N-2 1 ptn2_goldmanliberty.htm ptn2_goldmanliberty.htm
 
 
 
 
As filed with the Securities and Exchange Commission on March 29, 2013
Registration No. 333-            
 

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

 
FORM N-2
 

 

 
X
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
   
 
PRE-EFFECTIVE AMENDMENT NO.
   
 
POST-EFFECTIVE AMENDMENT NO.
   
 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
 


GOLDMAN SACHS LIBERTY HARBOR CAPITAL, LLC
 (Exact name of Registrant as Specified in Charter)
 

200 West Street, New York, New York 10282
(Address of Principal Executive Offices)
 
Registrant’s Telephone Number, including Area Code: (212) 902-0300
 
Jonathan Lamm
Goldman Sachs Liberty Harbor Capital, LLC
200 West Street, New York, New York 10282
(Name and Address of Agent for Service)
 

 
Copies of information to:
 
Paul D. Tropp, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, New York 10004
Telephone: (212) 859-8000
Facsimile: (212) 859-4000
Geoffrey R.T. Kenyon, Esq.
Richard Horowitz, Esq.
Dechert LLP
1095 Avenue of the Americas
New York, NY 10036
Telephone: (212) 698-3500
Facsimile: (212) 698-3599
Margery K. Neale, Esq.
Maria Gattuso, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212)728-9294
 
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
 
If any of the securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than Securities offered in connection with a dividend reinvestment plan, check the following box.    ¨
 
It is proposed that this filing will become effective (check appropriate box):
 
¨
when declared effective pursuant to section 8(c).
 
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
 
Title of Securities Being Registered
Proposed Maximum Aggregate Offering Price(1)
Amount of Registration Fee(2)
Common Stock, $0.001 par value per share
$100,000,000
$13,640.00
 
(1)
Includes the underwriters’ over-allotment option.
(2)
Estimated pursuant to Rule 457(o) solely for the purpose of determining the registration fee.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 

 
 
 

 
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS
 
SUBJECT TO COMPLETION, DATED      , 2013
 

 
       SHARES
 
GOLDMAN SACHS BDC, INC.
 
We are a recently formed, externally managed specialty finance company that is a non-diversified, closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  We were formed by The Goldman Sachs Group, Inc. (“Group Inc.”) to invest primarily in middle-market companies in the United States.  Our investment objective is to generate current income and, to a lesser extent, capital appreciation through investments in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities.

We are managed by our investment adviser, Goldman Sachs Asset Management, L.P. (“GSAMLP”), a wholly-owned subsidiary of Group Inc. Group Inc., together with Goldman, Sachs & Co., GSAMLP and its other subsidiaries and affiliates, is referred to herein as “Goldman Sachs.”

This is an initial public offering of our shares of common stock (the “IPO”). All of the shares of common stock offered by this prospectus are being sold by us.
 
Our shares of common stock have no history of public trading.  We currently expect that the initial public offering price per share of our common stock will be between $    and $    .  We intend to apply to have our common stock listed on                under the symbol “        ” (the “listing”).
 
We are an “emerging growth company” within the meaning of the recently enacted Jumpstart Our Business Startups (JOBS) Act.
 
This prospectus contains important information you should know before investing in our common stock. Please read it before you invest and keep it for future reference. Upon completion of this offering, we will file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or the SEC. This information will be available by written or oral request and free of charge by contacting us at        , or by calling us collect at          .  Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be a part of this prospectus. The SEC also maintains a website at http://www.sec.gov that contains this information.
 
Shares of closed-end investment companies that are listed on an exchange, including business development companies, frequently trade at a discount to their net asset value (“NAV”). If our shares trade at a discount to our NAV, it may increase the risk of loss for purchasers in this offering.  Assuming an initial public offering price of $        per share, purchasers in this offering will experience immediate dilution of approximately $        per share.  See “Dilution” for more information.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
Investing in our common stock involves a high degree of risk, including credit risk and the risk of the use of leverage, and is highly speculative. Before buying any shares of our common stock, you should read the discussion of the material risks of investing in our common stock, including the risk of leverage, in “Risk Factors” beginning on page 15 of this prospectus.

 
  
Per Share
 
    
Total
 
     
Public offering price
  
$
            
  
    
$
            
  
Underwriting discounts and commissions
  
$
 
  
    
$
 
  
Proceeds, before expenses, to us(1)
  
$
 
  
    
$
 
  


(1)
We estimate that we will incur offering expenses of approximately $       , or approximately $   per share, in connection with this offering.
 
The underwriters may also exercise their over-allotment option to purchase up to an additional         shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus. If the underwriters exercise this over-allotment option in full, the total underwriting discount will be $            , and total proceeds, before expenses, will be $            .
 
The shares will be ready for delivery on or about           , 2013.
 
 
 


 
__________________________________


__________________________________
The date of this prospectus is               , 2013.
 
 
 
 

 
TABLE OF CONTENTS
 

 
SUMMARY  1
THE OFFERING  8
FEES AND EXPENSES  12
SELECTED FINANCIAL AND OTHER INFORMATION  15
RISK FACTORS  16
POTENTIAL CONFLICTS OF INTEREST  40
FORWARD-LOOKING STATEMENTS  48
USE OF PROCEEDS  50
DISTRIBUTIONS  51
CAPITALIZATION  52
DILUTION  53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  54
SENIOR SECURITIES  62
BUSINESS  63
PORTFOLIO COMPANIES  73
MANAGEMENT  75
RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS  87
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS  89
DETERMINATION OF NET ASSET VALUE  91
DESCRIPTION OF CAPITAL STOCK  93
SHARES ELIGIBLE FOR FUTURE SALE  100
REGULATION  101
U.S. FEDERAL INCOME TAX CONSIDERATIONS  107
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT  117
PORTFOLIO TRANSACTIONS AND BROKERAGE  118
UNDERWRITING  119
LEGAL MATTERS  123
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  123
ADDITIONAL INFORMATION  117
INDEX TO FINANCIAL STATEMENTS  F-1
GSAM PROXY VOTING GUIDELINES SUMMARY  A-1
   
 
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information or to make any representations not contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume the information contained in this prospectus is accurate after the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
 
TRADEMARKS
 
This prospectus contains trademarks and service marks owned by Goldman Sachs.  This prospectus may also contain trademarks and service marks owned by third parties.
 
 
 

 

SUMMARY
 
This is only a summary. This summary may not contain all of the information that you should consider before investing in our common stock offered by this prospectus. You should review the more detailed information contained in this prospectus, especially the information set forth under the heading “Risk Factors.”
 
Unless indicated otherwise in this prospectus or the context requires otherwise, the terms:
 
●  
“Company,” “we,” “us” or “our” refer to Goldman Sachs BDC, Inc., or for periods prior to the Conversion (as defined below), Goldman Sachs Liberty Harbor Capital, LLC (See “—Formation Transactions”);
 
  
“GSAMLP” or our “investment adviser” refer to Goldman Sachs Asset Management, L.P.;
 
  
“Group Inc.” refers to The Goldman Sachs Group, Inc.; and
 
  
“administrator” refers to State Street Bank and Trust Company.
 
Unless indicated otherwise, the information in this prospectus assumes no exercise by the underwriters of their over-allotment option.
 
The Company
 
We are a recently formed, externally managed specialty finance company that is a non-diversified, closed-end management investment company that elected to be regulated as a business development company, or a “BDC,” under the Investment Company Act.
 
We are managed by our investment adviser, GSAMLP, subject to the supervision of our Board of Directors, a majority of whom are independent of GSAMLP and its affiliates.  GSAMLP, together with certain other affiliates of Group Inc., comprise Goldman Sachs Asset Management (“GSAM”).  GSAM is part of Group Inc., a public company that is a bank holding company, financial holding company and a world-wide, full-service financial services organization. Group Inc. is the general partner and principal owner of GSAMLP. GSAM has been providing financial solutions for investors since 1988 and has approximately $742.4 billion of assets under management as of December 31, 2012.
 
Our investment objective is to generate current income and, to a lesser extent, capital appreciation through investments in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities.  We invest primarily in U.S. middle-market companies, which GSAM believes have been underserved in recent years by banks and have difficulty accessing the public debt markets.  However, we may from time to time invest in larger or smaller companies.  In this prospectus, we generally use the term “middle-market” to refer to companies with earnings before interest expense, income tax expense, depreciation and amortization, or “EBITDA,” between $5 million and $75 million annually.  We use the term “mezzanine” to refer to a loan that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.  We expect to make investments through both primary originations and open-market secondary purchases.  We expect to invest across a number of different industries. Our investments are typically expected to have maturities between three and ten years and generally range in size between $5 and $50 million, though this investment size may grow if our capital base grows and shrink if our capital base shrinks.  If we are successful in achieving our investment objective, we believe that we will be able to provide our stockholders with consistent dividend distributions and attractive risk-adjusted total returns.
 
In addition to investments in U.S. middle-market companies, we may invest a portion of our capital in opportunistic investments, such as in large U.S. companies, foreign companies, stressed or distressed debt, structured products or private equity.  The proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating, although these types of investments generally will constitute less than 30% of our total assets.
 
The instruments in which we invest typically are not rated by any rating agency, but GSAM believes that if such instruments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors
 
 
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Service and lower than “BBB-” by Fitch Ratings or Standard & Poor’s Rating Services), which is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.  Bonds that are rated below investment grade are sometimes referred to as “high yield bonds,” “junk bonds” or “leveraged loans.”  We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by any nationally recognized statistical rating organization.
 
Since our initial funding by Group Inc. on November 15, 2012, as of February 28, 2013, we have invested approximately $72.7 million in eight companies.  Our investments have spanned across a variety of industries, including consumer-non-cyclical, industrial, technology, energy, financial and basic materials.  As of February 28, 2013, approximately 96% of our investments at net cost were in U.S. domestic companies.  Also as of such date, the weighted average remaining term of our debt investments was approximately 5.6 years.  At February 28, 2013, our portfolio on a net cost basis was invested approximately 91% in secured debt (31% in first lien debt and 60% in second lien debt) and 9% in unsecured debt.  As of February 28, 2013, on a net cost basis, approximately 52% of our portfolio was invested in debt bearing a fixed interest rate and approximately 48% was invested in debt bearing a floating interest rate. As of January 31, 2013, our portfolio had a fair value of approximately $71.0 million.
 
The following charts summarize our portfolio mix by industry and type based on the net cost of our investments as of February 28, 2013.
 
   
 
As of February 28, 2013, we had not incurred any leverage. Prior to the completion of this offering, we expect that we will be a party to one or more debt financing arrangements that will allow us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield.  In connection with these or other borrowings, our lenders may require us to pledge some or all of our assets.  In addition, the lenders may ask us to comply with positive or negative covenants that could have an adverse effect on our operations.
 
Our Investment Adviser
 
GSAMLP, a Delaware limited partnership, serves as our investment adviser and has been registered as an investment adviser with the SEC since 1990.  Subject to the supervision of our Board of Directors, our investment adviser manages our day-to-day operations and provides us with investment advisory and management services and certain administrative services.
 
In particular, the GSAM Liberty Harbor investment team will be responsible for identifying attractive investment opportunities, conducting research and due diligence on prospective investments, structuring our investments and monitoring and servicing our investments.  We do not have any employees.  As of January 31, 2013, the GSAM Liberty Harbor investment team had 24 investment professionals.  These individuals will have responsibilities other than relating to us and will allocate a portion of their time in support of our business based on their particular expertise as it relates to a potential investment opportunity and our investment objective as whole.  In addition, GSAM believes that is has best in class support personnel, including expertise in risk management, legal, accounting, tax, information technology and compliance, among others.  We expect to benefit from the support provided by these personnel in our operations.
 
 
 
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The GSAM Liberty Harbor investment team takes a bottom-up, fundamental research approach to investing and focuses primarily on corporate credit investment opportunities in North America.  The team has approximately $5.0 billion of assets under management as of January 31, 2013.  The senior members of the investment team have been working together since 2006 and have an average of over 14 years of experience in leveraged finance and private transactions.
 
The GSAM Liberty Harbor investment team has an investment committee comprised of four voting members, Brendan McGovern, Salvatore Lentini, Jon Yoder and David Yu, as well as three non-voting members with operational or legal expertise.  The investment committee is responsible for approving all of our investments.  The investment committee also monitors investments in our portfolio and approves all asset dispositions.  We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the investment committee, which includes expertise in primary and secondary leveraged credit, private mezzanine finance, stressed and distressed debt, bankruptcy, mergers and acquisitions and private equity.
 
We believe that the GSAM Liberty Harbor investment team will be able to leverage their current investment platform, resources and existing relationships with private equity sponsors, middle-market agents and intermediaries, financial institutions, the restructuring community and small public companies that have effectively lost access to the public capital markets, which we refer to as “orphaned” public companies, to provide us with attractive investment opportunities, as well as with analyzing, negotiating, structuring and monitoring our investments.
 
Market Opportunity
 
GSAM believes that current market conditions and regulatory changes have combined to create an attractive investment environment for us.  Specifically:
 
  
Loans to middle-market companies are typically illiquid and unrated.  Stakeholders in banks, including their shareholders, lenders and regulators, continue to exert pressure to contain the amount of illiquid, unrated assets held on bank balance sheets.  Examples of this include moves to codify the BASEL III accords in the U.S., which increase the regulatory capital charge for lower rated and unrated assets in most instances, and continued investor focus on the amount of illiquid assets whose fair value cannot be determined by using observable measures, or “Level 3 assets,” held on bank balance sheets.  As a result, GSAM believes that banks have reduced their lending to middle-market companies.
 
  
Consolidation of regional banks into money center banks has reduced the focus on middle-market lending.  Money center banks traditionally focus on lending and providing other services to large corporate clients to whom they can deploy larger amounts of capital more efficiently.  GSAM believes that this has resulted in fewer bank lenders to the U.S. middle-market and the reduced availability of debt capital to the companies we target.
 
  
In GSAM’s experience, the so-called “shadow banking sector” (which GSAM believes is comprised of hedge funds, mezzanine funds, private equity funds, structured vehicles and similar entities) has struggled since the 2008 financial crisis to attract investor interest in long-term capital commitments of the nature required to allow the managers of these vehicles to purchase illiquid assets such as middle-market loans.  As a result, GSAM believes the amount of capital in the “shadow banking sector” for lending to the U.S. middle-market is significantly smaller than it was prior to the 2008 financial crisis.
 
  
While public bond markets have been extremely robust in recent years, middle-market companies are rarely able to issue bonds in this market as the purchasers of public bonds are highly focused on liquidity.  For example, asset managers are a significant buyer of public bonds.  However, asset managers often have clients that expect to be able to liquidate their investment on very short notice.  Accordingly, the existence of an active secondary market for the bonds is an important consideration in the decision to purchase the bonds.  Typically, there is no active secondary market for the debt of U.S. middle-market companies.
 
  
The reduced availability of credit to middle-market companies typically results in an increased interest rate, or pricing, of loans for middle-market lenders.  In addition, recent loans to middle-
 
 
 
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market companies have often included meaningful upfront fees and prepayment protections, both of which should enhance the profitability of new loans to lenders.
 
Competitive Advantages
 
Broad Investment Platform
 
The GSAM Liberty Harbor investment team had approximately $5.0 billion of assets under management as of January 31, 2013, invested in three main strategies: hedged strategies (which includes event-driven, long-short, relative value, capital structure arbitrage and stressed and distressed credit); a long-only public credit strategy; and a long only private credit strategy.  GSAM believes that this broad platform provides a competitive advantage in sourcing attractive investment opportunities, pricing risk, and executing and monitoring transactions.  For example, GSAM believes that the GSAM Liberty Harbor investment team’s broad activities provide a differentiated set of relationships relative to singularly focused middle-market lenders, and this results in differentiated investment opportunities relative to many of our competitors.  GSAM also believes that the GSAM Liberty Harbor investment team’s large presence in the public credit markets gives it enhanced insight into the risk premium that should be sought for taking the illiquidity risk that often accompanies middle-market loans.  Finally, GSAM believes that the expertise obtained from engaging in a broad set of activities significantly enhances the core competencies of middle-market lending, such as by providing industry and sector insight and bankruptcy and work-out expertise.
 
Diversified Origination Strategy
 
The GSAM Liberty Harbor investment team originates investment opportunities from a variety of sources, including private equity sponsors, middle-market agents and intermediaries, financial institutions, the restructuring community and “orphaned” public companies.  These different channels produce attractive investment opportunities at different points in time as market conditions, the economic cycle and regulation changes.  GSAM believes that the ability to source investment opportunities from a diverse set of channels is an important competitive advantage.  Once an attractive investment opportunity has been identified, we believe that the “Goldman Sachs” brand recognition makes us a desirable capital provider relative to some of our competitors with lesser known brand names.  As a result, GSAM believes that we are more likely to be chosen as a capital provider when a prospective borrower has a choice.
 
Flexible Transaction Structuring
 
The GSAM Liberty Harbor investment team has extensive experience investing in a wide variety of transaction structures with a range of terms and conditions.  GSAM believes that the most attractive asset class within the middle-market shifts over time and even varies from borrower to borrower.  For example, in some environments, GSAM believes that traditional first lien lenders become aggressive in pricing and terms, which GSAM believes creates attractive opportunities for second lien or unsecured lenders.  At other times, the market for mezzanine or unsecured debt can become detached from underlying intrinsic values and result in comparatively better risk-adjusted returns for secured lenders.  Some borrowers may have significant collateral that can be pledged to structure an attractive secured loan, while other borrowers may have little collateral but a great deal of enterprise value that makes a mezzanine loan more attractive.  GSAM believes that the ability to be flexible and creative in structuring attractive solutions for particular borrowers provides us with the ability to opportunistically invest in the level of a borrower’s capital structure that GSAM believes will offer more attractive risk-adjusted returns as well as enhances our origination capability because prospective borrowers value our ability to customize a solution.
 
Disciplined Investment Approach
 
In making its investment decisions, the GSAM Liberty Harbor investment team utilizes the same approach that has allowed it to grow its assets under management to approximately $5.0 billion since its first fund launch in June 2007 and earn the confidence of clients ranging from high net worth individuals to large institutional investors and sovereign wealth funds.  Specifically, the GSAM Liberty Harbor investment team takes a bottom-up, fundamental research approach to its potential investments, focusing on capital preservation and minimizing downside risk.  The GSAM Liberty Harbor investment  team engages in extensive due diligence with an expectation of holding the investment to maturity, which commonly includes meetings with management and other stakeholders in the company, financial due diligence on the prospective borrower’s operating history, industry due diligence, site visits and background checks, among other things.  A high value is placed on businesses with cash flows that are dependable and predictable, that have significant asset value and/or a strong enterprise value.  The GSAM Liberty Harbor investment team emphasizes
 
 
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contractual protections in its investments, including covenants, structure and other terms and conditions. GSAM believes that this disciplined approach will lead to better risk-adjusted returns over economic cycles.
 
The Goldman Sachs Asset Management Platform
 
GSAM is one of the largest asset managers in the world, with over $742.4 billion of assets under management as of December 31, 2012. We expect to benefit from GSAM’s control, operational, administrative and support infrastructure, which we believe is one of the best in the financial services industry.  Our risk monitoring will be provided by GSAM’s global risk management team, the same team that monitors risk for all of GSAM.  We will utilize GSAM’s proprietary information technology systems, which we believe enhances our ongoing monitoring of our portfolio, among other things.  Finally, we will be served by GSAM’s legal and compliance teams, which bring a wealth of experience gleaned over many years of support to GSAM.
 
Our Administrator
 
State Street Bank and Trust Company serves as our administrator.  Pursuant to an administration agreement between us and our administrator (the “Administration Agreement”), our administrator is responsible for providing various accounting and administrative services to us. Our administrator is entitled to fees as described in “Management.” To the extent that our administrator outsources any of its functions, the administrator will pay any compensation associated with such functions.  See “Management—Our Administrator.”
 
Operating and Regulatory Structure
 
We have elected to be treated as a business development company under the Investment Company Act. As a business development company, we are generally prohibited from acquiring assets other than qualifying assets, unless, after giving effect to any acquisition, at least 70% of our total assets are qualifying assets.  Qualifying assets generally include securities of eligible portfolio companies, cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment.  Under the rules of the Investment Company Act, “eligible portfolio companies” include (i) private U.S. operating companies, (ii) public U.S. operating companies whose securities are not listed on a national securities exchange (e.g., the New York Stock Exchange) or registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (iii) public U.S. operating companies having a market capitalization of less than $250 million.  Public U.S. operating companies whose securities are quoted on the over-the-counter bulletin board and through OTC Markets Group Inc. are not listed on a national securities exchange and therefore are eligible portfolio companies.  See “Regulation.”
 
We intend to elect to be treated, and intend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ending on December 31, 2013. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we distribute to our stockholders as dividends if we meet certain source of income, distribution and asset diversification requirements. We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.  See “U.S. Federal Income Tax Considerations.”
 
Use of Leverage
 
Prior to the completion of this offering, we expect that we will be a party to one or more debt financing arrangements that will allow us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield.  This is known as “leverage” and could increase or decrease returns to our stockholders. The use of leverage involves significant risks. As a BDC, with certain limited exceptions, we will only be allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, equals at least 200% after such borrowing.  Certain trading practices and investments, such as reverse repurchase agreements, may be considered to be borrowings or involve leverage and thus are subject to the Investment Company Act restrictions. In accordance with applicable SEC staff guidance and interpretations, when we engage in such transactions, instead of maintaining asset coverage of at least 200%, we will segregate or earmark liquid assets, or enter into an offsetting position, in an amount at least equal to our exposure, on a mark-to-market basis, to the transaction (as calculated pursuant to requirements of the SEC). Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered to be borrowings for
 
 
 
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these purposes. Practices and investments that may involve leverage but are not considered to be borrowings are not subject to the asset coverage requirement and we will not otherwise segregate or earmark liquid assets or enter in offsetting positions. The amount of leverage that we employ will depend on our investment adviser’s and our Board of Directors’ assessment of market conditions and other factors at the time of any proposed borrowing.  Additionally, we will be able to incur additional leverage if we are able to exclude the debt of any small business investment company (“SBIC”) subsidiary we may form in the future from the leverage requirements otherwise applicable to BDCs.  We have not yet applied to the Small Business Administration (“SBA”) for approval and have not yet applied for exemptive relief from the SEC.
 
Formation Transactions
 
We were formed as Goldman Sachs Liberty Harbor Capital, LLC on September 26, 2012 and commenced operations on November 15, 2012, using seed capital contributions we received from Group Inc.  On March 29, 2013, we elected to become a BDC under the Investment Company Act.  On April 1, 2013, we converted from a Delaware limited liability company to a Delaware corporation named Goldman Sachs BDC, Inc. (the “Conversion”). On April 1, 2013, we consummated an offering of $   million of our common stock in a private placement. As a result of the Conversion and upon the consummation of the private placement on April 1, 2013, Group Inc. owned approximately     % of our common stock.    We intend to elect to be treated, and intend to qualify annually, as a RIC under the Code, commencing with our taxable year ending on December 31, 2013.
 
The sequence of events described above are collectively referred to herein as the “Formation Transactions.”
 
Implications of Being an Emerging Growth Company
 
We qualify as an emerging growth company, as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) for so long as we qualify as an emerging growth company.
 
In addition, Section 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act, as amended by Section 102(b) of the JOBS Act provide that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. However, pursuant to Section 107 of the JOBS Act, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
 
We could remain an emerging growth company until the earlier of (a) up to five years measured from the date of the first sale of common equity securities pursuant to an effective registration statement, (b) the last day of the first fiscal year in which our annual gross revenues are $1 billion or more, (c) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (d) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
 
Summary Risk Factors
 
Investing in us involves a high degree of risk and you could lose all or part of your investment.  We refer to certain of these risks below:
 
We are a relatively new company and have a limited operating history.
Our operation as a BDC will impose numerous constraints on us and significantly reduce our operating flexibility.  In addition, if we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.
We will be subject to corporate-level U.S. federal income tax on all of our income if we are unable to qualify as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance.
We will be dependent upon management personnel of our investment adviser for our future success.
 
 
 
6

 
 
Our investment adviser and its management have no prior experience managing a BDC.
Our ability to grow depends on our ability to raise additional capital.
We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
We operate in a highly competitive market for investment opportunities.
Potential conflicts of interest could impact our investment returns.
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
Our investment adviser can resign on 60 days’ notice.  We may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
Our ability to enter into transactions with our affiliates is restricted.
We will be exposed to risks associated with changes in interest rates.
Our activities may be limited as a result of being controlled by a bank holding company.
The Volcker Rule may impact how we operate our business.
Our investments are very risky and highly speculative.
The lack of liquidity in our investments may adversely affect our business.
Our debt investments may be risky and we could lose all or part of our investment.
Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our NAV.
We may initially invest a portion of the net proceeds of this offering primarily in high-quality short-term investments, which will generate lower rates of return than those expected from the interest generated on our intended investment program.
Investing in our common stock involves an above average degree of risk.
Non-U.S. stockholders may be subject to withholding of U.S. federal income tax on dividends we pay.
 
Potential Conflicts of Interest
 
We may have conflicts of interest arising out of the investment advisory activities of GSAM and other operations of Goldman Sachs.  See “Potential Conflicts of Interest” and “Risk Factors—Risks Relating to Our Business and Structure—Potential conflicts of interest could impact our investment returns.”
 
Corporate Information
 
Our principal executive offices are located at 200 West Street, New York, New York 10282 and our telephone number is (212) 902-0300.   We maintain a website located at            . Information on our website is not incorporated into or a part of this prospectus.
 
 

 
 
THE OFFERING
 
 
Common stock offered by us
                shares, excluding            shares of common stock issuable pursuant to the over-allotment option granted to the underwriters.
   
Common stock to be outstanding after this offering
         shares, excluding         shares of common stock issuable pursuant to the over-allotment option granted to the underwriters.
   
Use of proceeds
We expect to use proceeds from the closing of this offering to make investments consistent with our investment objectives, to repay a portion of our outstanding debt and for offering expenses and general corporate purposes.  See “Use of Proceeds.”
   
Regulatory and tax status
We are a BDC under the Investment Company Act.  We intend to elect to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ending on December 31, 2013. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we distribute to our stockholders as dividends. To obtain and maintain our RIC status, we must meet specified source-of-income and asset diversification requirements and timely distribute to our stockholders at least 90% of our “investment company taxable income” as defined by the Code, which generally includes net ordinary income and net short-term capital gains in excess of net long-term capital losses, for each taxable year. See “Distributions” and “U.S. Federal Income Tax Considerations.”
   
Distributions
We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.  The quarterly distributions, if any, will be determined by our Board of Directors.  The amount of any such distribution will be proportionately reduced to reflect the number of days remaining in the quarter after the completion of the initial offering.  All dividends and distributions will be subject to lawfully available funds therefor, and no assurance can be given that we will be able to declare such an initial distribution or distributions in future periods.
 
We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.  The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.  The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year.  See “Distributions.”
 
 
 
 
8

 
 
   
Listing
We intend to apply to list our common stock on             under the symbol “                     .”
   
Fees and expenses
We pay our investment adviser a base management fee at an annual rate of 1.50% of our average gross assets at the end of each of the two most recently completed calendar quarters (excluding cash and cash equivalents, but including assets purchased with borrowed amounts).
 
We also pay our investment adviser an incentive fee based on our performance. It consists of two parts, one based on income and the other based on capital gains, with both being subject to a hurdle amount based on our net asset value.
 
The portion of the Incentive Fee based on income will be determined and paid quarterly by reference to our aggregate net investment income, as adjusted, from the current calendar quarter and the three preceding calendar quarters (the “Trailing Four Quarters”), or, in the case of our first three quarters, the appropriate portion thereof. The Incentive Fee based on income is based on the amount by which (A) aggregate net investment income in respect of the relevant Trailing Four Quarters (the “Ordinary Income”) less the amount of any Net Capital Loss (as defined below) in respect of such Trailing Four Quarters (the Ordinary Income as adjusted, the “Adjusted Ordinary Income”) exceeds (B) the hurdle amount for such Trailing Four Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Four Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, net investment income is net of all fees and expenses, including the Management Fee but excluding any Incentive Fee paid.
 
“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
 
“Net Capital Gain” in respect of a particular period means the difference, if positive, between (i) aggregate capital gains, whether realized or unrealized, in such period and (ii) aggregate capital losses, whether realized or unrealized, in such period.
 
The Incentive Fee based on income for a particular quarter will equal 100% of the Trailing Four Quarters’ Excess Income Amount until the cumulative Incentive Fee for the quarter equals 20% of such Trailing Four Quarters’ Adjusted Ordinary Income, which will be achieved once our Adjusted Ordinary Income equals an annualized hurdle rate of 8.75% of our net asset value at the beginning of each quarter comprising the relevant Trailing Four Quarters. Thereafter, the Incentive Fee based on income for such quarter equals 20% of the Trailing Four Quarters’ remaining Excess Income Amount. The amount of the Incentive Fee based on income that will be paid to our investment adviser for a particular quarter will equal the excess of the Incentive Fee so calculated less the aggregate Incentive Fees based on income
 
 
 
9

 
 
that were paid in the preceding three calendar quarters comprising the relevant Trailing Four Quarters.
 
The portion of the Incentive Fee based on capital gains is calculated on an annual basis. For each period beginning on January 1 of each calendar year and ending on December 31 of the calendar year or, in the case of our first and last year, the appropriate portion thereof (each, an “Annual Period”), we will pay our investment adviser an Incentive Fee equal to (A) 20% of the difference, if positive, of the sum of our aggregate realized capital gains, if any, computed net of our aggregate realized capital losses, if any, and our aggregate unrealized capital depreciation, if any, in each case from April 1, 2013 until the end of such Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to our investment adviser from April 1, 2013. For the avoidance of doubt, unrealized capital gains are excluded from the calculation in clause (A), above.
 
Notwithstanding the foregoing, the portion of the Incentive Fee based on capital gains for each Annual Period will be limited to the amount, if any, by which (x) the Ordinary Income (reduced for this purpose by the Incentive Fee based on income in respect of such period, if any) plus the Net Capital Gain or minus the Net Capital Loss (as applicable) in respect of such period exceeds (y) the hurdle amount in respect of such period.
 
See “Fees and Expenses” and “Management—Investment Management Agreement.”
   
Leverage
We expect from time to time to borrow funds to make additional investments.  This is known as “leverage” and could increase or decrease returns to our stockholders.  The use of leverage involves significant risks.  As a BDC, with certain limited exceptions, we will only be allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, equals at least 200% after such borrowing.  In connection with certain trading practices and investments, we will, consistent with applicable SEC staff guidance and interpretations, segregate or earmark liquid assets, in an amount at least equal to our exposure, on a mark-to-market basis, to the transaction (as calculated pursuant to requirements of the SEC), or enter into an offsetting position. The amount of leverage that we employ will depend on our investment adviser’s and our Board of Directors’ assessment of market conditions and other factors at the time of any proposed borrowing.  Additionally, we will be able to incur additional leverage if we are able to exclude the debt of any SBIC subsidiary we may form in the future from the leverage requirements otherwise applicable to BDCs.
   
Trading at a discount
Shares of closed-end investment companies that are listed on an exchange, including BDCs, frequently trade at a discount to their NAV. We are not generally able to issue and sell our common stock at a price below our NAV per share unless, among other things, the requisite stockholders approve such a
 
 
 
10

 
 
  sale. The risk that our shares may trade at a discount to our NAV is separate and distinct from the risk that our NAV per share may decline. We cannot predict whether our shares will trade above, at or below NAV. See “Risk Factors.”
   
Investment adviser
Goldman Sachs Asset Management, L.P., a wholly-owned subsidiary of Group Inc., serves as our investment adviser.  See “Management—Our Investment Adviser.”
   
Administrator
State Street Bank and Trust Company serves as our administrator. See “Management—Our Administrator.”
   
Custodian, transfer agent and dividend disbursing agent
State Street Bank and Trust Company serves as our custodian and Goldman, Sachs & Co. serves as our transfer agent and dividend disbursing agent.  Goldman Sachs & Co. has retained State Street Bank and Trust Company as sub-transfer agent to assist in certain related functions.  See “Custodian, Transfer and Dividend Disbursing Agent.”
   
Risk factors
See “Risk Factors” and the other information in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
   
Available information
We have filed with the SEC a registration statement on Form N-2 under the Securities Act of 1933, as amended (the “Securities Act”) which contains additional information about us and the shares of our common stock being offered by this prospectus. After completion of this offering, we will be required to file annual, quarterly and current reports, proxy statements and other information meeting the information requirements of the Exchange Act. This information will be available at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549 and on the SEC’s website at http://www.sec.gov.  Information on the operation of the SEC’s public reference room may be obtained by calling the SEC at (202) 551-8090 or (800) SEC-0330.
 
We maintain a website at www.              .com and intend to make all of our information available, free of charge, on or through our website. You may also obtain such information by contacting us, in writing at:               , or by telephone at           . The information on our website is not incorporated by reference in this prospectus.

 
 
 
11

 
FEES AND EXPENSES
 
 
The following table is intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or that “we” will pay fees or expenses, our stockholders will indirectly bear such fees or expenses as our investors.
 
Stockholder transaction expenses:
   
Sales load (as a percentage of offering price)
%
(1)
 
Offering expenses (as a percentage of offering price)
%
(2)
 
Total stockholder transaction expenses (as a percentage of offering price)
%
 
 
Annual expenses (as a percentage of net assets attributable to common stock):
 
 
 
Base management fee
%
(3)
 
Incentive fees payable under the Investment Management Agreement
%
(4)
 
Interest payments on borrowed funds
%
(5)
 
Other expenses
%
(6)
 
Total annual expenses
%
 
 
 
 

(1)
The underwriting discount and commission with respect to shares of common stock sold in this offering, which is a one-time fee paid to the underwriters, is the only sales load paid in connection with this offering.
 
(2)
Amount reflects estimated offering expenses of approximately $        .
 
(3)
Our base management fee is       % of our average gross assets at the end of each of the two most recently completed calendar quarters (excluding cash and cash equivalents, but including assets purchased with borrowed amounts).  For purposes of this table, we have assumed that we maintain no cash or cash equivalents. See “Management—Investment Management Agreement.”
 
(4)
The incentive fee payable to our investment adviser is based on our performance and will not be paid unless we achieve certain goals. It consists of two parts, one based on income and the other based on capital gains, with both being subject to a hurdle amount based on our net asset value.
 
 
The portion of the Incentive Fee based on income will be determined and paid quarterly by reference to our aggregate net investment income, as adjusted, from the Trailing Four Quarters, or, in the case of our first three quarters, the appropriate portion thereof. The Incentive Fee based on income is based on the amount by which (A) aggregate net investment income in respect of the relevant Trailing Four Quarters (the “Ordinary Income”) less the amount of any Net Capital Loss (as defined below) in respect of such Trailing Four Quarters (the Ordinary Income as adjusted, the “Adjusted Ordinary Income”) exceeds (B) the hurdle amount for such Trailing Four Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Four Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, net investment income is net of all fees and expenses, including the Management Fee but excluding any Incentive Fee paid.
 
 
“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i)
 
 
 
12

 
 
 
aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
 
 
“Net Capital Gain” in respect of a particular period means the difference, if positive, between (i) aggregate capital gains, whether realized or unrealized, in such period and (ii) aggregate capital losses, whether realized or unrealized, in such period.
 
 
The Incentive Fee based on income for a particular quarter will equal 100% of the Trailing Four Quarters’ Excess Income Amount until the cumulative Incentive Fee for the quarter equals 20% of such Trailing Four Quarters’ Adjusted Ordinary Income, which will be achieved once our Adjusted Ordinary Income equals an annualized hurdle rate of 8.75% of our net asset value at the beginning of each quarter comprising the relevant Trailing Four Quarters. Thereafter, the Incentive Fee based on income for such quarter equals 20% of the Trailing Four Quarters’ remaining Excess Income Amount. The amount of the Incentive Fee based on income that will be paid to our investment adviser for a particular quarter will equal the excess of the Incentive Fee so calculated less the aggregate Incentive Fees based on income that were paid in the preceding three calendar quarters comprising the relevant Trailing Four Quarters.
 
 
The portion of the Incentive Fee based on capital gains is calculated on an annual basis. For each period beginning on January 1 of each calendar year and ending on December 31 of the calendar year or, in the case of our first and last year, the appropriate portion thereof (each, an “Annual Period”), we will pay our investment adviser an Incentive Fee equal to (A) 20% of the difference, if positive, of the sum of our aggregate realized capital gains, if any, computed net of our aggregate realized capital losses, if any, and our aggregate unrealized capital depreciation, if any, in each case from April 1, 2013 until the end of such Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to our investment adviser from April 1, 2013. For the avoidance of doubt, unrealized capital gains are excluded from the calculation in clause (A), above.
 
 
Notwithstanding the foregoing, the portion of the Incentive Fee based on capital gains for each Annual Period will be limited to the amount, if any, by which (x) the Ordinary Income (reduced for this purpose by the Incentive Fee based on income in respect of such period, if any) plus the Net Capital Gain or minus the Net Capital Loss (as applicable) in respect of such period exceeds (y) the hurdle amount in respect of such period.
 
 
See “Management—Investment Management Agreement.”
 
(5)
The table assumes: (a) that we borrow for investment purposes up to an amount equal to              % of our average total assets (average borrowing of $      million out of average total assets of $        million) and (b) that the interest expense and fees are $       million, based on estimated amounts for our first fiscal year. We may also issue preferred stock, subject to our compliance with applicable requirements under the Investment Company Act.  We do not currently anticipate issuing debt securities or preferred stock in the next 12 months.
 
(6)
“Other Expenses” are based on estimated amounts for the current fiscal year, including estimated overhead expenses, including payments under the Administration Agreement based on our allocable portion of overhead and other expenses incurred by our administrator.  See “Management—Our Administrator.”  Other Expenses also include certain estimates based on an assumed offering size of $       million.
 
Example
 
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed the estimated costs of borrowing assuming we incur leverage representing       % of our total assets, that none of our assets are cash or cash equivalents and that our annual operating expenses remain at the levels set forth in the table above and that stockholders would pay a sales load of     % with respect to common stock sold by us in this offering.
 
 
 
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1 year
 
  
3 years
 
  
5 years
 
  
10 years
 
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return(1)
  
$
   
  
$
   
  
$
 
  
  
$
 
  
 
(1)
The above illustration assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation. The expenses you would pay indirectly, based on a $1,000 investment and assuming a 5% annual return resulting entirely from net realized capital gains (and therefore subject to the capital gain incentive fee), and otherwise making the same assumptions in the example above, would be: 1 year, $    ; 3 years, $    ; 5 years, $   ; and 10 years, $    . Because our investment strategy involves investments that generate current income, we believe that a 5% annual return resulting entirely from net realized capital gains is unlikely.
 
While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the investment management agreement with our investment adviser (as amended and restated, the “Investment Management Agreement”), which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. In addition, the example assumes inclusion of offering expenses of approximately $      and reinvestment of all dividends and other distributions at NAV.
 
This example should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.
 
 
 
 
14 

 
 
SELECTED FINANCIAL AND OTHER INFORMATION
 
The selected financial and other information below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto.  Financial information as of and for the period ended December 31, 2012 has been derived from the audited financial statements of Goldman Sachs Liberty Harbor Capital, LLC, which are included elsewhere in this prospectus.  The audited financial statements included in this prospectus were audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm.
 
The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements and related notes included in this prospectus.
 
 
   
For the period from November 15, 2012 (Inception) through December 31, 2012
 
Statement of operations data:
     
Total investment income
  $ 161,910  
Total expenses
    346,255  
Net investment income (loss)
    (184,345 )
Net gain (loss) on investment transactions
    1,046,897  
Net increase (decrease) in member’s equity resulting from operations before tax
    862,552  
Income tax expense
    (351,975 )
Net increase (decrease) in member’s equity resulting from operations after tax
  $ 510,577  
Balance sheet data (at period end):
       
Total assets
  $ 51,768,807  
Total investments in securities
    49,964,820  
Total liabilities
    346,255  
Total member’s equity
  $ 51,422,552  
 
 
15 

 

 
  RISK FACTORS
 
Investing in our common stock involves certain risks relating to our structure and investment objective. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to make an investment in our common stock. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our NAV and the price per share of our common stock could decline, and you may lose all or part of your investment.
 
Risks Relating to Our Business and Structure
 
We are a relatively new company and have a limited operating history.
 
We commenced operations in November 2012. As a result, we have limited financial information on which you can evaluate an investment in us or our prior performance.  The results of any other funds or accounts managed by our investment adviser, which have or have had an investment program which is similar to, or different from, our investment program are not indicative of the results that we may achieve.  We have and expect to have a different investment portfolio and may employ different investment strategies and techniques from other funds and clients advised by our investment adviser.  Accordingly, our results may differ from and are independent of the results obtained by such other funds and accounts.  Moreover, past performance is no assurance of future returns.
 
We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially or your investment could become worthless. We anticipate that it could take       months to invest substantially all of the capital we expect to raise due to market conditions generally and the time necessary to identify, evaluate, structure, negotiate and close suitable investments in private middle-market companies. In order to comply with the RIC diversification requirements during the period following this offering, we may invest proceeds in temporary investments, such as cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the time of investment, which we expect will earn yields substantially lower than the interest, dividend or other income that we seek to receive in respect of suitable portfolio investments. Any dividends we pay during the period following this offering may be substantially lower than the dividends we expect to pay when the proceeds from this offering are fully invested in our portfolio.  We will pay a management fee to our investment adviser throughout the period following this offering irrespective of our performance. If the management fee and our other expenses exceed the return on the temporary investments, our equity capital will be eroded.
 
Financial markets have been in a period of disruption and instability for an extended period of time. These market conditions materially and adversely affected debt and equity capital markets and may have a negative impact on our business and operations.
 
Financial markets have been in a period of disruption for an extended period of time as evidenced by the lack of liquidity in the debt capital markets experienced in recent years, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and various foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have improved from the beginning of the disruption, there have been recent periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves or worsen in the future. If these adverse and volatile market conditions continue, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital in order to grow.
 
Moreover, the re-appearance of market conditions similar to those experienced from 2007 through 2009 for any substantial length of time could make it difficult for us to borrow money or for us to extend the maturity of or refinance any indebtedness we may have under similar terms and any failure to do so could have a material adverse effect on our business.
 
 
 
16

 
 
Given the extreme volatility and dislocation in the capital markets over the past several years, many BDCs have faced, and may in the future face, a challenging environment in which to raise or access capital. In addition, significant changes in the capital markets, including the extreme volatility and disruption over the past several years, has had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving these investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can adversely affect our investment valuations. Further, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital could have a material adverse impact on our business, financial condition or results of operations.
 
The downgrade of the U.S. credit rating and the economic crisis in Europe could negatively impact our business, financial condition and results of operations.
 
In August 2011, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating for the United States from “AAA” to “AA+”. In June 2012, Standard & Poor’s Ratings Services affirmed this “AA+” rating, but maintained a negative outlook on the long-term rating for the United States, reflecting the view of Standard & Poor’s Ratings Services that this rating could be lowered by 2014 as a result of the U.S. sovereign credit risks. In January 2012, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating for France, Italy, Spain and six other European countries, and recently, Moody’s Investors Service lowered its long-term sovereign credit rating for the United Kingdom, which has negatively impacted global markets and economic conditions. In addition, in April 2012, Standard & Poor’s Ratings Services further lowered its long-term sovereign credit rating for Spain. Recent U.S. “fiscal cliff” and budget deficit concerns, together with signs of deteriorating sovereign debt conditions in Europe, have increased the possibility of additional credit-rating downgrades and economic slowdowns. Moreover, significant uncertainty remains in light of the current political stalemate over the federal debt ceiling. The impact of the August 2011 downgrade or any further downgrade to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, and the impact of the current crisis in Europe with respect to the ability of certain European countries to continue to service their sovereign debt obligations is inherently unpredictable and could adversely affect the U.S. and global financial markets and economic conditions. In addition, the economic downturn and the significant government interventions into the financial markets and fiscal stimulus spending over the last several years have contributed to significantly increased U.S. budget deficits. There can be no assurance that future fiscal or monetary measures to aid economic recovery will be effective. These developments and reactions of the credit markets toward these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to obtain debt financing on favorable terms. In addition, any adverse economic conditions resulting from the August 2011 downgrade or any further downgrade of the U.S. government’s sovereign credit rating or the economic crisis in Europe could have a material adverse effect on our business, financial condition and results of operations.
 
Our operation as a BDC will impose numerous constraints on us and significantly reduce our operating flexibility.  In addition, if we fail to maintain out status as a BDC, we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.
 
The Investment Company Act imposes numerous constraints on the operations of business development companies. For example, business development companies generally are required to invest at least 70% of their total assets primarily in securities of qualifying U.S. private or thinly-traded public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less from the time of investment. Furthermore, any failure to comply with the requirements imposed on business development companies by the Investment Company Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.
 
GSAM believes that most of our portfolio company investments will constitute qualifying assets. However, we may be precluded from investing in what GSAM believes are attractive investments if such investments are not qualifying assets for purposes of the Investment Company Act. If we do not invest a sufficient portion of our assets in qualifying assets, we will be prohibited from making any additional investment that is not a qualifying asset and could be forced to forgo attractive investment opportunities. Similarly, these rules could
 
 
17

 
 
prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position).
 
In addition, if we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company that is required to register under the Investment Company Act, which would subject us to additional regulatory restrictions and significantly decrease our operating flexibility.
 
We will be subject to corporate-level U.S. federal income tax on all of our income if we are unable to qualify as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance.
 
Although we intend to elect to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ending December 31, 2013, we cannot assure you that we will be able to qualify for and maintain RIC status. To obtain and maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to our stockholders, we must meet the annual distribution, source-of-income and asset diversification requirements described below.
 
 
The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our investment company taxable income, for each taxable year. Because we expect to use debt financing, we expect to be subject to an asset coverage ratio requirement under the Investment Company Act, and we expect to be subject to certain financial covenants contained in our credit agreements and other debt financing agreements.  This asset coverage ratio requirement and these financial covenants could, under certain circumstances, restrict us from making distributions to our stockholders that are necessary for us to satisfy the distribution requirement. If we are unable to obtain cash from other sources, and thus are unable to make sufficient distributions to our stockholders, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes).
 
 
The source-of-income requirement will be satisfied if at least 90% of our gross income for each year is derived from dividends, interest, gains from the sale of stock or securities or similar sources.
 
 
The asset diversification requirement will be satisfied if, at the end of each quarter of our taxable year, at least 50% of the value of our assets consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other acceptable securities, and no more than 25% of the value of our assets is invested in the securities (other than U.S. government securities or securities of other RICs) of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships”. Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of our RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
 
If we fail to qualify for or maintain our RIC status for any reason, and we do not qualify for certain relief provisions under the Code, we would be subject to corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes). In this event, the resulting taxes could substantially reduce our net assets, the amount of our income available for distribution and the amount of our distributions to our stockholders, which would have a material adverse effect on our financial performance. For additional discussion regarding the tax implications of a RIC, see “U.S. Federal Income Tax Considerations.”
 
We will be dependent upon management personnel of our investment adviser for our future success.
 
We depend on the experience, diligence, skill and network of business contacts of the GSAM Liberty Harbor investment team. The GSAM Liberty Harbor investment team, together with other investment professionals that our investment adviser currently retains or may subsequently retain, will identify, evaluate,
 
 
 
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 negotiate, structure, close, monitor and manage our investments. Our future success will depend to a significant extent on the continued service and coordination of our investment adviser’s senior investment professionals. The departure of any of our investment adviser’s key personnel, including members of the GSAM Liberty Harbor investment committee, or of a significant number of the investment professionals of our investment adviser, could have a material adverse effect on our business, financial condition or results of operations. In addition, we cannot assure you that our investment adviser will remain our investment adviser or that we will continue to have access to our investment adviser or its investment professionals.
 
Our investment adviser, its principals, investment professionals and employees and the members of its investment committee have certain conflicts of interest.
 
Our investment adviser, its principals, investment professionals and employees and the members of its investment committee serve or may serve as investment advisers, officers, directors or principals of entities or private funds that operate in the same or a related line of business as us and/or of private funds managed by our investment adviser or its affiliates. Accordingly, these individuals may have obligations to investors in those entities or private funds, the fulfillment of which might not be in our best interests or the best interests of our stockholders. In addition, we note that any affiliated investment vehicle currently formed or formed in the future and managed by the investment adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, our investment adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although our investment adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by other clients or entities managed by our investment adviser or its affiliates. In any such case, if our investment adviser forms other affiliates in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with applicable regulations and regulatory guidance, as well as applicable allocation procedures. In certain circumstances, negotiated co-investments may be made only if we receive an order from the SEC permitting us to do so. There can be no assurance when any such order would be obtained or that one will be obtained at all. See “Risk Factors—Risks Relating to Our Business and Structure—Our ability to enter into transactions with our affiliates is restricted.”
 
Our investment adviser and its management have no prior experience managing a BDC.
 
Our investment adviser and the GSAM Liberty Harbor investment team have no prior experience managing a BDC, and the investment philosophy and techniques used by our investment adviser to manage a BDC may differ from the investment philosophy and techniques previously employed by our investment adviser and the GSAM Liberty Harbor investment team in identifying and managing past investments.  Accordingly, we can offer no assurance that we will replicate the historical performance of other clients or other entities or companies that the GSAM Liberty Harbor investment team or our investment adviser advised in the past, and we caution you that our investment returns could be substantially lower than the returns achieved by other clients of the investment adviser.
 
In addition, the Investment Company Act and the Code impose numerous constraints on the operations of BDCs and RICs that do not apply to the other types of investment vehicles. For example, under the Investment Company Act, BDCs are required to invest at least 70% of their total assets primarily in securities of qualifying U.S. private or thinly-traded public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less from the time of investment. The GSAM Liberty Harbor investment team and our investment adviser’s limited experience in managing a portfolio of assets under such constraints may hinder their respective ability to take advantage of attractive investment opportunities and, as a result, achieve our investment objectives.
 
Our financial condition and results of operations will depend on our ability to manage future growth effectively.
 
Our ability to achieve our investment objective will depend on our investment adviser’s ability to identify, invest in and monitor companies that meet our investment criteria.
 
Accomplishing this result on a cost-effective basis is largely a function of the structuring of our investment process and the ability of our investment adviser to provide competent, attentive and efficient services
 
 
 
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 to us. Our executive officers and the members of our investment adviser’s investment committee have substantial responsibilities in connection with their roles at our investment adviser and with other clients of our investment adviser, as well as responsibilities under the Investment Management Agreement. We may also be called upon to provide significant managerial assistance to certain of our portfolio companies. These demands on their time, which will increase as the number of investments grow, may distract them or slow the rate of investment. In order to grow, our investment adviser may need to hire, train, supervise, manage and retain new employees. However, we cannot assure you that they will be able to do so effectively. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
 
Our ability to grow depends on our ability to raise additional capital.
 
We will need to periodically access the capital markets to raise cash to fund new investments.  If we do not have adequate capital available for investment, our performance could be adversely affected.  In addition, we intend to elect to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code beginning with our taxable year ending December 31, 2013. To qualify, and maintain our qualification, as a RIC, among other requirements, we will be required to distribute to our stockholders on a timely basis an amount equal to at least 90% of our investment company taxable income for each taxable year.  Consequently, such distributions will not be available to fund new investments. We expect to use debt financing and issue additional securities to fund our growth, if any. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.
 
In addition, with certain limited exceptions, we will only be allowed to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as “senior securities,” such that our asset coverage, as defined under the Investment Company Act, equals at least 200% immediately after such borrowing (except in connection with certain trading practices and investments), which, in certain circumstances, may restrict our ability to borrow or issue debt securities or preferred stock. The amount of leverage that we will employ will depend on our investment adviser’s and our Board of Directors’ assessments of market conditions and other factors at the time of any proposed borrowing or issuance of senior securities. We cannot assure you that we will be able to obtain lines of credit or issue senior securities at all or on terms acceptable to us.
 
Furthermore, equity capital may be difficult to raise because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price per share less than NAV without first obtaining approval for such issuance from our stockholders and our Independent Directors.
 
Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.
 
The Investment Company Act imposes numerous constraints on the operations of business development companies. See “Regulation” for a discussion of BDC limitations. For example, business development companies are required to invest at least 70% of their total assets in qualifying assets, as defined under the Investment Company Act.  Qualifying assets include investments in securities of qualifying U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less from the time of investment.  Moreover, qualification for RIC tax treatment under Subchapter M of the Code requires satisfaction of source-of-income, asset diversification and other requirements. The failure to comply with these provisions in a timely manner could prevent us from qualifying as a BDC or a RIC or could force us to pay unexpected taxes and penalties, which could be material.
 
These constraints may hinder our investment adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.
 
Regulations governing our operation as a BDC affect our ability to raise additional capital, and the ways in which we can do so. Raising additional capital may expose us to risks, including the typical risks associated with leverage, and may result in dilution to our current stockholders. The Investment Company Act limits our ability to issue senior securities to amounts such that our asset coverage, as defined under the Investment Company Act, equals at least 200% immediately after such issuance (except in connection with certain trading practices or investments). Consequently, if the value of our assets declines, we may be required to sell a portion of
 
 
 
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our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when this may be disadvantageous to us and as a result, our stockholders.
 
We are generally not able to issue and sell our common stock at a price per share below NAV per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock either (i) with the consent of a majority of our common stockholders or (ii) if, among other things, a majority of our Independent Directors who have no financial interest in the transaction determines that a sale is in the best interests of us and our stockholders, and, other than in connection with our IPO, our stockholders (including our non-affiliated stockholders) approve it.
 
We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
 
As part of our business strategy, we may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors. Holders of these senior securities will have fixed-dollar claims on our assets that are superior to the claims of our common stockholders. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have if we did not employ leverage. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, the management fee will be payable based on our gross assets, including those assets acquired through the use of leverage but excluding cash and cash equivalents.  Additionally, we will be able to incur additional leverage if we are able to exclude the debt of any SBIC subsidiary we may form in the future from the leverage requirements otherwise applicable to BDCs.  We have not yet applied to the SBA for approval and have not yet applied for exemptive relief from the SEC and we can offer no assurances as to whether or when we will be able to form a SBIC subsidiary.
 
Furthermore, any credit agreement or other debt financing agreement into which we may enter may impose financial and operating covenants that restrict our investment activities, our ability to call capital, remedies on default and similar matters. In connection with borrowings, our lenders may also require us to pledge assets.
 
Lastly, we may be unable to obtain our desired leverage, which would, in turn, affect your return on investment.
 
 
The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.
 
 
  
Assumed Return on Our Portfolio
(Net of Expenses)
 
 
  
(10)%
   
(5)%
   
0%
   
5%
   
10%
 
Corresponding return to common stockholder(1)
  
   
             
     
     
 

(1)
The hypothetical return to common stockholders is calculated by multiplying our total assets as of        , 2013 by the assumed rates of return and subtracting all interest accrued on our debt for the quarter ended               2013; and then dividing the resulting difference by our total assets attributable to common stock. Based on $         million in total assets, $          million in debt and $         million in net assets, each as of        , 2013.
 
Based on an outstanding indebtedness of $              million as of                , 2013, the effective annual interest rate of             % as of that date, our investment portfolio at fair value would have had to produce an annual return of approximately            % to cover annual interest payments on the outstanding debt.

We operate in a highly competitive market for investment opportunities.

A number of entities compete with us to make the types of investments that we make in middle-market companies. We compete with other BDCs, commercial and investment banks, commercial financing companies,
 
 
 
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collateralized loan obligations (“CLOs”), private funds, including hedge funds and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are more experienced, substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, certain of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC and that the Code will impose on us as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to secure attractive investment opportunities from time to time.

We do not seek to compete primarily based on the interest rates we offer and GSAM believes that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we compete with our competitors based on our reputation in the market, existing investment platform, the seasoned investment professionals of our investment adviser, our experience and focus on middle-market companies, disciplined investment philosophy, extensive industry focus and relationships and flexible transaction structuring. For a more detailed discussion of these competitive advantages, see “Business—Competitive Advantages.”

We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on less favorable terms than what we may have originally anticipated, which may impact our return on these investments.
 
Our investment adviser will be paid a management fee even if the value of your investment declines and our investment adviser’s incentive fees may create incentives for them to make certain kinds of investments.
 
Even in the event the value of your investment declines, the management fee will still be payable. The management fee is calculated as a percentage of the average value of our gross assets including borrowed funds (excluding cash or cash equivalents) at the end of the prior two completed calendar quarters. Accordingly, the management fee is payable regardless of whether the value of our gross assets and/or your investment has decreased.
 
In addition, the incentive fee payable by us to our investment adviser may create an incentive for our investment adviser to make investments on our behalf that are risky or more speculative than would be the case in the absence of such a compensation arrangement and also to incur leverage. Our investment adviser receives the incentive fee based, in part, upon capital gains realized on our investments. As a result, our investment adviser may have an incentive to invest more in companies whose securities are likely to yield capital gains, as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during cyclical economic downturns.
 
The incentive fee payable by us to our investment adviser also may create an incentive for our investment adviser to invest on our behalf in instruments that have a deferred interest feature.  Under these investments, we would accrue the interest over the life of the investment but would not receive the cash income from the investment until the end of the term.  Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest.  Thus, a portion of this incentive fee would be based on income that we have not yet received in cash.
 
Beneficial owners of our equity securities may be subject to certain regulatory requirements based on their ownership percentages.
 
A beneficial owner, either directly or indirectly, of more than 25% of our voting securities is presumed to control us under the Investment Company Act. Certain events beyond an investor’s control may result in an increase in the percentage of such investor’s beneficial ownership of our shares, including the repurchase by us of shares from other stockholders. Control of us would also arise under the Investment Company Act if a person has the power to exercise a controlling influence over our management or policies, unless that power is solely the
 
 
 
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result of an official position with us. In the event you are or become a person that controls us, you and certain of your affiliated persons will be subject to, among other things, prohibitions or restrictions on engaging in certain transactions with us and certain of our affiliated persons. A beneficial owner of a large number of our equity securities will also become subject to public reporting obligations.
 
We will incur significant costs as a result of being a public company.
 
Public companies incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act.  Accordingly, once our common stock becomes registered under the Exchange Act, we will incur significant additional costs. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below. See “Regulation—Sarbanes-Oxley Act.” In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls, significant resources and management oversight will be required. We will be implementing additional procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We expect to incur significant additional annual expenses related to these steps and, among other things, directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, additional administrative expenses payable to our administrator to compensate it for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
 
The systems and resources necessary to comply with public company reporting requirements will increase further once we cease to be an “emerging growth company” under the JOBS Act. As long as we remain an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We will remain an emerging growth company for up to five years following an initial public offering, although if, among other things, the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.
 
Efforts to comply with Section 404 of the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act may adversely affect us and the market price of our common stock.
 
We have not previously been required to comply with the requirements of the Sarbanes-Oxley Act, including the internal control evaluation and certification requirements of Section 404 of that statute (“Section 404”), and we will not be required to comply with certain of those requirements until we have been subject to the reporting requirements of the Exchange Act for a specified period of time.  However, under current SEC rules, we will be required to report on our internal control over financial reporting pursuant to Section 404 starting with our fiscal year ending December 31, 2014.  Thereafter, we will be required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. Accordingly, our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 that we will eventually be required to meet. We are in the process of addressing our internal controls over financial reporting and are establishing formal procedures, policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.
 
We have begun the process of documenting our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an emerging growth company under the JOBS Act. Because we do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404, we cannot conclude in accordance with Section 404 that
 
 
 
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we do not have a material weakness in our internal controls or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal controls. As a public entity, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our operations, financial reporting or financial results could be adversely affected. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, and result in a breach of the covenants under the agreements governing any of our financing arrangements. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements could also suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in the market price of our common stock.
 
Certain investors are limited in their ability to make significant investments in us.
 
Private funds that are excluded from the definition of “investment company” either pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act are restricted from acquiring directly or through a controlled entity more than 3% of our total outstanding voting stock (measured at the time of the acquisition). Investment companies registered under the Investment Company Act are also subject to this restriction as well as other limitations under the Investment Company Act that would restrict the amount that they are able to invest in our securities. As a result, certain investors may be precluded from acquiring additional shares, at a time that they might desire to do so.
 
Potential conflicts of interest could impact our investment returns.
 
Goldman Sachs, including its affiliates and personnel, is a bank holding company and a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization, and a major participant in global financial markets that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, proprietary trader, prime broker, lender, agent and principal. In those and other capacities, Goldman Sachs purchases, sells and holds a broad array of investments, actively trades securities, derivatives, loans, commodities, currencies, credit default swaps, indices, baskets and other financial instruments and products for its own accounts or for the accounts of its customers, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity, bank loan and other markets in which we invest or may invest. Such additional businesses and interests will likely give rise to potential conflicts of interest and may restrict the way we operate our business.  For example, we may not be able to conduct transactions relating to investments in portfolio companies because our investment adviser is not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for us.  Stockholders should note the matters discussed in “Potential Conflicts of Interest” and “—Our ability to enter into transactions with our affiliates is restricted.”
 
Group Inc. and certain of its affiliates have influence, and may continue to exert influence, over our management and affairs and control over most votes requiring stockholder approval.
 
Group Inc. and certain of its affiliates own a significant portion of our common stock.  Therefore, Goldman Sachs is able to exert, and may be able to continue to exert, influence over our management and policies and have significant voting influence on most votes requiring stockholder approval.  This concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of us, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us and might ultimately affect the market price of our common stock, should a market for our common stock develop.  Our investment adviser has the authority to vote securities held by Group Inc. and certain of its affiliates, including on matters that may present a conflict of interest between our investment adviser and other stockholders.
 
 
 
 
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We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for gain or loss and the risks of investing in us in the same way as our borrowings.
 
Preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common stockholders, and preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference.
 
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
 
Our Board of Directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the Investment Company Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.
 
Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, and any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
 
We and our portfolio companies are subject to regulation by laws and regulations at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, are likely to change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.  In addition to the legal, tax and regulatory changes that are expected to occur, there may be unanticipated changes.  The legal, tax and regulatory environment for business development companies, investment advisers, and the instruments that they utilize (including, without limitation, derivative instruments) is continuously evolving.  In addition, there is significant uncertainty regarding recently enacted legislation (including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”) and the regulations that have recently been adopted and future regulations that will need to be adopted pursuant to such legislation) and, consequently, the full impact that such legislation will ultimately have on us and the markets in which we trade and invest is not fully known.  Such uncertainty and any resulting confusion may itself be detrimental to the efficient functioning of the markets and the success of certain investment strategies.
 
On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which impacts many aspects of the financial services industry. Some of the provisions of the Dodd-Frank Act have been enacted, while others have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities. While the full impact of the Dodd-Frank Act on us and our portfolio companies may not be known for an extended period of time, the Dodd-Frank Act, including current rules and regulations and future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us and our portfolio companies, impose additional costs on us and our portfolio companies, intensify the regulatory supervision of us and our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
 
 
 
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Our investment adviser can resign on 60 days’ notice. We may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
 
Our investment adviser has the right, under the Investment Management Agreement, to resign at any time upon not less than 60 days’ written notice, regardless of whether we have found a replacement. If our investment adviser resigns, we may not be able to find a new external investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected, and the market price of our common stock may decline.
 
Our investment adviser’s responsibilities and its liability to us are limited under the Investment Management Agreement, which may lead our investment adviser to act in a riskier manner on our behalf than it would when acting for its own account.
 
Our investment adviser has not assumed any responsibility to us other than to render the services described in the Investment Management Agreement, and it will not be responsible for any action of our Board of Directors in declining to follow our investment adviser’s advice or recommendations. Pursuant to the Investment Management Agreement, our investment adviser and Goldman Sachs and their respective directors, members, stockholders, partners, officers, employees or controlling persons will not be liable to us for their acts under the Investment Management Agreement, absent willful misfeasance, bad faith or gross negligence in the performance of their duties, or by reason of their reckless disregard of their obligations and duties under the Investment Management Agreement.  These protections may lead our investment adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “Risk Factors—Risks Relating to Our Portfolio Company Investments—Our investment adviser will be paid a management fee even if the value of your investment declines and our investment adviser’s incentive fees may create incentives for them to make certain kinds of investments.”
 
Our ability to enter into transactions with our affiliates is restricted.
 
As a BDC, we are prohibited under the Investment Company Act from knowingly participating in certain transactions with our affiliates without, among other things, the prior approval of a majority of our Independent Directors who, have no financial interest in the transaction, or in some cases, the prior approval of the SEC. For example, any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is deemed our affiliate for purposes of the Investment Company Act and, if this is the only reason such person is our affiliate, we are generally prohibited from buying any asset from or selling any asset (other than our capital stock) to such affiliate, absent the prior approval of such directors. The Investment Company Act also prohibits “joint” transactions with an affiliate, which could include joint investments in the same portfolio company, without approval of our Independent Directors or in some cases the prior approval of the SEC. Moreover, except in certain limited circumstances, we are prohibited from buying any asset from or selling any asset to a holder of more than 25% of our voting securities, absent prior approval of the SEC.  The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing.
 
We expect to apply for an exemptive order from the SEC that would permit us, among other things to co-invest with certain other funds, including certain funds managed by the GSAM Liberty Harbor investment team. Any such order, if issued, will be subject to certain terms and conditions and there can be no assurance that such order will be granted by the SEC. Accordingly, we cannot assure you that we will be permitted to co-invest with other accounts or other entities managed by the GSAM Liberty Harbor investment team, other than in the limited circumstances currently permitted by applicable SEC staff guidance and interpretations or in the absence of a joint transaction.
 
We may experience fluctuations in our quarterly results.
 
We could experience fluctuations in our quarterly operating results due to a number of factors, including interest rates payable on debt investments we make, default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we
 
 
 
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encounter competition in certain markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
 
We will be exposed to risks associated with changes in interest rates.
 
Our debt investments may be based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate.  General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.
 
Because we intend to borrow money, and may issue preferred stock to finance investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay dividends on preferred stock and the rate that our investments yield. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase except to the extent we have issued fixed rate debt or preferred stock, which could reduce our net investment income.
 
You should also be aware that a change in the general level of interest rates can be expected to lead to a change in the interest rate we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold and may result in a substantial increase in the amount of incentive fees payable to our investment adviser with respect to pre-incentive fee net investment income.
 
Certain provisions of our certificate of incorporation and bylaws, the Delaware General Corporation Law (“DGCL”) as well as other aspects of our structure, including the substantial ownership interest of Group Inc. and certain of its affiliates, could deter takeover attempts and have an adverse impact on the price of our common stock.
 
Our certificate of incorporation and bylaws as well as the DGCL contain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. Among other things, our certificate of incorporation and bylaws:
 
 
provide that, our Board of Directors is classified, which may delay the ability of our stockholders to change the membership of a majority of our Board of Directors;
 
 
do not provide for cumulative voting;
 
 
provide that vacancies on our Board of Directors, including newly created directorships, may be filled only by a majority vote of directors then in office;
 
 
provide that, once our Board of Directors is classified, our directors may be removed only for cause, and only by a supermajority vote of the stockholders entitled to elect such directors;
 
 
provide that, stockholders may only take action at an annual or special meeting of stockholders, and may not act by written consent;
 
 
restrict stockholders’ ability to call special meetings;
 
 
require a supermajority vote of stockholders to effect certain amendments to our certificate of incorporation and bylaws; and
 
 
 
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require stockholders to provide advance notice of new business proposals and director nominations under specific procedures for any meeting occurring after our IPO.
 
We have provisions comparable to those of Section 203 of the DGCL (other than with respect to Group Inc. and its affiliates and certain of its or their respective direct or indirect transferees and any group as to which such persons are a party). These provisions generally prohibit us from engaging in mergers, business combinations and certain other types of transactions with “interested stockholders” (generally defined as persons or entities that beneficially own 15% or more of our voting stock), other than the exempt parties as described above, for a period of three years following the date the person became an interested stockholder unless, prior to such stockholder becoming an interested stockholder, our board of directors has approved the “business combination” that would otherwise be restricted or the transaction that resulted in the interested stockholder becoming an interested stockholder or the subsequent transaction with the interested stockholder has been approved by our board of directors and 66 2/3% of our outstanding voting stock (other than voting stock owned by the interested stockholder). Such provisions may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer.
 
These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for the common stock. In addition, certain aspects of our structure, including the substantial ownership interest of Group Inc. and certain of its affiliates, may have the effect of discouraging a third party from making an acquisition proposal for us.
 
Our activities may be limited as a result of being controlled by a bank holding company.
 
In September 2008, Goldman Sachs elected to become a bank holding company (a “BHC”) under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and thereby subject to supervision and regulation by the Federal Reserve.  In addition, in August 2009, Goldman Sachs became a financial holding company (a “FHC”) under the BHCA, which is a status available to BHCs that meet certain criteria.  FHCs may engage in a broader range of activities than BHCs that are not FHCs.  However, the activities of FHCs and their affiliates remain subject to certain restrictions imposed by the BHCA and related regulations.  Because Goldman Sachs may be deemed to “control” us within the meaning of the BHCA, these restrictions could apply to us as well.  Accordingly, the BHCA and other applicable banking laws, rules, regulations and guidelines, and their interpretation and administration by the appropriate regulatory agencies, including but not limited to the Federal Reserve, may restrict the transactions and relationships between our investment adviser, Goldman Sachs and their affiliates, on the one hand, and us on the other hand, and may restrict our investments, transactions and operations.  For example, the BHCA regulations applicable to Goldman Sachs and us may, among other things, restrict our ability to make certain investments or the size of certain investments, impose a maximum holding period on some or all of our investments, and restrict our investment adviser’s ability to participate in the management and operations of the companies in which we invest.  In addition, certain BHCA regulations may require aggregation of the positions owned, held or controlled by related entities.  Thus, in certain circumstances, positions held by Goldman Sachs and its affiliates (including our investment adviser) for client and proprietary accounts may need to be aggregated with positions held by us.  In this case, where BHCA regulations impose a cap on the amount of a position that may be held, Goldman Sachs may utilize available capacity to make investments for its proprietary accounts or for the accounts of other clients, which may require us to limit and/or liquidate certain investments.  See “Potential Conflicts of Interest” below.
 
These restrictions may materially adversely affect us by, among other things, affecting our investment adviser’s ability to pursue certain strategies within our investment program or trade in certain securities.  In addition, Goldman Sachs may cease in the future to qualify as an FHC, which may subject us to additional restrictions.  Moreover, there can be no assurance that the bank regulatory requirements applicable to Goldman Sachs and us will not change, or that any such change will not have a material adverse effect on us.
 
Goldman Sachs may in the future, in its sole discretion and without notice to investors, engage in activities impacting us and/or our investment adviser in order to comply with the BHCA or other legal requirements applicable to, or reduce or eliminate the impact or applicability of any bank regulatory or other restrictions on, Goldman Sachs, us or other funds and accounts managed by our investment adviser and its affiliates.  Goldman Sachs may seek to accomplish this result by causing GSAMLP to resign as our investment adviser, voting for changes to our Board of Directors, causing Goldman Sachs personnel to resign from our Board
 
 
 
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of Directors, reducing the amount of Goldman Sachs’ investment in us (if any), revoking our right to use the Goldman Sachs name, or any combination of the foregoing, or by such other means as it determines in its sole discretion.  Any replacement investment adviser appointed by us may be unaffiliated with Goldman Sachs.
 
Recent Commodity Futures Trading Commission rulemaking may have a negative impact on us and our investment adviser.
 
On August 13, 2012, the Commodity Futures Trading Commission (the “CFTC”) and the SEC issued final rules establishing that certain swap transaction will be subject to CFTC regulation.  Engaging in such swap transactions may cause us to fall within the definition of “commodity pool” under the Commodity Exchange Act and related CFTC regulations.  Our commodity pool operator intends to elect to claim relief from regulation as a commodity pool operator pursuant to a recent CFTC staff no-action letter, which means that we will be limited in our ability to use futures or options on futures or engage in swap transactions.
 
The Volcker Rule may impact how we operate our business.
 
Section 13 of the BHCA, often referred to as the “Volcker Rule,” is expected to impose significant restrictions on Goldman Sachs’ ability to sponsor or invest in hedge funds, private equity funds or commodity pools (“covered funds”).  We expect and intend that we will not be a covered fund under the Volcker Rule once such rule is fully effective. As a result, we may refrain from engaging in certain activities, including entering into derivative transactions such as interest rate and currency hedging. The proposed rules are highly complex, and many aspects of the Volcker Rule remain unclear.  The full impact on us will not be known with certainty until the rules are finalized.  Compliance with the Volcker Rule may have a material adverse effect on our operations and share price.

Risks Related to Our Portfolio Company Investments
 
Our investments are very risky and highly speculative.
 
We will invest primarily in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities issued by middle-market companies.  The instruments in which we invest typically are not rated by any rating agency, but GSAM believes that if such instruments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service and lower than “BBB-” by Fitch Ratings or Standard & Poor’s Rating Services), which is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.  Investments that are rated below investment grade are sometimes referred to as “high yield bonds,” “junk bonds” or “leveraged loans.”
 
Secured Debt. When we make a secured debt investment, we generally take a security interest in the available assets of the portfolio company, including the equity interests of any subsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our debt investment may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise, and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. In some circumstances, our lien could be subordinated to claims of other creditors, such as trade creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt investment. Consequently, the fact that our debt is secured does not guarantee that we will receive principal and interest payments according to the debt investment’s terms, or at all, or that we will be able to collect on the loan, in full or at all, should we be forced to enforce our remedies.
 
Unsecured Debt, including Mezzanine Debt. Our unsecured debt investments, including mezzanine debt investments, generally will be subordinated to senior debt that will rank senior to our investment in the event of an insolvency. This may result in an above average amount of risk and loss of principal.
 
 
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Equity Investments. When we invest in secured debt or unsecured debt, including mezzanine debt, we may acquire equity securities from the company in which we make the investment.  In addition, we may invest in the equity securities of portfolio companies independent of any debt investment. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we hold may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
 
Investing in middle-market companies involves a number of significant risks.
 
Investing in middle-market companies involves a number of significant risks, including:
 
 
such companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
 
 
such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
 
 
such companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
 
 
such companies generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;
 
 
our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
 
 
such companies may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.
 
The value of our portfolio securities may not have a readily available market price and, in such a case, we will value these securities at fair value as determined in good faith under procedures adopted by our Board of Directors, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.
 
The majority of our investments are expected to be in debt instruments that do not have readily ascertainable market prices. The fair value of assets that are not publicly traded or whose market prices are not readily available will be determined in good faith under procedures adopted by our Board of Directors.  Our Board of Directors is expected to utilize the services of independent third-party valuation firms in determining the fair value of any securities. Investment professionals from our investment adviser will prepare portfolio company valuations using sources and/or proprietary models depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. The participation of our investment adviser in our valuation process could result in a conflict of interest, since the management fee is based in part on our gross assets and also because our investment adviser is receiving a performance-based incentive fee.
 
Because fair valuations, and particularly fair valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information, it could make it more difficult for investors to
 
 
 
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value accurately our investments and could lead to undervaluation or overvaluation of our common stock. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.
 
Our NAV as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date.  For example, if we were required to sell a certain asset or all or a substantial portion of its assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV.  Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our NAV.
 
The lack of liquidity in our investments may adversely affect our business.
 
Various restrictions render our investments relatively illiquid, which may adversely affect our business.  As we generally make investments in private companies, substantially all of these investments are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. Additionally, as an affiliate of Goldman Sachs, our investment adviser is not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for us, which could create an additional limitation on the liquidity of our investment.  The illiquidity of our investments may make it difficult for us to sell such investments if the need arises.  Therefore, if we are required to or desire to liquidate all or a portion of our portfolio quickly, we could realize significantly less than the value at which we have recorded our investments.
 
Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies default on their obligations under any of their debt instruments or if there is a downturn in a particular industry.
 
We are classified as a non-diversified investment company within the meaning of the Investment Company Act, which means that we are not limited by the Investment Company Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies. To the extent that we assume large positions in the securities of a small number of issuers or industries, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. In addition, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, a downturn in any particular industry in which we are invested could significantly affect our aggregate returns.
 
We may form one or more CLOs, which may subject us to certain structured financing risks.
 
To finance investments, we may securitize certain of our investments, including through the formation of one or more CLOs, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. Any interest in any such CLO held by us may be considered a “non-qualifying asset” for purposes of Section 55 of the Investment Company Act.
 
If we create a CLO, we will depend on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to our stockholders. The ability of a CLO to make distributions or pay dividends will be subject to various limitations, including the terms and covenants of the debt it issues. For example, tests (based on interest coverage or other financial ratios or other criteria) may restrict our ability, as holder of a CLO’s equity interests, to receive cash flow from these investments. There is no assurance any such performance tests will be satisfied. Also, a CLO may take actions that delay distributions in order to preserve ratings and to keep the cost of present and future financings lower or the CLO may be obligated to retain cash or other assets to satisfy over-collateralization requirements commonly provided for holders of the CLO’s debt. As a result, there may be a lag, which could be significant, between the repayment or other realization on a loan or other assets in, and the distribution of cash out of, a CLO, or cash flow may be completely restricted for the life of the CLO.  If we do not receive cash flow from any such CLO that is necessary to satisfy the annual distribution requirement for maintaining our RIC status, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we could fail to maintain our qualification as a RIC, which would have a material adverse effect on our financial performance.
 
 
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In addition, a decline in the credit quality of loans in a CLO due to poor operating results of the relevant borrower, declines in the value of loan collateral or increases in defaults, among other things, may force a CLO to sell certain assets at a loss, reducing their earnings and, in turn, cash potentially available for distribution to us for distribution to our stockholders.
 
To the extent that any losses are incurred by the CLO in respect of any collateral, such losses will be borne first by us as owner of equity interests. Finally, any equity interests that we retain in a CLO will not be secured by the assets of the CLO and we will rank behind all creditors of the CLO.
 
When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and other equity holders and management of the company may make decisions that could decrease the value of our portfolio holdings.
 
When we make debt or minority equity investments, we are subject to the risk that a portfolio company may make business decisions with which we disagree and the other equity holders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investment.
 
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
 
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:
 
 
increase or maintain in whole or in part our equity ownership percentage;
 
 
exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or
 
 
attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments.
 
We will have the discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with business development company requirements or compliance with the requirements for maintenance of our RIC status.
 
Our debt investments may be risky and we could lose all or part of our investment.
 
The debt that we invest in is typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB-” by Fitch Ratings or by Standard & Poor’s Ratings Services). Such investments are generally referred to as “junk bonds,” “high yield” or “leveraged loans.”  Indebtedness of below investment grade quality is regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Therefore, our investments may result in an above average amount of risk and volatility or loss of principal. We also may invest in assets other than first and second lien and mezzanine debt investments, including high-yield securities, U.S. government securities, structured securities and certain direct equity investments. These investments entail additional risks that could adversely affect our investment returns.
 
By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.
 
As part of our lending activities, we may originate loans to companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and
 
 
 
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liquidation proceedings. Although the terms of such financing may result in significant financial returns to us, they involve a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties is unusually high. There is no assurance that we will correctly evaluate the value of the assets collateralizing our loans or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a company that we fund, we may lose all or part of the amounts advanced to the borrower or may be required to accept collateral with a value less than the amount of the loan advanced by us to the borrower.
 
We may be exposed to special risks associated with bankruptcy cases.
 
Many of the events within a bankruptcy case are adversarial and often beyond the control of the creditors. While creditors generally are afforded an opportunity to object to significant actions, there can be no assurance that a bankruptcy court would not approve actions that may be contrary to our interests. Furthermore, there are instances where creditors can lose their ranking and priority if they are considered to have taken over management of a borrower.
 
The reorganization of a company can involve substantial legal, professional and administrative costs to a lender and the borrower; it is subject to unpredictable and lengthy delays; and during the process a company’s competitive position may erode, key management may depart and a company may not be able to invest its capital adequately. In some cases, the debtor company may not be able to reorganize and may be required to liquidate assets. The debt of companies in financial reorganization will, in most cases, not pay current interest, may not accrue interest during reorganization and may be adversely affected by an erosion of the issuer’s fundamental value.
 
In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. For example, we could become subject to a lender’s liability claim, if, among other things, the borrower requests significant managerial assistance from us and we provide such assistance as contemplated by the Investment Company Act.
 
We will have broad discretion over the use of proceeds of the funds we raise from investors and will use proceeds in part to satisfy operating expenses.
 
We will have significant flexibility in applying the proceeds of the funds we raise from investors in this offering and may use the net proceeds in ways with which stockholders may not agree, or for purposes other than those contemplated at the time of this offering. There can be no assurance that we will be able to locate a sufficient number of suitable investment opportunities to allow us to successfully deploy capital that we raise from investors in a timeframe that will permit investors to earn above-market returns. To the extent we are unable to invest substantially all of the capital we raise within our contemplated timeframe, our investment income, and in turn our results of operations, will likely be materially adversely affected.  See “—Risks Relating to Our Business and Structure—We are a relatively new company and have a limited operating history.”  We will also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from net proceeds raised from investors.  Our ability to achieve our investment objective may be limited to the extent that net proceeds of the funds we raise from investors, pending full investment by us in portfolio companies, are used to pay operating expenses.
 
Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our NAV.
 
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith under procedures adopted by our Board of Directors.  We may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to similar publicly traded securities, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. While most of our investments are not publicly traded,
 
 
 
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applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can also adversely affect our investment valuations. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our NAV by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer unrealized losses, which could have a material adverse impact on our business, financial condition and results of operations.
 
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
 
Our portfolio companies may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods. Therefore, during these periods our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.
 
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt that we hold and the value of any equity securities we own. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.
 
Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.
 
Our portfolio companies may have, or may be permitted to incur, other debt, or issue other equity securities, that rank equally with, or senior to, our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company typically are entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
 
The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that senior obligations are outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected.
 
Our portfolio companies may be highly leveraged.
 
Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to
 
 
 
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take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.
 
Our investments in non-U.S. companies may involve significant risks in addition to the risks inherent in U.S. investments.
 
Our investment strategy contemplates potential investments in securities of non-U.S. companies to the extent permissible under the Investment Company Act. Investing in non-U.S. companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of non-U.S. taxes (potentially at confiscatory levels), less liquid markets, less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
 
Our investments that are denominated in a non-U.S. currency will be subject to the risk that the value of a particular currency will change in relation to the U.S. dollar. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. Subject to application of the Volcker Rule, we may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us.  See “—Risks Relating to Our Business and Structure— The Volcker Rule may impact how we operate our business.”
 
We may expose ourselves to risks if we engage in hedging transactions.
 
Subject to application of the Volcker Rule, the Investment Company Act and applicable CFTC regulations, we may enter into hedging transactions, which may expose us to risks associated with such transactions.  Such hedging may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Use of these hedging instruments may include counter-party credit risk. See, “—Risks Relating to Our Business and Structure— The Volcker Rule may impact how we operate our business.”
 
Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.
 
The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. See also “Risk Factors—Risk Relating to Our Business— We will be exposed to risks associated with changes in interest rates” and  “—The Volcker Rule may impact how we operate our business.”
 
 
 
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We may initially invest a portion of the net proceeds of this offering primarily in high-quality short-term investments, which will generate lower rates of return than those expected from the interest generated on our intended investment program.
 
We may initially invest a portion of the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities and other high-quality short-term investments. These securities may earn yields substantially lower than the income that we anticipate receiving once we are fully invested in accordance with our investment objective. As a result, we may not be able to achieve our investment objective and any dividends we pay during this period may be substantially lower than the dividends that we expect to pay when our portfolio is fully invested. If we do not realize yields in excess of our expenses, we may incur operating losses.
 
Risks Relating to this Offering and Our Common Stock
 
Investing in our common stock involves an above average degree of risk.
 
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.
 
The market price of our common stock may fluctuate significantly.

The market price and liquidity of the market for shares of our common stock that will prevail in the market after this offering may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
 
 
 
significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;
 
 
changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
 
 
any loss of RIC or business development company status;
 
 
changes in earnings or perceived changes or variations in operating results;
 
 
changes or perceived changes in the value of our portfolio of investments;
 
 
changes in accounting guidelines governing valuation of our investments;
 
 
any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
 
 
the inability of our investment adviser to employ additional experienced investment professionals or the departure of any of our investment adviser’s key personnel;
 
 
operating performance of companies comparable to us;
 
 
general economic trends and other external factors; and
 
 
loss of a major funding source
 
Prior to this offering, there has been no public market for our common stock, and we cannot assure you that the market price of our shares will not decline following the offering.
 
 
 
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We cannot assure you that a trading market will develop for our common stock after this offering or, if one develops, that such trading market can be sustained. In addition, we cannot predict the prices at which our common stock will trade. The initial public offering price for our common stock will be determined through our negotiations with the underwriters and may not bear any relationship to the market price at which it may trade after our initial public offering. Shares of companies offered in an initial public offering often trade at a discount to the initial offering price due to underwriting discounts and related offering expenses. Also, shares of closed-end investment companies, including BDCs, frequently trade at a discount from NAV and our common stock may also be discounted in the market. This characteristic of closed-end investment companies is separate and distinct from the risk that our NAV per share may decline. We cannot predict whether our common stock will trade at, above or below NAV. The risk of loss associated with this characteristic of closed-end management investment companies may be greater for investors expecting to sell shares of common stock purchased in the offering soon after the offering. In addition, if our common stock trades below its NAV, we will generally not be able to sell additional shares of our common stock to the public at its market price without, among other things, the requisite stockholders approve such a sale.
 
Investors in this offering may experience immediate dilution upon the closing of the offering.
 
If you purchase shares of our common stock in this offering, you may experience immediate dilution if the price that you pay is greater than the pro forma NAV per share of the common stock you acquire. Investors in this offering could pay a price per share of common stock that exceeds the tangible book value per share after the closing of the offering. Assuming an initial public offering price of $        per share, purchasers in this offering will experience immediate dilution of approximately $        per share.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

Upon completion of this offering, we will have             shares of common stock outstanding (or            shares of common stock if the underwriters’ over-allotment option is fully exercised). Following this offering and the expiration of applicable lock-up periods, sales of substantial amounts of our common stock, or the availability of such shares for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so.  Additionally, as an owner of approximately      % of our common stock prior to this offering, Group Inc. is a significant stockholder that may decide to sell a substantial amount of its common stock, subject to its lock-up agreement with the underwriters not to sell its shares for   months and applicable securities laws, and such a sale would exacerbate the effects described above.

We may not be able to pay you distributions on our common stock, our distributions to you may not grow over time and a portion of our distributions to you may be a return of capital for U.S. federal income tax purposes.
 
We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. If we are unable to satisfy the asset coverage test applicable to us as a business development company, or if we violate certain covenants under our credit agreements and other debt financing agreements, our ability to pay distributions to our stockholders could be limited. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, financial condition, maintenance of our RIC status, compliance with applicable business development company regulations, compliance with covenants under our credit agreements and other debt financing agreements, and such other factors as our Board of Directors may deem relevant from time to time. The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.
 
We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.
 
For U.S. federal income tax purposes, we will include in our taxable income certain amounts that we have not yet received in cash, such as original issue discount or accruals on a contingent payment debt instrument,
 
 
 
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which may occur if we receive warrants in connection with the origination of a loan or possibly in other circumstances or contracted PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount and PIK interest will be included in our taxable income before we receive any corresponding cash payments.  We also may be required to include in our taxable income certain other amounts that we will not receive in cash.
 
Because in certain cases we may recognize taxable income before or without receiving cash representing such income, we may have difficulty making distributions to our stockholders that will be sufficient to enable us to meet the annual distribution requirement necessary for us to qualify as a RIC. Accordingly, we may need to sell some of our assets at times and/or at prices that we would not consider advantageous, we may need to raise additional equity or debt capital, or we may need to forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that are advantageous to our business) to enable us to make distributions to our stockholders that will be sufficient to enable us to meet the annual distribution requirement. If we are unable to obtain cash from other sources to meet the annual distribution requirement, we may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes). For additional discussion regarding the tax implications of a RIC, see “U.S. Federal Income Tax Considerations.”
 
Our stockholders may receive shares of our common stock as dividends, which could result in adverse tax consequences to them.
 
In order to satisfy the annual distribution requirement applicable to RICs, we will have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder would be taxed on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.  We currently do not intend to pay dividends in shares of our common stock.
 
If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S. stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses.
 
We expect to be treated as a “publicly offered regulated investment company” as a result of either (i) shares of our common stock being held by at least 500 persons at all times during a taxable year or (ii) shares of our common stock being treated as regularly traded on an established securities market.  However, we cannot assure you that we will be treated as a publicly offered regulated investment company for all years.  If we are not treated as a publicly offered regulated investment company for any calendar year, each U.S. stockholder that is an individual, trust or estate will be treated as having received a dividend from us in the amount of such U.S. stockholder’s allocable share of the management and incentive fees paid to our investment adviser and certain of our other expenses for the calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. stockholder.  Miscellaneous itemized deductions generally are deductible by a U.S. stockholder that is an individual, trust or estate only to the extent that the aggregate of such U.S. stockholder’s miscellaneous itemized deductions exceeds 2% of such U.S. stockholder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of the alternative minimum tax and are subject to the overall limitation on itemized deductions under the Code.  See “U.S. Federal Income Tax Considerations –Taxation of U.S. Stockholders.”
 
Non-U.S. stockholders may be subject to withholding of U.S. federal income tax on dividends we pay.
 
Distributions of our “investment company taxable income” to a non-U.S. stockholder that are not effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States will be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable income tax treaty) to the extent of our current or accumulated earnings and profits.  However, for our taxable years beginning before January 1, 2014, properly designated dividends are generally exempt from withholding of U.S. federal income tax where they (i) are paid in respect of our “qualified net interest income” (generally, our U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we or the non-U.S. stockholder are at least a 10% shareholder, reduced by expenses that are
 
 
 
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allocable to such income) or (ii) are paid in respect of our “qualified short-term capital gains” (generally, the excess of our net short-term capital gain over our long-term capital loss for such taxable year), and certain other requirements are satisfied.
 
NO ASSURANCE CAN BE GIVEN AS TO WHETHER ANY OF OUR DISTRIBUTIONS WILL BE ELIGIBLE FOR THIS EXEMPTION FROM WITHHOLDING OF U.S. FEDERAL INCOME TAX OR, IF ELIGIBLE, WILL BE DESIGNATED AS SUCH BY US.  IN PARTICULAR, THIS EXEMPTION WILL NOT APPLY TO OUR DISTRIBUTIONS PAID IN RESPECT OF OUR NON-U.S. SOURCE INTEREST INCOME OR OUR DIVIDEND INCOME (OR ANY OTHER TYPE OF INCOME OTHER THAN GENERALLY OUR NON-CONTINGENT U.S.-SOURCE INTEREST INCOME RECEIVED FROM UNRELATED OBLIGORS AND OUR QUALIFIED SHORT-TERM CAPITAL GAINS).  IN THE CASE OF OUR COMMON STOCK HELD THROUGH AN INTERMEDIARY, THE INTERMEDIARY MAY WITHHOLD U.S. FEDERAL INCOME TAX EVEN IF WE DESIGNATE THE PAYMENT AS QUALIFIED NET INTEREST INCOME OR QUALIFIED SHORT-TERM CAPITAL GAIN.  NO ASSURANCE CAN BE GIVEN AS TO WHETHER THIS EXEMPTION WILL BE EXTENDED FOR ANY OF OUR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY 1, 2014.  SEE “U.S. FEDERAL INCOME TAX CONSIDERATIONS— TAXATION OF NON-U.S. STOCKHOLDERS”.  BECAUSE OUR COMMON STOCK WILL BE SUBJECT TO SIGNIFICANT TRANSFER RESTRICTIONS, AND AN INVESTMENT IN OUR COMMON STOCK WILL GENERALLY BE ILLIQUID, NON-U.S. STOCKHOLDERS WHOSE DISTRIBUTIONS ON OUR COMMON STOCK ARE SUBJECT TO WITHHOLDING OF U.S. FEDERAL INCOME TAX MAY NOT BE ABLE TO TRANSFER THEIR SHARES OF OUR COMMON STOCK EASILY OR QUICKLY OR AT ALL.
 
 
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POTENTIAL CONFLICTS OF INTEREST
 
General Categories of Conflicts Associated with the Company
 
Goldman Sachs (which, for purposes of this “Potential Conflicts of Interest” section, shall mean, collectively, Group Inc., the investment adviser and their affiliates, directors, partners, trustees, managers, members, officers and employees) is a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization and a major participant in global financial markets. As such, Goldman Sachs provides a wide range of financial services to a substantial and diversified client base. In those and other capacities, Goldman Sachs advises clients in all markets and transactions and purchases, sells, holds and recommends a broad array of investments for its own accounts and for the accounts of clients and of its personnel, through client accounts and the relationships and products it sponsors, manages and advises (such Goldman Sachs or other client accounts (including the Company), relationships and products collectively, the “Accounts”). Goldman Sachs has direct and indirect interests in the global fixed income, currency, commodity, equities, bank loan and other markets, and the securities and issuers, in which the Company may directly and indirectly invest. As a result, Goldman Sachs’ activities and dealings, including on behalf of the Company, may affect the Company in ways that may disadvantage or restrict the Company and/or benefit Goldman Sachs or other Accounts.
 
The following are descriptions of certain conflicts and potential conflicts that may be associated with the financial or other interests that the investment adviser and Goldman Sachs may have in transactions effected by, with and on behalf of the Company. They are not, and are not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise.  Additional information about potential conflicts of interest regarding the investment adviser and Goldman Sachs is set forth in the investment adviser’s Form ADV, which prospective stockholders should review prior to purchasing the Company’s common stock.  A copy of Part 1 and Part 2 of the investment adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). A copy of Part 2 of the investment adviser’s Form ADV will be provided to stockholders or prospective stockholders upon request.
 
Other Activities of Goldman Sachs, the Sale of the Company’s Stock and the Allocation of Investment Opportunities
 
Sales Incentives and Related Conflicts Arising from Goldman Sachs’ Financial and Other Relationships with Intermediaries
 
Goldman Sachs and its personnel, including employees of the investment adviser, may have relationships (both involving and not involving the Company, and including without limitation placement, brokerage, advisory and board relationships) with distributors, consultants and others who recommend, or engage in transactions with or for, the Company. Such distributors, consultants and other parties may receive compensation from Goldman Sachs or the Company in connection with such relationships. As a result of these relationships, distributors, consultants and other parties may have conflicts that create incentives for them to promote the Company.
 
To the extent permitted by applicable law, the Company and Goldman Sachs may make payments to authorized dealers and other financial intermediaries and to salespersons (collectively, “Intermediaries”) from time to time to promote the Company. These payments may be made out of Goldman Sachs’ assets, or amounts payable to Goldman Sachs. These payments may create an incentive for a particular Intermediary to highlight, feature or recommend the Company.
 
Allocation of Investment Opportunities Among the Company and Other Accounts
 
The investment adviser may manage or advise multiple Accounts (including Accounts in which Goldman Sachs and its personnel have an interest) that have investment objectives that are similar to the Company’s investment objectives and may seek to make investments or sell investments in the same securities or other instruments, sectors or strategies as the Company. This may create potential conflicts, particularly in circumstances where the availability of such investment opportunities is limited (e.g., in local and emerging markets, high yield securities, fixed income securities, regulated industries, small capitalization and initial public offerings/new issues), where the liquidity of such investment opportunities is limited or where co-investments by the Company and other Accounts is not permitted under applicable law.
 
 
 
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The Company’s investment objectives and investment strategies are similar to those of other funds managed by the GSAM Liberty Harbor investment team, and an investment appropriate for the Company could also be appropriate for those investment funds.  As a result, the GSAM Liberty Harbor investment team may face conflicts in allocating investment opportunities among the Company and such other funds.
 
Subject to applicable law, Goldman Sachs or Accounts may invest alongside the Company.  In certain circumstances, negotiated co-investments by the Company and other funds managed by the GSAM Liberty Harbor investment team may be made only if the Company receives an order from the SEC permitting the Company to do so.  There can be no assurance when any such order would be obtained or that one will be obtained at all.  In the absence of an SEC order, when the investment adviser identifies certain investments, it will be forced to choose which funds should make the investment. Although the investment adviser will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that the Company will not be given the opportunity to participate in investments made by other funds managed by the investment adviser.
 
The Company is prohibited under the Investment Company Act from participating in certain transactions with its affiliates without the prior approval of the Independent Directors and, in some cases, of the SEC.  Any person that owns, directly or indirectly, five percent or more of the Company’s outstanding voting securities will be an affiliate of the Company for purposes of the Investment Company Act, and the Company is generally prohibited from buying or selling any assets from or to, or entering into certain “joint” transactions (which could include investments in the same portfolio company) with such affiliates, absent the prior approval of the Independent Directors.  The investment adviser and its affiliates, including persons that control, or are under common control with, the Company or the investment adviser, are also considered to be affiliates of the Company under the Investment Company Act, and the Company is generally prohibited from buying or selling any assets from or to, or entering into “joint” transactions with, such affiliates without prior approval of the Independent Directors and, in some cases, exemptive relief from the SEC.
 
The Company may, however, invest alongside other clients of the investment adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff guidance and interpretations.  For example, the Company may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting the Company and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the investment adviser, acting on behalf of the Company and on behalf of its other clients, negotiates no term other than price.  The Company may also invest alongside the investment adviser’s other clients as otherwise permissible under SEC staff guidance and interpretations, applicable regulations and the allocation policy of the investment adviser.
 
To address these potential conflicts, the investment adviser has developed allocation policies and procedures that provide that personnel of the investment adviser making portfolio decisions for Accounts will make purchase and sale decisions and allocate investment opportunities among Accounts consistent with its fiduciary obligations. To the extent permitted by applicable law, these policies and procedures may result in the pro rata allocation of limited opportunities across eligible Accounts managed by a particular portfolio management team, but in many other cases the allocations reflect numerous other factors as described below. Accounts managed by different portfolio management teams are generally viewed separately for allocation purposes. There will be cases where certain Accounts receive an allocation of an investment opportunity when the Company does not and vice versa.
 
Personnel of the investment adviser involved in decision-making for Accounts may make allocation related decisions for the Company and other Accounts by reference to one or more factors, including without limitation: the Account’s portfolio and its investment horizons, objectives, guidelines and restrictions (including legal and regulatory restrictions); strategic fit and other portfolio management considerations, including different desired levels of investment for different strategies; the expected future capacity of the applicable Accounts; limits on the investment adviser’s brokerage discretion; cash and liquidity considerations; and the availability of other appropriate investment opportunities. Suitability considerations, reputational matters and other considerations may also be considered. The application of these considerations may cause differences in the performance of different Accounts that have similar strategies. In addition, in some cases the investment adviser may make investment recommendations to Accounts where the Accounts make the investment independently of the investment adviser, which may result in a reduction in the availability of the investment opportunity for other Accounts (including the Company) irrespective of the investment adviser’s policies regarding allocation of investments. Additional
 
 
 
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information about the investment adviser’s allocation policies is set forth in Item 6 (“Performance-based Fees and Side-by-Side Management—Side-by-Side Management of Advisory Accounts; Allocation of Opportunities”) of the investment adviser’s Form ADV.
 
The investment adviser may, from time to time, develop and implement new trading strategies or seek to participate in new investment opportunities and trading strategies. These opportunities and strategies may not be employed in all Accounts or pro rata among Accounts where they are employed, even if the opportunity or strategy is consistent with the objectives of such Accounts.
 
During periods of unusual market conditions, the investment adviser may deviate from its normal trade allocation practices. For example, this may occur with respect to the management of unlevered and/or long-only Accounts that are typically managed on a side-by-side basis with levered and/or long-short Accounts.
 
The Company may or may not receive, but in any event will have no rights with respect to, opportunities sourced by Goldman Sachs businesses and affiliates. Such opportunities or any portion thereof may be offered to other Accounts, Goldman Sachs, all or certain investors in the Company, or such other persons or entities as determined by Goldman Sachs in its sole discretion. The Company will have no rights and will not receive any compensation related to such opportunities.
 
Goldman Sachs’ Financial and Other Interests May Incentivize Goldman Sachs to Promote the Sale of Company Stock
 
Goldman Sachs and its personnel have interests in promoting sales of the Company’s stock, and the compensation from such sales may be greater than the compensation relating to sales of interests in other Accounts. Therefore, Goldman Sachs and its personnel may have a financial interest in promoting the Company’s stock over interests in other Accounts.
 
The investment adviser receives performance-based compensation in respect of its investment management activities on the Company’s behalf, which rewards the investment adviser for positive performance of the Company’s investment portfolio.  As a result, the investment adviser may make investments for the Company that present a greater potential for return but also a greater risk of loss or that are more speculative than would be the case in the absence of performance-based compensation.  In addition, the investment adviser may simultaneously manage Accounts for which the investment adviser receives greater fees or other compensation than it receives in respect of the Company.  Therefore, the investment adviser may have an incentive to favor such Accounts.  To address these types of conflicts, the investment adviser has adopted policies and procedures under which it will allocate investment opportunities in a manner that it believes is consistent with its obligations as an investment adviser.  However, the amount, timing, structuring or terms of an investment by the Company may differ from, and performance may be lower than, the investments and performance of other Accounts.
 
Management of the Company by the Investment Adviser
 
Potential Restrictions and Issues Relating to Information Held by Goldman Sachs
 
Goldman Sachs has established certain information barriers and other policies to address the sharing of information between different businesses within Goldman Sachs. As a result of information barriers, the investment adviser generally will not have access, or will have limited access, to information and personnel in other areas of Goldman Sachs, and generally will not be able to manage the Company with the benefit of information held by such other areas. Such other areas, including without limitation, Goldman Sachs’ prime brokerage and administration businesses, will have broad access to detailed information that is not available to the investment adviser, including information in respect of markets and investments, which, if known to the investment adviser, might cause the investment adviser to seek to dispose of, retain or increase interests in investments held by the Company or acquire certain positions on the Company’s behalf, or take other actions. Goldman Sachs will be under no obligation or fiduciary or other duty to make any such information available to the investment adviser or personnel of the investment adviser involved in decision-making for. In addition, Goldman Sachs will not have any obligation to make available any information regarding its trading activities, strategies or views, or the activities, strategies or views used for other Accounts, for the benefit of the Company.
 
 
 
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Valuation of the Company’s Investments
 
The investment adviser, while not the Company’s primary valuation agent, performs certain valuation services related to securities and assets. The investment adviser, pursuant to delegated authority, values the Company’s securities and assets according to the Company’s valuation policies and may value an identical asset differently than another division or unit within Goldman Sachs or another Account values the asset, including because such other division or unit or Account has information regarding valuation techniques and models or other information that it does not share with the investment adviser or the Company. This is particularly the case in respect of difficult-to-value assets.  The investment adviser may face a conflict with respect to such valuations as they affect the investment adviser’s compensation.
 
Goldman Sachs’ and the Investment Adviser’s Activities on Behalf of Other Accounts
 
The investment adviser’s decisions and actions on the Company’s behalf may differ from those on behalf of other Accounts. Advice given to, or investment or voting decisions made for, one or more Accounts may compete with, affect, differ from, conflict with, or involve timing different from, advice given to or investment decisions made for the Company.
 
The extent of Goldman Sachs’ activities in the global financial markets may have potential adverse effects on the Company. Goldman Sachs, the clients it advises, and its personnel have interests in and advise Accounts which have investment objectives or portfolios similar to or opposed to those of the Company, and/or which engage in and compete for transactions in the same types of securities and other instruments as the Company. Transactions by such Accounts may involve the same or related securities or other instruments as those in which the Company invests, and may negatively affect the Company or the prices or terms at which the Company’s transactions may be effected. For example, Accounts may engage in a strategy while the Company is undertaking the same or a differing strategy, any of which could directly or indirectly disadvantage the Company.  The Company and Goldman Sachs may also vote differently on or take or refrain from taking different actions with respect to the same security, which may be disadvantageous to the Company. Accounts may also invest in or extend credit to different classes of securities or different parts of the capital structure of the same issuer and classes of securities that are subordinate or senior to, securities in which the Company invests.  As a result, Goldman Sachs and the Accounts may pursue or enforce rights or activities, or refrain from pursuing or enforcing rights or activities, with respect to a particular issuer in which the Company has invested. The Company could sustain losses during periods in which Goldman Sachs and other Accounts achieve profits. The negative effects described above may be more pronounced in connection with transactions in, or the Company’s use of, small capitalization, emerging market, distressed or less liquid strategies.
 
Goldman Sachs and its personnel may make investment decisions or recommendations, provide differing investment views or have views with respect to research or valuations that are inconsistent with, or adverse to, the Company’s interests and activities.  Similarly, the investment adviser’s portfolio management teams may have differing investment views in respect of an issuer or a security, and the actions the Company’s portfolio management team takes in respect of the Company’s investments may be inconsistent with, or adversely affected by, the interests and activities of the Accounts advised by other portfolio management teams of the investment adviser.  Research analyses or viewpoints may be available to clients or potential clients at different times. Goldman Sachs will not have any obligation to make available to the Company any research or analysis prior to its public dissemination. The investment adviser is responsible for making investment decisions on the Company’s behalf and such investment decisions can differ from investment decisions or recommendations by Goldman Sachs on behalf of other Accounts. Goldman Sachs may, on behalf of other Accounts and in accordance with its management of such Accounts, implement an investment decision or strategy ahead of, or contemporaneously with, or behind similar investment decisions or strategies made for the Company. The relative timing for the implementation of investment decisions or strategies among Accounts and the Company may disadvantage the Company. Certain factors, for example, market impact, liquidity constraints, or other circumstances, could result in the Company receiving less favorable trading results or incurring increased costs associated with implementing such investment decisions or strategies, or being otherwise disadvantaged.
 
Subject to applicable law, the investment adviser may cause the Company to invest in securities, loans or other obligations of companies affiliated with Goldman Sachs or in which Goldman Sachs or Accounts have an equity, debt or other interest, or to engage in investment transactions that may result in other Accounts being
 
 
 
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relieved of obligations or otherwise divesting of investments, which may enhance the profitability of Goldman Sachs’ or other Accounts’ investments in and activities with respect to such companies.
 
When the investment adviser wishes to place an order for different types of Accounts (including the Company) for which aggregation is not practicable, the investment adviser may use a trade sequencing and rotation policy to determine which type of Account is to be traded first. Under this policy, each portfolio management team may determine the length of its trade rotation period and the sequencing schedule for different categories of clients within this period provided that the trading periods and these sequencing schedules are designed to be fair and equitable over time. The portfolio management teams currently base their trading periods and rotation schedules on the relative amounts of assets managed for different client categories (e.g., unconstrained client accounts, “wrap program” accounts, etc.) and, as a result, the Company may trade behind other Accounts. Within a given trading period, the sequencing schedule establishes when and how frequently a given client category will trade first in the order of rotation. The investment adviser may deviate from the predetermined sequencing schedule under certain circumstances, and the investment adviser’s trade sequencing and rotation policy may be amended, modified or supplemented at any time without prior notice to clients.
 
Investments in Goldman Sachs Funds
 
To the extent permitted by applicable law, the Company may invest in money market and other funds sponsored, managed or advised by Goldman Sachs. In connection with any such investments, the Company, to the extent permitted by the Investment Company Act, will pay all advisory, administrative or Rule 12b-1 fees applicable to the investment, and fees to the investment adviser in its capacity as manager will not be reduced thereby (i.e., there could be “double fees” involved in making any such investment because Goldman Sachs could receive fees with respect to both the Company’s management and such money market fund). In such circumstances, as well as in all other circumstances in which Goldman Sachs receives any fees or other compensation in any form relating to the provision of services, no accounting or repayment to the Company will be required.
 
Goldman Sachs May In-Source or Outsource
 
Subject to applicable law, Goldman Sachs, including the investment adviser, may from time to time and without notice to investors in-source or outsource certain processes or functions in connection with a variety of services that it provides to the Company in its administrative or other capacities. Such in-sourcing or outsourcing may give rise to additional conflicts of interest.
 
Goldman Sachs May Act in a Capacity Other Than Investment Adviser to the Company
 
Cross Transactions
 
When permitted by applicable law and the investment adviser’s and the Company’s policies, the investment adviser, acting on the Company’s behalf, may enter into transactions in securities and other instruments with or through Goldman Sachs, and may cause the Company to engage in transactions in which the investment adviser, advises both sides of a transaction (cross transactions) and acts as broker for, and receives a commission from, the Company on one side of a transaction and a brokerage account on the other side of the transaction (agency cross transactions). There may be potential conflicts of interest or regulatory restrictions relating to these transactions which could limit the investment adviser’s ability to engage in these transactions for the Company. Goldman Sachs may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions, and has developed policies and procedures in relation to such transactions and conflicts. Any cross or agency cross transactions will be effected in accordance with fiduciary requirements and applicable law (which may include disclosure and consent).
 
Goldman Sachs May Act in Multiple Commercial Capacities
 
To the extent permitted by applicable law, Goldman Sachs may act as broker, dealer, agent, lender or advisor or in other commercial capacities for the Company or issuers of securities held by the Company. Goldman Sachs may be entitled to compensation in connection with the provision of such services, and the Company will not be entitled to any such compensation. Goldman Sachs will have an interest in obtaining fees and other compensation in connection with such services that are favorable to Goldman Sachs, and may take commercial
 
 
 
44

 
 
steps in its own interests in connection with providing such services that negatively affect the Company. For example, Goldman Sachs may require repayment of all or part of a loan at any time and from time to time or declare a default under an agreement with the Company or a portfolio company of the Company, liquidate the Company’s assets or redeem positions more rapidly (and at significantly lower prices) than might otherwise be desirable. In addition, due to its access to and knowledge of funds, markets and securities based on its other businesses, Goldman Sachs may make decisions based on information or take (or refrain from taking) actions with respect to interests in investments of the kind held directly or indirectly by the Company in a manner that may be adverse to the Company. Goldman Sachs may also derive benefits from providing services to the Company, which may enhance Goldman Sachs’ relationships with various parties, facilitate additional business development and enable Goldman Sachs to obtain additional business and generate additional revenue.
 
Subject to applicable law, Goldman Sachs or Accounts may invest in the Company and such investments may constitute substantial percentages of the Company’s outstanding equity securities.
 
To the extent permitted by applicable law, Goldman Sachs may create, write, sell, issue, invest in or act as placement agent or distributor of derivative instruments related to the Company, or with respect to the Company’s underlying securities or assets, or which may be otherwise based on or seek to replicate or hedge the Company’s performance. Such derivative transactions, and any associated hedging activity, may differ from and be adverse to the interests of the Company.
 
Goldman Sachs may make loans or enter into asset-based or other credit facilities or similar transactions that are secured by a client’s assets or interests, including the Company’s stock, interests in an Account or assets in which the Company or an Account has an interest. In connection with its rights as lender, Goldman Sachs may take actions that adversely affect the Account and which may in turn adversely affect the Company (e.g., if the Company holds the same type of security that is providing the credit support to the borrower Account, such holding may be disadvantaged when the borrower Account liquidates assets in response to an action taken by Goldman Sachs).
 
Code of Ethics and Personal Trading
 
Each of the Company and GSAMLP, as the Company’s investment adviser, has adopted a Code of Ethics (the “Code of Ethics”) in compliance with Section 17(j) of the Investment Company Act designed to provide that personnel of the investment adviser, and certain additional Goldman Sachs personnel who support the investment adviser, comply with applicable federal securities laws and place the interests of clients first in conducting personal securities transactions. The Code of Ethics imposes certain restrictions on securities transactions in the personal accounts of covered persons to help avoid conflicts of interest. Subject to the limitations of the Code of Ethics, covered persons may buy and sell securities or other investments for their personal accounts, including investments in the Company, and may also take positions that are the same as, different from, or made at different times than, positions taken by the Company. Additionally, Goldman Sachs personnel, including personnel of the investment adviser, are subject to firm-wide policies and procedures regarding confidential and proprietary information, information barriers, private investments, outside business activities and personal trading.
 
Proxy Voting by the Investment Adviser
 
The investment adviser has adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions that it makes on behalf of advisory clients, including the Company, and to help ensure that such decisions are made in accordance with its fiduciary obligations to its clients. Notwithstanding such proxy voting policies and procedures, proxy voting decisions made by the investment adviser with respect to securities held by the Company may benefit the interests of Goldman Sachs and Accounts other than the Company.
 
Potential Limitations and Restrictions on Investment Opportunities and Activities of the Investment Adviser and the Company
 
The investment adviser may restrict its investment decisions and activities on the Company’s behalf in various circumstances, including as a result of applicable regulatory requirements, information held by Goldman Sachs, Goldman Sachs’ internal policies and/or potential reputational risk or disadvantage to Accounts, including the Company, and Goldman Sachs. As a result, the investment adviser might not engage in transactions for the
 
 
 
45

 
 
Company in consideration of Goldman Sachs’ activities outside  services provided to the Company (e.g., the investment adviser may refrain from making investments for the Company that would cause Goldman Sachs to exceed position limits or cause Goldman Sachs to have additional disclosure obligations and may limit purchases or sales of securities in respect of which Goldman Sachs is engaged in an underwriting or other distribution). In addition, the investment adviser is not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for the Company. The investment adviser may also limit the activities and transactions engaged in by the Company, and may limit its exercise of rights on the Company’s behalf or in respect of the Company, for reputational or other reasons, including where Goldman Sachs is providing (or may provide) advice or services to an entity involved in such activity or transaction, where Goldman Sachs or an Account is or may be engaged in the same or a related transaction to that being considered on the Company’s behalf, where Goldman Sachs or an Account has an interest in an entity involved in such activity or transaction, or where such activity or transaction or the exercise of such rights on the Company’s behalf or in respect of the Company could affect Goldman Sachs, the investment adviser or their activities.
 
Brokerage Transactions
 
The investment adviser may select broker-dealers (including affiliates of the investment adviser) that furnish the investment adviser, the Company, their affiliates and other Goldman Sachs personnel with proprietary or third-party brokerage and research services (collectively, “brokerage and research services”) that provide, in the investment adviser’s view, appropriate assistance to the investment adviser in the investment decision-making process. As a result, the investment adviser may pay for such brokerage and research services with “soft” or commission dollars.
 
Brokerage and research services may be used to service the Company and any or all other Accounts, including in connection with Accounts other than those that pay commissions to the broker-dealer relating to the brokerage and research service arrangements. As a result, the brokerage and research services (including soft dollar benefits) may disproportionately benefit other Accounts relative to the Company based on the amount of commissions paid by the Company in comparison to such other Accounts. The investment adviser does not attempt to allocate soft dollar benefits proportionately among clients or to track the benefits of brokerage and research services to the commissions associated with a particular Account or group of Accounts.
 
Since the Company will generally acquire and dispose of investments in privately negotiated transactions, it will infrequently use brokers in the normal course of its business. Subject to policies established by the Company’s Board of Directors, the investment adviser will be primarily responsible for the execution of the publicly traded securities portion of its portfolio transactions and the allocation of brokerage commissions. The investment adviser does not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for the Company, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While the investment adviser generally will seek reasonably competitive trade execution costs, the Company will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, the investment adviser may select a broker based partly upon brokerage or research services provided to the investment adviser and the Company and any other Accounts. In return for such services, the Company may pay a higher commission than other brokers would charge if the investment adviser determines in good faith that such commission is reasonable in relation to the services provided.
 
Aggregation of Trades by the Investment Adviser
 
The investment adviser follows policies and procedures pursuant to which, subject to applicable law, it may combine or aggregate purchase or sale orders for the same security for multiple clients (sometimes called “bunching”) (including Accounts that are proprietary to Goldman Sachs), so that the orders can be executed at the same time. The investment adviser aggregates orders, when subject to applicable law, the investment adviser considers doing so appropriate and in the interests of its clients generally. In addition, under certain circumstances and subject to applicable law, trades for the Company may be aggregated with Accounts that contain Goldman Sachs assets.
 
When a bunched order is completely filled, the investment adviser generally will allocate the securities purchased or proceeds of sale pro rata among the participating Accounts, based on the purchase or sale order. If an
 
 
 
46

 
 
order is filled at several different prices, through multiple trades (whether at a particular broker-dealer or among multiple broker-dealers), generally all participating Accounts will receive the average price and pay the average commission, however, this may not always be the case (due to, e.g., odd lots, rounding, market practice or constraints applicable to particular Accounts).
 
The investment adviser does not bunch or aggregate orders for different Accounts, or net buy and sell orders for the same Account, if portfolio management decisions relating to the orders are made separately, or if bunching, aggregating or netting is not appropriate or practicable from the investment adviser’s operational or other perspective. The investment adviser may be able to negotiate a better price and lower commission rate on aggregated trades than on trades that are not aggregated, and incur lower transaction costs on netted trades than trades that are not netted. Where transactions for an Account are not aggregated with other orders, or not netted against orders for the Company, the Company may not benefit from a better price and lower commission rate or lower transaction cost.
 
 
 
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FORWARD-LOOKING STATEMENTS
 
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include, but are not limited to, information in this prospectus regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company and the expected performance of, and the yield on, our portfolio companies. In particular, there are forward-looking statements under “Summary—The Company”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors”, as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this prospectus could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.  Sections 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, do not apply to statements made in connection with any offering of securities pursuant to this prospectus or in the periodic reports we file under the Exchange Act.
 
The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
 
 
our future operating results;
 
 
changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
 
 
our business prospects and the prospects of our prospective portfolio companies;
 
 
the impact of investments that we expect to make;
 
 
the impact of increased competition;
 
 
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 prospective portfolio companies to achieve their objectives;
 
 
the relative and absolute performance of our investment adviser;
 
 
our expected financings and investments;
 
 
our ability to pay dividends or make distributions;
 
 
the adequacy of our cash resources and working capital;
 
 
 
48

 
 
 
 
the timing of cash flows, if any, from the operations of our prospective portfolio companies;
 
 
the impact of future acquisitions and divestitures;
 
 
our regulatory structure and tax status; and
 
 
our ability to operate as a BDC and a RIC.
 
 
 
49 

 
 
USE OF PROCEEDS
 
We estimate that the net proceeds we will receive from the sale of        shares of our common stock in this offering will be approximately $     million, based on an offering price of $     per share (which represents the mid-point of the range set forth on the cover of this prospectus), after deducting the fee paid to the underwriters and estimated offering expenses of approximately $     payable by us. Such estimate is subject to change and no assurances can be given that actual expenses will not exceed such amount. We expect to use proceeds from the closing of this offering to make investments consistent with our investment objectives, to repay a portion of our outstanding debt and for certain offering expenses and general corporate purposes.
 
We anticipate that substantially all of the net proceeds of this offering will be invested within        months  of the closing of this offering, in accordance with our investment objectives and strategies, depending on the availability of appropriate investment opportunities and market conditions. The time period during which we anticipate investing such proceeds can be affected by a number of factors. We cannot assure you we will achieve our targeted investment pace.
 
During the period when the proceeds of this offering are not fully invested, we expect that our investment earnings, and hence the return to stockholders, will be lower than after we are fully invested. See “Regulation—Temporary Investments” for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objectives.
 
 
 
50 

 
 
DISTRIBUTIONS
 
    We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.  The quarterly distributions, if any, will be determined by our Board of Directors.  The amount of any such distribution will be proportionately reduced to reflect the number of days remaining in the quarter after the completion of the initial offering.  All dividends and distributions will be subject to lawfully available funds therefor, and no assurance can be given that we will be able to declare such an initial distribution or distributions in future periods.
 
    We intend to elect to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ending on December 31, 2013.  To obtain and maintain RIC status, we must, among other things, timely distribute to our stockholders at least 90% of our investment company taxable income for each taxable year.  We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.  We generally will be required to pay such U.S. federal excise tax if our distributions during a calendar year do not exceed the sum of (1) 98% of our net ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.  If we retain net capital gains, we may treat such amounts as deemed distributions to our stockholders.  In that case, you will be treated as if you had received an actual distribution of the capital gains we retained and then you reinvested the net after-tax proceeds in our common stock.  In general, you also will be eligible to claim a tax credit (or, in certain circumstances, obtain a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.  The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year.  Please refer to “U.S. Federal Income Tax Considerations” for further information regarding the tax treatment of our distributions and the tax consequences of our retention of net capital gains.
 
 
51 

 
 
CAPITALIZATION
 
The following table sets forth our capitalization as of          , 2013 and on an adjusted basis to give effect to this offering at an assumed public offering price of $     per share (which represents the mid-point of the range set forth on the cover of this prospectus) after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $   million payable by us.

You should read this table together with “Use of Proceeds” and the audited financial statements and the related notes thereto included elsewhere in this prospectus.

 
   As of                   , 2013
 
     Actual
      As Adjusted
 
 
 
Assets
 
   
Cash and cash equivalents
 
   
Investments, at fair value
 
   
Other assets
 
   
Total assets
 
   
Liabilities:
 
   
     
     
     
Total liabilities
   
 
 
Stockholder’s equity:
   
Preferred Stock, par value $0.001 per share, 1,000,000 authorized, 0 shares issued and outstanding
Common stock, par value $0.001 per share, 200,000,000 authorized,         shares issued and outstanding, actual
                    shares issued and outstanding, as adjusted
 
   
Paid-in capital in excess of par value
 
   
Accumulated loss
 
   
Total stockholders’ equity
 
   
Total liabilities and stockholders’ equity
 
   
Pro forma net asset value per share
   
 
 
 
   
 
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DILUTION
 
 

 
The potential dilution to investors in this offering is represented by the difference between the offering price per share and the pro forma NAV per share after this offering. NAV per share is determined by dividing our NAV, which is our total tangible assets less total liabilities, by the number of outstanding shares of common stock.
 
As of               , 2013, we had     shares of common stock outstanding and as of            2013, our NAV was $    , or approximately $          per share. After giving effect to the sale of the shares of common stock to be sold in this offering, and the deduction of discounts and estimated offering expenses, our as-adjusted net NAV would be approximately $        million, or $          per share, representing an immediate dilution of $     per share, or        %, to shares sold in this offering.  The following illustration assumes no exercise of the underwriters’ over-allotment option. If the underwriters’ over-allotment is exercised in full, there would be an immediate dilution to the NAV of $       per share, or             %, to the shares sold in this offering.
 
The following table illustrates the dilution to the shares on a per share basis:

 
         
Initial public offering price per share
  
$
 
  
     , 2013 NAV per share immediately prior to this offering
  
$
 
  
 
  
     
Increase attributable to this offering
 
$
   
As-adjusted NAV per share immediately after this offering
  
$
 
  
 
  
     
Dilution per share to stockholders participating in this offering (without exercise of the over-allotment option)
  
     
 
The following table sets forth information with respect to the shares prior to and following this offering (without exercise of the underwriters’ over-allotment option):
 
   
Shares Purchased
 
Total Consideration
 
Average
Price
Per Share
  
 
Number
 
%
 
Amount
 
%
Shares outstanding
 
   
    
     
 
%    
    
     
 
 
%
   
    
 
Shares to be sold in this offering
 
   
    
     
 
%
   
    
     
 
 
%
   
    
 
Total
   
    
     
100.0
   
    
     
100.0
   
    
 

The as-adjusted NAV upon completion of this offering is calculated as follows:
 
 
Numerator:
 
   
  
 
 
Net Asset Value
 
 
$
   
 
Assumed proceeds from this offering (after deduction of underwriting discounts and commissions and offering expenses payable by us)
 
 
$
    
 
 
Net Asset Value upon completion of this offering
 
 
$
    
 
 
Denominator:
 
   
  
 
 
Shares outstanding
 
   
    
 
 
Shares included in this offering
 
   
    
 

 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and other parts of this prospectus contain forward-looking information that involves risks and uncertainties. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Forward-Looking Statements” appearing elsewhere in this prospectus.
 
Overview
 
We are a recently formed, externally managed specialty finance company that is a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act. On April 1, 2013, we converted from a Delaware limited liability company to a Delaware corporation.
 
Our investment objective is to generate current income and, to a lesser extent, capital appreciation through investments in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities.  We invest primarily in U.S. middle-market companies, which GSAM believes have been underserved in recent years by banks and have difficulty accessing the public debt markets.  However, we may from time to time invest in larger or smaller companies.
 
We expect to make investments through both primary originations and open-market secondary purchases.  We expect to invest across a number of different industries. Our investments are typically expected to have maturities between three and ten years and generally range in size between $5 and $50 million, though this investment size may grow if our capital base grows and shrink if our capital base shrinks.  If we are successful in achieving our investment objective, we believe that we will be able to provide our stockholders with consistent dividend distributions and attractive risk-adjusted total returns.
 
Since our initial funding by Group Inc. on November 15, 2012, as of February 28, 2013, we have invested approximately $72.7 million in eight companies. At February 28, 2013, our portfolio on a net cost basis was invested approximately 91% in secured debt (31% in first lien debt and 60% in second lien debt) and 9% in unsecured debt.
 
Investments
 
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.
 
As a BDC, we must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Pursuant to rules adopted by the SEC, “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million. See “Regulation.”
 
Revenues
 
We generate revenue in the form of interest income on the debt investments and, to a lesser extent, capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing
 
 
 
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managerial assistance and possibly consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts in to income. We record contractual prepayment premiums on loans and debt securities as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts.
 
Expenses
 
Our primary operating expenses include the payment of management and incentive fees to our investment adviser, legal and professional fees and other operating and overhead related expenses. Our management and incentive fees compensate our investment adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions in accordance with our Investment Management Agreement and our Administration Agreement. See “Management—Investment Management Agreement” and “Management—Our Administrator.”
 
During periods of asset growth, we expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets and increase during periods of asset declines. Incentive fees and costs relating to future offerings of securities would be incremental.
 
Formation Transactions
 
For a description of our Formation Transactions, see “Summary—Formation Transactions.”
 
Portfolio and Investment Activity
 
As of December 31, 2012, our existing investment portfolio consisted of secured debt and unsecured debt across 7 positions with an aggregate fair value of $50.0 million and a par value of $51.1 million. As of that date, our portfolio on a net cost basis was invested in approximately 83.7% in secured debt (37.1% in first lien debt and 46.6% in second lien debt) and 13.5% in unsecured debt.  As of December 31, 2012, our portfolio had an average investment size of $7.1 million and the weighted average remaining term of our debt investments was approximately 5.9 years.
 
Results of Operations
 
Investment Income
 
For the period ended December 31, 2012, gross investment income totaled approximately $162,000 and consisted primarily of approximately $85,000 from secured debt and approximately $77,000 from unsecured debt.
 
Expenses
 
Expenses totaled approximately $346,000 for the period ended December 31, 2012, of which approximately $280,000 was base management fees and performance-based incentive fees.  Of these net operating expenses, general and administrative expenses totaled approximately $66,000.  Net expenses consist of base investment advisory and management fees, insurance expenses, administrative services fees, legal fees, directors’ fees, audit and tax services expenses and other general and administrative expenses.
 
Net Investment Income (Loss)
 
Our net investment income (loss) totaled approximately ($184,000) for the period ended December 31, 2012.
 
Net Realized Gains (Losses)
 
We had no investment sales and prepayments for the period ended December 31, 2012.  There were no net realized gains for the period ended December 31, 2012.
 
 
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Net Unrealized Gains (Losses) on Investments
 
For the period ended December 31, 2012, net change in unrealized gain on our investments totaled approximately $1.05 million. Net unrealized gain was primarily due to positive performance in the underlying investments, particularly in secured debt.
 
Net Increase (Decrease) in Member’s Equity From Operations After Tax
 
For the period ended December 31, 2012, we had a net increase in net assets resulting from operations after tax of approximately $511,000.
 
Hedging
 
To the extent that any of our loans are denominated in a currency other than U.S. dollars, subject to application of the Volcker Rule, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of futures, options, swaps and forward contracts.  Costs incurred in entering into such contracts or in settling them, if any, will be borne by us. Our ability to engage in hedging transactions in the future may be adversely affected by recent rules adopted by the CFTC unless we register as a commodity pool operator. See “Risk Factors— The Volcker Rule may impact how we operate our business.”
 
Financial Condition, Liquidity and Capital Resources
 
The primary use of existing funds and any funds raised in the future, including from this offering is expected to be for our investments in portfolio companies, cash distributions to, our stockholders or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities.  See “Distributions.”
 
At December 31, 2012, we had cash and cash equivalents of approximately $1.5 million. Cash used in operating activities for the period ended December 31, 2012 was approximately $49.0 million, while cash provided by financing activities was approximately $50.6 million. We expect to raise equity capital by selling shares of our common stock in public and private placement offerings of shares of our common stock in the future.
 
To the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board of Directors otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders, we may enter into one or more credit facilities, including revolving credit facilities, or issue senior securities.  We would expect any such credit facilities may be secured by certain of our assets and may contain advance rates based upon pledged collateral.  The pricing and other terms of any such facilities would depend upon market conditions when we enter into any such facilities as well as the performance of our business, among other factors.
 
In addition, we may raise capital by securitizing certain of our investments, including through the formation of one or more CLOs or warehouse facilities, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers.  We may also pursue other forms of debt financing, including potentially from the SBA through a future SBIC subsidiary.
 
We also intend to enter into a prime brokerage agreement with a financial institution which we expect will be secured by certain of our assets based on our borrowings. Such agreement is expected to be terminable by the lender upon relatively short notice at which point we will not be able to make additional borrowings and we will be required, after a period of time, to pay down any then-outstanding amounts.
 
We will generate cash primarily from the net proceeds of this offering and any future offerings of securities and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less.
 
 
 
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Inflation
 
Inflation has not had a significant effect on our results of operations in any of the reporting periods presented in our financial statements. However, our portfolio companies may, from time to time, experience the impact of inflation on their operating results.
 
Contractual Obligations
 
We have entered into two contracts under which we have future commitments: the Investment Management Agreement, pursuant to which GSAMLP has agreed to serve as our investment adviser, as such agreement is expected to be amended and restated in connection with the Conversion, and the Administration Agreement, pursuant to which State Street Bank and Trust Company has agreed to furnish us with the administrative services necessary to conduct our day-to-day operations. See “Management—Our Investment Adviser” and “Management—Our Administrator.”  Payments under the Investment Management Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. Under the Administration Agreement, we pay our administrator such fees as may be agreed between us and our administrator that we determine are commercially reasonable in our sole discretion.  Either party may terminate the Investment Management Agreement without penalty upon at least 60 days’ written notice to the other.  Either party may terminate the Administration Agreement without penalty upon at least 30 days’ written notice to the other party.
 
Additionally, the following table shows our contractual obligations as of                 , 2013:
 
 
   
Payments Due by Period (Millions)
   
  
 
Total
 
Less Than
1 Year
 
1 – 3 Years
 
3 – 5 Years
 
More Than
5 Years
 
 
 
$
     
$
     
$
     
$
     
$
   

 
Off-Balance Sheet Arrangements
 
We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of December 31, 2012, we had no off-balance sheet arrangements.
 
Distribution Policy
 
We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.  The quarterly distributions, if any, will be determined by our Board of Directors.  All dividends and distributions will be subject to lawfully available funds therefor, and no assurance can be given that we will be able to declare such an initial distribution or distributions in future periods.
 
We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.  The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.  The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year.  See “Distributions.”
 
Quantitative and Qualitative Disclosures About Market Risk
 
We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio.
 
Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income
 
 
 
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is expected to be 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 significant change in market interest rates will not have a material adverse effect on our net investment income. See “Risk Factors—Risks Relating to Our Business and Structure—We will be exposed to risks associated with changes in interest rates.”
 
As of December 31, 2012, approximately 52% of our investments at fair value in our portfolio bore interest at fixed rates and approximately 48% bore interest at variable rates with interest rate floors.
 
We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities.
 
We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the Investment Company Act and the Volcker Rule. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this prospectus, we did not engage in interest rate hedging activities.
 
Based on our December 31, 2012 balance sheet, the following table 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:
 
As of December 31, 2012
Basis Point Change
Interest Income
Interest Expense
Net
Income
Up 300 basis points
493,440
493,440
Up 200 basis points
253,440
253,440
Up 100 basis points
13,440
13,440
Down 100 basis points
Down 200 basis points
Down 300 basis points
       
Critical Accounting Policies
 
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires management 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 materially. In addition to the discussion below, our critical accounting policies are further described in the notes to the financial statements.
 
Valuation of Portfolio Investments
 
As a BDC, we will conduct the valuation of our assets, pursuant to which our NAV shall be determined, at all times consistent with GAAP and the Investment Company Act. Our Board of Directors, with the assistance of our Audit Committee, will determine the fair value of our assets on at least a quarterly basis, in accordance with the terms of FASB Accounting Standards Codification Topic 820, Fair Value Measurement and Disclosures (“ASC 820”). Our valuation procedures are set forth in more detail below.
 
ASC 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. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
 
 
 
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ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
 
The three-level hierarchy for fair value measurement is defined as follows:
 
Level I — inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The type of financial instruments included in Level I include unrestricted securities, including equities and derivatives, listed in active markets.
 
Level II — inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The type of financial instruments in this category includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.
 
Level III — inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
 
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the financial instrument.
 
We expect that there will not be readily available market values for most, if not all, of the investments which are or will be in our portfolio, and we will value such investments at fair value as determined in good faith by or under the direction of our Board of Directors using a documented valuation policy, described below, and a consistently applied valuation process.  The factors that may be taken into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Under current auditing standards, the notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures adopted by our Board of Directors contemplates a multi-step valuation process each quarter, as described below:
 
 
(1)
Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our investment adviser responsible for the portfolio investment;
 
 
(2)
Preliminary valuation conclusions are then documented and discussed with the management of our investment adviser;
 
 
(3)
Our Board of Directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of an investment. The independent valuation firms review management’s preliminary valuations in light of its own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker.
 
 
 
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At least a portion of our portfolio will be reviewed on a quarterly basis by third-party valuation firms and our entire portfolio will be reviewed at least annually by third-party valuation firms;
 
 
(4)
The Audit Committee of our Board of Directors reviews the preliminary valuations of the investment adviser and that of the independent valuation firms and responds and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and
 
 
(5)
Our Board of Directors discusses the valuations and determines the fair value of each of our investments in good faith, based on the input of our investment adviser, the independent valuation firms and the Audit Committee.
 
Investment Transactions and Related Investment Income
 
We record our investment transactions on a trade date basis. Realized gains and losses are based on the specific identification method. Dividend income and expense are recorded on the ex-dividend date and interest income and expense are accrued over the life of the investment. Interest income and expense include accretion of discounts and amortization of premiums recorded over the life of the underlying instrument using the effective interest method. Interest and dividend income are presented net of withholding tax, if any.
 
We carry our investments in securities at fair value. Fair value generally is based on quoted market prices, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments in securities are measured at fair value as determined by our investment adviser and/or by one or more independent third parties.
 
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material.  For additional information, see Note 2 (“Significant Accounting Policies”) to our audited financial statements as of and for the period ended December 31, 2012, included elsewhere in this prospectus.
 
Federal Income Taxes
 
We intend to elect to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ending on December 31, 2013. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. To obtain and maintain our RIC status, we must meet specified source-of-income and asset diversification requirements and timely distribute to our stockholders at least 90% of our investment company taxable income for each year. Depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.  We generally will be required to pay such U.S. federal excise tax if our distributions during a calendar year do not exceed the sum of (1) 98% of our net ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.
 
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
 
Recent Accounting Pronouncements
 
In December 2011, Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-11, Disclosures about Offsetting Assets and Liabilities.  ASU 2011-11 creates new disclosure requirements about the nature of an entity’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The new disclosures are
 
 
 
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designed to make financial statements that are prepared under GAAP more comparable to those prepared under International Financial Reporting Standards (“IFRS”) and also to better facilitate comparison between financial statements prepared under GAAP and IFRS.  The new disclosures will give financial statement users information about both gross and net exposures. Our investment adviser is currently assessing the impact that the adoption of the ASU 2011-11 will have on our financial statement disclosures.
 
 
 
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SENIOR SECURITIES
 
Information about our senior securities is shown in the following table as of    , 2013.

Class and Period Ended
 
Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
 
Asset
Coverage
per Unit(2)
 
Involuntary
Liquidating
Preference
per Unit(3)
 
Average
Market Value
per Unit(4)
   
$
     
$
       
         
 
 
 
(1)
Total amount of each class of senior securities outstanding at the end of the period presented.
 
 
 
 
(2)
Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.
     
 
(3)
The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
     
 
(4)
Not applicable because senior securities are not registered for public trading.
 
 
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BUSINESS
 
The Company
 
We are a recently formed, externally managed specialty finance company that is a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act.
 
We are managed by our investment adviser, GSAMLP, subject to the supervision of our Board of Directors, a majority of whom are independent of GSAMLP and its affiliates.  GSAMLP, together with certain other affiliates of Group Inc., comprise GSAM.  GSAM is part of Group Inc., a public company that is a bank holding company, financial holding company and a world-wide, full-service financial services organization. Group Inc. is the general partner and principal owner of GSAMLP. GSAM has been providing financial solutions for investors since 1988 and has approximately $742.4 billion of assets under management as of December 31, 2012.
 
Our investment objective is to generate current income and, to a lesser extent, capital appreciation through investments in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities.  We invest primarily in U.S. middle-market companies, which GSAM believes have been underserved in recent years by banks and have difficulty accessing the public debt markets.  However, we may from time to time invest in larger or smaller companies.  In this prospectus, we generally use the term “middle-market” to refer to companies with EBITDA between $5 million and $75 million annually.  We use the term “mezzanine” to refer to a loan that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.  We expect to make investments through both primary originations and open-market secondary purchases.  We expect to invest across a number of different industries. Our investments are typically expected to have maturities between three and ten years and generally range in size between $5 and $50 million, though this investment size may grow if our capital base grows and shrink if our capital base shrinks.  If we are successful in achieving our investment objective, we believe that we will be able to provide our stockholders with consistent dividend distributions and attractive risk-adjusted total returns.
 
In addition to investments in U.S. middle-market companies, we may invest a portion of our capital in opportunistic investments, such as in large U.S. companies, foreign companies, stressed or distressed debt, structured products or private equity.  The proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating, although these types of investments generally will constitute less than 30% of our total assets.
 
The instruments in which we invest typically are not rated by any rating agency, but GSAM believes that if such instruments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service and lower than “BBB-” by Fitch Ratings or Standard & Poor’s Rating Services), which is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.  Bonds that are rated below investment grade are sometimes referred to as “high yield bonds,” “junk bonds” or “leveraged loans.”  We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by any nationally recognized statistical rating organization.
 
Since our initial funding by Group Inc. on November 15, 2012, as of February 28, 2013, we have invested approximately $72.7 million in eight companies.  Our investments have spanned across a variety of industries, including consumer-non-cyclical, industrial, technology, energy, financial and basic materials.  As of February 28, 2013, approximately 96% of our investments at net cost were in U.S. domestic companies.  Also as of such date, the weighted average remaining term of our debt investments was approximately 5.6 years.  At February 28, 2013, our portfolio on a net cost basis was invested approximately 91% in secured debt (31% in first lien debt and 60% in second lien debt) and 9% in unsecured debt.  As of February 28, 2013, on a net cost basis, approximately 52% of our portfolio was invested in debt bearing a fixed interest rate and approximately 48% was invested in debt bearing a floating interest rate.  As of January 31, 2013, our portfolio had a fair value of approximately $71.0 million.
 
 
 
 
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The following charts summarize our portfolio mix by industry and type based on the net cost of our investments as of February 28, 2013.
 
 
   
 
As of February 28, 2013, we had not incurred any leverage. Prior to the completion of this offering, we expect that we will be a party to one or more debt financing arrangements that will allow us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield.  In connection with these or other borrowings, our lenders may require us to pledge some or all of our assets.  In addition, the lenders may ask us to comply with positive or negative covenants that could have an adverse effect on our operations.
 
Our Investment Adviser
 
GSAMLP, a Delaware limited partnership, serves as our investment adviser and has been registered as an investment adviser with the SEC since 1990.  Subject to the supervision of our Board of Directors, our investment adviser manages our day-to-day operations and provides us with investment advisory and management services and certain administrative services.
 
In particular, the GSAM Liberty Harbor investment team will be responsible for identifying attractive investment opportunities, conducting research and due diligence on prospective investments, structuring our investments and monitoring and servicing our investments.  We do not have any employees.  As of January 31, 2013, the GSAM Liberty Harbor investment team had 24 investment professionals.  These individuals will have responsibilities other than relating to us and will allocate a portion of their time in support of our business based on their particular expertise as it relates to a potential investment opportunity and our investment objective as whole.  In addition, GSAM believes that is has best in class support personnel, including expertise in risk management, legal, accounting, tax, information technology and compliance, among others.  We expect to benefit from the support provided by these personnel in our operations.
 
The GSAM Liberty Harbor investment team takes a bottom-up, fundamental research approach to investing and focuses primarily on corporate credit investment opportunities in North America.  The team has approximately $5.0 billion of assets under management as of January 31, 2013.  The senior members of the investment team have been working together since 2006 and have an average of over 14 years of experience in leveraged finance and private transactions.
 
The GSAM Liberty Harbor investment team has an investment committee comprised of four voting members, Brendan McGovern, Salvatore Lentini, Jon Yoder and David Yu, as well as three non-voting members with operational or legal expertise.  The investment committee is responsible for approving all of our investments.  The investment committee also monitors investments in our portfolio and approves all asset dispositions.  We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the investment committee, which includes expertise in primary and secondary leveraged credit, private mezzanine finance, stressed and distressed debt, bankruptcy, mergers and acquisitions and private equity.
 
 
 
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We believe that the GSAM Liberty Harbor investment team will be able to leverage their current investment platform, resources and existing relationships with private equity sponsors, middle-market agents and intermediaries, financial institutions, the restructuring community and “orphaned” public companies to provide us with attractive investment opportunities, as well as with analyzing, negotiating, structuring and monitoring our investments.
 
Market Opportunity
 
GSAM believes that current market conditions and regulatory changes have combined to create an attractive investment environment for us.  Specifically:
 
 
Loans to middle-market companies are typically illiquid and unrated.  Stakeholders in banks, including their shareholders, lenders and regulators, continue to exert pressure to contain the amount of illiquid, unrated assets held on bank balance sheets.  Examples of this include moves to codify the BASEL III accords in the U.S., which increase the regulatory capital charge for lower rated and unrated assets in most instances, and continued investor focus on the amount of illiquid assets whose fair value cannot be determined by using observable measures, or “Level 3 assets,” held on bank balance sheets.  As a result, GSAM believes that banks have reduced their lending to middle-market companies.
 
 
Consolidation of regional banks into money center banks has reduced the focus on middle-market lending.  Money center banks traditionally focus on lending and providing other services to large corporate clients to whom they can deploy larger amounts of capital more efficiently.  GSAM believes that this has resulted in fewer bank lenders to the U.S. middle-market and the reduced availability of debt capital to the companies we target.
 
 
In GSAM’s experience, the so-called “shadow banking sector” (which GSAM believes is comprised of hedge funds, mezzanine funds, private equity funds, structured vehicles and similar entities) has struggled since the 2008 financial crisis to attract investor interest in long-term capital commitments of the nature required to allow the managers of these vehicles to purchase illiquid assets such as middle-market loans.  As a result, GSAM believes the amount of capital in the “shadow banking sector” for lending to the U.S. middle-market is significantly smaller than it was prior to the 2008 financial crisis.
 
 
While public bond markets have been extremely robust in recent years, middle-market companies are rarely able to issue bonds in this market as the purchasers of public bonds are highly focused on liquidity.  For example, asset managers are a significant buyer of public bonds.  However, asset managers often have clients that expect to be able to liquidate their investment on very short notice.  Accordingly, the existence of an active secondary market for the bonds is an important consideration in the decision to purchase the bonds.  Typically, there is no active secondary market for the debt of U.S. middle-market companies.
 
 
The reduced availability of credit to middle-market companies typically results in an increased interest rate, or pricing, of loans for middle-market lenders.  In addition, recent loans to middle-market companies have often included meaningful upfront fees and prepayment protections, both of which should enhance the profitability of new loans to lenders.
 
Competitive Advantages
 
Broad Investment Platform
 
The GSAM Liberty Harbor investment team had approximately $5.0 billion of assets under management as of January 31, 2013, invested in three main strategies: hedged strategies (which includes event-driven, long-short, relative value, capital structure arbitrage and stressed and distressed credit); a long-only public credit strategy; and a long only private credit strategy.  GSAM believes that this broad platform provides a competitive advantage in sourcing attractive investment opportunities, pricing risk, and executing and monitoring transactions.  For example, GSAM believes that the GSAM Liberty Harbor investment team’s broad activities provide a
 
 
 
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differentiated set of relationships relative to singularly focused middle-market lenders, and this results in differentiated investment opportunities relative to many of our competitors.  GSAM also believes that the GSAM Liberty Harbor investment team’s large presence in the public credit markets gives it enhanced insight into the risk premium that should be sought for taking the illiquidity risk that often accompanies middle-market loans.  Finally, GSAM believes that the expertise obtained from engaging in a broad set of activities significantly enhances the core competencies of middle-market lending, such as by providing industry and sector insight and bankruptcy and work-out expertise.
 
Diversified Origination Strategy
 
The GSAM Liberty Harbor investment team originates investment opportunities from a variety of sources, including private equity sponsors, middle-market agents and intermediaries, financial institutions, the restructuring community and “orphaned” public companies.  These different channels produce attractive investment opportunities at different points in time as market conditions, the economic cycle and regulation changes.  GSAM believes that the ability to source investment opportunities from a diverse set of channels is an important competitive advantage.  Once an attractive investment opportunity has been identified, we believe that the “Goldman Sachs” brand recognition makes us a desirable capital provider relative to some of our competitors with lesser known brand names.  As a result, GSAM believes that we are more likely to be chosen as a capital provider when a prospective borrower has a choice.
 
Flexible Transaction Structuring
 
The GSAM Liberty Harbor investment team has extensive experience investing in a wide variety of transaction structures with a range of terms and conditions.  GSAM believes that the most attractive asset class within the middle-market shifts over time and even varies from borrower to borrower.  For example, in some environments, GSAM believes that traditional first lien lenders become aggressive in pricing and terms, which GSAM believes creates attractive opportunities for second lien or unsecured lenders.  At other times, the market for mezzanine or unsecured debt can become detached from underlying intrinsic values and result in comparatively better risk-adjusted returns for secured lenders.  Some borrowers may have significant collateral that can be pledged to structure an attractive secured loan, while other borrowers may have little collateral but a great deal of enterprise value that makes a mezzanine loan more attractive.  GSAM believes that the ability to be flexible and creative in structuring attractive solutions for particular borrowers provides us with the ability to opportunistically invest in the level of a borrower’s capital structure that GSAM believes will offer more attractive risk-adjusted returns as well as enhances our origination capability because prospective borrowers value our ability to customize a solution.
 
Disciplined Investment Approach
 
In making its investment decisions, the GSAM Liberty Harbor investment team utilizes the same approach that has allowed it to grow its assets under management to approximately $5.0 billion since its first fund launch in June 2007 and earn the confidence of clients ranging from high net worth individuals to large institutional investors and sovereign wealth funds.  Specifically, the GSAM Liberty Harbor investment team takes a bottom-up, fundamental research approach to its potential investments, focusing on capital preservation and minimizing downside risk.  The GSAM Liberty Harbor investment  team engages in extensive due diligence with an expectation of holding the investment to maturity, which commonly includes meetings with management and other stakeholders in the company, financial due diligence on the prospective borrower’s operating history, industry due diligence, site visits and background checks, among other things.  A high value is placed on businesses with cash flows that are dependable and predictable, that have significant asset value and/or a strong enterprise value.  The GSAM Liberty Harbor investment team emphasizes contractual protections in its investments, including covenants, structure and other terms and conditions. GSAM believes that this disciplined approach will lead to better risk-adjusted returns over economic cycles.
 
The Goldman Sachs Asset Management Platform
 
GSAM is one of the largest asset managers in the world, with over $742.4 billion of assets under management as of December 31, 2012. We expect to benefit from GSAM’s control, operational, administrative and support infrastructure, which we believe is one of the best in the financial services industry.  Our risk monitoring will be provided by GSAM’s global risk management team, the same team that monitors risk for all of
 
 
 
66

 
 
GSAM.  We will utilize GSAM’s proprietary information technology systems, which we believe enhances our ongoing monitoring of our portfolio, among other things.  Finally, we will be served by GSAM’s legal and compliance teams, which bring a wealth of experience gleaned over many years of support to GSAM.
 
Investments
 
We seek to create a portfolio that includes primarily investments in secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, in equities in middle-market companies by generally investing on an individual portfolio company basis. We expect to make investments through both primary originations and open-market secondary purchases. We currently do not expect to limit our focus on any specific industry. Our investments are typically expected to have maturities between three and ten years and generally range in size between $5 and $50 million, though this investment size may grow if our capital base grows and shrink if our capital base shrinks. If we are successful in achieving our investment objective, we believe that we will be able to provide our stockholders with consistent dividend distributions and attractive risk adjusted total returns.
 
At February 28, 2013, our portfolio on a net cost basis was invested approximately 91% in secured debt (31% in first lien debt and 60% in second lien debt) and 9% in unsecured debt.  We expect that our portfolio will continue to include secured debt, including first and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, equities in middle-market companies. In addition, we also expect to invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our risk-adjusted returns to stockholders. Subject to the limitations of the Investment Company Act, these investments may include, but are not limited to, securities of public companies and debt and equity securities of companies located outside of the United States.
 
In the future, we may also securitize a portion of our investments in any or all of our assets. We expect that our primary use of funds will be to make investments in portfolio companies, distribute cash to holders of our common stock and pay our operating expenses, including debt service to the extent we borrow or issue senior securities to fund our investments.
 
We expect to apply for an exemptive order from the SEC that would permit us and certain of our controlled affiliates to co-invest with other funds managed by the GSAM Liberty Harbor investment team.  Any such order, if issued, will be subject to certain terms and conditions and there can be no assurance that such order will be granted by the SEC. Additionally, if our investment adviser forms other funds in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with applicable regulations and regulatory guidance, as well as applicable allocation procedures. In certain circumstances, negotiated co-investments may be made only if we receive an order from the SEC permitting us to do so.
 
For a list of the investments in our portfolio see “Portfolio Companies.”
 
Investment Criteria
 
We are committed to a value-oriented philosophy implemented by our investment adviser, which manages our portfolio and seeks to minimize the risk of capital loss without foregoing the potential for capital appreciation. We have identified several criteria, discussed below, that GSAM believes are important in identifying and investing in prospective portfolio companies.
 
These criteria provide general guidelines for our investment decisions. However, we caution that not all of these criteria will be met by each prospective portfolio company in which we choose to invest. Generally, we seek to use our experience and access to market information to identify investment candidates and to structure investments quickly and effectively.
 
 
Value orientation and positive cash flow
 
Our investment philosophy places a premium on fundamental analysis and has a distinct value orientation. We focus on companies in which we can invest at relatively low multiples of operating cash flow and that are profitable at the time of investment on an operating cash flow basis. Typically, we do not expect to invest in start-up companies or companies having speculative business plans.
 
 
 
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Experienced management and established financial sponsor relationships
 
We generally require that our portfolio companies have an experienced management team. We also require the portfolio companies to have proper incentives in place to induce management to succeed and to act in concert with our interests as investors. In addition, we focus our investments in companies backed by strong financial sponsors that have a history of creating value and with whom members of our investment adviser has an established relationship.
 
 
Strong and defensible competitive market position
 
We seek to invest in target companies that have developed leading market positions within their respective markets and are well-positioned to capitalize on growth opportunities. We also seek companies that demonstrate significant competitive advantages versus their competitors, which should help to protect their market position and profitability while enabling us to protect our principal and avoid capital losses.
 
 
Viable exit strategy
 
We seek to invest in companies that GSAM believes will provide a steady stream of cash flow to repay our loans and reinvest in their respective businesses. We expect that such internally generated cash flow, leading to the payment of interest on, and the repayment of the principal of, our investments in portfolio companies to be a key means by which we exit from our investments over time. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or other capital markets transactions.
 
 
Due diligence
 
Our investment adviser takes a bottom-up, fundamental research approach to our potential investments. It believes it is critical to conduct extensive due diligence on investment targets and in evaluating new investments. Our investment adviser conducts a rigorous due diligence process that is applied to prospective portfolio companies and draws from its experience, industry expertise and network of contacts. In conducting due diligence, our investment adviser uses information provided by companies, financial sponsors and publicly available information as well as information from relationships with former and current management teams, consultants, competitors and investment bankers.
 
Our due diligence typically includes:
 
 
review of historical and prospective financial information;
 
 
review of the capital structure;
 
 
analysis of the business and industry in which the company operates;
 
 
on-site visits;
 
 
interviews with management, employees, customers and vendors of the potential portfolio company;
 
 
review of loan documents;
 
 
background checks; and
 
 
research relating to the portfolio company’s management, industry, markets, products and services and competitors.
 
Upon the completion of due diligence and a decision to proceed with an investment in a company, the team leading the investment presents the investment opportunity to our investment committee. This committee
 
 
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determines whether to pursue the potential investment. All new investments are required to be reviewed by the investment committee. The members of the investment committee are employees of our investment adviser and they do not receive separate compensation from us or our investment adviser for serving on the investment committee.
 
Additional due diligence with respect to any investment may be conducted on our behalf (and at our expense) by attorneys and independent auditors prior to the closing of the investment, as well as other outside advisers, as appropriate.
 
Investment Committee
 
The GSAM Liberty Harbor investment committee currently consists of four voting members – Brendan McGovern, Salvatore Lentini, Jon Yoder and David Yu – as well as three non-voting members with operational or legal expertise. Our investment committee is responsible for approving all of our investments. Our investment committee also monitors investments in our portfolio and approves all asset dispositions. We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on our investment committee, which includes expertise in primary and secondary leveraged credit, private mezzanine finance, stressed and distressed debt, bankruptcy, mergers & acquisitions and private equity.
 
The purpose of our investment committee is to evaluate and approve, as deemed appropriate, all investments by our investment adviser. Our investment committee process is intended to bring the diverse experience and perspectives of our investment committee’s members to the analysis and consideration of every investment. Our investment committee also serves to provide investment consistency and adherence to our investment adviser’s investment philosophies and policies. Our investment committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.
 
In addition to reviewing investments, our investment committee meetings serve as a forum to discuss credit views and outlooks. Potential transactions and investment opportunities are also reviewed on a regular basis. Members of our investment adviser’s investment team are encouraged to share information and views on credits with our investment committee early in their analysis. This process improves the quality of the analysis and assists the deal team members to work more efficiently.
 
Investment Structure
 
Once we determine that a prospective portfolio company is suitable for investment, we work with the management of that company and its other capital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate among these parties and use creative and flexible approaches to structure our investment relative to the other capital in the portfolio company’s capital structure.
 
We expect our secured debt to have terms of three to ten years. We generally obtain security interests in the assets of our portfolio companies that will serve as collateral in support of the repayment of this debt. This collateral may take the form of first or second priority liens on the assets of a portfolio company.
 
We use the term “mezzanine” to refer to debt that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.  Mezzanine debt typically has interest-only payments in the early years, payable in cash or in-kind, with amortization of principal deferred to the later years of the mezzanine debt. In some cases, we may enter into mezzanine debt that, by its terms, converts into equity (or is issued along with warrants for equity) or additional debt securities or defers payments of interest for the first few years after our investment. Typically, our mezzanine debt investments have maturities of three to ten years.
 
In the case of our secured debt and unsecured debt, including mezzanine debt investments, we seek to tailor the terms of the investments to the facts and circumstances of the transactions and the prospective portfolio companies, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio companies to achieve their business plan and improve their profitability. For example, in addition to seeking a senior position in the capital structure of our portfolio companies, we seek to limit the downside potential of our investments by:
 
 
 
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requiring a total return on our investments (including both interest and potential equity appreciation) that compensates us for credit risk;
 
 
incorporating “put” rights and call protection into the investment structure; and
 
 
negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing their businesses as possible, consistent with preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or participation rights.
 
Our investments may include equity features, such as direct investments in the equity or convertible securities of portfolio companies or warrants or options to buy a minority interest in a portfolio company. Any warrants we may receive with our debt securities generally require only a nominal cost to exercise, so as a portfolio company appreciates in value, we may achieve additional investment return from these equity investments. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the company, upon the occurrence of specified events. In many cases, we may also obtain registration rights in connection with these equity investments, which may include demand and “piggyback” registration rights.
 
We expect to hold most of our investments to maturity or repayment, but may sell certain investments earlier if a liquidity event takes place, such as the sale or refinancing of a portfolio company. We also may turn over our investments to better position the portfolio as market conditions change.
 
Ongoing relationships with portfolio companies
 
Monitoring
 
Our investment adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company. Our investment adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
 
 
Assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;
 
 
Periodic or regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirement and accomplishments;
 
 
Comparisons to our other portfolio companies in the industry, if any;
 
 
Attendance at and participation in board meetings or presentations by portfolio companies; and
 
 
Review of monthly and quarterly financial statements and financial projections of portfolio companies.
 
Our investment adviser also employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. Under this system, investments with a grade of 5 involve the least amount of risk to our initial cost basis. The trends and risk factors since origination or acquisition for an investment with a grade of 5 are improving and the borrower is performing above expectations. Investments graded 4 involve an acceptable level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. An
 
 
 
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 investment with a grade of 4 generally is performing as expected and the risk to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 4. Investments graded 3 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased somewhat since origination or acquisition, including as a result of factors such as non-compliance with debt covenants; however, payments are generally not past due. Investments graded 2 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 180 days past due. An investment grade of 1 indicates that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.  For investments graded 1 or 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company. Our investment adviser grades the investments in our portfolio at least each quarter and it is possible that the grade of certain of these portfolio investments may be reduced or increased over time.
 
As of February 28, 2013, all of our portfolio companies had a grade of 4.  As of February 28, 2013, none of our investments was on non-accrual status.
 
Managerial assistance
 
As a BDC, we must offer, and must provide upon request, significant managerial assistance to certain of our eligible portfolio companies within the meaning of section 55 of the Investment Company Act. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We may receive fees for these services.  See “Regulation.”
 
Competition
 
Our primary competitors provide financing to middle-market companies and include other business development companies, commercial and investment banks, commercial financing companies, collateralized loan obligations, private funds, including hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Some of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us.
 
In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC. We also expect to use the industry information of GSAM’s investment professionals to which we have access to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships of the senior managers of our investment adviser enable us to learn about, and compete effectively for, financing opportunities with attractive middle-market companies in the industries in which we seek to invest.
 
Staffing
 
We do not currently have any employees.  Our day-to-day operations are managed by our investment adviser. Our investment adviser has hired and expects to continue to hire professionals with skills applicable to our business plan, including experience in middle-market investing, leveraged finance and capital markets.
 
Properties
 
We do not own any real estate or other properties materially important to our operations. Our principal executive officers are located at 200 West Street, New York, New York 10282. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.
 
 
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Legal Proceedings
 
We are not currently subject to any material legal proceedings, although we may, from time to time, be involved in litigation arising out of operations in the normal course of business or otherwise.
 
Our Administrator
 
Pursuant to our Administration Agreement, our administrator is responsible for providing various accounting and administrative services to us.  Our administrator is entitled to fees as described in “Management.” To the extent that our administrator outsources any of its functions, the administrator will pay any compensation associated with such functions.  See “Management—Our Administrator.”
 
 
 
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PORTFOLIO COMPANIES
 
Portfolio Companies
 
The following table sets forth certain information as of February 28, 2013, for each portfolio company in which we had an investment. Other than these investments, our only formal relationships with our portfolio companies are the significant managerial assistance that we may provide upon request and the board observation or participation rights we may receive in connection with our investment. We do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act.  In general, under the Investment Company Act, we would be presumed to “control” a portfolio company if we owned more than 25% of its voting securities and would be an “affiliate” of a portfolio company if we owned more than 5% of its outstanding voting securities.
 
 Name and Address of Portfolio 
 Company
 Industry
 Type of Investment
Interest Rate
 Maturity
 Date
 Principal Amount
 (mm)
 Fair Value (mm)
% of Class (1)
 Affordable Care
 4990 Highway 70 West
 Kinston, NC 28504
 Consumer Non-
 Cyclical
 Senior Secured Loan –
 Second Lien– Floating
LIBOR + 9.25% (1.25% Floor)
6/20/2019
 $21.50
 $21.50
 
 Dispensing Dynamics Intl
 1020 Bixby Drive
 Industry, CA 91745
 Industrial
 Senior Secured Bonds –
 Fixed
12.50%
1/1/2018
 15.00
 15.08
 
 Goodrich Petroleum Corp
 801 Louisiana, Suite 700
 Houston, TX 77002
 Energy
 Unsecured Bonds – Fixed
8.875%
3/15/2019
 4.50
 4.47
 
 Hutchinson Technology
 40 West Highland Park Drive N.E.
 Hutchinson, MN 55350
 Technology
 Senior Secured Bonds –
 Fixed
10.875%
1/15/2017
 12.20
 11.59
 
 JG Wentworth
 201 King of Prussia Road
 Radnor, PA 19087
 Financial
 Senior Secured—First
 Lien– Floating
LIBOR + 7.50% (1.50% Floor)
2/8/2019
 3.75
 3.70
 
 Lone Pine Resources
 Canada Ltd.
 Suite 1100, 640-5 Avenue SW
 Calgary, Alberta
 Canada
 T2P 3G4
 Energy
 Unsecured Bonds – Fixed
10.375%
2/15/2017
 2.80
 2.50
 
 
 
 
 
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 Molycorp, Inc
 5619 Denver Tech Center Parkway,
 Suite 1000
 Greenwood Village, CO 80111
 Basic Materials
 Senior Secured Bonds –
 Fixed
10.00%
6/1/2020
 4.78
 4.64
 
 Washington Inventory Service
 9265 Sky Park Court, Suite 100
 San Diego, CA 92123
 Consumer Non-
 Cyclical
 Senior Secured Loan –
 Second Lien– Floating
LIBOR + 9.25% (1.25% Floor)
6/20/2019
 11.00
 11.21
 
 
 
 
(1)
Percent of class held only applies to voting securities.
 
 
 
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MANAGEMENT
 
Our business and affairs are managed under the direction of our Board of Directors. Our Board of Directors consists of four members, three of whom will not be “interested persons” of the Company, as defined in Section 2(a)(19) of the Investment Company Act. We refer to these individuals as our “Independent Directors.” Our Board of Directors elects our officers, who serve at the discretion of our Board of Directors.
 
Board of Directors and Executive Officers
 
Our Board of Directors is divided into three classes.  Each class of directors holds office for a three-year term. However, the initial members of the three classes will have initial terms of one, two and three years, respectively.  At each annual meeting of our stockholders, the successors to the class of directors whose terms expire at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.
 
Each director holds office for the term to which he or she is elected or appointed and until his or her successor is duly elected and qualifies, or until his or her earlier death, resignation, removal or disqualification.
 
Directors
 
The following information regarding our initial Board of Directors is as of March 28, 2013:
 
 Name    Age    Position    Class
Interested Directors
           
             
James A. McNamara
 
50
 
Director
   
             
Independent Directors
           
             
Ashok N. Bakhru
 
70
 
Chairman of the Board of Directors
   
             
John P. Coblentz, Jr.
 
71
 
Director
   
             
Richard P. Strubel
 
73
 
Director
   

The address for each director is c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.

Executive Officers Who Are Not Directors
 
The following information regarding our executive officers who are not directors is as of March 28, 2013:
 
  Name     Age     Position
Brendan McGovern
 
42
 
Chief Executive Officer and President
         
Jon Yoder
 
39
 
Chief Operating Officer
         
Jonathan Lamm
 
38
 
Chief Financial Officer and Treasurer
         
George Djurasovic
 
42
 
Chief Compliance Officer
         
Salvatore Lentini       41   Executive Vice President
         
David Yu    31   Executive Vice President and Head of Research
 
The address for each executive officer is c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.
 
Biographical Information
 
Directors
 
Our Board of Directors is divided into two groups–interested directors and the Independent Directors. Interested directors are interested persons as defined in Section 2(a)(19) of the Investment Company Act.
 
 
 
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Interested Directors
 
James A. McNamara. Mr. McNamara was appointed as one of our directors in March 2013, and has served as one of the officers and the President of our predecessor entity since November 2012.  McNamara has served as President and a Trustee of certain other registered investment companies sponsored by GSAM since 2007 and has served as an officer of certain other registered investment companies sponsored by GSAM since 2001.  Mr. McNamara is a Managing Director at Goldman, Sachs & Co. Mr. McNamara is currently head of Global Third Party Distribution at GSAM, where he was previously head of U.S. Third Party Distribution. Prior to that role, Mr. McNamara served as Director of Institutional Fund Sales. Prior to joining Goldman Sachs, Mr. McNamara was Vice President and Manager at Dreyfus Institutional Service Corporation. Based on the foregoing, Mr. McNamara is experienced with financial and investment matters.
 
Independent Directors
 
Ashok N. Bakhru. Mr. Bakhru was appointed as one of our directors and as the Chairman of our Board of Directors in March 2013.  Mr. Bakhru has served as a Trustee of certain other registered investment companies sponsored by GSAM since 1991 and as Chairman of the Board of Trustees of such other registered investment companies since 1996. Mr. Bakhru is a Director of Apollo Investment Corporation, a BDC.  Previously, Mr. Bakhru served as President of ABN Associates, a management and financial consulting firm, and was the Chief Financial Officer, Chief Administrative Officer and Director of Coty Inc., a multinational cosmetics, fragrance and personal care company. Previously, Mr. Bakhru held several senior management positions at Scott Paper Company, a major manufacturer of paper products, including Senior Vice President and Chief Financial Officer. Mr. Bakhru also serves on the Governing Council of the Independent Directors Council and the Board of Governors of the Investment Company Institute. He also serves on the Advisory Board of BoardIQ, an investment publication. In addition, Mr. Bakhru has served as Director of Equity-Linked Investments II and Private Equity Investors III and IV, which are private equity partnerships based in New York City. Mr. Bakhru was also a Director of Arkwright Mutual Insurance Company. Based on the foregoing, Mr. Bakhru is experienced with financial and investment matters.
 
John P. Coblentz, Jr.  Mr. Coblentz was appointed as one of our directors in March 2013.  Mr. Coblentz is expected to be designated as the Board’s “audit committee financial expert” given his extensive accounting and finance experience. Mr. Coblentz has served as Trustee of certain other registered investment companies sponsored by GSAM since 2003.  Mr. Coblentz was a partner with Deloitte & Touche LLP for 28 years. While at Deloitte & Touche LLP, Mr. Coblentz was lead partner responsible for all auditing and accounting services to a variety of large, global companies, a significant portion of which operated in the financial services industry.  Mr. Coblentz was also the national managing partner for the firm’s risk management function, a member of the firm’s Management Committee and the first managing partner of the firm’s Financial Advisory Services practice, which brought together the firm’s mergers and acquisition services, forensic and dispute services, corporate finance, asset valuation and reorganization businesses under one management structure. He served as a member of the firm’s Board of Directors. Mr. Coblentz is a certified public accountant. Based on the foregoing, Mr. Coblentz is experienced with accounting, financial and investment matters.
 
Richard P. Strubel. Mr. Strubel was appointed as one of our directors in March 2013. Mr. Strubel has served as a Trustee of certain other registered investment companies sponsored by GSAM since 1987. Mr. Strubel also serves as Chairman of the Northern Funds, a family of retail and institutional mutual funds managed by The Northern Trust Company. He also serves on the board of Gildan Activewear Inc., which is listed on the New York Stock Exchange (“NYSE”). Mr. Strubel was Vice-Chairman of the Board of Cardean Learning Group (formerly known as Unext), and previously served as Unext’s President and Chief Operating Officer. Mr. Strubel was Managing Director of Tandem Partners, Inc., a privately-held management services firm, and served as President and Chief Executive Officer of Microdot, Inc. Previously, Mr. Strubel served as President of Northwest Industries, then a NYSE-listed company, a conglomerate with various operating entities located around the country. Before joining Northwest, Mr. Strubel was an associate and later managing principal of Fry Consultants, a management consulting firm based in Chicago. Mr. Strubel is also a Trustee Emeritus of the University of Chicago and is an adjunct professor at the University of Chicago Booth School of Business. Based on the foregoing, Mr. Strubel is experienced with financial and investment matters.
 
Executive Officers Who Are Not Directors
 
 
 
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Brendan McGovern.  Mr. McGovern was appointed as our chief executive officer and president in March 2013.  Mr. McGovern also serves as co-head and senior portfolio manager on the Liberty Harbor portfolio management team. He is also the Chair of Liberty Harbor’s Private Investment Committee, which is responsible for reviewing all privately negotiated debt transactions.  Prior to joining our investment adviser in 2006, Mr. McGovern served as a managing director in the Global Investment Group at Amaranth Advisors, where he worked on various desks, including Merger Arbitrage, US Convertibles, and US Credit, and co-headed the fund’s private placement efforts for both debt and equity linked products in the US.  He is also on the Board of Directors for the Oxalosis and Hyperoxaluria Foundation.  Mr. McGovern serves as chairman of our investment committee.
 
Jon Yoder.  Mr. Yoder was appointed as our chief operating officer in March 2013.  Mr. Yoder is a Vice President of Liberty Harbor’s Private Investments team with a focus on structuring, researching and executing privately negotiated debt financings. He is also a member of Liberty Harbor’s Private Investment Committee, which is responsible for reviewing all privately negotiated debt transactions.  Mr. Yoder has worked on Liberty Harbor’s private investments since the inception of the Liberty Harbor investment team in 2006, first from his role as in-house counsel and more recently as a member of the investment team. Mr. Yoder joined Goldman Sachs in 2005. Prior to joining the firm, he was a member of the mergers and acquisitions and private equity group at Paul, Weiss, Rifkind, Wharton & Garrison, LLP from 1999 to 2005. Mr. Yoder is a member of our investment committee.
 
Jonathan Lamm.  Mr. Lamm was appointed as our chief financial officer and treasurer in March 2013.  Mr. Lamm is Chief Operating Officer of Liberty Harbor.  He is responsible for the management of the Liberty Harbor business, including business financials, infrastructure support, IT project management, as well as the continuous improvement of the control environment.  Mr. Lamm joined the Liberty Harbor investment team in 2007 and was previously a vice president in the Finance Division of Goldman Sachs, where he worked in the Financial Reporting group on the firms quarterly external filings.  Prior to joining Financial Reporting, Mr. Lamm was a member of the Funding group where he worked with the firms Corporate Treasury team on various funding initiatives.  In addition, Mr. Lamm has also worked in the securities audit practice at Deloitte and Touche.  Mr. Lamm has been a vice president of Goldman Sachs since 2002.  Mr. Lamm is secretary and a non-voting member of our investment committee.
 
George Djurasovic. Mr. Djurasovic was appointed as our chief compliance officer in March 2013.  Mr. Djurasovic is currently the Head of the U.S. Regulatory Compliance Team within GSAM Compliance.  Mr. Djurasovic previously served as Assistant Secretary of certain other registered investment companies sponsored by GSAM. Mr. Djurasovic was an Associate General Counsel of Goldman Sachs from 2006 to 2012 and Assistant General Counsel of Goldman Sachs from 2005 to 2006.  Mr. Djurasovic has been a Vice President at Goldman Sachs since joining the firm in 2005.  Prior to joining Goldman Sachs, Mr. Djurasovic was Senior Counsel at TIAA – CREF from 2004 to 2005 and Counsel at TIAA - CREF from 2000 through 2004.
 
Salvatore Lentini. Mr. Lentini was appointed as our executive vice president in March 2013. Mr.  Lentini is co-head of the Liberty Harbor investment team and Head of Liquid Credit and Trading. Mr. Lentini is  also a member of Liberty Harbor’s Private Investment Committee, which is responsible for reviewing all privately  negotiated debt transactions. Mr. Lentini joined Goldman Sachs as a managing director in 2006. Prior to joining  the firm, Mr. Lentini was a managing director in the Global Investments Group at Amaranth Advisors, where he was responsible for trading all credit products within the United States. Before  joining Amaranth, he was responsible for trading high yield and crossover debt at the Royal Bank of Scotland  (RBS). Earlier, Mr. Lentini traded high yield fixed income for PaineWebber.  Mr. Lentini is a member of our  investment committee.

David Yu. Mr. Yu was appointed as our executive vice president and head of research in March 2013.  Mr. Yu is a portfolio  manager on Liberty Harbor’s private investments team with a focus on structuring, researching and executing  privately negotiated debt financings. He is also a member of Liberty Harbor’s Private Investment Committee,  which is responsible for reviewing all privately negotiated debt transactions. Prior to joining Liberty Harbor in  2006, Mr. Yu was an associate in the Global Investments Group at Amaranth Advisors, where he similarly worked  with public and private issuers to structure and execute debt and equity financings. Prior to joining Amaranth, he  worked in the Leveraged Finance and Sponsor Coverage Group at CIBC World Markets.  Mr. Yu is a member of  our investment committee.
 
Committees of the Board of Directors
 
Audit Committee
 
The members of the Audit Committee are Mr. Bakhru, Mr. Coblentz and Mr. Strubel, each of whom meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act and none of whom would be an “interested person” of the Company as defined in Section 2(a)(19) of the Investment Company Act. Mr. Bakhru is expected to serve as Chairman of the Audit Committee. Our Board of Directors has determined that Mr. Coblentz is an “audit committee financial expert” as defined under Item 407 of Regulation S-K of the Securities Exchange Act of 1934. The Audit Committee is responsible for overseeing matters relating to the appointment and activities of our auditors, audit plans and procedures, various accounting and financial reporting issues and changes in accounting policies, and reviewing the results and scope of the audit and other services provided by our independent public accountants. The Audit Committee is also be responsible for aiding our Board of Directors in fair value pricing debt and equity securities that are not publicly traded or for which current market values are not readily available.
 
Our Audit Committee met    times during the current fiscal year.
 
 
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Governance and Nominating Committee
 
The Governance and Nominating Committee members are Mr. Bakhru, Mr. Coblentz and Mr. Strubel, none of whom would be an “interested person” as defined in Section 2(a)(19) of the Investment Company Act.  Mr. Bakhru is expected to serve as the Chairman of the Governance and Nominating Committee. The Governance and Nominating Committee is responsible for identifying, researching and nominating directors for election by our stockholders, selecting nominees to fill vacancies on our Board of Directors or a committee of the Board of Directors, developing and recommending to the Board of Directors a set of corporate governance principles and overseeing the evaluation of the Board of Directors and our management. The Governance and Nominating Committee considers nominees properly recommended by our stockholders. Our bylaws provide that for any nomination to be properly brought by a stockholder for a meeting, such stockholder will have to comply with advance notice requirements and provide us with certain information. Generally, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of stockholders. Our bylaws further provide that, nominations of persons for election to the Board of Directors at a special meeting may be made only by or at the direction of the Board of Directors, and provided that the Board of Directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws. See “Description of Capital Stock—Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals.”
 
Our Governance and Nominating Committee met    times during the current fiscal year.
 
Compliance Committee
 
The Compliance Committee members are Mr. Bakhru, Mr. Coblentz and Mr. Strubel, none of whom are an “interested person” as defined in Section 2(a)(19) of the Investment Company Act.  Mr. Bakhru serves as Chairman of the Compliance Committee.  The Compliance Committee is responsible for overseeing our compliance processes, and insofar as they relate to services provided to us by our investment adviser, underwriting (if any), administrator, and transfer agent, except that compliance processes relating to the accounting and financial reporting processes, and certain related matters, are overseen by the Audit Committee. In addition, the Compliance Committee provides assistance to the full Board of Directors with respect to compliance matters.
 
Our Compliance Committee met    times during the current fiscal year.
 
Contract Review Committee
 
The Contract Review Committee members are Mr. Bakhru, Mr. Coblentz and Mr. Strubel, none of whom would be an “interested person” as defined in Section 2(a)(19) of the Investment Company Act.  Mr. Bakhru serves as Chairman of the Contract Review Committee.  The Contract Review Committee will be responsible for overseeing the processes of the Board of Directors for reviewing and monitoring performance under our investment management, underwriting (if any), transfer agency and certain other agreements with our investment adviser and its affiliates.  The Contract Review Committee also provides appropriate assistance to the Board of Directors in connection with the Board of Director’s approval, oversight and review of our other service providers, including without limitation, our custodian/accounting agent, sub-transfer agents, placement agent, professional (legal and accounting) firms and printing firms.
 
Our Contract Review Committee met    times during the current fiscal year.
 
Compensation of Directors
 
Each Independent Director is compensated with a unitary annual fee of $100,000 for his or her services as one of our directors.  The Independent Directors of the Board of Directors also receive $2,500 plus reasonable out-of-pocket expenses for each Board meeting attended ($1,250 if attending telephonically) and $1,000 plus reasonable out-of-pocket expenses for each Committee meeting attended ($500 if attending telephonically). In addition, the Chairman of the Board receives an annual fee of $25,000 and the Chairman of the Audit Committee receives an annual fee of $15,000 for their additional services in these capacities.  We may also pay the incidental costs of a director to attend training or other types of conferences relating to the business development company
 
 
 
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industry. No compensation is expected to be paid to directors who are “interested persons.”  In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers.
 
Compensation of Chief Executive Officer and Other Executive Officers
 
None of our officers will receive direct compensation from us.  We will not have a Compensation Committee because our executive officers will not receive any direct compensation from us.
 
Our Investment Adviser
 
GSAMLP, serves as our investment adviser. Our investment adviser has been registered as an investment adviser with the SEC since 1990 and is a subsidiary of Group Inc., a bank holding company.
 
Subject to the supervision of our Board of Directors, our investment adviser provides day-to-day advice regarding our portfolio transactions and is responsible for our business affairs and other administrative matters.
 
Portfolio Managers
 
Each of the individuals listed below is a portfolio manager and voting member of our investment adviser’s investment committee.  In addition, three other voting members and three non-voting members serve on the investment committee.  The investment committee is responsible for approving all of our investments.  The investment committee also monitors investments in our portfolio and approves all asset dispositions.  We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the investment committee, which includes expertise in primary and secondary leveraged credit, private mezzanine finance, stressed and distressed debt, bankruptcy, mergers and acquisitions and private equity.  As of        , 2013, the portfolio managers who are primarily responsible for our day-to-day management manage a total of          registered investment companies, pooled investment vehicles or other accounts with a total amount of approximately $       in assets under management.   See “Risk Factors—Risks Relating to Our Business and Structure—Our investment adviser, its principals, investment professionals and employees and the members of its investment committee have certain conflicts of interest” and “Potential Conflicts of Interest.” The members of the investment committee will receive no separate compensation from us or our investment adviser for serving on the investment committee.
 
 
 
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The table below shows the dollar range of shares of common stock to be beneficially owned by each of our portfolio managers prior to our IPO.
     
Name
 
Aggregate Dollar Range
of Equity Securities
in Goldman Sachs BDC, Inc.(1)
Brendan McGovern
 
   
______________________
                 (1) Dollar ranges are as follows: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000 or over $1,000,000.
 

Investment Management Agreement
 
Management Services
 
Pursuant to the terms of our amended and restated Investment Management Agreement, upon the approval of our initial member and our Board of Directors (the “Investment Management Agreement”), GSAMLP, subject to the overall supervision of our Board of Directors, manages our day-to-day investment-related operations and provides investment management services to us.
 
Subject to compliance with applicable law and published SEC guidance, nothing contained in the Investment Management Agreement will in any way preclude, restrict or limit the activities of our investment adviser or any of its respective subsidiaries or affiliated parties. See “Potential Conflicts of Interest.”
 
Management Fee and Incentive Fee
 
We will pay our investment adviser for its services to us a management fee (the “Management Fee”) and an incentive fee (the “Incentive Fee”) as set forth in the Investment Management Agreement. We will make any payments due under the Investment Management Agreement to our investment adviser (or to its designees as it may otherwise direct).
 
Management Fee
 
The Management Fee is calculated at an annual rate of 1.50% (0.375% per quarter) of the average value of our gross assets (excluding cash or cash equivalents but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters (and, in the case of our first quarter, our gross assets as of such quarter-end). The Management Fee is payable quarterly in arrears. The Management Fee for any partial quarter will be appropriately prorated.
 
Incentive Fee
 
The Incentive Fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not.  The calculation of our incentive fee pursuant to our Investment Management Agreement has been modified from the method discussed in the audited financial statements of Goldman Sachs Liberty Harbor Capital, LLC, included in this prospectus.
 
A portion of the Incentive Fee is based on our income and a portion is based on our capital gains, each as described below. Our investment adviser will be entitled to receive the Incentive Fee from us if our performance exceeds an annual “hurdle rate” of 7.00% as described below. For this purpose, the hurdle is computed by reference to our net asset value and does not take into account changes in the market price of our common stock.
 
The Incentive Fee based on income will be determined and paid quarterly by reference to our aggregate net investment income, as adjusted as described below, from the current calendar quarter and the three preceding calendar quarters (the “Trailing Four Quarters”), or, in the case of our first three quarters, the appropriate portion thereof. The Incentive Fee based on capital gains will be determined and paid annually by reference to an “Annual Period,” which means the period beginning on January 1 of each calendar year and ending on December 31 of the calendar year or, in the case of our first and last year, the appropriate portion thereof.
 
 
 
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The hurdle amount for each of the Incentive Fee based on income and the Incentive Fee based on capital gains will be determined separately. The hurdle amount for the Incentive Fee based on income will be determined on a quarterly basis, and will be equal to the sum of one-fourth of our annual hurdle rate, or 1.75%, multiplied by our net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Four Quarters. The hurdle amount for the Incentive Fee based on capital gains will be determined on an annual basis, and will be equal to the sum of one-fourth of our annual hurdle rate, or 1.75%, multiplied by our net asset value at the beginning of each quarter comprising the applicable Annual Period. In both instances, the hurdle amount will be calculated after making appropriate adjustments for subscriptions and distributions that occurred during such period. The Incentive Fee for any partial period will be appropriately prorated.
 
Quarterly Incentive Fee Based on Income. For the portion of the Incentive Fee based on income, we will pay our investment adviser a quarterly Incentive Fee based on the amount by which (A) aggregate net investment income in respect of the relevant Trailing Four Quarters (the “Ordinary Income”) less the amount of any Net Capital Loss (as defined below) in respect of such Trailing Four Quarters (the Ordinary Income as adjusted, the “Adjusted Ordinary Income”) exceeds (B) the hurdle amount for such Trailing Four Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Four Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, net investment income is net of all fees and expenses, including the Management Fee but excluding any Incentive Fee paid.
 
“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
 
“Net Capital Gain” in respect of a particular period means the difference, if positive, between (i) aggregate capital gains, whether realized or unrealized, in such period and (ii) aggregate capital losses, whether realized or unrealized, in such period.
 
The Incentive Fee based on income for a particular quarter will equal 100% of the Trailing Four Quarters’ Excess Income Amount until the cumulative Incentive Fee for the quarter equals 20% of such Trailing Four Quarters’ Adjusted Ordinary Income, which will be achieved once our Adjusted Ordinary Income equals an annualized hurdle rate of 8.75% of our net asset value at the beginning of each quarter comprising the relevant Trailing Four Quarters. Thereafter, the Incentive Fee based on income for such quarter equals 20% of the Trailing Four Quarters’ remaining Excess Income Amount. The amount of the Incentive Fee based on income that will be paid to our investment adviser for a particular quarter will equal the excess of the Incentive Fee so calculated less the aggregate Incentive Fees based on income that were paid in the preceding three calendar quarters comprising the relevant Trailing Four Quarters.
 
The following is a graphical representation of the calculation of the Incentive Fee based on income:
 
 
Incentive Fee based on Income
 
Adjusted Ordinary Income
(expressed as an annualized rate of return on the value of
net assets as of the end of the immediately preceding quarter)
 

Percentage of Adjusted Ordinary Income comprising the Incentive Fee based on Income

 
Annual Incentive Fee Based on Capital Gains. The portion of the Incentive Fee based on capital gains is calculated on an annual basis. For each Annual Period, we will pay our investment adviser an Incentive Fee equal to (A) 20% of the difference, if positive, of the sum of our aggregate realized capital gains, if any, computed net of our aggregate realized capital losses, if any, and our aggregate unrealized capital depreciation, in each case from April 1, 2013 until the end of such Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to our investment adviser from April 1, 2013. For the avoidance of doubt, unrealized capital gains are excluded from the calculation in clause (A), above.
 
Notwithstanding the foregoing, the portion of the Incentive Fee based on capital gains for each Annual
 
 
 
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Period will be limited to the amount, if any, by which (x) the Ordinary Income (reduced for this purpose by the Incentive Fee based on income in respect of such period, if any) plus the Net Capital Gain or minus the Net Capital Loss (as applicable) in respect of such period exceeds (y) the hurdle amount in respect of such period (we refer to the amount by which clause (x) exceeds clause (y) as the “Capital Gains Limiter”).
 
Example of Calculation of the Incentive Fee based on Income
 
Assumptions relating to the three preceding quarters
 
 
Quarter 1
 
 
Net Asset Value at the start of Quarter 1 = $100.0 million
 
 
Quarter 1 Ordinary Income = $2.0 million
 
 
Quarter 1 Net Capital Gain = $1.0 million
 
 
Quarter 1 incentive fee paid = $0.25 million
 
 
Quarter 2
 
 
Net Asset Value at the start of Quarter 2 = $100.0 million
 
 
Quarter 2 Ordinary Income = $6.0 million
 
 
Quarter 2 Net Capital Gain = $1.0 million
 
 
Quarter 2 incentive fee paid = $1.35 million
 
 
Quarter 3
 
 
Net Asset Value at the start of Quarter 3 = $100.0 million
 
 
Quarter 3 Ordinary Income = $2.0 million
 
 
Quarter 3 Net Capital Loss = ($6.0) million
 
 
Quarter 3 incentive fee paid = None
 
 
Hurdle rate = 7.00%
 
Assumptions relating to Quarter 4
 
 
Net Asset Value at the start of Quarter 4 = $100.0 million
 
 
Quarter 4 Ordinary Income = $3.0 million
 
 
Quarter 4 Net Capital Gain = $1.0 million
 
Determination of Incentive Fee based on income for Quarter 4
 
   The portion of the Incentive Fee based on income for Quarter 4 would be based on the amount by which (A) the Ordinary Income in respect of the relevant Trailing Four Quarters less the amount of any Net Capital Loss in respect of such period exceeds (B) the hurdle amount in respect of such period. The excess of (A) over (B) for such period is referred to as the Excess Income Amount.
 
 
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Therefore, using the assumptions above, the Excess Income Amount equals the amount by which (A) $2.0 million + $6.0 million + $2.0 million + $3.0 million less the sum (if negative) of $1.0 million + $1.0 million – $6.0 million + $1.0 million exceeds (B) 1.75% x $100.0 million + 1.75% x $100.0 million + 1.75% x $100.0 million + 1.75% x $100.0 million.
 
Therefore, the Excess Income Amount equals the amount by which (A) $13.0 million – $3.0 million exceeds (B) $7.0 million.
 
Therefore, the Excess Income Amount equals $3.0 million.
 
The Incentive Fee based on income is equal to 100% of the Trailing Four Quarters’ Excess Income Amount until the cumulative Incentive Fee for the period equals 20% of the Adjusted Ordinary Income, which will be achieved once our Adjusted Ordinary Income equals an annualized hurdle rate of 8.75% of our net asset value at the beginning of each quarter comprising the Trailing Four Quarters. Thereafter, the Incentive Fee based on income for the period equals 20% of such period’s remaining Excess Income Amount. The amount of the Incentive Fee based on income that will be paid to our investment adviser for the quarter will equal the excess of the Incentive Fee so calculated less the aggregate Incentive Fees based on income that were paid in the preceding three calendar quarters comprising the Trailing Four Quarters.
 
Therefore, the Incentive Fee based on income for Quarter 4 = 100% x (the lesser of $3.0 million and ($0.4375 million(1) + $0.4375 million(1) + $0.4375 million(1) + $0.4375 million(1))) + 20% ($3.0 million – the lesser of $3.0 million and ((8.75% – 7.0%) * $100.0 million)) – ($0.25 million + $1.35 million + $0)
 
Therefore, the Incentive Fee based on income for Quarter 4 equals 100% x ($1.75 million) + 20% x ($3.0 million – $1.75 million) – ($0.25 million + $1.35 million + $0)
 
Therefore, the Incentive Fee based on income for Quarter 4 equals $1.75 million + $0.25 million – $1.6 million
 
Therefore, the Incentive Fee based on income for Quarter 4 equals $0.4 million.
 
(1)
Equal to (8.75% - 7.0%)/4 multiplied by the net asset value at the start of the quarter.
 
Examples of Calculation of Incentive Fee based on Capital Gains
 
Assumptions
 
 
Net asset value as of the beginning of each quarter in Years 1 through 4 = $125 million
 
 
Year 1: $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)
 
 
Year 1: No Ordinary Income
 
 
Year 2: Investment A sold for $30 million, fair value of Investment B determined to be $25 million and fair value of Investment C determined to be $27 million
 
 
Year 2: Ordinary Income of $1 million
 
 
Year 3: fair value of Investment B determined to be $29 million and Investment C sold for $30 million
 
 
Year 3: Ordinary Income of $2 million
 
 
Year 4: fair value of Investment B determined to be $40 million
 
 
Year 4: Ordinary Income of $2 million
 
Determination of Incentive Fee based on capital gains
 
 
 
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The Incentive Fee based on capital gains, if any, would be:
 
 
Year 1: None
 
 
Year 2: None, which is calculated as follows:
 
The portion of the Incentive Fee based on capital gains equals the lesser of (x) (A) 20% of the difference, if positive, of the sum of our aggregate realized capital gains, if any, computed net of our aggregate realized capital losses, if any, and our aggregate unrealized capital depreciation, if any, in each case from April 1, 2013 until the end of the applicable Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to our investment adviser from April 1, 2013 and (y) the Capital Gains Limiter, determined below.
 
Therefore, using the assumptions above, the Incentive Fee based on capital gains equals the lesser of (x) (A) 20% x ($10.0 million – $5.0 million) minus (B) $0 and (y) the Capital Gains Limiter.
 
Therefore, the Incentive Fee based on capital gains equals the lesser of (x) $1.0 million and (y) the Capital Gains Limiter.
 
The Capital Gains Limiter is equal to the amount, if any, by which (x) the Ordinary Income (reduced for this purpose by the Incentive Fee based on income in respect of such period, if any) plus the Net Capital Gain or minus the Net Capital Loss (as applicable) in respect of such period exceeds (y) the hurdle amount in respect of such period.
 
Therefore, the Capital Gains Limiter equals the amount, if any, by which (x) $1.0 million – $3.0 million + $10.0 million exceeds (y) 1.75% x $125 million(1) + 1.75% x $125 million(1) +1.75% x $125 million(1) +1.75% x $125 million(1).
 
Therefore, the Capital Gains Limiter equals the amount, if any, by which (x) $8.0 million exceeds (y) $8.75 million.
 
Therefore, the Capital Gains Limiter is $0.
 
Therefore, because the Capital Gains Limiter is $0, there will be no Incentive Fee based on capital gains in Year 2.
 
(1)           Equal to 7.0%/4 multiplied by the net asset value at the start of the quarter.
 
 
Year 3: $250,000, which is calculated as follows:
 
The Incentive Fee based on capital gains equals the lesser of (x) (A) 20% x ($15.0 million – $1.0 million) minus (B) $0 and (y) the Capital Gains Limiter.
 
Therefore, the Incentive Fee based on capital gains equals the lesser of (x) $2.8 million and (y) the Capital Gains Limiter.
 
The Capital Gains Limiter equals the amount, if any, by which (x) $2.0 million + $2.0 million + $5.0 million exceeds (y) 1.75% x $125 million + 1.75% x $125 million +1.75% x $125 million +1.75% x $125 million.
 
Therefore, the Capital Gains Limiter equals the amount, if any, by which (x) $9.0 million exceeds (y) $8.75 million.
 
Therefore, the Capital Gains Limiter is $0.25 million.
 
 
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Therefore, because the Capital Gains Limiter is less than the $2.8 million, the Incentive Fee based on capital gains in Year 3 is the amount of the Capital Gains Limiter, or $0.25 million.
 
 
Year 4: $2.75 million, which is calculated as follows:
 
The Incentive Fee based on capital gains equals the lesser of (x) (A) 20% x ($15.0 million – $0 million) minus (B) $0.25 million and (y) the Capital Gains Limiter.
 
Therefore, the Incentive Fee based on capital gains equals the lesser of (x) $2.75 million and (y) the Capital Gains Limiter.
 
The Capital Gains Limiter equals the amount, if any, by which (x) $2.0 million + $11.0 million + $0 exceeds (y) 1.75% x $125 million + 1.75% x $125 million +1.75% x $125 million +1.75% x $125 million.
 
Therefore, the Capital Gains Limiter equals the amount, if any, by which (x) $13.0 million exceeds (y) $8.75 million.
 
Therefore, the Capital Gains Limiter is $4.25 million.
 
Therefore, because $2.75 million is less than the Capital Gains Limiter, the Incentive Fee based on capital gains in Year 4 is $2.75 million.
 
Expenses
 
Our investment adviser will pay all costs incurred by it in connection with the performance of its duties under the Investment Management Agreement. Our investment adviser will pay the compensation and expenses of all its personnel and will make available, without expense to us, the services of such of its partners, officers and employees as may duly be elected as our officers or directors, subject to their individual consent to serve and to any limitations imposed by law. Our investment adviser will not be required to pay any of our expenses other than those specifically allocated to it, including as set forth below. In particular, but without limiting the generality of the foregoing, our investment adviser will not be required to pay: (i) our operational and organizational expenses; (ii) fees and expenses, including travel expenses, incurred by our investment adviser or payable to third parties related to our investments, including, among others, professional fees (including, without limitation, the fees and expenses of consultants and experts) and fees and expenses from evaluating, monitoring, researching and performing due diligence on investments and prospective investments; (iii) interest payable on debt, if any, incurred to finance our investments; (iv) fees and expenses incurred by us in connection with membership in investment company organizations; (v) brokers’ commissions; (vi) fees and expenses associated with calculating our NAV (including the costs and expenses of any independent valuation firm); (vii) legal, auditing or accounting expenses; (viii) taxes or governmental fees; (ix) the fees and expenses of our administrator, transfer agent or sub-transfer agent; (x) the cost of preparing stock certificates or any other expenses, including clerical expenses of issue, redemption or repurchase of our shares; (xi) the expenses of and fees for registering or qualifying our shares for sale and of maintaining our registration and registering us as a broker or a dealer; (xii) the fees and expenses of our directors who are not affiliated with our investment adviser; (xiii) the cost of preparing and distributing reports, proxy statements and notices to our shareholders, the Securities and Exchange Commission and other regulatory authorities; (xiv) costs of holding stockholder meetings; (xv) listing fees; (xvi) the fees or disbursements of custodians of our assets, including expenses incurred in the performance of any obligations enumerated by our certificate of incorporation or bylaws insofar as they govern agreements with any such custodian; (xvii) insurance premiums; or (xviii) costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or dispute in connection with our business and the amount of any judgment or settlement paid in connection therewith, or the enforcement of our rights against any person and indemnification or contribution expenses payable by us to any person and other extraordinary expenses not incurred in the ordinary course our business. Our investment adviser shall not be required to pay expenses of activities which are primarily intended to result in sales of our shares, including, but not limited to, all costs and expenses associated with the preparation and distribution of an offering memorandum, a subscription agreement, if applicable, a registration statement or a shareholder application form.
 
 
 
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Our investment adviser may impose a voluntary cap on the amount of expenses that will be borne by us on a monthly or annual basis. Any such expense cap may be increased, decreased, waived or eliminated at any time at our investment adviser’s sole discretion.
 
To the extent that expenses to be borne by us pursuant to the Investment Management Agreement are paid by our investment adviser, we shall reimburse our investment adviser for such expenses, provided, however, that our investment adviser may elect, from time to time and in its sole discretion, to bear certain of our expenses set forth above, including organizational and other expenses.
 
Duration and Termination
 
The Investment Management Agreement will remain in full force and effect for two years initially, and will continue for periods of one year thereafter, but only so long as such continuance is specifically approved at least annually by (a) the vote of a majority of our directors who are not “interested persons” (as defined in the Investment Company Act) and in accordance with the requirements of the Investment Company Act and (b) by a vote of a majority of our Board of Directors or of a majority of our outstanding voting securities. The Investment Management Agreement may, on 60 days’ written notice to the other party, be terminated in its entirety at any time without the payment of any penalty, by our Board of Directors, by vote of a majority of our outstanding voting stock, or by our investment adviser. The Investment Management Agreement shall automatically terminate in the event of its assignment.
 
Organization of our Investment Adviser
 
Our investment adviser is registered as an investment adviser under the Investment Advisers Act of 1940. The principal executive offices of our investment adviser are located at 200 West Street, New York, New York 10282.
 
Our Administrator
 
Pursuant to the Administration Agreement between us and State Street Bank and Trust Company, our administrator, our administrator is responsible for providing various accounting and administrative services to us.
 
The Administration Agreement provides that the administrator will not be liable to us for any damages or other losses arising out of the performance of its services thereunder except under certain circumstances, and contains provisions for the indemnification of the administrator by us against liabilities to other parties arising in connection with the performance of its services to us.
 
We pay the administrator fees for its services as we determine are commercially reasonable in our sole discretion. We also reimburse the administrator for all reasonable expenses. To the extent that our administrator outsources any of its functions, the administrator will pay any compensation associated with such functions.
 
We are not obligated to retain our administrator. The Administration Agreement may be terminated by either party without penalty upon 30 days’ written notice to the other party.
 
The terms of any administration agreement that we may enter with any subsequent administrator may differ materially from the terms of the Administration Agreement with State Street Bank and Trust Company in effect prior to such retention, including, without limitation, providing for a fee structure that results in us, directly or indirectly, bearing higher fees for similar services and other terms that are potentially less advantageous to us.  Our stockholders will not be entitled to receive prior notice of the engagement of an alternate administrator or of the terms of any agreement that is entered into with such administrator.
 
 
 
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RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS
 
We are party to various agreements with affiliates of Group, Inc., which owns a significant amount of our common stock.  Our investment adviser and other affiliates of Goldman Sachs also perform services for other clients, which creates various conflicts of interest.  See “Potential Conflicts of Interest” and “Risk Factors—Risks Relating to Our Business and Structure—Potential conflicts of interest could impact our investment returns.”
 
Formation Transactions
 
For a description of our Formation Transactions, see “Summary—Formation Transactions.”
 
Co-Investment Opportunities
 
We have in the past co-invested and expect in the future to co-invest on a concurrent basis with other affiliates, unless doing so is impermissible with existing regulatory guidance, applicable regulations and our allocation procedures.  Certain types of negotiated co-investments may be made only if we receive an order from the SEC permitting us to do so.  There can be no assurance that we will obtain any such order.  See “Regulation.” We and our investment adviser intend to submit an exemptive application to the SEC to permit greater flexibility to negotiate the terms of co-investments if our Board of Directors determines that it would be advantageous for us to co-invest with other accounts managed by our investment adviser or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent.
 
Material Non-Public Information
 
Our senior management and other investment professionals from our investment adviser may serve as directors of, or in a similar capacity with, companies in which we invest or in which we are considering making an investment.  Through these and other relationships with a company, these individuals may obtain material, non-public information that might restrict our ability to buy or sell securities of such company under the policies of the company or applicable law.
 
Investment Management Agreement
 
We are party to an Investment Management Agreement, pursuant to which we pay our investment adviser a fee for investment management services consisting of a base management fee and an incentive fee.  This fee structure may create an incentive for our investment adviser to invest in certain types of securities.  Additionally, we rely on investment professionals from our investment adviser to assist our Board of Directors with the valuation of our portfolio investments.
 
The management fee and incentive fee paid to our investment adviser are based on the value of our investments and there may be a conflict of interest when personnel of our investment adviser are involved in the valuation process for our portfolio investments.  See also “Management—Investment Management Agreement.”
 
License Agreement
 
We are party to a license agreement with an affiliate of Goldman Sachs pursuant to which we have been granted a non-exclusive, royalty-free license to use the “Goldman Sachs” name. Under this agreement, we shall not have a right to use the Goldman Sachs name if GSAMLP or another affiliate of Goldman Sachs is not our investment adviser or if our continued use of such license results in a violation of applicable law, results in a regulatory burden or has adverse regulatory consequences.  Other than with respect to this limited license, we have no legal right to the “Goldman Sachs” name.
 
Transfer Agency Agreement

We have entered into a transfer agency agreement with Goldman, Sachs & Co. (the “Transfer Agency Agreement”), pursuant to which, Goldman, Sachs & Co. as transfer agent: (i) records the issuance, transfer and repurchase of shares of our common stock and preferred stock; (ii) provides purchase and repurchase confirmations, as well as certain other statements; (iii) provides dividend crediting and certain disbursing agent