is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.

The following table summarizes the Company’s cash distributions per share during the nine months ended September 30, 2017, and during the years ended December 31, 2016 and December 31, 2015.

Period Ended

 

Date Announced

 

Record Date

 

Payment Date

 

Per Share Amount

 

September 30, 2017

 

August 8, 2017

 

August 31, 2017

 

September 15, 2017

 

$

0.36

 

June 30, 2017

 

May 9, 2017

 

May 31, 2017

 

June 16, 2017

 

$

0.36

 

March 31, 2017

 

March 13, 2017

 

March 31, 2017

 

April 17, 2017

 

$

0.36

 

December 31, 2016

 

November 7, 2016

 

November 30, 2016

 

December 16, 2016

 

$

0.36

 

September 30, 2016

 

August 8, 2016

 

August 31, 2016

 

September 16, 2016

 

$

0.36

 

June 30, 2016

 

May 9, 2016

 

May 31, 2016

 

June 16, 2016

 

$

0.36

 

March 31, 2016

 

March 14, 2016

 

March 31, 2016

 

April 15, 2016

 

$

0.36

 

December 31, 2015

 

November 10, 2015

 

November 30, 2015

 

December 16, 2015

 

$

0.36

 

September 30, 2015

 

August 11, 2015

 

August 31, 2015

 

September 16, 2015

 

$

0.36

 

June 30, 2015

 

May 6, 2015

 

May 29, 2015

 

June 16, 2015

 

$

0.36

 

March 31, 2015

 

March 16, 2015

 

March 26, 2015

 

April 16, 2015

 

$

0.36

 

It is the Company’s intention to distribute all or substantially all of its taxable income earned over the course of the year; thus, no provision for income tax has been recorded in the Company’s condensed consolidated statements of operations during the three and nine months ended September 30, 2017 and 2016, respectively. For the year ended December 31, 2016, total distributions of $1.44 per share were declared and paid. Approximately $1.20 of the declared distribution represents a return of capital due to realized losses on debt investments. The remaining balance represents a distribution of ordinary income. Since March 5, 2014 (commencement of operations) to September 30, 2017, total distributions of $5.54 per share have been declared and paid.

 

32


Note 12. Subsequent Events

Distributions

On November 6, 2017, the Company announced that the Board declared a $0.36 per share distribution, payable on December 1, 2017, to stockholders of record on November 17, 2017.

Recent Portfolio Activity

From October 1, 2017 through November 6, 2017, the Company funded $35.5 million in new investments. TPC’s direct originations platform entered into $10.0 million of additional non-binding signed term sheets with venture growth stage companies, subject to due diligence, definitive documentation and investment committee approval, as well as compliance with TPC’s allocation policy.

Private Placement

On October 25, 2017, the Company sold in a private placement transaction: (i) 1,594,007 shares of the Company’s common stock at a price of $13.54 per share to certain investment funds managed by the Alternative Investments & Manager Selection Group of Goldman Sachs Asset Management, L.P. and (ii) 73,855 shares of the Company’s common stock at a price of $13.65 per share to certain of the Company’s executive officers, for total gross proceeds of approximately $22.6 million.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33


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

Forward-Looking Statements

The information contained in this section should be read in conjunction with our condensed consolidated financial statements and related notes and schedules thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise specified, references to “the Company”, “we”, “us”, and “our” refer to TriplePoint Venture Growth BDC Corp. and its subsidiaries.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about TriplePoint Venture Growth BDC Corp., our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q include statements as to:

 

our future operating results;

 

our business prospects and the prospects of our portfolio companies;

 

our relationships with third parties, including venture capital investors;

 

the impact and timing of our unfunded commitments;

 

the expected market for venture capital investments;

 

the performance of our existing portfolio and other investments we may make in the future;

 

the impact of investments that we expect to make;

 

actual and potential conflicts of interest with TriplePoint Capital LLC (“TPC”) and TPVG Advisers LLC’s (“Adviser”) and its senior investment team and Investment Committee;

 

our contractual arrangements and relationships with third parties;

 

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

the ability of our portfolio companies to achieve their objectives;

 

our expected financings and investments;

 

the ability of our Adviser to attract, retain and have access to highly talented professionals, including our Adviser’s senior management team;

 

our ability to qualify and maintain our qualification as a RIC and as a BDC;

 

the adequacy of our cash resources and working capital; and

 

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

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

 

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;  

 

a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

 

interest rate volatility could adversely affect our results, particularly when we elect to use leverage as part of our investment strategy;

 

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and

 

the risks, uncertainties and other factors we identify in “Risk Factors” in our Annual Report on Form 10-K under Part I, Item 1A and in this Quarterly Report on Form 10-Q.

 

34


Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described in “Risk Factors” in our Annual Report on Form 10-K under Part I, Item 1A. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

Overview

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. We have elected to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2014.

Our shares are currently listed on the New York Stock Exchange (the “NYSE”) under the symbol “TPVG”. Our 5.75% Notes due 2022 (the "2022 Notes") are currently listed on the NYSE under the symbol “TPVY”.

Our investment objective is to maximize our total return to stockholders primarily in the form of current income and, to a lesser extent, capital appreciation by primarily lending with warrants to venture growth stage companies focused in technology, life sciences and other high growth industries which are backed by TPC’s select group of leading venture capital investors.

We serve as the primary financing source for the venture growth stage business segment of TriplePoint Capital LLC’s global investment platform. TPC is widely recognized as a leading global financing provider devoted to serving venture capital-backed companies with creative, flexible and customized debt financing, equity capital and complementary services throughout their lifespan. TPC is located on Sand Hill Road in Silicon Valley and has a primary focus in technology, life sciences and other high growth industries.

We commenced investment activities on March 5, 2014. In order to expedite the ramp-up of our investment activities and further our ability to meet our investment objectives, on March 5, 2014, we acquired our initial portfolio. On March 11, 2014, we completed our initial public offering and received $141.6 million of net proceeds in connection with the initial public offering and concurrent private placement, net of the portion of the underwriting sales load and offering costs we paid. In 2015, we completed a follow-on public offering of our common stock raising approximately $95.9 million after offering costs.

Borrowings

In February 2014, we entered into a credit agreement with Deutsche Bank AG acting as administrative agent and a lender, and KeyBank National Association, Everbank Commercial Lender Finance, Inc., and AloStar Bank of Commerce, as other lenders, which provided us with a $150.0 million commitment, subject to borrowing base requirements (the “Revolving Credit Facility”). In August 2014, we amended the Revolving Credit Facility to increase the total commitments by $50.0 million to $200.0 million in aggregate. Effective as of a January 2016 amendment to the Credit Facility, borrowings under the Credit Facility bear interest at the sum of (i) a floating rate based on certain indices, including LIBOR and commercial paper rates, plus (ii) a margin of 3.0% during the Revolving Credit Facility’s revolving period. The revolving period under the amended Revolving Credit Facility expires on February 21, 2018 and the maturity date of the Revolving Credit Facility is February 21, 2019.

On August 4, 2015, we completed a public offering of $50.0 million in aggregate principal amount of our 6.75% Notes due 2020 (the “2020 Notes”) and received net proceeds of $48.3 million after the payment of fees and offering costs. On September 2, 2015, we issued an additional $4.6 million in aggregate principal amount of our 2020 Notes and received net proceeds of approximately $4.5 million, after the payment of the underwriting sales load and offering costs, as a result of the underwriters’ partial exercise of their option to purchase additional 2020 Notes. The interest on the 2020 Notes was payable quarterly on January 15, April 15, July 15 and October 15, beginning on October 15, 2015.

On July 14, 2017, we elected to exercise our option to redeem, in full, the 2020 Notes. On August 13, 2017, we redeemed all of the issued and outstanding 2020 Notes in an aggregate principal amount of $54.6 million and paid an aggregate accrued interest of approximately $0.3 million. The 2020 Notes have been delisted on the NYSE effective August 15, 2017.

On July 14, 2017, we completed a public offering of $65.0 million in aggregate principal amount of our newly issued 2022 Notes and received net proceeds of approximately $62.8 million, after the payment of fees and offering costs. On July 24, 2017, as a result of the underwriters’ full exercise of their option to purchase additional 2022 Notes, we issued an additional $9.75 million in aggregate principal amount of the 2022 Notes and received net proceeds of approximately $9.5 million, after the payment of fees and offering costs. The interest on the 2022 Notes is payable quarterly on January 15, April 15, July 15 and October 15, beginning October 15, 2017.  

 

35


Portfolio Composition, Investment Activity and Asset Quality

Portfolio Composition

We originate and invest primarily in venture growth stage companies. Companies at the venture growth stage have distinct characteristics differentiating them from venture capital-backed companies at other stages in their development lifecycle. We invest primarily in (i) growth capital loans that have a secured collateral position and that are used by venture growth stage companies to finance their continued expansion and growth, (ii) equipment financings, which may be structured as loans or leases, that have a secured collateral position on specified mission-critical equipment, (iii) on a select basis, revolving loans that have a secured collateral position and that are used by venture growth stage companies to advance against inventory, components, accounts receivable, contractual or future billings, bookings, revenues, sales or cash payments and collections including proceeds from a sale, financing or the equivalent and (iv) direct equity investments in venture growth stage companies. In connection with our growth capital loans, equipment financings and revolving loans, we generally receive warrants that allow us to participate in any equity appreciation of our borrowers and enhance our overall investment returns.

As of September 30, 2017, we held 97 investments in 41 companies and our four largest portfolio companies represented approximately 45.7% of our portfolio investments. Our investments included 53 debt investments, 32 warrant investments, and twelve direct equity and related investments. As of September 30, 2017, the total cost and fair value of these investments were approximately $309.2 million and approximately $311.1 million, respectively. As of September 30, 2017, one of our portfolio companies was publicly traded. As of September 30, 2017, the 53 debt investments with an aggregate fair value of approximately $292.7 million had a weighted average loan to enterprise value at the time of underwriting ratio of approximately 6.09%. Enterprise value of the portfolio company is estimated based on information available, including any information regarding the most recent rounds of capital raised by the portfolio company.

As of December 31, 2016, we held 99 investments in 33 companies and our four largest portfolio companies represented approximately 38% of our portfolio investments. Our investments included 63 debt investments, 29 warrant investments, and seven direct equity and related investments. As of December 31, 2016, the total cost and fair value of these investments were approximately $370.1 million and approximately $374.3 million, respectively. As of December 31, 2016, one of our portfolio companies was publicly traded. As of December 31, 2016, the 63 debt investments with an aggregate fair value of approximately $360.0 million had a weighted average loan to enterprise value at the time of underwriting ratio of approximately 8.6%. Enterprise value of the borrower is estimated based on information available, including any information regarding the most recent rounds of borrower funding.

The following tables provide information on the cost and fair value of our investments in companies along with the number of companies in our portfolio as of September 30, 2017 and December 31, 2016.

 

 

 

As of September 30, 2017

 

 

Investments by Type

(dollars in thousands)

 

Cost

 

 

Fair Value

 

 

Net Unrealized Gains (losses)

 

 

Number of

Investments

 

 

Number of

Companies

 

 

Debt investments

 

$

294,739

 

 

$

292,683

 

 

$

(2,056

)

 

 

53

 

 

 

19

 

 

Warrants

 

 

8,377

 

 

 

10,741

 

 

 

2,364

 

 

 

32

 

 

 

32

 

 

Equity investments

 

 

6,103

 

 

 

7,712

 

 

 

1,609

 

 

 

12

 

 

 

9

 

 

Total Investments in Portfolio Companies

 

$

309,219

 

 

$

311,136

 

 

$

1,917

 

 

 

97

 

 

 

41

 

*

 

 

 

As of December 31, 2016

 

 

Investments by Type

(dollars in thousands)

 

Cost

 

 

Fair Value

 

 

Net Unrealized Gains (losses)

 

 

Number of

Investments

 

 

Number of

Companies

 

 

Debt investments

 

$

359,059

 

 

$

360,007

 

 

$

948

 

 

 

63

 

 

19

 

 

Warrants

 

 

8,034

 

 

 

8,238

 

 

 

204

 

 

 

29

 

 

29

 

 

Equity investments

 

 

3,023

 

 

 

6,066

 

 

 

3,043

 

 

 

7

 

 

6

 

 

Total Investments in Portfolio Companies

 

$

370,116

 

 

$

374,311

 

 

$

4,195

 

 

 

99

 

 

 

33

 

*

_______________

*

Represents non-duplicative number of companies.

 

36


The following tables present the fair value of the portfolio of investments, by industry and the percentage of the total investment portfolio, as of September 30, 2017 and December 31, 2016.

 

 

 

As of September 30, 2017

 

 

Investments in Portfolio Companies by Industry

(dollars in thousands)‍

 

At Fair Value

 

 

Percentage of Total Investments

 

 

Business Applications Software

 

$

50,997

 

 

 

16.5

 

%

Financial Institution and Services

 

 

46,302

 

 

 

14.9

 

 

E-Commerce - Clothing and Accessories

 

 

42,260

 

 

 

13.6

 

 

Network Systems Management Software

 

 

31,163

 

 

 

10.0

 

 

Building Materials/Construction Machinery

 

 

30,478

 

 

 

9.8

 

 

Security Products

 

 

19,889

 

 

 

6.4

 

 

Wireless Communications Equipment

 

 

16,621

 

 

 

5.3

 

 

Security Services

 

 

14,238

 

 

 

4.6

 

 

Biofuels / Biomass

 

 

13,811

 

 

 

4.4

 

 

Database Software

 

 

11,751

 

 

 

3.8

 

 

Food & Beverage

 

 

10,135

 

 

 

3.3

 

 

Entertainment

 

 

7,608

 

 

 

2.4

 

 

Food & Drug

 

 

4,971

 

 

 

1.6

 

 

Restaurant / Food Service

 

 

2,636

 

 

 

0.8

 

 

Communications Software

 

 

2,000

 

 

 

0.6

 

 

E-Commerce - Personal Goods

 

 

1,715

 

 

 

0.6

 

 

General Media and Content

 

 

1,406

 

 

 

0.5

 

 

Household & Office Goods

 

 

1,000

 

 

 

0.3

 

 

Conferencing Equipment / Services

 

 

639

 

 

 

0.2

 

 

Software Development Tools

 

 

622

 

 

 

0.2

 

 

Travel and Leisure

 

 

256

 

 

 

0.1

 

 

Shopping Facilitators

 

 

250

 

 

 

0.1

 

 

Multimedia / Streaming Software

 

 

139

 

 

*

 

 

Advertising / Marketing

 

 

103

 

 

*

 

 

Medical Software and Information Services

 

 

74

 

 

*

 

 

Educational/Training Software

 

 

65

 

 

*

 

 

Business to Business Marketplace

 

 

7

 

 

*

 

 

Total portfolio company investments

 

$

311,136

 

 

 

100.0

 

%

  ______________

*

Amount represents less than 0.05% of the total portfolio investments.

 

 

37


 

 

As of December 31, 2016

 

 

Investments in Portfolio Companies by Industry

(dollars in thousands)

 

At Fair Value

 

 

Percentage of Total Investments

 

 

Database Software

 

$

50,888

 

 

 

13.6

 

%

Business Applications Software

 

 

48,065

 

 

 

12.8

 

 

E-Commerce - Clothing and Accessories

 

 

45,969

 

 

 

12.3

 

 

Conferencing Equipment / Services

 

 

40,524

 

 

 

10.8

 

 

Security Services

 

 

34,122

 

 

 

9.1

 

 

Wireless Communications Equipment

 

 

29,422

 

 

 

7.9

 

 

Network Systems Management Software

 

 

27,947

 

 

 

7.5

 

 

Financial Institution and Services

 

 

25,122

 

 

 

6.7

 

 

E-Commerce - Personal Goods

 

 

22,076

 

 

 

5.9

 

 

Shopping Facilitators

 

 

20,838

 

 

 

5.6

 

 

Biofuels / Biomass

 

 

16,065

 

 

 

4.3

 

 

Entertainment

 

 

7,430

 

 

 

2.0

 

 

Restaurant / Food Service

 

 

3,146

 

 

 

0.8

 

 

General Media and Content

 

 

1,422

 

 

 

0.4

 

 

Software Development Tools

 

 

622

 

 

 

0.2

 

 

Travel and Leisure

 

 

298

 

 

 

0.1

 

 

Multimedia / Streaming Software

 

 

166

 

 

*

 

 

Advertising / Marketing

 

 

106

 

 

*

 

 

Medical Software and Information Services

 

 

74

 

 

*

 

 

Business to Business Marketplace

 

 

9

 

 

*

 

 

Total portfolio company investments

 

$

374,311

 

 

 

100.0

 

%

______________

*

Amount represents less than 0.05% of total portfolio investments.

The following tables present the financing product type of our debt investments as of September 30, 2017 and December 31, 2016.

 

 

 

As of September 30, 2017

 

 

Debt Investments By Financing Product

(dollars in thousands)

 

Fair Value

 

 

Percentage of Total Debt Investments

 

 

Growth capital loans

 

$

248,128

 

 

 

84.8

 

%

Equipment leases

 

 

11,697

 

 

 

4.0

 

 

Equipment loans

 

 

31,720

 

 

 

10.8

 

 

Convertible notes

 

 

1,138

 

 

 

0.4

 

 

Total debt investments

 

$

292,683

 

 

 

100.0

 

%

 

 

 

As of December 31, 2016

 

 

Debt Investments By Financing Product

(dollars in thousands)

 

Fair Value

 

 

Percentage of Total Debt Investments

 

 

Growth capital loans

 

$

341,006

 

 

 

94.7

 

%

Equipment leases

 

 

15,303

 

 

 

4.3

 

 

Equipment loans

 

 

3,698

 

 

 

1.0

 

 

Total debt investments

 

$

360,007

 

 

 

100.0

 

%

 

Growth capital loans in which the borrower held a term loan facility, with or without an accompanying revolving loan, in priority to our senior lien represent approximately 17.3% and 18.7% of the debt investments at fair value as of September 30, 2017 and December 31, 2016, respectively.

 

38


Investment Activity

During the three months ended September 30, 2017, we entered into commitments with three new portfolio companies and one existing portfolio company totaling $121.9 million, funded twelve debt investments for approximately $82.8 million in principal value, acquired warrants representing approximately $1.5 million of value, made $0.3 million of equity investments and sold equity in one company for $1.4 million. During the nine months ended September 30, 2017, we entered into commitments with eight new portfolio companies and three existing portfolio companies totaling $264.9 million, funded twenty-four debt investments for approximately $151.7 million in principal value, acquired warrants representing approximately $3.0 million of value, made $3.7 million of equity and related investments and sold equity in one company for $1.4 million.

During the three months ended September 30, 2016, we entered into commitments with one new portfolio company and five existing portfolio companies totaling $69.0 million, funded three debt investments for approximately $15.0 million in principal value and acquired warrants representing approximately $0.3 million of value and made $0.2 million of equity and related investments. During the nine months ended September 30, 2016, we entered into commitments with six new portfolio companies and five existing portfolio companies totaling $194.0 million, funded seventeen debt investments for approximately $93.8 million in principal value, acquired warrants representing approximately $1.7 million of value and made $0.2 million of equity and related investments.

During the three months ended September 30, 2017, we received $21.8 million of debt prepayments from two portfolio companies. During the nine months ended September 30, 2017, one portfolio company repaid at maturity its outstanding growth capital loans of approximately $22.5 million and seven portfolio companies prepaid prior to maturity all their outstanding growth capital loans of approximately $182.0 million.

During the three months ended September 30, 2016, one of our portfolio companies fully prepaid its outstanding principal of approximately $10.0 million. During the nine months ended September 30, 2016, three of our portfolio companies fully prepaid their outstanding principal of approximately $34.8 million and one of our portfolio companies made a partial prepayment of $5.0 million.

Total portfolio investment activity for the three and nine months ended September 30, 2017 and September 30, 2016 was as follows:

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Beginning portfolio at fair value

 

$

253,804

 

 

$

299,649

 

 

$

374,311

 

 

$

271,717

 

New debt investments

 

 

79,996

 

 

 

14,659

 

 

 

146,485

 

 

 

91,932

 

Principal payments from debt investments

 

 

(3,136

)

 

 

(1,650

)

 

 

(7,796

)

 

 

(5,768

)

Early principal prepayments and repayments

 

 

(21,750

)

 

 

(10,000

)

 

 

(204,524

)

 

 

(41,115

)

Accretion of debt investment fees

 

 

775

 

 

 

2,296

 

 

 

637

 

 

 

4,821

 

Payment-in-kind coupon

 

 

611

 

 

 

316

 

 

 

1,501

 

 

 

1,284

 

New warrants

 

 

1,538

 

 

 

334

 

 

 

2,939

 

 

 

1,677

 

New equity investments

 

 

304

 

 

 

196

 

 

 

3,703

 

 

 

196

 

Proceeds from the sale of investments

 

 

(1,417

)

 

 

(1,885

)

 

 

(1,491

)

 

 

(1,892

)

Net realized (losses) on investments

 

 

1,044

 

 

 

1,081

 

 

 

(2,351

)

 

 

(20,906

)

Net change in unrealized gains (losses) on investments

 

 

(633

)

 

 

3,861

 

 

 

(2,278

)

 

 

6,911

 

Ending portfolio at fair value

 

$

311,136

 

 

$

308,857

 

 

$

311,136

 

 

$

308,857

 

As of September 30, 2017, our unfunded commitments to eleven portfolio companies totaled approximately $158.2 million. As of December 31, 2016, our unfunded commitments to nine portfolio companies totaled approximately $117.4 million. During the three months ended September 30, 2017, $0 in unfunded commitments expired or were terminated and approximately $82.8 million were funded. During the nine months ended September 30, 2017, $85.0 million in unfunded commitments expired or were terminated and approximately $151.7 million were funded.

 

 

 

 

 

 

 

39


The following table provides additional information on our unfunded commitments regarding milestones, expirations, and types of loans.

 

Unfunded Commitments*

(dollars in thousands)

 

As of September 30, 2017

 

 

As of December 31, 2016

 

Dependent on milestones

 

$

50,000

 

 

$

60,000

 

Expiring during:

 

 

 

 

 

 

 

 

2017

 

 

30,956

 

 

 

102,352

 

2018

 

 

97,241

 

 

 

10,000

 

2019

 

 

30,000

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Growth capital loans

 

 

145,376

 

 

 

113,000

 

Equipment leases and loans

 

 

12,821

 

 

 

4,352

 

_______________

* Does not include backlog of potential future commitments.

Our credit agreements with our portfolio companies contain customary lending provisions which allow us relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. We generally expect more than 75% of our gross unfunded commitments to eventually be drawn before the expiration of their corresponding availability periods.

The fair value at the inception of the delay draw credit agreements with our portfolio companies is equal to the fees and/or warrants received to enter into these agreements, taking into account the remaining terms of the agreements and the counterparties’ credit profile. The unfunded commitment liability reflects the fair value of these future funding commitments. As of September 30, 2017, and December 31, 2016, the fair value for these unfunded commitments totaled approximately $1.4 million and $1.2 million, respectively, and was included in “other accrued expenses and liabilities” in our condensed consolidated statements of assets and liabilities.

Our level of investment activity can vary substantially from period to period as our Adviser chooses to slow or accelerate new business originations depending on market conditions, rate of investment of TPC’s select group of leading venture capital investors, our Adviser’s knowledge, expertise and experience, our funding capacity (including availability under the Revolving Credit Facility and our ability or inability to raise equity or debt capital), and other market dynamics.

The following table shows the debt commitments, fundings of debt investments (principal balance) and equity investments and non-binding term sheet activity for the three and nine months ended September 30, 2017 and 2016.

 

Commitments and Fundings

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Debt Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New portfolio companies

 

$

106,879

 

 

$

15,000

 

 

$

242,879

 

 

$

140,000

 

Existing portfolio companies

 

 

15,000

 

 

 

54,000

 

 

 

22,000

 

 

 

54,000

 

Total *

 

$

121,879

 

 

$

69,000

 

 

$

264,879

 

 

$

194,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funded Debt Investments

 

$

82,790

 

 

$

15,000

 

 

$

151,658

 

 

$

93,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Investments

 

$

303

 

 

$

195

 

 

$

3,703

 

 

$

195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Binding Term Sheets

 

$

267,000

 

 

$

89,000

 

 

$

459,718

 

 

$

197,000

 

_______________

* Includes backlog of potential future commitments.

We may enter into commitments with certain portfolio companies which permit an increase in the commitment amount in the future in the event that conditions to such increases are met.  If such conditions to increase are met, these amounts may become unfunded commitments if not drawn prior to expiration. As of September 30, 2017 and December 31, 2016, this backlog of potential future commitments totaled $27.4 million and $40.0 million, respectively.

 

40


Payables

On September 30, 2017, we acquired $95.0 million in face value of U.S. Treasury bills which were sold on October 3, 2017. On December 30, 2016, we acquired $40.0 million in face value of U.S. Treasury bills which were sold on January 4, 2017. The purchase and sale of U.S. Treasury bills were done to efficiently meet certain diversification tests.

Asset Quality

Consistent with TPC’s existing policies, our Adviser maintains a credit watch list with borrowers placed into five groups based on our Adviser’s senior investment team’s judgment, where 1 is the highest rating and all new loans are generally assigned a rating of 2. 

 

Category

 

Category Definition

 

Action Item

 

 

 

 

 

Clear (1)

 

Performing above expectations and/or strong financial or enterprise profile, value or coverage.

 

Review quarterly.

White (2)

 

Performing at expectations and/or reasonably close to it. Reasonable financial or enterprise profile, value or coverage. All new loans are initially graded White.

 

Contact portfolio company regularly in no event less than quarterly.

Yellow (3)

 

Performing generally below expectations and/or some proactive concern. Adequate financial or enterprise profile, value or coverage.

 

Contact portfolio company monthly or more frequently as determined by our Adviser’s Investment Committee; contact investors.

Orange (4)

 

Needs close attention due to performance materially below expectations, weak financial and/or enterprise profile, concern regarding additional capital or exit equivalent.

 

Contact portfolio company weekly or more frequently as determined by our Adviser’s Investment Committee; contact investors regularly; our Adviser forms a workout group to minimize risk of loss.

Red (5)

 

Serious concern/trouble due to pending or actual default or equivalent. May experience partial and/or full loss.

 

Maximize value from assets.

 

As of September 30, 2017 and December 31, 2016, the weighted average investment ranking of our debt investment portfolio was 2.02 and 1.85, respectively. During the three months ended September 30, 2017, there were four changes within the credit categories. Two portfolio companies, Blue Bottle Coffee, Inc., with a principal balance of $10.0 million, and Forgerock, Inc., with a principal balance of $13.1 million, were upgraded from White (2) to Clear (1). Two portfolio companies, Harvest Power, Inc., with a principal balance $13.2 million, and Munchery, Inc., with a principal balance of $2.6 million, were downgraded from White (2) to Yellow (3).  The following table shows the credit rankings for the portfolio companies that had outstanding obligations to us as of September 30, 2017 and December 31, 2016.

 

 

 

As of September 30, 2017

 

Credit Category

(dollars in thousands)

 

Fair Value

 

 

Percentage of Total Debt Investments

 

 

Number of Portfolio Companies

 

Clear (1)

 

$

65,602

 

 

 

22.4

 

%

 

4

 

White (2)

 

 

167,332

 

 

 

57.2

 

 

 

10

 

Yellow (3)

 

 

47,210

 

 

 

16.1

 

 

 

3

 

Orange (4)

 

 

12,539

 

 

 

4.3

 

 

 

2

 

Red (5)

 

 

 

 

 

 

 

 

 

 

 

$

292,683

 

 

 

100.0

 

%

 

19

 

 

 

 

As of December 31, 2016

 

Credit Category

(dollars in thousands)

 

Fair Value

 

 

Percentage of Total Debt Investments

 

 

Number of Portfolio Companies

 

Clear (1)

 

$

129,878

 

 

 

36.1

 

%

 

4

 

White (2)

 

 

166,908

 

 

 

46.4

 

 

 

11

 

Yellow (3)

 

 

51,014

 

 

 

14.2

 

 

 

2

 

Orange (4)

 

 

12,207

 

 

 

3.3

 

 

 

2

 

Red (5)

 

 

 

 

 

 

 

 

 

 

 

$

360,007

 

 

 

100.0

 

%

 

19

 

 

41


Results of Operations

Operating results for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016.

For the three months ended September 30, 2017, our net increase in net assets resulting from operations was approximately $3.7 million, which was comprised of approximately $4.4 million of net investment income and approximately $0.7 million of net realized and unrealized losses. On a per share basis, net investment income was $0.27 per share and the net increase in net assets from operations was $0.23 per share.

For the three months ended September 30, 2016, our net increase in net assets resulting from operations was approximately $11.4 million, which was comprised of approximately $6.5 million of net investment income and approximately $4.9 million of net realized and unrealized gains. On a per share basis, net investment income was $0.40 per share and the net increase in net assets from operations was $0.71 per share.

For the nine months ended September 30, 2017, our net increase in net assets resulting from operations was approximately $15.4 million, which was comprised of approximately $21.1 million of net investment income and approximately $5.7 million of net realized and unrealized losses. On a per share basis for the nine months ended September 30, 2017, net investment income was $1.32 per share and the net increase in net assets from operations was $0.96 per share.

For the nine months ended September 30, 2016, our net increase in net assets resulting from operations was approximately $4.2 million, which was comprised of approximately $18.2 million of net investment income and approximately $14.0 million of net realized and unrealized losses. On a per share basis for the nine months ended September 30, 2016, net investment income was $1.12 per share and the net increase in net assets from operations was $0.26 per share.

Investment Income

Total investment income for the three months ended September 30, 2017 was approximately $10.4 million as compared to approximately $12.5 million for the three months ended September 30, 2016. Total investment income for the nine months ended September 30, 2017 was approximately $40.4 million as compared to approximately $33.0 million for the nine months ended September 30, 2016.

The decrease in investment and other income for the three-month period ended September 30, 2017 compared to the comparable period of 2016 of $2.1 million is primarily due to lower amounts of unfunded commitments expiring unutilized between corresponding periods. The increase in investment and other income for the nine-month period ended September 30, 2017 compared to the comparable period of 2016 of $7.4 million is primarily related to prepayment and other income related to higher prepayment activity between periods.  

For the three months ended September 30, 2017, we recognized approximately $0.1 million in other income from the realization of certain fees paid by portfolio companies and other income related to prepayment activity. For the three months ended September 30, 2016, we recognized approximately $1.3 million in other income consisting of approximately $1.1 million due to the termination or expiration of unfunded commitments and approximately $0.2 million from the realization of certain fees paid by portfolio companies and other income.

For the nine months ended September 30, 2017, we recognized approximately $1.3 million in other income consisting of approximately $0.4 million due to the termination or expiration of unfunded commitments and approximately $0.9 million from the realization of certain fees paid by portfolio companies and other income related to prepayment activity. For the nine months ended September 30, 2016, we recognized approximately $1.8 million in other income consisting of approximately $1.6 million due to the termination or expiration of unfunded commitments and approximately $0.2 million from the realization of certain fees paid by portfolio companies and other income.

 

42


Operating Expenses

Total operating expenses consists of base management and incentive fees, interest expense, administration agreement expenses, and general and administrative expenses and is summarized in the statement of operations. In determining the base management fee, our Adviser has agreed to exclude the U.S. Treasury bill assets acquired at the end of the applicable quarters in 2017 and 2016 in the calculation of the gross assets. We anticipate operating expenses will increase over time as our portfolio continues to grow. However, we anticipate operating expenses, as a percentage of totals assets and net assets, will decrease over time as our portfolio and capital base expand. We expect base management and income incentive fees will increase as we grow our asset base and our earnings. Capital gains incentive fee will depend on realized and unrealized gains and losses. Interest expense will increase as we utilize more of the Revolving Credit Facility, and we expect expenses per the administration agreement and general and administrative expenses will increase to meet the additional requirements associated with servicing a larger portfolio.

Total operating expenses for the three months ended September 30, 2017 was approximately $6.1 million as compared to approximately $6.0 million for the three months ended September 30, 2016. Total operating expenses for the nine months ended September 30, 2017 was approximately $19.3 million as compared to approximately $14.8 million for the nine months ended September 30, 2016.

Base management fee totaled approximately $1.6 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively and $4.8 million and $4.1 million during the nine months ended September 30, 2017 and 2016, respectively. Base management fee for the three and nine months ended September 30, 2017, as compared to September 30, 2016, increased due to an increase in the average size of our portfolio between periods.

Income incentive fee totaled approximately $1.0 million and $1.6 million for the three months ended September 30, 2017 and 2016, respectively and $4.5 million and $1.6 million during the nine months ended September 30, 2017 and 2016, respectively. The decrease in income based fees for the three-month period ended September 30, 2017 from the comparable period in 2016 was primarily due to lower investment income due to less principal outstanding on our investment portfolio from prepayment activity between periods. The increase in income based fees for the nine-month period ended September 30, 2017 from the comparable period in 2016 is primarily related to the total return provision. For the nine months ended September 30, 2017, our income incentive fee was reduced by $0.6 million due to the total return requirement under the income component of our incentive fee structure, which resulted in approximately $0.6 million of reduced expense and equivalent additional net income, or $0.04 per share, to stockholders. For the nine months ended September 30, 2016, our income incentive fee was reduced by $2.0 million due to the total return requirement under the income component of our incentive fee structure, which resulted in approximately $2.0 million of reduced expense and equivalent additional net income, or $0.12 per share, to stockholders.

There was no capital gains incentive fee expense calculated for the three or nine month periods ended September 30, 2017 or 2016.

Interest and fees on our borrowings totaled approximately $2.3 million and $2.0 million for the three months ended September 30, 2017 and 2016, respectively and $6.9 million and $5.7 million during the nine months ended September 30, 2017 and 2016, respectively. Interest and fee expense for the three and nine months ended September 30, 2017, as compared to September 30, 2016, increased due to a higher weighted average principal balance outstanding due to the issuance of our 2022 Notes and higher usage on our Revolving Credit Facility.

Administration agreement and general and administrative expenses totaled approximately $1.1 million and $1.0 million for the three months ended September 30, 2017 and 2016, respectively, and $3.1 million and $3.4 million during the nine months ended September 30, 2017 and 2016, respectively. The increase for the three months ended September 30, 2017, as compared to September 30, 2016 was primarily due to higher professional services. The decrease for the nine months ended September 30, 2017, as compared to September 30, 2016 was primarily due to lower overhead allocation costs and lower valuation and legal services.

 

43


Net Realized Gains and Losses and Net Unrealized Gains and Losses

During the three months ended September 30, 2017, we recognized net realized gains from the sale of investments of $1.0 million, consisting entirely of realized gains from the sale of 60,000 shares of Nutanix, Inc., a publicly traded company. During the same period, we elected to exercise our option to redeem, in full, our 2020 Notes at par plus accrued and unpaid interest which resulted in a realized loss on debt extinguishment of approximately $1.1 million.  

During the nine months ended September 30, 2017, we recognized net realized losses from the sale of investments of approximately $2.4 million, consisting of gross realized gains of $1.0 million from the sale of equity in one portfolio company, offset by gross realized losses of $3.4 million, of which $2.8 million consisted of warrant and equity losses related to the acquisition of 4 portfolio companies and $0.6 million related to the reversal of accrued loan modification fees in conjunction with the pay-off of one portfolio company. During the same period, we recognized a realized loss on debt extinguishment of approximately $1.1 million in relation to the acceleration of unamortized fees on our 2020 Notes redemption.  

During the three months ended September 30, 2016, we had realized gains of approximately $1.1 million primarily due to proceeds from warrants and equity in Dollar Shave Club and warrants in Jet.com upon these companies’ respective acquisitions.

During the nine months ended September 30, 2016, there were net realized losses of approximately $20.9 million, which consisted of realized losses on two debt investments ($14.3 million on Intermodal Data, Inc. and $6.1 million on HouseTrip Limited), and net realized losses of $0.8 million on warrants, which were offset by realized gains of $0.3 million on equity.

Net change in unrealized losses during the three months ended September 30, 2017 was approximately $0.6 million, which consisted primarily of the reversal of previously recorded unrealized gains and recognition of realized gains of $0.8 million in conjunction with the sale of publicly traded shares of Nutanix, Inc., offset by $0.2 million of unrealized appreciation on the investment portfolio related to mark to market activity. Net change in unrealized gains of approximately $3.9 million during the three months ended September 30, 2016 related entirely to mark to market activity on the investment portfolio.

Net change in unrealized losses during the nine months ended September 30, 2017 was approximately $2.3 million, which primarily consisted of the reversal and recognition of previously recorded net unrealized gains of $1.7 million into realized gains from five companies, and $0.6 million of net unrealized depreciation on the investment portfolio related to mark to market activity. Net change in unrealized gains of approximately $6.9 million during the nine months ended September 30, 2016 consisted of $4.9 million related to the reversal and recognition of unrealized losses into realized losses and $2.0 million of net unrealized appreciation related to mark to market activity on the investment portfolio.

Net change in realized and unrealized gains or losses in subsequent periods may be volatile as it depends on changes in the market, changes in the underlying performance of our portfolio companies and their respective industries, and other market factors.

 

44


The table below presents our statement of operations for the three and nine months ended September 30, 2017 and September 30, 2016.

 

Net Increase in Net Assets

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands, except per share amounts)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Investment and Other Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from investments

 

$

10,310

 

 

$

11,207

 

 

$

39,061

 

 

$

31,214

 

Other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expirations / terminations of unfunded commitments

 

 

 

 

 

1,133

 

 

 

418

 

 

 

1,558

 

Other fees

 

 

109

 

 

 

162

 

 

 

926

 

 

 

214

 

Total Investment and Other Income

 

 

10,419

 

 

 

12,502

 

 

 

40,405

 

 

 

32,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base management fee

 

 

1,567

 

 

 

1,376

 

 

 

4,805

 

 

 

4,076

 

Income incentive fee

 

 

1,066

 

 

 

1,568

 

 

 

4,520

 

 

 

1,568

 

Capital gains incentive fee

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and amortization of fees

 

 

2,306

 

 

 

2,036

 

 

 

6,861

 

 

 

5,733

 

Administration agreement expenses

 

 

346

 

 

 

395

 

 

 

1,058

 

 

 

1,190

 

General and administrative expenses

 

 

767

 

 

 

632

 

 

 

2,044

 

 

 

2,238

 

Total Operating Expenses

 

 

6,052

 

 

 

6,007

 

 

 

19,288

 

 

 

14,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

4,367

 

 

 

6,495

 

 

 

21,117

 

 

 

18,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains (losses) on investments

 

 

1,044

 

 

 

1,081

 

 

 

(2,351

)

 

 

(20,906

)

Net change in unrealized (losses) gains on investments

 

 

(620

)

 

 

3,859

 

 

 

(2,277

)

 

 

6,906

 

Net realized loss on extinguishment of debt

 

 

(1,112

)

 

 

 

 

 

(1,112

)

 

 

 

Net realized and unrealized (losses) gains

 

 

(688

)

 

 

4,940

 

 

 

(5,740

)

 

 

(14,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

3,679

 

 

$

11,435

 

 

$

15,377

 

 

$

4,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income per share

 

$

0.27

 

 

$

0.40

 

 

$

1.32

 

 

$

1.12

 

Net increase (decrease) in net assets per share

 

$

0.23

 

 

$

0.71

 

 

$

0.96

 

 

$

0.26

 

Weighted average shares of common stock outstanding

 

 

16,023

 

 

 

16,091

 

 

 

16,001

 

 

 

16,227

 

We believe an important measure of the investment income that we will be required to distribute each year is core net investment income, to the extent it is divergent from GAAP net investment income. Core net investment income, unlike GAAP net investment income, excludes accrued, but as yet unearned, capital gains incentive fees on net unrealized gains. Specifically, the capital gains component of the incentive fee is paid at the end of each calendar year and is 20.0% of our aggregate cumulative realized capital gains from commencement of operations through the end of the year, computed net of our aggregate cumulative realized capital losses and our aggregate cumulative unrealized losses through the end of such year. For the foregoing purpose, our “aggregate cumulative realized capital gains” does not include any unrealized gains. The capital gains component of the incentive fee is not subject to any minimum return to stockholders. No capital gains incentive fee was earned or was payable during the three and nine months ended September 30, 2017, respectively. Therefore, GAAP net investment income and core net investment income were the same during the respective periods.

Portfolio Yield and Total Return

Investment income includes interest income on our debt investments utilizing the effective yield method including cash interest income as well as the amortization of any purchase premium, accretion of purchase discount, original issue discount, facilities fees, and the amortization and payment of the end-of-term (“EOT”) payments. For the three and nine months ended September 30, 2017, interest income totaled approximately $10.3 million and $39.1 million, respectively, representing a weighted average annualized portfolio yield on debt investments for the period held of approximately 15.4% and 17.4%, respectively.

For the three and nine months ended September 30, 2016, interest income totaled approximately $11.2 million and $31.2 million, respectively, representing a weighted average annualized portfolio yield on debt investments for the period held of approximately 15.1% and 14.7%, respectively.

We calculate weighted average annualized portfolio yields for periods shown as the annualized rates of the interest income recognized during the period divided by the average amortized cost of debt investments in the portfolio at the beginning of each month in the period. The weighted average yields reported for these periods are annualized and reflect the weighted average yields to maturities. Should the portfolio companies choose to repay their loans earlier, our weighted average yields will increase for those debt investments affected but may reduce our weighted average yields on the remaining portfolio in future quarters.

 

45


The yield on our portfolio, excluding the impact of prepayments, was approximately 13.5% and 13.0%, respectively, for the three and nine months ended September 30, 2017. The yield on our portfolio, excluding the impact of prepayments, was approximately 13.7% and 13.8%, respectively, for the three and nine months ended September 30, 2016.

The following table provides the weighted average annualized portfolio yield on our portfolio comprising of cash interest income, accretion of the net purchase discount, facilities fees and the value of warrants received, accretion of EOT payments and the accelerated receipt of EOT payments on prepayments.  

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

Portfolio Yield (1)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Weighted average annualized portfolio yield on debt investments

 

 

15.4

%

 

 

15.1

%

 

 

17.4

%

 

 

14.7

%

Coupon income

 

 

10.4

%

 

 

10.5

%

 

 

10.4

%

 

 

10.5

%

Accretion of discount

 

 

0.9

%

 

 

0.8

%

 

 

0.7

%

 

 

0.7

%

Accretion of end-of-term payments

 

 

2.2

%

 

 

2.4

%

 

 

1.9

%

 

 

2.6

%

Impact of prepayments during the period

 

 

1.9

%

 

 

1.4

%

 

 

4.4

%

 

 

0.9

%

______________

 

(1)

The yields for periods shown are the annualized rates of interest income or the components of interest income recognized during the period divided by the average amortized cost of debt investments in the portfolio at the beginning of each month in the period.

Our weighted average annualized portfolio yield on debt investments may be higher than an investor’s yield on an investment in shares of our common stock. Our weighted average annualized portfolio yield on debt investments does not reflect operating expenses that may be incurred by us. In addition, our weighted average annualized portfolio yield on debt investments and total return figures disclosed above do not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of our common stock. Our weighted average annualized portfolio yield on debt investments and total return based on NAV do not represent actual investment returns to stockholders. Our weighted average annualized portfolio yield on debt investments and total return figures are subject to change and, in the future, may be greater or less than the rates set forth above. Total return based on NAV is the change in ending NAV per share plus distributions per share paid during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning NAV per share. Total return based on stock price is the change in the ending stock price of the Company’s common stock plus distributions paid during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning stock price of the Company’s common stock. The total return is for the period shown and is not annualized.

For the three and nine months ended September 30, 2017, our total return per period based on the change in NAV plus distributions reinvested as of the distribution date per share was 1.9% and 7.7%, respectively, and our total return per period based on the change in stock price plus distributions reinvested as of the distribution date was 3.6% and 23.6%, respectively. For the three and nine months ended September 30, 2016, our total return per period based on the change in NAV plus distributions reinvested as of the distribution date per share was 6.6% and 5.1%, respectively, and our total return per period based on the change in stock price plus distributions reinvested as of the distribution date was 3.6% and (1.5)%, respectively.

The table below summarizes our return on average total assets and return on average NAV for the three and nine months ended September 30, 2017 and 2016.

 

Returns on Net Asset Value and Total Assets

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

(dollars in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net investment income

 

$

4,367

 

 

$

6,495

 

 

$

21,117

 

 

$

18,181

 

Net increase (decrease) in net assets

 

 

3,679

 

 

 

11,435

 

 

 

15,377

 

 

 

4,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average net asset value (1)

 

 

215,730

 

 

 

210,740

 

 

 

215,763

 

 

 

220,869

 

Average total assets (1)

 

 

334,042

 

 

 

331,397

 

 

 

355,576

 

 

 

322,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income to average net asset value (2)

 

 

8.0

%

 

 

12.3

%

 

 

13.1

%

 

 

11.0

%

Net increase (decrease) in net assets to average net asset value (2)

 

 

6.8

%

 

 

21.6

%

 

 

9.5

%

 

 

2.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income to average total assets (2)

 

 

5.2

%

 

 

7.8

%

 

 

7.9

%

 

 

7.5

%

Net increase (decrease) in net assets to average total assets (2)

 

 

4.4

%

 

 

13.7

%

 

 

5.8

%

 

 

1.7

%

______________

 

(1)

The average NAVs and the average total assets are computed based on daily balances. Total assets are gross assets before deducting total liabilities.

 

(2)

Percentage is presented on an annualized basis.

 

46


Critical Accounting Policies

The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Valuation of investments, income recognition, realized / unrealized gains or losses and U.S. federal income taxes are considered to be our critical accounting policies and estimates. These have been disclosed under “Significant Accounting Policies” in the notes to consolidated financial statements described in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 13, 2017. Changes to the policy are disclosed in our notes to the condensed consolidated financial statements in this Form 10-Q.

Liquidity and Capital Resources

During the nine months ended September 30, 2017, cash provided by operating activities, consisting primarily of purchases, sales and repayments of investments and the items described in “Results of Operations,” was approximately $85.8 million and cash used by financing activities was approximately $88.4 million due to repayments under the Revolving Credit Facility for $89.5 million, $54.6 million due to the redemption of 2020 Notes, approximately $16.5 million in distributions and $72.2 million of net proceeds from the issuance of 2022 Notes. As of September 30, 2017, cash, including restricted cash, was approximately $8.5 million.

During the nine months ended September 30, 2016, cash used by operating activities, consisting primarily of purchases, sales and repayments of investments and the items described in “-Results of Operations,” was approximately $34.4 million and cash provided by financing activities was approximately $16.5 million due to $39.0 million of borrowings under our Revolving Credit Facility, partially offset by approximately $16.1 million in distributions, approximately $5.4 million in repurchase of common stock and approximately $1.1 million in payments of Revolving Credit Facility costs, which are deferred and expensed over the term of the Revolving Credit Facility. As of September 30, 2016, cash, including restricted cash, was approximately $20.8 million.

As a BDC, we generally have an ongoing need to raise additional capital for investment purposes. As a result, we expect, from time to time, to access the debt and equity markets when we believe it is necessary and appropriate to do so. In this regard, we continue to explore various options for obtaining additional debt or equity capital for investments. This may include expanding or extending the Revolving Credit Facility, or the issuance of additional shares of our common stock or debt securities. If we are unable to obtain leverage or raise equity capital on terms that are acceptable to us, our ability to grow our portfolio could be substantially impacted.

Contractual Obligations

In February 2014, we entered into our Revolving Credit Facility which provided us with a $150.0 million commitment, subject to borrowing base requirements. In August 2014, we amended our Revolving Credit Facility to increase the total commitments available there under by $50.0 million to $200.0 million in aggregate.

As of September 30, 2017 and December 31, 2016, we had outstanding borrowings of $25.5 million and $115.0 million, respectively, under our Revolving Credit Facility, which is included in the condensed consolidated statements of assets and liabilities. We had $174.5 million and $85.0 million of remaining capacity on our Revolving Credit Facility as of September 30, 2017 and December 31, 2016, respectively.

On July 14, 2017, we completed a public offering of $65.0 million in aggregate principal amount of our newly issued 2022 Notes and received net proceeds of approximately $62.8 million after the payment of fees and offering costs. On July 24, 2017, as a result of the underwriters’ full exercise of their option to purchase additional 2022 Notes, we issued an additional $9.75 million in aggregate principal amount of the 2022 Notes and received net proceeds of approximately $9.5 million after the payment of fees and offering costs. The interest on the 2022 Notes is payable quarterly on January 15, April 15, July 15 and October 15, beginning October 15, 2017.

The tables below provide a summary of when payments are due under our Revolving Credit Facility, 2020 Notes and 2022 Notes as of September 30, 2017 and December 31, 2016.

 

Payments Due By Period

 

As of September 30, 2017

 

(dollars in thousands)

 

Total

 

 

Less than 1 year

 

 

1-3 years

 

 

3-5 years

 

 

More than 5 years

 

Revolving Credit Facility

 

$

25,500

 

 

$

 

 

$

25,500

 

 

$

 

 

$

 

2022 Notes

 

 

74,750

 

 

 

 

 

 

 

 

 

74,750

 

 

 

 

Total

 

$

100,250

 

 

$

 

 

$

25,500

 

 

$

74,750

 

 

$

 

 

 

47


Payments Due By Period

 

As of December 31, 2016

 

(dollars in thousands)

 

Total

 

 

Less than 1 year

 

 

1-3 years

 

 

3-5 years

 

 

More than 5 years

 

Revolving Credit Facility

 

$

115,000

 

 

$

 

 

$

115,000

 

 

$

 

 

$

 

2020 Notes

 

 

54,625

 

 

 

 

 

 

 

 

 

54,625

 

 

 

 

Total

 

$

169,625

 

 

$

 

 

$

115,000

 

 

$

54,625

 

 

$

 

We are a party to certain delay draw credit agreements with our portfolio companies, which require us to make future advances at the companies’ discretion during a defined loan availability period. Our credit agreements contain customary lending provisions that allow us relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. As of September 30, 2017 and December 31, 2016, our unfunded commitments totaled approximately $158.2 million to eleven portfolio companies and $117.4 million to nine portfolio companies, respectively. See “-Investment Activity” above for additional information on our unfunded commitments.

Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. Over time, we generally expect approximately 75% of our gross unfunded commitments to be drawn before the expiration of their corresponding availability periods. We evaluate funding needs and expectations for each company at the time of commitment and as the company progresses and develops during the availability period.

As of September 30, 2017, we had a payable of approximately $95.0 million in face value due October 3, 2017 for the acquisition of U.S. Treasury bills. On October 3, 2017, we sold the U.S. Treasury bills and settled the payable in full. As of December 31, 2016, we had a payable of approximately $40.0 million in face value due January 4, 2017 for the acquisition of U.S. Treasury bills. On January 4, 2017, we sold the U.S. Treasury bills and settled the payable in full.

In addition to the contractual obligations set forth above, we have certain obligations with respect to the investment advisory and administration services we received. As of September 30, 2017 and December 31, 2016, these outstanding obligations totaled approximately $3.0 million and $3.0 million, respectively.

Off-Balance Sheet Arrangements

Commitments

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of September 30, 2017 and December 31, 2016, our off-balance sheet arrangements consisted of approximately $158.2 million and $117.4 million, respectively of unfunded commitments, of which $50.0 million and $60.0 million, respectively, was dependent upon the portfolio companies reaching certain milestones before the debt commitment becomes available to them. Our credit agreements with our portfolio companies contain customary lending provisions that allow us relief from funding obligations for previously made commitments in instances where the underlying portfolio company experiences materially adverse events that affect the financial condition or business outlook for the portfolio company.

 

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The table below provides our unfunded commitments by portfolio company as of September 30, 2017 and December 31, 2016.

 

Unfunded Commitments for Growth Capital Loans (unless otherwise noted)*

(dollars in thousands)

 

As of September 30, 2017

 

 

As of December 31, 2016

 

 

Blue Bottle Coffee, Inc.

 

$

20,000

 

 

 

 

 

BlueVine Capital, Inc.

 

 

10,000

 

 

 

 

 

CrowdStrike,Inc.

 

 

 

 

 

5,000

 

 

Eero, Inc.

 

 

5,000

 

 

 

15,000

 

 

Farfetch UK Limited

 

 

 

 

 

5,000

 

 

FinancialForce.com,Inc.

 

 

 

 

 

15,000

 

 

Green Chef Corporation

 

 

 

 

 

10,000

 

 

MapR Technologies, Inc. (Equipment Lease)

 

 

2,956

 

 

 

4,352

 

 

Optoro, Inc.

 

 

 

 

 

25,000

 

 

Outfittery GMBH

 

 

2,376

 

 

 

 

 

PillPack, Inc.

 

 

30,000

 

 

 

 

 

Rent the Runway, Inc.

 

 

18,000

 

 

 

28,000

 

 

Ring, Inc.

 

 

30,000

 

 

 

 

 

Stance, Inc.

 

 

15,000

 

 

 

 

 

Varsity Tutors LLC

 

 

15,000

 

 

 

 

 

View, Inc. (Equipment Loan)

 

 

9,865

 

 

 

 

 

WorldRemit Ltd.

 

 

 

 

 

10,000

 

 

Total

 

$

158,197

 

 

$

117,352

 

 

_______________

*    Does not include backlog of potential future commitments. Refer to “Investment Activity” above. 

Distributions

We have elected to be treated, and intend to qualify annually thereafter, as a RIC under the Code, beginning with our taxable year ended December 31, 2014. To obtain and maintain RIC tax treatment, we must distribute at least 90% of our net ordinary income and net realized short-term capital gains in excess of our net realized long-term capital losses, if any, to our stockholders. In order to avoid a non-deductible 4% U.S. federal excise tax on certain of our undistributed income, we would need to distribute during each calendar year an amount at least equal to the sum of: (a) 98% of our ordinary income (not taking into account any capital gains or losses) for such calendar year; (b) 98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year (unless an election is made by us to use our taxable year); and (c) certain undistributed amounts from previous years on which we paid no U.S. federal income tax. For the tax years ended December 31, 2014 and 2015, we were subject to a 4% U.S. federal excise tax and we may be subject to this tax in future years. In such cases, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

To the extent our taxable earnings fall below the total amount of our distributions for the year, a portion of those distributions may be deemed a return of capital to our stockholders. Our Adviser monitors available taxable earnings, including net investment income and realized capital gains, to determine if a return of capital may occur for the year. The tax character of distributions will be determined at the end of the taxable year. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of any distribution is our taxable ordinary income or capital gains. The specific tax characteristics of our distributions will be reported to stockholders after the end of the taxable year.

The following table summarizes our cash distributions per share that have been authorized by our board of directors since our initial public offering. From March 5, 2014 (commencement of operations) to December 31, 2015, these distributions represent ordinary income as our earnings exceed distributions. Approximately $1.20 per share of the distributions during the year ended December 31, 2016 represent a return of capital.

 

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Period Ended

 

Date Announced

 

Record Date

 

Payment Date

 

Per Share Amount

 

 

September 30, 2017

 

August 8, 2017

 

August 31, 2017

 

September 15, 2017

 

$

0.36

 

 

June 30, 2017

 

May 9, 2017

 

May 31, 2017

 

June 16, 2017

 

$

0.36

 

 

March 31, 2017

 

March 13, 2017

 

March 31, 2017

 

April 17, 2017

 

$

0.36

 

 

December 31, 2016

 

November 7, 2016

 

November 30, 2016

 

December 16, 2016

 

$

0.36

 

 

September 30, 2016

 

August 8, 2016

 

August 31, 2016

 

September 16, 2016

 

$

0.36

 

 

June 30, 2016

 

May 9, 2016

 

May 31, 2016

 

June 16, 2016

 

$

0.36

 

 

March 31, 2016

 

March 14, 2016

 

March 31, 2016

 

April 15, 2016

 

$

0.36

 

 

December 31, 2015

 

November 10, 2015

 

November 30, 2015

 

December 16, 2015

 

$

0.36

 

 

September 30, 2015

 

August 11, 2015

 

August 31, 2015

 

September 16, 2015

 

$

0.36

 

 

June 30, 2015

 

May 6, 2015

 

May 29, 2015

 

June 16, 2015

 

$

0.36

 

 

March 31, 2015

 

March 16, 2015

 

March 26, 2015

 

April 16, 2015

 

$

0.36

 

 

December 31, 2014

 

December 3, 2014

 

December 22, 2014

 

December 31, 2014

 

$

0.15

 

(1)

 

 

October 27, 2014

 

November 28, 2014

 

December 16, 2014

 

$

0.36

 

 

September 30, 2014

 

August 11, 2014

 

August 29, 2014

 

September 16, 2014

 

$

0.32

 

 

June 30, 2014

 

May 13, 2014

 

May 30, 2014

 

June 17, 2014

 

$

0.30

 

 

March 31, 2014

 

April 3, 2014

 

April 15, 2014

 

April 30, 2014

 

$

0.09

 

(2)

_______________

(1)Represents a special distribution.

(2)The amount of this initial distribution reflected a quarterly dividend rate of $0.30 per share, prorated for the 27 days for the period from the pricing of our initial public offering on March 5, 2014 (commencement of operations) through March 31, 2014.

For the nine months ended September 30, 2017 and for the year ended December 31, 2016, distributions paid were comprised of interest-sourced distributions (qualified interest income) in amounts equal to 96.7% and 95.8% of total distributions paid, respectively.

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

 

We have entered into an investment advisory agreement, dated February 18, 2014, with our Adviser. Certain of our officers are also principals of the Adviser.

 

We have entered into an Administration Agreement, dated February 18, 2014, with our Administrator. Pursuant to the terms of the Administration Agreement, our Administrator provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. Certain of our officers are also principals of the Administrator.

 

We have entered into a license agreement with TPC pursuant to which TPC has agreed to grant us a non-exclusive, royalty-free license to use the name “TriplePoint.”

We have also adopted a Code of Ethics which applies to our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Business Conduct and Ethics. As required by the NYSE corporate governance listing standards, the Audit Committee of our board of directors (the “Board”) is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

 

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Recent Developments

Distributions

On November 6, 2017, we announced that our Board declared a $0.36 per share distribution, payable on December 1, 2017, to stockholders of record on November 17, 2017.

Recent Portfolio Activity

From October 1, 2017, through November 6, 2017, we funded $35.5 million in new investments. TPC’s direct originations platform entered into $10.0 million of additional non-binding signed term sheets with venture growth stage companies, subject to due diligence, definitive documentation and investment committee approval, as well as compliance with TPC’s allocation policy.

Private Placement

On October 25, 2017, we sold in a private placement transaction: (i) 1,594,007 shares of our common stock at a price of $13.54 per share to certain investment funds managed by the Alternative Investments & Manager Selection Group of Goldman Sachs Asset Management, L.P. and (ii) 73,855 shares of our common stock at a price of $13.65 per share to certain of our executive officers, for total gross proceeds of approximately $22.6 million.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates.

Interest Rate Risk

Interest rate sensitivity refers to the change in our earnings and in the relative values of our portfolio that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a change in market interest rates will not have a material adverse effect on our net investment income.

As of September 30, 2017, a majority of the debt investments (approximately 59% and approximately $173.8 million in principal balance) in our debt investment portfolio bore interest at floating rates, all of which have interest rate floors and some of them have interest rate caps for a limited period. In the future, we may increase the amount of loans in our portfolio subject to floating interest rates. Almost all of our unfunded commitments float with changes in the prime rate from the date we enter into the commitment to the date of the actual draw. Our Revolving Credit Facility bears interest at a floating rate. Our 2022 Notes bears interest at a fixed rate. As of September 30, 2017, our floating rate borrowings totaled $25.5 million, so an increase in interest rates would currently benefit us as we would generate additional interest income in excess of the additional interest expense. This is illustrated in the following table which shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure from the September 30, 2017 condensed consolidated statement of assets and liabilities. 

 

 

Change in Interest Rates

(dollars in thousands)

 

Increase (decrease) in interest income

 

 

(Increase) decrease in interest expense

 

 

Net increase (decrease) in net investment income

 

Up 300 basis points

 

$

3,896

 

 

$

(776

)

 

$

3,120

 

Up 200 basis points

 

$

2,610

 

 

$

(517

)

 

$

2,093

 

Up 100 basis points

 

$

1,324

 

 

$

(259

)

 

$

1,065

 

Up 50 basis points

 

$

681

 

 

$

(129

)

 

$

552

 

Down 25 basis points

 

$

(360

)

 

$

65

 

 

$

(295

)

This analysis is indicative of the potential impact on our investment income as of September 30, 2017, assuming an immediate and sustained change in interest rates as noted. It should be noted that we anticipate growth in our portfolio funded in part with additional borrowings and such additional borrowings, all else being equal, will increase our investment income sensitivity to interest rates, and such changes could be material. In addition, this analysis does not adjust for potential changes in our portfolio or our borrowing facilities nor does it take into account any changes in the credit performance of our loans that might occur should interest rates change.

Since it is our intention to hold loans to maturity, the fluctuating relative value of these loans that may occur due to changes in interest rate may have an impact on unrealized gains and losses during quarterly reporting periods. Based on our assessment of the interest rate risk, as of September 30, 2017, we had no hedging transactions in place as we deemed the risk acceptable and we did not believe it was necessary to mitigate this risk at that time.

While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments. In addition, there can be no assurance that we will be able to effectively hedge our interest rate risk.

Substantially all of our assets and liabilities are financial in nature. As a result, changes in interest rates and other factors drive our performance more directly than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates.

 

52


Item 4. Controls and Procedures

(a)

        Evaluation of Disclosure Controls and Procedures 

 

As of September 30, 2017 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

 

(b)Changes in Internal Controls Over Financial Reporting

 

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

53


PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We, our wholly-owned subsidiaries, our Adviser and our Administrator are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, our wholly-owned subsidiaries, our Adviser or our Administrator. From time to time, we, our wholly-owned subsidiaries, our Adviser or our Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 13, 2017, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. There have been no material changes during the nine months ended September 30, 2017 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.

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

Dividend Reinvestment Plan

During the three months ended September 30, 2017, we issued 25,183 shares of common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements under the Securities Act of 1933, as amended. The cash paid for shares of common stock issued under our dividend reinvestment plan during the three months ended September 30, 2017 was approximately $0.3 million.  Other than shares issued under our dividend reinvestment plan, during the three months ended September 30, 2017 we did not sell any unregistered equity securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

 

54


Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

 

Exhibit

Number

 

Description of Document

 

 

 

3.1

 

Articles of Amendment and Restatement (1)

3.2

 

Amended and Restated Bylaws (2)

 

 

 

4.1

 

Specimen Stock Certificate (3)

 

 

 

4.2

 

Second Supplemental Indenture relating to the 5.75% Notes due 2022, by and between TriplePoint Venture Growth BDC Corp and U.S. National Bank Association, as trustee, dated July 14, 2017 (4)

 

 

 

4.3

 

Form of Global Note with respect to the 5.75% Notes due 2022 (5)

 

 

 

10.1

 

Securities Purchase Agreement, dated as of October 25, 2017, by and between the Company and certain investment funds managed by the Alternative Investments  & Manager Selection Group of Goldman Sachs Asset Management, L.P. (6)

 

 

 

10.2

 

Securities Purchase Agreement, dated as of October 25, 2017, by and between the Company and James P. Labe, Sajal K. Srivastava and Andrew J. Olson (7)

 

 

 

11.1

 

Computation of Per Share Earnings (8)

 

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended (*)

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended (*)

 

 

 

32.1

 

Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (*)

 

 

 

32.2

 

Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (*)

 

 

 

 

(1)

Incorporated by reference to Exhibit (a) to the Registrant’s Pre-Effective Amendment No. 1 to TriplePoint Venture Growth BDC Corp.’s registration statement on Form N-2 (File No. 333-191871) filed on January 22, 2014.

(2)

Incorporated by reference to Exhibit (b) to the Registrant’s Pre-Effective Amendment No. 1 to TriplePoint Venture Growth BDC Corp.’s registration statement on Form N-2 (File No. 333-191871) filed on January 22, 2014.

(3)

Incorporated by reference to Exhibit (d) to the Registrant’s Pre-Effective Amendment No. 1 to TriplePoint Venture Growth BDC Corp.’s registration statement on Form N-2 (File No. 333-191871) filed on January 22, 2014.

(4)

Incorporated by reference to Exhibit d(6) to the Registrant’s Post-Effective Amendment No. 6 to TriplePoint Venture Growth BDC Corp.’s Registration Statement on Form N-2 (File No. 333-204933) filed on July 14, 2017.

(5)

Incorporated by reference to Exhibit d(7) to the Registrant’s Post-Effective Amendment No. 6 to TriplePoint Venture Growth BDC Corp.’s Registration Statement on Form N-2 (File No. 333-204933) filed on July 14, 2017.

(6)

Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 26, 2017.

(7)

Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on October 26, 2017.

(8)

Included in the notes to the financial statements contained in this Report.

(*)

Filed herewith.

 

 

 

55


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

 

 

TRIPLEPOINT VENTURE GROWTH BDC CORP.

 

 

 

Date: November 6, 2017

By:

/s/ James P. Labe

 

 

James P. Labe, Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

 

 

 

Date: November 6, 2017

By:

/s/ Andrew J. Olson

 

 

Andrew J. Olson, Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 

56