UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarter Ended
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number:
(Exact name of registrant as specified in its charter)
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on Which Registered |
N/A |
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N/A |
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N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
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☒ |
Smaller Reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of March 31, 2024, there was no established public market for the registrant’s units. The issuer had
SCP PRIVATE CREDIT INCOME BDC LLC
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
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Index |
Page No. |
PART I. |
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Item 1. |
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3 |
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4 |
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5 |
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6 |
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Consolidated Schedule of Investments as of March 31, 2024 (unaudited) |
7 |
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Consolidated Schedule of Investments as of December 31, 2023 |
11 |
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14 |
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25 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
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Item 1. |
35 |
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Item 1A. |
36 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
36 |
Item 3. |
36 |
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Item 4. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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38 |
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2
PART I. FINANCIAL INFORMATION
In this Quarterly Report, “Company”, “we”, “us”, and “our” refer to SCP Private Credit Income BDC LLC unless the context states otherwise.
Item 1. Financial Statements
SCP Private Credit Income BDC LLC
Consolidated Statements of Assets and Liabilities
(in thousands, except unit amounts)
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March 31, |
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December 31, |
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Assets |
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Investments at fair value: |
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Companies less than 5% owned (cost: $ |
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$ |
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$ |
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Companies 5% to 25% owned (cost: $ |
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Cash |
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Interest receivable |
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Receivable for investments sold |
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Prepaid expenses |
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Total assets |
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$ |
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$ |
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Liabilities |
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Debt ($ |
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$ |
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$ |
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Distributions payable |
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Management fee payable (see note 3) |
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Incentive fee payable (see note 3) |
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Administration fee payable (see note 3) |
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Interest payable (see note 5) |
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Other liabilities and accrued expenses |
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Total liabilities |
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$ |
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$ |
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(see note 6) |
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Unitholders’ Capital |
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Common Unitholders’ capital ( |
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Accumulated distributable net loss |
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( |
) |
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( |
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Total unitholders’ capital |
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$ |
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$ |
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Total liabilities and unitholders’ capital |
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$ |
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$ |
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Net asset value per unit |
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$ |
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$ |
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See notes to consolidated financial statements.
3
SCP Private Credit Income BDC LLC
Consolidated Statements of Operations (unaudited)
(in thousands, except unit amounts)
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Three months ended |
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March 31, |
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March 31, |
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Investment Income: |
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Interest: |
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Companies less than 5% owned |
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$ |
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$ |
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Other income: |
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Companies less than 5% owned |
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Total investment income |
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Expenses: |
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Management fees (see note 3) |
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$ |
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$ |
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Incentive fees (see note 3) |
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( |
) |
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Administration fees (see note 3) |
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Interest and other credit facility expenses (see note 5) |
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Other general and administrative expenses |
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Total expenses |
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Net investment income |
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$ |
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$ |
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Realized and unrealized gain (loss) on investments: |
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Net realized gain on companies less than 5% owned |
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$ |
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$ |
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Net change in unrealized gain (loss) on investments: |
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Companies less than 5% owned |
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( |
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Companies 5% to 25% owned |
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Net change in unrealized gain (loss) on investments |
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( |
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Net realized and unrealized gain (loss) |
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( |
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Net Increase (Decrease) in Unitholders’ Capital Resulting From |
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$ |
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$ |
( |
) |
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Net Income (Loss) Per Unit |
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$ |
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$ |
( |
) |
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See notes to consolidated financial statements.
4
SCP Private Credit Income BDC LLC
Consolidated Statements of Changes in Unitholders’ Capital (unaudited)
(in thousands, except unit amounts)
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Three months ended |
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March 31, |
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March 31, |
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Increase (decrease) in unitholders’ capital resulting from |
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Net investment income |
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$ |
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$ |
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Net realized gain |
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Net change in unrealized gain (loss) |
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( |
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Net increase (decrease) in unitholders’ capital resulting from operations |
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( |
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Distributions to unitholders: |
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From net investment income |
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( |
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Increase in unitholders’ capital resulting from capital activity: |
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Contributions |
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Net increase in unitholders’ capital resulting from capital |
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Total increase in unitholders’ capital |
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Unitholders’ capital, beginning of period |
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Unitholders’ capital, end of period |
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$ |
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$ |
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Capital unit activity (see note 7): |
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Units issued |
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Net increase from capital unit activity |
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See notes to consolidated financial statements.
5
SCP Private Credit Income BDC LLC
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
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Three months ended |
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Three months ended |
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Cash Flows from Operating Activities: |
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Net increase (decrease) in unitholders’ capital resulting from operations |
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$ |
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$ |
( |
) |
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Adjustments to reconcile net increase (decrease) in unitholders’ capital resulting from |
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Net realized gain on investments |
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( |
) |
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Net change in unrealized (gain) loss on investments |
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( |
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Deferred financing costs |
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Net accretion of discount on investments |
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( |
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( |
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(Increase) decrease in operating assets: |
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Purchase of investments |
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( |
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( |
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Proceeds from disposition of investments |
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Capitalization of payment-in-kind income |
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( |
) |
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( |
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Receivable for investments sold |
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( |
) |
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Interest receivable |
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( |
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Prepaid expenses |
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( |
) |
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( |
) |
Increase (decrease) in operating liabilities: |
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Management fee payable |
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( |
) |
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Incentive fee payable |
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( |
) |
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( |
) |
Administration fee payable |
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( |
) |
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( |
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Interest payable |
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( |
) |
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Other liabilities and accrued expenses |
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( |
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( |
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Net Cash Provided by Operating Activities |
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Cash Flows from Financing Activities: |
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Contributions from unitholders |
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Cash distributions paid |
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( |
) |
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( |
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Proceeds from borrowings |
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Repayments of borrowings |
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( |
) |
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( |
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Net Cash Used in Financing Activities |
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( |
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( |
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NET DECREASE IN CASH |
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( |
) |
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( |
) |
CASH AT BEGINNING OF PERIOD |
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CASH AT END OF PERIOD |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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See notes to consolidated financial statements.
6
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (unaudited)
March 31, 2024
(in thousands, except share/unit amounts)
Description |
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Industry |
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Spread |
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Floor |
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Interest |
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Acquisition |
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Maturity |
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Par |
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Cost |
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Fair |
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Bank Debt/Senior Secured |
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AMF Levered II, LLC(2) |
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Diversified Financial Services |
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S+ |
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% |
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% |
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$ |
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$ |
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$ |
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Alimera Sciences, Inc.(2) |
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Pharmaceuticals |
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S+ |
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% |
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% |
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All State Ag Parts, LLC(2) |
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Trading Companies & Distributors |
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S+ |
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% |
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% |
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Arcutis Biotherapeutics, Inc.(2)(4) |
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Pharmaceuticals |
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S+ |
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% |
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% |
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Ardelyx, Inc.(2)(4) |
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Pharmaceuticals |
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S+ |
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% |
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% |
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Basic Fun, Inc.(2) |
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Specialty Retail |
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S+ |
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% |
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% |
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BayMark Health Services, Inc.(2) |
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Health Care Providers & Services |
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S+ |
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% |
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% |
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CC SAG Holdings Corp. (Spectrum |
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Diversified Consumer Services |
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S+ |
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% |
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% |
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|||||||
Cerapedics, Inc. (2) |
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Biotechnology |
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S+ |
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% |
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% |
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|||||||
Enhanced Permanent Capital, LLC(2)(4) |
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Capital Markets |
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S+ |
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% |
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% |
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ENS Holdings III Corp. & ES Opco USA |
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Trading Companies & Distributors |
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S+ |
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% |
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% |
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Erie Construction Mid-west, LLC(2) |
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Building Products |
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S+ |
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% |
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% |
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Fertility (ITC) Investment Holdco, LLC(2) |
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Health Care Providers & Services |
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S+ |
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% |
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% |
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|||||||
Foundation Consumer Brands, LLC(2) |
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Personal Products |
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S+ |
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% |
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% |
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|||||||
GSM Acquisition Corp. (2) |
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Leisure Equipment & Products |
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S+ |
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% |
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% |
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|||||||
High Street Buyer, Inc. (2) |
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Insurance |
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S+ |
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% |
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% |
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|||||||
Human Interest Inc.(2) |
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Internet Software & Services |
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S+ |
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% |
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% |
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|||||||
iCIMS, Inc.(2) |
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Software |
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S+ |
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% |
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% |
(5) |
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|||||||
Kaseya, Inc.(2) |
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Software |
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S+ |
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% |
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% |
(6) |
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|||||||
Kid Distro Holdings, LLC (Distro Kid)(2) |
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Software |
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S+ |
|
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% |
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|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Meditrina, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
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% |
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|
% |
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|
|
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|
|
|
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|
|
|
|||||||
Neuronetics, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
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|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Nexus Intermediate III, LLC (Vortex)(2) |
|
Professional Services |
|
S+ |
|
|
% |
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|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Orthopedic Care Partners Management, |
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Health Care Providers & Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Outset Medical, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Peter C. Foy & Associates Insurance |
|
Insurance |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Pinnacle Treatment Centers, Inc.(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Plastics Management, LLC(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
RQM+ Corp.(2) |
|
Life Sciences Tools & Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
RxSense Holdings LLC(2) |
|
Diversified Consumer Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Southern Orthodontic Partners |
|
Health Care Providers & Services |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
SunMed Group Holdings, LLC(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
TAUC Management, LLC(2) |
|
Health Care Providers & Services |
|
P+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tilley Distribution, Inc.(2) |
|
Trading Companies & Distributors |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Transportation Insight, LLC(2) |
|
Road & Rail |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Ultimate Baked Goods Midco LLC |
|
Packaged Foods & Meats |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Vapotherm, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
% |
|
|
% |
(7) |
|
|
|
|
|
|
|
|
|
|
|||||||
Vessco Midco Holdings, LLC(2) |
|
Water Utilities |
|
S+ |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Bank Debt/Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||
See notes to consolidated financial statements.
7
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (unaudited) (continued)
March 31, 2024
Description |
|
Industry |
|
|
|
|
|
|
|
Acquisition |
|
|
|
Shares/ Units |
|
|
Cost |
|
|
Fair |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Assertio Holdings, Inc. Common Stock†(11) |
|
Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Centrexion Therapeutics, Inc. Warrants† |
|
Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Meditrina, Inc. Warrants† |
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senseonics Holdings, Inc Common |
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
SLR-AMI Topco Blocker, LLC†(8)(9) |
|
Internet & Catalog Retail |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Vapotherm, Inc.† |
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Total Investments(10) — 150.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Liabilities in Excess of Other Assets - (50.0%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||
Net Assets — 100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||
See notes to consolidated financial statements.
8
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (unaudited) (continued)
March 31, 2024
(in thousands)
Name of Issuer |
|
Fair Value at |
|
|
Gross |
|
|
Gross |
|
|
Realized Gain |
|
|
Change in Unrealized |
|
|
Fair Value at |
|
|
Interest/Dividend |
|
|||||||
SLR-AMI Topco Blocker, LLC |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|||||||
†
See notes to consolidated financial statements.
9
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (unaudited) (continued)
March 31, 2024
(in thousands)
Industry Classification |
|
Percentage of Total |
|
|
Health Care Providers & Services |
|
|
% |
|
Health Care Equipment & Supplies |
|
|
% |
|
Pharmaceuticals |
|
|
% |
|
Software |
|
|
% |
|
Insurance |
|
|
% |
|
Diversified Consumer Services |
|
|
% |
|
Trading Companies & Distributors |
|
|
% |
|
Life Sciences Tools & Services |
|
|
% |
|
Internet & Catalog Retail |
|
|
% |
|
Leisure Equipment & Products |
|
|
% |
|
Internet Software & Services |
|
|
% |
|
Diversified Financial Services |
|
|
% |
|
Biotechnology |
|
|
% |
|
Personal Products |
|
|
% |
|
Building Products |
|
|
% |
|
Capital Markets |
|
|
% |
|
Packaged Foods & Meats |
|
|
% |
|
Road and Rail |
|
|
% |
|
Water Utilities |
|
|
% |
|
Professional Services |
|
|
% |
|
Specialty Retail |
|
|
% |
|
Total Investments |
|
|
% |
|
See notes to consolidated financial statements.
10
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments
December 31, 2023
(in thousands, except share/unit amounts)
Description |
|
Industry |
|
Spread |
|
|
Floor |
|
|
Interest |
|
|
Acquisition |
|
Maturity |
|
Par |
|
|
Cost |
|
|
Fair |
|
||||||
Bank Debt/Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
AMF Levered II, LLC(2) |
|
Diversified Financial Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Alimera Sciences, Inc.(2) |
|
Pharmaceuticals |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
All State Ag Parts, LLC(2) |
|
Trading Companies & Distributors |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Arcutis Biotherapeutics, Inc.(2)(4) |
|
Pharmaceuticals |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ardelyx, Inc.(2)(4) |
|
Pharmaceuticals |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic Fun, Inc.(2) |
|
Specialty Retail |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
BayMark Health Services, Inc.(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
BridgeBio Pharma, Inc. (2)(4) |
|
Biotechnology |
|
|
— |
|
|
|
— |
|
|
|
% |
(5) |
|
|
|
|
|
|
|
|
|
|
||||||
CC SAG Holdings Corp. (Spectrum |
|
Diversified Consumer Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cerapedics, Inc. (2) |
|
Biotechnology |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Enhanced Permanent Capital, LLC(2)(4) |
|
Capital Markets |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ENS Holdings III Corp. & ES Opco USA |
|
Trading Companies & Distributors |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Erie Construction Mid-west, LLC(2) |
|
Building Products |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fertility (ITC) Investment Holdco, LLC(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foundation Consumer Brands, LLC(2) |
|
Personal Products |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Glooko, Inc.(2) |
|
Health Care Technology |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
GSM Acquisition Corp. (2) |
|
Leisure Equipment & Products |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
High Street Buyer, Inc. (2) |
|
Insurance |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Human Interest Inc.(2) |
|
Internet Software & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
iCIMS, Inc.(2) |
|
Software |
|
S+ |
|
|
|
% |
|
|
% |
(6) |
|
|
|
|
|
|
|
|
|
|
||||||||
Kaseya, Inc.(2) |
|
Software |
|
S+ |
|
|
|
% |
|
|
% |
(11) |
|
|
|
|
|
|
|
|
|
|
||||||||
Kid Distro Holdings, LLC (Distro Kid)(2) |
|
Software |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Meditrina, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Neuronetics, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nexus Intermediate III, LLC (Vortex)(2) |
|
Professional Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Orthopedic Care Partners Management, |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Outset Medical, Inc.(2)(4) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Peter C. Foy & Associates Insurance |
|
Insurance |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pinnacle Treatment Centers, Inc.(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Plastics Management, LLC(2) |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
RQM+ Corp.(2) |
|
Life Sciences Tools & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
RxSense Holdings LLC(2) |
|
Diversified Consumer Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Southern Orthodontic Partners |
|
Health Care Providers & Services |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
SunMed Group Holdings, LLC(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
TAUC Management, LLC(2) |
|
Health Care Providers & Services |
|
P+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tilley Distribution, Inc.(2) |
|
Trading Companies & Distributors |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Transportation Insight, LLC(2) |
|
Road & Rail |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ultimate Baked Goods Midco LLC |
|
Packaged Foods & Meats |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vapotherm, Inc.(2) |
|
Health Care Equipment & Supplies |
|
S+ |
|
|
|
% |
|
|
% |
(7) |
|
|
|
|
|
|
|
|
|
|
||||||||
Vessco Midco Holdings, LLC(2) |
|
Water Utilities |
|
S+ |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Bank Debt/Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||
See notes to consolidated financial statements.
11
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2023
(in thousands)
Description |
|
Industry |
|
|
|
|
|
|
|
Acquisition |
|
|
|
Shares/ Units |
|
|
Cost |
|
|
Fair |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Assertio Holdings, Inc. Common Stock†(12) |
|
Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Centrexion Therapeutics, Inc. Warrants† |
|
Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Meditrina, Inc. Warrants† |
|
Health Care |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senseonics Holdings, Inc Common |
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
SLR-AMI Topco Blocker, LLC†(8)(9) |
|
Internet & Catalog Retail |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Vapotherm, Inc.† |
|
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Total Investments(10) — 156.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Liabilities in Excess of Other Assets - (56.8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||
Net Assets — 100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||
Name of Issuer |
|
Fair Value at June 16, 2023 |
|
Gross Additions |
|
|
Gross Reductions |
|
|
Realized Gain (Loss) |
|
Change in Unrealized Gain (Loss) |
|
Fair Value at December 31, 2023 |
|
Interest/Dividend Income |
|
|||||||
Oldco AI, LLC (f/k/a Amerimark) |
|
$ |
|
$ |
- |
|
|
$ |
( |
) |
a |
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Oldco AI, LLC (f/k/a Amerimark) |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||||
SLR-AMI Topco Blocker, LLC |
|
|
|
|
|
a |
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
|
|
$ |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
a Includes contribution of basis from Oldco AI, LLC to SLR-AMI Topco Blocker, LLC
† Non-income producing security.
See notes to consolidated financial statements.
12
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2023
(in thousands)
Industry Classification |
|
Percentage of Total |
|
|
Health Care Providers & Services |
|
|
% |
|
Health Care Equipment & Supplies |
|
|
% |
|
Software |
|
|
% |
|
Pharmaceuticals |
|
|
% |
|
Insurance |
|
|
% |
|
Diversified Consumer Services |
|
|
% |
|
Biotechnology |
|
|
% |
|
Trading Companies & Distributors |
|
|
% |
|
Life Sciences Tools & Services |
|
|
% |
|
Internet & Catalog Retail |
|
|
% |
|
Leisure Equipment & Products |
|
|
% |
|
Internet Software & Services |
|
|
% |
|
Diversified Financial Services |
|
|
% |
|
Personal Products |
|
|
% |
|
Building Products |
|
|
% |
|
Capital Markets |
|
|
% |
|
Packaged Foods & Meats |
|
|
% |
|
Road and Rail |
|
|
% |
|
Water Utilities |
|
|
% |
|
Professional Services |
|
|
% |
|
Health Care Technology |
|
|
% |
|
Specialty Retail |
|
|
% |
|
Total Investments |
|
|
% |
|
See notes to consolidated financial statements.
13
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited)
March 31, 2024
(in thousands, except Unit amounts)
Note 1. Organization
SCP Private Credit Income BDC LLC (the “Company”, “we”, “us” or “our”) is a Delaware limited liability company formed on May 18, 2018. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“the 1940 Act”). Furthermore, as the Company is an investment company, it applies the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for U.S. federal income tax purposes, the Company has elected to be treated, and intends to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company was formed primarily to provide investors with attractive long-term returns through investments made pursuant to the investment strategy of the Company described below (the Company’s investments in portfolio companies are referred to herein as “Portfolio Investments”).
On October 5, 2018 (the “Initial Closing Date”), the Company closed on $
The Company has implemented a corporate lending strategy focused on sourcing, underwriting and managing a diverse portfolio of private senior secured loans primarily to upper middle market companies (generally, aggregate loan sizes of $
The offering period of the Company ended on April 5, 2019 (the “Offering Period”). The investment period of the Company ended on December 31, 2022. The term of the Company will be six years from the end of the Offering Period unless the Company is liquidated earlier as set forth in the Limited Liability Company Agreement of the Company (as amended, restated or otherwise modified from time to time, the “LLC Agreement”), but may be extended by the Company’s Board of Directors (the “Board”) for up to two consecutive one year periods upon approval of the Company’s independent directors and the approval of unitholders of the Company (“Unitholders”), which approval will be obtained through a non-1940 Act vote as described in the LLC Agreement. The Company may be dissolved and its affairs wound up prior to the end of the term under the circumstances set forth in the LLC Agreement. The fiscal year end of the Company is December 31.
Note 2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and certain wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to current period presentation.
Interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, they may not include all of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2024.
In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for the fair presentation of financial statements, have been included.
14
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
The significant accounting policies consistently followed by the Company are:
The valuation principles set forth above may be modified from time to time without notice to Unitholders, in whole or in part, as determined by the Board in its sole discretion.
The Board will also (1) periodically assess and manage valuation risks; (2) establish and apply fair value methodologies; (3) test fair value methodologies; (4) oversee and evaluate third-party pricing services, as applicable; (5) oversee the reporting required by Rule 2a-5 under the 1940 Act; and (6) maintain recordkeeping requirements under Rule 2a-5.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by
15
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
pricing services are considered as an input in the valuation process. For the three months ended March 31, 2024, there has been no change to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.
ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined 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 in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.
16
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
Note 3. Agreements and Related Party Transactions
The Company has entered into an investment management agreement with the Adviser (the “Investment Management Agreement”) pursuant to which it will pay management fees, administrative coordinator fees and incentive fees to the Adviser. The Company will pay the Adviser a fee for investment advisory and management services consisting of two components: a base management fee and an incentive fee. The Company will also pay the Adviser (in its capacity as Administrative Coordinator, defined herein) an administration fee for administrative and coordination services. The cost of the base management fee, the incentive fee, and the administration fee will be borne by the Unitholders.
Management Fees and Administration Fees
The Company will pay the Adviser a management fee (the “Management Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (each such date, the “Management Fee Calculation Date”), in an amount equal to
Pursuant to the Investment Management Agreement, the Adviser has also been appointed to provide administrative and coordination services to the Company (in such capacity, the “Administrative Coordinator”). The Company will pay the Administrative Coordinator, a fee (the “Administration Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (the “Administration Fee Calculation Date”), in an amount equal to
Each of the Management Fee and the Administration Fee will be appropriately adjusted for any stub period. Such fees will be paid out of net current income and/or disposition proceeds or, to the extent such amounts are not available, from unfunded capital commitments that will be drawn down, or borrowings of the Company. In the event that the Adviser arranges for the Company to pay any portion of a placement fee to a placement agent, the amount of Management Fees otherwise payable shall be reduced by an amount equal to
17
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
Incentive Fee
The Company will make distributions out of two categories: Current Proceeds and Disposition Proceeds (collectively referred to as “Investment Proceeds”). “Disposition Proceeds” means all amounts received by the Company upon the disposition of an investment, including full or partial repayments or amortization of principal (but excluding Current Proceeds). “Current Proceeds” means all proceeds from investments, including interest income, fee income, warrant gains, prepayment fees and exit fees, other than Disposition Proceeds. The Adviser will apportion each Unitholder’s pro rata share of Investment Proceeds between Disposition Proceeds and Current Proceeds. Amounts of Investment Proceeds apportioned to Unitholders will be divided between and distributed to Unitholders, on the one hand, and the Adviser, on the other hand, in the following amounts and order of priority:
(i) Disposition Proceeds apportioned to Unitholders shall be divided between and distributed to Unitholders, on the one hand, and paid to the Adviser as an incentive fee, on the other hand, in the following amounts and order of priority:
(A) Return of Capital Contributions. First,
(B) Unitholder Preferred Return. Second,
(C) Adviser Catch Up to
(D)
(ii) Current Proceeds apportioned to Unitholders shall be divided between and distributed to Unitholders, on the one hand, and paid to the Adviser as an incentive fee, on the other hand, in the following amounts and order of priority:
(A) Unitholder Preferred Return. First,
(B) Adviser Catch Up to
(C)
In no event will the Adviser receive amounts attributable to Disposition Proceeds that, as of any distribution or payment date, exceeds
The Adviser has the right with respect to all Unitholders, upon approval of the Company’s independent directors, to waive or reduce the incentive fee to which it is entitled. The Adviser may also elect not to receive all or any portion of the incentive fee that would otherwise be distributed to it, and may cause any or all amounts subsequently available for distribution to the Unitholders to be distributed to the Adviser until it has received the same aggregate amount of incentive fees had it not previously waived receipt of incentive fees.
The Adviser will be entitled to withhold from any distributions, in its discretion, any required tax withholdings. Amounts of taxes paid or withheld from amounts otherwise distributable to a Unitholder will be deemed distributed for purposes of the calculations above.
18
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
Upon liquidation of the Company, the Adviser will be required to restore funds to the Company for distribution to the Unitholders if and to the extent that the Adviser has received cumulative incentive fees in excess of the incentive fees that would have been payable to the Adviser on an aggregate basis covering all transactions of the Company; provided, however, that in no event will the Adviser be required to contribute an aggregate amount in excess of
For the three months ended March 31, 2024, the Company incurred $
The aggregate amount of certain annual operating expenses relating to Unitholders investing directly in the Company will not exceed the Operating Expense Cap, calculated as follows: (A) if the Company has less than or equal to $
The Adviser or Administrative Coordinator and/or their affiliates has advanced organizational and offering expenses to the Company, which include organizational fees, costs, expenses and liabilities of the Company, including legal expenses, incurred in connection with the initial offering of Units and the formation and establishment of the Company (“Organizational Expenses”). The Adviser or Administrative Coordinator (or such affiliate) has been reimbursed by the Company for such advanced costs and expenses in an amount not to exceed $
Note 4. Fair Value
Fair value is defined 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. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
19
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).
Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications involving Level 3 assets and liabilities are reported as transfers in/out of Level 3 as of the end of the quarter in which the reclassifications occur. Within the fair value hierarchy tables below, cash and cash equivalents are excluded but could be classified as Level 1.
The following tables present the balances of assets measured at fair value on a recurring basis, as of March 31, 2024 and December 31, 2023:
Fair Value Measurements
As of March 31, 2024
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank Debt/Senior Secured Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
While the Company has not made an election to apply the fair value option of accounting to any of its debt obligations, if the Company’s debt obligations were carried at fair value at March 31, 2024, the fair value of the SPV Facility and the Subscription Facility would be $
Fair Value Measurements
As of December 31, 2023
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank Debt/Senior Secured Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
While the Company has not made an election to apply the fair value option of accounting to any of its debt obligations, if the Company’s debt obligations were carried at fair value at December 31, 2023, the fair value of the SPV Facility and the Subscription Facility would be $
20
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
The following table provides a summary of the changes in fair value of Level 3 assets for the three months ended March 31, 2024, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at March 31, 2024:
|
|
Bank Debt/Senior |
|
|
Common Equity/Equity |
|
|
Total |
|
|||
Fair value, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
|
|
|||
Net realized gain |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized gain |
|
|
|
|
|
|
|
|
|
|||
Purchase of investment securities* |
|
|
|
|
|
|
|
|
|
|||
Proceeds from dispositions of investment securities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Transfers into Level 3 |
|
|
|
|
|
|
|
|
|
|||
Transfers out of Level 3 |
|
|
|
|
|
|
|
|
|
|||
Fair value, March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Unrealized gains for the period relating to |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized gain |
|
$ |
|
|
$ |
|
|
$ |
|
|||
*
The following table provides a summary of the changes in fair value of Level 3 assets for the year ended December 31, 2023, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2023:
|
|
Bank Debt/Senior |
|
|
Common Equity/Equity |
|
|
Total |
|
|||
Fair value, December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
|
|
|||
Net realized gain |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of investment securities* |
|
|
|
|
|
|
|
|
|
|||
Proceeds from dispositions of investment securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transfers into Level 3 |
|
|
|
|
|
|
|
|
|
|||
Transfers out of Level 3 |
|
|
|
|
|
|
|
|
|
|||
Fair value, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Unrealized losses for the period relating to |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
*
Quantitative Information about Level 3 Fair Value Measurements
The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.
21
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.
Quantitative information about the Company’s Level 3 asset fair value measurements as of March 31, 2024 is summarized in the table below:
|
|
Asset or |
|
Fair Value at |
|
|
Principal Valuation |
|
Unobservable Input |
|
Range (Weighted |
|
Senior Secured Loans |
|
Asset |
|
$ |
|
|
Income Approach |
|
Market Yield |
|
||
Common Equity/Equity Interests/Warrants |
|
Asset |
|
$ |
|
|
Market Approach |
|
Volatility |
|
||
|
|
|
|
$ |
|
|
EBITDA Multiple |
|
Comparable Multiple |
|
||
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets. Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s investments.
Quantitative information about the Company’s Level 3 asset fair value measurements as of December 31, 2023 is summarized in the table below:
|
|
Asset or |
|
Fair Value at |
|
|
Principal Valuation |
|
Unobservable Input |
|
Range (Weighted |
|
Senior Secured Loans |
|
Asset |
|
$ |
|
|
Income Approach |
|
Market Yield |
|
||
Common Equity/Equity Interests/Warrants |
|
Asset |
|
$ |
|
|
Market Approach |
|
Volatility |
|
||
|
|
|
|
$ |
|
|
EBITDA Multiple |
|
Comparable Multiple |
|
||
Note 5. Debt
Revolving credit facility due August 2024 (the “SPV Facility”)—On February 27, 2019, the Company, through its wholly-owned subsidiary, SCP Private Credit Income BDC SPV LLC (the “SPV”), entered into a $
Revolving credit facility due December 2024 (the “Subscription Facility”)—During the first quarter of 2019, the Company established the $
22
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
The average annualized interest cost for borrowings for the three months ended March 31, 2024 and the year ended December 31, 2023 was
Note 6. Commitments and Contingencies
The Company had unfunded debt commitments to various revolving and delayed-draw term loans.
|
|
March 31, |
|
|
December 31, |
|
||
iCIMS, Inc. |
|
$ |
|
|
$ |
|
||
RxSense Holdings, LLC |
|
|
|
|
|
|
||
Kid Distro Holdings, LLC |
|
|
|
|
|
|
||
GSM Acquisition Corp. |
|
|
|
|
|
|
||
Foundation Consumer Brands, LLC |
|
|
|
|
|
|
||
Basic Fun, Inc. |
|
|
|
|
|
|
||
Ultimate Baked Goods Midco LLC |
|
|
|
|
|
|
||
SunMed Group Holdings, LLC |
|
|
|
|
|
|
||
ENS Holdings III Corp. & ES Opco USA LLC |
|
|
|
|
|
|
||
Vessco Midco Holdings, LLC |
|
|
|
|
|
|
||
TAUC Management, LLC |
|
|
|
|
|
|
||
Vapotherm, Inc. |
|
|
|
|
|
|
||
CC SAG Holdings Corp. (Spectrum Automotive) |
|
|
|
|
|
|
||
High Street Buyer, Inc. |
|
|
|
|
|
|
||
Nexus Intermediate III, LLC (Vortex) |
|
|
|
|
|
|
||
Kaseya, Inc. |
|
|
|
|
|
|
||
Total Commitments |
|
$ |
|
|
$ |
|
||
The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the respective portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of March 31, 2024 and December 31, 2023, the Company had sufficient cash available and/or liquid securities available to fund its commitments and had reviewed them for any appropriate fair value adjustment.
In the normal course of our business, we invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities. As of March 31, 2024, we held no such contracts.
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of March 31, 2024 and December 31, 2023, management is not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.
23
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (unaudited) (continued)
March 31, 2024
(in thousands, except Unit amounts)
Note 7. Unitholders’ Capital
Transactions in Unitholders’ capital were as follows:
|
|
Three months ended |
|
|
Three months ended |
|
||
Units at beginning of period |
|
|
|
|
|
|
||
Units issued |
|
|
|
|
|
|
||
Units issued and outstanding at end of period |
|
|
|
|
|
|
||
Note 8. Financial Highlights
The following is a schedule of financial highlights for the three months ended March 31, 2024 and March 31, 2023:
|
|
Three months ended |
|
|
Three months ended |
|
||
Per Share Data: (a) |
|
|
|
|
|
|
||
Net asset value per Unit, beginning of period |
|
$ |
|
|
$ |
|
||
Net investment income |
|
|
|
|
|
|
||
Net realized and unrealized gain (loss) |
|
|
|
|
( |
|
||
Net increase (decrease) in Unitholders’ capital resulting from operations |
|
|
|
|
|
( |
) |
|
Distributions to Unitholders: |
|
|
|
|
|
|
||
From distributable earnings |
|
|
( |
) |
|
|
|
|
Net asset value per Unit, end of period |
|
$ |
|
|
$ |
|
||
Total Return (b)(c) |
|
|
% |
|
|
( |
)% |
|
Unitholders’ capital, end of period |
|
$ |
|
|
$ |
|
||
Units outstanding, end of period |
|
|
|
|
|
|
||
Ratios to average net assets of Unitholders’ |
|
|
|
|
|
|
||
Net investment income |
|
|
% |
|
|
% |
||
Operating expenses |
|
|
% |
|
|
% |
||
Interest and other credit facility expenses |
|
|
% |
|
|
% |
||
Total expenses |
|
|
% |
|
|
% |
||
Average debt outstanding |
|
$ |
|
|
$ |
|
||
Portfolio turnover ratio |
|
|
% |
|
|
% |
||
*
Note 9. Subsequent Events
The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.
24
Report of Independent Registered Public Accounting Firm
To the Unitholders and Board of Directors
SCP Private Credit Income BDC LLC:
Results of Review of Interim Financial Information
We have reviewed the consolidated statement of assets and liabilities of SCP Private Credit Income BDC LLC (and subsidiary) (the Company), including the consolidated schedule of investments, as of March 31, 2024, the related consolidated statements of operations, changes in unitholders’ capital and cash flows for the three-month periods ended March 31, 2024 and 2023, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities, including the consolidated schedule of investments, of the Company as of December 31, 2023, and the related consolidated statements of operations, changes in unitholders’ capital, and cash flows for the year then ended (not presented herein); and in our report dated February 27, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities, including the consolidated schedule of investments, from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLP |
New York, New York |
May 8, 2024 |
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to:
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
26
We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
SCP Private Credit Income BDC LLC (the “Company”, “we”, “us” or “our”) was formed as a limited liability company under the laws of the State of Delaware on May 18, 2018. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and have elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As such, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, RIC asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest. In addition, we expect that all of the Company’s total portfolio will be comprised of investments in the U.S. The Company was formed primarily to provide investors with attractive long-term returns through investments made pursuant to the investment strategy of the Company described below (the Company’s investments in portfolio companies are referred to herein as “Portfolio Investments”).
SLR Capital Partners, LLC (the “Adviser”) serves as the Company’s investment adviser pursuant to an investment management agreement between the Company and the Adviser (as amended, restated or otherwise modified from time to time, the “Investment Management Agreement”). Subject to the overall supervision of the Company’s Board of Directors (the “Board”), the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of investment professionals. The managing members of the Adviser are Michael Gross and Bruce Spohler, who also oversee the Adviser’s investment committee. Pursuant to the Investment Management Agreement, the Adviser has also been appointed to provide administrative and coordination services to the Company (in such capacity, the “Administrative Coordinator”). The Administrative Coordinator supervises or provides the Company’s administrative services, including operational trade support, net asset value calculations, financial reporting, fund accounting and registrar and transfer agent services. The Administrative Coordinator also provides assistance to the Adviser in connection with communicating with investors and other persons with respect to the Company.
The Company is organized primarily for investors who may invest through one or more investment funds created by one or more financial institutions unaffiliated with the Company (collectively, the “Access Fund”). Certain other investors may also invest directly in the Company. For those investors who invest through the Access Fund, we expect the Access Fund will issue a pro rata interest to each investor in the Access Fund (the “Access Fund Investors”) that, with respect to each Access Fund Investor’s investment in the Access Fund, corresponds to the pro rata share of the Company’s units (the “Units”) issued by the Company to the Access Fund. We also expect that Units will only be sold (i) in the U.S. only to U.S. persons who are “accredited investors” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and (ii) outside the U.S. in accordance with
27
Regulation S under the Securities Act. Upon a sale of Units to an investor, we expect the Access Fund will pass its voting rights in the Company through to the Access Fund Investors.
The Company’s principal focus is to invest in first lien secured floating rate loans primarily to upper middle market private leveraged companies (generally, loan sizes of $100 million to $300 million to companies with earnings before interest, tax, depreciation and amortization (“EBITDA”) between approximately $25 million and $100 million) that have significant free cash flow and are in non-cyclical industries in which the Adviser has direct experience. In addition to senior secured loans to upper middle market companies, the Company intends to invest a portion of its assets in non-traditional asset-based loans and first lien loans to rapidly growing healthcare companies. The Company also expects that some of its investments will contain delayed-draw term loan type features (which is a legally binding commitment by the Company to fund additional term loans to a borrower in the future) and/or other types of unfunded commitments. The Company expects to co-invest with other vehicles managed by the Adviser. There can be no assurance that the Company will be able to co-invest with such other funds, including as a result of legal restrictions and contractual restrictions and, as a result, the Company may not be able to meet its investment objective. The Company believes the potential scale resulting from co-investments with vehicles managed by the Adviser will provide the Company a significant advantage to source loans over other lenders that do not have the capital base to provide significant debt financing.
The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 and the Company may from time to time take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.
Recent Developments
None.
Revenues
The Company’s principal focus is to invest in first lien secured floating rate loans primarily to upper middle market private leveraged companies (generally, aggregate loan sizes of $100 million to $300 million to companies with EBITDA between approximately $25 million and $100 million) that have significant free cash flow and are in non-cyclical industries in which we have direct experience. In addition to senior secured loans to upper middle market companies, the Company intends to invest a portion of its assets in non-traditional asset-based loans and first lien loans to rapidly growing healthcare companies.
Expenses
The Company will (directly or indirectly) bear:
28
In addition, the aggregate amount of the annual operating expenses relating to Unitholders investing directly in the Company set forth in clauses (ii)-(iv) and the operating expenses included in sub-clauses (xiii) and (xvi) related to U.S. regulatory bodies above borne by the Company (directly or indirectly) will not exceed the Operating Expense Cap, calculated as follows: (A) if the Company has less than or equal to $400 million in capital commitments (“Commitments”), an amount equal to the sum of (x) the product of the Commitments and 0.0025 and (y) $1.25 million, or (B) if the Company has greater than $400 million in Commitments, $2.25 million. Any amount in excess of the Operating Expense Cap for any fiscal year will be paid by the Adviser. Solely by way of example, if Commitments equal $350 million, the Operating Expense Cap will be equal to $2.125 million. For the avoidance of doubt, the Operating Expense Cap will not apply to any fees, costs, expenses and liabilities allocable to persons investing indirectly in the Company through any Unitholder.
Additionally, the Company will not bear the costs of any third-party valuation agent engaged solely for purposes of valuing the net asset value of the Company.
The Adviser or Administrative Coordinator and/or their affiliates has advanced organizational and offering expenses to the Company, which include organizational fees, costs, expenses and liabilities of the Company, including legal expenses, incurred in connection with the initial offering of Units and the formation and establishment of the Company. The Adviser or Administrative Coordinator (or such affiliate) has been reimbursed by the Company for such advanced costs and expenses in an amount not to exceed $0.5 million. Accordingly, $0.3 million of offering expenses were charged to capital and $0.1 million of organizational costs were expensed in 2019.
Portfolio and Investment Activity
During the three months ended March 31, 2024, we invested $1.1 million across 4 portfolio companies. This compares to investing $27.9 million in 18 portfolio companies for the three months ended March 31, 2023. Investments sold or prepaid during the three months ended March 31, 2024 totaled $18.0 million versus $27.4 million for the three months ended March 31, 2023.
At March 31, 2024, our portfolio consisted of 42 portfolio companies and was invested 96.5% directly in senior secured loans and 3.5% in common equity/equity interests/warrants, in each case, measured at fair value versus 55 portfolio companies invested 99.9% directly in senior secured loans and 0.1% in common equity/equity interests/warrants at March 31, 2023.
At March 31, 2024, 100% of our income producing investment portfolio was floating rate, measured at fair value. At March 31, 2023, 97.2% of our income producing investment portfolio was floating rate and 2.8% was fixed rate, measured at fair value.
29
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported.
Valuation of Portfolio Investments
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act addressing fair valuation of fund investments. The rule sets forth requirements for good faith determinations of fair value, as well as for the performance of fair value determinations, including related oversight and reporting obligations. The rule also defines “readily available market quotations” for purposes of the definition of “value” under the 1940 Act, and the SEC noted that this definition will apply in all contexts under the 1940 Act. The Company complies with Rule 2a-5’s valuation requirements.
The Company conducts the valuation of its assets, pursuant to which the Company’s net asset value (the “NAV”) is determined, at all times consistent with GAAP and the 1940 Act. The Board will (1) periodically assess and manage valuation risks; (2) establish and apply fair value methodologies; (3) test fair value methodologies; (4) oversee and evaluate third-party pricing services, as applicable; (5) oversee the reporting required by Rule 2a-5 under the 1940 Act; and (6) maintain recordkeeping requirements under Rule 2a-5.
It is anticipated that in respect of many of the Company’s assets, readily available market quotations will not be obtainable and that such assets will be valued at fair value. A market quotation is readily available for a security only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the Company can access at the measurement date, provided that a quotation will not be readily available if it is not reliable. If the Company anticipates using a market quotation for a security, it will also monitor for circumstances that may necessitate the use of fair value, such as significant events that may cause concern over the reliability of a market quotation.
For purposes of calculating the NAV, the Company’s assets will generally be valued as described in Note 2(b) to the Company’s Consolidated Financial Statements.
Leverage
The Company is required to comply with the asset coverage requirements of the 1940 Act. The Company expects to employ leverage and otherwise incur indebtedness with respect to its portfolio both on a recourse and non-recourse basis (including and potentially through guarantees, derivatives, forward commitments and reverse repurchase agreements), but will not exceed the maximum amount permitted by the 1940 Act. The Company is generally permitted, under specified conditions, to issue senior securities in amounts such that the Company’s asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after such issuance. In connection with the organization of the Company, the Adviser, as the initial Unitholder, has authorized the Company to adopt the 150% asset coverage ratio as of August 2, 2018. In connection with their subscriptions of the Units, our Unitholders were required to acknowledge our ability to operate with an asset coverage ratio that may be as low as 150%. The Company will be exposed to the risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for gain and loss on amounts invested and therefore increases the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to the Adviser will be borne by our Unitholders. As of March 31, 2024, the Company had $153.3 million of senior securities, for an asset coverage ratio of 276.5%.
Taxation as a RIC
The Company elected to be treated as a RIC under Subchapter M of the Code and intends to qualify for taxation as a RIC annually. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes to Unitholders as dividends. In order to qualify for taxation as a RIC, the Company is required, among other things, to be diversified at each quarter end and to timely distribute to its Unitholders at least 90% of investment company taxable income, as defined by the Code, for each year. There is no guarantee the Company will be able to maintain its status as a RIC. Depending on the level of taxable income earned in a given tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an estimated excise tax, if any, on estimated excess taxable income.
30
Recent Accounting Pronouncements
None.
Results of Operations
Results are shown for the three months ended March 31, 2024 and March 31, 2023:
Investment Income
For the three months ended March 31, 2024 and March 31, 2023, gross investment income totaled $12.8 million and $14.8 million, respectively. The comparative decrease in gross investment income is due a reduction in the size of the income-producing portfolio.
Expenses
Expenses totaled $6.2 million and $7.3 million, respectively, for the three months ended March 31, 2024 and March 31, 2023, of which $2.4 million and $0.6 million, respectively, were management, incentive and administration fees and $3.5 million and $6.4 million, respectively, were interest and other credit facility expenses. Administrative services, organization and other general and administrative expenses totaled $0.3 million and $0.3 million, respectively, for the three months ended March 31, 2024 and March 31, 2023. Expenses generally consist of management fees, administration fees, performance-based incentive fees, insurance, legal expenses, directors’ expenses, audit and tax expenses and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The comparative decrease in expenses is generally due to lower interest expense from a reduction in borrowings on a smaller portfolio.
Net Investment Income
The Company’s net investment income totaled $6.6 million and $7.5 million, or $0.25 and $0.34 per average Unit, respectively, for the three months ended March 31, 2024 and March 31, 2023.
Net Realized Gain
The Company had investment sales and prepayments totaling approximately $18.0 million and $27.4 million, respectively, for the three months ended March 31, 2024 and March 31, 2023. Net realized gain over the same periods totaled $24 thousand and $0, respectively.
Net Change in Unrealized Gain (Loss)
For the three months ended March 31, 2024 and March 31, 2023, net change in unrealized gain (loss) on the Company’s assets totaled $0.7 million and ($10.5) million, respectively. Net unrealized gain for the three months ended March 31, 2024 was primarily due to appreciation on our investments in Arcutis Biotherapeutics, Inc., Peter C. Foy & Associates Insurance Services, LLC and Neuronetics, Inc., among others, partially offset by depreciation on our investments in TAUC Management, LLC, Outset Medical, Inc. and Transportation Insight, LLC, among others. Net unrealized loss for the three months ended March 31, 2023 was primarily due to depreciation on our investments in AmeriMark Intermediate Holdings, LLC and TAUC Management, LLC, among others, partially offset by appreciation on our investments in Spectrum Pharmaceuticals, Inc., iCIMS, Inc. and Pinnacle Treatment Centers, Inc., among others.
Net Increase (Decrease) in Unitholders’ Capital Resulting From Operations
For the three months ended March 31, 2024 and March 31, 2023, the Company had a net increase (decrease) in Unitholders’ capital resulting from operations of $7.3 million and ($3.0) million, respectively. For the same period, income (loss) per average unit was $0.27 and ($0.14), respectively.
Financial Condition, Liquidity and Capital Resources
Our primary uses of cash are for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying the Adviser), (iii) debt service of any borrowings, and (iv) cash distributions to our Unitholders.
31
Equity
During the period March 12, 2019 (commencement of operations) to March 31, 2024, on a net basis, the Company sold and issued 26,710,775 Units at an average price of $10.40 per Unit, for net proceeds of $277.8 million. All of our outstanding Units were issued and sold in reliance upon the available exemptions from registration requirements of Section 4(a)(2) of the Securities Act. Unfunded equity capital commitments totaled $48.2 million at March 31, 2024.
Debt
Revolving credit facility due August 2024 (the “SPV Facility”)—On February 27, 2019, the Company, through its wholly-owned subsidiary, SCP Private Credit Income BDC SPV LLC (the “SPV”), entered into a $100 million SPV Facility with JPMorgan Chase Bank, N.A. acting as administrative agent. Effective with the latest amendment dated October 20, 2023, the stated interest rate on the SPV Facility is SOFR plus 2.70% with no floor requirement and the current final maturity date is August 15, 2024. Maximum commitments are $261.4 million and future advances are no longer permitted. The SPV Facility is secured by all of the assets held by the SPV. Under the terms of the SPV Facility, the Company and SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The SPV also includes usual and customary events of default for credit facilities of this nature. As of March 31, 2024, there were $153.3 million of borrowings outstanding under the SPV Facility.
Revolving credit facility due December 2024 (the “Subscription Facility”)—During the first quarter of 2019, the Company established the $35.0 million Subscription Facility with East West Bank. Effective with the latest amendment dated December 22, 2023, the facility size is now $32.0 million with a stated interest rate of SOFR plus 2.95%. and a maturity date of December 31, 2024. Under the terms of the Subscription Facility, the Company has made certain customary representations and warranties and is required to comply with various covenants, including reporting requirements and other customary requirements for similar credit facilities. The Subscription Facility also includes usual and customary events of default for credit facilities of this nature. As of March 31, 2024, there were no borrowings outstanding under the Subscription Facility.
Cash Equivalents
We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held no cash equivalents at March 31, 2024.
Contractual Obligations
We have entered into certain contracts under which we have material future commitments. We have entered into the Investment Management Agreement with the Adviser in accordance with the 1940 Act. Under the Investment Management Agreement, the Company will pay the Adviser the Management Fee and the Incentive Fee, and the Administrative Coordinator the Administration Fee. Under the Investment Management Agreement, the Administrative Coordinator may engage or delegate certain administrative functions to third parties or affiliates on behalf of the Company. The Administrative Coordinator will be responsible for all expenses of its own staff responsible for (i) certain on-going, routine, non-investment-related administrative services for the Company, (ii) the coordination of various third-party services needed or required by the Company, and (iii) certain Unitholder servicing functions.
32
A summary of our significant contractual payment obligations is as follows as of March 31, 2024:
Payments due by Period as of March 31, 2024 |
|
|||||||||||||||||||
|
|
Total |
|
|
Less than |
|
|
1-3 years |
|
|
3-5 years |
|
|
More than |
|
|||||
Credit facilities (1) |
|
$ |
153.3 |
|
|
$ |
153.3 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Management Agreement. Any new investment advisory agreement would also be subject to approval by our Unitholders.
Off-Balance Sheet Arrangements
From time-to-time and in the normal course of business, the Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments. These unfunded capital commitments always take into account the Company’s liquidity and cash available for investment, portfolio and issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at March 31, 2024 and December 31, 2023, respectively:
|
|
March 31, |
|
|
December 31, |
|
||
(in millions) |
|
|
|
|
|
|
||
iCIMS, Inc. |
|
$ |
2.2 |
|
|
$ |
2.3 |
|
RxSense Holdings, LLC |
|
|
1.6 |
|
|
|
1.6 |
|
Kid Distro Holdings, LLC |
|
|
1.1 |
|
|
|
1.1 |
|
GSM Acquisition Corp. |
|
|
1.1 |
|
|
|
1.1 |
|
Foundation Consumer Brands, LLC |
|
|
1.0 |
|
|
|
1.0 |
|
Basic Fun, Inc. |
|
|
1.0 |
|
|
|
0.9 |
|
Ultimate Baked Goods Midco LLC |
|
|
0.7 |
|
|
|
0.7 |
|
SunMed Group Holdings, LLC |
|
|
0.5 |
|
|
|
0.5 |
|
ENS Holdings III Corp. & ES Opco USA LLC |
|
|
0.4 |
|
|
|
0.7 |
|
Vessco Midco Holdings, LLC |
|
|
0.4 |
|
|
|
0.4 |
|
TAUC Management, LLC |
|
|
0.4 |
|
|
|
0.4 |
|
Vapotherm, Inc. |
|
|
0.2 |
|
|
|
— |
|
CC SAG Holdings Corp. (Spectrum Automotive) |
|
|
0.2 |
|
|
|
0.2 |
|
High Street Buyer, Inc. |
|
|
— |
|
|
|
1.9 |
|
Nexus Intermediate III, LLC (Vortex) |
|
|
— |
|
|
|
1.3 |
|
Kaseya, Inc. |
|
|
— |
|
|
|
0.6 |
|
Total Commitments |
|
$ |
10.8 |
|
|
$ |
14.7 |
|
The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the respective portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of March 31, 2024 and December 31, 2023, the Company had sufficient cash available and/or liquid securities available to fund its commitments.
Distributions
Tax characteristics of all distributions will be reported to Unitholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by our Board. We expect that our distributions to Unitholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.
We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of
33
the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a BDC, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a RIC. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind income, which represents contractual income added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC.
With respect to the distributions to Unitholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to Unitholders.
Related Parties
We have entered into the Investment Management Agreement with the Adviser. Mr. Gross, our Chairman, Co-Chief Executive Officer and President and Mr. Spohler, our Co-Chief Executive Officer, Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, the Adviser. In addition, Mr. Kajee, our Chief Financial Officer and Treasurer serves as the Chief Financial Officer for the Adviser and Mr. Talarico, our Chief Compliance Officer and Secretary, serves as Partner, General Counsel and Chief Compliance Officer for the Adviser.
The Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Adviser presently serves as investment adviser to SLR Investment Corp., a publicly traded BDC, which focuses on investing in senior secured loans, financing leases and to a lesser extent, unsecured loans and equity securities, SLR HC BDC LLC, an unlisted BDC whose principal focus is to invest directly and indirectly in senior secured loans and other debt instruments typically to middle market companies within the healthcare industry, and SLR Private Credit BDC II LLC, an unlisted BDC whose principal focus is to invest in first lien senior secured floating rate loans primarily to upper middle market leveraged companies with EBITDA between approximately $25 million and $250 million that have significant free cash flow and are in non-cyclical industries in which the Adviser has significant experience. In addition, Michael S. Gross, our Chairman, Co-Chief Executive Officer and President, Bruce Spohler, our Co-Chief Executive Officer and Chief Operating Officer, and Shiraz Y. Kajee, our Chief Financial Officer, and Guy F. Talarico, our Chief Compliance Officer and Secretary, serve in similar capacities for SLR Investment Corp., SLR HC BDC LLC and SLR Private Credit BDC II LLC. The Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Adviser’s allocation procedures. On June 13, 2017, the Adviser received an exemptive order that permits the Company to participate in negotiated co-investment transactions with certain affiliates, in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to various conditions (the “Order”). If the Company is unable to rely on the Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on an alternating basis. Although the Adviser’s investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, the Company and its Unitholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of the Adviser. In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Delaware Limited Liability Company Act.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. Uncertainty with respect to interest rates, inflationary pressures, risks in respect of a failure to increase the U.S. debt ceiling or a downgrade in the U.S. credit rating, the war between Ukraine and Russia, certain regional bank failures, an inflationary environment, the ongoing war in the Middle East and health
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epidemics and pandemics introduced significant volatility in the financial markets, and the effects of this volatility have materially impacted and could continue to materially impact our market risks. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In a low interest rate environment, including a reduction of SOFR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results. Conversely, in a rising interest rate environment, such as the current economic environment, such difference could potentially increase thereby increasing our net investment income. During the three months ended March 31, 2024, certain investments in our investment portfolio had floating interest rates. These floating rate investments were primarily based on floating SOFR and typically have durations of one to three months after which they reset to recent market interest rates. Additionally, some of these investments have floors. The Company also has revolving credit facilities that are generally based on floating SOFR. Assuming no changes to our balance sheet as of March 31, 2024 and no new defaults by portfolio companies, a hypothetical one percent decrease in SOFR on our comprehensive floating rate assets and liabilities would decrease our net investment income by approximately seven cents per average Unit over the next twelve months. Assuming no changes to our balance sheet as of March 31, 2024 and no new defaults by portfolio companies, a hypothetical one percent increase in SOFR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately eight cents per average Unit over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At March 31, 2024, we have no interest rate hedging instruments outstanding on our balance sheet.
Increase (Decrease) in SOFR |
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|
(1.00 |
%) |
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|
1.00 |
% |
Increase in Net Investment Income Per Unit Per Year |
|
$ |
(0.07 |
) |
|
$ |
0.08 |
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Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of March 31, 2024 (the end of the period covered by this report), our management, including our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our management, including the Co-Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
(b) Changes in Internal Controls Over Financial Reporting
Management has not identified any change in the Company’s internal control over financial reporting that occurred during the first quarter of 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We and our consolidated subsidiaries are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or our consolidated subsidiaries. From time to time, we and our consolidated subsidiaries may be a party to certain legal proceedings in the ordinary course of business, including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
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Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in the February 27, 2024 filing of our Annual Report on Form 10-K, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. There have been no material changes during the three months ended March 31, 2024 to the risk factors discussed in “Risk Factors” in the February 27, 2024 filing of our Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
There were no unregistered sales of equity securities other than those already disclosed in certain Form 8-Ks filed with the SEC.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the fiscal quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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Item 6. Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
3.1 |
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3.2 |
Second Amended and Restated Limited Liability Company Agreement(2) |
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4.1 |
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31.1 |
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31.2 |
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|
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31.3 |
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32.1 |
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32.2 |
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32.3 |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
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101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document* |
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents* |
|
|
104 |
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document* |
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 8, 2024.
SCP PRIVATE CREDIT INCOME BDC LLC |
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|
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By: |
/s/ MICHAEL S. GROSS |
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Michael S. Gross Co-Chief Executive Officer (Principal Executive Officer) |
|
|
By: |
/s/ BRUCE J. SPOHLER |
|
Bruce J. Spohler Co-Chief Executive Officer (Principal Executive Officer) |
|
|
By: |
/s/ SHIRAZ Y. KAJEE |
|
Shiraz Y. Kajee Chief Financial Officer (Principal Financial and Accounting Officer) |
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